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Assignment 3: Warehouse, Transportation & Journal Entry

Student’s Name

Institutional Affiliation

Course Name and Code

Instructor’s Name

Date Due
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Module 6: Warehouse Management

Question 1

This analysis will compare the cost and effectiveness of two shipping options for a

manufacturer with inventory in Montreal: direct shipment to retailers and warehouse-to-retailer

shipment using a third-party warehouse in Regina. By calculating the total cost for each shipping

option and considering factors such as transport rates, handling charges, and inbound

transportation costs, we will determine the most cost-effective strategy for the manufacturer.

Computations

Shipment Option

For the direct shipment option, the total cost would be calculated by adding the transport

rates for each retailer to the manufacturer's inventory in Montreal to the handling charge.

Brandon: 150 cwt * $16/cwt = 2400

Madison Hat: 200 cwt * $20/cwt = 4000

Kelowna: 100 cwt * $50/cwt = 5000

Abbotsford: 250 cwt * $65/cwt = 16250

Handling charge: $100

Total cost: $2400 + $4000 + $5000 + $16250 + $100 = 32550

Warehouse-To-Retailer Shipment

For the warehouse-to-retailer shipment option, the total cost would be calculated by

adding the transport rates for each retailer from the warehouse in Regina to the handling charge

and the inbound transportation rate from Montreal to Regina.

Brandon: 150 cwt * $8/cwt = 1200

Madison Hat: 200 cwt * $5/cwt = 1000

Kelowna: 100 cwt * $15/cwt = 1500

Abbotsford: 250 cwt * $20/cwt = 5000

Inbound transportation: 250 cwt * $25/cwt = 6250

Handling charge: $100

Total cost: $1200 + $1000 + $1500 + $5000 + $6250 + $100 = 13650

Recommended Strategy

Based on these calculations, the warehouse-to-retailer shipment option would be more

cost-effective, as it has a total cost of $13650, compared to $32550 for the direct shipment

option.

Question 2

The distribution and logistics industry plays a crucial role in ensuring the smooth flow of

goods and services to meet the demands of consumers (Asif, 2022). In recent years,

advancements in technology and consumer behavior have led to significant changes in how

goods are transported and stored. A critical aspect of this industry is the design and management

of warehouses, which play a crucial role in the efficiency of the distribution system. Proper

strategy and management of warehouses can significantly improve the efficiency and

effectiveness of the distribution and logistics industry, leading to cost savings and customer

satisfaction.

Computation and Explanation

To determine the number of loading and unloading bays needed in a warehouse, we need

to consider several factors, including the volume of goods being handled, the number of trucks
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that need to be loaded and unloaded each day, and the time required for each loading and

unloading operation.

First, let's consider the volume of goods being handled. In this example, the warehouse

has an annual throughput of 5,000,000 bottles and is open for 300 days a year, for a daily

throughput of 5,000,000/300 = 16,666 bottles.

Next, we need to determine the number of trucks that must be loaded and unloaded daily.

In this example, the average truckload quantity for inbound trucks is 1000 bottles and 1200

bottles for outbound shipments, for a total of 2200 bottles per truck. This means that the number

of trucks that need to be loaded and unloaded daily is 16,666/2200 = 7.55 trucks.

Finally, we must consider the time required for each loading and unloading operation. In

this example, it takes 3.5 hours to offload a truck into the warehouse and 4.0 hours to upload one

from the warehouse. This means it takes 3.5 + 4.0 = 7.5 hours to load and unload one truck.

To determine the number of loading and unloading bays needed in the warehouse, we

need to divide the number of trucks that need to be loaded and unloaded each day by the number

of trucks that can be loaded and unloaded each hour. In this example, the warehouse is open 8

hours a day and can handle 8/7.5 = 1.07 trucks per hour. The warehouse would need 7.55/1.07 =

7.06 loading and unloading bays. It is generally a good idea to have some extra capacity to allow

for unexpected increases in demand or maintenance of the bays. Therefore, the warehouse would

likely need at least eight loading and unloading bays to support the daily activity level in this

example.

Question 3
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We can use the transportation simplex method to balance the transportation problem and

find the least cost distribution plan.

The first step is to set up the transportation table, which includes the supplies and

demands and the transportation costs. We also need to add a dummy row and a dummy column

to balance the supplies and demands. The dummy row represents the excess or deficiency of

supplies, and the dummy column represents the excess or deficiency of demand.

Supplies:

Supplier A: 4000 units

Supplier B: 6000 units

Supplier C: 4000 units

Total supply: 14000 units

Demands:

WHS 1: 6000 units

WHS 2: 5000 units

WHS 3: 5000 units

Total demand: 16000 units

There is a deficiency of 2000 units, so we need to add 2000 units to the dummy row.

