Question

A small medical supply company in Australia has just developed a never-before-seen product with major pre-release orders from around the globe already. This company will need more production capacity to support their forecasted sales for this new blockbuster product. If they simply expand their plant in Australia, they estimate that their production, transportation, and warehousing costs will be approximately $450 million (AUD). After a careful network design study, they have found two solutions that people in the company generally like:
a. Solution #1: Estimated cost of $375 million with a new large plant in China to supplement their existing plant in Australia.
b. Solution #2: Estimated cost of $385 million with three new smaller plants in China, Brazil, and Italy to supplement their plant in Australia. These plants would service their local regions.
(Assume the costs listed here include all the costs that are relevant.) What would be the best reasons for picking Solution #1? For picking Solution #2? Why is it important for this firm to consider other nonquantifiable factors when determining their best course of action for expansion?


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  • CreatedOctober 29, 2015
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