Chapter 5 Case Study Group 1

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Management of Supply Chain Operations Group 1 - Shahbaz Mujtaba Bukhari, Leland Archer, Amir Mujic Department of Supply Chain and Management, Bellevue University MSCM500: 3.2 Group Discussion Assignment – Chapter 5 Case Study Designing the Production Network at CoolWipes Professor: Rick Pennington December 17, 2023 1. What is the annual cost of serving the entire nation from Chicago? Total transportation cost for a zone = total number of units x cost per unit Transportation cost for the Northwest zone = (500,000 +50000) x $6.32 = $3,476,000 Transportation cost for the Southwest zone = (700000+90000)x $6.32 = $4,992,800 Transportation cost for the Upper Midwest zone = (900000+120000) x $3.68 = $3,753,600 Transportation cost for the Lower Midwest (800000+65000) x $4.04 = $3,494,600

Transportation cost for the Northeast (1000000+120000) x $5.76 = $6,451,200 Transportation costs for the Southeast (600000 +70000) x $5.96 = $3,993,200 Total transportation cost for the entire Chicago Sum of all zones = $26,161,400 Annual cost of serving the entire nation from Chicago = $26,161,400 2. Do you recommend adding any plant(s)? If so, where should the plant(s) be built 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? Considering current transportation costs, it would recommend constructing new plants in LA and Princeton for wipes. For ointments, a plant in solely Chicago will be the best according to the chart provided. CoolWipes will be able to serve the entire country through the listed locations at a lower cost. It would not be required to develop a new facility if transportation costs were half of what they are now. The transportation expenses from Chicago would be low enough that continuing to serve the entire country from Chicago would be more cost-effective for both the wipes and the ointments line. There was not much change if the transportation cost remained the same compared to being doubled. But if transportation costs doubled, it would still be advantageous to construct a new facility in Princeton and LA for the Wipes and for ointments line, the Chicago plant is the best location according to the spreadsheet. 3. If Matt 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 besides Chicago would be at the cost and capacity specified under the new network options. Would your decision be different if transportation costs were half of their current value? What if they were double their current value?

Overview: Designing a New Network from Scratch: When creating a new production network without the existing Chicago plant, the focus should be on optimizing the distribution of plants (including a potential new Chicago plant) to minimize total costs (fixed, variable, and transportation) under varying transportation cost scenarios. This approach should ensure meeting the national demand efficiently, with decisions potentially varying significantly based on whether transportation costs are at their current level, halved, or doubled. Analysis Approach: 1. Start Without Chicago Plant: Consider the costs and capacities of building new plants in each location (Chicago, Princeton, Atlanta, Los Angeles). 2. Optimize for Lower Costs: Find the plant configuration that minimizes total costs (fixed, variable, and transportation) while meeting demand. 3. Scenarios of Transportation Costs: Evaluate current, half, and double transportation costs. General Recommendations: · Distributed Production: A more distributed network might be more effective, especially if transportation costs are high or expected to increase. · Capacity Considerations: Ensure that the total capacity across all plants meets or exceeds the national demand for both products. · Strategic Locations: Choose strategically positioned locations to serve high-demand areas with lower transportation costs.

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