Bay Area Bakery Company was a regional baker and distributor of bread and operated six bakeries, shown on the map in Figure 1. The manager of transportation and customer service for Bay Area Bakery Company was asked to prepare a report outlining the effect of the proposed San Jose, California, baking facility on the company’s physical distribution system. The problem centered around the fact that marketing territories served by the Santa Cruz and Stockton bakeries had increased rapidly in population, necessitating consideration for locating and equipping a new baking plant at San Jose. Varying costs of labour, ingredients, and operations affected the total cost of
baking a standard quantity of bread at each of the locations. This average cost for each of the bakeries is shown in Table 1, along with the daily capacity at each location. The full line of the company’s goods was baked at each of the six locations.