Blue Computers, a major server manufacturer in the United States, currently has
ID: 457118 • Letter: B
Question
Blue Computers, a major server manufacturer in the United States, currently has plants in Kentucky and Pennsylvania. The Kentucky plant has a capacity of 1 million units a year, and the Pennsylvania plant has a capacity of 1.5 million units a year. The firm divides the United States into five markets: northeast, southeast, Midwest, south, and west. Each server sells for $1,000.The firm anticipates a 50 per-cent growth in demand (in each region) this year (after which demand will stabilize) and wants to build a plant with a capacity of 1.5 million units per year to accommodate the growth. Potential sites being considered are in North Carolina and California. Currently the firm pays federal, state, and local taxes on the income from each plant. Federal taxes are 20 percent of income, and all state and local taxes are 7 percent of income in each state. North Carolina has offered to reduce taxes for the next 10 years from 7 percent to 2 percent. Blue Computers would like to take the tax break into consideration when planning its network. Consider income over the next 10 years in your analysis. Assume that all costs remain unchanged over the 10 years. Use a discount factor of 0.1 for your analysis. Annual fixed costs, production and shipping costs per unit, and current regional demand (before the 50 percent growth) are shown in Table 5-13. a. If Blue Computers sets an objective of minimizing total fixed and variable costs, where should it build the new plant? How should the network be structured? b. If Blue Computers sets an objective of maximizing after-tax profits, where should it build the new plant? How should the network be structured?Explanation / Answer
ANSWER IS
Supply chain network style choices embrace the assignment of facility role, location of manufacturing, storage, or transportation-related facilities, and the allocation of capacity and markets to every facility. Supply chain network style choices area unit classified as follows. 1. Facility role: What role should every facility play? What processes area unit performed at every facility? a pair of. Facility location: Where ought to facilities be located? three. Capacity allocation: however a lot of capability ought to be allotted to every facility? four. Market and offer allocation: What markets ought to every facility serve? that offer sources ought to feed every facility? Network style choices have a major impact on performance as a result of they verify {the offer|the availability|the provision} chain configuration and set constraints among that the opposite supply chain drivers may be used either to decrease supply chain price or to extend responsiveness. All network design choices have an effect on every alternative and should be created taking this reality into thought. Decisions regarding the role of every facility area unit important as a result of they verify the number of flexibility the availability chain has in ever-changing the method it meets demand. For example, Toyota has plants located worldwide in every market that it serves. Before 1997, each plant was capable of serving solely its native market. This hurt Toyota when the Asian economy went into a recession in the late Nineteen Nineties. The local plants in Asia had idle capability that may not be wont to serve alternative markets that were experiencing excess demand. Toyota has added flexibility to every plant to be ready to serve markets apart from the native one. This additional flexibility helps Toyota deal a lot of effectively with ever-changing international market conditions. Facility location decisions have a semipermanent impact on a offer chain's performance as a result of it is terribly dearly-won to pack up a facility or move it to a special location. A good location call will facilitate a offer chain be responsive whereas keeping its prices low. Toyota, for example, built its initial America. Assembly plant in Lexington, Kentucky, in 1988 and has used the plant since then. The Lexington plant proved terribly profitable for Toyota once the yen reinforced and cars made in Japan were too dearly-won to be price competitive with cars made in the us. The Lexington plant allowed Toyota to be responsive to the U.S. Market while keeping prices low. In contrast, a poorly located facility makes it terribly tough for a offer chain to perform shut to the economical frontier. For example, Amazon.com found it very tough to be price effective in activity books throughout the United States once it had one warehouse in city. As a result, the company has added warehouses in alternative components of the country. Capacity allocation choices additionally have a major impact on offer chain performance. Whereas capacity allocation will be altered a lot of simply than location, capacity choices do tend to keep in situ for many years. Allocating too much capability to a location leads to poor utilization, and as a result, higher costs. Allocating too little capability leads to poor responsiveness if demand isn't happy or high price if demand is crammed from a remote facility. The allocation of supply sources and markets to facilities has a important impact on performance as a result of it affects total production, inventory, and transportation costs incurred by the offer chain to satisfy client demand. This decision ought to be reconsidered on a regular basis so the allocation may be modified as market conditions or plant capacities modification. Of course, the allocation of markets and offer sources will solely be modified if the facilities area unit versatile enough to serve completely different|completely different} markets and receive supply from different sources. As we mentioned earlier, Amazon.com has built new warehouses and modified the markets provided by every warehouse as its client base has big. As a result, it has lowered prices and improved responsiveness. Network design choices should be revisited as a firm grows or once 2 corporations merge. Because of the redundancies and variations in markets served by either of the 2 separate corporations, consolidating some facilities and changing the location and role of others will typically facilitate scale back price and improve responsiveness. We focus on developing a framework still as methodologies that may be used for network style during a offer chain. In the next section, we identify various factors that influence network design decision