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  • 5078 - Assignment 1 Network Design

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    Neha Wali
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    Magic Mattress is deciding where to locate distribution centers (DCs) in northern India to serve 6 demand points (cities) and minimize total costs including transportation, facility operation, and interstate sales tax (CST). Currently CST is 4%. The company will locate at least 1 DC and serve each region from the closest DC. It wants to determine the optimal DC locations and how the decision would change if CST is reduced to 2%.

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    5078_assignment 1 Network Design

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    Magic Mattress is deciding where to locate distribution centers (DCs) in northern India to serve 6 demand points (cities) and minimize total costs including transportation, facility operation, and interstate sales tax (CST). Currently CST is 4%. The company will locate at least 1 DC and serve each region from the closest DC. It wants to determine the optimal DC locations and how the decision would change if CST is reduced to 2%.

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    Download as DOC, PDF, TXT or read online from Scribd
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    Download as doc, pdf, or txt
    231 views1 page

    5078 - Assignment 1 Network Design

    Uploaded by

    Neha Wali
    Magic Mattress is deciding where to locate distribution centers (DCs) in northern India to serve 6 demand points (cities) and minimize total costs including transportation, facility operation, and interstate sales tax (CST). Currently CST is 4%. The company will locate at least 1 DC and serve each region from the closest DC. It wants to determine the optimal DC locations and how the decision would change if CST is reduced to 2%.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    1. Magic Mattress, a mattress manufacturing company in Bangalore, is trying to finalize its distribution network for northern India.

    The company has a manufacturing facility and a central inventory depot in Bangalore attached to it. In the northern region, the firm presently markets its product through six demand points Delhi, Kanpur, Jalandhar, Jaipur, Faridabad and Dehra Dun. Each of these demand points belongs to different states and union territories. If the firm serves retailers within the region from distribution centres (DCs) located in the same region (state/union territories) then it does not have to pay central sales tax (CST). CST is an interstate sales tax and is levied @ 4% on goods that are sourced from outside the region. If the firm locates DCs in all six regions it can avoid paying CST completely. The fixed cost per period of installing (apportioned) and operating a DC is Rs 2,500 per week. Transportation cost is Rs 0.2 per kilometer per unit, and the unit cost of a mattress is Rs 1,000. the firm has decided to locate at least one DC in the northern region so that the lead time for the retailer is less than 48 hours. The firm will try to serve a market in any region from a DC located closest to the market. Demand point specific data. Delhi Distance from central warehouse Weekly demand 2,050 40 Kanpur 1,855 16 Jalandha r 2,415 16 Jaipur 2,000 16 Faridaba d 2,020 8 Dehra Dun 2,240 4

    Distances Matrix (in km). Warehouse/ market Delhi Kanpur Jalandhar Jaipur Faridabad Dehra Dun Delhi 0 480 375 260 30 235 Kanpur 480 0 855 520 450 575 Jalandha r 375 855 0 635 405 365 Jaipur 260 520 635 0 290 495 Faridaba d 30 450 405 290 0 260 Dehra Dun 235 575 365 495 260 0

    The firm wants to decide the optimal location of its DCs so as to minimize the total cost. The total cost will include transport cost, fixed facility cost and CST-related cost. a) Where should the company locate its warehouse? b) The Indian government is planning to reduce CST over a period of time. How will your decision change if CST is brought down to 2 per cent.

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