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UNIVERSITI UTARA MALAYSIA MASTER OF BUSINESS ADMINISTRATION (MBA)

Case Study: Designing the Production Network at Coolwipes

Submitted By: Tharshini Manalan (COHORT 9 - ID 814789)

For SUPPLY CHAIN MANAGEMENT (BJMP 6023) DR. MARTINO LUIS

BJMP6023 Supply Chain Management

Case study: Designing the Production Network at Coolwipes Question 1 What is the annual cost of serving the entire nation from Chicago? Based on the calculation below, the total cost to serve Chicago is $32,661.40.

Plant Costs and Capacity Wipes

Ointment

Variable Variable Plant Fixed Cost Cost/unit Capacity Fixed Cost Cost/unit Capacity Chicago 5000 10 5000 1500 20 Princeton, NJ 2200 10 2000 1500 20 Atlanta 2200 10 2000 1500 20 LA 2200 10 2000 1500 20

1000 1000 1000 1000

Regional Demand by Product Zone Wipes Ointment

Upper lower Northwest southwest midwest midwest northeast southeast 500 700 900 800 1000 50 90 120 65 120

Total 600 4500 70 515

Transportation Costs Upper lower Northwest southwest midwest midwest Chicago

northeast southeast

Transport cost Multiplier 1

BJMP6023 Supply Chain Management 6.32

6.32

3.68

4.04

5.76

5.96

Princeton, NJ 6.60

6.60

5.76

5.92

3.68

4.08

Atlanta

6.72

6.48

5.92

4.08

4.04

3.64

LA

4.36

3.68

6.32

6.32

6.72

6.60

Wipes Variables Northwest southwest Chicago 500 700 Princeton, NJ 0 0 Atlanta 0 0 LA 0 0 Demand 0 0

Upper lower midwest midwest northeast southeast 900 800 1000 0 0 0 0 0 0 0 0 0 0 0 0

Fixed 600 0 0 0 0

1 0 0 0

Capacity 500 0 0 0

1 0 0 0

Capacity 485 0 0 0

Ointment Variables Upper lower Northwest southwest midwest midwest northeast southeast Chicago 50 90 120 65 120 Princeton, NJ 0 0 0 0 0 Atlanta 0 0 0 0 0 LA 0 0 0 0 0 Demand 0 0 0 0 0

Total Cost

32661.4

Fixed 70 0 0 0 0

BJMP6023 Supply Chain Management

Question 2 Do you recommend adding any plant(s)? Is so, where should the plant(s) be built and what lines should be included? Assume that the Chicago plant will be maintained at its current capacity but could be run at lower utilization. Would your decision be different if transportation costs are half of their current value? What if they were double their current value? There was reduction of total cost to $29,188.80. Based on this reduction would like to recommend on building a plant at Princeton, Atlanta and LA. All of this plant can offer both the Wipes and Ointment product line. The calculation is shown below :

Plant Costs and Capacity Plant Fixed Cost Chicago 5000 Princeton, NJ 2200 Atlanta 2200 LA 2200

Wipes Ointment Variable Variable Cost/unit Capacity Fixed Cost Cost/unit Capacity 10 5000 1500 20 10 2000 1500 20 10 2000 1500 20 10 2000 1500 20

1000 1000 1000 1000

Regional Demand by Product Zone Wipes Ointment

Upper lower Northwest southwest midwest midwest northeast southeast 500 700 900 800 1000 50 90 120 65 120

Total 600 4500 70 515

BJMP6023 Supply Chain Management

Transportation Costs Upper lower Northwest southwest midwest midwest

northeast southeast

6.32

6.32

3.68

4.04

5.76

5.96

Princeton, NJ 6.60

6.60

5.76

5.92

3.68

4.08

Atlanta

6.72

6.48

5.92

4.08

4.04

3.64

LA

4.36

3.68

6.32

6.32

6.72

6.60

Chicago

Transport cost Multiplier 1

Wipes Variables Upper lower Northwest southwest midwest midwest northeast southeast Chicago 0 0 900 800 0 Princeton, NJ 0 0 0 0 1000 Atlanta 0 0 0 0 0 LA 500 700 0 0 0 Demand 0 0 0 0 0

Upper lower Northwest southwest midwest midwest northeast southeast Chicago 0 0 120 65 0 Princeton, NJ 0 0 0 0 120

Fixed 0 0 600 0 0

1 0.5 0.3 0.6

Fixed 0 0

Capacity 3300 0 0 0

Capacity 1 815 0.12 0

BJMP6023 Supply Chain Management Atlanta LA Demand

Total Cost

0 50 0

0 90 0

0 0 0

0 0 0

0 0 0

70 0 0

0.07 0.14

0 0

29188.8

The recommendation would remain the same to build all the additional plants, but with different production quantities if the transportation costs were half their current amount as the resulting total cost would now be $16,947. 88 as calculated below:

Plant Costs and Capacity Plant Fixed Cost Chicago 5000 Princeton, NJ 2200 Atlanta 2200 LA 2200

Wipes Ointment Variable Variable Cost/unit Capacity Fixed Cost Cost/unit Capacity 10 5000 1500 20 10 2000 1500 20 10 2000 1500 20 10 2000 1500 20

