Section VI: Quantitative Factors (Excel Spreadsheet)
Provide a detailed recommendation as to whether you should open a West Coast distribution center, add on to the existing East Coast factory and warehouse, or build a combination West Coast manufacturing location and warehouse? Your response must be quantitatively based using the data in section II, the additional data below, and from external resources as needed.
Use this template attached to show your numeric calculations. Without calculations shown for how you reached your conclusion, section IV will earn 0 points. REMEMBER: Decisions like this are based on a comparison of option A versus current methods, or option B versus current methods.
- The products are primarily medium- and large-size insulated coolers, like you might use for a picnic or trip to the beach. Each cooler occupies 2 cubic feet of trailer truck space; trailers are 10 x 10 x 40’ long and cost $1,000 to ship from the East Coast to the West Coast.
- The coolers are made of 3 components: 1 lb of raw material A, 1/4 lb of raw material B, and 1 gallon of material C, weighing 10 lbs. Based on this information, the added freight cost to get raw materials to a West Coast manufacturing location would be $0.20, $0.20, and $0.60 per finished-good unit, respectively.
- The mass merchandiser location on the West Coast will be purchasing 10,000 units per week, but in lots of only 1,000 at a time because of their retail store space constraints.
- The market is very competitive, with generally stable or decreasing marketplace prices.
- In countries that are warm year-round, sales are pretty steady; in southern countries and states or those that have seasons, 90% of sales occur in the May–August period.
- The raw materials to make this product are bulky, and inbound shipping from the suppliers to the manufacturing plant represents 20% of total raw material costs. These raw materials are supplied in the United States from the East Coast; they are not available elsewhere.
- Domestic demand is expected to increase 5% annually; international demand is expected to increase 15% annually in France and Spain, but only 2% in Northern European countries.
- In the past, to keep West Coast customers happy, the CEO agreed to freight equalize customer shipping charges to be competitive with West Coast competition. She says that they only charge those customers the local freight cost of shipping, which is $200 per delivery for anything up to half-truckload quantities.
Section VII: Respond to the following in 250 words:
- Describe how what was learned in this mass merchandising industry could be applied to the logistics challenges in some other industry.
- Would the logistics criteria for decision making be the same as for mass merchandising? Why or why not?
- Would the logistics metrics be the same as for the mass merchandising industry? Why or why not?