Documente Academic
Documente Profesional
Documente Cultură
ANUJ SHARMA
RAFAEL NADOFF
Background
Darby Company manufactures and distributes meters used to measure electric power
consumption. The company has production plants in El Paso, Texas and San Bernardino,
California. The company also has three distribution centers in Fort Worth, Texas; Santa Fe, New
Mexico; and Las Vegas, Nevada. The company has nine customer zones that its product is
shipped to from the three distribution centers and they are; Dallas, San Antonio, Wichita, Kansas
City, Denver, Salt Lake City, Phoenix, Los Angeles, and San Diego.
objective
Due to the rapid growth that Darby Company has experienced, the overall efficiency of our
distribution system is being assessed to verify that Darby Company is maximizing its distribution
resources.
Results obtained
Table 1
#
Units
Version 1
Version 2
Version 3
$ 600,942
$ 553,534
620,770
Manufacturing Cost
* Units ( El Paso)
$10.50
28,220
21,260
21,260
$10.00
13,040
20,000
20,000
Total Units
41,260
41,260
41,260
TOTAL MANUFACTURING
$426,710
$423,230
$423,230
TOTAL TRANSPORTATION
$194,060
$177,712
$130,304
$/Units
$15
$15
$13
Version 3 costs $2
less per meter to ship
than Version 1 or
Version 2
Recommendation
After a thorough analysis of the Darby Company distribution system, Version 3 of the
distribution methods analyzed is the distribution network that Darby Company should pursue to
maximize its resources and minimize costs. We further recommend Darby not expand
manufacturing operations until its demand has grown to meet and exceed its supply capabilities.
Rationale
Should Darby choose to include some shipping directly from the manufacturer in its schedule, it
will save $3480.00 in manufacturing costs as well as $67,236 in transportation costs at its
current demand schedule. Darby also has the potential in save $2.00 in transportation costs per
unit and, therefore, could face an additional potential savings of $17,480 as its demand
increases, totaling a potential cost savings of $88,196.
Further, Darby has the ability to meet an increase of demand up to 8740 units before it is forced
to expand its manufacturing operations. If the cost of opening a new plant is an average near $2
million, and the costs of shipping up to 8740 additional units is approximately $120,000, Darby
can save, $1.8 million by waiting to increase production.
Managerial Report
#1. If the company does not change its current distribution strategy, what will its distribution
costs be for the following quarter?
DALLAS
SALT
LAKE
14,520
13,700
13,040
6300
4880
San Bern
ElPaso Production Plant
Productio
KANSAS
SALT
LOS
WICHITA CITY DENVER PHOENIX LAKE ANGELES
2130
1210
6120
2750
8580
4830
$ 426,710.00
$ 194,060.00
$ 620,770.00
#2. Suppose that the company is willing to consider dropping the distribution center limitations;
that is, customers could be served by any of the distribution centers for which costs are available.
Can costs be reduced? By how much?
DALLAS
SALT
LAKE
14,520
6,740
20,000
6300
4880
1210
6120
620
4830
$ 423,230.00
$ 177,712.00
TOTAL COST
Table 3
$ 600,942.00
Transportation costs will be reduced from version 1 to version 2 by $16,348. This is largely due
to the lower production cost in San Bernardino passed on to the distribution center then onto
the transportation cost.
#3. The company wants to explore the possibility of satisfying some of the customer demand
directly from the production plants. In particular, the shipping cost is $0.30 per unit from San
Bernardino to Los Angeles and $0.70 from San Bernardino to San Diego. The cost for direct
shipments from El Paso to San Antonio is $3.50 per unit. Can distribution costs be further
reduced by considering these direct plant to customer shipments?
2750
8580
384
SALT
KANSAS
SALT SAN
LOS
SAN LOS
DALLAS LAKE WICHITA CITY DENVER PHOENIX LAKE ANTONIO ANGELES DIEGO ANGELES
6300 4880
2130
1210
6120
2750
4830
8580
4880
8580
$ 423,230.00
$ 130,304.00
$ 553,534.00
Version 3 costs
$67,236 less than
Version 1
#4. Over the next five years, Darby is anticipating moderate growth (5000 meters) to the North
and West. Would you recommend that they consider plant expansion at this time?
Due to the fact that Darby is currently under-selling its current supply of 50,000 meters, it is not
practical for Darby to expand its plant operations at this time. If the company grows by
approximately 5000 meters, there will still be a remaining portion of 3,740 of the supply
remaining.
