Metalworks case study|
Metalwork is a company supplying cabinets and safety boxes. At the moment it has two plants and two warehouses which are “Des Moines” and “Dover”. Metalwork also uses an external supplier in case they can’t meet the demand. However in the case Metalwork has to buy products from supplier it doesn’t make any profit since the selling price $75 for the cabinet and $107 equals the buying price. Regarding this situation Metalwork has decided to improve its logistic efficiency by either increasing its capacity in “Des Moines” or investing in Juarez, Mexico by building up a new factory. Our job in this condition is to analyze the best option, to optimize the logistic efficiency and help Metalwork make a decision. At first we will see and optimize the current logistic system and then we will try to run the two solutions. And see which one is the best in order to give Metalwork the best possible answer. Baseline scenario 1: without distance constrains and with direct shipment from supplier to customers. The first job we had to do was to actualize every data and verify everything was correct. This work consisted in adding the data for the 3 time periods missing (2011-2012-2013). So we added the data regarding warehouse capacity, production capacity, production costs, and customers demand. We allowed direct shipment from the supplier to customers. We also checked the flows between every actor of the logistic process (exhibit 1). We use the Rail Warehouses Midwest between warehouses and ABC fleet carrier from warehouses to customers.
Then we made the software run for a first try and saw the results.
So as a result we can see that first the scenario is feasible. Hopefully by the way since it is how the Metalwork is supposed to work. We can see that the total cost (which contains manufacturing, transportation, warehousing, variables, and holding costs) is $321 741 907 75 and total profit of $2 001 748 527 44. So the situation is pretty good since the company realizes profits.
We can also see that in this baseline scenario we order 629 398 84 units to our supplier. Units on which we don’t make any profit. So we can clearly see that there is a need to invest in order to meet the demand thanks to our products. Baseline scenario 2 without distance constrains and without direct shipment from supplier to customers. In this scenario we will try to see if it is possible work without direct shipment from the supplier to the customers. That is why the lane visual changes compared to the first one.
The answer in this case is that this scenario is not feasible, because of warehouses capacity. Indeed we begin to see that it is necessary to work with more than 2 warehouses. Baseline scenario with direct shipment and with distance constrains for warehouse to customer. In this scenario we will introduce constraints regarding the maximum distance to customers. Indeed high quality service and responsiveness is highly important to Metalwork that is why we add a distance constraint of maximum 800 miles to Tier 1 customers and 1000 miles to Normal customers. We keep the same data and the same lanes and logistic system. Except that we allow this time delivery from the supplier to the customers. Because if not we would have add the same problem as in the second scenario since the situation is even harder regarding the distance constraints. That is why we decided to run it with this scenario.
So we can see that the two warehouses supply the customers in within the 1000 miles away. That is why the supplier has to send directly to the other customers and also to supply the rest that is needed by the customers. We can see that only having two warehouses is really not enough. In this situation the supplier has much more importance and that has huge effects on the costs. Dual supply
On the diagram bellow we can see that the supplier has a huge importance on the...