Question

B C E F Total Supply Chain Cost Analysis Excel Online Activity: Total Supply Chain Cost A global sourcing manager for Delta Automotive wants to compute the total supply chain costs for automobile parts purchased from three different global suppliers. The data related to the supply chain costs associated with three possible suppliers has been collected in the Microsoft Excel Online file below. The annual demand D is 475,000 units. The supplier prices and transportation costs are predicated on an order quantity of 47,500 units (note that this not the EOQ.) We may assume that parts are transported from Mexico to the United States by truck, and by a combination of ships and trucks from Japan and China, and 250 working days per year. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Questions 1. What are the total supply chain cost for each of the suppliers? Round your answers to the nearest dollar. 2. Which supplier provides the lowest total supply chain cost?

Answer 1

Economies of scale occur when average production costs decrease as output increases. An economy can only fully take advantage of economies of scale if the equilibrium quantity demanded meets the efficient production levels. International trade allows economies to achieve this efficiency by enabling them to operate at larger scales, export excess, and benefit from a diverse market.

Step-by-step explanation:

The concept of economies of scale refers to the phenomenon where the average cost of production decreases as the quantity of the output increases. When a graph is plotted with quantity produced on the horizontal axis and average cost of production on the vertical axis, a downward sloping curve typically indicates the presence of economies of scale. As production expands, fixed costs are spread over more units, reducing the average cost.

If the equilibrium quantity of semiconductors demanded in a market is below the quantity at which full economies of scale are realized (for example, 90,000 units), the economy in question cannot benefit from the lowest possible average costs. With demands at 70,000, 50,000, or 30,000 units, the production does not reach the most cost-efficient level of operation. This is where international trade can play a crucial role.

It allows even small economies to produce at a larger and more efficient scale by exporting excess production, importing goods to meet domestic demand, and thus achieving economies of scale while benefiting from competition and variety.