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CASE ON DISTRIBUTION SYSTEM DESIGN

Presented By: Aakanksha Jain Amit Arora Farhan Aqeel 211001 211016 211045

DARBY COMPANY
• Manufactures and distributes meters used to measure electric power consumption. • Started with a production plant in El Paso and distribution center in Ft. Worth, Texas. • With expansion of business to north, new distribution center opened in Santa Fe, New Mexico. • With growth of business in the West Coast, new distribution center opened in Las Vegas and a production plant in San Bernardino, California.

CASE DESCRIPTION

Cost of production per meter at each production plant:
PRODUCTION PLANT COST OF PRODUCTION

El Paso San Bernardino

10.50 10

Quarterly production capacity at each production plant:
PRODUCTION PLANT PRODUCTION CAPACITY

El Paso San Bernardino

30000 20000

Worth • Santa Fe • Las Vegas • • • • • • • • • Dallas San Antonio Wichita Kansas City Denver Salt Lake City Phoenix Los Angeles San Diego 9 CUSTOMER ZONES .• El Paso • San Bernardino 2 PRODUCTION PLANTS 3 DISTRIBUTION CENTERS • Ft.

4 -- 3.3 -3.20 1.0 -- 6.4 2.7 5.4 -4.5 -- 4. Worth Santa Fe 0.3 2.90 LAS VEGAS 4. WORTH 3.7 2.4 6.1 5. 2.1 -2.4 -3.0 2.5 Las Vegas -- .20 Shipping cost per unit from the distribution centers to the customer zones: CUSTOMER ZONE DISTRIBUTION CENTER DALLAS SAN ANTONIO WICHIT A KANSAS CITY DENVER SALT LAKE CITY PHOENIX LOS ANGELES SAN DIEGO Ft.3 5.Shipping cost per unit from Production plants to distribution centers: DISTRIBUTION CENTER PLANT El Paso San Bernardino FT.20 3.2 2.20 -SANTA FE.1 4.7 3.

Quarterly demand forecast at the customer zones: CUSTOMER ZONE Dallas San Antonio Wichita Kansas City Denver Salt Lake City Phoenix Los Angeles San Diego DEMAND (meters) 6300 4880 2130 1210 6120 4830 2750 8580 4460 .

Worth El Paso San Antonio Wichita Kansas City Denver Santa Fe San Bernardino Las Vegas Salt Lake City Phoenix Los Angeles San Diego .CURRENT DISTRIBUTION SYSTEM Dallas Ft.

what will its manufacturing and distribution costs be for the following quarter? .PART I If the company does not change its current distribution strategy.

 To calculate the distribution cost from Production plants to the distribution centers we use a transportation model with production plants as sources and distribution centers as destinations. Worth.  For Ft.  The demand of the distribution centers is calculated by adding the individual demands of the customer zones catered by them. demand = demand from Denver + Salt lake city + Phoenix =6120 + 4830 + 2750 =13700  For Las Vegas. demand = demand from Dallas+ San Antonio + Wichita + Kansas City =6300 + 4880 + 2130 + 1210 =14520  For Santa Fe. demand = demand from Los Angeles + San Diego =8580 + 4460 =13040 MODEL DESCRIPTION .

e.The Transportation table is as follows: FT. i.2 ∞ 2.2 0 0 30000 20000 SAN BERNARDI NO DEMAND 14520 13700 13040 8740 50000 .2 1. supply exceeds demand by 8740.2 1. WORTH EL PASO SANTA FE LAS VEGAS D1 SUPPLY 3. WORTH EL PASO SANTA FE LAS VEGAS SUPPLY 3.2 3.2 3. say.2 30000 20000 SAN BERNARDI NO DEMAND 14520 13700 13040 As there is a demand-supply gap. D1 FT. we insert a dummy demand destination.2 ∞ 2.9 4.9 4.

9) 14520 (∞) 13700 6740 (1.214520 2.7) 13040 (3) 8740 (0) Initial Basic Feasible Solution: FT.213040 0 20000 6960 50000 (1. WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 14520 -- 6740 6960 -13040 8740 -- .26740 4.2) (3.96960 1. WORTH EL PASO SANTA FE LAS VEGAS D1 SUPPLY 3.2) SAN BERNARDI NO DEMAND ∞ 3.2 08740 30000 15480 6740 (2.2) (2.Applying Vogel’s Approximation Method (VAM) FT.

5 0 -0 0 1.2 2. we apply MODI method: Cost for occupied cells: FT. Thus.7 Vj .2 -1. to check for optimality.2 -3. solution is non-degenerate.9 2. Now.2 -0.2 3.Check for non-degeneracy: m+n-1 = 2+4-1=5 which is equal to the number of basic variables. WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 Ui 3.

WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 Ui -∞ 3.70 .5 -0 0 0 1.Cost for unoccupied cells: FT.7 Vj Net Evaluation: FT. WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 -∞ --- 4.70 -- --1.20 --0.2 --2.2 4.

