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Plaza the Logistics Park of Zaragoza

Solution Id Length Case Author Case Publisher
2581 1391 Words (6 Pages) Noel Watson, Santiago Kraiselburd Harvard Business School : 609113
This solution includes: A Word File A Word File

In the year 2000, the government of Spain signed a huge project which was no doubt a very big step towards the progress of the country. This was a very massive step toward the development of a logistics park that was on a huge scale on the outskirts of the city of Zaragoza. The plaza covers a considerable area that is 12,826,898 meters square hence it has lent its area to different business organizations, national as well as international. The main cost that is faced by Zaragoza is transportation which will be decreased once the container size increases but if that change is a decrease in the number of units per container then the transportation charges will be increased and the company will bear the loss. If the product cost increases the overall cost will increase and vice versa. The customers can also be benefited as the inventory holding cost of Zaragoza is less than other areas and ports. There are better services of inventory holding and other facilities that add much more to the reputation of Zaragoza which ultimately makes it a better option than Rotterdam.

Following questions are answered in this case study solution:

  1. Calculate the total relevant costs of each option for a Plaza park customer.

  2. How would the customer's conclusions change if the following assumptions changed: (i) Demand was more/lee uncertain (ii) The number of units per container changed (iii) The service level increased (iv) The product cost increased/decreased

  3. What other issues (besides the one presented) should the customer take into account?

  4. What opinion would you have about setting up more than one DC to cover Europe (i.e. one in PLAZA and one in Rotterdam)?

Case Study Questions Answers

1. Calculate the total relevant costs of each option for a Plaza park customer.

This plaza is a brand new park which is located near Zaragoza in Spain. It is connected to a very massive business chain around the country it also deals with the business on international grounds. Its focal point is the logistic activities and the supply chain. The plaza covers a huge area that is 12,826,898 meters square hence it has lent its area to different business organizations, national as well as international. As the chain is immense, there are various options for the plaza park customers. The cost summary represents the calculations of each of the given options. Cost Summary of Zaragoza is as follows: Total Shipping Costs of Zaragoza is none. Total Costs of Transport from Port to Warehouse is1613.3 Euros. Total Inventory Costs of Zaragoza is 3001.2 euros. The transportation cost is causing a massive addition to the total cost. As it is very costly for the delivery from Plaza to port. The delivery from the plaza to customers in Central Europe also adds a lot to the total cost. For the calculation, the formula that has been used is the economic order quantity formula. The formula is: EOQ = square root of: [2(setup costs) (demand rate)] / holding costs. The costs that are considered in the formula are the fixed costs that are paid at the ports when the order is being processed. Like the cost of Zaragoza is 305 euros. The Total Cost of Delivery from Warehouse to Customer is 2509.5 euros. Hence, the total relevant costs of each option for a Plaza park customer are 7124.0 euros. However, Zaragoza which covers a huge land and is a very massive asset for entire Spain is considered one of the best options. 

2. How would the customer's conclusions change if the following assumptions changed: (i) Demand was more/less uncertain (ii) The number of units per container changed (iii) The service level increased (iv) The product cost increased/decreased?

i. Demand was more/less uncertain:

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