[20 points] Describe how increasing or decreasing the number of facilities affect following factors. Response time Inventory costs Transportation cost Facility cost Total logistics cost [20 points] List and briefly describe the design options for distribution network. What type(s) of distribution network is (are) typically best suited for commodity items? Provide reasoning to your answer. What type(s) of distribution network is (are) best suited to highly differentiated products? Provide reasoning to your answer. [10 points] A group of inventors have designed a portable grill with some unique features. They plan to fund the initial stages of the product lifecycle through a crowdfunding method, such as Kickstarter, and later-on when the product reaches its mature part of the product life cycle, sell the grill through traditional hardware store chains. Do you think their plan of selling channel is a good idea? Discuss your answer. [10 points] How do import duties and exchange rates affect the location decision in a supply chain? How is the rise in transportation costs likely to affect global supply chain networks? [20 points] DryIce, Inc., is a manufacturer of air conditioners that has seen its demand grow significantly. The company anticipates nationwide demand for the next year to be 180,000 units in the South, 120,000 units in the Midwest, 110,000 units in the East, and 100,000 units in the West. Managers at DryIce are designing the manufacturing network and have selected four potential sites—New York, Atlanta, Chicago, and San Diego. Plants could have a capacity of either 200,000 or 400,000 units. The annual fixed costs at the four locations are shown in the following table, along with the cost of producing and shipping an air conditioner to each of the four markets. Where should DryIce build its factories and how large should they be? [Hint: use the Excel template of capacitated plant location model] Production and Transport Costs for DryIce, Inc. New York Atlanta Chicago San Diego Annual fixed cost of 200,000 plant $6 million $5.5 million $5.6 million $6.1 million Annual fixed cost of 400,000 plant $10 million $9.2 million $9.3 million $10.2 million East $211 $232 $238 $299 South $232 $212 $230 $280 Midwest $240 $230 $215 $270 West $300 $280 $270 $225 [20 points] StayCool, a manufacturer of high-quality refrigerators in India has one factory, located in Mumbai. Due to rapidly growing demand, the CEO of StayCool has decided to set up another factory to serve its southern markets. The supply chain manager is asked to find a suitable location for the new factory. Four parts plants, located in Chennai, Bengaluru, Hyderabad, and Mumbai, will supply parts to the new factory, which will serve major markets in Andhra Pradesh (AP), Karnataka (KK), Kerala (KL), and Tamil Nadu (TN). The coordinate location, the demand in each market, the required supply from each parts plant, and the shipping cost for each supply source or market are shown in the table below. Find out the location for the new factory which minimizes the total transportation cost. [Hint: use Gravity location model Excel template]. Locations of Supply Sources and Markets for StayCool refrigerators Sources/Markets Transportation Cost Rupees/Ton Mile (Fn ) Quantity in Tons (Dn ) Coordinates xn yn Supply Sources Bengaluru 35 400 300 300 Chennai 32 700 500 300 Hyderabad 28 500 400 825 Mumbai 33 600 100 1100 Markets Andhra Pradesh 40 450 450 425 Karnataka 40 350 200 400 Kerala 40 400 250 150 Tamil Nadu 40 600 400 200

The increase or decrease in facilities effect the following factors:

Response time- This is the time in between the customer placing the order and recieving the delivery. Increase in facilities will result in small response time and decrease in facilities will result in longer response time. Also the customers who can accept larger response time can have facilties located far from the customers and vice versa.

Inventory costs- Inventory costs increase with the increase in facilities and decrease with the decrease in it.

Transportation costs- If the economies scale of inbound transportation are maintained, transportation costs decrease with increase in the facilities and increase with the decrease in facilities. But if the economies scale of inbound transportation shows losses then the transportation costs will increase with the increase in facilities and vice versa.

Facility costs- The faciity costs decrease with the reduction in the number of facilities and increases with the increase in it as in less number of facilities the firm is able to exploit economies of scale.

Total logistics cost- This includes the cost of inventory, transportation and facilties combined together. With the increase in number of facilities the total logictics cost at first decrease and then gradually increase. The goal of the firm should be to keep the logistics costs minimum so that it has the scope of increasing the facilities to reduce the response time to its customers.

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