Consider the idea of upgrading the Los Angeles warehouse to include a distribution center capable of processing all the volume coming into the United States. Assume that containers coming into Seattle would be inspected by federal officials (this needs to be done at all port locations) and then immediately shipped by rail in their original containers to Los Angeles. All volume would be unloaded and quality-checked in Los Angeles (the quality check cost $5.00 per CBM when done in Los Angeles). Eighteen percent of the volume would then be kept in Los Angeles for distribution through that warehouse and the rest transshipped by rail to the Kansas City warehouse. Assume the cost to transship by rail is

$0.0018 per CBM per mile. The material sent to Kansas City would not need to go through the “unload and quality check process,” and would be stored directly in the Kansas City distribution center. Assume that the remaining volume would be transferred by truck to the eight remaining warehouses in the United States at a cost of $0.0220 per CBM per mile.

LO15-2