As all Cij is not equal to or greater than zero. thus solution is not optimal. solution is non-degenerate. To obtain an optimal solution. Thus. WORTH EL PASO SANTA FE LAS VEGAS D1 14520 13700 -- 1780 SAN BERNARDINO -- -- 13040 6960 Check for non-degeneracy: m+n-1 = 2+4-1=5 which is equal to the number of basic variables. FT. we insert θ in the solution and form a loop. WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 14520 -- 6740+θ 6960-θ -13040 8740-θ θ New Basic Feasible Solution: FT. .

2 0 0 0 0 0 Vj Cost for unoccupied cells: FT.2 -2.2 -3.9 2.2 -3. we again apply MODI method. WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 Ui -∞ 3.2 2. WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 Ui 3.Now to check for optimality.2 --0 0 0 Vj . Cost for occupied cells: FT.2 4.2 1.20 -1.2 -1.

Thus. thus the solution is optimal.Net Evaluation: FT. WORTH EL PASO SAN BERNARDINO SANTA FE LAS VEGAS D1 -∞ -1. Distribution Cost from production plants to the distribution centers =14520*3.20+13040*1.20 =$92252 .20+13700*2.7 3 -- --- As all Cij is greater than or equal to zero.

1+4460*2.7+4830*4.50+13700*10.1+1210*4. Total distribution cost =92252+101808 =$194060  For manufacturing cost.3+4880*2. Thus. to calculate Distribution Cost from distribution centers to the customer zones we multiply the per meter cost of transportation with the demand at each customer zone. we multiply the quantity supplied to each distribution center from a production plant with the production cost at that production plant. =6300*0.5 =1890+10248+6603+5324+16524+22701+9350+18018+11150 =$101808 Thus.7+2750*3.4+6120*2. As we are given fixed distribution pattern from distribution center to customer zones. Total Cost = 194060+426710 =$620770 . manufacturing cost = 14520*10.1+2130*3.50+13040*10 = $426710 Therefore.4+858 0*2.

Can costs be reduced? By how much? .PART II Suppose that the company is willing to consider dropping the distribution center limitations. customers could be served by any of the distribution centers for which costs are available. that is.

9 ∞ 0 ∞ 50000 4.7 3.2 ∞ 2.e.7 2. each distribution center can serve any customer zone for which costs are available. 50000 meters.4 2750 ∞ ∞ ∞ 3.7 5.0 ∞ 1210 6. a dummy demand destination is inserted.As the distribution center limitations are removed. WORT H SANTA FE LAS VEGAS DEMA ND SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. say.1 4.4 6.4 6120 0 0 0 8740 0 ∞ ∞ 50000 50000 50000 50000 200000 .e.3 4830 ∞ ∞ ∞ 3.1 5.2 ∞ ∞ 0 50000 30000 20000 0. WORT H SANTA FE LAS VEGAS SUPPLY ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.2 1.1 8580 ∞ ∞ ∞ 2. As there is a demand supply gap.2 ∞ 6300 2.5 ∞ 2130 4.4 2. to calculate the distribution cost we use a transshipment model with distribution centers acting as the transient nodes.0 2.4 ∞ 4880 3. D1 The transshipment model table is now as follows: DALL AS EL PASO SAN BERN ARDIN O FT. Thus.3 5.5 4460 ∞ ∞ 3.3 2. The supply and demand for the transient nodes i. the distribution centers would be equal to the total available supply or demand i.2 3.

9 ∞ 4.521 30 6.7) (2.012 10 2.2) (4.4 3.2) (1.6)(0.5384 0 0 ∞ ∞ 030000 (0)(0)(2 .2 1.4) (1.9) 4880 (3.2) (1.5) DE MA ND 6300 (4.2) (1.7) 4830 (1.2) (∞) 50000 31180 (2.7620 08740 ∞ 031180 ∞ (0)(0)(0 )(2.4) (1. SAN T 5.1)(2.2) (2.2) (2. 7) (0) SAN FT.7)(2.4 ∞ ∞ 6.4 4.1) (0.2) 4460 3840 (0.36300 ∞ ∞ 2.4) 2750 (1) (1) (1) (1) 8580 (1.18580 2.7) (2.4275 0 2.6) (∞) 6120 (2.3) 213 0 (1.2) (∞) 50000 30000 (1. SANT LAS SUPPL Y ∞ ∞ 0.761 20 4.218820 3.348 30 2.0 ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ 0 3.7)(0 .5)( 2.2 5.7 3.4 3.2) .1 ∞ ∞ 4.3 2.2) (0.2) (1.5) 8740 (0) (0) (0) (0) 50000 11180 (3.2) (0.4) (∞) 1210 (1.2) (0.211180 ∞ 038820 2.220000 ∞ 30000 18820 20000 50000 43700 38820 50000 48790 46660 40540 9360 620 50000 20000 15170 6590 3840 20000 0 (1)(2)( ∞) (2.2) (2.Applying Vogel’s Approximation Method (VAM) D EL SA W K DE SLC P LA SD D1 FT.7) LAS ∞ ∞ ∞ ∞ 5.14880 ∞ ∞ 3.3)(0. 1)(2.4) (1.

to check for optimality.Initial Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. . WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. Thus. Now. we apply MODI method. solution is non-degenerate. WORT H SANTA FE LAS VEGAS --- --- --- --- --- --- --- --- --- --- 11180 -- 18820 -- -20000 6300 --- 4880 --- -2130 -- -1210 -- -6120 -- --4830 --2750 --8580 -620 3840 -8740 -- 38820 --- -31180 -- --30000 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables.

