A Swedish company with customers in virtually all of Europe wants to reduce its distribution costs and have read that many companies have adopted a more centralized distribution structure to reduce them. The company therefore plans to investigate whether there may be an option. In the starting position, the company has distribution warehouses in Sweden, UK, Germany, Spain, Turkey, Slovakia, France, and Romania, and the demand for these warehouses are approximately equal. The cost for this structure can be seen in Table 1. Table 1. Cost before change (KSEK/year) 3500 Warehousing costs: Buildings Equipment Employees Stock Keeping Costs: Capital cost Risk Cost Transportation cost 3200 1900 Information cost 360 The alternative option means that the company only has one warehouse and liquidate the rest. One impact is that the warehousing costs would be reduced to 1 600 000 SEK/ year, an other that transportation costs would increase to 2 800 000 SEK/ year. The company will also need to invest in a new information system, meaning that these costs will increase to 640 000 SEK/ year. Stock Keeping costs in the current option consists of 75% of the cycle stock. The cycle stock will overall be the same in the more centralized alternative. The remaining 25% of the stock keeping costs of the current option is the cost of safety stock. The current cost for the safety stock is [Select ] tSEK The new cost the safety stock is [Select] tSEK (Round to closest integer) The company saves in total [Select] tSEK Based on the economic feasibility, should they go through with the change? [ Select] (Type YES or NO) select the right an 1 goo 976 430-850 2. 257 283 356.420 Pound to closest ant 3- 1350 566 1237-2200 u. yes - No. A Swedish company with customers in virtually all of Europe wants to reduce its distribution costs and have read that many companies have adopted a more centralized distribution structure to reduce them. The company therefore plans to investigate whether there may be an option. In the starting position, the company has distribution warehouses in Sweden, UK, Germany, Spain, Turkey, Slovakia, France, and Romania, and the demand for these warehouses are approximately equal. The cost for this structure can be seen in Table 1. Table 1. Cost before change (KSEK/year) 3500 Warehousing costs: Buildings Equipment Employees Stock Keeping Costs: Capital cost Risk Cost Transportation cost 3200 1900 Information cost 360 The alternative option means that the company only has one warehouse and liquidate the rest. One impact is that the warehousing costs would be reduced to 1 600 000 SEK/ year, an other that transportation costs would increase to 2 800 000 SEK/ year. The company will also need to invest in a new information system, meaning that these costs will increase to 640 000 SEK/ year. Stock Keeping costs in the current option consists of 75% of the cycle stock. The cycle stock will overall be the same in the more centralized alternative. The remaining 25% of the stock keeping costs of the current option is the cost of safety stock. The current cost for the safety stock is [Select ] tSEK The new cost the safety stock is [Select] tSEK (Round to closest integer) The company saves in total [Select] tSEK Based on the economic feasibility, should they go through with the change? [ Select] (Type YES or NO) select the right an 1 goo 976 430-850 2. 257 283 356.420 Pound to closest ant 3- 1350 566 1237-2200 u. yes - No
