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The Darby Company manufactures and distributes meters used to measure electric power consumption.
The company started with a small production facility at El Paso, Texas.
A distribution center was first opened at Ft.Worth,Texas, and later to cater to larger markets,
A second center was opened at Santa Fe, New Mexico.
As business improved, a third distribution center was opened at Las Vegas and a second
Production plant was opened at San Bernardino, California.The cost of production at the new plant
Was $ 0.5 more than the older plant which was $10.5 per unit.
The company decided that it was necessary to look at its distribution system as the companys rapid
growth had occupied the attention of the management till now. The quarterly production capacity at El
Paso is 30000 meters, while it is 20000 meters at the new plant.
The cost of shipping a meter from each of the units to the various distribution centers is given in one of the
tables. TABLE 1
The company serves 9 customer zones from the three Dis. Centers. The demand forecast at the various
zones are given below. TABLE 2
The cost per unit of shipping from each center to customer zone is given in Table 3.
The current design is : Demand at Dallas, S.A,Wichita, and K city zones is met by shipments from Ft.
Worth; Demand at Denver, S L city and Phoenix is met by shipments from Santa Fe and the third center
takes care of the rest. To determine how many units to ship from each plant, the quarterly customer
demand forecasts are aggregated at the distribution centers, and a Transportation model is used to
minimize the cost of shipping from the plants to the distribution center
Table 1
Shipping Costs
($)
Forecasts
El Paso
San Bernardino
Ft. Worth
3.2
_
Santa Fe
2.2
3.9
Las Vegas
4.2
1.2
Customer Zone
DALLAS
SAN ANTONIO
WICHITA
KANSAS CITY
DENVER
S L CITY
PHONEIX
LOS ANGELES
SAN DIEGO
Demand
6300
4880
2130
1210
6120
4830
2750
8580
4460
DA
.3
SA
2.1
WI
3.1
Santa Fe
5.2
5.4
4.5
Las Vegas
KCITY
4.4
DENVER
6
SL CITY
-
PHO
-
LA
-
SAN DIEGO
-
2.7
4.7
3.4
3.3
2.7
5.4
3.3
2.4
2.1
2.5