Data for analysis of distribution facility
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Supporting Data:
In order to minimize product transportation costs, liquid chemicals would be delivered to the new facility by ocean-going barge. (On a cost per pound-mile basis, trucking costs are more expensive than rail. Rail is more expensive than barge, which is slightly more expensive than sea-going ship.) Both analyses found that the cost of construction plus the cost of operation plus the cost of transportation (from the barge to the facility and from the facility to the customer) out weighed the potential growth in sales.
Scenario:
You decide that the former analyses are sound, but you need to come up with a recommendation. You examine a detailed map of the Northeast and find that one city in eastern PA is located at the juncture of three interstate highways that lead to major population centers. You then look at a sectional map showing rail lines and discover that two major railroads also serve that city. You decide to propose an "in-land" location that will receive liquid chemical products by rail and make shipments by tank truck, but including ship or barge shipments may not be completely excluded.
Problem to Solve:
What kind of data will you need to fully perform your analysis? Remember that adding a new distribution facility will reduce the volume through other facilities. Transportation costs will clearly be affected; instead of shipping products by truck from Charleston, SC (the nearest existing facility), products will be shipped from eastern PA to the Northeast. A new facility will also affect inventory levels (and valuations). Which products will you propose to distribute through the new facility? How will you estimate the construction costs of the new facility? How will you estimate the cost of real estate for the new facility? How will you estimate the operating costs of the new facilities?
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Solution Summary
The following data will be required to conduct an in-depth cost benefit analysis of the proposed distribution facility in the North East.
Solution Preview
1 - What kind of data will you need to fully perform your analysis?
The following data will be required to conduct an in-depth cost benefit analysis of the proposed distribution facility in the North East:
1) Real Estate Data: The first information that will be required is the data for the real estate rates in the proposed location in order to ascertain the cost of purchasing the land for the proposed construction of the facility. In order to get this data, a survey of the local area with the help of various real estate brokers should be done and the most competitive rates for various options in the area should be obtained.
2) Taxes and benefits for setting up operations in the state: Another major area to analyze is the tax structure in the proposed state. It is essential to know whether the tax structure will prove to be beneficial for the company for distributing the products or not. It may be so that the existing tax structure will increase the tax load, and thereby prices for the end customer which, in turn, will make the products of the company uncompetitive. Further, there might be an instance of some special benefit or subsidy provided by the state for setting up operations, which will result in a ...
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- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
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