Transportation table:

Destinations

Origins WHS 1 WHS 2 WHS 3 Dummy

Supplier A $ 4.00 $ 6.00 $ 7.00

Supplier B $ 5.00 $ 2.00 $ 1.00

Supplier C $ 8.00 $ 3.00 $ 9.00

Dummy 2000

Demand -> 6000 5000 5000 2000

The next step is to find the initial solution using the northwest corner rule. This involves

allocating the maximum amount possible to the cell with the lowest transportation cost until the

supply or demand is exhausted. Starting with Supplier A, the maximum amount that can be

shipped is 4000 units to WHS 1. The transportation cost for this allocation is $4.00 * 4000 =

$16,000.

Next, we move to Supplier B. The maximum amount that can be shipped is 5000 units to

WHS 2. The transportation cost for this allocation is $2.00 * 5000 = $10,000. Then, we move to

Supplier C. The maximum amount that can be shipped is 4000 units to WHS 3. The

transportation cost for this allocation is $9.00 * 4000 = $36,000. Finally, we move to the dummy

row. The maximum amount that can be shipped is 2000 units to the dummy column. There is no

transportation cost for this allocation.

Initial transportation table:

Destinations

Origins WHS 1 WHS 2 WHS 3 Dummy

Supplier A 4000

Supplier B 5000

Supplier C 4000

Dummy 2000

Demand -> 6000 5000 5000 2000

The initial solution has a total transportation cost of $16,000 + $10,000 + $36,000 =

$62,000.

Now, we need to check for optimality by finding the lowest transportation cost for the

cells in the dummy column. If there is a negative cost, we can improve the solution by using the

cell as the entering cell and an existing cell as the leaving cell. The lowest transportation cost in

the dummy column is -$6.00. This means that we can improve the solution by using the cell at

the Supplier A intersection, the dummy column as the entering cell, and an existing cell as the

leaving cell. To find the leaving cell, we need to calculate the reduced cost for each allocated cell

in the transportation table. The reduced cost for a cell is the difference between its transportation

cost and the lowest transportation cost in the dummy column, divided by the difference between

its supply or demand and the corresponding supply or demand in the dummy column.

For the cell in the intersection of Supplier A and WHS 1, the reduced cost is:

($4.00 - (-$6.00)) / (4000 - 2000) = $10.00 / 2000 = $0.50

For the cell in the intersection of Supplier B and WHS 2, the reduced cost is:

($2.00 - (-$6.00)) / (6000 - 2000) = $8.00 / 4000 = $0.20

For the cell in the intersection of Supplier C and WHS 3, the reduced cost is:

($9.00 - (-$6.00)) / (4000 - 2000) = $15.00 / 2000 = $0.75

The cell with the lowest reduced cost is the intersection of Supplier B and WHS 2, with a

reduced cost of $0.20. This cell will be used as the leaving cell. We can now use the stepping

stone method to find the new allocation. The stepping stone method involves moving along a

closed loop of cells, starting and ending at the entering cell, until we reach an allocated cell. The

movement along the loop follows the following rules:

If the entering cell is in a row, we move to the right until we reach an allocated cell.

If the entering cell is in a column, we move down until we reach an allocated cell.

If the allocated cell is in a row, we move down until we reach an unallocated cell.

If the allocated cell is in a column, we move to the right until we reach an unallocated

cell.

Following these rules, we can trace the following loop:

Supplier A (entering cell) -> WHS 1 -> Supplier B -> WHS 2 (leaving cell) -> Supplier A

The new allocation for the entering cell, Supplier A, is the difference between the supply

in the entering cell and the demand in the leaving cell, which is 2000 units - 5000 units = -3000

units. The new allocation for the leaving cell, WHS 2, is the difference between the demand in

the leaving cell and the supply in the entering cell, which is 5000 units - 2000 units = 3000 units.

We can now update the transportation table with the new allocation:

Destinations

Origins WHS 1 WHS 2 WHS 3 Dummy

Supplier A -3000

Supplier B 8000

Supplier C 4000

Dummy 5000

Demand -> 6000 5000 5000 5000

The total transportation cost for this solution is:

($4.00 * 4000) + ($2.00 * 5000) + ($9.00 * 4000) + ($6.00 * -3000) = $62,000 + $30,000

= $92,000
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Reference

Asif, K. (2022). The Impact of Procurement Strategies on Supply Chain Sustainability in the

Pharmaceutical Industry: Supply Chain Sustainability. South Asian Journal of Social

Review (ISSN: 2958-2490), 1(1), 53-64.