Harley Davidson purchases components from three suppliers.Components purchased from Supplier A are priced at $ 5 each andused at the rate of 240,000 units per year. Components purchasedfrom Supplier B are priced at $ 4 each and are used at the rate of30,000 units per year. Components purchased from Supplier C arepriced at $ 5 each and used at the rate of 10,800 units per year.Currently Harley purchases a separate truckload from each supplier.As part of its JIT drive, Harley has decided to aggregate purchasesfrom the three suppliers. The trucking company charges a fixed costof $ 400 for the truck with an additional charge of $100 for eachstop. Thus, if Harley asks for a pickup from only one supplier, thetrucking company charges $ 500; from two suppliers it charges $600; and from three suppliers it charges $ 700. Harley incurs aholding cost of 20% (of the price) for each component.
1.) What is the minimal annual inventory cost of the newaggregate replenishment strategy ?
2.) What is the minimal annual inventory cost of the Harley’scurrent strategy of ordering separately from each supplier ?
3.) How much is the saving resulted ?
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