A Supply Chain Problem Essay

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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…show more content…
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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