PLAZA, •SecB_Group8_Case Plaza

THE •Made by
•Shubham Shakar
LOGISTIC •Rahul Kr Tiwari
S PARK OF •Nikhil Jaiswal

ZARAGOZ •Prithvi V
•Saurav Prasad Malik
A
Q1. Calculate the total relevant costs of each option for a park customer.

• Annual demand = 100000 units per year

• Standard deviation σ = 10000 units per year
• Z at confidence level 95% = 1.645
• Daily demand = 333.3 (assuming 300 working days)

• Average Lead time through Barcelona L = 27 days

• Average Lead time to Rotterdam L = 31 days
• Periodic review P = 30 days
• Average inventory = Daily demand*(P+L)/2 + safety stock
 Safety stock = σ* Z*

Zaragoza Rotterdam

Saftey Stock 7170.389 7440.262

Total demand per year 107170.4 107440.3

Average inventory = Daily demand*(P+L)/2 + safety stock

Zaragoza Rotterdam

Average inventory 16670.39 17606.93

Total inventory cost 1316083 1731829

Transportation cost from warehouse to customer

Zaragoza Rotterdam

Number of truckloads per year 107.1704 107.4403

Average truckload cost 1.1 1.05
Total cost 287810.4 116444.8
Transportation cost from port to warehouse
Zaragoza Rotterdam

Fixed cost 305 335

No of orders 5.640547 5.283947

Total fixed cost 1720.367 1770.122

Forwarder cost 495 0

Total number trucks 107.1704 107.4403

Total Forwarder cost 53049.34 0

Total cost 54769.71 1770.122

• Additional Shipment cost
Zaragoza Rotterdam

Additional distance shippment cost 0 145

No of TEU 214.3408 214.8805

Total additional Shipment cost 0 31157.68

Total Annual Logistic cost for Customers in both options

Zaragoza Rotterdam

Additional Shipment cost 0 31157.68

Transportation from port to warehouse 54769.71 1770.122
Transportation from warehouse to customer 287810.4 116444.8
Annual Inventory cost 1316083 1731829
Total Annual cost 1658663 1881202
Q2. How would the customer's conclusions change if the
following assumptions changed

(i) Demand was more/less uncertain:

• If there are more uncertainties, they would like to go with less lead time
solution in which they would reduce the risk of inventory storage or stock
run out.
• Zaragoza has better lead time than Rotterdam, Customer might tend to go
for Zaragoza.

(ii) The number of units per container changed:

• Each TEU contain 500 units and each truckload can carry two TEU, if the
number of units per container is decreased, then the carrying cost
increases and EOQ decreases. Vice versa if units per container increased.
• If more units per container increased, the Average transportation cost
would be decreased and will be favorable for Zaragoza.
(iii) The service level increased:
• To increase the service level, we
should increase the safety stock.
This would increase the inventory cost
and increase in delivery cost.

(iv) The product cost

increased/decreased:
• With the production cost increase, the
inventory cost also increases.
With every unit of production cost
increases, Rotterdam inventory would
increase 0.2 units and Zaragoza
inventory would increase by 0.15 units.
This would be in favour of Zaragozara.
Q3. What other issues (besides the one presented) should the customer take into account?

Factors that customer should take into account :

• ZLC is a research and teaching institution in collaboration with the government and other industry players.
• Research done in Zaragoza can help companies to tackle the complex supply chain and logistics related
problems.
• Plaza has the support of the government that can provide a lot of stability.
• Availability of inexpensive land and access to additional land for future growth.
• Intermodal Connectivity is better in Plaza as it had access to developed infrastructure like two motorways, a
very large airstrip with two cargo holding facilities capable of landing the largest plans, connections with
railways that were being completed and a separate dry port. The dry port had contracts with different
seaports and could help in logistical problems.
• Plaza has separate managerial parks, separate area for dangerous goods.
• The facilities mentioned above can provide basic infrastructural requirements to the companies to set up
their central office or headquarters in Plaza.
• The inventory holding cost at Zaragoza is less than that of Rotterdam.
 Q4. What opinion would you have about setting up more
than one DC to cover Europe (i.e. one in PLAZA and one in
Rotterdam)?

PLAZA ROTTERDAM

• Rotterdam has an advantage of

• The inventory holding costs,
and all the added facilities and
services that Plaza offers
• keeping high levels of
inventory and safety stock,
and Plaza would be the better
option in times of uncertain
demands
• it is much cheaper to keep
large amounts of inventory in
Plaza
being closer to central Europe.
• Rotterdam would be in a better
position to timely deliver
products to central Europe
• it is more costly to operate
from Rotterdam
• If the company operates in a JIT mode, then
Rotterdam would be better, because then the
company can operate a smaller warehouse in
Rotterdam
• the company can operate the two different
strategies mentioned above and keep a very
large warehouse at plaza, and a small one in
Rotterdam.
• Instead of shipping directly to Rotterdam, all the inventory should be
unloaded at plaza, and then transported to Rotterdam. This would
keep costs low
• This would also mean that the Rotterdam warehouse would then be
able to deliver goods to central Europe in case if there is a disruption
in logistics between plaza and central Europe.
• This strategy would also help in reducing the delivery time of the
goods to retailers in central Europe.