Because of increasing global demand for its fiber optics products, Hanover Inc. is currently facing a decision on how to increase its production capacity. Hanover has three fiber optic products denoted by FA, FB, and FC. Hanover has two existing plants in Austin, Texas and Paris, France. Hanover plans to keep the Austin and Paris plants will open, but the production capacity at these two existing plants can be changed from their current levels (600,000 units per year). Each plant can make any mix of the three products. Seven locations are being considered for an additional new plant. These consist of two cities in the United States (Charleston, SC and Mobile, AL) and five other locations currently simply defined by country (Australia, India, Malaysia, South Africa, and Spain).

The companys customers have been aggregated onto eight customer regions (Malaysia, China, France, Brazil, US Northeast, US Southeast, US Midwest, and US West) and its Planning and Forecasting department has forecasted demand for each region five years into the future. The Planning and Forecasting department has also provided other relevant data to help with the decision on how to expand capacity given the forecasted demand. Descriptions of the available data provided in the file Hanover follow:

Duty: This worksheet contains the duty rate charged from each plant to each customer region. This rate is multiplied by the selling price to get the cost per unit paid in duty to ship into one country from another country.

Fixed Cost: This worksheet contains the fixed cost of plant operation including capital costs, insurance, management, etc. These costs depend on the capacity level of the plant, and costs for two different levels of capacity are given for each plant location. The capacities are independent of product mix.

Forecast: This worksheet contains five-year-out forecasted demand for each product by customer region.

F&WH Cost: This worksheet contains freight and warehousing cost per unit from each plant location to each customer region (which are independent of product type).

Price: This worksheet contains the selling price of each product for each customer region.

Variable Cost: This worksheet contains the variable cost of each product at each plant. The vice president of supply chain management would like you to study this situation using the given data.

To make a recommendation to Hanovers vice president of supply chain management. In particular, make a recommendation regarding whether or not a new plant is needed and if so, at which of the seven locations under consideration it should be located. Also, your report should indicate which capacity levels should be used at each plant, and how product should be sourced.

Plant Austin Austin Austin Austin Austin Australia Australia Australia Australia Australia Charleston Charleston Charleston Charleston Charleston India India India India India Malaysia Malaysia Malaysia Malaysia Malaysia Mobile Mobile Mobile Mobile Mobile Paris Paris Paris Paris Paris S Africa S Africa S Africa S Africa S Africa Spain Spain Spain Spain Spain Customer Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Duty Rate 0.220 0.300 0.090 0.120 0.000 0.220 0.300 0.090 0.120 0.042 0.220 0.300 0.090 0.120 0.000 0.220 0.300 0.063 0.120 0.042 0.000 0.300 0.063 0.120 0.042 0.220 0.300 0.090 0.120 0.0001 0.220 0.300 0.000 0.120 0.042 0.220 0.150 0.056 0.120 0.042 0.220 0.300 0.000 0.120 0.042 Plant Austin Austin Australia Australia Charleston Charleston India India Malaysia Malaysia Mobile Mobile Paris Paris S Africa S Africa Spain Spain Capacity Fixed Cost 600000 $ 725,000 1,200,000 $1,245,000 600000 $1,037,000 1200000 $1,256,000 600000 $1,082,000 1200000 $1,300,000 600000 $ 960,000 1200000 $1,179,000 600000 $ 959,000 1200000 $1,178,000 600000 $1,057,000 1200000 $1,276,000 600000 $ 875,000 1200000 $ 977,000 600000 $ 801,000 1200000 $1,050,000 600000 $ 994,000 1200000 $1,213,000 Customer Product Forecsted Volume Malaysia A 42900 China A 318830 France A 143600 Brazil A 19350 US Northeast A 9870 US Southeast A 102970 US Midwest A 57490 US West A 183400 Malaysia B 25800 China B 57090 France B 31980 Brazil B 27050 US Northeast B 34320 US Southeast B 71130 US Midwest B 175030 US West B 295230 Malaysia 133160 China 165930 France 182080 Brazil 77070 US Northeast 7830 US Southeast 155230 US Midwest 224750 US West 127360 Plant Austin Austin Austin Austin Austin Austin Austin Austin Australia Australia Australia Australia Australia Australia Australia Australia Charleston Charleston Charleston Charleston Charleston Charleston Charleston Charleston India India India India India India India India Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Mobile Mobile Mobile Mobile Mobile Mobile Mobile Mobile Paris Paris Paris Paris Paris Paris Paris Paris S Africa S Africa S Africa S Africa S Africa S Africa S Africa S Africa Spain Spain Spain Spain Spain Spain Spain Spain Customer Freight & Warehousing Costs (per unit) Malaysia $0.27 China $0.49 France $0.44 Brazil $0.52 US Northeast $0.23 US Southeast $0.17 US Midwest $0.15 US West $0.16 Malaysia $0.34 China $0.36 France $0.40 Brazil $0.46 US Northeast $0.80 US Southeast $0.80 US Midwest $0.82 US West $0.81 Malaysia $0.24 China $0.46 France $0.41 Brazil $0.48 US Northeast $0.19 US Southeast $0.13 US Midwest $0.11 US West $0.12 Malaysia $0.26 China $0.39 France $0.35 Brazil $0.64 US Northeast $0.55 US Southeast $0.55 US Midwest $0.57 US West $0.55 Malaysia $0.17 China $0.25 France $0.39 Brazil $0.66 US Northeast $0.39 US Southeast $0.40 US Midwest $0.41 US West $0.40 Malaysia $0.24 China $0.46 France $0.41 Brazil $0.48 US Northeast $0.19 US Southeast $0.13 US Midwest $0.11 US West $0.12 Malaysia $0.32 China $0.26 France $0.09 Brazil $0.37 US Northeast $0.34 US Southeast $0.34 US Midwest $0.37 US West $0.48 Malaysia $0.58 China $0.61 France $0.45 Brazil $0.25 US Northeast $0.79 US Southeast $0.79 US Midwest $0.80 US West $0.81 Malaysia $0.31 China $0.37 France $0.25 Brazil $0.39 US Northeast $0.48 US Southeast $0.48 US Midwest $0.50 US West $0.51 Customer Malaysia China France Brazil United States Malaysia China France Brazil United States Malaysia China France Brazil United States Product A . A A . A B B B B B Price / Unit $12.57 $12.57 $12.72 $11.52 $11.13 $12.33 $12.33 $12.45 $11.28 $10.92 $12.84 $12.84 $12.96 $11.79 $11.40 Plant Austin Austin Austin Australia Australia Australia Charleston Charleston Charleston India India India Malaysia Malaysia Malaysia Mobile Mobile Mobile Paris Paris Paris S Africa S Africa S Africa Spain Spain Spain Product Variable Cost (per unit) . $1.50 B $1.50 $1.56 A $0.75 B $0.91 $0.89 A $1.44 B $1.74 $1.70 A $0.75 B $0.90 $0.88 A $0.80 B $0.96 $0.95 A $1.25 B $1.25 $1.65 A $1.56 B $1.57 $1.55 A $0.76 B $0.92 $0.90 A $1.56 B $1.88 $1.86