4460
50,000
41,260
8,740
5,000
3,740
Table5
Appendix
Table 1
#
Units
Version 1
Version 2
Version 3
$ 600,942
$ 553,534
620,770
Manufacturing Cost
* Units ( El Paso)
$10.50
28,220
21,260
21,260
$10.00
13,040
20,000
20,000
Total Units
41,260
41,260
41,260
TOTAL MANUFACTURING
$426,710
$423,230
$423,230
TOTAL TRANSPORTATION
$194,060
$177,712
$130,304
$/Units
$15
$15
$13
Version 3 costs $2
less per meter to ship
than Version 1 or
Version 2
Warehouse Expansion
Unit Cost
TOTAL COST
# Units
Version 1
$
620,770
Version 2
$
600,942
Version 3
$
553,534
Manufacturing Cost
* Units ( El Paso)
$10.50
28220
21260
21260
$10.00
13040
20000
20000
TOTAL MANUFACTURING
$426,710
$423,230
$423,230
TOTAL TRANSPORTATION
$194,060
$177,712
$130,304
Case 3-1
Case 3-2
Case 3-3a
EPFW
EPSF
EPLV
EPSA
SBSF
SBLV
SBLA
SBSD
FWDA
FWSA
FWWI
FWKC
FWDE
SFDA
SFSA
SFWI
SFKC
SFDE
SFSL
SFPH
SFLA
SFSD
LVDE
LVSL
LVPH
LVLA
LVSD
Variable
X13
X14
X15
X17
X24
X25
X213
X214
X36
X37
X38
X39
X310
X46
X47
X48
X49
X410
X411
X412
X413
X414
X510
X511
X512
X513
X514
14520
13700
0
-
14520
6740
0
-
0
13040
-
0
20000
-
6300
4880
2130
1210
-
6120
4830
2750
-
8580
4460
6300
4880
2130
1210
0
0
0
0
0
6120
0
0
0
620
0
4830
2750
8580
3840
9640
6740
0
4880
0
6960
8580
4460
6300
0
2130
1210
0
0
0
0
0
6120
0
620
0
0
0
4830
2130
0
0
Shipping Cost Per Unit from Production Plants to Distribution Centers (in $)
Distribution Center
Fort
Worth
Santa Fe
Las
Vegas
El Paso
3.2
2.2
4.2
San Bernardino
3.9
1.2
Plant
Demand (meters)
Dallas
San Antonio
Wichita
Kansas City
Denver
Salt Lake City
Phoenix
Los Angeles
San Diego
6300
4880
2130
1210
6120
4830
2750
8580
4460
Customer Zone
Dallas
San Antonio
Wichita
Kansas City
Denver
Salt Lake City
Phoenix
Los Angeles
San Diego
Distribution Center
Fort
Santa
Worth
Fe
0.3
5.2
2.1
5.4
3.1
4.5
4.4
6
6
2.7
*
4.7
*
3.4
*
3.3
*
2.7
Las
Vegas
*
*
*
*
5.4
3.3
2.4
2.1
2.5
Version 1 Network
Dallas
6300
6
.30
x36
San
Antonio
`
2.10
x37
4880
7
Fort Worth
x13
30000
El Paso
x38
13.70
3.10
Wichita
2130
x39
x14
1
4.40
Kansas
City
12.70
14.70
1210
9
x15
x410
Sante Fe
2.70
Denver
6120
x24
x411
4.70
13.90
20000
10
Salt Lake
x412
San
Bernadino
x25
4830
3.40
11
11.20
Phoenix
2750
Las Vegas
12
x513
2.10
Los Angeles
8580
x514
13
2.50
San Diego
4460
14
DALLAS
SALT
LAKE
14,520
13,700
13,040
6300
4880
2130
1210
6120
2750
4830
8580
$ 426,710.00
$ 194,060.00
TOTAL COST
$ 620,770.00
4460
Linear Model
Objective Function
Model
MIN
13.7x13+12.7x14+14.7x15+13.9x24+11.2x25+.3x36+2.1x37+3.1x38+4.4x39+2.7x410+4.7x411+3.4x412+2.1x513+2.5x514
s.t.
