BABY CHIPS Case
BABY CHIPS SUPPLY CHAIN CASE1
The BABY CHIPS Company sells Potato Chips. They can buy their raw materials (Potatoes) from farm cooperatives (Suppliers) in Idaho and Maine. The suppliers’ data table that is provided at the end of this case summarizes the suppliers’ respective cost per ton of potato purchased. The same table also contains the minimum and maximum quantities that must be purchased, if a specific supplier is selected. BABY CHIPS has two Plants located in Wichita (WIC), and
Cincinnati (CIN) with food processing and packaging capabilities. The products can be sold and distributed to customers via Distribution Centers (DC’s) in three metropolitan market zones:
Indianapolis (IND), Kansas (KAN), and Memphis (MEM). Each DC has specific minimum and maximum sales requirements, as the Distributions Centers Data table indicates. The same table also summarizes the gross revenues obtained at each DC per 100-cases of chips sold.
A schematic representation of BABY’s supply chain is shown in Figure 1. Raw materials are delivered to the plants where they are processed in separate potato processing units. The processed products (chips) are then packaged in bags and the bags packaged in cases for shipment to the markets. Operation of the processing and packaging lines at each plant incurs fixed and variable costs, as shown in the Plants Data tables. The same table also provides information about the capacity of both lines.
As Director of Supply Chain Strategy, BABY’s CEO has asked you to develop a model of the company’s purchasing, manufacturing, transportation, and sales activities for next year (2008).
He is concerned that the total delivered cost of the company’s products could be significantly reduced, and net revenues significantly increased, if the company would pursue an integrated planning approach to its supply chain. He is also interested in evaluating options for next year relating to sourcing, manufacturing, customer service, and acquisition of a plant.
You
The BABY CHIPS Company sells Potato Chips. They can buy their raw materials (Potatoes) from farm cooperatives (Suppliers) in Idaho and Maine. The suppliers’ data table that is provided at the end of this case summarizes the suppliers’ respective cost per ton of potato purchased. The same table also contains the minimum and maximum quantities that must be purchased, if a specific supplier is selected. BABY CHIPS has two Plants located in Wichita (WIC), and
Cincinnati (CIN) with food processing and packaging capabilities. The products can be sold and distributed to customers via Distribution Centers (DC’s) in three metropolitan market zones:
Indianapolis (IND), Kansas (KAN), and Memphis (MEM). Each DC has specific minimum and maximum sales requirements, as the Distributions Centers Data table indicates. The same table also summarizes the gross revenues obtained at each DC per 100-cases of chips sold.
A schematic representation of BABY’s supply chain is shown in Figure 1. Raw materials are delivered to the plants where they are processed in separate potato processing units. The processed products (chips) are then packaged in bags and the bags packaged in cases for shipment to the markets. Operation of the processing and packaging lines at each plant incurs fixed and variable costs, as shown in the Plants Data tables. The same table also provides information about the capacity of both lines.
As Director of Supply Chain Strategy, BABY’s CEO has asked you to develop a model of the company’s purchasing, manufacturing, transportation, and sales activities for next year (2008).
He is concerned that the total delivered cost of the company’s products could be significantly reduced, and net revenues significantly increased, if the company would pursue an integrated planning approach to its supply chain. He is also interested in evaluating options for next year relating to sourcing, manufacturing, customer service, and acquisition of a plant.
You