Case Situation

1. LG Ltd. is a manufacturing of AC that has been its demand grows significantly. The
company anticipates nationwide demand for the year 2012 to be 180,000 units in the West,
120,000 units in the South India, 110,000 units in the North, and 100,000 units in the west
south India. Manager of LG Ltd are designing the manufacturing network and have selected
four potential sites Delhi, Mumbai, Chennai, and Bangalore. Plants could have a capacity
of either 200,000 to 400,000 units. The annual fixed costs at the four locations are shown in
table along with the cost of producing and shipping an AC to each of the four markets.
Where should LG build its factories and how large should they be?
Delhi Mumbai Chennai Bangalore
Annual fixed cost
of 200,000 plant
$6 Million $5.5 Million $5.6Million $6.1 Million
Annual fixed cost
of 400,000 plant
$10 Million $9.2 million $9.3Million $10.2Million
South
211 232 238 299
West
232 212 230 280
East
240 230 215 270
North
300 280 270 225


Delhi
Shipped
from
Delhi
Mumbai
Shipped
from
Mumbai
Chennai
Shipped
from
Chennai
Bangalore
Shipped
from
Bangalore
Fixed Costs
200k
$6 Million

$5.5
Million

$5.6Million

$6.1 Million

400k
$10
Million

$9.2
million

$9.3Million

$10.2Million

Variable Costs
North 211

110,000

232 - 238

- 299 -
West 232

-

212 180,000 230

- 280 -
South 240

-

230 - 215

120,000 270 -
West-
south 300

-

280 - 270

- 225 100,000







(a.) Total cost of LG
Delhi Mumbai Chennai
Bangalore
Various Cost 23,210,000 38,160,000 25,800,000 22,500,000
Fixed Cost 6,000,000 5,500,000 5,600,000 6,100,000

Total Cost 29,210,000 43,660,000 31,400,000 28,600,000

Total LG Cost 265,740,000


(b) if management want to close Chennai plant than what would you recommended to
management.

(c0) if west market demand increase by 30,000 units than how company supply these units
form exist network and how much cost increase?

2. SC Consulting, a supply chain consulting firm, must decide on the location of its home
offices. Its clients are located primarily in the 16 states listed in table. There are four potential
sites for home offices: New Delhi, Jaipur, Mumbai, and Pune the annual fixed cost of
locating an office in New Delhi is $165, 428, Jaipur is $ 131, 230, Mumbai is $140,000, and
Pune is $ 145,000. The expected no. of trips to each is Cities and the travel costs from each
potential site are shown in table. Each consultant is expected to take at most 25 trips each
year.
Cites Total # of trips
Cost from
Delhi
Cost from
Jaipur
Cost From
Mumbai
Cost from
Pune

40 150 250 200 25
Bangalore 35 150 250 200 75
Noida 100 75 200 150 125
Bhopal 25 150 200 125 125
Lucknow 40 100 200 125 150
Chennai 25 175 175 125 125
Nasik 50 150 175 100 150
Indore 30 150 150 100 200
Gaogoan 50 75 100 200 250
surat 65 150 125 25 250
HY 40 125 125 75 125
Warangal 30 300 200 150 200
Goa 20 300 175 125 200
Udaipur 30 250 100 125 250
Ahmadabad 40 250 75 75 300
Ajmer 55 100 25 125 300






output from Excel

Cites
Total #
of trips
Trips
from
Delhi
Cost
from
Delhi
Trips
from
Jaipur
Cost
from
Jaipur
Trips
from
Mumbai
Cost
From
Mumbai
Trips
from
Pune
Cost
from
Pune
40 - 150 - 250 - 200 40 25
Bangalore 35 - 150 - 250 - 200 35 75
Noida 100 100 75 - 200 - 150 - 125
Bhopal 25 - 150 - 200 - 125 25 125
Lucknow 40 40 100 - 200 - 125 - 150
Chennai 25 - 175 - 175 - 125 25 125
Nasik 50 - 150 - 175 50 100 - 150
Indore 30 - 150 - 150 30 100 - 200
Gurgaon 50 50 75 - 200 - 100 - 250
surat 65 - 150 - 125 65 25 - 250
HY 40 - 125 - 125 40 75 - 300
Warangal 30 - 300 - 200 30 150 - 200
Goa 20 - 300 - 175 20 125 - 200
Udaipur 30 - 250 30 100 - 125 - 250
Ahmadabad 20 - 250 20 75 - 75 - 300
Ajmer 55 - 250 55 25 - 125 - 300

Solution:
(a) Total Trip from Various office
a. Delhi office = 100+40+50 = 190
b. Jaipur Office = 30+20+55 = 105
c. Mumbai office = 50+30+65+40+30+20 = 235
d. Pune office = 40+35+25+25 = 125
(b) How many consultant at various offices
No. of consultant = total no. of trip / no of trip per consultant
a. Delhi office = 190/25 = 7.6 = 8 consultant
b. Jaipur office = 105/25 = 4.02 = 5 consultant
c. Mumbai office = 235 / 25 = 9.4 = 10 consultant
d. Pune office = 125/25 = 5 consultant
Total consultants for SC consulting = 8+5+10+5 = 28

(c) Total cost of SC consulting
Total office cost = Fixed cost + variable cost
Variable cost = no. of trip * trip cost



Delhi Jaipur Mumbai Pune
# of trips 190 125 235 125
# of Consultants 8 5 10 5
Fixed Cost of office 165,428 131,230 140,000 145,000
Cost of Trips 15,250 7,375 19,625 9,875
Total Office Cost 180,678 138,605 159,625 154,875


Total System Cost

633,783

Total cost of SC Consulting = 180678 + 138605 + 159625 + 154875 = 633783

(d) If SC consulting have only four consultants at Jaipur than what would you solution for
company.
(e) If SC consulting have only 26 consultants that what is your recommendation to
company?