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Cost Optimization for Warehouse Distribution

This case study examines the optimal distribution of household goods from four warehouses to six stock points in major South Indian cities. The transportation costs and capacities of the warehouses and demands of the stock points are provided. The study aims to identify: 1) The least cost schedule for distributing goods from warehouses to cities 2) How shutting down the Kochi operations and serving it from Mysore would impact costs 3) How adding a fifth warehouse would impact allocation and overall transportation costs

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Prajakta
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26 views1 page

Cost Optimization for Warehouse Distribution

This case study examines the optimal distribution of household goods from four warehouses to six stock points in major South Indian cities. The transportation costs and capacities of the warehouses and demands of the stock points are provided. The study aims to identify: 1) The least cost schedule for distributing goods from warehouses to cities 2) How shutting down the Kochi operations and serving it from Mysore would impact costs 3) How adding a fifth warehouse would impact allocation and overall transportation costs

Uploaded by

Prajakta
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

CASE STUDY

Q 1 A manufacturer of certain household goods caters primarily to south Indian market. At


present, the manufacturer has located six stock points in the major south Indian cities of
Hyderabad, Mysore, Chennai, Kochi, Pune and Vizag to cater to the demand. There are four
warehouses from which the components are distributed. In order to save on the cost of
operations, the warehouses are typically located away from these cities in different locations.
The unit cost of transporting the items from each of these warehouses to the cities (Rs/tonne),
the capacity of the warehouses and the demand at the city stock points per unit time (in
tonnes) are all summarized in Figure. Identify the least cost schedule for deciding which
warehouse will send the item to the cities.
Hyderabad Mysore Madras Kochi Pune Vizag Supply
Warehous 60 70 10 30 90 90 1900
eA
Warehous 70 25 40 55 80 100 1800
eB
Warehous 50 80 45 75 85 30 3300
eC
Warehous 80 40 50 45 90 60 1300
eD
Demand 1750 750 2000 1800 1200 800 8300
A) Identify the least cost schedule for deciding which warehouse will send the item to the
cities.
B) The company has decided to shut down its Kochi operations and to serve the
requirements of Kochi from Mysore. Will the decision change? What will the cost
impact of this decision be?
C) Suppose the company has received a proposal for setting up another warehouse
(Warehouse E) with a capacity of 900 units. The location of the warehouse in such
that the unit costs of transporting to the six cities are as follows: Hyderabad-
45,Mysore-75,Chennai-30,Kochi-65,Pune-90 and [Link] company would like
to know how the allocation will change if the warehouse is made operational and the
likely cost impact on the operation of the system.

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