Chapter 1

Problem 1:
Consider the supply chain for a domestic automobile.
a. What are the components of the supply chain for the automobile?
b. What are the different firms involved in the supply chain?
c. What are the objectives of these firms?
d. Provide examples of conflicting objectives in this supply chain.
e. What are the risks that rare or unexpected events pose to this supply chain?
Answer:
a. The supply chain for a car typically includes the following components::
1. Suppliers for raw materials
2. Suppliers for parts and subsystems
3. Automobile manufacturer (Ford, in the example). Within a company, there are also different
departments, which constitute the internal supply chain:
i. Purchasing and material handling
ii. Manufacturing
iii. Marketing, etc.
4. Transportation providers
5. Automobile dealers
b. Many firms are involved in the supply chain.
1. Raw material suppliers. For instance, suppliers for steel, rubber, plastics, etc.
2. Parts suppliers. For instance, suppliers for engines, steering wheels, seats, and electronic components,
etc.
3. Automobile manufacturer. For instance, Ford.
4. Transportation providers. For instance, shippers, trucking companies, railroads, etc.
5. Automobile dealers. For instance, Hayward Ford.
c. All companies involved in the supply chain want to maximize their respective profits by increasing revenue
and decreasing cost. However, companies may employ different strategies in order to achieve this goal.
Some of them focus on customer satisfaction and quick delivery, while others may be more concerned about
minimizing inventory holding costs.

d. In general, different parts of the supply chain have objectives that are not aligned with each other.
1. Purchasing: Stable order quantities, flexible delivery lead times and little variation in mix.
2. Manufacturing: Long production runs, high quality, high productivity and low production costs.
3. Warehousing: Low inventory, reduced transportation costs and quick replenishment capability.
4. Customers: Short order lead times, a large variety of products and low prices.
e. Typically, the automobile dealer would like to offer a variety of car colors and configurations to
accommodate different customer preferences, and meanwhile have a short delivery lead time from the
manufacturer. However, in order to maximize the length of production runs, and utilize resources more
efficiently, the manufacturer would like to aggregate orders from different dealers and offer less variety in
car configurations. This is a clear example of conflicting marketing and manufacturing goals.
Problem 2: Consider a consumer mortgage offered by a bank.
a. What are the components of the supply chain for the mortgage?
Answer:
1

Marketing companies that handle solicitation to potential customers.

Credit reporting agencies that evaluate potential customers.

The bank that extends the mortgage loans.

Mortgage brokers through which the loans are distributed.

b. Is there more than one firm involved in the supply chain? What are the objectives of the firm or firms?
Answer:
The marketing companies strive to increase the response rate from homebuyers in order to maximize their
returns. Banks aim at a customer portfolio with a relatively low risk, healthy flow of payments and low average
loan maturity date. The brokers would like to maximize their sales commissions.
c. What are the similarities between product and service supply chains? What are the differences?
Answer:
Similar to product supply chains, the objective of a service supply chain is to provide what is needed (in this
case, a particular type of service, rather than a physical product) at the right location, at the right time, and in a
form that conforms to customer requirements while minimizing system wide costs. However, there are a
number of differences between the two types of supply chains. For instance:
1. In a product supply chain, there is both a flow of information and physical products. In a service supply
chain, it is primarily information.
2. Contrary to a service supply chain, transportation and inventory are major cost components in a product
supply chain.

3. Services typically cannot be held in inventory, so matching capacity with demand is frequently more
important in a service supply chain.
4. In a service supply chain, the (explicit) cost of information is higher than in a product supply chain.
Note that in the mortgage example above, the bank has to compensate the credit reporting agency for
each credit report it obtains.
Problem 3: What is an example of a supply chain that has evolved over time?
Answer:
Many supply chains evolve over time. For example, consider a memory chip supply chain.

