Fireside Tire Company, a manufacturer of radial tires for sport utility vehicles

Question

Fireside Tire Company, a manufacturer of radial tires for sport utility vehicles, sells its products in the automotive aftermarket and distribution them throughout the United States. Fireside has three tire production plants located in Allentown, Pennsylvania; Toledo, Ohio; and Macomb, Illinois (see map). Normally, Fireside ships tires from its plants to distribution centers, but truckload-size purchases typically are transported directly from plants to customer locations. All shipments to a region move under truck-load rates applying to a minimum weight of 40,000 pounds, or 400 cwt.

Fireside management is concerned about the most economical location for a distribution center to serve its southeastern region, consisting of North Carolina, South Carolina, Georgia, Florida, Mississippi, Alabama, and southeastern Tennessee. Although an Atlanta distribution center currently serves this region, Fireside management is concerned that the Atlanta location is not the most logistically sound alternative.

To help the logistics department conduct an analysis of this region's distribution center location using the grid method. Fireside's transportation department developed the following data based on projections for 2008:

2008 Shipments to Atlanta Grid Coordinates

From CWT RATE/CWT Mileage Horizontal Vertical

Toledo 15K $2.20 640 1,360 1,160
Macomb 5K $2.43 735 980 1,070
Allentown 11K $2.52 780 1,840 1,150

2008 Shipments From Atlanta Grid Coordinates

TO CWT Horizontal Vertical
Chattanooga 2,700 1,350 650
Atlanta 3,500 1,400 600
Tampa 4,300 1,570 220
Birmingham 2,800 1,260 580
Miami 5,300 1,740 90
Jacksonville 5,100 1,600 450
Columbia 2,200 1,600 650
Charlotte 2,900 1,590 740
Raleigh/Durham 2,200 1,700 800

CAse study Questions

1. Based on the available information is Atlanta the best location for a distribution center to serve the shouteast region? If not, what would you recommend?

2. The Fireside transportation department projects a 25 percent irate increase in 2013 from all of its transportation providers. How will this affect the southeastern location?

3. Marketing anticipates that the raliegh Durham market will grow by 3000 cwt in 2014, and tyhat fireside will serve the growth from Allentown. how will this affect Atlanta as a location?

Explanation / Answer

Oops sorry about that. Here you go.

1)

Based on the grid analysis below, probably so; coordinates (1532, 637) indicate an optimal location in rural northeast Georgia near the South Carolina border. Atlanta is the nearest city location to that point that will be likely to have a significant labor pool and transportation infrastructure sufficient to handle the demand and supply networks needed to serve the marketplaces. Geographically knowledgeable students might also suggest nearby Asheville, NC or Knoxville, TN as alternative locations based on taxation rate and/or labor force arguments.

2)

The 25% across-the-board hike in transport rates impacts the shorter, more expensive southern LTL routes roughly three times as strongly as the fewer, cheaper northern TL routes in terms of cost. Thus, the new coordinates (1226, 510) represent a shift more toward the southern center of gravity, near Montgomery AL. Management in this case should consider moving the DC (especially if contracted or public) from north of Atlanta to near Montgomery

3)

Addressing this contingency with the assumption that the rate increase in 2010 does not happen, we find that the center of gravity for the DC moves almost directly into the south Atlanta suburbs at (1395, 580), making the city an almost perfect location for handling these operations. (If students assume that the rate increases from 2010 do in fact apply to this problem as well, the resulting coordinates will yield a solution in southern Alabama or Mississippi)

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