5 -4.5 -3.4 2.2 -- -1.2 --0.4 -2.8 2.2 0 .3 6.2 0.3 3.2 -0 0 0.2 2.1 -- -- -- -- -- -- -- -- 0 -- -- -0.8 0 --0.1 --2.9 4.7 -2.2 -- 2.3 -2. WORT H SANTA FE LAS VEGAS Ui --- --- --- ---- --- --- --- --- --- --- 3. WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.3 2.8 SANTA FE LAS VEGAS Vj --1.4 1.0 -5.5 2.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.1 2.5 0 --0.1 2.7 2.

Cost for unoccupied cells:
DALL AS
EL PASO

SAN ANTO NIO

WICH ITA

KANS AS CITY

DENV ER

SALT LAKE CITY

PHOE NIX

LOS ANGEL ES

SAN DIEG O

D1

FT. WORT H

SANTA FE

LAS VEGAS

Ui

--

--

4.2

2.4

SAN BERN ARDIN O
FT. WORT H SANTA FE LAS VEGAS Vj


∞ 4.7 -3.3


∞ 3.4 -2.4


∞ 3.3 -2.1


∞ --2.5

3.9
∞ -∞ -0.2

-∞ ∞ -0

1.2

-5.2 ∞ 1.1

-5.4 ∞ 2.9

3.1 -∞ 4.3

4.4 -∞ 5.8

6.0 -5.4 2.5

0 -0 -0.2

-∞ ∞ 0.8

-0.8 0.2 0

Net Evaluation:
DALL AS
EL PASO

SAN ANTO NIO

WICH ITA

KANS AS CITY

DENV ER

SALT LAKE CITY

PHOE NIX

LOS ANGEL ES

SAN DIEG O

D1

FT. WORT H

SANTA FE

LAS VEGAS

--

--

1.8

SAN BERN ARDIN O
FT. WORT H SANTA FE LAS VEGAS


∞ 1.2 --


∞ 0.8 --


∞ 1 --


∞ ---

2.9
∞ -∞

-∞ ∞ --

-3.9 ∞

-2.3 ∞

-0.4 -∞

-0.6 -∞

4.3 -2.9

1 -0.2

-∞ ∞

As all Cij is not equal to or greater than zero, thus solution is not optimal. To obtain an optimal solution, we insert θ in the solution and form a loop.

DALL AS
EL PASO SAN BERN ARDIN O FT. WORT H SANTA FE LAS VEGAS

SAN ANTO NIO

WICH ITA

KANS AS CITY

DENV ER

SALT LAKE CITY

PHOE NIX

LOS ANGEL ES

SAN DIEG O

D1

FT. WORT H

SANTA FE

LAS VEGAS

---

---

---

--θ 1210 -θ --

---

---

---

---

---

---

11180 +θ --

18820 -θ --

-20000

6300 ---

4880 ---

-2130 --

-6120 --

--4830

--2750

--8580

-620 3840

-8740 --

38820 -θ ---

-31180 +θ --

--30000

Here, θ=1210

Thus. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.New Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. . we again apply MODI method. to check for optimality. solution is non-degenerate. WORT H SANTA FE LAS VEGAS --- --- --- --- --- --- --- --- --- --- 12390 -- 17610 -- -20000 6300 --- 4880 --- -2130 -- 1210 --- -6120 -- --4830 --2750 --8580 -620 3840 -8740 -- 37610 --- -32390 -- --30000 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables. Now.

4 -2.1 2.4 2.4 1.2 2.2 -0 0 0.5 0 --0.5 2.8 SANTA FE LAS VEGAS Vj --1.3 --5.3 -2.1 2.8 0 --0.2 -- -1.5 -4.2 2.1 -- 4.2 0. WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.2 0 .9 4.3 3.1 --2.7 -2.2 --0.7 2. WORT H SANTA FE LAS VEGAS Ui --- --- --- ---- --- --- --- --- --- --- 3.4 -- -- -- -- -- -- 0 -- -- -0.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.2 -- 2.3 2.5 -3.

9 ∞ -∞ -0.4 SAN BERN ARDIN O FT.2 0 .8 -0.0 -5.2 -5.2 -∞ ∞ 0.1 ∞ ∞ --2.3 -6. WORT H SANTA FE LAS VEGAS Vj ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4. WORT H SANTA FE LAS VEGAS Ui ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 4.Cost for unoccupied cells: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.0 ∞ 5.3 -2.4 ∞ 2.5 ∞ ∞ 3.2 -∞ ∞ -0 1.8 0.2 2.1 -∞ 4.7 -3.4 -2.3 ∞ ∞ 3.4 ∞ ∞ 3.1 -5.5 0 -0 -0.9 3.2 6.4 2.2 ∞ 1.

.2 -- ∞ ∞ 0.Net Evaluation: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.9 1 -0. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 1.9 ∞ -2.1 ∞ -∞ -∞ ∞ -- -3. thus solution is not optimal.3 ∞ -0. To obtain an optimal solution. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ 1.8 -- ∞ ∞ 1 -- ∞ ∞ --- ∞ ∞ 4.8 SAN BERN ARDIN O FT.2 -∞ ∞ As all Cij is not greater than or equal to zero. we again insert θ in the solution and form a loop.3 -2.6 ∞ 4.4 -∞ -0.