Production

strategies may change during different stages of the product life cycle. When a new memory chip is introduced,
price is high, yield is low, and production capacity is tight, and the availability of the product is important.
Consequently, production is usually done at plants close to markets, and the management focuses on increasing
yield, reducing the number of production disruptions, and fully utilizing capacity. When the product matures,
however, its price drops and demand is stabilized for a period of time, so minimizing production cost moves to
center stage. To reduce costs, production may be outsourced to overseas foundries, where labor and materials
are much cheaper.
Problem 4: A vertically integrated company is a company that owns, manages, and operates all its
business functions. A horizontally integrated company is a corporation consisting of a number of
companies, each of which is acting independently. The corporation provides branding, direction, and
general strategy. Compare and contrast the supply chain strategies of the two types of companies.
Answer:
A vertically integrated company aims at tighter interaction among various business components, and frequently
manages them centrally. Such a structure helps to achieve system wide goals more easily by removing conflicts
among different parts of the supply chain through central decision making. In a horizontally integrated
company, there is frequently no benefit in coordinating the supply chains of each business within the company.
Indeed, if every business specializes in its core function, and operates optimally, an overall global optimum may
be approached.

Problem 5: If a firm is completely vertically integrated, is effective supply chain management still
important?
Answer:

Effective supply chain management is also important for vertically integrated companies. In such an
organizational structure, various business functions are handled by different departments of the company that
usually have different internal objectives, and these objectives are not necessarily aligned with each other. This
may be due to lack of communication among departments or the incentives provided by the upper management.
For instance, if the sales department is evaluated based on revenue only, and the manufacturing department is
evaluated based on revenue only, and the manufacturing department is evaluated based on cost only, the
companys profit may not be maximized globally. Effective supply chain management is still necessary to
achieve globally optimal operations.
Problem 6: Consider the supply chain for canned peaches sold by a major food processing company.
What are the sources of uncertainty in this supply chain?
Answer:
The sources of uncertainty in this example include:
1. Factors such as weather conditions, diseases, and natural disasters cause uncertainty in availability of raw
materials, i.e., peach crop.
2. Uncertain lead times during transportation of crop from the field to the processing facility may affect the
quality of peaches, e.g., they may get spoiled.
3. Processing times in the plant, as well as the subsequent warehousing and transportation times are subject to
uncertainty.
4. Demand is not known in advance.
Problem 7: Consider a firm redesigning its logistics network. What are the advantages to having a small
number of centrally located warehouses? What are the advantages to having a larger number of
warehouses closer to the end customers?
Answer:
A small number of centrally located warehouses allow a firm to take advantage of risk pooling in order to
increase service levels and decrease inventory levels and costs. However, outbound transportation cost is
typically higher, and delivery lead times are longer. On the other hand, by building a larger number of
warehouses closer to the end customers, a firm can decrease outbound transportation costs and delivery lead
times. However, this type of system will have increased total inventory levels and costs, decreased economies of
scale, increases warehousing expenses, and potentially increased inbound transportation expenses.
Problem 8: Consider a firm selecting a supplier of transportation services? What are the advantages to
using a truckload carrier? A package delivery firm such as UPS?

Answer:
The choice of the particular transportation service depends largely on the types and sizes of products the
company wants to transport, the inventory and delivery strategies and the need for flexibility:
1.

A truckload carrier is better if delivering bulky items or small items in large and stable quantities from
warehouses to demand points (stores). A good example is the delivery of groceries from warehouses to
supermarkets. Note that in this case we would like the demand to be in increments of full truck loads.

2.

A package delivery firm is more appropriate if relatively small items are delivered from the
manufacturer/warehouse directly to the customers. Additionally, a package carrier company offers more
flexibility by different modes of transportation depending on the needs of the individual customers.

Problem 9: What are the advantages to a firm of high inventory levels? What are the disadvantages?
What are the advantages of low inventory levels? The disadvantages?
Answer:
1.

High inventory levels

i.

Advantages: High fill rate (service level) and quick order fulfillment.

ii.

