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Karnataka Engineering Company Limited: Solution by Group IV

Shekhar Chakravarty Shailendra Kumar Sharma Ravi Sharma Satish Babu Sanjeev Mittal

Q.1 At what volumes is the opening of a warehouse in a state justified primarily on the grounds of the 4% CST across the state. Ans. The decision of opening a warehouse depends up on the consideration of cost incurred on operation of a warehouse vis--vis central sales tax paid on a given volume of sales of Moped and/or Scooter. The cost of operating a warehouse is approx 21,000/and the minimum sales required to be generated so as to avoid CST of minimum 21,000/- will be = 21,000/0.04 = 5,25,000/Hence a warehouse can be opened only if the sales volume of any combination of Moped and Scooter is more than 5,25,000/Q2 How many warehouses do you think are required for the distribution of KECs product in Andhra Pradesh? What could the candidate locations of the warehouses be? What would be the criteria on which to select the candidate? Ans. Following inter-related and often conflicting requirements are to be considered for calculating the number of warehouses and their locations in the state: Minimum operating costs of warehouses o It requires minimum warehouses to be established Minimum distances from sales point o This requires more warehouses optimally located.

Minimum expenditure on CST o This entails opening of warehouses such that minimum per month sale of 5,25,000/- is affected from every warehouse. Optimal use of transport. o This requires location and distribution such that full truck loads are operated. Minimum distances from warehouses to the POS o This requires the warehouses to be located near points of maximum offtake. For this consideration the probable candidates will be Hyderabad, Vijayawada and Vizag. o It requires optimal allocation of demand point to a warehouse.

The solution can be found out by solving the problem by using Mixed Integer Linear Programming.

Q.3 Determine the optimum selection of the warehouses and the best allocation of demand points to the selected warehouses. Ans. Let there be i Supply points and j Demand points The quantity of Moped Units shipped from i to j be denoted as Xij, the distances be denoted by Dij and rates per km for a given Transporter for 80 Moped Unit are Rij, where i varies from 1 to n and j varies from 1 to m The objective Function works out as follows Min { Xij 0 Dj Si } (For all values of j) (For all values of j)

Q 4 What are the best choices for the shipment (Truck) size from warehouses to demand point? Given the size, what routing would you recommend for a typical dispatch run? Ans. It will be decided after the optimized quantity of shipment to each demand point and number and locations of warehouses are determined. The quantities to be transported in each type of transport system for each spoke will be decided in such a manner that optimum space utilization of the Truck is done for a given trip, keeping in view the cost of transportation.