Sara, Lance and Ted, with the help of the SCM 309 class, have achieved unparalleled success with "Orange Bowl Brewery." Dramatically improved planning has enabled sales increases resulting from reduced out of stocks and far less waste in ordering raw materials, cutting COGS and operating expenses. In addition, the enhanced inventory management processes have reduced both supplier average lead times and variation and enabled streamlined operations to meet demand more quickly, thus requiring far less investment in both raw materials and finished goods inventory and higher inventory turns.

These supply chain improvements have led to a significant increase in cash flow (greater revenues, lower costs = higher profit margins; less profit spent on inventory to achieve higher sales) that have been invested in growing markets and product lines, as well as a new canning line in the brewery. The canning operation plus business development efforts have enabled 98 to begin selling canned beers to local grocery and convenience store chains in Knoxville city and Knox County.

To help reduce costs and improve service, Ted and Lance are evaluating renting out space as a forward staging facility to deliver product to retail customers. If they did this then they could distribute cases to a small number of customers from the current brewery and use the new facility to distribute the bulk of product to retail locations. They are evaluating a facility in West Knoxville on Middlebrook Pike. They have also broken their retail customers down into five areas: Downtown, Bearden, Far West (Farragut and Hardin Valley), SoKno, and Powell (North Knox areas). The estimated average cost per delivery from the brewery and staging location to customers along with associated capacities and the estimated number of deliveries to each retail area was also estimated. The following will also be required in the distribution network:

• Customer demand must be met but cannot be exceeded
• Outgoing shipments from the brewery may not exceed its manufacturing capacity of 28,100 cases per year
• Outbound shipments from the staging facility must be equal to inbound shipments
• Storage space at the brewery will limit the volume of cases that can be direct shipped from the brewing facility directly to retail locations to 7,000 cases

Use the data below to answer the following questions about what design would provide the minimum cost logistics network.

Cost per Delivery

To/From	Staging Facility	Downtown	Bearden	Far West	SoKno	Powell
Brewery	$5	$1	$2	$5	$2.5	$5.5
Staging Facility		$4.25	$2	$3	$6	$3

Estimated Demand

Retail Area	Downtown	Bearden	Far West	SoKno	Powell
# of Deliveries	6,100	7,200	3,500	5,500	2,200

1. What is the estimated cost of the minimum cost logistics network?
2. How many deliveries would you make from the brewery to the downtown area in this network?
3. How many deliveries would you make from the staging facility to the downtown area in this network?
4. How much would the cost to deliver a product from the staging facility to downtown need to increase before your optimal solution would change?
5. How much would adding 1 case of storage capacity at the brewery decrease cost?