Solution for QID #24245: CASE STUDY NO:1 Superior Medical Equipment Company suppli | StudyHelpMe

CASE STUDY NO:1 Superior Medical Equipment Company supplies electrical equipment that is used as components in the assembly of MRI, CAT scanners, PET scanners, and other medical diagnostic equipment. Superior has production facilities in Phoenix, Arizona, and Monterrey, Mexico. Customers for the components are located in selected locations throughout the United States and Canada. Currently, a warehouse, that receives all components from the plants and redistributed them to customers, is located at Kansas City, Kansas. Superior’s management is concerned about location of its warehouse since its sales have declined due to increasing competition and shifting sales levels among the customers. The lease is about to expire on the current warehouse, and management wishes to examine whether it should be renewed or warehouse space at some other location should be leased. The warehouse owner has offered to renew the lease at an attractive rate of $2.75 per sq. ft. per year for the 200,000 sq. ft. facility. It is estimated that any other location would cost $3.25 per q. ft. for a similar-size warehouse. A new or renewed lease will be for five years. Moving the inventory, moving expenses for key personnel, and other location expenses would result in a one-time charge of $3, 00,000. Warehouse operating costs are expected to be similar at any location. In the most recent year, Superior was able to achieve sales of nearly $70 million. Transportation costs from the plants to the Kansa warehouse were $2,162,535, and from the warehouse to customers were $4,819,569. One million dollars was paid annually as warehouse lease expenses. To study the warehouse location question, data shown in Tables 1 and 2 were collected. Although transport costs are not usually expressed on a $/cwt./mile basis, given that the outbound transportation costs for the most recent year were $4,819,569, the weighted average distance of the shipments was 1128 miles, and the annual volume shipped was 182,100 cwt., the estimated average outbound rate from a warehouse is $0.0235/cwt./mile. Table 1Volume, Rate, Distance, and Coordinate Data for Shipping from Plants to the Kansas City Warehouse in Truckload Quantities (Class 100) for the Most Recent Year. PLANT LOCATION ANNUAL VOLUME, TRANSPORT RATE,S/CWT DISTANCE,MILES GRID COORDINATES^a X GRID CO-ORD^A Y PHOENIX 61500 16.73 1163 3.60 3.90 MONTERREY 120600 9.40 1188 6.90 1.00     Table 2:Volumes,Rate,Distance and co-ordinate data for shipping from plants to the Kansas city Warehouse in Truck in 5000lb quantities(Class 100) for the most recent year PLANT LOCATION ANNUAL VOLUME, TRANSPORT RATE,S/CWT DISTANCE,MILES GRID COORDINATES^a X GRID CO-ORD^A Y Seattle 17000 33.69 1858 0.90 9.10 Los Angels 32000 30.43 1496 1.92 4.20 Denver 12500 25.75 598 5.6 6.10 Dallas 9500 18.32 560 7.80 3.6 Chicago 29500 25.24 504 10.20 6.90 Atlanta 21000 19.66 855 11.30 3.95 New York 41300 26.52 1340 14.00 6.55 Toronto 8600 26.17 1115 12.70 7.80 Montreal 10700 27.98 1495 14.30 8.25 Total Kansan city 182100     8.20 6.00 Questions: 1. Based on information for the current years, is Kansas City the best location for a warehouse? If not, what are the coordinates for a better location>? What cost improvement can be expected from the new location? 2. If by year 5 increases are expected of 25 percent in warehouse outbound transport rates and 15 percent in warehouse inbound rates, would your decision change about the warehouse location?   Caselet 2 Personal Care limited (PCL) is a large and premier FMCG company in India with a turnover of about Rs 1,200 crore. It has 25 production plants and 10 contract manufacturers spread over the whole country, producing about 120 products ranging from personal care to household goods. Again out of 120 products, about 60 percent have different variants as well as package sizes. The company has four own central warehouses situated in the four zones of north, south, east and west that receive products from almost all the plants on a regular and consignment basis in container by road. These warehouses are responsible for taking care of stocks, order placement for next arrivals, loading and unloading, protective storage, stock recording, apart from order processing and replenishment of good to distributors of respective zone whose numbers come around 150 per warehouse. After receiving goods from various plants, these warehousing are first entered into the computer for inventory recording purposes. Suitable storage location spaces are then assigned after taking into consideration the quantity to be stored, the physical dimension, characteristics of items, frequency of flow, and availability of the space, which is quite variable and flexible. For storage of goods, a flexible racking system is used so that the size of a rack’s space can be changed as per the size on the product’s package. Furthermore, racing is back-to-back in pallet blocks which are 5-storied, and in one block there are about 400 back-to-back racks. In certain area, for selected heavy weight and bulky items, 50 selectors drive forklift trucks and in the remaining area, as many as 350 selectors pick the goods manually and use hand trolley. Selectors are normally less educated and highly experienced, who have well-defined areas of selection. With this existing system, there have been a lot of practical problems, such as underutilization of space, traffic congestion in between the racks as one selector blocks another’s progress while he is picking item from a location, wrong assortment, difficult to track goods, difficult to fill one single order as it contains a variety of items, etc. this result into frequent complaints lodged by distributors. Furthermore, a trucker is required to collect items from different places of the warehouse to make up the order. Frequently, they have to wait for a full load. Then, the driver has to collect challan and other required papers. Normally, this whole process takes seven to ten days, subject to ready availability of the goods in stock. In the case of stock-out item, it may goes anywhere between 15 and 30 days. That is why replenishment cycle time for nearby distributors is about 10-15 days and for others, it comes to around 3 weeks. Due to a gradual increase in the quantum of competition and increasing customer expectations, along with increasing awareness about the overwhelming contribution of logistics in cost reduction and service improvement, the top management of PCL have appointed highly qualified and experienced professionals at all four warehouses with the following objectives: · To improve the efficiency of the warehouses · To reduce the replenishment cycle time by percent · To reduce the total logistical costs by 10 per cent · To have transparency in dispatch of premium products. The chief warehouse manager, who joined the north zone warehouse as had a very successful career of 25 years. He wants to redefine the whole warehouse operating system. Questions: 1. How should the chief warehouse manager of PCL approach this problem? 2. Develop a warehousing operational strategy to overcome the problem and fulfill the redefined objectives of the firm.