Reference no: EM131086748
XYZ company manufactures toys in three different countries: S1, S2 and S3. It sells these toys in four countries: A, B, C and D. The following table shows the total requirement for each type of toy by country of manufacture:
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A
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B
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C
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D
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S1
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10
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40
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60
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10
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S2
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4
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15
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21
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36
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S3
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31
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20
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14
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16
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XYZ is looking at two potential options:
Option 1. Direct shipment. Each factory directly ships its toys to the destination country. In this case, transportation cost is $1.50 per lb-mile. Assume that each toy weighs 1 lb (one lb-mile indicates transportation effort to ship one pound weight over one mile distance).
Option 2. Via warehouse. In this case, a central warehouse is established. All shipments from S1, S2 and S3 go to the central warehouse. In the central warehouse, toys are repackaged by destination - that is, all toys needed for A are consolidated and shipped to A. Cost of transportation for in-bound units to the central warehouse is $0.85 per lb-mile, and outbound transportation cost is $1.30 per lb-mile.
The (x, y) coordinates for the factories and customers are given below:
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A
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B
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C
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D
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S1
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S2
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S3
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x- coordinate
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7
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8
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13
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20
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5
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10
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1
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y- coordinate
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4
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15
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12
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12
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13
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14
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5
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Answer the following questions:
What is the total cost if direct shipments are used?
Should XYZ establish a central warehouse? If so, where should it be located? Justify or support your analysis with adequate computational analysis.
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