Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
12th Edition
ISBN: 9780134741062
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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Discuss why locating a plant solely on the basis of low labor costs may be the wrong approach ?
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 _________________
Explain 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 (12th Edition) (What's New in Operations Management)
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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- Explain what are the people that are involved in facility location decisions?arrow_forwardDiscuss what are the people that are involved in facility location decisions?arrow_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_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
- Explain the differences among factor rating, the load–distance model, and break-even analysis. What criteria does eachmethod use to make the location decision?arrow_forwardWiebe Trucking, Inc., is planning a new warehouse to serve the western United States. Denver, Santa Fe, and Salt Lake City are under consideration. For each location, annual fixed costs (rent, equipment, and insurance) and average variable costs per shipment (labor, transportation, and utilities) are listed in the following table. Sales projections range from 550,000 to 600,000 shipments per year. Location Annual fixed cost Variable Costs per Shipment Denver $5,000,000 $4.65 Santa Fe $4,200,000 $6.25 Salt Lake City $3,500,000 $7.25 a. Plot the total cost curves for all the locations on a single graph. b. Which city provides the lowest overall costs? Thank you!!!arrow_forwardWhen an organization is determining a location choice, what sustainability issues should it consider? What ethical issues should be considered?arrow_forward
- How can the centre-of-gravity method be used to find the best locations for local services such as public libraries, medical centres, or post offices? What constraints should be considered when the method is used in large, congested cities?arrow_forwardA small firm produces and sells novelty items in a five-barangay area. The firm expects to consolidate assembly of its greeting cards line at a single location. Currently, operations are in three widely scattered locations. The leading candidate for location will have a monthly fixed cost of Php42, 000 and variable costs of Php3 per card. Cards sell for Php7 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_forwardDiscuss the major location factors and how they influence location decisions?arrow_forward
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