Plaza the logistics of Zaragoza

Topics: Inventory, Costs, Holding cost Pages: 7 (1223 words) Published: October 14, 2014
Plaza, the Logistics park of Zaragoza Case Analysis

Supply Chain Network Diagram

The supply chain flow and the respective lead times
 
Option 1
Option 2
Average Cycle Time(Days)
Rotterdam
Zaragoza
Average Time to reach the port
29
24
Time spent at port
1.5
1.5
Time from warehouse to customer
0.5
1.5
Total average lead time(days)
31
27

The average time to reach the port was averaged for each option 1 from the data given Demand, Inventory and Safety Stock
 
Option 1
Option 2
 
 
Rotterdam
Zaragoza
 
Annual Demand (D) (units)
100000
100000
 
Inventory Review Period( T) (days)
30
30
 
Inventory per review period (Q)
8219.178082
8219.17808
Q = D(units/Year) * T (in years)
Standard Deviation (σ d) (units/year)
10000
10000
 
S.D during Lead Time(σ T+L)
4088.071522
3951.76396
σ T+L = Sqrt(T+L) * σ d
Safety Stock(SS) (units/review period)
6704.437296
6480.89289
SS = 1.64*σ T+L
Average Inventory per review period(Q*)
10814.02634
10590.4819
Q* = (Q/2) + SS
Average Inventory (Q**)(in units)
10814
10590
Q**= Q* * No. of review periods/year
Annual Average Inventory transported (Q** tl)(in truckloads) 282
282
(Q**tl) = (Q/No. of units per truck)*12

The number of truckloads transported per order = 8219.17/No: of units in truck load =23 per order So Total No: of truckloads/year = 23*12 = 282

Transportation Costs
Transportation Costs
Option 1
Option 2
 
 
Rotterdam
Zaragoza
 
Shipping Cost from China to Port/TEU*
145
0
 
Shipping Cost from China to Port/Truckload*
72.5
0
 
Port handling charges/Truckload
335
305
 
Transportation Cost from Port to Warehouse/TL
0
495
 
Average Distance from W.house to customer (km)
516.1
1220.7
 
Average Cost per km
1.2
1.02
 
Transportation Cost from W.house to customer/TL
619.32
1245.114
 
Total Transportation Cost /TL(Tr.C/TL)
1026.82
2045.114
 
Total Annual Transportation Cost(T.Tr.C)*
289358.2779
576313.926
T.Tr.C =( Tr.C/TL) X Q**tl

* All costs indicated in the report are euros
Here we only are calculating the differences because we did not identify the shipping cost from China/Manufacturer to the first port (port in Spain).Since it is difference of cost calculation we assumed it to be zero. The transportation cost per truckload = Average distance between warehouse and customer * Average cost per KM for each option

Inventory Holding Costs

Inventory Holding Cost
Option 1
Option 2
 
 
Rotterdam
Zaragoza
 
Unit Price ( C )
100
100
 
Holding Cost per unit (Hc)
26
18
Hc = Unit cost* Percent Holding cost/100
Annual Average Inventory Holding Cost ( T.Hc)
281164.6848
190628.675
(T.Hc) = Hc X Q**

Pipeline Inventory Costs
Pipeline Inventory Cost
Option 1
option 2
 
Financial Cost or Interest rate
8%
8%
 
Lead time in pipeline(days)
31
27
 
No: of units in Transit
8219.178082
8219.17808
 
Unit Cost
100
100
 
Pipeline Inventory Cost (P.C)
5584.537437
4863.95196
P.C = Demand*Unit Cost*Interest *Lead Time

Pipeline Inventory is the inventory held up in the flow process. Since the customer pays only after handing over the inventory. The entire flow lead time till the inventory reaches customer was considered. In the flow process we assumed there would be no labor costs and rents of the building were considered. So we calculated the interest rate as the sum of financial cost + Insurance Cost = 7% +1% =8%

Total Costs
Total costs = Inventory Holding Cost + Cost of the Inventory + Transportation Cost + Pipeline Inventory Cost

Total Cost
Option 1
Option 2
 
Rotterdam
Zaragoza
Annual Average Inventory Holding Cost ( T.Hc)
281164.7
190628.675
Total Annual Transportation Cost(T.Tr.C)*
289358.3
576313.9
Pipeline Inventory Cost (P.C)
5584.5
4864.0
Annual Cost of Products
1081402.634
1059048.19
Total Final Cost
1657510.1
1830854.7

Here we need to remember that the transportation cost considered was...
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