LP Formulations For Network Problems

1. Transportation Model
2. Transshipment Model
3. Shortest Path Problem

1. Transportation Model
-- Model Description:
Set of suppliers (factories) with limited capacities
Set of buyers (retailers) requesting for products
Route between each supplier and buyer
Find most efficient shipment plan

-- A Graphical Representation
Capacities Suppliers Customers Demands

-- Example: Powerco has three electric power plants that supply the power needs of four
cities. Each power plant can supply the amounts shown in Table 1 (in millions of kilowatt-
hours of electricity). The peak power demand (again in millions of kwh) at each city is
given in Table 2. Finally, the cost (in dollars) of sending a million kwh from each plant to
each city is given in Table 3.
Table 1: Capacity of each plant
Plant Plant 1 Plant 2 Plant 3
Supply 35 50 40

Table 2: Demand of each city

City City 1 City 2 City 3 City 4
Demand 45 20 30 30

Table 3: Shipping cost between each plant and city

City 1 City 2 City 3 City 4
Plant 1 8 6 10 9
Plant 2 9 12 13 7
Plant 3 14 9 16 5

a. Find the lowest-cost shipment plan for Powerco to meet the demand of the four cities.
b. If the connection between Plant 1 and City 2 is not available, resolve the problem.
c. If the supply of Plant 1 increases to 40, do we need to change our setup?
d. If the demand of City 4 increases to 35, resolve the problem.

-- Excel Data Organization:

Unit cost and total cost
Shipment plan
2. Transshipment Model (An Extension of Transportation Model)
-- Model Description:
Set of suppliers (factories) with limited capacities
Set of buyers (retailers) requesting for products
Set of warehouses in between suppliers and buyers
Route between each supplier, warehouse, and buyer
Find most efficient shipment plan

-- A Graphical Representation
Capacities Suppliers Warehouse Customers Demands

-- An Example:
Foodco produces food at three plants (nodes 1, 2, and 3). Food can be shipped directly to
customers (node 6 and 7) or it can be shipped to warehouses (node 4 and 5) and then to
the customers. The cost of producing food at each plant is the same, so Foodco is
concerned with minimizing the total shipping cost incurred in meeting customer demands.
The production capacity of each plant (in tons per year) and the demand of each customer
are listed in Table 1 and 2. The cost of shipping a ton of food (in thousands of dollars)
between each pair of points is given in Table 3, where a dash indicates that Foodco cannot
ship from a node to itself. At most 200 tons of food can be shipped between any two
nodes. Foodco wants to determine a minimum cost shipping schedule.
Table 1: Capacity of each plant
Plant Plant 1 (node 1) Plant 2 (node 2) Plant 3 (node 3)
Supply 200 300 100

Table 2: Customer demands

Customer Customer 1 (node 6) Customer 2 (node 7)
Demand 400 180

Table 3: Unit shipping cost

To Node
1 2 3 4 5 6 7
1 -- 5 3 2 1 2 4
From 2 9 -- 9 1 1 8 9
Node 3 0.4 8 -- 1 0.5 10 8
4 1 1 0.5 -- 1.2 5 1
5 2 1 0.6 0.8 -- 2 7
6 2 9 1 0.6 0.7 -- 3
7 7 3 6 1 0.3 7 --

-- Solution Procedure:
1. Calculate gap = sum(supplies) - sum(demands).
2. If gap > 0, add a dummy customer with demand = gap, flow-in capacity = gap, and
flow-out capacity = 0.
3. If gap < 0, add a dummy supplier with supply = gap, flow-in capacity = 0 and flow-out
capacity = gap.
4. The unit shipment costs from and to the dummy are set to 0 in both cases.
5. In the constraint, set net out-flow of each node = given out-flow (supply, -demand, or
0), where net out-flow = out-flow - in-flow.