Disadvantages: High opportunity cost of capital tied in inventory, danger of price

declines over time and obsolescence, need for more warehouse space.

2.

Low inventory levels

i.

Advantages: Low inventory holding and warehousing costs.

ii.

Disadvantages: Higher risk of shortages and lower service levels.

Problem 10: What are some ways that redundancy can be built into a supply chain? What are the
advantages and disadvantages of building redundancy into the supply chain?
Answer:
Building redundancy into the supply chain means that if one portion fails, the supply chain can still
satisfy demand. This is the biggest advantage of building redundancy in the supply chain. Alternate
sources of supply, provision for alternate transportation and distribution modes, alternate warehouses are
some of the ways by which redundancy can be built. A disadvantage of this policy is that excess capacity
is built into the system in order to hedge against emergencies that may disrupt the supply if these
capacities are not used over time and if too much capacity is built as redundant capacity, the costs to the
supply chain increases. Other ways by which redundancy can be built is by using information to better
sense and respond to disruptive events, incorporating flexibility into supply contracts to better match
supply and demand and improving supply chain processes by including risk assessment measures

Chapter 7

Problem 1: Consider a large discount store. Discuss some products and suppliers for which the
discount store should use a cross-docking strategy; some products and suppliers better suited to a
direct-shipment strategy; and, finally, some products and suppliers for which the discount store
should utilize a change to; "traditional warehousing strategy."
Answer:
Cross Docking strategy is useful for the retail stores that deal with multiple products. Since they need to
maintain lowest level of inventories in their warehouses for all specific items and must be able to ship

them at the right time to their retail outlets. The best example of the implementation of cross-docking
strategy is Wal-Mart. Wal-Mart generally handles thousands of products in their retail outlets. Hence
requires cross-docking strategy for general day to day purpose products such as soaps, cosmetics,
vegetables and other food items such as bread, cereals, dairy etc. that have reasonable perishable times.
Direct shipping is generally suited for products such as electronic items, bikes, accessories such as school
bags, laptop bags that do not have high day to day demand. Here the companies can use the retail outlets
for the promotion and sales purpose; but should be able to manage sales by directly shipping from their
warehouses. Traditional warehousing should be utilized for products such as clothes, utensils,
stationary, books etc. These products have longer life periods and the demand can be managed easily by
the discount stores. And in case of high demand products, the company can purchase
the products in wholesale from the distributor. Also in case of traditional warehouses thewarehouses

are

spread across multiple locations that are logistically correct, the lead-time should not be a concern for the
discount stores
Problem 2: Consider the following supply chains. For each one, list specific advantages of
centralized and decentralized management, and centralized and local facilities:
a. Milk and dairy products
b. Newspapers
c. MP3 players
d. Carse. Jeans

Answer: a). Milk and Dairy Products:

1)
2)
3)
4)
5)

Advantages of Centralized Management:

Less inventory holding cost.
Lesser lead-Times. Faster Transportation.
Accurate Demand information.
Advantage due to centralized risk-pooling.

Advantages due to Decentralized Management:

1) Limited inventory carrying cost.
2) Faster shipment of products to the retail outlets.

3) Retailers demand specific warehouses. This implies functioning of warehouses with regards to
the retailer's demand on one to one basis.
4) Local Optimization.
Advantages of Centralized and Local Facilities:
1) Higher service levels.
2) Higher sales. And could improve product promotion and brand value.
b). Newspaper:
Advantages of Centralized Management:
1) Lesser inventory costs due to the accurate demand estimations. Since could involve incorrect
estimation of demand due to available inventory models such as news-vendor. Also, availability
of historical data.
2) Wholesale discounts to the customers.
Advantages due to Decentralized Management:
1) Faster delivery time.
2) More sales. Because of higher safety stock at each retailer and distributor.
3) Can answer unexpected or variability in demand.

Advantages of Centralized and Local Facilities:

1) More customers.
2) Higher sales.
c). MP3 Players:
Advantages of Centralized Management:
1) Maximum utilization of information systems. Both in terms of shipments and ordering.
2) Lower inventory costs.

