| nternational Textile Company, Ltd, is a Hong # Kong-based firm chat distributes textiles world- ice. The company is owned by the Lao family. Should the People’s Republic of China continue its economic renaissance, the company hopes to use its current base to expand operations to the mainland. International Textile has mils in the Bahamas, Hong Kong, Korea, Nigeria, and Venezuela, each weaving fabrics out of two or more raw fibers: cotton, poly- ester, and/or silk. The mills service eight company dis- ribution centers located near the customers’ geographical centers of activity. Because transportation costs historically have been less than 10% of total expenses, management has paid litte attention to extracting savings through judicious routing of shipments. Ching Lao is returning from the United States, where he has just completed his bachelor's degree in marketing. He believes that teach year he can save International Textile hundreds of thousands of dollars—perhaps millions—just by better routing of fabrics from mills to distribution centers, One glaring example of poor routing is the current assignment of fabric output to the Mexico City distribution center from Nigeria instead of from Venezuela less than a third the distance. Similarly, the Manila center now gets most of its textiles from Nigeria and Venezuela, although the mills in Hong. Kong itself are much closer. (Of course, the cost of shipping a bolt of cloth does not depen’ on distance alone. Table 5.14 provides the actual costs supplied to Lao from com- pany headquarters. Distribution center demands are seasonal, so a new shipment plan must be made each month. Table 5.15 provides the fabric requirements for the month of March, International Textile’s mills have varying capacities for producing the various types of cloth. Table 5.16 provides the quantities that apply during March. fe 5.14 Shipping Cost Dats (Dollars Per Bol) ey ____ Distribution Center Mi Los Angeles Chicago London _ Mexico Manita New York, 2 2 3 3 7 4 7 1 6 i 8 10 2 9 4 8 5 6 8 n 4 9 1 7 Nigeria 4 2 6 9 u % 5 0 Venezucla 4 3 5 ' 9 6 n 4 _ distri =o = abel ge! Mexico City Manila ‘New York Cotton 500, 800 900, 900 800 Polyester 1,000 2,000 3.000 1,500 400 700 900 Silk. 100 100 200 50 400 200 700 *phis ease was written by Lawre 2 L Lapin, San Jose Sate Universi