A population has a mean of 50 and a standard deviation of 19. If a random sample

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MGMT 511

Location Problem

George Heller was so successful in his previous assignment that he was promoted to the coveted position of Infrastructure Manager on the Mergers and Acquisitions Team.

Again Agame has recently acquired a competitive company with a plant and a warehouse in a nearby city. Management has decided to keep the additional warehouse. However, they are unsure if they need to keep the additional manufacturing plant. All products can be manufactured in either plant and shipped from either warehouse. Each plant and each warehouse has sufficient capacity to meet the total forecasted demand individually.

Prepare a report for management with your recommendation. Three possible choices exist. 1) Close the Competitor plant and satisfy all demand from the Again Agame plant; 2) Close the Again Agame plant and satisfy all demand from the Competitor plant; 3)Keep both plants open.

Your recommendation should include a solution for each of the five years in question. Include your calculations and spreadsheets in support of your recommendations.

Sales Forecast (cases)

 

2011

2012

2013

2014

2015

Competitor Warehouse (WH1)

15,000,000

20,000,000

26,000,000

34,000,000

44,000,000

Again Agame Warehouse (WH2)

6,000,000

7,000,000

10,000,000

15,000,000

21,000,000

Fixed Costs

 

2011

2012

2013

2014

2015

Competitor Plant (P1)

900,000

900,000

900,000

900,000

900,000

Again Agame Plant (P2)

800,000

800,000

800,000

800,000

800,000

Transportation Costs

$1.00 / 1,000 cases / mile

4

Costs -- Both Plant Scenario

20112012201320142015

Transport P1 - WH1

Transport P2 - WH2

Fixed Cost - P1

Fixed Cost - P2

Total

General Info.

Infrastructure Exercise Date: 28/10/97
Situation:
a) Package - RGB
b) Nr. Plants - 2
c) Nr. WH - 2
d) Period - 5 years
e) Sales Frcst. - Decreasing
Capacity MM U/C per Year:
Plant 1 - 5 avg. HK 70 (KS)
Plant 2 - 3 avg. HK 42 (KS)
Distance Matrix: (Km)
WH1 WH2
P1 50 600
P2 600 100
Diagram:
&A
Page &P
WH2
Franchise 2
Franchise 1
P2
P1
WH1

Sales Frcst.

Infrastructure Exercise Date: 28/10/97
Sales Forecast (M U.C)
RGB '98 '99 '00 '01 '02
WH1 5000.0 4000.0 3400.0 2800.0 2400.0
WH2 3000.0 2400.0 2000.0 1600.0 1400.0
Obs. Volume is Decreasing 15% per year.
&A
Page &P

Costs

Infrastructure Exercise Date: 28/10/97
Transport Costs:
0.5 1,000 cases per Km
Fixed Costs:
900,000 P1 = $600,000/year
800,000 P2 = $500,000/year
&A
Page &P

Analysis

Infrastructure Exercise Date: 28/10/97
Fixed Costs
'98 '99 '00 '01 '02
P1 800,000 800,000 800,000 800,000 800,000
P2 700,000 700,000 700,000 700,000 700,000
Total 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
Transportation Costs
'98 '99 '00 '01 '02
P1 - WH1 125,000 100,000 85,000 70,000 60,000
P2 - WH2 150,000 120,000 100,000 80,000 70,000
P1 - WH2 900,000 720,000 600,000 480,000 420,000
P2 - WH1 1,500,000 1,200,000 1,020,000 840,000 720,000
Total 1 275,000 220,000 185,000 150,000 130,000
(both plants)
Total 2 1,025,000 820,000 685,000 550,000 480,000
(Only Plant 1)
Total 3 1,650,000 1,320,000 1,120,000 920,000 790,000
(Only Plant 2)
Costs -- Both Plant Scenario
2011 2012 2013 2014 2015
Transport P1 - WH1
Transport P2 - WH2
Fixed Cost - P1
Fixed Cost - P2
Total
&A
Page &P

Analysis
&A
Page &P
Fixed Cost
Transportation Cost
Only Plant 1 Running
&A
Page &P
Fixed Cost
Transportation Cost
Only Plant 2 Running
&A
Page &P
Fixed Cost
Transportation Cost
Both Plants Running
&A
Page &P
Total 1
Total 2
Total 3
Total Costs

Costs -- Plant 1 Scenario

20112012201320142015

Transport P1 - WH1

Transport P1 - WH2

Fixed Cost - P1

Fixed Cost - P200000

Total

General Info.

Infrastructure Exercise Date: 28/10/97
Situation:
a) Package - RGB
b) Nr. Plants - 2
c) Nr. WH - 2
d) Period - 5 years
e) Sales Frcst. - Decreasing
Capacity MM U/C per Year:
Plant 1 - 5 avg. HK 70 (KS)
Plant 2 - 3 avg. HK 42 (KS)
Distance Matrix: (Km)
WH1 WH2
P1 50 600
P2 600 100
Diagram:
&A
Page &P
WH2
Franchise 2
Franchise 1
P2
P1
WH1

Sales Frcst.