1000 1000 1000 1000

Regional Demand by Product Zone Wipes Ointment

Upper lower Northwest southwest midwest midwest northeast southeast 500 700 900 800 1000 50 90 120 65 120

Total 600 4500 70 515

BJMP6023 Supply Chain Management

Transportation Costs Upper lower Northwest southwest midwest midwest

northeast

southeast

3.16

3.16

1.84

2.02

2.88

2.98

Princeton, NJ 3.30

3.30

2.88

2.96

1.84

2.04

Atlanta

3.36

3.24

2.96

2.04

2.02

1.82

LA

2.18

1.84

3.16

3.16

3.36

3.30

Chicago

Transport cost Multiplier 0.5

Wipes Variables Upper lower Northwest southwest midwest midwest northeast southeast Fixed Capacity Chicago 148.3937 196.58816 264.565 234.148546 270.3321 168.9190782 1 3717.053 Princeton, NJ 115.8152 165.81522 212.283 187.675122 245.4469 145.0543489 0.53604 0 Atlanta 115.8797 166.05073 211.969 191.286233 244.7403 145.9178755 0.53777 0 LA 120.2114 171.54589 211.184 186.890098 239.4807 140.1086974 0.53471 0 Demand 0 0 0 0 0 0

Ointment Variables Chicago

Upper lower Northwest southwest midwest midwest northeast southeast Fixed Capacity 45.25362 53.508448 78.9855 59.8188387 59.75241 45.83936501 1 656.8418

BJMP6023 Supply Chain Management Princeton, NJ Atlanta LA Demand

0.175122 0 4.571256 0

Total Cost

16947.88

10.175123 10.41063 15.905799 0

14.1425 0.78502517 22.30676 13.8285 4.39613612 21.60024 13.0435 0 16.340058 0 0 0

9.414253628 10.27777926 4.468602102 0

0.057 0.06051 0.05433

0 0 0

If transportation costs were double their current levels, the recommendation would be to stay with the Chicago facility servicing the entire nation as the total costs would rise to $86,530.20.

Plant Costs and Capacity Wipes

Plant Chicago Princeton, NJ Atlanta LA

Ointment

Variable Fixed Variable Fixed Cost Cost/unit Capacity Cost Cost/unit Capacity 5000 10 5000 1500 20 1000 2200 2200 2200

10 10 10

2000 2000 2000

1500 1500 1500

20 20 20

1000 1000 1000

Regional Demand by Product Zone Wipes

Upper lower Northwest southwest midwest midwest northeast southeast Total 500 700 900 800 1000 600 4500

BJMP6023 Supply Chain Management Ointment

50

90

120

65

120

70

515

Transportation Costs North west

South west

Upper mid west

lower mid west

North east 11.52

Transport cost Multiplier

South east

Chicago Princeton, NJ

12.64

12.64

7.36

8.08

13.20

13.20

11.52

11.84

7.36

8.16

Atlanta

13.44

12.96

11.84

8.16

8.08

7.28

8.72

7.36

12.64

12.64

LA

11.92

13.44

2

13.20

Wipes Variables

0

Upper lower mid mid North west west east 0 900 800

0 0

0 0

0 0

0 0

1000 0

0 600

0.5 0.3

0 0

500

700

0

0

0

0

0.6

0

North west Chicago Princeton, NJ Atlanta LA

South west

South east 0

Fixed Capacity 0 1 3300

BJMP6023 Supply Chain Management Demand

0

0

0

0

0

0

Ointment Variables

0

Upper lower mid mid North west west east 0 120 65

0

0

0

0

120

0

0.12

0

0 50 0

0 90 0

0 0 0

0 0 0

0 0 0

70 0 0

0.07 0.14

0 0

North west Chicago Princeton, NJ Atlanta LA Demand

Total Cost

South west

86530.2

South east 0

Fixed Capacity 0 1 815

BJMP6023 Supply Chain Management

Question 3 As calculated below in the three spreadsheets, the recommendations would be exactly as above for current costs, transportation costs at half their current level and with transportation costs at double their current costs. The only difference in the recommendations would involve the production quantities at each facility.

Plant Costs and Capacity Wipes Plant Chicago Princeton, NJ Atlanta LA

Ointment

Variable Variable Fixed Cost Cost/unit Capacity Fixed Cost Cost/unit Capacity 5000 10 5000 1500 20 2200 10 2000 1500 20 2200 10 2000 1500 20 2200 10 2000 1500 20

1000 1000 1000 1000

Regional Demand by Product Zone Wipes Ointment

Northwest

Upper southwest midwest lower midwest northeast southeast 500 700 900 800 1000 50 90 120 65 120

Total 600 4500 70 515

Transportation Costs Northwest

southwest

Upper midwest

lower midwest

northeast

southeast

Transport cost Multiplier

BJMP6023 Supply Chain Management

Chicago

6.32

6.32

3.68

4.04

5.76

5.96

Princeton, NJ

6.60

6.60

5.76

5.92

3.68

4.08

Atlanta

6.72

6.48

5.92

4.08

4.04

3.64

LA

4.36

3.68

6.32

6.32

6.72

6.60

1

Wipes Variables Chicago Princeton, NJ Atlanta LA Demand

Northwest southwest 110.8526 147.57128 119.5143 169.51426 117.7819 171.2466 151.8513 211.66785 0 0

