Answer for the first part on whether to expand versus build another plant — ABC Bottling Company sales have been expanding rapidly Their single which ships

ABC Bottling Company’s sales have been expanding rapidly. Their single plant, which ships directly to customers, is now out of capacity. What factors should they consider when they decide whether to expand the existing plant or build another one? If they build another plant, what factors should they consider when they locate this plant?

SOLUTION

There are many answers here that could be considered correct. You can use this question for a nice discussion in class. You will receive many different answers, and a lot will depend on the assumptions people make about ABC Bottling Company. You can adjust this problem to add more detail to ABC (do they make bottles and sell them to a few factories that fill them with juice? Do they make a soda product and ship to hundreds of retailers around the country? Are they a national firm, or do they serve just a single city or region? And so on…).

Answer for the first part on whether to expand versus build another plant:

They should look at the cost of expanding versus the cost of building a new plant.

Do they have the land and space to actually expand?

Where are the customers? Do they need a plant close to customers?

Do they have enough qualified labor in the area if they expand?