θ=2130 . WORT H SANTA FE LAS VEGAS --- --- --θ 2130 -θ -- --- --- --- --- --- --- --- 12390 +θ -- 17610 -θ -- -20000 6300 --- 4880 --- 1210 -6120 --4830 --2750 --8580 -620 3840 -8740 -- 37610 -θ --- -32390 +θ -- --30000 -- -- Here. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.DALL AS EL PASO SAN BERN ARDIN O FT.

WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.New Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. Thus. . we again apply MODI method. to check for optimality. Now. WORT H SANTA FE LAS VEGAS --- --- --- --- --- --- --- --- --- --- 14520 -- 15480 -- -20000 6300 --- 4880 --- 2130 --- 1210 --- -6120 -- --4830 --2750 --8580 -620 3840 -8740 -- 35480 --- -34520 -- --30000 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables. solution is non-degenerate.

1 2.2 -- 2.5 2.3 -2.3 2.2 2.2 --0.1 4.7 -2. WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.8 0 --0. WORT H SANTA FE LAS VEGAS Ui --- --- --- ---- --- --- --- --- --- --- 3.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.9 --3.4 -- -- -- -- -- -- 0 -- -- -0.2 0.2 -0 0 0.8 SANTA FE LAS VEGAS Vj --1.5 -3.1 --2.4 2.3 3.4 1.2 0 .2 2.9 --5.7 2.5 0 --0.4 -2.2 -- -1.1 2.1 3.

5 0 -0 -0.9 ∞ -∞ -0.8 0.3 ∞ ∞ 3. WORT H SANTA FE LAS VEGAS Vj ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.1 -5.1 ∞ ∞ --2.0 ∞ 5.5 ∞ ∞ 3.7 -3.2 -∞ ∞ 0.5 ∞ 3.8 -0.0 -5.2 -∞ ∞ -0 1.4 ∞ 2.4 ∞ ∞ 3.4 -2.2 0 .9 -6.4 2.3 -2.2 -5.9 -4. WORT H SANTA FE LAS VEGAS Ui ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 4.2 ∞ 1.4 SAN BERN ARDIN O FT.2 6.2 2.Cost for unoccupied cells: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.

8 SAN BERN ARDIN O FT.6 ∞ 4.3 ∞ -0.9 1 -0. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 1. thus solution is optimal.4 ∞ -0.3 -2. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ 1.9 ∞ -∞ -∞ ∞ -- -3.8 -- ∞ ∞ 1 -- ∞ ∞ --- ∞ ∞ 2.Net Evaluation: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.2 -- ∞ ∞ 0.9 ∞ -2. .2 -∞ ∞ As all Cij is greater than or equal to zero.

WORT H SANTA FE LAS VEGAS --- --- --- --- --- --- --- --- --- --- 14520 -- 15480 -- -20000 6300 -- 4880 -- 2130 -- 1210 -- -6120 --- --- --- -620 -8740 35480 -- -34520 --- LAS VEGAS -- -- -- -- -- 4830 2750 8580 3840 -- -- -- 30000 . WORT H SANTA FE SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.Optimal Table: DALL AS EL PASO SAN BERN ARDIN O FT.

Dallas San Antonio Wichita El Paso Kansas City Denver Santa Fe San Diego DISTRIBUTION SYSYTEM Ft. Worth San Bernardino Salt Lake City Las Vegas Phoenix Los Angeles .

Thus.2-8740*2.7+3840*2.3+4880*2. the cost of distribution from El Paso to Santa Fe includes the cost of these extra units which needs to be subtracted.4+8580*2.7+ 4830*3.4+6120*2. Total distribution cost =85292+92420 =$177712 . We also subtract the cost of shipping 8740 units as they are being shipped to a dummy destination.1+620*2. =14520*3. =6300*0.2 =46464+34056+24000-19228 =$85292  Distribution cost from distribution centers to the customer zone is calculated by adding the corresponding contributed costs from each distribution center to a customer zone. To calculate Distribution cost from production plant to the distribution centers we add the corresponding contributed costs from each production plant to a distribution center.1+1210*4.2+15480*2.3+2750*2.2+20000*1.5 =1890+10248+6603+5324+16524+15939+6600+18018+1674+9600 =$92420 Thus.1+2130*3.

