Reference no: EM133123958

Supply Chain Design the Darby Company

The Darby Company manufactures and distributes meters used to measure electric powerconsumption. The company started with a small production plant in El Paso and gradually built acustomer base throughout Texas. A distribution center was established in Fort Worth, Texas, andlater, as business expanded, a second distribution center was established in Santa Fe, NewMexico.The El Paso plant was expanded when the company began marketing its meters in Arizona,California, Nevada, and Utah. With the growth of the West Coast business, the Darby Companyopened a third distribution center in Las Vegas and just two years ago opened a secondproduction plant in San Bernardino, California.

Manufacturing costs differ between the company's production plants. The cost of eachmeterproduced at the El Paso plant is $10.50. The San Bernardino plant utilizes newer and moreefficient equipment; as a result, manufacturing cost is $0.50 per meter less than at the El Pasoplant.

Due to the company's rapid growth, not much attention had been paid to the efficiency of itssupply chain, but Darby's management decided that it is time to address this issue. The cost ofshipping a meter from each of the two plants to each of the three distribution centers is shown inthe table below.

Shipping Cost per Unit from Production Plants to Distribution Centers (In $)

The quarterly production capacity is 30,000 meters at the older El Paso plant and 20,000 metersat the San Bernardino plant. Note that no shipments are allowed from the San Bernardino plantto the Fort Worth distribution center.

The company serves nine customer zones from the three distribution centers. The forecast of thenumber of meters needed in each customer zone for the next quarter is shown in the table below.

Quarterly Demand Forecast

The cost per unit of shipping from each distribution center to each customer zone is given in

The table below; note that some distribution centers cannot serve certain customer zones. These areindicated by a dash, "-".

Shipping Cost from the Distribution Centers to the Customer Zones

In its current supply chain, demand at the Dallas, San Antonio, Wichita, and Kansas Citycustomer zones is satisfied by shipments from the Fort Worth distribution center. In a similarmanner, the Denver, Salt Lake City, and Phoenix customer zones are served by the Santa Fedistribution center, and the Los Angeles and San Diego customer zones are served by the Las Vegas distribution center. To determine how many units to ship from each plant, the quarterly customer demand forecasts are aggregated at the distribution centers, and a transportation modelis used to minimize the cost of shipping from the production plants to the distribution centers.

You are asked to make recommendations for improving Darby Company's supply chain. Your report should address, but not be limited to, the following issues:

Question 1: If the company does not change its current supply chain, what will its distribution costs be for the following quarter?

Question 2: Suppose that the company is willing to consider dropping the distribution centerlimitations; that is, customers could be served by any of the distribution centers for whichcosts are available. Can costs be reduced? If so, by how much?

Question 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 fromSan Bernardino to Los Angeles and $0.70 from San Bernardino to San Diego. The costfor direct shipments from El Paso to San Antonio is $3.50 per unit. Can distribution costsbe further reduced by considering these direct plant-to-customer shipments?

Attachment:- Supply Chain Design the Darby Company.rar