1. The followingisacomprehensive examinationof the MetalWorksCorporation’scurrentand
recommendedredesigneddistributionnetwork. The teamatAdvancedLogisticsConsultinghas
collectedall the pertinentdistributiondataandhascompletednumerousscenariostofindanoptimal
solutionforMentalWorksnewdistributionnetwork.These are onlyrecommendations andshouldbe
examinedmore closelybythe managementteamatMetalWorks,butthe mathematicsbehindthe
solutionsare defendable.
To begin,ALCenteredall the relevantinformationintoLogisticNetPlusandbegantopars out
differentscenarios.ACLexaminedall the scenariosona4-yeartrail,due to demandforecasting
constraints.
The firstscenarioACL examinedwas,if MetalWorksdidnotchange theircurrentdistribution
network.The total costs for 2016-2017 can be examinedinAppendix A (ShareholderOptionsFixed
Warehouses). The scenarioislabeled“DoNothing”.Asstatedabove eachscenariowascompletedfor
years2016-2019, but due to capacityconstraintsACLwas not able tofindan optimal solutionfor2018-
2019. ACL wasable to conclude thatif MetalWorksdoesnotchange theircurrentdistributionnetwork
that by 2018, theywill notbe able to fulfilltheirforecasteddemandoptimally.Concludingif
MetalWorksnetworkstaysthe same,service levelsandcustomerservice will decrease drastically,which
will inevitable hurtsales.
The secondscenariofocusedonaddingwarehouse capacity.MetalWorksexpressed some
concernto ACL regardingexpandingtooquickly;sotoalleviate thisissue MetalWorksputseveral
constraintsonhow manywarehousescouldbe openedinthe yearsof 2016-2019. MetalWorksonly
wantedtoopenone to two warehousesin2016-2017 andonlyone to two warehousesin2018-2019
(LaterACL will examine howmuchthisconservatismiscostingMetalWorks). The total costfor2016-
2018 can be examinedinAppendix A, labeling“AddWarehouses”.Again,the programwasunable to
give ACLan optimal solutionfor2019, due to capacityconstraints. EventhoughMetalWorkswouldbe
addingfournewwarehouse (Phoenix,Reno,Houston,andOrland) tothe currentdistributionnetwork,
theywouldstill notbe able tomeetforecasteddemandrequirementsin2019.
The third scenariofocusedonnotonlyaddingwarehousesbutalsoaddingcapacityto
MetalWorkscurrentplantin Iowa.By installingnew machineryatthe plant,the steel cabinetproduction
capacitycan be expandedby50%and the safetybox capacity by25%. One the new equipment is
installed,the percabinetvariable productioncostatthe plantwill decrease by$0.10 perunitand the
variable productioncostsforsafetyboxeswill decrease by$0.20. Thiscapacity expansioncanbe done
immediatelywithaone-time fixedcostof $1 million,whichisreflectedinAppendix A (Column:2016,
Row:“Add WarehousesandIowaCapacity”). Asseeninthe chart,the NetPresentValue of total costs,
usinga 10% interestrate,is$218,426,033. Thisscenariowascompletedwithopeningtwowarehouses
in2016, Phoenix at450,000 square feetandReno450,000 square feet,andtwowarehousesin2018,
Houstonat 250,000 square feetandOrlando250,000 square feet. Several issueswereexaminedwhen
determiningoptimal warehousingcapacity,butthose are detailedlaterinthe examination.
The last scenariothatwas examined,focusedon addingwarehousesand buildinganew
manufacturingplantinJuarez,Mexico.The plantwouldtake aboutayear to build;sothe earliestitcan
be completedinatthe start of 2017. The facilitywill costabout$5 milliontobuild,whichinnotedin
Appendix A. The scenarioislabeled“AddWarehousesandJuarezPlant”.ACLdeterminedopeningtwo
warehousesin2016, Phoenix at500,000 square feetandSacramento450,000 square feet,andtwo

2. warehousesin2018, Orlando250,000 square feetandHouston250,000 square feet,wouldbe an
optimal solution forthe scenario due tocapacityconstraintsandforecasteddemand.The NetPresent
Value of total costs wascalculated,usinga10% interestrate,$219,382,280. This isa about $956,247
difference betweenscenariothree andfour,favoringscenariothree “AddWarehousesandIowa
Capacity”.
To be specific,
Several issues wereexaminedwhendeterminingoptimal warehousingcapacity,one of which
was openingabiggerfacilityatthe beginningconstructionorwaitingandbuildingcapacityinthe
warehouseswhenneededinlateryears.Inthisscenario,ACLoptedtoopenthe biggerwarehouses
whenconstructionwasfirstpurposed.ACLdidthatfor several reasons,one of whichwas the addedcost
of addingcapacityto a currentwarehouse onlyone yearafteritwasconstructed. For example,the
LogicNetsoftware requiredthe Phoenixwarehouse tochange capacityonlyone yearafterconstruction,
from400,000 square feetto450,000 square feet.Thischange incapacitywouldnotonlyadd costin
2017 but itwouldalso possiblyaddstraininthe warehouse whereconstructionwashappeningyear
afteryear.