I am needing help with the task illustrated below. Basically the company is wishing to consider construction of a new facility within the northeastern part of the US and you are to formulate your thoughts of how/why/where.
These are my thoughts:
Instead of moving or erecting a facility in Northeast PA (where it suggests) it should be done in VA which is near a port as this area has a lower cost of living/lower taxes/land, etc.
Then the questions -
1) What kind of data will you need to fully perform your analysis? - You would need real estate information data, tax information (both personal for associate relocation and corporate), trucking costs, transportation costs, and all other costs which I cannot think of at this time.
2) Remember that adding a new distribution facility will reduce the volume through other facilities. Transportation costs will clearly be affected; instead of shipping products by truck from Charleston, SC (the nearest existing facility), products will be shipped from eastern PA to the Northeast. A new facility will also affect inventory levels (and valuations). - This area would pull from the SC facility and the Savannah facility and probably in turn close the Savannah facility which is in turn struggling anyway. It will in turn be a go between so to speak for the other areas as it in between.
3) Which products will you propose to distribute through the new facility? - This I feel should be perceived by the demand of the market/customers. It should be housed with the products the customers in the area purchase - thus making it a one stop shop so to speak.
4) How will you estimate the construction costs of the new facility? How will you estimate the cost of real estate for the new facility? - I think these are connected and should be done through the hiring of a professional company which is an expert in this field as this is a large transition/investment for the organization.
5) How will you estimate the operating costs of the new facilities? - I would think they would be compared to the facilities which are currently operational within the company.
Evaluate the feasibility of and economic justification (if any) for building a new liquid chemicals distribution facility in near New York City.
In speaking over the telephone with the sales/marketing managers for the Industrial Chemicals and Specialty Chemicals divisions, they point out that the Northeast is the most densely populated region of the country and that two of Canbide’s competitors already have distribution facilities near New York. Without the facility, they jointly estimate that market share in the region will decline by about 5% per year for the next five years, then stabilize there. With a new facility, they jointly estimate that regional market share will increase by 10-15% per year for the next three years, then 5-8 % for the next two years. The increase in market share is equivalent to a 15% increase in annualized sales volume.
You stop by the central records storage and request copies of the two previous studies that looked at building a new liquid chemicals distribution facility in the Northeast. Both of these studies assumed that, in order to minimize product transportation costs, liquid chemicals would be delivered to the new facility by ocean-going barge. (On a cost per pound-mile basis, trucking costs are more expensive than rail. Rail is more expensive than barge, which is slightly more expensive than sea-going ship.) Both analyses found that the cost of construction plus the cost of operation plus the cost of transportation (from the barge to the facility and from the facility to the customer) out weighed the potential growth in sales.
You decide that the former analyses are sound, but you need to come up with a recommendation. You examine a detailed map of the Northeast and find that one city in eastern PA is located at the juncture of three interstate highways that lead to major population centers. You then look at a sectional map showing rail lines and discover that two major railroads also serve that city. You decide to propose an "in-land" location that will receive liquid chemical products by rail and make shipments by tank truck, but including ship or barge shipments may not be completely excluded.
What kind of data will you need to fully perform your analysis? Remember that adding a new distribution facility will reduce the volume through other facilities. Transportation costs will clearly be affected; instead of shipping products by truck from Charleston, SC (the nearest existing facility), products will be shipped from eastern PA to the Northeast. A new facility will also affect inventory levels (and valuations). Which products will you propose to distribute through the new facility? How will you estimate the construction costs of the new facility? How will you estimate the cost of real estate for the new facility? How will you estimate the operating costs of the new facilities?
Internet Research IS required including properly formatted in-text citations and references.
Scenario:
You have been promoted to senior analyst in the Distribution Engineering, Maintenance, and Productions Management group of the Central Engineering Department of the Canbide Corporation, near Torrance, CA. At this location is a facility for the electronics business. Based upon your previous successes in the electronics division, you will now spend most of your time with the chemical plants.
The Canbide Corporation is a U.S.-based, multi-national, publicly traded, manufacturing company with annual sales nearing $10 billion. Canbide is one of the pioneers of the petrochemical industry and is the acknowledged technology leader in several market sectors, and benefits from large licensing royalty checks for those technologies. Canbide is the low cost producer for a number of commodity products. Canbide's current marketing approach is based on providing a wide selection of products from a single location, more than any of their competitors.
In a suburb of Tulsa, OK, Canbide operates a facility for the Chemical Business Group, which contains the Divisional Research and Engineering Department (DRE), the experts on the specific reactions and equipment associated with that division's production processes, and the Central Central Engineering and Research Department (CERG), experts in specific subjects that cross divisional boundaries. The employees in CERG generally work as internal consultants for the divisional research and engineering groups and often work on plant level issues.
Mr. Villani, president of the Chemicals Business Group, is pressing his divisional VPs to solve several problems. There is internal pressure for a new distribution facility in the Midwest. There continue to be quality problems at a facility near Toledo, OH that serves the automotive market in Michigan. There are customer service problems at most of the distribution locations, but especially at a facility near Denver, CO. There are inventory and materials handling problems at the production facility near Huntsville, AL.
Your supervisor has alerted you to three important projects for the coming year.
Product Quality and Distribution Problems at the Denver facility: This facility has experienced slow physical growth since its beginning in the 1930s. Over the years, new production units (measuring 2 km x 1 km) have been added on the periphery of the facility, in a widely scattered manner. Unfortunately, your previous recommendations regarding customer service have not yet been implemented due to budgetary constraints; customers desiring to pickup multiple products must now drive from point to point within the plant to pick up each product. There are often waiting lines at each loading point. This is causing gridlock within the facility caused by the arrival pattern of trucks picking up products. In addition, there are product quality problems, primarily due to new rules that the automotive industry (ISO 9000) is imposing on all of their suppliers.
New Distribution Facility in the Northeast: For years, long before you joined Canbide, the Divisional Sales and Marketing Departments have clamored for a new distribution facility located near New York to serve many customers throughout the Northeast. Previous studies have always indicated that the benefits of a New York location are outweighed by the costs. In spite of this, you are being asked to take another look.
A Quality Program for CERG: With the increasing prevalence of ISO 9000 programs, Canbide has initiated a corporate wide Excellence through Quality (EQ) program. Most of the plants and operational locations have already launched their EQ programs. Now, Mr. Harkins, the VP of Central Engineering and Research Group (CERG), has picked you to help develop and implement the EQ program for his corporate level engineering and R&D groups.