3) Lower inventory levels.

4) Reduction in over-all system costs due to Centralized risk pooling.
Advantages due to Decentralized Management:
1)
2)
3)
4)

Reduced shipment times.

Direct shipments.
High service levels.
Higher safety stocks.

Advantages of Centralized and Local Facilities:.

1) Increase in sales due to availability of products near local areas.
2) Promotion.
d). Cars:
Advantages of Centralized Management:.
1)
2)
3)
4)
5)

Overall reduction in system costs due to risk pooling.

Lower safety stocks.
Higher sales to the dealer at a point in time.
Lesser warehouses.
Information sharing among dealers. Good for the parent company sales.

Advantages due to Decentralized Management:

1)
2)
3)
4)

Higher safety stocks.

Higher service levels.
Lower lead times.
Higher sales.

Advantages of Centralized and Local Facilities:

1) Higher service levels. As the customer can approach other dealer in case of unavailability of a car.
2) Optimal solution for a car making company.
3) Increase in sales.
e). Jeans:

Advantages of Centralized Management:

1) Lower inventory.
2) Lower Inventory costs.
3) Accurate demand estimations using efficient information systems.
Advantages due to Decentralized Management:
1)
2)
3)
4)

Faster delivery.
Lead-Time Reduction.
Higher safety stock.
Wholesale discounts.

Advantages of Centralized and Local Facilities:

1) Promotion of products and leverage of brand value.
2) More sales due to more customers.
3) Availability of the product nearer to the customer.
Problem 3: What companies or supply chains can you think of that use an inventory pooling
strategy?
Answer:
Inventory pooling is the capability of the companies to serve several marketplaces each with their own
uncertain demand from a single stock of inventory (centralized warehouse, common components,
delayed differentiation, product/component substitution, e-tailing, etc.).Companies that serve multiple
products to multiple markets can use inventory pooling strategy such as fashion apparel companies.
Problem 4:
What companies or supply chains can you think of that use transshipment strategies?
Answer:
Transshipment is the shipment of goods or containers to an intermediate destination, then to yet another
destination. Companies that require the cheapest route of bringing goods from one location to another, use
the transshipment. The transshipment strategy is recommended for companies like IKEA (designs and
sells ready-to-assemble furniture, appliances, and home accessories) where the goods are easy to
assemble or disassemble by the customers themselves. It requires an export license to carry transshipped
goods unless it comes under certain exemptions. It usually takes place between two different countries.
The transshipped goods however do not undergo a customs check as it will deter it from being an efficient
means of transportation. This makes it more susceptible to illegal activities.
Problem 5:

List two similarities between inventory pooling and transshipment strategies. List two differences.
Why might one or the other be appropriate for a particular supply chain?
Answer:
The similarities between the inventory pooling and the transshipment strategies are:
Both the methodologies reduce the risk of the retailer, as the lost in sale can be compensated either by
ordering higher than required as in the case of inventory pooling or by sharing the inventory form
the other retailer as in the case of transhipment.

Problem 6:
Discuss how companies or dealers can encourage search.
Answer:
Companies can encourage search by estimating the percentage of customers searching for other dealers,
from the dealer who has lost the sale. This information is important for the company because the company
can estimate the estimated loss in sales for the particular dealer and could accommodate this percentage to
the orders he has made. Dealers can encourage search to gain customer good-will in providing the car to
the customer from the other dealer (Competitor) to compensate for the lost sale, reduce lead times and
optimize the profits between the dealers through sharing their inventory information
Problem 7:
Discuss how dealers might discourage search. Why might dealers want to discourage search.
Answer:
Dealers might discourage search, since they need to share the information with their competitors. As it
appears; due to the final sales from either of the dealers the manufacturer benefits, but the lost in sale
to one dealer is an advantage to its competitor. Moreover this is more risky to the independent dealers or
retailers when compared to the company owned retail outlets.
Problem 8: Answer the following questions about Amazon case at the start of the chapter. What
expansion options should Amazon Europe select? Expand into other countries? Launch
Marketplace activities?
Answer:

In Europe, as seen from the given case, Amazon has 3 independent Distribution Centers (DCs), in the UK,
Germany & France. Here, we have seen the location of the inventory to be geographically determined.
However, we believe that Amazon could adopt the concept of a European Distribution Network (EDN),
where the location of the inventory could be strategically determined.

