INDIVIDUAL ASSIGNMENT #3
TOTAL LANDED COST
Please answer the following questions including showing all of your work:
1) How many pounds of mango concentrate are required?
a. (2 points). In a month?
b. (2 points). How many in a year?
2) (5 points). In computing the Total Landed cost for mango concentrate, we are interested in the incrementalcost per unit (cost per pound) added along the supply chain, rather than the total cost added at each step along the chain (for example, total cost of ocean shipping). Why?
3) (10 points). Using some variation of business process mapping, graph out the mango concentrate supply chain focusing on when cost is added to the supply chain. (i.e. Display/draw the process from Papa Growers to Mom & Pop market, highlighting the points where cost is added to the process).
(4 points). Why would tracking this cost be important to International Fruit Distributors?
4) (45 points). Identify the individual cost components and the total cost of delivering the product from supplier to retailer. Identify each cost in terms of the incremental addition to the product cost (Hint: Express your answers in terms of cost per poundÂ—not total cost). Present your findings in the table below using 4 significant digits. Yes, some of these may be very small numbers — but why might that be important?
(Hint: You should be able to identify 13 separate cost categories in this supply chain. 3 have been identified for you).
Cost per Pound
1. Original unit price
Given in the case.
2. Ocean Freight charge
13. General and Administrative fees
Total Landed Cost (Sum of 1-13 above)
5) (4 points). What conclusion can you draw when comparing the total landed or delivered cost to the original purchase cost?
(4 points). What does this suggest about the importance of supply chain management?
6) Assume that Joyce Johnson has asked you recommend ways to cut the total landed cost of mango concentrate. Given your above analysis, identify three costs you would recommend for further study to cut or reduce. How might you accomplish that? Be specific and realistic in your ideas and provide the first steps you would take to make that happen! (Hint: Starting a new mango grove in San Diego is not a viable option. It would cost much more than $0.39 per pound to produce the raw product there, plus loose the unique flavor!).
a) (8 points)
b) (8 points)
c) (8 points)
Case modified from Monczka, Trent, and Handfield, Purchasing and Supply Chain Management, 3rd edition, South-Western Publishing, 2005.