2: Configuring the Supply Chain Network: Add Distribution Centers or Not? Flooring and Beyond, Inc., is a U.S.-based importer and producer of flooring products. Its key product lines are engineered wood flooring, laminate flooring, and hardwood flooring. The company produces its engineered wood flooring and laminate flooring lines in its three manufacturing facilities located in Talladega, AL; Greenville, SC; and Rockford, IL. The hardwood flooring line is imported in a prefinished stage from manufacturers overseas and then finished in the same facilities. Flooring and Beyonds major customers are home improvement retailers, commercial businesses, and professional installers. Its largest customers are in Seattle, WA; Phoenix, AZ; Harford, CT; Durango, CO; Austin, TX; and St. Paul, MN. Due to steady growth in the supply of housing in these markets, Flooring, and Beyond has been receiving stable demand from these customers. The predictions for the year 2021 show that the company will fulfill a total of 1,450 pallets of flooring products each quarter. The production capacity of each plant is shown in Table 0 and the demand requests from the major customers are shown in Table 1. Table 0 Production Capacity of Plant (number of pallets) Plant Talladega, AL Greenville, SC Rockford, IL Production Capacity 800 600 750 Table 1 Quarterly demand (number of pallets) Seattle, WA Phoenix, AZ Hartford, CT Durango, CO Austin, TX St. Paul, MN 280 265 230 210 290 175 The company currently utilizes less-than-truckload services to ship its products from the manufacturing facilities to the customer locations. The costs associated with these shipments are summarized in Table 2. Table 2 Transportation-related costs in $ per pallet (Supply and Demand Location) Demand Supply Seattle, WA Phoenix, AZ Hartford, CT Durango, CO Austin, TX St. Paul, MN Talladega, AL $1,055 $780 $500 $700 $465 $575 Greenville, SC $1,120 $845 $495 $770 $555 $570 Rockford, IL $860 $755 $520 $635 $575 $320 Company analysts have developed an optimization model to allocate demand from the major customers to the supply facilities. The resulting distribution plan minimizes the total distribution costs in the current configuration. However, company executives are considering certain modifications in Flooring and Beyonds distribution network in order to possibly reduce the total operating costs. Particularly, they are considering opening new distribution centers that will serve as transshipment points. The potential locations are Tulsa, OK; Provo, UT; and Charleston, WV. If a distribution center is open, then the manufacturing facilities will ship products to this center rather than shipping them directly to customer locations. The units that arrive at a distribution center will be unloaded, consolidated, sorted, and finally shipped to the customer locations. No production activity will take place at the distribution centers, meaning that any quantity of products that arrives at a distribution center will leave the distribution center with no change in its quantity. The executives think this new configuration will simplify the supply chain network, but they would like to see a detailed cost analysis to understand whether any cost savings can be achieved. They determined the relevant costs for this analysis as fixed costs of the new distribution centers and the transportation costs between the newly introduced origindestination pairs. The data are summarized in Tables 3, 4 and 5. The results from the detailed cost analysis will provide company executives with insights into whether a distribution center should be made operational or not, and how the products will be distributed over the modified supply chain network in a way that will minimize the total distribution cost and the fixed cost of operating the distribution centers. Table 3 Transportation-related costs in $ per pallet (From Supply location to Distribution Center ) Distribution Centers Supply Locations Tulsa, OK Provo, UT Charleston, WV Talladega, AL $305 $640 $210 Greenville, SC $395 $695 $155 Rockford, IL $310 $490 $225 Table 4 Transportation-related costs in $ per pallet ( From Distribution Center to Demand Location) Demand LC DC Seattle, WA Phoenix, AZ Hartford, CT Durango, CO Austin, TX St. Paul, MN Tulsa, OK $650 $340 $475 $270 $135 $165 Provo, UT $240 $155 $710 $65 $370 $360 Charleston, WV $820 $600 $170 $480 $365 $250 Table 5 Distribution Centers Capacity (# pallets) Fixed Cost (Quarter) Tulsa, OK 800 $34,000 Provo, UT 850 $38,500 Charleston, WV 800 $35,000 Questions (1) What is the distribution plan that Flooring and Beyond uses in its current supply chain network? To answer this question, you need to develop an optimization model to allocate demand from the major customers to the supply facilities. (2) Develop a new optimization model to determine whether the company can generate any cost savings by introducing the distribution centers. As in Question 1, you need to develop an optimization model to determine the distribution plan. Your model should also optimally determine whether a distribution center should be made operational. What is the new distribution plan generated by solving this model? Is Flooring and Beyond able to obtain any cost savings