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The uncertainty in need is shown in the reorder point and security stock. The more the irregularity in demand the greater will be the reorder point and the security stock. A higher variance in need would straight affect the security stock levels required at the storage facilities and hence increase the stock bring costs. This increase would then impact the overall costs. Utilizing our stand out model, If we increase the standard discrepancy of annual need from 10,000 to 32,000, the total expenses for Rotterdam end up being higher than those of Zaragoza.
Similarly, differing the service life has an impact on the overall expense as it manages the safety stock which in turn manages the inventory holding cost. For this reason, as the service life increases to a higher value the cost of choice 2 (Zaragoza) will be lesser than choice 1. Expense of the product
As the expense of the item increases the stock holding boost increasing the overall expense. So Zaragoza as has a better expense benefit over Rotterdam option.
In our excel design, plugging a product expense of 295 Euros (E 47 and F 47 cells), keeping all other criteria unchanged makes Zaragoza a much better cost choice. So it is an element to be considered.
Based on our above analysis, we recommend the following to the CEO of Zaragoza Logistics Park (Who should they try to sell their idea/option) Zaragoza should target customers with high number of units/TEU They should target customers with high product costs
They should target customers whose demand uncertainty is high.
They should target customers with high annual demand rates
They should target customers who have preference for high service rates Plaza is also an educational center for logistics while Rotterdam is a just a logistics park. Zaragoza should try to educate the customer about the supply chain benefits of associating with a world class logistics research center Plaza is a government backed firm – they should use this factor to instill more confidence in the customer over a private firm like Rotterdam option
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