A SUPPLY CHAIN PROBLEM:
HOW BEST TO COMBINE TRANSPORTATION AND WAREHOUSING
TO SERVE A SPECIFIC MARKET

CASE REPORT

PREPARED BY:
DATE:

PREPARED FOR:

MEMO
TO:

LARGE FLOUR MILL

FROM:

SUPPLY CHAIN MANAGEMENT TEAM

2
DATE:

OCTOBER 21, 2015

RE:

A SUPPLY CHAIN PROBLEM

We are currently analyzing how best to combine transportation and warehousing to serve the
Alberta market.
The decision that has to be determined is whether to have either one or two warehouses.
Given the current Alberta business, and given the newly acquired Calgary operation, should a new packaging and warehousing facility be built or acquired in Edmonton, or should reliance be solely on the currently underused Calgary facility. In a decision such as this, we performed …show more content…

GARY

FREIGHT
RATE/TONNE
$3
$5
$10
$15
$20

ANNUAL DEMAND TOTAL TONNES/
TOTAL
DEMAND/WEEK IN
ANNUAL
IN TRANSIT
IN TONNES
SHIPMENT
SHIPMENTS/WEEK
TONNES
FREIGHT COST
(DAYS)
30,000
40
15
600
$90,000
18,000
40
9
360
$90,000
17,000
40
9
340
$170,000
18,000
40
9
360
$270,000
1
17,000
40
9
340
$340,000
1
$960,000

OPTION #2 – DIVIDING DEMAND BETWEEN CALGARY & EDMONTON

SALES
LOSSES

$169,000
$161,000
$330,000

3

INVENTORY COSTS AT EACH FACILITY

4
CALGARY
ANNUAL DEMAND
PACKAGING PLANT
(TONNES)
LARGE BAKERY
0
50 KG BAGS
25,000
10 KG BAGS
5,000
5 KG BAGS
5,000
TOTAL
35,000

VALUE
ANNUAL
CARRYING WEEKLY DEMAND INVENTORY COST BI-WEEKLY DEMAND INVENTORY COST MONTHLY DEMAND INVENTORY COST
/TONNE CARRYING COST COST/TONNE
(TONNES)
ON WEEKLY
(TONNES)
ON BI-WEEKLY
(TONNES)
ON MONTHLY
$0
0%
$0
0
$0
0
$0
0
$0
$400
25%
$100
500
$25,000
1000
$50,000
2000
$100,000
$500
25%
$125
100
$6,250
200
$12,500
400
$25,000
25%
100
$10,000
$800
$200
200
$20,000
400
$40,000
700
$41,250
1400
$82,500
2800
$165,000

EDMONTON
ANNUAL DEMAND
PACKAGING PLANT
(TONNES)
50 KG BAGS
25,000
10 KG BAGS
5,000
5 KG BAGS
5,000
TOTAL
35,000

VALUE
ANNUAL
CARRYING WEEKLY DEMAND INVENTORY COST BI-WEEKLY DEMAND INVENTORY COST MONTHLY DEMAND INVENTORY COST
/TONNE CARRYING COST COST/TONNE
(TONNES)
ON WEEKLY
(TONNES)
ON BI-WEEKLY
(TONNES)
ON MONTHLY
$400
25%
$100
500
$25,000
1000
$50,000
2000
$100,000
$500
25%
$125
100
$6,250
200
$12,500
400
$25,000
25%
100
$10,000
$800
$200
200
$20,000
400
$40,000
700
$41,250
1400
$82,500
2800