**Designing the Production Network at CoolWipes**

**Rex Zhou**

Rizwan Walji

Rizwan Walji

What are CoolWipes?

A company which produces baby wipes and diaper ointments for the entire country

Founded in the late 1980's

Matt O'Grady being the Vice President of the supply chain at CoolWipes

Current Situation

Has one facility in Chicago which transports to the whole of America

Over time demand increased and so did the customers geographical location

This lead to an increase in transportation cost by a factor of more than 4 since the birth of the company

Solutions

CoolWipes has the opportunity to expand base of operations and build a new facility at:

Princeton

Atlanta

Los Angeles

Transportation costs are expected to increase

Facility Capabilities

The wipes line in Chicago has a:

Capacity of 5 Million Units

Fixed costs of 5$ Million a year

Variable costs of 10$ per unit produced

The wipes line at any new plant will have a:

Capacity of 2 Million Units

Fixed costs of 2.2$ Million a year

Variable costs of 10$ per unit produced

The ointment line in Chicago has a:

Capacity of 1 Million Units

Fixed costs of 1.5$ Million

Variable costs of 20$ per unit produced

Each new facility can contain and wipe line, ointment line or can produce both products

The ointment line at any new plant will have a:

Capacity of 1 Million Units

Fixed costs of 1.5$ Million a year

Variable costs of 20$ per unit produced

Transportation Costs and Units Transported

Question and Answer

1. What are the annual costs of serving the nation from Chicago

To find the total cost of wipes we proceeded as follow:

TC = Fixed Costs + Variable Costs * Units produced + Transportation Costs per unit to each region individually * Units transported to each region individually

We used the exact same formula to calculate the total cost of ointments as well resulting in:

TC(w) = 73,464,000 $

TC(o) = 14,497,000 $

TC(w) + TC(o) = 87,961,000 $

Questions and Answers

2. a) Do you recommend adding any plants, if so where and what lines should be included, assume the Chicago will be maintained at current capacity but could be run at lower utilization.

To answer this question we used solver and set objective to minimize our total cost function

After running solver using these constraints our total cost resulted in

86,421,000 $.

Questions and Answers

2. b) Similar to question 2, only now the transportation costs are half of the current value.

So in order to answer this question, we had to alter our transportation costs, rather than doing this manually we added a multiplier to our transportation costs table.

We run the exact same solver, same parameters and same constraints, the only thing that has changed are the transportation costs.

This resulted in a total cost of 68,340,000 $

Questions and Answers

2. c) Similar to question 2, only now the transportation costs is twice its current value

Like the previous question, all we did was change our multiplier then ran solver again to find the solution

With a multiplier of 2, the total transportation costs increase, the same solver parameters are taken.

This resulted in a total cost of 146,701,000 $

Questions and Answers

3. a) If Matt could design a new network from scratch, (assuming Chicago didn't exist) what production network would you recommend. Assume that any new plant built besides Chicago would be at the cost and capacity specified under the new network options

The question itself is congruent to question 2, the main difference is in the fact that the facility in Chicago does not exist, giving solver more freedom to optimize by taking away a constraint

With these new constraints then total cost is 85,454,000 $

Questions and Answers

3. b) Similar to question 3, only now the transportation costs are half of the current value

Like we did with question 2b, we used the multiplier on the transportation cost and then ran solver

Using the same parameters in solver as before with only the transportation costs changed

We get a total cost of 68,324,000 $

Questions and Answers

3. c) Similar to question 3, only now the transportation costs is twice its current value

Congruous to what we did in question 2c, we altered the transportation cost multiplier

Using the same parameters in solver as before with only the transportation costs altered

We find that the total cost is 146,449,000 $

Conclusion

After running several solver data analysis it has shown that Chicago is only the most optimal geographical facility to produce and distribute wipes when it has not been built yet and the transportation costs are half.

Allowing for less constraints in solver will result in a lower total cost and thus maximize optimization

For almost all other constraints and transportation costs, Chicago is not the most efficient which results in an accumulating loss for CoolWipes

If the transportation costs remain the same then 3 new wipe facilities will be built in Princeton, Atlanta and Los Angeles while only one new ointment facility will be built in Los Angeles

Assumptions

Building a new facility incurs no cost

When adding a new facility for any production line, we can only add one in each new place