50+20000*10-8740*10.50+15480*10. Manufacturing cost = 14520*10.5 =152460+162540+200000-91770 =$423230 = 177712+423230 =$600942 Thus. Total cost .

e.e. which is a savings of $19. a savings of $16.888. a savings of $3480.In case of a distribution plan without limitations:  The total cost would be reduced to $600. which is 20.828 or 3.  This plan allows a different center to service customers if it is cheaper.942.000 units. CHANGES IN COST .712 i.  This new plan allows the company to produce more of its meters at its more cost efficient San Bernardino plant – in fact.  This plan allows more than one center to supply to a specific zone and the solution shows that this is the case for the San Diego customer zone. under this plan it produces at capacity.2%  The distribution cost is reduced to $177.  The manufacturing cost is reduced to $423230 i.

the shipping cost is $0. Can distribution costs be further reduced by considering these direct plant-customer shipments? .PART III The company wants to explore the possibility of satisfying some of the customer demand directly from the production plants. The cost of direct shipments from EI Paso to San Antonio is $3.50 per unit.30 per unit from San Bernardino to Los Angeles and $0.70 from San Bernardino to San Diego. In particular.

the distribution centers is the total supply available. .70 With an option of direct plant-customer shipments we replace the cells corresponding to these direct shipments with the costs given in place of ∞ from the earlier table.e.50 $0. The demand and supply of the transient nodes i.Distribution costs for some direct plant-customer shipments: PRODUCTION PLANT El Paso San Bernardino San Bernardino CUSTOMER ZONE San Antonio Los Angeles San Diego COST $3.30 $0. The demand of the destinations is also the same. The supply of the sources remains the same as production capacity remains the same.

4 6.4 2750 ∞ 0.70 ∞ 2. WORT H SANTA FE LAS VEGAS SUPPL Y ∞ ∞ 3.4 ∞ 4880 3.5 ∞ 2130 4.1 8580 ∞ 0.50 ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.1 5.1 4.9 ∞ 0 ∞ 50000 4.7 5.2 ∞ 2.Modified Transshipment table is as follows: DALL AS EL PASO SAN BERN ARDIN O FT.2 3.5 4460 ∞ ∞ 3.3 4830 ∞ ∞ ∞ 3.7 2.2 1.0 ∞ 1210 6.2 ∞ 6300 2.7 3. WORT H SANTA FE LAS VEGAS DEMA ND SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.3 5.3 2.4 2.30 ∞ 3.4 6120 0 0 0 8740 0 ∞ ∞ 50000 50000 50000 50000 .2 ∞ ∞ 0 50000 30000 20000 0.0 2.

7) (2.4) (1.29360 30000 23700 18820 9460 20000 11420 6960 (1)(1. SANT LAS SUPPL Y ∞ 3.8) (∞) . 4)(0.4 6.7 0 ∞ 040540 ∞ 50000 48790 46660 40540 50000 41260 38510 33680 (0)(0) LA S ∞ ∞ ∞ ∞ 5.0 ∞ ∞ ∞ ∞ 0 043700 ∞ ∞ 50000 43700 SA NT 5.2 5.2) 50000 16320 9360 (1.5 08740 ∞ ∞ 033680 (0)(0) DE MA ND 6300 4880 2130 1210 6120 4830 2750 8580 4460 874 0 (0) (0) (∞) 50000 6300 (3.4 3.7) (1.4 4.2) (1. 0.2) (∞) 50000 9460 (2.3085 80 0.4275 0 2.Applying Vogel’s Approximation Method (VAM) D EL SA W K DE SLC P LA SD D1 FT.348 30 2.4) (∞) (1.1 3.4)(0.1 4.2) (4.8) (1.012 10 2.704460 ∞ ∞ 3.9) (∞) (1.7) (0) SA N ∞ ∞ ∞ ∞ ∞ ∞ ∞ 0.7) (2.9) (1.8) (∞) (1.8) (1.2) (2.8) (1.9 1.4)( 0.2) (3) (4.5048 80 ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ 3.3 2.5 )(2. 3)(2)( 2.8) (1.26300 2.36300 2.26960 FT.521 30 6.2) (1.2) (0.4) (∞) (1) (1) (∞) (1.4 3.7 3.7) (1.29460 4.2) (1.7612 0 4.1 2.6) (∞) (2.4) (1.

Thus. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.Initial Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. to check for optimality. . Now. we apply MODI method. solution is non-degenerate. WORT H SANTA FE LAS VEGAS --- 4880 -- --- --- --- --- --- -8580 -4460 --- 6300 -- 9460 -- 9360 6960 6300 --- ---- -2130 -- -1210 -- -6120 -- --4830 --2750 ---- ---- --8740 43700 --- -40540 -- --33680 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables.

5 -- --- ---- --- --- --- -0.2 1.9 ---0.7 4.2 -- 2.5 -2.4 2.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.3 -- -- -- -- -- -- -- -- -- 0 -- -- 1 SANTA FE LAS VEGAS Vj ---0.0 -4 2.7 --- 3.7 -3. WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.7 -0.5 -0 0 ---1 0 --2 -0 0 2 0 .3 -2.3 3.2 0.2 1.2 -- 4.7 ---0. WORT H SANTA FE LAS VEGAS Ui --- 3.4 ---0.3 -0.5 6.2 4.

3 2.2 -5.Cost for unoccupied cells: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.2 ∞ -0.9 ∞ -∞ -2 -∞ ∞ -0 1.4 ∞ -0.1 -∞ 2.1 -0.2 SAN BERN ARDIN O FT.7 0 0 -0 -∞ ∞ -1 1 2 0 . WORT H SANTA FE LAS VEGAS Vj ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.7 2.5 ∞ ∞ 3.5 4.7 -3.7 2.3 ∞ ∞ 3.9 -∞ 2.4 -∞ 3.4 0. WORT H SANTA FE LAS VEGAS Ui ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- -- 4.5 -0.0 -5.1 5.4 -2.7 3.4 -∞ 4 6.

