24-10-2014, 03:59 PM
Consolidated Bottling
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Consolidated Bottling Incorporated bottles spring water. It has distribution centers in or near twelve cities in the United States, in or near eighteen North American cities, including the twelve cities with bottling plants. Recently, Consolidated has encountered some problems at two of its plants: The level of certain chemicals in the bottled water at these plants is too high.
After a great deal of thought, management decides that it is time to reevaluate the entire shipping plan to determine if it is worthwhile to upgrade either or both of these plants or if new plants should be built in different locations. Especially attractive as potential sites for new facilities are the six cities that already have distributorships. The analysis includes the evaluation of many location factors. For example, the (fixed) costs associated with revamping the old plants must be weighed against those associated with building new plants. There are also labor-related factors to consider.
The following table lists the plant capacities in the twelve cities with bottling plants and demand for Consolidated bottled water at each of the eighteen distribution sites.
Shipping costs, a management focus, depend on several factors. Different truck lines carry the products on different routes. Assume, though, that the intercity shipping costs are proportional to the intercity distances. The distances between all pairs of cities are given in the following table (in rounded hundreds of miles between cities).
Discussion Question
1. A new plant would have a capacity anywhere between 130 thousand cases per year and 180 thousand cases per year. If a new plant is to be built in one of the six cities that serves as a distributorship but currently does not have a plant, which city should be chosen? How large should the plant be? How much would be saved in shipping miles (money) each year? How will a new plant affect shipping routes?