Consider a consumer packaged goods company that sells their products to supermarkets. For the bigger supermarket retailers, they ship full truckloads from their warehouses directly to the retailer’s warehouses. For smaller ones, they will ship their product in full truckloads from their warehouse to local wholesalers who then ship to the stores. This firm is interested in the best locations for their warehouses to minimize the transportation cost. If they have built a cost matrix that has the cost per truckload from every potential warehouse to every one of their ship-to locations, why don’t they need to worry about the distance between the potential warehouses and the ship-to points?
Answer to relevant QuestionsWhen we build a model using expected demand for the next three years, we clearly realize that the demand will be a forecast. Why should you also consider the transportation cost to be a forecast? What does this tell you ...If it costs $10 million to build a new facility and you expect to depreciate the building over 20 years, why wouldn’t you include the full $10 million when you are building a model with a year’s worth of demand? If your baseline model’s costs are 20% lower than the actual costs, under what conditions could this still be a valid baseline? Even though we don't have the cost of opening a warehouse in the model, what information does the model give us in terms of what this cost needs to be for these solutions to be effective? Let’s consider the case of a chewing gum manufacturer that is interested in optimizing its manufacturing network and sourcing strategy. The products include sugar-based and sugar-free sticks of gum. Following is a quick ...
Post your question