Companys Distribution System - Math Problem Example

TotalForth Worth 22,050 25,864 13,419 9,196 - - - - - 70,529 Santa Fe - - - - 29,988 - - - - 29,988 Las Vegas - - - - - 21,735 9,900 28,314 16,502 76,451 Total 22,050 25,864 13,419 9,196 29,988 21,735 9,900 28,314 16,502 176,968 3.

If the company can directly deliver from the plants to the customer zones, thereby by passing distribution centers, the estimated savings will be $47,904.4. Given the existing forecasted demand in the near future, there is an excess capacity of 8,740 meters, and the anticipated moderate growth of the North and West customer zones of 5,000 meters over the next five years; I don't recommend an immediate expansion of the plants. What I recommend is expansion after three years, just about the time the excess capacity will be overtaken by the growth in demand.

Given the above, I recommend the following actions which will significantly improve distribution efficiency and decrease distribution costs:Assign distribution centers to customer zones according to which center can deliver with the least cost. For example, Santa Fe is currently serving Denver, Salt Lake City and Phoenix zones wherein the Las Vegas center can serve both Salt Lake City and Phoenix zones at a. The details of this cost are presented in the tables below and on the next page. 4. Given the existing forecasted demand in the near future, there is an excess capacity of 8,740 meters, and the anticipated moderate growth of the North and West customer zones of 5,000 meters over the next five years; I don't recommend an immediate expansion of the plants.

What I recommend is expansion after three years, just about the time the excess capacity will be overtaken by the growth in demand. Assign distribution centers to customer zones according to which center can deliver with the least cost. For example, Santa Fe is currently serving Denver, Salt Lake City and Phoenix zones wherein the Las Vegas center can serve both Salt Lake City and Phoenix zones at a much cheaper distribution cost. Allow direct distribution to customer zones from plants whenever costs savings justify such.

The simulated distribution from San Bernardino to Los Angeles and San Diego, and El Paso to San Antonio projected a savings of almost $50,000. In conclusion, cost savings are very short term oriented. The company must also think about the impact of its distribution strategy decisions on its customer relationship.