x13+x14+x15
x24+x25
x13-x36-x37-x38-x39
x14+x24-x410-x411-x412
x15+x25-x513-x514
x36
x37
x38
x39
x410
x411
x412
x513
x514
Xij
Layout
x13
x14
x15
x24
x25
x36
x37
x38
x39
x410
x411
x412
x513
x514
<
<
=
=
=
=
=
=
=
=
=
=
=
=
>
30000
20000
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
0
14520
13700
0
0
13040
6300
4880
2130
1210
6120
4830
2750
8580
4460
13.7x13+12.7x14+14.7x15+13.9x24+11.2x25+.3x36+2.1x37+3.1x38+4.4x39+2.7x410+4.7x411+3.4x412+2.1x513+2.5x514
620770
x13+x14+x15
x24+x25
x13-x36-x37-x38-x39
x14+x24-x410-x411-x412
x15+x25-x513-x514
x36
x37
x38
x39
x410
x411
x412
x513
x514
28220
13040
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
10
Adjustable Cells
Cell
$C$28 x13 >
$C$29 x14 >
$C$30 x15 >
$C$31 x24 >
$C$32 x25 >
$C$33 x36 >
$C$34 x37 >
$C$35 x38 >
$C$36 x39 >
$C$37 x410 >
$C$38 x411 >
$C$39 x412 >
$C$40 x513 >
$C$41 x514 >
Name
Original Value
0
Final Value
620770
Name
Original Value
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Final Value
14520
13700
0
0
13040
6300
4880
2130
1210
6120
4830
2750
8580
4460
Cell Value
28220
13040
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
Formula
$C$46<=30000
$C$47<=20000
$C$48=0
$C$49=0
$C$50=0
$C$51=6300
$C$52=4880
$C$53=2130
$C$54=1210
$C$55=6120
$C$56=4830
$C$57=2750
$C$58=8580
$C$59=4460
Constraints
Cell
Name
$C$46 x13+x14+x15 >
$C$47 x24+x25 >
$C$48 x13-x36-x37-x38-x39 >
$C$49 x14+x24-x410-x411-x412 >
$C$50 x15+x25-x513-x514 >
$C$51 x36 >
$C$52 x37 >
$C$53 x38 >
$C$54 x39 >
$C$55 x410 >
$C$56 x411 >
$C$57 x412 >
$C$58 x513 >
$C$59 x514 >
Status
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Slack
1780
6960
0
0
0
0
0
0
0
0
0
0
0
0
11
Version 2 Network
Dallas
6300
6
.30
x36
2.10
x37
Fort Worth
x13
30000
El Paso
x39
x14
x310
x47
5.20
1
12.70
14.70
5.40
4.50
Wichita
2130
4.40
x46
6.00
Kansas
City
x48
x49
6.00
x410
Sante Fe
Denver
2.70
4.70
x24
6120
5.40
x411
13.90
20000
1210
9
x15
San
Bernadino
4880
7
3.10
x38
13.70
San
Antonio
10
4
3.40
x412
x25
Salt Lake
x414
4830
2.70
x413
11.20
11
3.30
x510
x511
3.30
Phoenix
2750
2.40
Las Vegas
x512
12
x513
2.10
Los
Angeles
5
x514
8580
13
2.50
San
Diego
4460
14
DALLAS
SALT
LAKE
14,520
6,740
20,000
6300
4880
1210
6120
620
4830
$ 423,230.00
$ 177,712.00
TOTAL COST
$ 600,942.00
12
2750
8580
384
Objective Function
Model
MIN
13.7x13+12.7x14+14.7x15+13.9x24+11.2x25+.3x36+2.1x37+3.1x38+4.4x39+6x310+5.2x46+5.4x47+4.5x48+6x49+2.7x410+4.7x411+3.4x412+3.3x413+2.7x414+5.4x510+3.3x511+2.4x512+2
s.t.
