Commonwealth Ice Cream Company

Commonwealth Ice Cream Company

I. Problem: Expand or build a new plant

II. Objective: To weigh the difference between putting up a new plant and expanding existing plants.

III. Areas of Consideration:

The Commonwealth Ice Cream Company manufactures and distributes ice cream in the state of Virginia. The company owns four ice cream plants located at Alexandria, Norfolk, Roanoke and Richmond. These four plants distribute ice cream to six marketing areas throughout the state.

There has been high population growth in Washington, D.C. area and the company considers building a new plant at Arlington, Virginia. One or more existing plants might be terminated. Each plant distributes to its own marketing area but this practice is not required. Any plant can distribute to any marketing area in the state but with variance in production costs and transportation costs from one location to another.

In the next 5 years, demand in Charlottesville, Roanoke, Richmond and Norfolk is expected to increase 20 percent while demand in Danville will remain constant and the demand in Alexandria will increase by 50 percent.

IV. Assumption

A new ice cream plant will be built in Arlington, Virgina since addition of a new plant would require one or more of the existing plants to be phased out. This will lead to closing the Alexandria plant for the reason of consolidation of manufacturing the Arlington site and also due to the plant’s age and location.

Arlington is adjacent to Alexandria and is located across from Washington D.C. It’s proximity to Washington D.C. gives easy access to the target market and at the same time enables the plant to continue distributing ice cream to the marketing area the Alexandria plant currently serves. Advantages of adding a new plant accelerates speed to market and eliminates delays and costs often associated with long-distance shipping.

V. Alternative Courses of Action

Commonwealth Ice Cream Company should consult specialists which could conduct...