Chapter 9

Problem 1: Answer the following questions about the case at the beginning of this chapter:
a) Describe Zaras current sourcing strategy. How is it a competitive advantage for the firm?
b) What specific challenges is a result of Zaras rapid inventory turnover? What portions of Zaras
replenishment strategy make it easier to manage?
c) Will Zaras current sourcing strategy continues to be useful as it expands? How should this
strategy change? What are the risks associated with this new strategy?
Answer a):
Most other retailers (like American chain GAP and Swedish retailer H&M) completely outsource their
production to factories around the world, most of them in low cost Asian countries. The production which
is not outsourced is owned or closely-controlled facilities-tremendous amount of flexibility and control.
Answer b):
Short lead time = more fashionable clothes
Lower quantities = scarce supply
More styles = more choice, more chances of hitting it right
More designers = rapid implementation of ideas
Usually shorter routes
Store receives garments within 1-2 days several times a week.

Answer c):
Concerning ZARAs impressive growth during the last years despite of their differing strategy, it would
not make sense to expand the new strategy. Of course for the moment they profit by the higher margins
(because of the lower production costs), but ZARAs customers set value on premium quality and inseason fashion. ZARA does not make brand advertising like other brands do so.
Therefore the most important about ZARA is their IMAGE.
Problem 2: Discuss the impact of the product life cycle on the buy/make framework developed in
Section 9.3
Answer:
In order to assess the effect of product life cycles on the make/buy framework developed in Section 9.3,
we need to understand how product knowledge and capacity requirements evolve over the life cycle of a
product. A typical product life cycle has several stages:
1. The product is newly introduced, and bought initially by a relatively small number of customers (early
adopters). At this stage of the product life cycle, production level is low and capacity is usually not an
issue.

Under these conditions, the buy/make framework implies that anew

product

should

not

be

immediately outsourced.
2. In the rapid adoption phase, demand for the product increases at an increasing rate. If this leads to tight
production capacity, and the production processes are already stable, then outsourcing should be
considered. It may even be the only choice to keep up with the increasing demand.
3. When the product reaches the maturity phase, i.e., when demand stabilizes over time, then the
outsourcing decision should be re-considered under the framework discussed in Section 9.3. For instance,
if earlier an integral product was outsourced due to capacity constraints, then the firm should consider
installing additional capacity to meet the stabilized demand, and manufacturing the product in-house.
4. When the product is approaching its end-of-life, outsourcing is a good option for both integral and
modular products because the company should focus on new products.

Problem 3:

Apply the hierarchical model discussed in section 9.3 to IBM decision in the early 1980s to
outsource the production of microprocessors for its PCs to Intel.
Answer:
IBM subcontracted two critical technologies, the operating system and the microprocessor, respectively,
to suppliers Microsoft and Intel. In just ten years, IBM went from dominance in the industry to a
company that has gone through dramatic downsizing. At one point in the last few years, the market value
of Microsoft, a company with 1/10 the revenue of IBM, was higher than that of IBM.

Problem 4:
Consider a consumer product manufacturer such as Procter & Gamble. Analyze whether the
company should outsource the production of products such as shampoo. Is your recommendation
consistent with P&G's strategy? If not, explain the reason for the difference between your strategy
and what is done by P&G.
Answer:
Yes,
The impetus for P&Gs outsourcing strategy can be traced to the formation of the companys global
business services department in 1999. One of the largest and most far-reaching shared services
organization in the world at the time, Global Business Services (GBS) consolidated more than 70
services, including facility management, real estate, accounting, information technology and human
resources.

