Answer:
a. The shipping fee that they should negotiate with the supplier is:
= $375 per shipment
b. Based on this new shipping fee, the reduction in annual holding cost will be 37.5%
Step-by-step explanation:
a) Data and Calculations:
Shipping fee per order = $1,000
Average shipments received per year = 4.5 times
Total shipping fee per year = $4,500 (4.5 * $1,000)
Annual demand = 6,500 tons
If shipment is changed to 12 times per year, the shipping fee that they should negotiate with the supplier = $4,500/12 = $375 per shipment
Holding cost will reduce by 37.5% (4.5/12 * 100)