Use This Information for Questions That Refer to the United

question 83

Multiple Choice

Use this information for questions 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: 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.
-As marketing manager, United's Terry Harter should realize that:

• A) transporting costs may limit her choice of target markets.
• B) a supply chain can only consist of one distribution channel.
• C) the lowest cost distribution system is the best alternative.
• D) all of the above.

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Definitions:

Objective Function

A mathematical function representing goals of optimization, which is either maximized or minimized in decision-making processes.

Emergency Rooms

Hospital departments that provide immediate treatment to patients with acute illnesses or injuries, operating on a 24/7 basis.

Integer Optimization Models

Mathematical models used in operations research where the decision variables are constrained to be integers, often used in planning and allocation problems.