-- Two Excel Tricks Used in the Example:

1. Define a name for a range: Mark the range, and enter the name in the name cell at the
up-left corner of the sheet.
2. Convert a row vector into a column vector: Mark the range of the column vector,
enter the formula transpose(range of the row vector) in the first cell of the marked
column vector. Press Control, Shift, and then Enter.
3. Shortest path problem and applications

-- Description of the problem

Given:
A network with nodes and arcs
Length of each arc
Find:
Shortest path from origin to destination

-- Idea of the solution procedure:

Treat the length of each arc as unit shipment cost
Try to send 1 unit of flow from the origin to the destination with minimum cost

-- A simple example
Find the shortest path from node 2 to node 6 in the following network.

5
8
9 6
6
2
6

4 3
6

7 3 4

-- Applications to equipment replacement:

Tradeoff between replacement cost and aging cost.

-- Example (best policy for trade-in car)

Jane Driver has just purchased (at time 1) a new car for $12,000. The cost of maintaining
a car during a year depends on the age of the car at the beginning of the year, as given in
the following table. To avoid high maintenance costs associated with an older car, Jane can
trade in a car and purchase a new car. The prices she receives on a trade-in are also given
in the table. To simplify the computations, we assume that at any time it costs Jane
$12,000 to purchase a new car. Janes goal is to minimize the net costs (purchasing costs
plus maintenance costs minus money received in trade-ins) incurred during the next five
years.
 Age of Car (years) Annual Maintenance Cost Trade-in Price
0 $2000 N/A
1 $4000 $7000
2 $5000 $6000
3 $9000 $2000
4 $12000 $1000
5 N/A $0

-- Network representation of car trade-in problem

Beginning of End of year 5

year 1

-- Calculating cost for each option

Cij: the total net cost incurred by owning and operating a car from the beginning of year i
to the beginning of year j if a new car is purchased at the beginning of year i and this car is
traded in at the beginning of year j.

Cij =

-- Example:
C12 =
C13 =
C14 =
...
C23 =
C24 =
...

-- Excel data organization:

Input data
Calculating cost of each option and total cost
Trading plan
Homework Problems for Network Related Problems:

Problem 1. General Ford produces cars at LA and Detroit and has a warehouse in Atlanta.
The company supplies cars to customers in Houston and Tampa. The costs of shipping a
car between various points are listed in the following table, where a dash means that a
shipment is not allowed. LA can produce up to 1100 cars, and Detroit can produce up to
2900 cars. Houston must receive 2400 cars, and Tampa must receive 1500 cars.
Determine how to minimize the cost of meeting demands at Houston and Tampa.

To
LA Detroit Atlanta Houston Tampa
LA - $140 $100 $90 $225
From Detroit $145 - $111 $110 $119
Atlanta $105 $115 - $113 $78
Houston $89 $109 $121 - -
Tampa $210 $117 $82 - -
Total Shipping Cost: $420,500

Problem 2. Solve the project management example in my lecture (house construction) by

formulating the problem as a shortest (longest) path problem. Find out the minimum
project duration and all critical activities. Use the maximum time (b) for each task.

26 days

Problem 3. Solve the car replacement problem by Excel.

Total Cost: $31,000

Problem 4. (Extra Credit, 0.5% bonus toward your final grade)

A company sells seven types of boxes, ranging in volume from 17 to 33 cubic feet. The
demand and size of each box are given in the following table. The variable cost (in dollars)
of producing each box is equal to the volume of the box. A fixed cost of $1000 is incurred
to produce any of a particular box. If the company desires, demand for a box can be
satisfied by a box of a larger size. Determine how to minimize the cost of meeting the
demand for boxes.

Box 1 2 3 4 5 6 7
Size 33 30 26 24 19 18 17
Demand 400 300 500 700 200 400 200

Hint: Compare this problem with the car-trade example and try to change the problem to a
shortest path problem. For example, one possible solution of the problem could be
producing 700 boxes of size 33, 1200 boxes of size 26, and 800 boxes of size 19. This
feasible solution can be represented a path in the network representation of this problem.

$72,100