| Summary |
Ying-Hsuann Chen,2007.06
Department of Transportation Technology and Management National Chiao Tung University
Kinmen Kaoliang Liquor Inc. (KKL), once a non-profitable government agency, was corporatized in 1998. Give doubled tax obligation, cost reduction and profit maximization have become its most crucial goals. Over 90% of the liquor of KKL is sold in Taiwan area. There exist two major channels: branch companies and sales agencies. KKL handles the logistics operation for the goods sold by its branch companies. For the other channel, the sales agencies take care of the whole logistics operations from the factory in Kinmen Island. Sales agencies helps to simplify the operations, but at the same time KKL suffers from several drawbacks, such as reduction of profits, inefficiency of transportation operation and cultivating potential competitors. KKL has been retrieving the amounts of sales from the agencies and is planning to establish distribution centers (DCs), in charge of logistics operation and trade transactions in Taiwan area. These oncoming DCs can be the forerunner of the marketing company KKL may invest for the next stage.
There were not many domestic quantitative studies regarding the location anaysis of DCs in the past, and this study aims to explore the significant factors concerning KKL’s establishment of DCs in Taiwan area. The classical fixed charge model is modified to take into consideration of the inbound and outbound transportation costs associated with the DCs as well as the variable and fixed components of the DC facility costs. This study collects and estimates the values of the related parameters in the model. The results indicate that the total cost will be 110,786,400 NT dollars per year if the three DCs are built up in Keelung City, Changhua City and Kaohsiung City with the floor area of 5,000, 3,900 and 1,100 square meters respectively. After setting up the DCs, KKL can also improve the service level due to the proximity to markets and increase the gross profits of about 6.7 billions NT dollars per year.
Sensitivity analysis suggests that the changes in fixed cost and demand level have more impacts than the unit cost difference between inbound and outbound transportation of the DCs. Besides, according to the comparison between the scenarios, the cost will increase about 50, 000, 000 NT dollars if merely one DC is set up. Besides, the location decision is not very sensitive to the locations of the demands, which may change in the future. The results of the above analysis offer decision makers various facets for considerations. |
