supply chain management- Mixed integer linear programming- SportStuff.com Case - This Case study assignment should be solved in Excel - there's two question at the end - the highlighted text in red should be ignored and not considered

excel file should be provided

Managing Growth at SportStuff.com In December 2008, Sanjay Gupta and his management jackets from families and any surplus equipment from team were busy evaluating the performance at manufacturers and retailers and sell these over the Internet. SportStuff.com over the previous year. Demand had The idea was well received in the marketplace, demand grown by 80 percent. This growth, however, was a grew rapidly, and by the end of 2004, the company had mixed blessing. The venture capitalists supporting the sales of $0.8 million. By this time, a variety of new company were very pleased with the growth in sales and and used products were being sold, and the company the resulting increase in revenue. Sanjay and his team, received significant venture capital support. however, could clearly see that costs would grow faster In June 2004, Sanjay leased part of a warehouse than revenues if demand continued to grow and the in the outskirts of St. Louis to manage the large supply chain network was not redesigned. They decided amount of product being sold. Suppliers sent their to analyze the performance of the current network to see product to the warehouse. Customer orders were how it could be redesigned to best cope with the rapid packed and shipped by UPS from there. As demand growth anticipated over the next three years. grew, SportStuff.com leased more space within the warehouse. By 2007, SportStuff.com leased the entire warehouse and orders were being shipped to SportStuff.com customers all over the United States. Management Sanjay Gupta founded SportStuff.com in 2004 with a mis divided the United States into six customer zones for sion of supplying parents with more affordable sports planning purposes. Demand from each customer zone equipment for their children. Parents complained about in 2007 was as shown in Table 5-15. Sanjay estimated having to discard expensive skates, skis, jackets, and shoes that the next three years would see a growth rate of because children outgrew them rapidly. Sanjay's initial about 80 percent per year, after which demand would plan was for the company to purchase used equipment and level off. Table 5-15 Regional Demand at SportStuff.com for 2007 Zone Demand in 2007 Zone Demand in 2007 Northwest 320,000 Lower Midwest 220,000 Southwest 200,000 Northeast 350,000 Upper Midwest 160,000 Southeast 175,000 XXX rred The Network Options aggregating throughput through a few facilities reduces the Sanjay and his management team could see that they inventory held as compared with disaggregating through- put throug! warehouse handling 1 needed more warehouse space to cope with the antici- million units pated growth. One option was to lease more warehouse aventory holding cost of space in St. Louis itself. Other options included leasing has problems solving the nonlinear objective function, use $600,000 in your version of Excel warehouses all over the country. Leasing a warehouse the following inventory costs: involved fixed costs based on the size of the warehouse and variable costs that depended on the quantity shipped through the warehouse. Four potential locations for Range of F Inventory Cost warehouses were identified in Denver, Seattle, Atlanta, 0-2 million and Philadelphia. Warehouses leased could be either 0.310F small about 100,000 sq. ft.) or large (200,000 sq. ft.). 2-4 million 0.170F Small warehouses could handle a flow of up to 2 million 4-6 million 0.133F units per year, whereas large warehouses could handle a More tha: milion $798,000Y + 0.113F flow of up to 4 million units per year. The current ware- house in St. Louis was small. The fixed and variable costs of small and large warehouses in different loca- If you can handle only a single linear inventory tions are shown in Table 5-16. cost, you should use $475,000Y + 0.165E For each Sanjay estimated that the inventory holding costs at facility, Y=1 if the facility is used, 0 otherwise. a warehouse (excluding warehouse expense) was about SportStuff.com charged a flat fee of $3 per shipment $600 VF, who ats flowing through sent to a customer. An average customer order contained the warehouse hip is based on the four units. SportStuff.com in turn contracted with UPS to theoretical obs held at a facility handle all its outbound shipments. UPS charges were (not across the network) is proportional to the square based on both the origin and the destination of the root of the throughput through the facility. As a result, shipment and are shown in Table 5-17. Management XXX XXX Table 5-16 Fixed and Variable Costs of Potential Warehouses Small Warehouse Large Warehouse Fixed Cost ($/year) Variable Cost ($/Unit Flow) Location Fixed Cost ($/year) Variable Cost ($/Unit Flow) Seattle 0.20 0.20 Denver 0.20 300,000 250,000 220,000 220,000 240,000 0.20 0.20 St. Louis 500,000 420,000 375,000 375,000 400,000 0.20 0.20 0.20 Atlanta Philadelphia 0.20 0.20 estimated that inbound transportation costs for shipments from suppliers were likely to remain unchanged, no matter what warehouse configuration was selected. Questions 1. What is the cost SportStuff.com incurs if all warehouses leased are in St. Louis? (In 2007, 08, 09 and 2010) 2. What supply chain network configuration do you recom- mend for SportStuff.com? Why? (if location is not restricted to St. Louis) Table 5-17 UPS Charges per Shipment (Four Units) Northwest Southwest Upper Midwest Lower Midwest Northeast Southeast Seattle $2.00 $5.00 $3.50 $2.50 $5.50 $4.50 Denver $2.50 St. Louis $2.50 $2.50 $3.50 $4.00 $5.00 $3.50 $4.00 $4.50 $3.50 $2.50 $3.00 $3.00 $4.00 $3.00 $2.50 $2.50 $3.50 $4.00 $3.00 $3.00 $2.50 Atlanta Philadelphia $2.50 $4.00 Managing Growth at SportStuff.com In December 2008, Sanjay Gupta and his management jackets from families and any surplus equipment from team were busy evaluating the performance at manufacturers and retailers and sell these over the Internet. SportStuff.com over the previous year. Demand had The idea was well received in the marketplace, demand grown by 80 percent. This growth, however, was a grew rapidly, and by the end of 2004, the company had mixed blessing. The venture capitalists supporting the sales of $0.8 million. By this time, a variety of new company were very pleased with the growth in sales and and used products were being sold, and the company the resulting increase in revenue. Sanjay and his team, received significant venture capital support. however, could clearly see that costs would grow faster In June 2004, Sanjay leased part of a warehouse than revenues if demand continued to grow and the in the outskirts of St. Louis to manage the large supply chain network was not redesigned. They decided amount of product being sold. Suppliers sent their to analyze the performance of the current network to see product to the warehouse. Customer orders were how it could be redesigned to best cope with the rapid packed and shipped by UPS from there. As demand growth anticipated over the next three years. grew, SportStuff.com leased more space within the warehouse. By 2007, SportStuff.com leased the entire warehouse and orders were being shipped to SportStuff.com customers all over the United States. Management Sanjay Gupta founded SportStuff.com in 2004 with a mis divided the United States into six customer zones for sion of supplying parents with more affordable sports planning purposes. Demand from each customer zone equipment for their children. Parents complained about in 2007 was as shown in Table 5-15. Sanjay estimated having to discard expensive skates, skis, jackets, and shoes that the next three years would see a growth rate of because children outgrew them rapidly. Sanjay's initial about 80 percent per year, after which demand would plan was for the company to purchase used equipment and level off. Table 5-15 Regional Demand at SportStuff.com for 2007 Zone Demand in 2007 Zone Demand in 2007 Northwest 320,000 Lower Midwest 220,000 Southwest 200,000 Northeast 350,000 Upper Midwest 160,000 Southeast 175,000 XXX rred The Network Options aggregating throughput through a few facilities reduces the Sanjay and his management team could see that they inventory held as compared with disaggregating through- put throug! warehouse handling 1 needed more warehouse space to cope with the antici- million units pated growth. One option was to lease more warehouse aventory holding cost of space in St. Louis itself. Other options included leasing has problems solving the nonlinear objective function, use $600,000 in your version of Excel warehouses all over the country. Leasing a warehouse the following inventory costs: involved fixed costs based on the size of the warehouse and variable costs that depended on the quantity shipped through the warehouse. Four potential locations for Range of F Inventory Cost warehouses were identified in Denver, Seattle, Atlanta, 0-2 million and Philadelphia. Warehouses leased could be either 0.310F small about 100,000 sq. ft.) or large (200,000 sq. ft.). 2-4 million 0.170F Small warehouses could handle a flow of up to 2 million 4-6 million 0.133F units per year, whereas large warehouses could handle a More tha: milion $798,000Y + 0.113F flow of up to 4 million units per year. The current ware- house in St. Louis was small. The fixed and variable costs of small and large warehouses in different loca- If you can handle only a single linear inventory tions are shown in Table 5-16. cost, you should use $475,000Y + 0.165E For each Sanjay estimated that the inventory holding costs at facility, Y=1 if the facility is used, 0 otherwise. a warehouse (excluding warehouse expense) was about SportStuff.com charged a flat fee of $3 per shipment $600 VF, who ats flowing through sent to a customer. An average customer order contained the warehouse hip is based on the four units. SportStuff.com in turn contracted with UPS to theoretical obs held at a facility handle all its outbound shipments. UPS charges were (not across the network) is proportional to the square based on both the origin and the destination of the root of the throughput through the facility. As a result, shipment and are shown in Table 5-17. Management XXX XXX Table 5-16 Fixed and Variable Costs of Potential Warehouses Small Warehouse Large Warehouse Fixed Cost ($/year) Variable Cost ($/Unit Flow) Location Fixed Cost ($/year) Variable Cost ($/Unit Flow) Seattle 0.20 0.20 Denver 0.20 300,000 250,000 220,000 220,000 240,000 0.20 0.20 St. Louis 500,000 420,000 375,000 375,000 400,000 0.20 0.20 0.20 Atlanta Philadelphia 0.20 0.20 estimated that inbound transportation costs for shipments from suppliers were likely to remain unchanged, no matter what warehouse configuration was selected. Questions 1. What is the cost SportStuff.com incurs if all warehouses leased are in St. Louis? (In 2007, 08, 09 and 2010) 2. What supply chain network configuration do you recom- mend for SportStuff.com? Why? (if location is not restricted to St. Louis) Table 5-17 UPS Charges per Shipment (Four Units) Northwest Southwest Upper Midwest Lower Midwest Northeast Southeast Seattle $2.00 $5.00 $3.50 $2.50 $5.50 $4.50 Denver $2.50 St. Louis $2.50 $2.50 $3.50 $4.00 $5.00 $3.50 $4.00 $4.50 $3.50 $2.50 $3.00 $3.00 $4.00 $3.00 $2.50 $2.50 $3.50 $4.00 $3.00 $3.00 $2.50 Atlanta Philadelphia $2.50 $4.00