Does it make sense?

The company has recently increased its number of warehouses from 5 to 10. A junior consultant realized that it doesn’t make sense. Do you agree with her? If so, what do you think the company should do?

You are given the following information:

Stores S1 S2 S3 S4 S5 S6 S7 S8 S9 S10
Demand 2.600 200 500 280 450 1.200 300 1.400 1.500 500

 

Warehouses Capacity
W1 1.000
W2 2.000
W3 5.000
W4 400
W5 1.000
W6 2.500
W7 3.000
W8 100
W9 4.500
W10 6.000

 

Unit Costs S1 S2 S3 S4 S5 S6 S7 S8 S9 S10
W1 1 5 6 9 10 3 4 2 9 10
W2 9 9 7 5 4 1 3 2 3 1
W3 15 15 20 1 5 7 2 20 12
W4 1 2 3 2 4 1 12 15 1 2
W5 5 18 20 3 1 2 15 1 6 9
W6 10 9 8 7 6 5 4 3 2 1
W7 8 5 6 11 14 19 20 4 7 1
W8 5 1 8 9 2 4 7 2 7 10
W9 2 5 6 1 5 15 20 3 7 1
W10 1 2 3 4 5 6 7 8 9 10

 

The solution:

Shipments S1 S2 S3 S4 S5 S6 S7 S8 S9 S10 Weekly capacity
W1 600 400 1.000
W2 1.200 300 500 2.000
W3 280 450 730
W4 400 400
W5 1.000 1.000
W6 0 0 0 0 0 0 0 0 1100 0 1.100
W7 0 0 0 0 0 0 0 0 0 0
W8 0 100 0 0 0 0 0 0 0 0 100
W9 0 0 0 0 0 0 0 0 0 0
W10 2000 100 500 0 0 0 0 0 0 0 2.600
Weekly demand 2.600 200 500 280 450 1.200 300 1.400 1.500 500 8930\8930
Total costs  €   11.680  

 

The junior consultant is right.

The company has to eliminate the warehouses number 7 and 9 because they generate inefficiencies in the logistics system. Maintaining a warehouse is costly and two of them shouldn’t send products to any store due to high unit costs.

By: Arnau Casellas, Daniel Puerto and Pol Ribera

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s