Total Transportation Cost for Des Moines 6740($14)+4740($16)+940($0)+3400($15)+ 310($17)+5670($9)+5000($11) = $332,500.

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Presentation transcript:

Total Transportation Cost for Des Moines 6740($14)+4740($16)+940($0)+3400($15)+ 310($17)+5670($9)+5000($11) = $332,500

Total Transportation Cost for Montgomery 1740($14)+4690($18)+5050($16)+940($0)+ 3710($15)+5670($9)+5000($9)=$341,260 This is $8,760 greater than the total transportation cost if the new manufacturing facility is located in Des Moines. Therefore, in terms of minimizing transportation cost, Des Moines is best.

Other Factors? What about the possibility of a customer in Lincoln, Nebraska? Other factors: –operating costs (i.e., labor and materials) –utility costs –investment –incentives from state and local governments If customer in Lincoln materializes, then the Des Moines case becomes even stronger since Des Moines is a short distance from Lincoln.

Always minimize costs? NO! –cost –quality –delivery reliability –flexibility –speed –any competitive issues that can be enhanced by going with the non least-cost should be considered.

Location of a warehouse in Germany Method: Load-Distance Method (a.k.a.: center-of-gravity method) Customer locations (coordinates) and demands in units per year are given

Show map here

Location? Central Germany