Question
StayFresh, a manufacturer of refrigerators in India, has two plants - one in Mumbai and the other in Chennai. Each plant has a capacity of
StayFresh, a manufacturer of refrigerators in India, has two plants - one in Mumbai and the other in Chennai. Each plant has a capacity of 300,000 units. The two plants serve the entire country, which is divided into four regional markets; North (demand of 100,000 units); East (demand of 50,000 units); West (demand of 150,000 units) and South (demand of 150,000 units). Two other potential site for plants are Delhi and Kolkata. The variable production and transport costs (in thousands of rupees; 1US dollar is worth about 45 rupees) per refrigerator from each potential production site to each market are shown below:
Production & Transport Cost ('000s Rupees) per Refrigerator for StayFresh
North | East | West | South | |
Chennai | 20 | 19 | 17 | 15 |
Delhi | 15 | 18 | 17 | 20 |
Kolkata | 18 | 15 | 20 | 19 |
Mumbai | 17 | 20 | 15 | 17 |
StayFresh is anticipating a compounded growth in demand of 20% per year for the next five years and must plan its network investment decisions carefully. Capacity can be added in increments of either 150,000 or 300,000 units. Adding 150,000 units of capacity incurs a one-time cost of 2 billion rupees, whereas adding 300,000 units of capacity incurs a one-time cost of 3.4 billion rupees.
Assume StayFresh plans to meet all demand (prices are sufficiently high) and that capacity for each year must be in place by the beginning of the year. Assume a discount factor of 0.2. That is, 1 rupee spent next year is worth 1/(1+0.2)=0.8333 rupee this year. 1 rupee spent in 2 years is worth 1/(1+0.2)2=0.6944 rupee this year.
Examine the network design to determine the optimal capacity solution over the 5-year period for a discount factor of 0.2 and a growth in demand of 20%.
Question: Please advise the input table and using excel solver, solve the additional capacity by market and year, and the total cost in today's rupees.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started