Andrew-Carter, Inc. - Starting Right Company
Essay by Ganzell • July 2, 2018 • Research Paper • 1,947 Words (8 Pages) • 2,107 Views
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CASE STUDY
Andrew-Carter, Inc.
Andrew-Carter, Inc. (A-C), is a major Canadian producer and distributor of outdoor lighting fixtures. Its fixture is distributed throughout North America and has been in high demand for several years. The company operates three plants that manufacture fixtures and distribute it to five distribution centers (Warehouses).
During the present recession, A-C has seen a major drop in demand for its fixture as the housing market has declined. Based on the forecast of interest rates, the head of operations feels that demand for housing and thus for A-C’s products will remain depressed for the foreseeable future. A-C is considering closing one of its plants, as it is now operating with a forecast excess capacity of 34,000 units per week. The forecast weekly demands for the coming year are
Warehouse 1 | 9,000 | Units |
Warehouse 2 | 13,000 | Units |
Warehouse 3 | 11,000 | Units |
Warehouse 4 | 15,000 | Units |
Warehouse 5 | 8,000 | Units |
The plant capacities, in units per week, are
Plant 1, regular time | 27,000 | Units |
Plant 1, on overtime | 7,000 | Units |
Plant 2, regular time | 20,000 | Units |
Plant 2, on overtime | 5,000 | Units |
Plant 3, regular time | 25,000 | Units |
Plant 3, on overtime | 6,000 | Units |
If A-C shuts down any plants, its weekly costs will change, as fixed costs will are lower for a non-operating plant. Table 1 shows production costs at each plant, both variable at regular time and overtime, and fixed when operating and shut down. Table 2 shows the distribution costs from each plant to each warehouse (distribution center).
Table 1: Variable Costs and Fixed Production Costs per Week
Plant | Variable Cost (per unit) | Fixed Cost (per week) | |
Operating | Not operating | ||
1,Regular time 1,Overtime 2,Regular time 2,Overtime 3,Regular time 3,Overtime | $2.80 $3.52 $2.78 $3.48 $2.72 $3.42 | $14,000 $12,000 $15,000 | $6,000 $5,000 $7,500 |
Table 2: Distribution Costs per Unit
From Plant | To Distribution Centers (per unit) | ||||
W1 | W2 | W3 | W4 | W5 | |
1 | $0.50 | $0.44 | $0.49 | $0.46 | $0.56 |
2 | $0.40 | $0.52 | $0.50 | $0.56 | $0.57 |
3 | $0.56 | $0.53 | $0.51 | $0.54 | $0.35 |
Discussion Questions
- Evaluate the various configurations of operating and closed plants that will meet weekly demand. Determine which configuration minimizes total costs.
- Discuss the implication of closing a plant.
Question1: Evaluate the various configurations of operating and closed plants that will meet weekly demand. Determine which configuration minimizes total costs.
We can evaluate the minimizes total costs of Andrew-Carter (A-C) by 4 scenarios as shown in table below.
Scenario | Detail |
1 | Operate all 3 plants |
2 | Operate plant 1, 2 and shut down plant 3 |
3 | Operate plant 1, 3 and shut down plant 2 |
4 | Operate plant 2, 3 and shut down plant 1 |
Define variable:
R11 : Production from Plant 1, Regular time distribute to Warehouse 1
R12 : Production from Plant 1, Regular time distribute to Warehouse 2
R13 : Production from Plant 1, Regular time distribute to Warehouse 3
R14 : Production from Plant 1, Regular time distribute to Warehouse 4
R15 : Production from Plant 1, Regular time distribute to Warehouse 5
R21 : Production from Plant 2, Regular time distribute to Warehouse 1
R22 : Production from Plant 2, Regular time distribute to Warehouse 2
R23 : Production from Plant 2, Regular time distribute to Warehouse 3
R24 : Production from Plant 2, Regular time distribute to Warehouse 4
R25 : Production from Plant 2, Regular time distribute to Warehouse 5
R31 : Production from Plant 3, Regular time distribute to Warehouse 1
R32 : Production from Plant 3, Regular time distribute to Warehouse 2
R33 : Production from Plant 3, Regular time distribute to Warehouse 3
R34 : Production from Plant 3, Regular time distribute to Warehouse 4
R35 : Production from Plant 3, Regular time distribute to Warehouse 5
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