Question
CPP acquired two competitors, USC and UCLA, recently. All three are shipping container manufacturers. Their current market sizes are as shown in the following table.
CPP acquired two competitors, USC and UCLA, recently. All three are shipping container manufacturers. Their current market sizes are as shown in the following table. All demand is in millions of units.
Table: Demand
Markets | N. America | S. America | Europe (EU) | Europe (Non EU) | Japan | Rest of Asia/Au stralia | Africa |
CPP | 10 | 4 | 20 | 3 | 2 | 2 | 1 |
;USC | 12 | 1 | 4 | 8 | 7 | 3 | 1 |
UCLA | 22 | 3 | 5 | 7 | 3 | 7 | 1 |
Before the merge, each company has their own factories. The following table shows the capacity (in millions of units) and annual fixed costs (in millions of $) for each plant.
Table: Fixed Facility Cost
Plant | Capacity | Fixed Cost / year |
|
CPP-1 | 20 | 100 |
|
CPP-2 | 20 | 100 |
|
CPP-3 | 10 | 60 |
|
USC-1 | 50 | 450 |
|
UCLA-1 | 40 | 200 |
|
UCLA - 2 | 100 | 50 |
|
Variable production and transportation costs from factories to markets are combined and as shown in the following table. All costs are shown in dollars per unit.
Table : Variable Production Costs and Transportation Costs From Plants to Markets
Plant | N. America | S. America | Europe (EU) | Europe (Non EU) | Japan | Rest of Asia/Australia | Africa |
CPP-1 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
CPP-2 | 7 | 6 | 5 | 4 | 3 | 2 | 1 |
CPP-3 | 10 | 12 | 7 | 8 | 8 | 3 | 9 |
USC | 7 | 8 | 9 | 10 | 11 | 12 | 15 |
UCLA-1 | 3 | 7 | 6 | 5 | 12 | 6 | 15 |
UCLA-2 | 9 | 19 | 6 | 5 | 7 | 8 | 6 |
QA -- The merged company wants to examine the option of downsizing. Assume that each closed plant will not incur the corresponding fixed costs and variable costs in the above tables. Please use the Excel solver to develop a recommendation. After the downsizing, what is the total supply chain cost in million dollars? Copy paste the exact number into the following box. Use the numbers in the provided tables and your total costs will be naturally in million dollars. Simplex LP is recommended.
QB -- Assume that USC, although a quite expensive option, is specialized in serving the sophisticated Japan market. After the merge, all demand from Japan shall be met by USC only. Now what is the new total cost at the minimum level?
No need to explain or upload the worksheet. Just final numbers. Example answer:
QA- 34
QB 134
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