3 -4.2 3.9 ∞ 1.Net Evaluation: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. To obtain an optimal solution.0 ∞ ∞ 4.7 ∞ -∞ -∞ ∞ -- -3. . thus solution is not optimal.8 4.6 -∞ 4.6 -- ∞ ∞ -1 -- -∞ 2.4 -∞ -0.0 -∞ 1. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ -0.1 ∞ -0.2 3. WORT H SANTA FE LAS VEGAS ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- -- SAN BERN ARDIN O FT. we insert θ in the solution and form a loop.7 -1 -2 -- -∞ ∞ As all Cij is not greater than or equal to zero.

WORT H SANTA FE -6300 -- ---- --2130 --1210 --6120 ---- ---- 8580 --- 4460 --- --θ -43700 -- LAS VEGAS -- -- -- -- -- 4830 2750 -- -- 8740θ -- 33680 +θ Here θ = 8740 .DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOEN IX LOS ANGEL ES SAN DIEGO D1 FT. WORTH SANTA FE LAS VEGAS -- 4880 -- -- -- -- -- -- -- -- 6300 9460+ θ --40540θ -- 9360θ 6960 --- SAN BERNA RDINO FT.

WORT H SANTA FE LAS VEGAS --- 4880 -- --- --- --- --- --- -8580 -4460 --- 6300 -- 18200 -- 620 6960 6300 --- ---- -2130 -- -1210 -- -6120 -- --4830 --2750 ---- ---- -8740 -- 43700 --- -31800 -- --42430 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables. Thus. . we again apply MODI method. to check for optimality. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.New Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. solution is non-degenerate. Now.

2 -- 4.9 ---0.2 4.5 -- --- ---- --- --- --- -0.5 0 --2 ---1 0 --2 -0 0 2 0 .3 -- -- -- -- -- -- -- -- -- 0 -- -- 1 SANTA FE LAS VEGAS Vj ---0. WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.7 -0.3 3. WORT H SANTA FE LAS VEGAS Ui --- 3.3 -2.4 2.2 1.7 -3.2 1.0 -4 2.4 ---0.5 6.7 --- 3.2 0.2 -- 2.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.3 -0.5 -2.7 4.7 ---0.

2 SAN BERN ARDIN O FT.7 2.7 2.7 -3.5 4.4 0.5 -0.4 -2.4 ∞ -0.3 2.Cost for unoccupied cells: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.5 ∞ ∞ 3.2 -5.1 5.1 -∞ 2. WORT H SANTA FE LAS VEGAS Vj ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.3 ∞ ∞ 3.1 -0.9 ∞ -∞ -2 -∞ ∞ -0 1. WORT H SANTA FE LAS VEGAS Ui ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- -- 4.2 ∞ -0.4 -∞ 4 6.9 -∞ 2.7 3.4 -∞ 3.7 0 -0 -2 -∞ ∞ -1 1 2 0 .0 -5.

7 1 -2 -∞ ∞ As all Cij is not greater than or equal to zero.2 3.9 ∞ 1.6 -- ∞ ∞ -1 -- -∞ 2.4 -∞ -0.0 ∞ ∞ 4.2 3.8 4.Net Evaluation: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.1 ∞ -0. To obtain an optimal solution.0 -∞ 1.3 -4.7 ∞ -∞ -∞ ∞ -- -3. WORT H SANTA FE LAS VEGAS ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- -- SAN BERN ARDIN O FT.6 -∞ 4. thus solution is not optimal. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ -0. we insert θ in the solution and form a loop. .

WORTH SANTA FE LAS VEGAS --6300 --- 4880 ----- ---2130 -- ---1210 -- ---6120 -- ----4830 ---θ 2750θ -8580 ---- -4460 ---- ---8740 -- 6300 -43700 --- 18200 +θ --31800θ -- 620-θ 6960 --42420 +θ Here θ = 620 .DALL AS EL PASO SAN BERNA RDINO FT. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOEN IX LOS ANGEL ES SAN DIEGO D1 FT.

Thus.New Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. to check for optimality. . Now. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. we again apply MODI method. WORT H SANTA FE LAS VEGAS --- 4880 -- --- --- --- --- --- -8580 -4460 --- 6300 -- 18820 -- -6960 6300 --- ---- -2130 -- -1210 -- -6120 -- --4830 -620 2130 ---- ---- -8740 -- 43700 --- -31180 -- --43050 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables. solution is non-degenerate.

3 3.3 --0.5 -- --- ---- --- --- --- -0.2 -- -1.5 6.7 --- 3.0 -5 2.4 ---0.2 0.9 ---0.3 4.2 -- 2. WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.3 -0.3 3.2 3.3 -- -- -- -- -- -- -- -- -- 0 -- -- 0 SANTA FE LAS VEGAS Vj --0.5 0 --1 --0 0 --1 -0 0 1 0 .2 1.7 -3.4 2.4 2. WORT H SANTA FE LAS VEGAS Ui --- 3.5 -3.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.7 -1.

