Question

Location Strategies
The Ambrose
Distribution Center
The Ambrosz family owns a small regional chain of relaillistore. Tbet kest knowo produek ar
audio CDs concal DVD3, DVD players and audio accessories. Currently, the family utilizes the
service of an independent contrelor to supply their store by truck. The family is not completely
satisfied with the timeliness and reliability of the contractor. The family has researched the issue
of distribution centers, and has come to the conclusion (ual it will discontinue its contract with the
trucking contractor, and go forward with its own distribution center (DC). Coincidentally, the
chain has 10 outlets=5 in Texas and 5 in Ollahoma. Thes oullēts are located in 10 cities as
shown in the table also given are the amual lons of merchandise requiredal achoutlet
The family's research shows that there are two distinct capacily configurations for distribution
centers: "small" und "large. The small version can support S relail outlets: the large can support
10. Annual Gixed costs for the wall are $2,000,000 each; cach
large lins annual fixed costs of
$3,600,000. The family's
costuccountant leuls variable costs as proportional to the amount of
merchandise moved through a facility. Last year, that proportion was 35% of the value of
merchandise. The organization recognize that the other major cost is shipping it must consider
transportation costs of $2,00 per lonmile. (A load a 40 tons moved 10 miles is 400 ton-miles)
The locations are shown in the table at night bach distance unit equals 40 miles. (Use formula
la
distance VI ()
ya)
The family has contacted Robert Piland, a professor in Texas, la serie ax ils consultant on this
projeul. Il asked Prolaxar Piland to answer several questions. Should the chain construct one
large distribution center or two small ones? Where should the distribution center's) be located!
What will be the annual total cos associated with
eich choice? WhatconsideAlions other tun
cost should be considered in making this decision?
DERSON
EAST WEST NESTI SOFT
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F
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BTR S T
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2.
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DISCUSSIONIOUESTION
Prepare Roben Piland's report to the Ambrose family.
10
(2)
arch​

Answer 1

Answer:

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