Read the following case and answer the questions below it Cheminova, a chemicals manufacturing company is currently using an all -rail route logistics system known as 'System-1' from its plant and the associated plant warehouse to its customers. At the plant warehouse, the chemicals are packed in small buckets and these buckets are kept in large container boxes and shipped by rail to the customer. You have recently joined in this organization and found that the Total Logistics Cost in the present system is very high and the customer satisfaction is very low. Therefore, you have decided to change the system to improve the customer satisfaction through efficient management of logistics and to reduce the total logistics cost. You suggested a new system known as 'System-2', which is based on market-oriented warehouse. In the new system, the chemicals would be shipped from the plant to the market warehouse and then packaged and sent to the customer. Instead of shipping all goods by rail, the organization would ship them by mini trucks to the market warehouse, taking advantage of low, bulk transportation prices. Then, after bagging, the chemicals would move by rail from the warehouse to the customer. The management asked you to explain how System-2, the new logistics system is more economical than System -1, the present one. The data related to both the Systems is given in the following tables. Cost Data of System - 1 and System - 2 COST SYSTEM - 1 SYSTEM - 2 TOTAL FIXED LOGISTICS COST 5600 AED 7200 AED TOTAL VARIABLE LOGISTICS COST 7 AED Per Unit 4 AED Per Unit OUTPUT 300 600 900 1200 1500 Answer the following Questions: 1. Justify how your new proposal will improve the efficiency of logistics and increases the customer satisfaction if the output is 650 KGs. 2. Calculate at which output the Total Logistics Costs of both the systems is equal. 3. Draw a graph to display your results
