Al Akhawayn University Decision Making
School of Business Administration Dr. Yassine Benrqya
Assignment – Designing the Supply Chain Network
1. Sunchem, a manufacturer of printing inks, has five manufacturing plants worldwide. Their locations and capacities
are shown in Table 2 along with the cost of producing 1 ton of ink at each facility. The production costs are in the
local currency of the country where the plant is located. The major markets for the inks are North America, South
America, Europe, Japan, and the rest of Asia. Demand at each market is shown in Table 2. Transportation costs from
each plant to each market in U.S. dollars are shown in Table 2. Management must come up with a production plan
for the next year.
a) If exchange rates are expected as in Table 3, and no plant can run below 50 percent of capacity, how much
should each plant produce and which markets should each plant supply?
b) If there are no limits on the amount produced in a plant, how much should each plant produce?
c) Can adding 10 tons of capacity in any plant reduce costs?
d) How should Sunchem account for the fact that exchange rates fluctuate over time?
Table 2 Capacity, Demand, Production, and Transportation Costs for Sunchem
North South
America Europe Japan America Asia Capacity Production
Tons/Year Cost/Ton
United States $600 $1,300 $2,000 $1,200 $1,700 185 $10,000
Germany $1,300 $600 $1,400 $1,400 $1,300 475 15,000 euro
Japan $2,000 $1,400 $300 $2,100 $900 50 1,800,000 yen
Brazil $1,200 $1,400 $2,100 $800 $2,100 200 13,000 real
India $2,200 $1,300 $1,000 $2,300 $800 80 400,000 rupees
Demand 270 200 120 190 100
(tons/year)
Table 5-8 Anticipated Exchange Rates for the Next Year
US$ Euro Yen Real Rupee
US$ 1.000 1.993 107.7 1.78 43.55
Euro 0.502 1 54.07 0.89 21.83
Yen 0.0093 0.0185 1 0.016 0.405
Real 0.562 1.124 60.65 1 24.52
Rupee 0.023 0.046 2.47 0.041 1
2. Telecommunication companies deal with network design problems in recommending sites for the toll-free call-in
centers of their telemarketing customers. The centers handle telephone reservations and orders arising in many
geographic zones. The location of the centers is very important, since the communication rates vary dramatically
depending on the zone of call origin and the location of the receiving center. A well-designed system should
minimize the total of call charges and center setup costs. Let us consider the specific case of a telecom firm, Tmark: 8
sites under consideration by Tmark for their centers in a map of 14 calling zones. There are unit calling charges,
denoted cij, from zone j to center i, i = 1, . . . ,8, j = 1, . . . ,14. Each zone j has an anticipated call load, dj. Finally, a
center can handle a maximum of 5000 call units per day. However, their fixed costs of operation vary significantly
because of difference in labor and real estate prices. The estimated daily fixed cost for a center located at the site i is
designated by fi, i = 1, . . . ,8.
Region\
1 2 3 4 5 6 7 8 9 10 11 12 13 14 Capacity ui Fixed cost
Call center
1 0.5 0.14 0.4 0.46 0.43 0.27 0.34 0.22 0.23 0.42 0.22 0.26 0.22 0.37 5000 276000
2 0.21 0.35 0.29 0.21 0.44 0.36 0.23 0.31 0.19 0.36 0.29 0.25 0.18 0.32 5000 320000
3 0.17 0.27 0.27 0.34 0.1 0.17 0.15 0.37 0.42 0.1 0.46 0.34 0.44 0.4 5000 328000
4 0.14 0.35 0.25 0.3 0.1 0.19 0.18 0.31 0.24 0.48 0.19 0.41 0.48 0.3 5000 529000
5 0.32 0.38 0.41 0.2 0.43 0.37 0.42 0.32 0.45 0.48 0.35 0.42 0.25 0.31 5000 707000
6 0.42 0.21 0.13 0.37 0.45 0.34 0.27 0.22 0.1 0.29 0.49 0.14 0.14 0.17 5000 331000
7 0.25 0.25 0.31 0.22 0.44 0.15 0.3 0.13 0.25 0.17 0.31 0.48 0.45 0.19 5000 304000
8 0.14 0.15 0.24 0.13 0.14 0.18 0.43 0.4 0.41 0.43 0.29 0.11 0.17 0.43 5000 540000
Demand dj 700 1200 1100 1400 1800 1200 3200 2200 1500 1000 2000 1200 2300 4200
