In general, what are the qualitative pros and cons for domestic sales of having multiple distribution centers and shipping locations in the United States?
The CEO is considering three options with the same total construction and operating costs: expanding the warehouse next to the East Coast manufacturing plant; building a West Coast distribution center; or building a combination manufacturing and warehouse location on the West coast given the following general information, what are at least 5 criteria that must be considered when locating a new or expanded shipping warehouse domestically?
The products are primarily medium- and large-size insulated coolers, like you might use for a picnic or trip to the beach. Transportation firms charge by space, or cubic feet, rather than weight, which is the more normal method.
The coolers are made of 3 components, which are all produced by suppliers solely on the East Coast; the raw materials to make this product are bulky, and inbound shipping from the East Coast suppliers currently represents 20% of total raw material costs.
The market is very competitive with generally stable or decreasing marketplace prices.
In states that are warm year-round, sales are pretty steady; in states that have seasons, 90% of sales occur in the May-August period.
Right now, to keep West Coast customers happy, the CEO says that they only charge those customers the local freight cost of shipping, which is $200 for anything up to half a truckload.
Describe 3 metrics that you would use to assess the success of any logistics plan involving you as a manufacturer and a mass merchandiser. Provide support for your selections.
Identify 3 subjective, qualitative factors to consider in the recommendation.
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.
Without calculations shown for how you reached your conclusion, section V 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 states that are warm year-round, sales are pretty steady In states 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.
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.
What are the 3 most important points that you want the CEO to understand about this entire decision-making process?