Initial idea: Offer affordable sports equipment for children
Products:
− Used (second-hand) products
− Surplus equipment from manufacturers and retailers
Current situation (December 2007):
− Demand has been growing steadily over the last years
− The products are distributed to the U.S. customers through a single (and small) warehouse in St. Louis
− The warehouse is leased on a year-to-year basis
− The current network design, in particular the distribution network and warehouse configuration, is not appropriate to satisfy the forecasted demand
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Customers from the 6 U.S. customer zones are served from a central warehouse in St. Louis
Washington
Northwest
Maine
Montana
North Dakota
Demand:
…show more content…
Louis
$3.5
$3.5
$2.5
$2.5
$3.0
$3.5
Atlanta
$4.0
$4.0
$3.0
$2.5
$3.0
$2.5
Philadelphia
$4.5
$5.0
$3.0
$3.5
$2.5
$4.0
UPS 's charges ($ per shipment) are based on both, origin (warehouse location) and destination of the shipment (one of the six regions)
But SportStuff.com charges the customers a flat fee of $3.0 per shipment (order)
An average order (shipment) contains 4 units
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2. Assignments
10
Assignments
1.
What is the (minimal annual) cost SportStuff.com incurs if all warehouses leased are St. Louis?
2.
What supply chain network configuration do you recommend for
SportStuff.com?
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Question 1.
12
Problem specification
Objective:
− Lease all necessary warehouse-capacity in St. Louis
− Find the cost-optimal warehouse-leasing strategy for the years 2008, 2009, 2010
− Calculate the annual cost associated with this strategy
Preliminary considerations:
− Warehouses are leased (no switching costs) which allows a reconfiguration of the warehouse set each year in function of the forecasted demand
− Small and large warehouses only differ in their fixed costs and inventory holding costs
− Consequently, variable costs do not affect the optimal strategy. That is, they increase costs but cannot be
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Part A: Describe how you would design a new logistics network consisting of only a single warehouse.
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