2 -5.1 5.2 ∞ 0.3 3.9 ∞ -∞ -1 -∞ ∞ -0 1.5 4.9 -∞ 2.5 -0.3 2.7 -3.Cost for unoccupied cells: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.1 -∞ 3.5 ∞ ∞ 3.2 SAN BERN ARDIN O FT.4 1.0 -5.4 -∞ 5 6. WORT H SANTA FE LAS VEGAS Vj ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.3 ∞ ∞ --2. WORT H SANTA FE LAS VEGAS Ui ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 4.4 -∞ 3.1 -0.4 ∞ 0.7 2.3 2.7 0 -0 -1 -∞ ∞ 0 0 1 0 .2 3.

6 -∞ 4.2 3. we insert θ in the solution and form a loop. thus solution is not optimal.Net Evaluation: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ 0.3 -4.1 ∞ -0.7 1 -1 -∞ ∞ As all Cij is not greater than or equal to zero. WORT H SANTA FE LAS VEGAS ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 1 SAN BERN ARDIN O FT.8 4.9 ∞ 1. To obtain an optimal solution.0 -∞ 2.0 ∞ ∞ 3.4 -∞ -0.7 ∞ -∞ -∞ ∞ -- -3.2 3. .4 -- ∞ ∞ --- -∞ 3.

WORT H SANTA FE LAS VEGAS --- 4880 -- --- --θ 1210 -θ -- --- --- --- -8580 -4460 --- 6300+ θ -- 18820 -θ -- -6960 6300 --- ---- -2130 -- -6120 -- --4830 -620 2130 ---- ---- -8740 -- 43700 -θ --- -31180 +θ -- --43050 Here θ=1210 .DALL AS EL PASO SAN BERN ARDIN O FT. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.

we again apply MODI method. WORT H SANTA FE LAS VEGAS --- 4880 -- --- --- --- --- --- -8580 -4460 --- 7510 -- 17610 -- -6960 6300 --- ---- -2130 -- 1210 --- -6120 -- --4830 -620 2130 ---- ---- -8740 -- 42490 --- -32390 -- --43050 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables. . WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. Now.New Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. Thus. solution is non-degenerate. to check for optimality.

7 --- 3.3 --0.3 -0.3 3. WORT H SANTA FE LAS VEGAS Ui --- 3.5 0 --1 --0 0 --1 -0 0 1 0 .3 4.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.4 -- -- -- -- -- -- 0 -- -- 0 SANTA FE LAS VEGAS Vj --0.3 3.4 ---0.2 3.7 -1.4 2.2 0.4 2. WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.4 2.5 --4.5 -- --- ---- --- --- --- -0.2 -- -1.2 -- 2.5 -3.3 -- -- 4.7 -3.2 1.9 ---0.

4 -∞ 3.3 2.3 2.5 -6 ∞ 4. WORT H SANTA FE LAS VEGAS Vj ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.4 6.7 -3.0 -5.7 0 -0 -1 -∞ ∞ 0 0 1 0 .1 5.4 ∞ 0.3 ∞ ∞ --2.4 1.5 -0.1 -∞ 3.2 3.9 -∞ 2.2 ∞ 0.2 -5.1 -0.Cost for unoccupied cells: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.9 ∞ -∞ -1 -∞ ∞ -0 1.7 2.3 3. WORT H SANTA FE LAS VEGAS Ui ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 4.5 ∞ ∞ 3.2 SAN BERN ARDIN O FT.

3 -4.9 ∞ 1. WORT H SANTA FE LAS VEGAS ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 1 SAN BERN ARDIN O FT.2 3.7 1 -1 -∞ ∞ As all Cij is not greater than or equal to zero.0 -∞ 2. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ 0.4 -∞ -0.7 ∞ -∞ -∞ ∞ -- -3.2 3.0 ∞ ∞ 3.4 -- ∞ ∞ --- -∞ 3. To obtain an optimal solution.6 ∞ 4. . we insert θ in the solution and form a loop.1 ∞ -0.8 4.Net Evaluation: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. thus solution is not optimal.

DALL AS EL PASO SAN BERN ARDIN O FT. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. WORT H SANTA FE LAS VEGAS --- 4880 -- --θ 2130 -θ -- --- --- --- --- -8580 -4460 --- 7510+ θ -- 17610 -θ -- -6960 6300 --- ---- 1210 --- -6120 -- --4830 -620 2130 ---- ---- -8740 -- 42490 -θ --- -32390 +θ -- --43050 Here θ=2130 .

solution is non-degenerate. . Now.New Basic Feasible Solution: DALL AS EL PASO SAN BERN ARDIN O FT. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. to check for optimality. we again apply MODI method. Thus. WORT H SANTA FE LAS VEGAS --- 4880 -- --- --- --- --- --- -8580 -4460 --- 9640 -- 15480 -- -6960 6300 --- ---- 2130 --- 1210 --- -6120 -- --4830 -620 2130 ---- ---- -8740 -- 40360 --- -34520 -- --43050 Check for non-degeneracy: m+n-1 = 5+13-1=17 which is equal to the number of basic variables.

