Use This Information for Question That Refer to the United

question 24

Multiple Choice

Use this information for question that refer to the United Tools case. Terry Harter is marketing manager for United Tools and Mike O'Reilly is the firm's logistics manager.They work together to make decisions about how to get United's hand and power tools to its customers-a mix of manufacturing plants and final consumers (who buy United tools at a hardware store) .United Tools does not own its own transport facilities and it works with wholesalers to reach its business customers.
Together,Harter and O'Reilly try to coordinate transporting,storing,and product handling activities to minimize cost while still achieving the customer service level their customers and intermediaries want.This usually requires that United keep an inventory of most of its products on hand,but demand for its products is fairly consistent over time so inventory is easy to manage.
Harter has identified four options for physical distribution systems she could use to reach two of her key wholesalers,Ralston Supply and Ricotta Tool Co.The total cost for each option-and the distribution service levels that can be achieved-are as follows: $\begin{array}{c}\text{Main feature of system:} && \text{Total Cost} && \text{Distribution Service Level}\\\text{1. Airfreight} && \$ 1,000,000 && \text{95 percent}\\\text{2. Inland waterways} && \$ 300,000 && 60 \text{percent}\\\text{3. Trucks} && \$ 500,000 && 70 \text{pereent}\\\text{4. Rail and regional} && \$ 650,00 && 80 \text{percent}\\\text{warehouses} && &&\end{array}$ Ralston Supply expects a very high level (90 percent) of distribution customer service.Ricotta Tool Co.is willing to settle for a 70 percent customer service level,even if that means some products will occasionally be out of stock,if it gets products at a lower price.
For its large retail hardware customers (like Home Depot) ,United regularly ships smaller orders directly to individual stores or in some cases to the retail chain's warehouses.Cross-country shipments usually go by rail while regional shipments usually go by truck.
One of United's biggest customer has placed a very large,heavy order.Its warehouse is in a location served by all transport modes,and the customer has directed United to ship the order by the mode with the lowest transport costs.In this situation,United will probably ship the tools by

• A) airfreight.
• B) trucks.
• C) waterways.
• D) railroads.

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Definitions:

Dollar Value

The worth of a good or service expressed in terms of the amount of money that it can be bought or sold for in the market.

Form Utility

The value added by the process of transforming raw materials into a finished product that is more useful and valuable to consumers.

Manufacturing

The process of converting raw materials or components into finished goods through the use of labor, machinery, and equipment.