Factory directly ships its toys to the destination country

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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:

 

A

B

C

D

S1

10

40

60

10

S2

4

15

21

36

S3

31

20

14

16

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:

 

A

B

C

D

S1

S2

S3

x- coordinate

7

8

13

20

5

10

1

y- coordinate

4

15

12

12

13

14

5

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.

Reference no: EM131086748

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