Question:

You are asked to make recommendations for improving the distribution system. Your re-port 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 this time?