What cost improvement can be expected from the new location

Assignment Help Operation Management
Reference no: EM13221297

Superior Medical Equipment Company supplies electrical equipment that is used as components in the assembly of MRI, CAT scanners, PET scanners, and other medical diagnostic equipment. Superior has production facilities in Phoenix, Arizona, and Monterrey, Mexico. Customers for the components are located in selected locations throughout the United States and Canada. Currently, a warehouse, that receives all components from the plants and redistributed them to customers, is located at Kansas City, Kansas. Superior's management is concerned about location of its warehouse since its sales have declined due to increasing competition and shifting sales levels among the customers. The lease is about to expire on the current warehouse, and management wishes to examine whether it should be renewed or warehouse space at some other location should be leased. The warehouse owner has offered to renew the lease at an attractive rate of $2.75 per sq. ft. per year for the 200,000 sq. ft. facility. It is estimated that any other location would cost $3.25 per q. ft. for a similar-size warehouse. A new or renewed lease will be for five years. Moving the inventory, moving expenses for key personnel, and other location expenses would result in a one-time charge of $3, 00,000. Warehouse operating costs are expected to be similar at any location.

 

In the most recent year, Superior was able to achieve sales of nearly $70 million. Transportation costs from the plants to the Kansa warehouse were $2,162,535, and from the warehouse to customers were $4,819,569. One million dollars was paid annually as warehouse lease expenses. To study the warehouse location question, data shown in Tables 1 and 2 were collected.

 

Although transport costs are not usually expressed on a $/cwt./mile basis, given that the outbound transportation costs for the most recent year were $4,819,569, the weighted average distance of the shipments was 1128 miles, and the annual volume shipped was 182,100 cwt., the estimated average outbound rate from a warehouse is $0.0235/cwt./mile.

 

Table 1 Volume, Rate, Distance, and Coordinate Data for Shipping from Plants to the Kansas City Warehouse in Truckload Quantities (Class 100) for the Most Recent Year.

 

Examination Paper: Logistics Management

 

IIBM Institute of Business Management 4

 

Table 2 Volumes, Rate, Distance, and Coordinate Data for Shipping from Plants to the Kansas City

 

Warehouse in Truck in 5,000 lb Quantities (Class 100) for the Most Recent Year.

 

PLANT LOCATION

ANNUAL VOLUME,

TRANSPORT RATE,S/CWT

DISTANCE,MILES

GRID COORDINATES^a

            X

GRID CO-ORD^A

    Y

PHOENIX

61500

16.73

1163

3.60

3.90

MONTERREY

120600

9.40

1188

6.90

1.00

 

amiles = 230 X coordianate distance

 

bcwt =100 lb

 

Table 2: Volumes,Rate,Distance and co-ordinate data for shipping from plants to the Kansas city Warehouse in Truck in 5000lb quantities(Class 100) for the most recent year

 

PLANT LOCATION

ANNUAL VOLUME,CWTb

TRANSPORT RATE,S/CWT

DISTANCE,MILES

GRID COORDINATES^a

            X

GRID CO-ORD^A

    Y

Seattle

17000

33.69

1858

0.90

9.10

Los Angels

32000

30.43

1496

1.92

4.20

Denver

12500

25.75

598

5.6

6.10

Dallas

9500

18.32

560

7.80

3.6

Chicago

29500

25.24

504

10.20

6.90

Atlanta

21000

19.66

855

11.30

3.95

New York

41300

26.52

1340

14.00

6.55

Toronto

8600

26.17

1115

12.70

7.80

Montreal

10700

27.98

1495

14.30

8.25

Total Kansan city

182100

 

 

8.20

6.00

 

Questions:

 

1. Based on information for the current years, is Kansas City the best location for a warehouse? If not, what are the coordinates for a better location>? What cost improvement can be expected from the new location?

 

2. If by year 5 increases are expected of 25 percent in warehouse outbound transport rates and 15 percent in warehouse inbound rates, would your decision change about the warehouse location?

Reference no: EM13221297

Questions Cloud

Describe a project selection process : Please describe a project selection process from either the literature or an organization of your choice. If it's from the literature, please submit the article; if it's an organization, please include the website. Include a figure showing the p..
Develop a warehousing operational strategy : How should the chief warehouse manager of PCL approach problem and develop a warehousing operational strategy to overcome the problem and fulfill the redefined objectives of the firm.
Explain complexities that would arise under new scenarios : Assume that Microsoft is considering a merger. The possible merger faces some threats and that the industry desides on self-expansion as an alternative strategy, describe the additional complexities that would arise under this new scenario of expa..
Explain what is the volume of oil : The density of olive oil is 0.918 , the density of vinegar is 1.006 , and the two do not mix. If a certain mixture of olive oil and vinegar has a total mass of 407.1 and a total volume of 421.6 , what is the volume of oil and what is the volume of..
What cost improvement can be expected from the new location : Based on information for the current years, is Kansas City the best location for a warehouse? If not, what are the coordinates for a better location>? What cost improvement can be expected from the new location?
Depict a mechanism to demonstrate how pyridine catalyzes : Draw a mechanism to demonstrate how pyridine catalyzes the hydrolysis of acetic anhydride to two molecule of acetic acid. Is this reaction reversible? why or why not? Show all non-bonding electrons on each atom, circle positive charges
What are the potential gains and the potential losses : What is an optimum currency area. What are the potential gains and the potential losses when countries adopt a common currency In terms of a country reacting to economic shocks, what conditions would be desirable in labor markets.
What is business model design and innovation : What is "Business Model Design and Innovation"? Please provide examples and discussion for each factor listed). At least 3 paragraphs.
Explain benzopinacolone have nearly identical melting points : benzopinacol and benzopinacolone have nearly identical melting points, describe how you might prove that samples of the two compounds are different

Reviews

Write a Review

 

Operation Management Questions & Answers

  Reply to linear programming model

Find out the optimal solution by using the graphical solution procedure. How many tons of each product must be produced and what is the project total profit contribution?

  Managers frequently use experience and intuition to make

If managers frequently use experience and intuition to make complex, nonprogrammed decisions, how do they apply evidence-based management

  Determine the biggest organizational managerial mistake

Determine the biggest organizational managerial mistake you have seen or read about and determine how this mistake affected the organization.

  Calculate the average setup cost per year

Radovilsky Manufacturing Company, in Hayward. California. makes flashing lights for toys. The company operates its production facility 300 days per year.

  Organizational psychology

What is organizational psychology? How is it different from general psychology?

  Determine optimal quantities of decision variables

Determine optimal quantities of decision variables. Which resources are not completely used by your solution. Elucidate how much of each resource is unused.

  Receive customer order from counter employee

receive customer order from Counter Employee, retrieve uncooked food, drop food into fry vat, wrap cooked food into special packaging

  Describe how much information is a firm obliged

From an ethical perspective, describe how much information is a firm obliged to tell a potential strategic alliance partner about

  Graphically decide a daily production plan that minimizes

Graphically decide a daily production plan that minimizes the cost of meeting Leary Chemical's daily demands.

  Assume that you own a very upscale restaurant

Assume that you own a very upscale restaurant (think shearwater at the hotel del Coronado or the grant grill at the us grant hotel). Business has fallen off greatly at your restraurant because of the economic crisis

  How would you handle this situation

Due to cutbacks at the company you work for, the division you manage recently merged with another division to minimize costs.

  Identify which that you believe to be most important

Identify which that you believe to be most important, and describe at least one strategic response.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd