Week 2 – Case Study: MARS (D)
July 19, 2015
In 2009 MARS Inc. has been faced with new challenges in their buying process of their diesel engine due to changes with their Columbus supplier. The D-342 diesel engine market is in jeopardy which is why the supplier dropped production and left MARS Inc. with only one option in suppliers. Having to now deal with only one supplier Tom Sosa, the purchasing manager, has had to figure out what this change means to MARS Inc. in terms of transportation cost, inventory and storage costs, and continue the enforcement of MARS INC.’s implementation of lean manufacturing.
Case Study Questions
1. What ...view middle of the document...
with this change. The Portland supplier’s location to MARS Inc. based on the current situation charges “per hundredweight is $10 for carload lots of 50,000 pounds. The less than carload rate is $15 per hundredweight.” While anything coming from the Columbus supplier was offered just-in-time delivery service at no charge to MARS Inc. Also, this will affect the EOQ’s because dealing with the Columbus supplier they were located close enough that they offered JIT delivery which allowed the reduction minimizing “work-in-process inventories (waste) by reducing lot sizes in order to increase production efficiency and product quality.” Now, with the change, it will force MARS Inc. to spend money on warehousing and carrying cost due to the one week replenishment cycle the Portland supplier has.
4. What is the difference between all-unit quantity discount and incremental discount schedules? How would the costs and EOQs differ? Which would be preferable assuming that both share the same cost figures?
The difference between all-unit quantity discount and incremental discount schedules are that in the all units discounts model, as the order quantity increases, the unit purchasing cost decreases, while, in the incremental quantity discounts case, the unit purchasing cost decreases only for units beyond a certain threshold and not for every unit as in the all units discounts case. In the all-unit quantity discount method the cost decreases...