2. A Solution for the Future

How could the company improve on their current poor financial situation whilst remaining a responsible company? Investigate a number of options (quantitative and qualitative) for improving the network. You should:

a. Demonstrate how your scenarios can improve the efficiency of the Bronte network operations particularly focussing on cost reduction. For example how could the network be restructured to improve efficiency (e.g. centre of gravity)?

b. Justify the reasons for ALL your chosen scenarios and quantify the impact of changing the network for at least 2 scenarios in terms of cost, km and CO2 emissions.

c. Discuss the implications of the changes proposed in your scenarios on the current business operations and environmental sustainability of the firm.

Appendix A 57.80 56.80 Bronte PLC's Current UK Distribution Network 55.80 54.80 53.80 52.80 51.80 50.80 5 49.80 -7.40 -5.40 -3.40 -1.40 0.60 Customers Depots A Factories Appendix B Customer location and demand data and number of deliveries are provided in the worksheet: Bronte - Input Data 2020.xls which can be found on Canvas. == | == | | & | Beast 10 | 51.4753 Sle Appendix C Locations of the Depots and UK Factories Depot Location Longitude Latitude 1 Gift factory & warehouse Skelmersdale, Lancs -2.7603 53.5234 Stretford, Manchester 2 Chocolate warehouse -2.3197 53.4669 3 Chocolate factory & warehouse Grays, Essex 0.2966 51.4753 Depot costs Depot costs can be calculated approximately as: Fixed Costs: 75,000 per month Variable Costs: 50 per pallet throughput The depots are located in rural areas and can be expanded if required. To maintain the high service levels expected of the brand, stock in the depots should be maintained at approximately two weeks for the confectionary operation and one month for the gifts operation relying on delivery from India and China. You can assume that the average value of a pallet is 1000 and the annual cost of holding stock is 20% of the value of the product. Transport Costs Bronte's transport cost is made up of two elements, trunking costs and local delivery costs. Trunking Costs Trunking is currently carried out between the factories and the depots in full truckloads of 44 tonne Lorries. The trunking transit time depends on location but is generally 2-3 days. Trunking costs can be calculated approximately as: Fixed Costs - 11 per pallet Variable Costs - 0.07 per pallet per km Local Delivery Costs Negotiations with local contractors have resulted in a local delivery rate of: Fixed Costs - 25 per pallet Variable Costs - 0.7 per pallet per km Estimating CO2 Emissions and Associated Costs Bronte would like to know what the CO2 emissions are for their different network options. They are only interested in the transport operations and will not attempt to estimate CO2 associated with production. Consultations with an expert in the area have resulted in the following emissions data: Emissions for European Vehicles = 1.1 kg of CO2 per km travelled Shipping Emissions = 13 g per tonne km Rail Emissions = 30 g per tonne km One pallet of Bronte goods weighs approximately 500kg. Appendix D Production Costs Chocolates The company estimates that the cost of producing 1 pallet of chocolates is 200. Gifts Bronte pays 110 for a pallet of T-shirts sourced from India and 80 for a pallet of toys sourced from China. This price is for full pallets delivered to the port of origin. Approximately 60% of the gifts are T-shirts and 40% Toys. The customisation process in Skelmersdale is estimated to cost 100 per pallet. Shipping Costs Bronte has negotiated a TEU rate with a well-known shipping company to ship product from Mumbai in India and Shantou in China to the port of Liverpool in the UK. Shipping takes approximately 2 weeks from India and 3 weeks from China. They estimate the costs to be approximately: Cost from China Cost from India 1780 1200 /TEU /TEU The shipping distance from Mumbai to Liverpool is estimated to be 11550 km and the shipping distance from Shantou to Liverpool is estimated to be 18100km. The latitude and longitude of the port in Liverpool is 53.4N, 2.99 W. The gifts are then trunked to the factory in Skelmersdale for customisation. Appendix E - Other Useful Information Driving distance is approximately 20% more than straight line distance. Alternative forms of transport you could consider (alternatives to trunking). 1. Rail - there are two forms of rail transport a Full Trains: A full train takes 2000 tonnes of product and must be delivered to a single location. Transit time depends on location but is generally 5 - 6 days. Onward lorry trunking to a depot takes a further 2 days. The cost of this form of transport is 100,000 per train and 0.01 per tonne per km travelled and includes loading facilities (for onward travel) at the destination station. These costs assume the train is fully loaded, per tonne costs will be higher for partially loaded trains. b. Individual Wagons: A wagon can carry 50 tonnes. Wagons are loaded at the factory and then moved to one or more central locations where they wait until sufficient wagons (from a variety of companies) for the destination are available to make a decent sized train. This process is not well controlled and there are no guarantees of when your wagon will arrive. You have heard stories of wagons that have occasionally been "lost" for several weeks. The total transit time is generally between 2 and 4 weeks. The costs of this form of transport (including delivery to the local depot from the nearest station) are 300 per wagon and 2 per km travelled per wagon. Cross