Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 25

Suntrek is a global manufacturer and supplier of denim jeans to apparel retailers around the world. It purchases baled cotton from its cotton producers in Arkansas, Texas, Georgia, and Mississippi and ships it to its warehouse at the port of Savannah, where it then ships it overseas to its distribution center in India that supplies its nearby denim fabric and denim jeans factories. The demand from these overseas manufacturing facilities averages about 1,245,000 bales per year. The monthly handling and storage cost for a bale of cotton at Suntrek's distribution center in India is $15.35. Each time Suntrek needs cotton it ships from Savannah on its own container ship at a cost of $2.7 million. Determine the optimal order quantity, minimum total annual inventory cost, number of shipments per year, and the time between shipments.