x13+x14+x15
x24+x25
x13-x36-x37-x38-x39-x310
x14+x24-x46-x47-x48-x49-x410-x411-x412-x413-x414
x15+x25-x510-x511-x512-x513-x514
x36+x46
x37+x47
x38+x48
x39+x49
x310+x410+x510
x411+x511
x412+x512
x413+x513
x414+x514
Layout
x13
x14
x15
x24
x25
x36
x37
x38
x39
x310
x46
x47
x48
x49
x410
x411
x412
x413
x414
x510
x511
x512
x513
x514
<
<
=
=
=
=
=
=
=
=
=
=
=
=
30000
20000
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
14520
6740
0
0
20000
6300
4880
2130
1210
0
0
0
0
0
6120
0
0
0
620
0
4830
2750
8580
3840
13.7x13+12.7x14+14.7x15+13.9x24+11.2x25+.3x36+2.1x37+3.1x38+4.4x39+6x310+5.2x46+5.4x47+4.5x48+6x49+2.7x410+4.7x411+3.4x412+3.3x413+2.7x414+5.4x510+3.3x511+2.4x512+2.1x513+2.5
600942
x13+x14+x15
x24+x25
x13-x36-x37-x38-x39-x310
x14+x24-x46-x47-x48-x49-x410-x411-x412-x413-x414
x15+x25-x510-x511-x512-x513-x514
x36+x46
x37+x47
x38+x48
x39+x49
x310+x410+x510
x411+x511
x412+x512
x413+x513
x414+x514
21260
20000
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
13
Adjustable Cells
Cell
$C$28 x13 >
$C$29 x14 >
$C$30 x15 >
$C$31 x24 >
$C$32 x25 >
$C$33 x36 >
$C$34 x37 >
$C$35 x38 >
$C$36 x39 >
$C$37 x310 >
$C$38 x46 >
$C$39 x47 >
$C$40 x48 >
$C$41 x49 >
$C$42 x410 >
$C$43 x411 >
$C$44 x412 >
$C$45 x413 >
$C$46 x414 >
$C$47 x510 >
$C$48 x511 >
$C$49 x512 >
$C$50 x513 >
$C$51 x514 >
Name
Original Value
0
Final Value
600942
Name
Original Value
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Final Value
14520
6740
0
0
20000
6300
4880
2130
1210
0
0
0
0
0
6120
0
0
0
620
0
4830
2750
8580
3840
Cell Value
21260
20000
0
0
0
6300
4880
2130
1210
6120
4830
4460
8580
2750
Formula
$C$56<=30000
$C$57<=20000
$C$58=0
$C$59=0
$C$60=0
$C$61=6300
$C$62=4880
$C$63=2130
$C$64=1210
$C$65=6120
$C$66=4830
$C$69=4460
$C$68=8580
$C$67=2750
Constraints
Cell
Name
$C$56 x13+x14+x15 >
$C$57 x24+x25 >
$C$58 x13-x36-x37-x38-x39-x310 >
$C$59 x14+x24-x46-x47-x48-x49-x410-x411-x412-x413-x414 >
$C$60 x15+x25-x510-x511-x512-x513-x514 >
$C$61 x36+x46 >
$C$62 x37+x47 >
$C$63 x38+x48 >
$C$64 x39+x49 >
$C$65 x310+x410+x510 >
$C$66 x411+x511 >
$C$69 x414+x514 >
$C$68 x413+x513 >
$C$67 x412+x512 >
Status
Not Binding
Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Slack
8740
0
0
0
0
0
0
0
0
0
0
0
0
0
14
Version 3 Network
Dallas
14.00
6300
x17
6
.30
x36
2.10
x37
Fort Worth
x13
30000
El Paso
x39
x14
x310
x47
5.20
1
12.70
14.70
5.40
Wichita
2130
4.40
x46
6.00
Kansas
City
x48
x49
4.50
6.00
x410
Sante Fe
Denver
2.70
4.70
x24
10
4
3.40
x412
x25
Salt Lake
x414
4830
2.70
x413
11.20
6120
5.40
x411
13.90
20000
1210
9
x15
San
Bernadino
4880
7
3.10
x38
13.70
San
Antonio
11
3.30
x510
3.30
x511
Phoenix
2750
2.40
Las Vegas
x512
12
x513
2.10
Los
Angeles
5
x514
2.50
8580
13
x213
10.30
x214
San
Diego
10.70
4460
14
DistributionNetworkVersion3
SanBernardino
ProductionPlants
ElPasoProductionPlants
UNITS UNITCOST
FORTWORTHDISTPLT
9,640
SANTEFEDISTPLT
6,740
LASVEGASDISTPLT
6,960
El PASO(Direct Line)
4,880
SANBERNARDINO(Direct Line) 13,040
SALT
KANSAS
SALT SAN
LOS SAN LOS SAN
DALLAS LAKE WICHITA CITY DENVER PHOENIX LAKE ANTONIO ANGELES DIEGO ANGELES DIEGO
6300 4880 2130
1210
6120
2750 4830
8580
8580 4460
TOTALUNITS(ELPASO)
21,260 $10.50 $223,230.00
TOTALUNITS(SANBERNADION) 20,000 $10.00 $200,000.00
TOTALUNITS
41,260
TOTALMANUFACTURING
TOTALTRANSPORTATION
TOTALCOST
4460
4880
$423,230.00
$130,304.00
$553,534.00
15
Objective Function
Model
MIN
13.7x13+12.7x14+14.7x15+14x17+13.9x24+11.2x25+10.3x213+10.70x214+.3x36+2.1x37+3.1x38+4.4x39+6x310+5.2x46+5.4x47+4.5x48+6x49+2.7x410+4.7x411+3.4x412+3.3x413+2.7x414+5.4
s.t.
