• October 5th, 2017

CHAPTER 14 LOCATION, LOGISTICS, AND DISTRIBUTION

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Chapter 14 Location, Logistics, and distribution
Review and Discussion Questions
1. What motivations typically cause firms to initiate a facilities location or relocation project?
2. List five major reasons why a new electronic components manufacturing firm should move into your city or town?.
3. How do facility location decisions differ for service facilities and manufacturing plants?
4. What are the pro and cons of relocating a small or midsized manufacturing firm (that makes mature products) from the United States to China?
5. If you could locate your new software development company anywhere in the world, which place would you choose, and why?
PROBLEM
1.
d1x = 150 d1y = 75 V1 = 8,000
d2x = 100 d2y = 300 V2 = 6,200
d3x = 275 d3y = 380 V3 = 7,000

2.
d1x = 300 d1y = 320 V1 = 4,000
d2x = 375 d2y = 470 V2 = 6,000
d3x = 470 d3y = 180 V3 = 3,000
3.
a. This is the optimal solution, with a total cost of $720.

b. Place a sufficiently small cost into the A to D cell to force a shipment from A to D. The solver can provide the value that will cause shipments to go from A to D, and in this case, any cost less than $10 will cause cars to be sent that way.
4. a. The key here is properly calculating the total cost per 1,000 pounds for each source and destination pair. Some students will convert the given capacity to the equivalent number per 1,000 lbs. Here it is left as given and the spreadsheet does the conversion.
b. We are using almost none of the supply from Philadelphia. If the Philadelphia capacity cannot be used to satisfy demand elsewhere, then we should consider closing Philadelphia and adding slightly to capacity at another plant to pick up the slack.

Analytics Exercise: Distribution Center Location
1. Relative to the United States distribution network, calculate the cost associated with running the existing system. Assume that 40% of the volume arrives in Seattle and 60% in Los Angeles and the port processing fee for federal inspection at both locations is $5.00 per CBM. Assume that everything is transferred to the Kansas City distribution center by rail where it is unloaded and quality checked. Assume that all volume is then transferred by truck to the 9 existing warehouses in the United States.

2. Consider the idea of upgrading the Los Angeles warehouse to include a distribution center capable of processing all the volume coming into the United States. Assume that containers coming into Seattle would be inspected by federal officials (this needs to be done at all port locations) and then immediately shipped by rail in their original containers to Los Angeles. All volume would be unloaded and quality checked in Los Angeles (the quality check cost %5.00 per CBM when done in Los Angeles). 18% of the volume would then be kept in Los Angeles for distribution through that warehouse and the rest transshipped by rail to the Kansas City warehouse. The cost to transship to Kansas City would be $0.0018 per CBM. The material sent to Kansas City would not need to go through the “unload and quality check process,” and would be stored directly in the Kansas City distribution center. Assume that the remaining volume would be transferred by truck to the 8 remaining warehouses in the United States at a cost of $0.0220 per CBM.
3. What should be done based on your analytics analysis of the United State distribution system? Should the new Los Angeles distribution center be added? Is there any obvious change that Grainger might do to make this option more attractive?

4. Is this strategically something that Grainger should do? What have they not considered that may be important?

 

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