Case: Omega Paints

Omega paints have a rented facility at a location. Owing to certain political issues; their top
management has decided to move to some other location. They identified three potential
locations for their facility. The items manufactured at the selected location need to be shipped to
the three Central Distribution Centers (CDCs). From the CDCs, the items are to be distributed
to the respective Regional Distribution Centers (RDCs) and finally shipped to the retailers. Each
CDC is a source of demand which is known to the management. The shipments from the plant to
the CDCs are being carried out once after every 10 working days and the shipping cost is
dependent on the distance covered. Further, the labor wages are paid daily and the production
activity is carried out on 300 days every year. Based on the information available in the
following tables, take a decision on the behalf of Omega Paints management to select a plant
location that will maximize the firms profit.

OMEGA Paints Distribution Centers
X Y Z
Sites A 300 250 400
B 250 350 200
C 300 400 250
Annual Demand 270000 12000 11500

Contribution Margin per unit $10
Transportation Cost per unit distance $12
No. of Trips/per year 30
No. of working Days 300

Labor Productivity
(Units/Day/Worker)
Daily Wages
($/Worker)
Facility Annual Rent
(in $)
A 12 50 $100,000
B 15 75 $85,000
C 12.5 70 $110,000