Economics Anaylsis

Economics Anaylsis

´╗┐New Mexico State University

MGT-351-M01

Case Study 2


03/01/2016


From:
Ali Alhenzab


To:
Dr. Carlo A. Mora M


YYZ Inc, a custom drum set manufacturer, has seen its demand grow significantly in recent times due to its quality and recent endorsements by big stars (e.g. Neil Peart, Steward Copeland, among others).
The company anticipates a nationwide demand for the upcoming year of 110000 kits in East, 180000 in the South, 120000 in the Midwest, and 100000 in the West regions. The Supply Chain Manager along with its top Executive team are considering building a network of manufacturing facilities in four potential sites: New York, Atlanta, Chicago, and San Diego. Besides their location, the facilities could have a capacity of 200000 or 400000 drum sets per year. The annual fixed costs at each of the four locations along with the production and transportation costs for each of the markets are described in the table below.



Supply



New York
Atlanta
Chicago
San Diego
Demand




East
$211.00
$232.00
$238.00
$299.00
South
$232.00
$212.00
$230.00
$280.00
Midwest
$240.00
$230.00
$215.00
$270.00
West
$300.00
$280.00
$270.00
$225.00
Small Plant Cap
200,000.00
200,000.00
200,000.00
200,000.00
Fixed Costs
$6,000,000.00
$5,500,000.00
$5,600,000.00
$6,100,000.00
Large Plant Cap
400,000.00
400,000.00
400,000.00
400,000.00
Fixed Costs
$10,000,000
$9,200,000
$9,300,000
$10,200,000


1-Given the current conditions, where would YYZ Inc. built its factories and how large should they be?

Based on the information provided, I was able to establish the following decision variable which are consist of the supply and demand for each location to produce the drum set, the supply are from ( NY, ATL, CHI, and SD) while the demand is to cover the regions( East, South, Mid-West, and West).


The objective is to build the plant in any of the location that will cover the demand of all regions...

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