International Textile Company Case Study

Problem Statement
International Textile Company is a Hong Kong based firm distributing textiles worldwide. The company has
mills in Bahamas, Honk Kong, Korea, Nigeria and Venezuela. Each mill weaves fabric from cotton, polyester
and silk. The mills service company distribution centers situated in Los Angeles, Chicago, London, Mexico
City, Manila, Rome, Tokyo and New York. Since, transportation cost has historically been less than 10% of
total expense; management has not invested much in judicious planning of shipment routing. However, an
individual who has recently joined the company believes that he can save millions for the company by
better planning better routing fabrics from mills to the distribution centers. To do this, the individual has
data on the shipping cost from each mill to each distribution center. Another point to note is that demand
in the distribution centers are seasonal and hence need to be taken into account while planning the
shipment routing.
Available Data

 Shipping Cost from each mill to each distribution center

 Cotton, Polyester and Silk production capacity of each mill
 Cotton, Polyester and Silk demand of each distribution center for the month of March
Question 1.1
Find the optimal March shipment schedule and the shipment cost for Cotton, Polyester and Silk
Decision Variable
Xij= Units of fabrics shipped from Mill i to Distribution Centre j
Where i= {1=Bahamas, 2= Hong Kong, 3=Korea, 4=Nigeria, 5=Venezuela}
j= {1=Los Angeles, 2=Chicago, 3=London, 4=Mexico City, 5=Manila, 6=Rome, 7=Tokyo, 8=New York}
Objective function
As the objective is to find the optimal shipment schedule and cost, this is a minimization problem.

ZMIN=
(2X11+2X12+3X13+3X14+7X15+4X16+7X17+X18) + (6X21+7X22+8X23+10X24+2X25+9X26+4X27+8X28) +
(5X31+6X32+8X33+11X34+4X35+9X36+X37+7X38) + (14X41+12X42+6X43+9X44+11X45+7X46+5X47+10X48) +
(4X51+3X52+5X53+X54+9X55+6X56+11X57+4X58)
Subject to –
a. Cotton:

 Demand:
Los Angeles : X11+X21+X31+X41+X51 >= 500
Chicago : X12+X22+X32+X42+X52 >= 800
London : X13+X23+X33+X43+X53 >= 900
Mexico City : X14+X24+X34+X44+X54 >=900
Manila : X15+X25+X35+X45+X55 >= 800
Rome : X16+X26+X36+X46+X56 >= 100
Tokyo : X17+X27+X37+X47+X57 >= 200
New York : X18+X28+X38+X48+X58 >= 700

 Capacity:
Bahamas : X11+X12+X13+X14+X15+X16+X17+X18 <= 1000
Hong Kong : X21+X22+X23+X24+X25+X26+X27+X28 <= 2000
Korea : X31+X32+X33+X34+X35+X36+X37+X38 <= 1000
Nigeria : X41+X42+X43+X44+X45+X46+X47+X48 <= 2000
Venezuela : X51+X52+X53+X54+X55+X56+X57+X58 <= 1000
SOLVER:

As per the Solver report, the optimal

shipment schedule is as shown in the
screenshot with a minimal cost of
$15,400.
 b. Polyester:

 Demand:
Los Angeles : X11+X21+X31+X41+X51 >= 1000
Chicago : X12+X22+X32+X42+X52 >= 2000
London : X13+X23+X33+X43+X53 >= 3000
Mexico City : X14+X24+X34+X44+X54 >=1500
Manila : X15+X25+X35+X45+X55 >= 400
Rome : X16+X26+X36+X46+X56 >= 700
Tokyo : X17+X27+X37+X47+X57 >= 900
New York : X18+X28+X38+X48+X58 >= 2500

 Capacity:
Bahamas : X11+X12+X13+X14+X15+X16+X17+X18 <= 3000
Hong Kong : X21+X22+X23+X24+X25+X26+X27+X28 <= 2500
Korea : X31+X32+X33+X34+X35+X36+X37+X38 <= 3500
Nigeria : X41+X42+X43+X44+X45+X46+X47+X48 <= 0
Venezuela : X51+X52+X53+X54+X55+X56+X57+X58 <= 2000
SOLVER:

According to the solver report, we

are not able to arrive at the optimal
solution for the problem, as there is
a short of 1000 in New York.
However, if a Dummy Mill is considered, which makes up for the shortfall then we arrive at the Optimal
Solution. Below is the screenshot of the Solver including the Dummy Mill which has a capacity of 1000.

According to the solver report, we

arrive at the optimal solution for the
problem if the Dummy Mill is
considered with a minimal cost of
$40,300
 c. Silk:

 Demand:
Los Angeles : X11+X21+X31+X41+X51 >= 100
Chicago : X12+X22+X32+X42+X52 >= 100
London : X13+X23+X33+X43+X53 >= 200
Mexico City : X14+X24+X34+X44+X54 >= 50
Manila : X15+X25+X35+X45+X55 >= 400
Rome : X16+X26+X36+X46+X56 >= 200
Tokyo : X17+X27+X37+X47+X57 >= 700
New York : X18+X28+X38+X48+X58 >= 200

 Capacity:
Bahamas : X11+X12+X13+X14+X15+X16+X17+X18 <= 0
Hong Kong : X21+X22+X23+X24+X25+X26+X27+X28 <= 1000
Korea : X31+X32+X33+X34+X35+X36+X37+X38 <= 500
Nigeria : X41+X42+X43+X44+X45+X46+X47+X48 <= 0
Venezuela : X51+X52+X53+X54+X55+X56+X57+X58 <= 0
SOLVER:

According to the solver report, we

are not able to arrive at the optimal
solution for the problem, as there is
a short of 200 in New York & 250 in
Tokyo.
However, if a Dummy Mill is considered, which makes up for the shortfall then we arrive at the Optimal
Solution. Below is the screenshot of the Solver including the Dummy Mill which has a capacity of 450.

According to the solver report, we

arrive at the optimal solution for the
problem if the Dummy Mill is
considered with a minimal cost of
$5,000
Question 1.2. Should the Nigeria Mill process silk in March for an additional one-time cost of $2000
Capacity constraint for Nigeria will become,
X41+X42+X43+X44+X45+X46+X47+X48 <= 1000

As per the Solver report, the optimal

shipment schedule is as shown in the
screenshot with a minimal cost of
$8,050 that is increased to $ 10,050
because of the additional one-time
cost of $ 2,000.

Conclusion
In the above solution for Silk, increasing the capacity of the Nigeria mill results in a total cost of $10,050.
However, in the alternate solution for question 1 for Silk where a dummy mill is used shorting the London,
Mexico and Rome centers results in a lower cost of $ 5,000. As such, it is preferable to short the London,
Mexico and Rome centers by 200, 50 and 200 bolts of silk respectively, rather than investing in increasing
the capacity of the Nigeria mill.

Thus, we can conclude that the Nigeria mill should not process Silk in March.