Academic MBA Question:
MBA Assignment – XYZ parts is a company making brake pads for trucks. It wants to set up its manufacturing and dispatch warehouse either in Delhi or Mumbai. From the city they select, they will make shipments to 6 cities- Delhi, Mumbai, Bangalore, Kolkata and Hyderabad and Chennai. Each parcel they ship to their customers in these cities weighs between 750 grams and 900 grams. They negotiated with a logistics company for shipping their parcels and the best rates they got for all parcels up to 1 kg are given in below table:
The number of orders they are expecting to get from each city per month are given in below table
For manufacturing, storing the inventory and dispatching, they need a 10000 sq. ft warehouse. Monthly rent in Mumbai for a 10000 sqft warehouse is Rs. 1.5 lakhs per month and in Delhi it is Rs. 90000. All other costs of operating the warehouse and manufacturing is same for both the cities. How will the company decide how which city is cost effective to operate? Which city as per your calculations should be there preferred location?