Business Strategy

Assignment no: 4

Group Name: Know Thyself

Topic: Facilities Location

Prepared for

Sayeedul Karim

Course Instructor

Operations Management

BRAC University

Group Members

Name | ID |

Kowser Bakhtiar | 10164019 |

Manik Mohammad Nandan | 10164052 |

Ziaul Alam | 10164018 |

Md. Al Mamun | 10164010 |

Sonia Islam | 11364014 |

Submission Date: 7 December, 2011

Problem no 1

| | | Variable Cost to Save Customers($) | |

| Potential Location | Fixed Cost ($) | 1 | 2 | 3 | 4 | 5 |

A | Alabama | 45000 | 40 | 90 | 40 | 90 | 60 |

B | Boston | 45000 | 30 | 50 | 20 | 60 | 40 |

C | California | 55000 | 60 | 40 | 50 | 30 | 70 |

D | Detroit | 40000 | 20 | 80 | 30 | 40 | 90 |

Demand (units) | | 1000 | 1000 | 1000 | 1000 | 1000 |

Drop HeuristicStart with all warehouse open |

Step 1 | | | | | |

| | | FC | VC | TC |

ABCD | | | 185000 | 150000 | 335000 |

| | | | | |

From | Drop | Leaves | FC | VC | TC |

ABCD | A | BCD | 140000 | 150000 | 290000 |

ABCD | B | ACD | 140000 | 180000 | 320000 |

ABCD | C | ABD | 145000 | 170000 | 315000 |

ABCD | D | ABC | 145000 | 160000 | 305000 |

| | | | | |

Step 2 | | | | | |

From | Drop | Leaves | FC | VC | TC |

BCD | B | CD | 95000 | 190000 | 285000 |

BCD | C | BD | 85000 | 170000 | 255000 |

BCD | D | BC | 100000 | 160000 | 260000 |

| | | | | |

Step 3 | | | | | |

From | Drop | Leaves | FC | VC | TC |

BD | B | D | 40000 | 260000 | 300000 |

BD | D | B | 45000 | 200000 | 245000 |

Findings: The lowest cost solution by using DROP Heuristic is open to B for a total cost of $245000.

Recommendation: Mega- Clean should open facility only in Boston to operate their business with minimum cost.

Limitations: This recommendation is based on only DROP Method without considering ADD method. So, it may be a good solution but not the best one. Moreover, capacity of the facility is not consider in this recommendation.

Note: FC = Fixed cost;...