Chapter-15
Problem 2: What is the importance of standards in managing a global supply chain?
Answer:
Global supply chain standards are focused on much more than the elements of a standard barcode,
devised years ago by the UCC. Today, it embraces such crucial aspects as the location of product and
containers in transit, utilizing electronic data interchange (EDI) technology.
In the U.S., the organization has focused on the inclusion of software vendors and other technology
partners in barcode standardization. Industry can connect those entities with its extensive membership,
consisting of more than 200,000 companies in the U.S. alone. That particular effort was launched in
February 2011 and is open to anyone working with Gen 2 tags and barcodes.
Problem 3: How would you suggest taking advantage of RFID to manage promotions?
Answer:
RFID delivers so many benefits to retailers.
Retail is a dynamic environment where the customer is king, and losing their interest due to out-of-stock
merchandise means losing the sale. Item level tagging with RFID technology enables continuous product
visibility from warehouse to checkout, improving overall inventory management and reducing out of
stock situations.
Additionally, RFID delivers real-time access to product data and faster transaction processing, resulting in
increased profitability through better productivity, and freeing uptime for customer service. Savvy
retailers know that the ability to quickly spot fluctuations in market and buyer behavior allows a more
efficient and successful retail operation throughout the entire supply chain.

Problem 4: How do you see a future supply chain when all items are tagged?
Answer:

Item-level tagging provides a quick, automated, cost efficient and accurate way to track inventory through
the supply chain and in the retail environment. Benefits to item-level tagging include better visibility and
control of inventory and an expansion of customer experience capabilities. Item-level tagging is critical in
order to determine how much inventory is on the floor, what sizes and colors need to be restocked and
what inventory is available in stock rooms. Other benefits include the ability to keep a fully stocked floor,
increased time and labor savings, increase inventory accuracy, and reduction in clearance items due to
incorrect inventory and excess ordering.
To develop collaborative and measurable value propositions for retailers, suppliers, consumers and other
stakeholders, and to continue to develop business applications and best practices around standards-based
RFID that demonstrate the impact of EPC-enabled RFID technology on processes and products within the
global supply chain. We want to define a strategy for the phased introduction of item-level RFID
technology into the supply chain whenever appropriate.

Chapter 11

Problem 4: Discuss some examples of products that are designed to lower shipping and storage costs.
Answer:
Some of the items that are designed to reduce shipping and transportation costs are products that can be
packed compactly and can be packed in great quantities without the transportation mode reaching weight
carrying capacity. These would include fashion items, such as clothes, shoes and bags. Also included
would be products that can be boxed or placed in containers such as consumer goods such as canned food
or other such groceries. Also included would plastic products that can be easily packaged such as
Tupperware.
Problem 5: How does the proliferation of products, models, and options make the supply chain
more difficult to manage?
Answer:
The proliferation of products, models and options make the supply chain more difficult to manage in that
the great variety of products as they are produced in sequence cause longer lead times. This means that
concurrent and parallel processing is necessary. This then means that the manufacturing process itself has
to be modified to be conducive to such processing and manufacture. Another difficulty may arise in that
for each product or module, different levels of inventory may be necessary and these have to be integrated
into the manufacturing process for each product or model.
Offering more products, models, and options requires more customization and more complicated
production scheduling.
Product proliferation makes it difficult for manufacturers to take advantage of economy of scale,
because products are processed in small batches.
Offering more products adds difficulty to inventory tracing.
Non-aggregate demand usually has higher variability than aggregate demand.

