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Cost calculation of current distribution system for Roma:

Assuming 20 working days in a month.


Monthly demand served at Roma = No. of days * Avg. daily demand served = 20*
154.8 = 3096 pieces/month.
Operating costs = 3605 lire/piece/month.
Total operating cost = operating cost * avg. inventory = 3605 * 1200 = 4326000 lire
Total operating cost/piece = 4326000/3096 = 1397.28 lire/piece

Inventory cost/piece/month = 1035 lire/piece/month


Total Inventory cost = Inventory cost/piece/month * avg. Inventory = 1035 * 1200
=1242000
Total inventory cost/piece = 1242000/3096 = 401.16 lire

Short Haul transportation cost = 4300 lire/piece

Distance between Roma and Fabriano is 175 km


For 175km, cost of large truck is 0.38Mn.
No. of trucks required = Total pieces / capacity of the truck = 3096/120 = 25.8 trucks
Transportation cost = 25.8 * 380000 = 9804000
Long haul Transportation cost/piece = 9804000/3096 = 3166.67

Total cost/piece = operating cost/piece+ inventory cost/piece+ Short Haul


transportation cost + Long haul Transportation cost/piece = 1397.28 + 401.16 + 4300 +3166.67 =
9265.11 lire

Cost calculation of transit point system for Roma:


Operating cost has reduced to 20%. So operating cost/piece = 20% of 1117.8 =
279.45
As there is no inventory holding, Inventory cost is zero.
Short haul transportation cost is same as the previous system. So it is 4300
lire/piece.

For long haul transportation, we have the option to use small truck. So we can use
them to reduce the cost. Use the large trucks for max capacity i.e. 20 days * 120
=2400 pieces
Remaining pieces = 3096-2400 = 696
No.of small trucks required = 696/45 = 15.47
For 175km, cost of small truck is 0.22mn.
Total transportation cost = (20*380000) + (15.47*220000) =11003400
Long haul transportation cost/piece = 11003400/3096 = 3554.07
Total cost/piece = operating cost/piece+ inventory cost/piece+ Short Haul
transportation cost + Long haul Transportation cost/piece = 279.45 + 0+4300+3554.07 = 8133.52

Cost calculation of current distribution system for Catanzaro:


Assuming 25 working days in a month.
Monthly demand served at Catanzaro = No. of days * Avg. daily demand served =
20* 58.7 = 1174 pieces/month.
Operating costs = 3324 lire/piece/month.
Total operating cost = operating cost * avg. inventory = 3324 * 780 = 2592720 lire
Total operating cost/piece = 2592720/1174 = 2208.45 lire/piece

Inventory cost/piece/month = 1721 lire/piece/month


Total Inventory cost = Inventory cost/piece/month * avg. Inventory = 1721 * 780
=1342380
Total inventory cost/piece = 1342380/1174 =1143.424 lire

Short Haul transportation cost = 4700 lire/piece

Distance between Catanzaro and Fabriano is 810 km


For 810km, cost of large truck is 1.06Mn.
No. of trucks required = Total pieces / capacity of the truck = 1174/120 = 9.78 trucks
Transportation cost = 9.78 * 1060000 = 10366800
Long haul Transportation cost/piece = 10366800/1174 = 8830.368

Total cost/piece = operating cost/piece+ inventory cost/piece+ Short Haul


transportation cost + Long haul Transportation cost/piece = 2208.45 + 1143.424 +4700+8830.368 =
16882.272 lire

Cost calculation of transit point system for Catanzaro:


Operating cost has reduced to 20%. So operating cost/piece = 20% of 2208.45=
441.69
As there is no inventory holding, Inventory cost is zero.
Short haul transportation cost is same as the previous system. So it is 4700
lire/piece.
For long haul transportation, we have the option to use small truck. So we can use
them to reduce the cost. Use the large trucks for max capacity i.e. 10 days * 120
=1200 pieces
Remaining pieces = 1174 1080 = 94
No.of small trucks required = 1
For 810km, cost of small truck is 0.61mn.
Total transportation cost = (10*1060000) =10600000
Long haul transportation cost/piece = 10600000/1174 =9028.96
Total cost/piece = operating cost/piece+ inventory cost/piece+ Short Haul
transportation cost + Long haul Transportation cost/piece = 441.69 + 0 + 4700 + 9028.96 =
14170.65

20.6 * 590000 =12154000


=10352.64