Docking Depots are available. They are essentially secure compounds with minimal staff, no storage and low over-head costs - they can also be used as consolidation centres. They DO NOT replace depots, but can be useful especially in outlying areas. With a capacity of 5000 m per month the costs are: Fixed Transhipment Costs Variable Transhipment Costs 17,000 per month 7 per pallet throughput = Appendix A 57.80 56.80 Bronte PLC's Current UK Distribution Network 55.80 54.80 53.80 52.80 51.80 50.80 5 49.80 -7.40 -5.40 -3.40 -1.40 0.60 Customers Depots A Factories Appendix B Customer location and demand data and number of deliveries are provided in the worksheet: Bronte - Input Data 2020.xls which can be found on Canvas. == | == | | & | Beast 10 | 51.4753 Sle Appendix C Locations of the Depots and UK Factories Depot Location Longitude Latitude 1 Gift factory & warehouse Skelmersdale, Lancs -2.7603 53.5234 Stretford, Manchester 2 Chocolate warehouse -2.3197 53.4669 3 Chocolate factory & warehouse Grays, Essex 0.2966 51.4753 Depot costs Depot costs can be calculated approximately as: Fixed Costs: 75,000 per month Variable Costs: 50 per pallet throughput The depots are located in rural areas and can be expanded if required. To maintain the high service levels expected of the brand, stock in the depots should be maintained at approximately two weeks for the confectionary operation and one month for the gifts operation relying on delivery from India and China. You can assume that the average value of a pallet is 1000 and the annual cost of holding stock is 20% of the value of the product. Transport Costs Bronte's transport cost is made up of two elements, trunking costs and local delivery costs. Trunking Costs Trunking is currently carried out between the factories and the depots in full truckloads of 44 tonne Lorries. The trunking transit time depends on location but is generally 2-3 days. Trunking costs can be calculated approximately as: Fixed Costs - 11 per pallet Variable Costs - 0.07 per pallet per km Local Delivery Costs Negotiations with local contractors have resulted in a local delivery rate of: Fixed Costs - 25 per pallet Variable Costs - 0.7 per pallet per km Estimating CO2 Emissions and Associated Costs Bronte would like to know what the CO2 emissions are for their different network options. They are only interested in the transport operations and will not attempt to estimate CO2 associated with production. Consultations with an expert in the area have resulted in the following emissions data: Emissions for European Vehicles = 1.1 kg of CO2 per km travelled Shipping Emissions = 13 g per tonne km Rail Emissions = 30 g per tonne km One pallet of Bronte goods weighs approximately 500kg. Appendix D Production Costs Chocolates The company estimates that the cost of producing 1 pallet of chocolates is 200. Gifts Bronte pays 110 for a pallet of T-shirts sourced from India and 80 for a pallet of toys sourced from China. This price is for full pallets delivered to the port of origin. Approximately 60% of the gifts are T-shirts and 40% Toys. The customisation process in Skelmersdale is estimated to cost 100 per pallet. Shipping Costs Bronte has negotiated a TEU rate with a well-known shipping company to ship product from Mumbai in India and Shantou in China to the port of Liverpool in the UK. Shipping takes approximately 2 weeks from India and 3 weeks from China. They estimate the costs to be approximately: Cost from China Cost from India 1780 1200 /TEU /TEU The shipping distance from Mumbai to Liverpool is estimated to be 11550 km and the shipping distance from Shantou to Liverpool is estimated to be 18100km. The latitude and longitude of the port in Liverpool is 53.4N, 2.99 W. The gifts are then trunked to the factory in Skelmersdale for customisation. Appendix E - Other Useful Information Driving distance is approximately 20% more than straight line distance. Alternative forms of transport you could consider (alternatives to trunking). 1. Rail - there are two forms of rail transport a Full Trains: A full train takes 2000 tonnes of product and must be delivered to a single location. Transit time depends on location but is generally 5 - 6 days. Onward lorry trunking to a depot takes a further 2 days. The cost of this form of transport is 100,000 per train and 0.01 per tonne per km travelled and includes loading facilities (for onward travel) at the destination station. These costs assume the train is fully loaded, per tonne costs will be higher for partially loaded trains. b. Individual Wagons: A wagon can carry 50 tonnes. Wagons are loaded at the factory and then moved to one or more central locations where they wait until sufficient wagons (from a variety of companies) for the destination are available to make a decent sized train. This process is not well controlled and there are no guarantees of when your wagon will arrive. You have heard stories of wagons that have occasionally been "lost" for several weeks. The total transit time is generally between 2 and 4 weeks. The costs of this form of transport (including delivery to the local depot from the nearest station) are 300 per wagon and 2 per km travelled per wagon. Cross Docking Depots are available. They are essentially secure compounds with minimal staff, no storage and low over-head costs - they can also be used as consolidation centres. They DO NOT replace depots, but can be useful especially in outlying areas. With a capacity of 5000 m per month the costs are: Fixed Transhipment Costs Variable Transhipment Costs 17,000 per month 7 per pallet throughput =