| As one of the biggest automobile manufacturers whose vendors of car parts spread all over China and whose annual logistic expenditure is nearly up to five billion, the FAW Group has clearly recognized the importance of the logistics. Currently, the FAW Group has launched the related logistics policy as to prepare for the integration of the whole logistics system in the future. Therefore, the modern third party logistics plays the significant role in the development of the FAW Group's logistics system. This paper mainly aims to examine the feasibility of the establishment of the distribution center (DC). It provides the analysis of DC's market forecasting, construction scale and logistics functions, discusses the location and design of the DC, the associated information system and DC's investment and construction. Furthermore, on the basis of the above research, the paper estimates and analyses a wide range of financial indexes and finally comes to the conclusion of the feasibility of the establishment of distribution center. The brief introduction is following: 1. Market forecasting and construction scale 1.1 Status quo of distribution market The distribution center services have developed rapidly abroad and been preferred widely by manufacturers and customers. Below are the features of DC services: Coordinative and collaborative distribution; planning distribution; larger scope of distribution; computer management of distribution; advanced and various approach to distribution; integrative and lean distribution 1.2 Market forecasting DC provides the services for the FAW Group, car parts suppliers and parts trading mall in the larger potential market. FAW's expenditure on storage and distribution in Changchun is about 50 million. The forecasting revenue is as following table: FAW Supplier Auto Trade City ratio Income ratio Income ratio Income First Year (2005) 6% 300 Second Year (2006) 32% 1600 4 400 Third Year (2007) 36% 1800 6 600 4% 200 Fourth Year (2008) 36% 1800 6 600 4% 200 Fifth Year (2009) 36% 1800 6 600 4% 200 1.3 Scale of construction This DC is designed according to modern logistic system. Total layout area of the center is 42.524 thousand square meter; warehouse architecture area is 18.794 thousand square meter; total stock capability reaches 24512 units; the average stock turnover period is 10 days; the average daily throughput is 2451 pallets when running with full burthen (amounting to 136 vehicles, 18 pallets per vehicle), which is 2451 pallets coming in, and 2451 pallets going out every day. 2. Function orientation and management strategy 2.1 Main functions of distribution system This center which is operated according to the modern logistics model, provides a variety of supply chain management functions such as warehousing,distributing,packaging,products processing and logistics information processing. 2.2 Management strategy Competition strategy of lowering price, competition strategy of customization; strategy of combination of brand, service and capital management; strategy of expanding scope of customers. 3. Location of DC The DC is located in the spot, 1,200 meters from beginning of the ChangShen Highway, so the traffic there is quite convenient. 4. Design of DC As a systemic engineering project, DC is designed through the four aspects of logistics system, information system, standardized design and organization management. The distribution model provides the comprehensive third party logistics services; designs the service model of the distribution system; designs interior operation process; dispose the area inside DC; designs information systemproject. The establishment of DC will be finished in 9 months and put into use in the tenth month in the same year. The DC has a total area of 42,524 square kilometers with three high-rack warehouses, among which No.1 is used to store electricity parts, No.2 and No.3 are used to store plastic parts,rubber parts and nonmetal sets. The two warehouses without storage facility are named No.4 and No.5 where the container cargos are stored. This warehouse has no warm establishment and is used to store metal parts. The management of all warehouses applies information system. 5. Construction engineering and public facility Construction, environmental protection, energy source, fire control, security and sanitation are designed according to the correlative laws of nation and Changchun. 6. Deploying equipments and calculating its capability The general principle is that the information system has the broad and wide functions and storage and distribution equipment can be utilized easily and economically. Given the current situation, it is not considered to invest in the automatic warehouses and pick-up equipments. However, the focus is on the disposal of all kinds of functional areas, the improvement of warehousing, distributing operation efficiency and standardization. High-rack warehouses are available for 18,112 storage units and others for 6400 units. There are 15 forklift trucks to load and unload cargoes, 15 vehicles used for distribution, 8 platforms used to unload cargoes in order to enhance the loading efficiency. The information system equipments are shown as table7-1. 7. Organization of corporation and ration of labor The project has set 7 departments and 95 persons who are employed from the interior of the company. 8. Evaluation of investment and finance 8.1 Estimating investment and raising capital The total investment of the project is 43.202million Yuan, among which 33.822million Yuan are the newly construction investment, including 20million Yuan loan from bank. The rest are raised by Transportation Company itself, inventing in the construction and reconstruction of warehouse and purchase oflogistics facilities and information system equipments. Working capital are 2million Yuan, raised by corporation itself. Fixed asset 7.38million from FAW are used 8.2 Estimate of finance The economic benefit is as the following table: Incoming($) Total profit($) Tax and annex($) 260.00 K 17,049.50 K 858.00 K The finance estimation indexes are as following table: Sequence Index Value Remark 1 Invest-Income 1.1 Invest-Refund-Period 3.42 year n=10年1.2 NPV 45,697.50 K$ Ic=10% 1.3 IRR 37.07% 2 Invest-Profit-Ratio 21.48% 3 Invest-Tax-Ratio 30.31% 4 Fund-Profit-Ratio 39.99% 5 Lending-Refund-Period 2.63 Year Sensitivity Analysis Table: Incoming Change NPV(Ten Kilo) IRR Invest(-ReYefaunr)d-P eriodIncoming Added 20% 6552.01 48.80% 2.87 Incoming Added 10% 5560.88 43.22% 3.09 Incoming Added 5% 5065.31 39.84% 3.24 Forecast Incoming 4569.75 37.07% 3.42 Incoming Reduced 5% 4074.18 34.12% 3.61 Incoming Reduced 10% 3578.62 31.28% 3.83 Incoming Reduced 20% 2587.49 25.33% 4.38 Incoming Reduced 30% 1596.36 19.59% 5.15 Incoming Reduced 40% 605.23 13.66% 6.35 Profit and loss balance analysis: The project uses the utilization rate of throughput as BEP BEP=33.75% Revenue of distribution is 8.875 million Yuan.9. Conclusion As the above analysis has shown, all the financial and economic evaluation indexes of this project are matching or higher than the standard indexes in the same logistics sector, so this project is feasible. |
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