Transportation Mode Analysis
The longer a product is in transit, the longer the firm has its money invested. But faster shipping is usually more expensive than slow shipping. A simple way to obtain some insight into this trade-off is to evaluate holding cost against shipping options. We do this in Example S4.
Example S4 Determining Daily Cost of Holding
A shipment of new connectors for semiconductors needs to go from San Jose to Singapore for assembly. The value of the connectors is $1,750, and holding cost is 40% per year. One airfreight carrier can ship the connectors 1 day faster than its competitor, at an extra cost of $20.00. Which carrier should be selected?
Approach
First we determine the daily holding cost and then compare the daily ...
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