Foulke Consumer Products, Inc.

The Southeast Region

RadCorp Consulting Group

Background
1924: Brand A licensee Company expansion via acquisitions of smaller companies
Resulting in redundancies and inefficiencies

Autonomous operation of plants

Individual sales and production responsibility

Agenda
Preliminary Analysis Project Requirements Our Methodology Qualitative Consideration

Our Recommendations
Conclusion

Preliminary Analysis
Attempt to solve delivery efficiency by redrawing sales territories Lack of effort to examine problems regionally or nationally
Capacity: lack of or excess Profitability: unequal among plants Operations: some suffered severely

Project Requirements
Establish optimal plant locations
Existing plants
Orlando, Florida Atlanta, Georgia Lexington, North Carolina

Potential new plants

Ft. Myers, Florida Lake City, Florida

Project Requirements
Establish optimal mix of plant capacity
Expansion of existing plants (or selling)
Orlando, Florida Atlanta, Georgia Lexington, North Carolina

Openings in new location

Ft. Myers, Florida Lake City, Florida

Our Methodology
1. Develop linear integer model to represent Foulkes distribution system 2. Solve current problem to maximum profitability 3. Solve 20 year model when meeting all demand
1. Sensitivity analysis on key variables 2. Costs of meeting all demand

Our Model
Linear integer programming model
Long term profit maximization

Optimizes plant distribution given inputs

Assumptions
Ft. Myers
All costs (fixed and variable) and revenues are the same as the Orlando plant

Lake City
All costs (fixed and variable) and revenues are the same as the Lexington plant

Demand fluctuation is insignificant (slight changes) over the next 20 years

Base Case
To Excel..

Base Case

Base Case

All demand met No change to current setup

Scenario 1
Maximize Profit

To Excel..

Scenario 1
Maximize Profit

Scenario 1
Maximize Profit

Sensitivity Analysis
Marginal revenues from new plants Fixed costs of new plants

Demand Maximize Profit

Scenario 2
Meet All Demand

Satisfying 100% demand

Allows company to maintain current market share Some loss of profit as the marginal revenue from some plants does not offset their fixed costs

Scenario 2
Meet All Demand

To Excel..

Scenario 2
Meet All Demand

Scenario 2
Meet All Demand

Sensitivity Analysis
Marginal revenues from new plants Fixed costs of new plants

Demand Meet All Demand

Results
Both alternative solutions have large advantages over the base case Maximizing profits is more profitable than meeting all demand by approximately $1.9 million over 20 years

Our Recommendations
Meet all demand
$9.3 million more profitable than base case $1.9 million less profitable than maximum possible It makes up for this in other ways

Our Recommendations
Advantages of meeting all demand:
Reduces possibility of competition Spare capacity gives buffer for plant maintenance Easily adaptable to increased demand Employee relocation: Orlando to Lake City

Conclusion
Optimal manufacturing distribution system via our solution implementation Major decision: satisfy all demand or not

Questions?

Appendices

Qualitative Considerations
Closing plants:
May lower company morale May adversely affect company culture May allow competing brands to gain a foothold in your territory Cost of relocating / training employees

Capacity
Allowance for capacity increase in new facilities to 350,000 Orlando plant: decision to always sell New facilities decision (capacity-dependent)
Ft. Myers: never purchase Lake City: possibility of purchasing

If Lake City capacity is 330,000:

Sell Atlanta plant, expand Lexington plant

20-year profit increases by 4.4%

Just over $3.5 million

Assumptions
Leasing possibility: model may be expanded to account for this