This article discusses the process that was applied to develop a decision model that Oliva could use when deciding about the location of its manufacturing facility. The company wanted to lower its transportation costs as a way of optimizing its supply chain and becoming competitive in a globalized economy. The center of gravity method was used to develop this model as the company’s case corresponds to a continuous location problem. After considering different scenarios involving the company’s supply chain, the following results were arrived at using Excel software.
First, it was established that the current factory location is optimized. Second, setting up a second factory in Sao Paolo would significantly reduce the company’s total cost of transportation of raw materials. However, this study could not guarantee the short-term reduction of total logistics costs. Third, given that there is an expected increase in demand in foreign markets, especially in Brazil, opening the cost of opening a new factory in a different location could be lower than keeping operations in the current location. Ultimately, the two main factors that would determine the final decision-making include the location of the packaging material suppliers and the associated cost of transport. However, this model of decision-making does not give a final or definite answer. On the contrary, it could only be used to guide the decision-making process because it does not consider the costs of setting up another factor in the proposed location. Therefore, Oliva has to time the opening of the new factory at a time when the associated cost is less than the cumulative gains from reducing transportation costs. From this article, I have learned that the optimization of the supply chain could be approached methodically using mathematical formulae and scientific methods to create a model for decision-making.
The article relates to and supports different aspects of location decisions by covering the development of a decision-making model using the center of gravity method. According to the article, the optimal location is the one that minimizes the total transportation costs of raw materials and the final product. According to the article, the model seeks to ensure the minimum total volume of ???????? at one point, which is then multiplied by the rate of transportation ???????? to transport to the point multiplied by the distance ???????? to the point. Various factors are considered when deciding the optimal location for operations including supply locations, total transport costs, the availability of raw materials and the market for the final product, conversion units, and annual demand for a product.
The company could use this information to make an informed decision concerning the feasibility of opening a new factory in Sao Paolo. The data presented in this article is vital in arriving at the final decision because the company needs to consider other expenses such as initial set-up costs for a new factory. From the information in this article, it has emerged that some aspects are more important than cost in the decision-making process. For instance, in this case, the decision to open a new factory in Sao Paolo could be mainly focused on the potential growth in demand for olive oil in the region. The long-term benefits of this decision could override the costs that would be incurred in the short term when setting up the new plant. Therefore, under such circumstances, market prospects could override costs in the decision-making process.