CHAPTER 6

NETWORK OPTIMIZATION PROBLEMS

SOLUTION TO SOLVED PROBLEMS

6.S1 Distribution at Heart Beats

Heart Beats is a manufacturer of medical equipment. The company’s primary product is a
device used to monitor the heart during medical procedures. This device is produced in two
factories and shipped to two warehouses. The product is then shipped on demand to four third-
party wholesalers. All shipping is done by truck. The product distribution network is shown
below. The annual production capacity at Factories 1 and 2 is 400 and 250, respectively. The
annual demand at Wholesalers 1, 2, 3, and 4 is 200, 100, 150, and 200, respectively. The cost of
shipping one unit in each shipping lane is shown on the arcs. Due to limited truck capacity, at
most 250 units can be shipped from Factory 1 to Warehouse 1 each year. Formulate and solve a
network optimization model in a spreadsheet to determine how to distribute the product at the
lowest possible annual cost.

1
This is a minimum-cost flow problem. To set up a spreadsheet model, first list all of the arcs as
shown in B4:C11, along with their capacity (F4) and unit cost (G4:G11). Only the arc from F1
to WH1 is capacitated. Then list all of the nodes as shown in I4:I11 along with each node’s
supply or demand (L4:L11).

B C D E F G H I J K L
3 From To Capacity Unit Cost Nodes Supply/Demand
4 F1 WH1 250 $40 F1 400
5 F1 WH2 $35 F2 250
6 F2 WH2 $25 WH1 0
7 WH1 WS1 $60 WH2 0
8 WH1 WS2 $35 WS1 -200
9 WH2 WS2 $55 WS2 -100
10 WH2 WS3 $50 WS3 -150
11 WH2 WS4 $65 WS4 -200

The changing cells are the amount of flow to send through each arc. These are shown in Flow
(D4:D11) below, with an arbitrary value of 10 entered for each. The flow through the arc from
F1 to WH1 must be less than the capacity of 250, as indicated by the constraint D4 <= F4.

B C D E F G
3 From To Flow Capacity Unit Cost
4 F1 WH1 10 <= 250 $40
5 F1 WH2 10 $35
6 F2 WH2 10 $25
7 WH1 WS1 10 $60
8 WH1 WS2 10 $35
9 WH2 WS2 10 $55
10 WH2 WS3 10 $50
11 WH2 WS4 10 $65

2
For each node, calculate the net flow as a function of the changing cells. This can be done using
the SUMIF function. In each case, the first SUMIF function calculates the flow leaving the node
and the second one calculates the flow entering the node. For example, consider the F1 node
(I4). SUMIF(From, I4, Flow) sums each individual entry in Flow (the changing cells in D4:D11)
if that entry is in a row where the entry in From (B4:B11) is the same as in I4 (i.e., F1). Since I4
= F1 and the only rows that have F1 in From (B4:B11) are rows 4 and 5, the sum in the ship
column is only over these same rows, so this sum is D4+D5.

B C D E F G H I J K L
3 From To Flow Capacity Unit Cost Nodes Net Flow Supply/Demand
4 F1 WH1 10 <= 250 $40 F1 20 = 400
5 F1 WH2 10 $35 F2 10 = 250
6 F2 WH2 10 $25 WH1 10 = 0
7 WH1 WS1 10 $60 WH2 10 = 0
8 WH1 WS2 10 $35 WS1 -10 = -200
9 WH2 WS2 10 $55 WS2 -20 = -100
10 WH2 WS3 10 $50 WS3 -10 = -150
11 WH2 WS4 10 $65 WS4 -10 = -200

J
3 Net Flow
4 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
5 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
6 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
7 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
8 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
9 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
10 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
11 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
The goal is to minimize the total cost of shipping the product from the factories to the
wholesalers. The cost is the SUMPRODUCT of the Unit Costs with the Flow, or Total Cost =
SUMPRODUCT(UnitCost, Flow). This formula is entered into TotalCost (D13).

B C D E F G H I J K L
3 From To Flow Capacity Unit Cost Nodes Net Flow Supply/Demand
4 F1 WH1 10 <= 250 $40 F1 20 = 400
5 F1 WH2 10 $35 F2 10 = 250
6 F2 WH2 10 $25 WH1 10 = 0
7 WH1 WS1 10 $60 WH2 10 = 0
8 WH1 WS2 10 $35 WS1 -10 = -200
9 WH2 WS2 10 $55 WS2 -20 = -100
10 WH2 WS3 10 $50 WS3 -10 = -150
11 WH2 WS4 10 $65 WS4 -10 = -200
12
13 Total Cost $3,650

C D
13 Total Cost =SUMPRODUCT(UnitCost,Flow)

3
The Solver information and solved spreadsheet are shown below.

B C D E F G H I J K L
3 From To Flow Capacity Unit Cost Nodes Net Flow Supply/Demand
4 F1 WH1 250 <= 250 $40 F1 400 = 400
5 F1 WH2 150 $35 F2 250 = 250
6 F2 WH2 250 $25 WH1 0 = 0
7 WH1 WS1 200 $60 WH2 0 = 0
8 WH1 WS2 50 $35 WS1 -200 = -200
9 WH2 WS2 50 $55 WS2 -100 = -100
10 WH2 WS3 150 $50 WS3 -150 = -150
11 WH2 WS4 200 $65 WS4 -200 = -200
12
13 Total Cost $58,500

Range Name Cells

Capacity F4
Flow D4:D11
From B4:B11
NetFlow J4:J11
Nodes I4:I11
SupplyDemand L4:L11
To C4:C11
TotalCost D13
UnitCost G4:G11

J
3 Net Flow
4 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
5 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
6 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
7 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
8 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
9 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
10 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)
11 =SUMIF(From,Nodes,Flow)-SUMIF(To,Nodes,Flow)

C D
13 Total Cost =SUMPRODUCT(UnitCost,Flow)

Thus, Flow (D4:D11) indicates how to distribute the product so as to achieve the minimum Total
Cost (D13) of $58,500.