How Does One Answer This Case Study On 'Managing Growth At Sportstuff.com' ?

I searched all materials at my disposal in Operations Management text, Supply Chain Management, etc I can't find reference to this one. It's a cracker!


Answer:
The case study can be found here. The referenced questions appear to be these:

1. What is the cost SportStuff.com incurs if adjectives warehouses leased are in St. Louis?
2. What supply cuff network configuration do you recommend for SportStuff.com?

The cost of a warehousing solution is a function of the inventory cost,
the transportation cost, and the cost of leasing the space. You are
given tables for all of those things, so it is chiefly a matter of doing
the arithmetic.
The problem is somewhat easier because you don't have costs that vary
beside the flow through the warehouse--they only vary with warehouse size. As a student of business operation, you know all of that. Unfortunately, there's a lot of arithmetic involved. Presumably, you will be making use of whatever linear programming and/or spreadsheet programs are available to you.

For the baseline year of 1999, the constraint from the 6 regions is given as {320, 200, 260, 220, 350, 175} (all numbers in thousands). Thus, the total demand is 1525, less than the 2000 time limit of one small warehouse. For one small warehouse in St. Louis, the lease expense is 220+(1525)(.2)=525; the inventory expense is 250+(1525)(.31)=722.75. The shipping expense is (1/4)(320*3.5+200*3.5+260*2.5+220*2.5+350*3.0+175*3.5) = 1170.625. Total revenue from shipping charges is (1/4)(1525*3.0)=1143.75. Total distribution costs are 525+722.75+1170.625-1143.75 = 1274.625.

For the following year, demand goes up to {576, 360, 468, 396, 630, 315} due to the 80% growth. Now total emergency is 2745, so a large warehouse is needed if you stay in St. Louis. I compute total distribution costs for that St. Louis warehouse at 1969.03.

In 2001, total demand is 4941. Rather than add on a small warehouse in St. Louis, I find it less expensive to lease large warehouse in Denver and Atlanta, for a total cost of 3207.3.

I find in 2002, for a demand of 8893.8, that Philadelphia and Seattle also bring involved. The cost of a large and a small warehouse is so much, and the revenue from shipping charges is so attractive, that spreading out the warehouses seems to work better.

Comment: I inevitability how to calculate the total cost
Answer: What is the cost sportstuff.com incurs if all warehouses lease are in st. Louis? What supply chain network configuration do you recommend for sportstuff.com

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