Problem 7: What are some products or industries that have been damaged by excessive part
standardization?
Answer:
One of these industries is the personal computer industry. Standardization must be a positive force to
eliminate the cost and inconvenience caused by the possible incompatibility between products offered by
different vendors, and still allows competition and innovation. Excessive standardization could reduce
design

options

and

affects

the

development

of

product

or

industry.

large population of MS windows users and the wide acceptance of this operating system among

The
various

software vendors make many MS window technologies industrial standards. Microsoft takes advantage of
this to block competition and manipulate market rather than improve the performance of its products.
Problem 8: Discuss some examples of modular and non-modular products and processes.
Answer:

A modular product would be a cell phone, a television or a watch.

Non-modular products include remote controls or rice products.
A modular process would include the assembly of an automobile.
Anon-modular process would include the making of chocolate or ice cream.

Chapter 3

Problem 1: Why is it important for a firm to periodically review its logistics network design? How
do firms requirements for its logistics network change over time?
Answer:
The factors that affect the performance of the logistics network are not static, i.e., they change over time.
These factors include demand, product design, various costs in the logistics network, regulations,
contracts, etc. The effects of these dynamics need to be evaluated periodically in order to determine
whether the existing configuration is still satisfactory given the new operating environment. For instance,
service level requirements may change due to increased competition which typically means that the lead
time to fulfill customer orders needs to be shortened. This may require the firm to redesign its logistic
network and build new warehouses that are closer to the end customers.
Problem 2: Within the organization, who is involved in a network design project (operations, sales,
marketing executives, etc.)? How?
Answer:
The design of the logistics network is a strategic decision that has long lasting effects and impacts all
functions within the company. For the success of such a project, many levels of the organization must be
involved:
1. Upper Management: The new design must be aligned with the vision and strategic goals of
the company. Additionally, such a project may be costly, so management buy-in is essential to ensure that
sufficient resources are devoted to the project.
2. Sales and Marketing: Demand forecasts and anticipated changes in product design and offerings affect
the network and need the involvement of sales and marketing teams.
3. Manufacturing and Operations: The logistics network design has obvious impact on day-to-day
operation of the firm. In order for the implementation to succeed, it is essential that the people involved
with operating the system on a daily basis are involved in its design.

Problem 4: In selecting potential warehouse sites, it is important to consider issues such as

geographical and infrastructure conditions, natural resources and labor availability, local industry
and tax regulations, and public interest. For each of the following industries, give specific examples
of how the issues listed above could affect the choice of potential warehouse sites:
a)
b)
c)
d)
e)
f)
g)

Automobile manufacturing
Pharmaceuticals
Books
Aircraft manufacturing
Book distribution
Furniture manufacturing and distribution
PC manufacturing

Answer:
A. In automobile manufacturing, cars are usually delivered over land, and demand is concentrated
around major cities. Therefore, we would expect warehouses in this industry to be located near
large cities with easy access to freeways and railroads. This would help to reduce the delivery
lead time to dealerships in the cities.
B. In the pharmaceutical industry, overnight delivery is common. Therefore, proximity to a major
airport is a factor that should be considered when choosing a warehouse location. Additionally,
for raw material warehouses it is important that these are close to natural resources.
C. In the book industry, supplier warehouse locations would be affected by the availability of nearby
natural resources.
D. In the aircraft manufacturing industry, sub-assemblies and parts are delivered by thousands of
suppliers scattered all over the globe to the manufacturing facilities. Therefore, for these supplier
warehouses, by far the most significant consideration is the ability to ship parts easily and ontime, i.e., the proximity to railroads, freeways, harbors, etc. In such a capital intensive industry,
we would also expect that regulations such as tax breaks have an impact on potential warehouse
locations.
E. With a large customer base shopping for books on-line, short delivery lead times are
crucial. Therefore, in book distribution, we would expect to find large centralized warehouses on
reasonably priced land and where quick transportation modes are available.

F. Furniture manufacturing and distribution depends heavily on manual labor. Therefore,

warehouses in this industry should be located close to cities with sufficient labor supply.

In PC manufacturing, outsourcing from all around the world is common where labor is cheaper and
regulations favor the huge investments associated with high-tech manufacturing. These consider at ions
should be factored in when choosing candidate warehouse locations