The Darby Company manufactures and distributes meters used to measure electric power consumption. The company started with

Question:

The Darby Company manufactures and distributes meters used to measure electric power consumption. The company started with a small production plant in El Paso and gradually built a customer base throughout Texas. A distribution center was established in Fort Worth, Texas, and later, as business expanded, a second distribution center was established in Santa Fe, New Mexico.
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 Company opened a third distribution center in Las Vegas and just two years ago opened a second production plant in San Bernardino, California.
TABLE (a)
SHIPPING COST PER UNIT FROM PRODUCTION PLANTS TO
DISTRIBUTION CENTERS (IN $)

TABLE (b) QUARTERLY DEMAND FORECAST
Customer Zone Demand (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
TABLE (c)
SHIPPING COST FROM THE DISTRIBUTION CENTERS TO THE CUSTOMER ZONES

Managerial Report
You are asked to make recommendations for improving the distribution system. Your report should address, but not be limited to, the following issues:
1. If the company does not change its current distribution strategy, what will its distribution costs be for the following quarter?
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?
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?
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 thistime?