Please read the case on Michael's Hardware and prepare an executive summary (explaining the different transportation networks provided in the case). Answer the 4 questions at the end of the case using your understanding of the transportation networks. Please show your calculations in a table form while answering the questions

CASE STUDY Designing the Distribution Network for Michael's Hardware Ellen Lin, vice president of supply chain at Michael's Hard ware, was looking at the financial results from the past quarter and thought that the company could significantly improwe its distribution costs, especially given the recent expansion into Arizona. Transportation costs had been very high, and Ellen believed that moving away from LTL shipping to Arizona would help lower transportation costs without significantly mising inventories. Michacl's had 32 stores each in Illinots and Arizona and sourced its products from eight suppliers located in the Midwest. The company began in Illinois and its stores in the state enjoyed strong sales. Fach Illinois store sold on average 50,000 units a year of product from each supplier (for annual sules of 400,000 units per store). The Arizona operation was started about five years ago and still had plenty of room to grow, Each Arizona store solk 10,000 units a year from each supplier (for anaual sales of 80,000 units per store). Given large sales at its Illinois stores, Michacl's followed a direct ship model and shipped small truckloads (with a capacity of 10.000 units) from each supplier to each of its IIlinois stores. Each small truck cost 5450 per delivery from a supplier to an Illinois store and could carry up to 10,000 unils, In Aripona, however the company wanted to keep inventories low and used LTL, shipping that requined a minimum shipment of only 500 units per store but cost $0.50 per unit. Holding costs for Michael's were SI per unit per year. Ellea asked her stafr to propose different distribution alternatives for both 11 linois and Arizana. Distribution Alternatives for Illinois Ellen's staff proposed two alternative distributicn strategies for the stores in Illinoix: 1. Use direct shipping with even larger trucks that had a capacity of 40,000 units. These trucks charged only \$1.150 per delivery to an IIlinots store. Using larger tnucks would lower transportation costs but increase inveatories because of the larger batch sizes. 2. Run milk runs from each supplier to multiple stcres in Illinois to kower inventory cost even if the cost of transportation increased. Large trucks feapacity of 40.000 units) would charge \$1.000 per shipment and a charge of $150 per delivery. Small trucks (capacity of 10,000 units) would charge $400 per shipment and a charge of $50 per delivery. Distribution Alternatives for Arizona Ellen's staff had three alternatives for the stores in Arizona: 1. Use direct shipping with small trucks (capacity of 10,000 units) as was currently beiag done in IIlinois. Each small truck charged $2,050 for a shipment of up to 10,000 units from a supplier to a store in Arizona. This was a significantly lower transportation cost than was currently being charged by the LTL carrier. This alternative, how:ever, would increase inventory costs in Arizona given the larger batch sizes. 2. Run milk runs using small trucks (capacity of 10,000 units) from each supplier to multiple stores in Arizona. The small truck carrier charged \$2,000 per shipment and $50 per delivery. Thus, a milk run from a supplier to four stores would cost $2,200. Milk runs would iacur higher transportation costs than direct shipping but would keep inventory costs lower. 3. Use a third-party cross-docking facility in Arizona that charged 50.10 per unit for this cross-docking service. This would allow all suppliers to ship product (destined for all 32 Arizona stores) using a large truck to the cross-dock facility, where it would be cross-docked and sent to stores in smaller trucks (each smaller truck would now contain product from all eight suppliers). Large trucks (capacity of 40,000 units) charged $4,150 from each supplier to the cross-dock facility. Small trucks (capacity of 10,000 units) charged $250 from the cross-dock facility to each retail store in Arizona. Ellen wondered how best to structure the distribution network and whether the savings would be worth the effort. If she used milk runs in either region, she also had to dectde on how many stores to include in each milk run. QUESTIONS 1. What is the annual distribution cost of the current distribution network? Include transportation and inventory costs. 2. How should Ellen structure distribution from suppliers to the stores in Illinois? What unnual savings can she expect? 3. How should Ellen structure distribution from suppliers to the stores in Arizona? What annual savings can she expect? 4. What changen in the disrribution network (if any) would you suggest as both raakets grow