data tech inc. _final 1
TRANSCRIPT
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Data Tech Inc UKM Universiti
Capacity Planning and Facility Location
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Case background• Establishment
• Started by Jeff Styles in his two-car garage
• Business function : transferring hard copy of documents, such as invoices, bills, or mailing list, onto CDs
• First customers: two large corporations
• Small garage operation turned into a major business
• Operations function
• First, unpacking and sorting mails received ( usually 10,000 to 30,000 pieces of mail per day are received)
• Next, scanning item to transfer content to disk
• Then, making accuracy check to ensure information is transferred correctly
• Finally, packaging disks and documents and sending back to the costumers
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The need for capacity and relocation
• Signing to additional customers
• Ensuring the smoothly operation without any bottlenecks
• Turning into a major business
Data Tech needs to move to a larger facility that could accommodate the larger size of business
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Three potential locations• Most important factors considering relocation Proximity to the postal
service
Closeness to the airport
• Three Potential Locations:
• Two locations are larger than needs
• One location would meet current capacity needs but would not immediately be expanded
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Q 1 – Part a
• Help Jeff Decide whether he should give greater priority to a smaller facility with possibility for expansion, or move into a large facility immediately.
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Decision Tree
Decision
Large Facility
High Deman
d
1,000,000
Low Deman
d
600,000
Small Facility
High Deman
d
800,000
500,000
Low Deman
d
500,000
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Probability
• The probability of high demand: 0.70
• The probability of low demand: 0.30
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Expected Value of Decision 1
• Decision 1: A smaller facility with possibility of expansion
• EV of potential for expansion =(0.3*$500,000)+(0.7*$800,000)
=$710,000
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Expected Value of Decision 2
• Decision 2: Move into a large facility immediately
• EV of excessing capacity
=(0.3*$600,000)+(0.7*$1,000,000)
=$880,000
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Large Facility or Small?
• EV of excessing capacity is greater than EV of potential for expansion as
$880,000 > $710,000.
Large Facility
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Q 1 – Part b
• Choose weights for the two capacity factors based on your findings.
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Data Tech Inc. Information
Factor FactorWeight
Factor score at each location
# 1 # 2 # 3
Proximity to Airport 20 3 4 4
Proximity to postal service 30 4 2 5
Facility with excess capacity ? 4 5 0Facility with potential for future expansion ? 0 1 5
Close to business community 10 5 4 4
Pleasant environment 10 3 4 4
100
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Missing Data
• Total Expected Profit :
= 880,000+710,000 = $1,590,000
Facility with excess capacity= 30 * (880,000 / 1,590,000) = 16.6
Facility with potential for future expansion
= 30 * (710,000 / 1,590,000) = 13.4
Factor Weight for “Facility with Excess Capacity” should be more than weight for “Facility with
potential for future expansion”
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Question 2
• Once you have selected the factors for the two capacity alternatives, use factor rating to select a new location for Data Tech.
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Factor Score at Each Location Weighted Score at
each location
FactorFactorWeigh
t
Factor score at each location
Weighted Scores
# 1 # 2 # 3 # 1 # 2 # 3
Proximity to Airport 20 3 4 4 60 80 80Proximity to postal service 30 4 2 5 120 60 150
Facility with excess capacity 16.6 4 5 0 66.4 83 0
Facility with potential for future expansion 13.4 0 1 5 0 13.4 67
Close to business community 10 5 4 4 50 40 40
Pleasant environment 10 3 4 4 30 40 40
100326.
4316.
4 377
Finding: best new location for Data Tech Inc is the location with the highest weighted score, and that is location #3 with a weighted score of 377.
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Question 3
• How would your factor analysis be different if you had selected a different capacity alternative?
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Decision Tree and Expected ValueDecision
Large Facility$880,000
High Demand
1,000,000
Low Demand
600,000
Small Facility $710,000
High Demand
800,000
500,000
Low Demand
500,000
EV (Excess capacity) = 0.30($600,000) + 0.70($1,000,000) = $880,000
EV (Potential for expansion) = $800,000 + $150,000 = $950,000
EV =0.3*$500000=150,000
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Factor Weight
• Factor weight for excess capacity
= ($880,000 / 1,830,000) * 30 = 14.4
• Factor Weight for potential for expansion
= ($950,000 / 1,830,000) * 30 = 15.6
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Factor Score at Each Location Weighted Score at
each location
Factor FactorWeight
Factor score at each location
Weighted Scores
# 1 # 2 # 3 # 1 # 2 # 3
Proximity to Airport 20 3 4 4 60 80 80Proximity to postal service 30 4 2 5 120 60 150
Facility with excess capacity 14.4 4 5 0 57.6 72 0
Facility with potential for future expansion 15.6 0 1 5 0 15.6 78
Close to business community 10 5 4 4 50 40 40
Pleasant environment 10 3 4 4 30 40 40100 317.6 307.6 388
Finding: Location #3 scores even more highly at 388.
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THANK YOU