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Linear programming quiz
Linear programming quiz
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I. Problem Description
The Darby Company is re-evaluating its current production and distribution system in order to determine whether it is cost-effective or if a different approach should be considered. The company produces meters that measure the consumption of electrical power. Currently, they produce these meters are two locations – El Paso, Texas and San Bernardino, California. The San Bernardino plant is newer, and therefore the technology is more effective, meaning that their cost per unit is $10.00, while the El Paso plant produces at $10.50. However, the El Paso plant has a higher capacity at 30,000 to San Bernardino’s 20,000. Once manufactured, the meters are sent to one of three distribution centers – Ft. Worth, Texas, Santa Fe, New Mexico and Las Vegas. Due to the proximity of El Paso to Ft. Worth, they are only plant to ship to Ft. Worth. The costs associated with each shipment are described in detail in Appendix 2.2A. From these distribution centers, meters are shipped to one of nine customer zones. The Ft. Worth center services Dallas, San Antonio, Wichita and Kansas City, the Santa Fe center services Denver, Salt Lake City, and Phoenix, and the Las Vegas center ships to Los Angeles and San Diego.
The purpose of this report to compare the current distribution system to a distribution system without the aforementioned limitations on which distribution centers are allowed to service a specific area. In order to determine which system would be better, Darby Company has gathered additional information about the costs of shipping to other areas. For example, the Ft. Worth center could also service Denver, in addition to its current zones, Santa Fe could ship to any customer and Las Vegas could ship to Denver, Salt Lake City, and Phoenix, as well as LA and San Diego. In Appendix 2.2B, specific costs of shipping from distribution centers to customers are detailed.
Darby Company is also considering supplying a number of customers directly. From the San Bernardino plant, they would ship direct Los Angeles and San Diego, and from the El Paso plant they would supply direct to San Antonio (exact costs in Appendix 2.2C). In order to determine what will be the most cost effective way to distribution the meters, I will use network mapping and linear programming to minimize costs.
II. Model Description
In order to minimize the total shipping costs in the Darby distribution system, linear programming can be used.
8. If a coal-burning electrical generating plant burns 2 tons of coal to generate 6000 kWh of electricity, calculate the efficiency of the plant as the ratio of electricity output to fuel energy input (refer to Table 3.4).
Devondale is an Australian company that specialized in selling wide span of dairy categories, such as, milk, spreads, and cheese products. This company is formed in 1950 with dairy farmers as their major suppliers. In 2013 – 2014, Devondale is contributing around 3.4 billion liters of milk or estimated around 37% of the Australian market, and generating $2.9 billion dollars as the revenue in excess.
This optimal profit can be achieved with two different allocations of raw sugar shipments to processing plants, as below :
The presentation of the material is in dollars only. Overhead is applied to products as a percent of direct labor dollar cost. Factory profit for each year is found by subtracting direct material, direct labor, and direct overhead costs from total sales. The overhead percentage is calculated at the same time budgeting and is applied as a single overhead pool throughout each model year. The consulting company used 435% of direct labor costs in 1987 for their study; the budgeted was actually 437% (OH/DL=107,954/24,682). A similar percentage applies in the following year (109890/25294=434.5%). However in the next two years, after the outsourcing of oil pans and mufflers was enacted, the allocation of overhead in...
Increasing the power output is meant to increase the overall megawatts produced by the company. With increased megawatts, the company will be in a position to distribute power to more consumers and hence increase its resources. The Ohio project...
Sharplin, Arthur. (1989). Lincoln Electric Company Harvard Case Study. McNeese State University. Retrieved from http://my.uopeople.org/pluginfile.php/59756/mod_book/chapter/39460/Lincoln_Electric.pdf
The merchandise is imported through several ports including of Los Angeles, Houston; New York; and Savannah, Ga. The company utilizes strategically placed distribution warehouses in Texas for storage and shipment of items to their district stores. To manage the availability of supplies the organization utilizes Oracles Transportation Management system which offers a single platform of which to manage all transportation activities throughout their Supply Chains. The use of the software creates flexible process automation within logistics network worldwide. The software is used in conjunction with Oracles other products that integrate accounting, marketing and sales functions into one program. By including these functional areas in their management system the company is able to monitor their total operating costs and
Zanjirani F., Rezapour, S. & Kardar, L. (2011) Logistics operations and management concepts and models, 1st ed. London ; Elsevier.
Production and distribution issues will also be addressed. Many production issues will be corrected as the facility is updated. Distribution is less of an immediate problem and future growth will resolve many of these concerns.
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task.
All choices made by Seven-Eleven are structured to lower its transportation and receiving costs. For example, its area-dominance strategy of opening at least 50 to 60 stores in an area helps with marketing but also lowers the cost of replenishment. All manufacturing facilities are centralized to get the maximum benefit of capacity aggregation and also lower the inbound transportation cost from the manufacturer to the distribution center (DC). Seven-Eleven also requires all suppliers to deliver to the DC where products are sorted by temperature. This reduces the outbound transportation cost because of aggregation of deliveries across multiple suppliers. It also lowers the receiving cost. The information infrastructure is set up to allow store managers to place orders based on analysis of consumption data. The information infrastructure also facilitates the sorting of an order at the DC and receiving of the order at the store. The key point to emphasize here is that most decisions by Seven-Eleven are structured to aggregate transportation and receiving to make both cheaper.
Job costing involves usage of situations where every job is done cost differently, consumers specifications play a bigger picture in this case. Direct and indirect costs are encountered. It is believed that job costing has lots of costs accrued from the production to the consumers (REEVE, J. M., WARREN, C. S., & DUCHAC, J. E. 2012). This involves labor, running of machines, and all the individuals who are involved in the production of a product from raw to the final product, indirect costs are applied in this order. Job costing order is best showcased in a manufacturing company, let’s take coca cola company, company specialized in beverages manufacturing and distribution, usually customers have no say in the final products of this company, but as the trends for consumption of a certain flavor, according to their statistics they will conform with the demands. The special requirements, like name branding on the bottles of the beverages, customization of the containers have had a significant impact in the consumption of coca cola products (Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. 2010).
For example: with the increase of the number of products produced, the cost of operating a machine also increase. Second we have batch level costs which is associated with batches; producing a multiple units of the same product that are processed together is called a batch. The third type is product level costs which arise from any activity in order to support the production of products. The fourth and the last type is facility level costs, this costs cannot be determined with a particular unit, product or batch; this costs are fixed with respect to batches, products and number of units produced. A single measure of volume is used for allocating costs to each service or product in traditional method for example: direct material cost, machine hours, direct labor cost and direct labor hours. A cost driver is an activity that generate costs, it can be generated by two types of costs the first is a particular machine 's running costs where the costs is driven by production volume as machine hours; the second is quality inspection costs where the cost is driven by the number of times the relevant activity occurs as the number of
4. What other transportation costs and issues must Alex consider to make an effective supplier selection? (Coyle, J., & Novack, R., 2011)
UK’s plant #1 is facing significant losses, due to high fixed and overhead costs. As future prospects are in red, the plant should be closed, equipment moved to plant #2. Planned annual savings are EUR 500k – EUR 750k.