A Supply Chain Problem Essay

1537 Words Oct 23rd, 2015 7 Pages
A SUPPLY CHAIN PROBLEM:
HOW BEST TO COMBINE TRANSPORTATION AND WAREHOUSING
TO SERVE A SPECIFIC MARKET

CASE REPORT

PREPARED BY:
DATE:

PREPARED FOR:

MEMO
TO:

LARGE FLOUR MILL

FROM:

SUPPLY CHAIN MANAGEMENT TEAM

2
DATE:

OCTOBER 21, 2015

RE:

A SUPPLY CHAIN PROBLEM

We are currently analyzing how best to combine transportation and warehousing to serve the
Alberta market.
The decision that has to be determined is whether to have either one or two warehouses.
Given the current Alberta business, and given the newly acquired Calgary operation, should a new packaging and warehousing facility be built or acquired in Edmonton, or should reliance be solely on the currently underused Calgary facility. In a decision such as this, we performed
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al
AREA 3 - Edmonton Urban
AREA 4 - North Rural

Total in Tonnes

Retail 5kg Bags
0
2,500
2,500
5,000
10,000

Annual Demand
30,000
18,000
17,000
18,000
17,000
100,000

Total Annual
Demand
30,000
18,000
18,000
34,000
100,000

Total Annual
Demand
65,000
35,000
100,000

OPTION #1 – USING ONLY THE CALGARY FACILITY
COSTS FROM WINNIPEG TO CALGARY
SHIPPING
ALERNATIVES (# of cars) FREIGHT RATE/CAR
1
25
$1,600
50
$1,440
100
$1,200

FREIGHT
RATE/TONNE
$20
$18
$15

TOTAL TONNES/
SHIPMENT
80
2000
4000
8000

COST PER
SHIPMENT

SHIPMENTS PER
YEAR

ANNUAL FREIGHT
COST/YEAR

AVG INVENTORY
(TONNES)

$40,000
$72,000
$120,000

50
25
12.5

$2,000,000
$1,800,000
$1,500,000

1000
2000
4000

TOTAL INVENTORY
COSTS
NET ANNUAL COSTS
$75,000
$150,000
$300,000

$2,075,000
$1,950,000
$1,800,000

INVENTORY COSTS AT CALGARY
CALGARY
ANNUAL DEMAND
PACKAGING PLANT
(TONNES)
LARGE BAKERY
30,000
50 KG BAGS
50,000
10 KG BAGS
10,000
5 KG BAGS
10,000
TOTAL
100,000

VALUE
ANNUAL
CARRYING WEEKLY DEMAND INVENTORY COST BI-WEEKLY DEMAND INVENTORY COST MONTHLY DEMAND INVENTORY COST
/TONNE CARRYING COST COST/TONNE
(TONNES)
ON WEEKLY
(TONNES)
ON BI-WEEKLY
(TONNES)
ON MONTHLY
$350
25%
$88
600
$26,250
1200
$52,500
2400
$105,000
$400
25%
$100
1000
$50,000
2000
$100,000
4000
$200,000
$500
25%
$125
200
$12,500
400
$25,000
800
$50,000
25%
200
$20,000
$800
$200
400
$40,000
800
$80,000
2000
$108,750
4000
$217,500
8000
$435,000

TRANSPORTAION COSTS TO FINAL DESTINATIONS
TO FINAL DESTINATION FROM
CALGARY
Large Bakery
AREA 1 -
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