# WGP chemical company

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WGP chemical company
WGP CHEMICAL COMPANY CASE STUDY
1. What is the total distribution cost for W-G-P Chemical Company? What is the cost per pound, cubic foot, case, line, and order? How can these measures contribute to the distribution review process?
In order to calculate the total distribution cost, carrying cost must be calculated. Inventory carrying cost rate was given as 18%. The formula is
Annual carrying cost=average inventory level * carrying cost rate Average inventory was given in table 4 as \$90 million. Therefore
Annual carrying cost=\$90 million*0.18=\$16.2 million
Thus Total distribution cost equals all costs in table 4 excluding average inventory level.
=3.1m(Storage)+1.3m(Handling)+3.5m(ordering)+2.3m(Transportation to warehouse) +1.2m (Transportation transfer between distribution centers)+5.6m(Transportation customers)+16.2m(carrying cost)=33.2m
1)a. Cost per pound=Total distribution cost/weight(lb.) =33.2m/242,717,768=\$0.1368 per pound
1)b. Cost per cubic feet=Total distribution cost/cubic feet =33.2m/26,887,513=\$1.235 per cubic foot 1)c. cost per case=Total distribution cost/cases =33.2m/2,912,753=\$11.398 per case
1) d. Cost per product line=Total distribution cost/Product lines =33.2m/25,392=\$1,307.498 per product line
e. Cost per order=Total distribution cost/orders =33.2m/19,139=\$1,7346.678 per order
With these measures W-G-P chemical company will identify where to cut costs. Also, by benchmarking these measures against their competitors’ measures, they will pinpoint areas that need improvement and areas they have a competitive advantage.
2) On a map, plot the distribution facilities and network for W-G-P Chemical Company. What product and market characteristics can help explain this distribution structure?
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