Company PlainSteel wants to re-design its supply chain network in Europe. As the employees do not have the required expertise, they approach you to consult them based on your recently acquired knowledge. A few meetings with the management team of PlainSteel allowed you to collect the following information and data.
The current supply chain network of PlainSteel has been established over a long time and has been extended over this period using rules of thumbs instead of appropriate quantitative methods. This has already led to problems due to sub-optimal usage of the available facilities and resources. The management team of PlainSteel would like to evaluate some of their previous decisions and make better ones in the future when re-designing and extending their supply chain network.
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Write My Essay For MePlainSteel is currently producing a single product called RawSteel50 in its four factories lo- cated in Amsterdam (AMS), Munich (MUN), Paris (PAR), and Vienna (VIE). Fixed costs, unit production costs, and production capacities of these factories are given in Table 1. PlainSteel is selling RawSteel50 to several retailer via central distribution centers. One such distribution center currently exists in each of the following five countries: Austria (AUT), Belgium (BEL), France (FRA), Germany (GER), and Sweden (SWE). Besides fixed costs for these distribution centers, the management team of PlainSteel has also estimated the variable costs per product handled at a center. Table 2 summarizes these costs for each of the five distribution centers.
PlainSteel currently sells RawSteel50 to ten retailers in the five countries mentioned above, see Table 3 for their demands and locations (countries). The current policy is that each retailer collects the required quantity of RawSteel50 from the distribution center located in the same country. Transportation costs between the distribution centers and the retailers are paid by the retailers. However, PlainSteel needs to pay the transportation costs for shipping products between its factories and distribution centers. Costs for these shipments depend on the factory and distribution center and occur per unit of product and km of distance. Distances between factories and distribution centers are given in Table 4 while costs per unit and per km are given in Table 5.
So far, one main goal of PlainSteel was to reduce the complexity of managing its supply chain network. Thus, they established a policy called SIMPLE. In SIMPLE, each distribution center is supplied by the factory in the same country if such a factory exists. The distribution centers in Belgium and Sweden are supplied from the factory in Amsterdam. The impact of this policy should now be quantified. To do so, its outcome should be compared to policy NORM in which all factories and distribution centers must remain open, but each distribution center can be supply from every factory (and possibly from more than one). In addition, the management team of PlainSteel also wants to consider a variant of NORM called NORM+ in which factories may be closed. You should answer the following questions:
Question 1: How much money could PlainSteel save by using policy NORM instead of SIMPLE when the goal is to minimize to total costs?
Question 2: Should PlainSteel consider policy NORM+ instead of NORM or SIMPLE when the aim is to minimize the total costs?
Don’t forget to include the resulting configuration of the supply chain network (used factories, shipped products) of PlainSteel in addition to the total costs in your answers. For these questions the demands of retailers should be fully satisfied.
To prepare for the future, PlainSteel wants to assess the impact of the following aspects on their supply chain network: (i) shipping products directly to retailers or (ii) producing and selling an additional product called TopSteel99. These options should be evaluated using policy NORM+ or an analogous policy RET+ in which products are shipped directly to the retailers instead of to distribution centers. Thus, neither the fixed costs nor the variable costs (per unit of RawSteel50) for distribution centers occur in RET+. In the following, the management team of PlainSteel want to focus on profit maximization rather than cost minimization. Thus, demands of retailers may be fulfilled only partially (or even not at all) in all of the following questions.
Besides knowing the current selling prices of RawSteel50 (for policy NORM+), PlainSteel has estimated the prices it could charge retailers when using policy RET+, i.e., when delivering Raw- Steel50 directly to them and eliminating their need of picking up the required units of RawSteel50 themselves. Selling prices can be increased by 10% in policy RET+ (compared to NORM+). Resulting prices per unit for each of the two policies are given in Table 6 while the distances (in km) be- tween factories and retailers are given in Table 7. Transportation costs per unit and km between a factory and a retailer are 50% higher than those between the same factory and the distribution center located in the retailers country. For example the unit transportation costs per km between the factory in Amsterdam and retailer 1 are equal to 1.5 · 0.1 = e 0.15 (since retailer 1 is located in Austria).
The management team of PlainSteel first wants to figure out whether it is better to close down all distribution centers and ship products directly to the retailers. Therefore, they ask you to provide answers to the following questions:
Question 3: Can PlainSteel increase its profits by using policy RET+ or should it better apply policy NORM+?
Question 3 only!
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