Technology and information management

Chapter 5

144 PART II + Designing the Supply Chain Network

Travel Costs ($)

State Los Angeles Tulsa Denver Seattle Number of Trips

Washington 150 250 200 25 40

Oregon 150 250 200 75 35

California 75 200 150 125 100

Idaho 150 200 125 125 25

Nevada 100 200 125 150 40

Montana 175 175 125 125 25

Wyoming 150 175 100 150 50

Utah 150 150 100 200 30

Arizona 75 200 100 250 50

Colorado 150 125 25 250 65

New Mexico 125 125 75 300 40

North Dakota 300 200 150 200 30

South Dakota 300 175 125 200 20

Nebraska 250 100 125 250 30

Kansas 250 75 75 300 40

;c Oklahoma 250 25 125 300 55

Each consultant is expected to take at most 25 trips each year.

(a) If there are no restrictions on the number of consultants at a site and the goal is to m ini-

mize costs. where should the home offices be located and how many consultant s should

be assigned to each office? What is the annual cost in terms of the facility and tr avel?

(b) If, at most, 10 consultants are to be assigned to a home office, where should the

offices be set up? How many consultants should be assigned to each office? What is

the annual cost of this network?

(c) What do you think of a rule by which all consulting projects out of a giv en state are

assigned to one home office? How much is this policy likely to add to cost co m-

pared to allowing multiple offices to handle a single state?

2. Dry lee, Inc., is a manufacturer of air conditioners that has seen its demand grow significantly.

The company anticipates nationwide demand for the year 2006 to be 180, 000 units in the

South, 120,000 units in the Midwest, 110,000 units in the East, and 100,000 un its in the West.

Managers at Dry lee are designing the manufacturing network and have selec ted four poten-

tial sites-New York, Atlanta, Chicago, and San Diego. Plants could have a ca pacity of either

200,000 or 400,000 units. The annual fixed costs at the four locations are sho wn in Table 5-6,

New York Atlanta Chicago San Diego

Annual-fixed cost of 200,000 plant $6 million $5.5 million $5.6 million

$6.1 million

Annual fixed cost of 400,000 plant $10 million $9.2 million $9.3 million

$10.2 million

East $211 $232 $238 $299

South $232 $212 $230 $280

Midwest $240 $230 $215 $270

West $300 $280 $270 $225

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Chapter 11

Chapter 13