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final project - Project Contents Background w on,o 1:uveme...

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Project Contents Background: "",,, won,o.' , ~nn"'t AI""""..;;L·; ../ 1:uveme ~- ~~ - .. - .& 'i- I ." Jack"n 8h.le etrtb l' ",u."," , $plm Li~?, ti£~Vflt& I j,ow< ___ .0 0 :M~ 0 Spegcer £mmel'itll.lr 0 ISh.,don I F"' •• ICity!M~I' cr"~1 oe;orah! Wlukon i Q 00 U (I 9 C,"" Laic -.2.MbOf\;Cit)' o rang~ Clty AI!ile>n'8 Ch,cilll~C~ty Prlill1le duC-hlElfl ,0 CMrt;lkee. { ·PlanlN"lu.' l.eMlitf't _ D W' r1 \ o Storm LakeQ' I v-: 'I O~1l FOof1 OQ(j~eO ~n ,Cago_ ' .. \ Slaif \ IOni 0 )f-'-7"T-- omaha Wln~ PatmhoJ'-q Q Fig. 1 Map of central United States Fig. 2 Map of East China Blizzard Corporation is a cattle feed company whose headquarter is located in Ames, IA. It has two domestic plants in Decorah and She/don, IA (see Fig. i), and one off-shore plant in Shanghai (See Fig. 2), China. Blizzard sells its products in Chicago. The demand-price relationship in Chicago market for cattle feed is D = 120000 -120P , where 0 is the demand (ton/month) and P is the selling price (S/ton) decided by Blizzard.
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Phase I: First, suppose Ql (ton), Q2 (ton), and Q3 (ton) represent the production quantity in Decorah, Sheldon and Shanghai respectively. The total production costs excluding any salary are 150Ql + O.lQ; ($), 145Q2 + 0.08Q~ ($) and 120Q3 + 0.05Q~ (¥) in Decorah, Sheldon and Shanghai, respectively. In Decorah and Sheldon, the labor efficiency (number of tons of cattle feed that can be produced by unit worker in unit time) is 10 tons per person per month and the salary level is $2,000 per person per month. Meanwhile, in Shanghai, the labor efficiency is 5 tons per person per month and the salary level is ¥1,000 per person per month is the currency symbol of Chinese RMB, which is pronounced as "yuan"). For all plants, once produced, the products are transported to and sold at Chicago without any distinction of origination. There are two domestic transportation approaches: trucks and trains. Cost of delivering via trucks is $1 per ton per mile while cost of delivering via trains is $0.5 per ton per mile. However, there are quantity capacities for train transportation, which are 800 tons per month in Decorah and 1,200 tons per month in Sheldon. For off-shore plant in Shanghai, to deliver the cattle feed to Chicago market, ship transportation is used and the cost is $0.05 per ton per mile. There is no capacity limit for ship. The mileages from Decorah, Sheldon and Shanghai to Chicago are approximately 300 miles, 550 miles, and 8,000 miles, respectively. For cattle feed produced off-shore, tariff and exchange rate are two main factors that influence the business decisions. In this phase, we assume that there is a free-trade-market agreement between U.S. government and Chinese government regarding the agricultural products, including the cattle feed. Hence, there is no tariff for cattle feed imported from China. As for the exchange rate, in this phase, we hypothetically assume that $1.00=¥1.00. Besides the economic consideration, from an environmental perspective, the carbon footprint is also a critical element that managers should consider when making business decisions. We will assume that the truck transportation utilizes bio-fuel, and the carbon emission rate is given by 0.08 Ibs per mile. We also assume that the train and ship
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