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ZAMECH purchases subassemblies A and B from two suppliers located in Syracuse and New Orleans, respectively, for its assembly plants in Seattle and San Jose, which operate 360 days a year. The assembly plant in Seattle makes 50 products per day, whereas the plant in San Jose makes 75 products per day. Both types of products are assembled in Seattle and San Jose require one unit of each of the subassemblies A and B. Trucks used have a capacity of 3,000 units and cost $4,000 per truckload shipped. The inventory holding cost per subassembly per day is $0.90, and the transit time associated with each route is 5 days.

1. Currently, direct shipments are made in full truckloads from the supplier locations to the assembly plants. Provide the total annual logistics (transportation, in-transit inventory, and on-site inventory) cost associated with the current system configuration.
2. What would the total annual logistics (transportation, in-transit inventory, and on-site inventory) cost be, if optimal shipment quantities were to be used for making direct deliveries?
3. What would the total annual logistics (transportation, in-transit inventory, and on-site inventory) cost be, if optimal shipment quantities for a milk-run delivery scheme is to be used? In other words, a truck picks up subassemblies first from Syracuse then from New Orleans and drops off first at San Jose and then at Seattle. Assume that it takes exactly 3 days to drive from Syracuse to New Orleans, exactly 3 days from New Orleans to San Jose and exactly 3 days from San Jose to Seattle in calculating the in-transit costs associated with this system.

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