Upper midwest lower midwest northeast southeast Fixed Capacity 329.807 264.962732 213.3321 102.9381071 0.23389 0 193.529 171.416398 278.5836 175.6963702 0.55413 0 191.219 197.978638 273.3866 182.0482804 0.56683 0 185.445 165.641932 234.6977 139.3172423 0.54431 0 0 0 0 0

Ointment Variables Northwest Chicago Princeton, NJ Atlanta LA Demand

Total Cost

0 0 7.894912 42.10509 0

31015.503

southwest 0 6.8413447 21.368701 61.789955 0

Upper midwest lower midwest northeast southeast Fixed Capacity 120 49.3274491 0 0 0.16933 0 0 0 65.13929 36.90651706 0.10889 0 0 15.6725509 46.77481 33.09348294 0.1248 0 0 0 8.0859 0 0.11198 0 0 0 0 0

BJMP6023 Supply Chain Management

Plant Costs and Capacity Wipes Plant Chicago Princeton, NJ Atlanta LA

Ointment

Variable Variable Fixed Cost Cost/unit Capacity Fixed Cost Cost/unit Capacity 5000 10 5000 1500 20 2200 10 2000 1500 20 2200 10 2000 1500 20 2200 10 2000 1500 20

1000 1000 1000 1000

Regional Demand by Product Zone Wipes Ointment

Upper lower Northwest southwest midwest midwest 500 700 900 50 90 120

northeast southeast 800 1000 65 120

Total 600 4500 70 515

Transportation Costs Northwest

southwest

Upper midwest

lower midwest

northeast

Transport cost Multiplier

southeast

Chicago

3.16

3.16

1.84

2.02

2.88

2.98

Princeton, NJ

3.30

3.30

2.88

2.96

1.84

2.04

Atlanta

3.36

3.24

2.96

2.04

2.02

1.82

LA

2.18

1.84

3.16

3.16

3.36

3.30

0.5

BJMP6023 Supply Chain Management

Wipes Variables Chicago Princeton, NJ Atlanta LA Demand

Upper lower Northwest southwest midwest midwest northeast southeast Fixed Capacity 123.8451 160.56383 342.799 277.955261 226.3247 115.9306609 0.24948 0 115.1834 165.18324 189.198 167.085556 274.2527 171.3655169 0.54113 0 113.4511 166.91575 186.889 193.6488091 269.0557 177.7174251 0.55384 0 147.5204 207.337 181.114 161.311092 230.3668 134.986397 0.53132 0 0 0 0 0 0 0

Ointment Variables Northwest Chicago Princeton, NJ Atlanta LA Demand

Total Cost

southwest

0 0 7.894912 42.10509 0

0 6.8413447 21.368701 61.789955 0

Upper lower midwest midwest northeast southeast Fixed Capacity 120 49.3274491 0 0 0.16933 0 0 0 65.13929 36.90651706 0.10889 0 0 15.6725509 46.77481 33.09348294 0.1248 0 0 0 8.0859 0 0.11198 0 0 0 0 0

11948.843

Plant Costs and Capacity Wipes

Plant

Fixed Cost

Variable Cost/unit

Ointment

Capacity

Fixed Cost

Variable Cost/unit

Capacity

BJMP6023 Supply Chain Management Chicago Princeton, NJ Atlanta LA

5000

10

5000

1500

20

1000

2200 2200 2200

10 10 10

2000 2000 2000

1500 1500 1500

20 20 20

1000 1000 1000

Regional Demand by Product Zone Wipes Ointment

Upper lower Northwest southwest midwest midwest northeast southeast Total 500 700 900 800 1000 600 4500 50 90 120 65 120 70 515

Transportation Costs Upper lower Northwest southwest midwest midwest northeast southeast Chicago Princeton, NJ

12.64

12.64

7.36

8.08

13.20

13.20

11.52

11.84

7.36

8.16

Atlanta

13.44

12.96

11.84

8.16

8.08

7.28

8.72

7.36

12.64

12.64

LA

11.52

13.44

Transport cost Multiplier

11.92

2

13.20

Wipes Variables Upper lower Northwest southwest midwest midwest northeast southeast Fixed

Capacity

BJMP6023 Supply Chain Management Chicago Princeton, NJ Atlanta LA Demand

0

0

900

800

0

0

0.34

0

0 0

0 0

0 0

0 0

1000 0

0 600

0.5 0.3

0 0

500 0

700 0

0 0

0 0

0 0

0 0

0.6

0

Ointment Variables Chicago Princeton, NJ Atlanta LA Demand

Total Cost

Upper lower Northwest southwest midwest midwest northeast southeast Fixed Capacity 0 0 120 65 0 0 0.185 0 0

0

0

0

120

0

0.12

0

0 50 0

0 90 0

0 0 0

0 0 0

0 0 0

70 0 0

0.07 0.14

0 0

82007.7