Supply Chain Modeling

Assessment Item Two

Disclaimer
Please note all the information and any related data presented in this document are NOT
accurate, and are not supported by any reference either. They are only provided for you
for this assessment item. You should not assume that this is real data.
1 Background
Dronautics Ltd., a drone manufacturer operating across three manufacturing sites across
Australia, has experienced a big surge in demand for their products over the past few years.
Table 1 shows the current year's demand information for 12 markets across Australia.

Dronautics is currently manufacturing in Cairns (QLD), Darwin (NT), and Mandurah

(WA). There are two distribution centers in its supply network, one in Adelaide (SA), and
one in Newcastle (NSW). The company demands all products to go though the distribution
centers for operational consistency.

2 Transportation Options

While Dronautics was able to ramp up their production for the demand, the management
team realized that the current transportation network is costing too much, as products

2 Transportation Options

While Dronautics was able to ramp up their production for the demand, the management
team realized that the current transportation network is costing too much, as products

Region Demand State(s)

Sydney 50,230 New South Wales

Melbourne 49,360 Victoria

Brisbane 24,630 Queensland

Perth 20,590 Western Australia

Adelaide 13,460 South Australia

Gold Coast-Tweed Heads 6,790 Queensland/New South Wales

Newcastle-Maitland 4,870 New South Wales

Canberra-Queanbeyan 4,580 Australian Capital Territory/New South Wales

Sunshine Coast 3,330 Queensland

Wollongong 3,020 New South Wales

Geelong 2,680 Victoria

Hobart 2,330 Tasmania

Table 1: Number of drones demanded across 12 Australian markets.

used to be transported in individual units.

Dronautics decides to use pallets when possible. For those drones that are not packed into a
pallet, they will be individually transported throughout the supply network as before. The
shipping costs for pallets are much more attractive, as there are no additional handling,
shrinking wrapping, and manual operations involved. Once a drone is shipped in pallets,
they will remain in pallets until arrive _nal destinations. A standard pallet holds 240
drones.
Tables 2 and 3 list the transportation costs for one pallet and one unit between the plants
and the distribution centers, and between the distribution centers and the markets.

3 Manufacturing Planning
Currently the unit production costs (excluding materials and components) across the three
manufacturing plants are $43/unit in Cairns, $40/unit in Darwin, and $42/unit in Man-
durah.
Based on the new transportation options available, Dronautics wants to know how many
units to produce at each manufacturing site, and the corresponding distribution across its
supply network.

4 Production Relocation
At the same time, Dronautics is also considering relocating its production facilities, as all three
plants are not close to major markets. It was proposed that one new manufacturing facility to be
opened and co-locate with one of the distribution centers. By doing so, Dronautics will be able
to leverage the manufacturing economy of scales and be more responsive to market demand.

If a drone is to be produced at the new facility, the unit production cost will be $33 in Adelaide,
and $32 in Newcastle, as a result of consolidation of manufacturing activities. The new
manufacturing facility will cost $1.5 million annually to operate over its designed lifespan. With
the co-location, products will be directly shipped out of the manufacturing facility. Dronautics
will continue to use the pallets when possible. The existing manufac- turing facilities will be use
to manufacture other products.

5 Tasks
You will be using network optimization techniques, and based on the models you construct- ed,
to answer the questions like the following ones (but you are not limited to those):

1. The manufacturing plans at Cairns, Darwin, and Mandurah, the three manufacturing
sites. ------Module 9

2. The distribution network and the associated flows over the whole network. ----Module 9

3. How rational is the policy that products have to go through the distribution centers? If
this could be changed, what changes you would like to propose? What results you would
expect to see? ----------- Module 9

4. How much will be the cost difference, if breaking down of pallets (i.e., taking products
from fully packed pallets) is allowed? ----------- module 9

5. Assess whether it will be worthwhile if Dronautics relocates its production to either

Adelaide or Newcastle. – Module 6 Binary
 6. If the production relocation is profitable, which site should be chosen? How much would
be the cost saving? If the production location is not profitable, by how much should the
annual operating cost reduce so that it will be attractive to Dronautics again? --------
Module 9

7. Discuss the impact of production relocation to cycle and safety stocks, try to pick
appropriate parameters to estimate the effect. ---------- Module 9

8. Construct at least one other possible scenario, and discuss your findings. ------ Module 9

When addressing the above questions, please address each one individually. If you need or want
to address the combined effects of any two (or more) of the above, please clearly mention it in
your report.