Cobalt Robotics: How Many Distribution Centres?
Operations
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Scenario
Cobalt Robotics is a industrial robotics business in Japan shipping about 4m orders a year on ¥985 B of revenue.
It runs 1 distribution centre today. The supply chain team has proposed moving to 2.
Current economics per order:
- Line-haul: ¥46
- Last-mile: ¥116
- Average delivery time: 4 days
Under the proposed network:
- Each additional DC costs ¥18 B a year to run
- Last-mile falls to about ¥94 per order, because stock sits closer to customers
- Average delivery time falls to 2 days
- Marketing estimates faster delivery is worth roughly 4.4% of revenue in additional sales
The CFO is resisting on the grounds that fixed costs go up.
Supporting data
volume
- revenue
- 985
- orders m per year
- 4
derived hints
- added fixed cost
- 18
- revenue lift value
- 43.3
- last mile annual saving
- 0.1
current network
- avg delivery days
- 4
- last mile per order
- 116
- line haul per order
- 46
- distribution centres
- 1
proposed network
- avg delivery days
- 2
- dc fixed cost each
- 18
- last mile per order
- 94
- distribution centres
- 2
- estimated revenue lift pct
- 4.4
Your task
Advise on the network. Your answer should provide:
- Analysis — total cost-to-serve under both networks, computed.
- Risks — what the case depends on and what you would monitor.
- Recommendation — a specific number of DCs and why.
State any assumptions you make.
Ready to move forward? Up next: Wavelength Media: Review This DCF Before It Goes to the ICNext question
How you'll be graded
100 points, 60% to pass.
- recommendation20
- service tradeoff25
- problem structuring25
- quantitative analysis30
Hint
Reveal suggested structure
Cost-to-serve build-up; fixed vs variable trade; service level as revenue; marginal DC analysis