New Bakery For Oz Bread Background Oz Bread A Rapidly Developing New Bakery In M

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New Bakery for Oz Bread Background Oz Bread, a rapidly developing new bakery in Melbourne, is facing a critical supply chainproblem. Mitchell McGuire, supply chain manager of Oz Bread, was asked by the boss tofind a solution. Given the continuous growth in business over the years, it is obvious thatthe current production and distribution network of the company needs to be restructured.Oz Bread started off with a single baking facility in Mentone. Every day, the freshly bakedbreads and pies are delivered to its shops located in Glen Waverley, Doncaster, MelbourneCBD, Thomastown, St. Albans, and Hoppers Crossing. Business is growing and soon themaximum daily production capacity at the Mentone baking plant will be reached. A quickdecision on building one or more new baking plants could save the company significantamount of money in lost sales in the future. A new baking plant will take a year to buildfrom planning to completion. For example, if Oz Bread decides in this year to build a newbaking plant, the earliest date the new facility is available will be next year. Oz Bread was founded eight years ago and has been producing since then fresh breads anddelicious gourmet meat pies for Melburnians. Current average daily demands for theirbreads and pies, which are relatively stable throughout the year, are shown in Table 1. Theshops open 360 days a year. It is expected that the demands (breads and pies alike) at theexisting shops will grow by the percentages shown in Table 1 for another three years beforethey become stabilized due to market saturation. For simplicity reason, it can be assumedthat the increase in demand takes effect all of a sudden at the beginning of each year andnow it is the beginning of the current year. At present, the company has one baking plant inMentone which produces both products for the entire metropolitan area of Melbourne. Table 1 — Average daily demand for breads and pies at 0: Bread in current year Glen Melbourne HoppersDaily Waverley Doncaster CBD Thomastown CrossingDemand __ Pies 750Growth In Year 1 | 15% 12%Growth in Year 2 8?? 6%Growth in Year 3 4% 3% The bread production line at the Mentone baking plant has a capacity of 6,000 units per day, an annualized maintenance and overhead cost of $200,000 a year, and a production cost of$0.3 per unit. The pie production line has a capacity of 4,000 units per day, an annualizedmaintenance and overhead cost of $300,000 a year, and a production cost of $0.5 per unit. 1|Page

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