Eight12 is a large chain of convenience stores, with a number of outlets throughout Europe. The stores are conveniently located at street corners or other busy parts of urban centersand carry a limited selection of everyday items such as fruits, breadand pastries, snacks, tobacco products and magazines.

The last mile distribution network for Eight12's stores in Berlin, Germany, is designed like many other last mile distribution networks. Just outside the city, Eight12 has a distribution center (DC). From this DC, a large fleet of company-owned and operated trucks supply the stores in and around Berlin. Most stores are replenished daily from the DC.

Recently, Eight12 decided to completely redesign their last mile distribution network in Berlin. The company's idea was to completely rethink their whole network design, including how many stocking points and cross-docking points to have in the city, as well as how many vehicles, and of which type, to operate within the network.

The supply chain analytics team at Eight12 was given the task of coming up with alternative designs for this revised network. After six months of meetings, discussions, number crunching, and a well-received off-site conference at a ski resort in the Swiss mountains, the team has decided to propose two alternative designs to the VP of Supply Chain, as follows:

• Alternative 1is a mobile multi-tier network. With this design, Eight12 will need to invest in mobile stocking points, as well as smaller electric distribution vehicles. The mobile stocking points are basically large trucks that will act as temporary stocking locations from which the smaller distribution vehicles distribute to each store. This solution will provide a lot of flexibility and reduce fuel costs for Eight12. However, this design is conceptually and operationally very different from the current distribution network.
• Alternative 2is a more traditional network. This alternative consists of updating the fleet of trucks and retaining the current DC. The company would invest heavily in the currentDC, in order to make it efficient and capable of supporting future growth.

PART 1:

Both alternatives are assumed to pay back within 2 years. The alternatives are mutually exclusive.