WORT H SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.4 2.2 3.9 ---0.4 -- -- -- -- -- -- 0 -- -- 0 SANTA FE LAS VEGAS Vj --0.2 -- -1.4 2.1 4.4 ---0.5 0 --1 --0 0 --1 -0 0 1 0 .7 -3.1 --4.3 3.3 3.3 --3.2 1.5 -- --- ---- --- --- --- -0.3 -- 3. WORT H SANTA FE LAS VEGAS Ui --- 3.2 -- 2.7 -1.Cost for occupied cells: DALL AS EL PASO SAN BERN ARDIN O FT.7 --- 3.3 -0.2 0.3 --0.4 2.

4 6.4 -∞ 3.4 1. WORT H SANTA FE LAS VEGAS Ui ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 4.1 -6 ∞ 4.7 2.2 3.5 ∞ ∞ 3.3 -4.3 2.1 5.3 2.0 -5.1 -0.5 ∞ 3.7 0 -0 -1 -∞ ∞ 0 0 1 0 .9 ∞ -∞ -1 -∞ ∞ -0 1.5 -0.4 ∞ 0. WORT H SANTA FE LAS VEGAS Vj ∞ ∞ ∞ ∞ ∞ ∞ ∞ 4.Cost for unoccupied cells: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.2 -5.3 ∞ ∞ --2.9 -∞ 2.2 SAN BERN ARDIN O FT.7 -3.2 ∞ 0.

9 ∞ 1.8 4. WORT H SANTA FE LAS VEGAS ∞ ∞ ∞ ∞ ∞ ∞ ∞ 0. .7 ∞ -∞ -∞ ∞ -- -3. thus it is an optimal solution.0 ∞ ∞ 3.4 ∞ -0.Net Evaluation: DALL AS EL PASO SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.0 -∞ 2. WORT H SANTA FE LAS VEGAS ∞ -- ∞ ∞ ∞ ∞ ∞ ∞ ∞ ∞ -- -- 1 SAN BERN ARDIN O FT.3 -3.4 -- ∞ ∞ --- -∞ 3.2 3.2 3.6 ∞ 4.1 ∞ -0.7 1 -1 -∞ ∞ As all Cij are greater than or equal to zero.

WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT. WORT H SANTA FE LAS VEGAS --- 4880 -- --- --- --- --- --- -8580 -4460 --- 9640 -- 15480 -- -6960 6300 --- ---- 2130 --- 1210 --- -6120 -- --4830 -620 2130 ---- ---- -8740 -- 40360 --- -34520 -- --43050 .Optimal Table: DALL AS EL PASO SAN BERN ARDIN O FT.

DISTRIBUTION SYSYTEM Dallas Ft. Worth Wichita Kansas City Santa Fe Denver San Antonio San Bernardino Las Vegas Los Angeles San Diego Salt Lake City El Paso Phoenix .

7 =1890+17080+6603+5324+16524+15939+2108+5112+2574+3122 =$76276 Thus. Distribution cost from production plant to the distribution centers =9640*3.5 =101220+162540+69600+51240+85800+ 44600=$423230 91770 Thus.1+1210*4.4+8580*0.2+6960*1.2+15480*2.4+6120*2.5+2130*3.5+ 8580*10+4460*10-8740*10.7 +4830*3.3+620*3.5+15480*10.4+2130*2.2 =30848+34056+8352-19228 =$54028  Distribution cost from distribution centers and production plants to the customer zone =6300*0.3+4460*0.2-8740*2. Total distribution cost =54028+76276 =$130304  Manufacturing cost = 9640*10.3+4880*3. Total cost = $553534 .5+6960*10+4880*10.

 The manufacturing costs are the same as those in Part II.8% from the original distribution system. or 10.236. but it is the cost of shipping in this system that reduces the total cost.408.9% from the limitation-free distribution system and a savings of $67. or 7.534 – which is a savings of $47. CHANGES IN COST . Darby Company’s total cost will be reduced to $553.  Darby should definitely adopt this plan of allowing customer zones to be supplied by numerous distribution centers as well as shipping directly the mentioned customer zones.

PART IV Over the next five years. Would you recommend that they consider plant expansion at this time? . Darby is anticipating moderate growth (5000 meters) to the North and West.

WORT H SANTA FE LAS VEGAS --- 4880 -- --- --- --- --- --- -8580 -4460 --- 9640 -- 15480 -- -6960 6300 --- ---- 2130 --- 1210 --- -6120 -- --4830 -620 2130 ---- ---- -8740 -- 40360 --- -34520 -- --43050 .Optimal Solution from Part III: DALL AS EL PASO SAN BERN ARDIN O FT. WORT H SANTA FE LAS VEGAS SAN ANTO NIO WICH ITA KANS AS CITY DENV ER SALT LAKE CITY PHOE NIX LOS ANGEL ES SAN DIEG O D1 FT.

if the demand is focused in North there is no need to go for plant expansion at this time. Thus.e. El Paso plant is producing 8740 units below their capacity.  The plant should only be expanded if the majority of the demand comes from the West where it is cheaper to produce and ship from the San Bernardino plant.  The cost of expanding a plant should of course be weighed against the cost of shipping to determine whether it is worth it. 20000 meters.  San Bernardino plant is producing at full capacity i. which could be used to satisfy increased demand. RECOMMENDATIONS .

THANK YOU .