Infrastructure Exercise Date: 28/10/97
Sales Forecast (M U.C)
RGB '98 '99 '00 '01 '02
WH1 5000.0 4000.0 3400.0 2800.0 2400.0
WH2 3000.0 2400.0 2000.0 1600.0 1400.0
Obs. Volume is Decreasing 15% per year.
&A
Page &P

Costs

Infrastructure Exercise Date: 28/10/97
Transport Costs:
0.5 1,000 cases per Km
Fixed Costs:
900,000 P1 = $600,000/year
800,000 P2 = $500,000/year
&A
Page &P

Analysis

Infrastructure Exercise Date: 28/10/97
Fixed Costs
'98 '99 '00 '01 '02
P1 800,000 800,000 800,000 800,000 800,000
P2 700,000 700,000 700,000 700,000 700,000
Total 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
Transportation Costs
'98 '99 '00 '01 '02
P1 - WH1 125,000 100,000 85,000 70,000 60,000
P2 - WH2 150,000 120,000 100,000 80,000 70,000
P1 - WH2 900,000 720,000 600,000 480,000 420,000
P2 - WH1 1,500,000 1,200,000 1,020,000 840,000 720,000
Total 1 275,000 220,000 185,000 150,000 130,000
(both plants)
Total 2 1,025,000 820,000 685,000 550,000 480,000
(Only Plant 1)
Total 3 1,650,000 1,320,000 1,120,000 920,000 790,000
(Only Plant 2)
Costs -- Plant 1 Scenario
2011 2012 2013 2014 2015
Transport P1 - WH1
Transport P1 - WH2
Fixed Cost - P1
Fixed Cost - P2 0 0 0 0 0
Total
&A
Page &P

Analysis
&A
Page &P
Fixed Cost
Transportation Cost
Only Plant 1 Running
&A
Page &P
Fixed Cost
Transportation Cost
Only Plant 2 Running
&A
Page &P
Fixed Cost
Transportation Cost
Both Plants Running
&A
Page &P
Total 1
Total 2
Total 3
Total Costs

Costs -- Plant 2 Scenario

20112012201320142015

Transport P2 - WH1

Transport P2 - WH2

Fixed Cost - P100000

Fixed Cost - P2

Total

General Info.

Infrastructure Exercise Date: 28/10/97
Situation:
a) Package - RGB
b) Nr. Plants - 2
c) Nr. WH - 2
d) Period - 5 years
e) Sales Frcst. - Decreasing
Capacity MM U/C per Year:
Plant 1 - 5 avg. HK 70 (KS)
Plant 2 - 3 avg. HK 42 (KS)
Distance Matrix: (Km)
WH1 WH2
P1 50 600
P2 600 100
Diagram:
&A
Page &P
WH2
Franchise 2
Franchise 1
P2
P1
WH1

Sales Frcst.

Infrastructure Exercise Date: 28/10/97
Sales Forecast (M U.C)
RGB '98 '99 '00 '01 '02
WH1 5000.0 4000.0 3400.0 2800.0 2400.0
WH2 3000.0 2400.0 2000.0 1600.0 1400.0
Obs. Volume is Decreasing 15% per year.
&A
Page &P

Costs

Infrastructure Exercise Date: 28/10/97
Transport Costs:
0.5 1,000 cases per Km
Fixed Costs:
900,000 P1 = $600,000/year
800,000 P2 = $500,000/year
&A
Page &P

Analysis

Infrastructure Exercise Date: 28/10/97
Fixed Costs
'98 '99 '00 '01 '02
P1 800,000 800,000 800,000 800,000 800,000
P2 700,000 700,000 700,000 700,000 700,000
Total 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
Transportation Costs
'98 '99 '00 '01 '02
P1 - WH1 125,000 100,000 85,000 70,000 60,000
P2 - WH2 150,000 120,000 100,000 80,000 70,000
P1 - WH2 900,000 720,000 600,000 480,000 420,000
P2 - WH1 1,500,000 1,200,000 1,020,000 840,000 720,000
Total 1 275,000 220,000 185,000 150,000 130,000
(both plants)
Total 2 1,025,000 820,000 685,000 550,000 480,000
(Only Plant 1)
Total 3 1,650,000 1,320,000 1,120,000 920,000 790,000
(Only Plant 2)
Costs -- Plant 2 Scenario
2011 2012 2013 2014 2015
Transport P2 - WH1
Transport P2 - WH2
Fixed Cost - P1 0 0 0 0 0
Fixed Cost - P2
Total
&A
Page &P

Analysis
&A
Page &P
Fixed Cost
Transportation Cost
Only Plant 1 Running
&A
Page &P
Fixed Cost
Transportation Cost
Only Plant 2 Running
&A
Page &P
Fixed Cost
Transportation Cost
Both Plants Running
&A
Page &P
Total 1
Total 2
Total 3
Total Costs