Case Background

The Darby Company started manufacturing and distributing meters (used to measure electric power consumption) in El Paso, a small production plant until they progressively signed relationships with other companies through out the entire Texas state. Three distribution sites were established to cater to the growing customers that the company had to deal with. The first distribution center was positioned in Fort Worth, Texas. The second in Santa Fe, New Mexico and a third established in Las Vegas with a second production plant in San Bernardino, California a couple of years ago.

Due to the companys rapid growth, not much attention had been paid to the different manufacturing costs between the El Paso and the San Bernardino plants. A meter produced in the El Paso plant costs $10.50 while the San Bernardino plant (with newer and much more efficient equipment) costs $0.50 less than the El Paso plant. It was about time that the management decided to address the problem.

A difference of 10,000 meters were noted between the two plants in their quarterly production capacity. 30,000 meters at the El Paso plant while 20,000 meters for the San Bernardino plant. It was also mentioned that there are no shipments made from the SB plant to the Fort Worth distribution center.

The company serves nine different customer zones from the three distribution centers. The Fort Worth distribution center supplies to Dallas, San Antonio, Wichita, and Kansas City. The Santa Fe distribution center supplies to Denver, Salt Lake City, and Phoenix. While the Los Angeles and San Diego customer zones are catered to by the Las Vegas distribution center.

Statement Of The Problem

The Darby company would want to figure out how many units of the meters are to be shipped from each of the plants. Due to the growth of all of their plants and distribution centers, the company would want to experiment with direct shipments to the customers without the company losing much money.