Operations Management: Processes and Supply Chains (11th Edition)
11th Edition
ISBN: 9780133872132
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Chapter 13, Problem 16P
Summary Introduction
Interpretation: The shipping pattern that minimizes the total transportation cost and the new plant location is to be determined.
Concept Introduction: Plant location means to choice the particular region for setting up a business. Choosing a place for plant is most essential in order to get maximum profit. So it is very crucial to identify an ideal place, where all the capitals are brought together for progress of business.
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The Giant Farmer Company processes food for sale in discount food stores. It has two plants: one in Chicago and one in Houston. The company also operates warehouses
in Miami, Florida; Denver, Colorado; Lincoln, Nebraska; and Jackson, Mississippi. Forecasts indicate that demand soon will exceed supply and that a new plant with a capacity
of 8,000 cases per week is needed. The question is where to locate the new plant. Three potential sites are Buffalo, Atlanta, and Memphis. The two tables below give data
on capacities, forecasted demand, and shipping costs that have been gathered.
Plant
Chicago
Houston
Capacity
(cases per week)
New plant
Warehouse
Plant
Chicago
Houston
Buffalo (alternative
1)
Atlanta (alternative
2)
Memphis
(alternative 3)
For each alternative new plant location, determine the total cost of the shipping pattern that will minimize total transportation costs. Where should the new plant be located?
If the new plant is located in Buffalo, the optimal cost is $
(Enter your…
A firm that has recently experienced enormous growth is seeking to lease a small plant
in Memphis, TN; Biloxi, MS; or Birmingham, AL. Prepare an economic analysis of the
three locations given the following information: Annual costs for building, equipment,
and administration would be $40,000 for Memphis, $60,000 for Biloxi, and $100,000 for
Birmingham. Labor and materials are expected to be $8 per unit in Memphis, $4 per unit
in Biloxi, and $5 per unit in Birmingham. The Memphis location would increase system
transportation costs by $50,000 per year, the Biloxi location by $60,000 per year, and the
Birmingham location by $25,000 per year. Expected annual volume is 10,000 units.
6.
Discuss why locating a plant solely on the basis of low labor costs may be the wrong approach ?
Chapter 13 Solutions
Operations Management: Processes and Supply Chains (11th Edition)
Ch. 13 - Prob. 1DQCh. 13 - Prob. 2DQCh. 13 - Prob. 3DQCh. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - Prob. 4PCh. 13 - Prob. 5PCh. 13 - Prob. 6PCh. 13 - Prob. 7P
Ch. 13 - Prob. 8PCh. 13 - Prob. 9PCh. 13 - Prob. 10PCh. 13 - Prob. 11PCh. 13 - Prob. 12PCh. 13 - Prob. 13PCh. 13 - Prob. 14PCh. 13 - Prob. 15PCh. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 24PCh. 13 - Prob. 1AMECh. 13 - Prob. 2AMECh. 13 - Prob. 3AMECh. 13 - Prob. 4AMECh. 13 - Prob. 1VCCh. 13 - Prob. 2VCCh. 13 - Prob. 3VC
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- A firm that recently experienced an enormous growth rate is seeking to lease a small plant in Memphis, TN; Biloxi MS; or Birmingham, AL. Prepare an economic analysis of the three locations giving the following information. Annual costs for building, equipment, and administration would be $64,000 for Memphis, $74,000 for Biloxi, and $109,000 for Birmingham. Labor and materials are expected to be $7 per unit in Memphis, $6 per unit in Biloxi, and $6 per unit in Birmingham. The Memphis location would increase system transportation costs by $63,000 per year, the Biloxi location by $73,500 per year, and the Birmingham location by $25,900 per year. Expected annual volume is 14,900 units. Total Cost Memphis _______________ Biloxi _______________ Birmingham _________________arrow_forwardExplain why locating a plant solely on the basis of low labor costs may be the wrong approach.arrow_forwardThe Giant Farmer Company processes food for salein discount food stores. It has two plants: one inChicago and one in Houston. The company also oper-ates warehouses in Miami, Florida; Denver, Colorado;Lincoln, Nebraska; and Jackson, Mississippi. Forecastsindicate that demand soon will exceed supply and thata new plant with a capacity of 8,000 cases per week isneeded. The question is where to locate the new plant.Two potential sites are Buffalo, New York, and Atlanta,Georgia. The two tables at the bottom of this page givedata on capacities, forecasted demand, and shippingcosts that have been gathered.For each alternative new plant location, determine the ship-ping pattern that will minimize total transportation costs.Where should the new plant be located?arrow_forward
- Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm’s customers prefer local suppliers. The selling price of the product is $250 per unit in either case. Use the following information to determine which location yields the higher total profit per year: Location AnnualFixed Cost Variable Costper Unit ForecastDemand per Year Jackson Dayton $1,500,000 $2,800,000 $50 $85 30,000 units 40,000 unitsarrow_forwardWilliams Auto Top Carriers currently maintains plants in Atlanta and Tulsa to supply auto top carriers to distribution centers in Los Angeles and New York. Because of expanding demand, Williams has decided to open a third plant and has narrowed the choice to one ot two cities – New Orleans and Houston. Table below provides pertinent production and distribution costs as well as plant capacities and distribution demands. Which of the new locations, in combination with the existing plants and distribution centers, yields a lower cost for the firm? From Plants To Distribution centers Normal production Unit production cost Los Angeles New York Existing plants Atlanta Tulsa $8 $4 $5 $7 600 900 $6 $5 Proposed locations New Orleans Houston $5 $4 $6 $6a 500 500 $4 (anticipated) $3 (anticipated) Forecast demand 800 1,200 2,000 a – Indicates distribution cost (shipping, handling, storage) will be $6 per…arrow_forwardThe Quick Copy center for document copying is decidingwhere to locate a new facility. Th e annual fi xed and variable costsfor each site it is considering have been estimated as follows: If demand is expected to be 3000 units, which location is best?arrow_forward
- A small firm produces and sells novelty items in a five-barangay area. The firm expects toconsolidate assembly of its greeting cards line at a single location. Currently, operations are in three widelyscattered locations. The leading candidate for location will have a monthly fixed cost of Php 42,000 andvariable costs of Php3 per card. Card sell for Pho7 each. Prepare a table that shows total profits, fixed costs, variable costs, and revenues for monthly volumes of 10,000, 12,000, and 15,000 units. What is the break-even point?arrow_forwardProvide a perspective on why location decisions may impact production system design decisions.arrow_forwardWhat are the advantages and disadvantages of using the weighted factor method, centre of gravity method and location break even analysis in operations management when looking at locationsarrow_forward
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