x13+x14+x15+x17
x24+x25+x213+x214
x13-x36-x37-x38-x39-x310
x14+x24-x46-x47-x48-x49-x410-x411-x412-x413-x414
x15+x25-x510-x511-x512-x513-x514
x36+x46
x37+x47+x17
x38+x48
x39+x49
x310+x410+x510
x411+x511
x412+x512
x213+x413+x513
x214+x414+x514
Xij
Layout
x13
x14
x15
x17
x24
x25
x213
x214
x36
x37
x38
x39
x310
x46
x47
x48
x49
x410
x411
x412
x413
x414
x510
x511
x512
x513
x514
<
<
=
=
=
=
=
=
=
=
=
=
=
=
>
30000
20000
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
0
9640
6740
0
4880
0
6960
8580
4460
6300
0
2130
1210
0
0
0
0
0
6120
0
620
0
0
0
4830
2130
0
0
13.7x13+12.7x14+14.7x15+14x17+13.9x24+11.2x25+10.3x213+10.70x214+.3x36+2.1x37+3.1x38+4.4x39+6x310+5.2x46+5.4x47+4.5x48+6x49+2.7x410+4.7x411+3.4x412+3.3x413+2.7x414+5.4x510+3
553534
x13+x14+x15+x17
x24+x25+x213+x214
x13-x36-x37-x38-x39-x310
x14+x24-x46-x47-x48-x49-x410-x411-x412-x413-x414
x15+x25-x510-x511-x512-x513-x514
x36+x46
x17+x37+x47
x38+x48
x39+x49
x310+x410+x510
x411+x511
x412+x512
x213+x413+x513
x214+x414+x514
21260
20000
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
16
Adjustable Cells
Cell
$C$28 x13 >
$C$29 x14 >
$C$30 x15 >
$C$31 x17 >
$C$32 x24 >
$C$33 x25 >
$C$34 x213 >
$C$35 x214 >
$C$36 x36 >
$C$37 x37 >
$C$38 x38 >
$C$39 x39 >
$C$40 x310 >
$C$41 x46 >
$C$42 x47 >
$C$43 x48 >
$C$44 x49 >
$C$45 x410 >
$C$46 x411 >
$C$47 x412 >
$C$48 x413 >
$C$49 x414 >
$C$50 x510 >
$C$51 x511 >
$C$52 x512 >
$C$53 x513 >
$C$54 x514 >
Name
Original Value
0
Final Value
553534
Name
Original Value
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Final Value
9640
6740
0
4880
0
6960
8580
4460
6300
0
2130
1210
0
0
0
0
0
6120
0
620
0
0
0
4830
2130
0
0
Cell Value
21260
20000
0
0
0
6300
4880
2130
1210
6120
4830
2750
8580
4460
Formula
$C$59<=30000
$C$60<=20000
$C$61=0
$C$62=0
$C$63=0
$C$64=6300
$C$65=4880
$C$66=2130
$C$67=1210
$C$68=6120
$C$69=4830
$C$70=2750
$C$71=8580
$C$72=4460
Constraints
Cell
Name
$C$59 x13+x14+x15+x17 >
$C$60 x24+x25+x213+x214 >
$C$61 x13-x36-x37-x38-x39-x310 >
$C$62 x14+x24-x46-x47-x48-x49-x410-x411-x412-x413-x414 >
$C$63 x15+x25-x510-x511-x512-x513-x514 >
$C$64 x36+x46 >
$C$65 x17+x37+x47 >
$C$66 x38+x48 >
$C$67 x39+x49 >
$C$68 x310+x410+x510 >
$C$69 x411+x511 >
$C$70 x412+x512 >
$C$71 x213+x413+x513 >
$C$72 x214+x414+x514 >
Status
Not Binding
Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Slack
8740
0
0
0
0
0
0
0
0
0
0
0
0
0
17
18