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Case Study: Badger Meter The Badger Meter Company manufactures and distributes meters used to measure electric consumption. The company started with a production plant in

Case Study: Badger Meter
The Badger Meter Company manufactures and distributes meters used to measure electric
consumption. The company started with a production plant in El Paso, which has a capacity of 30,000
meters and gradually built a customer base throughout Texas. A distribution center was established in
Ft. Worth, and later, as the business expanded, a second distribution center was established in Santa Fe.
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 company opened a third
distribution center in Las Vegas and just two years ago opened a second production plant in
Sacramento, with a capacity of 20,000 meters.
Manufacturing costs differ between the companys production plants. The cost of each meter produced
at the El Paso plant is $10.50. The Sacramento plant uses newer and more efficient equipment, and as
result, its manufacturing costs com to only $10.00 per unit.
Due to the firms rapid growth, little attention has been paid to the efficiency of the distribution system,
but company management has decided that it is time to address this issue. The cost of shipping a meter
from each of the two plants to each of the three distribution centers is show in the following table:
Plant
Ft
Worth Santa Fe
Las
Vegas
El Paso $3.20 $2.20 $4.20
Sacramento - $3.90 $1.20
The company serves nine customer zones from the three distribution centers. The forecast for the
number of meters needed in each customer zone for the next quarter is show in the following table.
Customer Demand
Zone (meters)
Dallas 6300
San Antonio 4880
Wichita 2130
Kansas City 1210
Denver 6120
Salt Lake City 4830
Phoenix 2750
Los Angeles 8580
San Diego 4460
The cost per unit of shipping from each distribution center to each customer zone is given in the
following table. Some distribution centers do not server certain customer zones because the costs
would be prohibitive.
Customer Zone
Dallas
San
Antonio Wichita
Kansas
City Denver
Salt Lake
City Phoenix
Los
Angeles
San
Diego
Fort Worth $0.30 $2.10 $3.10 $4.40 $6.00----
Santa Fe $5.20 $5.40 $4.50 $6.00 $2.70 $4.70 $3.40 $3.30 $2.70
Las Vegas ---- $5.40 $3.30 $2.40 $2.10 $2.50
In the current distribution system, demand at the Dallas, San Antonio, Wichita, and Kansas City
customer zones is satisfied by shipments form the Ft. Worth distribution center. In a similar manner, the
Denver, Salt Lake City, and Phoenix customer zones are served by the Santa Fe distribution center, and
the Los Angeles and San Diego customer are served by the Las Vegas distribution center. The El Paso
plant supply the Ft. Worth and Santa Fe distribution centers, while the Sacramento plant supplies the
Las Vegas distribution center.
You have been called in to make recommendations for improving the distribution system, and, how to
address the following issues.
a) If the company does not change its current distribution strategy, what will the distribution
system (production and shipping) cost be for the following quarter?
b) Suppose that the company is willing to consider dropping the distribution center limitations. In
other words, customer zones would not necessarily be assigned to unique distribution centers
and distribution centers would not necessarily be assigned to unique plants. With this added
flexibility, by how much could costs be reduced?
c) Using Solver Table to answer the question: How sensitive is the new plan outlined in b) to
changes in demand?
d) The company believes that remaining competitive will require moving one distribution center.
Which city should be considered for relocating the proposed distribution center? What city
would you relocate the distribution center to? What would be your target costs for the new
distribution center? Justify your answer by adjusting the model created in b) and how your
proposal reduces overall costs and satisfies demand.

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