Case Study: Darby Company Distribution System Design
[Case Study: Darby Company Distribution System Design]
Case Overview
Darby Company, a producer of meters for measuring electric power consumption has expanded its business operations beyond their El Paso Plant in Texas towards the west coast and built a more cost efficient plant in San Bernardino (SanB), California. The firm also opened a third Distribution Centre (DC) Las Vegas to better serve customers in the larger markets zones of California. The current network presents several constraints to the firm to distribute meters at the lowest possible per unit cost as plants have differing production cost levels. In this case a fixed charge for production and transportation cost per unit has been imposed for each link between Plants and between DC’s and customer areas.
To improve the total transport cost of the current distribution system design the company aims at using its DC in Santa Fe, New Mexico as a transshipment hub serving all nine customer zones. The other two DC’s split the nine customer areas among them more effectively to serve all nine customer zones more effectively than one DC possibly could to increase service quality levels while reducing total transportation costs.
Thirdly a direct shipment scenario from both plants to 3 selected customer zones is supposed to further reduce total transportation cost. An optimization of the current network system design has been realized by utilizing MS -Excel linear programming technique with add - in solver function.
Linear programming is heavily used in microeconomics and company management, such as planning, production, transportation, technology etc. Although modern management problem are continuously changing, most companies would like to maximize profits or minimize costs with their limited resources. Therefore, many issues can boil down to linear programming problems, Bernd Gartner, Jiri Matousek (2006).
Linear programming consists of three main components; a decision variable, an
Case Overview
Darby Company, a producer of meters for measuring electric power consumption has expanded its business operations beyond their El Paso Plant in Texas towards the west coast and built a more cost efficient plant in San Bernardino (SanB), California. The firm also opened a third Distribution Centre (DC) Las Vegas to better serve customers in the larger markets zones of California. The current network presents several constraints to the firm to distribute meters at the lowest possible per unit cost as plants have differing production cost levels. In this case a fixed charge for production and transportation cost per unit has been imposed for each link between Plants and between DC’s and customer areas.
To improve the total transport cost of the current distribution system design the company aims at using its DC in Santa Fe, New Mexico as a transshipment hub serving all nine customer zones. The other two DC’s split the nine customer areas among them more effectively to serve all nine customer zones more effectively than one DC possibly could to increase service quality levels while reducing total transportation costs.
Thirdly a direct shipment scenario from both plants to 3 selected customer zones is supposed to further reduce total transportation cost. An optimization of the current network system design has been realized by utilizing MS -Excel linear programming technique with add - in solver function.
Linear programming is heavily used in microeconomics and company management, such as planning, production, transportation, technology etc. Although modern management problem are continuously changing, most companies would like to maximize profits or minimize costs with their limited resources. Therefore, many issues can boil down to linear programming problems, Bernd Gartner, Jiri Matousek (2006).
Linear programming consists of three main components; a decision variable, an
References: Daganzo, C.F., “Logistics Systems Analysis”, (2005) Fourth Edition, Springer Bernd Gärtner, Jiří Matoušek (2006). Understanding and Using Linear Programming, Other references http://www.absoluteastronomy.com/topics/Linear_programming