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Solution for Supply Chain Network Design: Applying Optimization and Analytics to the Global Supply Chain 1st Edition Chapter 1, Problem 1

by Michael Watson Sara Lewis Peter Cacioppi Jay Jayaraman
106 Solutions 14 Chapters 18741 Studied ISBN: 9780133017373 Supply Chain Management 5 (1)

Chapter 1, Problem 1 : 1. ABC Bottling Company’s sales have been expanding...

1. ABC Bottling Company’s sales have been expanding rapidly. Their single plant, which ships directly to customers, is now out of capacity. What factors should they consider when they decide whether to expand the existing plant or build another one? If they build another plant, what factors should they consider when they locate this plant?

Step-By-Step Solution

1. There are many answers here that could be considered correct. You can use this question for a nice discussion in class. You will receive many different answers, and a lot will depend on the assumptions people make about ABC Bottling Company. You can adjust this problem to add more detail to ABC (do they make bottles and sell them to a few factories that fill them with juice? Do they make a soda product and ship to hundreds of retailers around the country? Are they a national firm, or do they serve just a single city or region? And so on…).

Answer for the first part on whether to expand versus build another plant:

They should look at the cost of expanding versus the cost of building a new plant.

Do they have the land and space to actually expand?

Where are the customers? Do they need a plant close to customers?

Do they have enough qualified labor in the area if they expand?

If they build a new plant, should they keep the old one or close it down?

Do they have the management systems in place to handle two plants?

Answer for the second part on what factors they should consider when choosing the location of the new plant (note that this question is related to the first question, and it is acceptable to have a single list of answers):

Cost of transportation relative to the customer base.

Cost of production at the two locations.

Tax implications of the new potential locations.

Strategic implications of the new locations.

Which customers the existing plant will serve and which ones the new plant will serve.

How big to make the new plant—should they make it big enough for forecasted growth over the next five years? Should they make it big enough to handle double the expected growth?

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