Location planning at A.B. Corp Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction

AB Corporation is the leading producer of the agricultural products and farm equipment in vidharba region, Maharashtra India. The industry in which AB Corp operates is highly price sensitive because of the changing demand of rural population.

AB Corp had an alliance partnership with Padgilwar Agro for the production of agricultural based tools and Equipment. The market segment that AB Corp particularly targets is the rural segment, which is why it operates mainly in rural areas.

Issues

The main issue, which needs to be addressed by AB Corp, is to construct a central warehouse where its cost can be reduced and profits can be maximized. It is because AB Corp is making huge significant losses in prior years.

In order to achieve this, the main issues to be dealt with are not only quantitative in nature but also qualitative. For example tax cost, land cost, infrastructures are quantitative issues but other issues such as demographics, professional skilled labor are qualitative issues.

Analysis

The main issue that the management is pondering over is what location of central house to select to reduce their cost of building of infrastructure, cost of land, tax liabilities and load distance factor, which in simple terms means reduction of transportation cost.

The data already given by management is of 5 distribution centers (DC’s) and 4 central warehouses (CWH), however, they insisted on adding one more central warehouse, which should be central to all distribution centers both in terms of distance and the moving of loads. For this, the center of gravity technique is used to locate the X and Y coordinates of the position of 5^th warehouse (See Appendix A).

By applying this technique, the X and Y coordinates derived are 261,363. One thing to be noted is that these values are derived on mathematical assumptions. Other factors can be required for further evaluation of best central location, which can be qualitative and complex in nature such as circular roads and other matters. However, based on the distances of distribution centers with their loads, this can be the best method to derive the coordinates.

Since the coordinates of central warehouse number 5 are derived, therefore further progress can be made. Calculation of the load distance factor of all 5 central warehouses is very vital. This is because it is required to derive the data that will interpret which location might be better to select in terms of low transportation cost. Referring to Appendix B, the coordinates of distribution centers and central warehouses are given along with their respective loads to be moved. The load distance factor for each central warehouse is calculated against the 5 distribution centers.

These are calculated on the basis of Load distance technique derived from the statistical mathematical calculation. Appendix B indicates that the most costly warehouse among all could be central warehouse 2 as it is located far away from all 5 locations of distribution centers.

Its load distance value is the highest among all which 3,291,530. The cheapest in terms cost will be Central warehouse 5. This is because the load distance value is small as compared to others and the value of Central warehouse 5 is 1,934,129.

However, these numerical data are based on aggregates; the individual picture of each distribution center differs in the analysis. Some distribution centers seem to be cheap for central warehouse 2 while some seem to be very expensive for central warehouse 5. Distribution center number 3 is cheap for central warehouse 2 and expensive for central warehouse 5. This must be investigated as to why the transportation costs are higher in warehouse 5 and differ significantly and after highlighting the issues, the cost can be mitigated.

The data given by management was based on different factors of location, which is ranked on a basis of favorability in terms of cost on a score scale of out of 100. The scores already placed in the data are of cost of land, infrastructure and tax structure. For deriving the scores of load distance factors, the use of professional judgment is required to derive the subjective scores on the basis of load distance factors and other relevant factors (Appendix C).

These scores are marked with (0 to 100) on the basis of which central warehouse is low in terms of cost, the lower the value, the high the numbers. The same assumption is used in deriving the scores of load distance factors. Warehouse 5 has the best score in both total (90) and weighted score (49.5) in terms of low distance factor due to the low value of distance. Similarly, warehouse 2 has the lowest total score (60) and the weighted score (33) in terms of the distance factor because of very high value.......................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.