Network Design Assignment
Autor: Adnan • December 28, 2017 • 1,611 Words (7 Pages) • 552 Views
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As this table shows, for Hot & Cold, France and Germany are operating at full capacity, France supplying South and West regions, Germany supplying North, East and West and Finland is supplying only East European market with 5 million units per year. In the case of CaldoFreddo, UK plant is at full capacity supplying North, East and West regions leaving Italy’s plant to supply the remaining demand of East and the full demand of South region.
Post-merger situation
After the merger, the network supply can be optimized using the best plant locations to supply the total European demand. Since the total capacity of all the plants now belonging to the same company is 250 and the total demand is 190, a possible closure of one plant must be considered. The model changed and it was solved again using assistance of the Microsoft Solver. The results are as follows:
North
East
South
West
Total Prod.
Revenue
Variable Costs
Fixed Costs
Total Cost
Gross Profit
Taxes
Net Profit
(million units)
(million €)
France
Open
0.0
0.0
50.0
0.0
50.0
15,000.00
5,250.00
1,000.00
6,250.00
8,750.00
2,187.50
6,562.50
Germany
Open
45.0
0.0
0.0
5.0
50.0
15,000.00
4,800.00
1,000.00
5,800.00
9,200.00
2,300.00
6,900.00
Finland
Open
0.0
40.0
0.0
0.0
40.0
12,000.00
4,000.00
850.00
4,850.00
7,150.00
2,145.00
5,005.00
UK
Open
0.0
0.0
0.0
50.0
50.0
15,000.00
4,500.00
1,000.00
5,500.00
9,500.00
1,900.00
7,600.00
Italy
Close
0.0
0.0
0.0
0.0
0.0
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total
45.0
40.0
50.0
55.0
190
57,000.00
18,550.00
3,850.00
22,400.00
34,600.00
8,532.50
26,067.50
For the optimal network design, four plants remain open after the merger. All of them would be working at full capacity and the plant from Italy should be shut down. The total production is more regionalized since most of the plants are now supplying only one region. The exception is Germany that not only supplies North region demand but also the remaining unmet demand of the West region. The plant form Finland cannot fulfill the demand from the West since its production capacity is lower than the demand in this region.
In all, the total profit for the merged company is € 26,067.50M and, compared to the sum of both companies’ profits (€ 24,608.75M), it represents almost a 6% increase.
Sensitivity Analysis
Changing some parameters could affect the design of the supply network shown in the previous paragraph. Analyzing the results of the optimal network design, the variable production and shipping costs represent more than 80% of the cost (Variable + Fixed Costs),
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