Supply chain management Analytics
The purpose of this assignment is to enable students to investigate, analyze and critique a process that allows decision making for optimizing logistics supply chain design at the tactical level which includes global logistics and distribution and warehousing design features. This may include utilizing linear programming techniques for optimizing supply chain networks.
Assessment 1consists of three parts
Assessment 1- Part A- Case study-1- Supply chain design of X & Co.
Designing the Production Network at X & Co.
Mr. Johnson, vice president of supply chain at x & co. thought that his current production and distribution network was not appropriate given the significant increase in Transportation costs over the past few years. Compared to when the company had set up its production facility in Chicago, Transportation costs had increased by a factor of More than four and were expected to continue growing in the next few years. A quick decision on building one or more new plants could save the company significant Amounts in Transportation expenses in the future.
X & Co.
X & was founded in the late 1970s and produced baby wipes and diaper ointment. The demand for the two products was as shown in Table 1. The company currently had one factory in Chicago that produced both Products for the entire country. The wipes line in the Chicago facility had a capacity of 5 million units, an annualized fixed cost of $5 million a year, and a variable cost of $10 per unit. The ointment line in the Chicago facility had a capacity of 1 million units, an annualized fixed cost of $1.5 million a year, and a variable cost of $20 per unit, the current transportation costs per unit (for both wipes and ointment) are shown in Table 2.
Table 1
Table 1: Regional Demand at X & Com (in 000s)
Zone
Wipes Demand
Ointment Demand
Zone
Wipes Demand
Ointment Demand
Northwest
500
50
Lower Midwest
800
65
Southwest
700
90
Northest
1,000
120
Upper Midwest
900
120
southeast
600
70
Table 2
Table 2 Transportation Costs per Unit
Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Chicago
$6.32
$6.32
$3.68
$4.04
$5.76
$5.96
Princeton
$6.60
$6.60
$5.76
$5.92
$3.68
$4.08
Atlanta
$6.72
$6.48
$5.92
$4.08
$4.04
$3.64
Los Angeles
$4.36
$3.68
$6.32
$6.32
$6.72
$6.60
New Network Options
Johnson had identified Princeton, Chicago; Atlanta; and Los Angeles as potential sites for new plants. Each new plant could have a wipes line, an ointment line, or both. A new wipes line had a capacity of 2 million units, an annual fixed cost of $2.2 million, and a variable production cost of $10 per unit. A new ointment line had a capacity of 1 million units. An annual fixed cost of $1.5 million, and a variable cost of $20 per unit. The current transportation cost per unit is shown in Table 3. Johnson had to decide whether to build a new plant and if so, which production lines to put into the new plant.
Question
1. What is the annual cost of serving the entire nation from Chicago?
2. Do you recommend adding any plant(S)? if so, where should the plant(S) be build and what lines should be included? Assume that the Chicago plant will be maintained at its current capacity but could be run at lower utilization. Would your decision be different if transportation costs are half of their current value? What if they were double their current value?
3. If Johnson could design a new network from scratch (assume he did not have the Chicago plant but could build it at the cost and capacity specified in the case). What production network would you recommend? Assume that any new plants built beside Chicago would be at the cost and capacity specified under the new network options. Would your decision be different in transportation costs were half of their current value? What if they were double their current value?
