SAMPLE CASE ANALYSIS

Source:Quantitative Approaches to Management 5th ed. (pp. 452-469)

R.I. Levin, C.A. Kirkpatrick and D.S. Rubin

The sample case analysis below is recast of the illustrative problem presented in the above
reference. The questions herein are just guide for you to provide the minimum information needed
to be presented. Presentation of additional information is highly encouraged for a better
appreciation of the company and the problem it faces. Detailed quantitative solutions will have to
be attached for submission with this project.

What business is the company into? Bass Gravel Company (Bass) is small local supplier of gravel for
construction projects. It recently received a contract to supply gravel for three new road projects
located in the towns of Greenville, Fountain and Ayden. Bass operates three gravel plants located in
the towns of Kinston, Wilson and Bethel. The gravel required for the construction projects can be
supplied by these three plants.

What is the problem being faced by the company? Considering having three plants (sources) and
three new road projects (destination), Bass has to find the schedule of shipments needed to
minimize the total transportation cost considering source capacities, destination requirements and
the costs of transporting the gravel from source to destination.

Which quantitative method may be utilized to solve the company’s problem? Considering the nature
of the problem, a linear programming solution appears to be the method of choice. Specifically, we
may look at the transportation method, a special purpose algorithm for linear programming. A
review of Module 4, Lesson 2 may be used as reference or for review.

What are the relevant information or data needed to solve the problem? Having identified the
quantitative method of choice, we know that the transportation problem algorithm will require the
following information: capacities of gravel plants, requirements of new projects and the costs of
transporting gravel from plants to new projects.

Construction engineers have estimated the amounts of gravel which will be needed at three road
construction projects:

Project Location Weekly Requirement (Truck Loads)

A Greenville 72
B Fountain 102
C Ayden 41
Total 215

Bass’s chief dispatcher has calculated the amounts of gravel which can be supplied by each plant:

Plant Location Amount Available/Week (Truck Loads)

W Kinston 56
X Wilson 82
Y Bethel 77
Total 215
At this point we see that the total amount available is exactly equal to the total amount required.
When total supply is equal to total demand, a balanced condition is said to exist. Although the
balanced case is very unlikely in actual practice, let’s assume for simplicity in this sample.

The company has computed the delivery costs from each plant to each project site. An in the linear
programming problems, we assume that the variables in the problem must be linearly related. In
this case, delivery costs per truckload between each plant and project site vary directly with the
quantity distributed. These costs are shown below:

Cost per Truckload

From To Project A To Project B To Project C
Plant W $4 $8 $8
Plant X $16 $24 $16
Plant Y $8 $16 $24

What is your solution to the company’s problem?

The problem is illustrated graphically below:

Plant W (Kinston) 56 loads

$4 available

Project A
(Greenvill
e) 72
$16
loads
$8
Plant X (Wilson) 82 loads
$24
available
$8 Project B
(Fountain)
$16 102 loads $8
required
Plant Y (Bethel) 77 loads Project C
$16
available (Ayden)
41 loads
$24 required

Employing the transportation algorithm discussed in Module 4, Lesson 2, we find the initial
tableaux would appear as
Continually doing the steps we have learned to arrive at an optimal solution, we arrive at the final
solution (optimal) tableaux below:

Total Cost of Optimum Solution for Bass Gravel Company Problem

Shipping Assignments Quantity Shipped Unit Cost Total Cost

WB 56 $8 $448
XA 41 16 656
XC 41 16 656
YA 31 8 248
YB 46 16 736
Total Transportation Cost $2,744

What are the implications of your solution? Bass might question the use of a somewhat tedious
method for solving such a simple problem. Why not use a trial-and error method? Why not
begin by simply choosing the lowest-cost route and using it to the fullest extent? Then we
might select the next highest rate and use it to the fullest extent, and so on, until we have
satisfied all the requirements for the project. The assumption underlying this thought is
that making the best possible choice in each part of the scheduling program will
automatically result in the best overall program. An examination of the final solution to our
problem indicates that the assumption is not a valid one. Considering the final solution,
two of the least-cost routes, squares WA and WC are not included in the optimal solution.
Here we recognize the importance of a characteristic of operations research: a problem
must be studied in terms of the total system, not merely the separate parts. The optimal
source-destination combinations are often far from apparent, even in small problems like
that of the Bass Gravel Company.

Alternative Optimal Solutions

Let us examine further the optimal solution to the Bass Gravel Company problem with particular
attention to the improvement index of square XB computed below:

Unused Square Closed Path Computation of Improvement Index

WA +XB-YA+YB-WB +4-8+16-8 = +4
WC +WC-XC+XA-YA+YB-WB +8-16+16-8+16-8 = +8
XB +XB-YB+YA-XA +24-16+8-16 = 0
YC +YC-XC+XA-YA +24-16+16-8 = +16

The improvement index for square XB is zero. What does this signify? A zero improvement index
for an unused square means that if this route was brought into the solution, the shipping
assignments would change, yet the total transportation cost would be the same. Thus, if we were to
assign one truckload to unused square XB, the total cost figure would neither increase nor decrease.
We can conclude, then, that in addition to our present optimal shipping schedule, another equally
profitable schedule exists. To determine what this alternative optimal solution is, we follow the
same procedure used for bringing any route into the solution. In this case the maximum number of
truckloads that can be assigned to square XB is 41. We find the alternative solution and its total
cost below:

Shipping Assignments Quantity Shipped Unit Cost Total Cost

WB 56 $8 $448
XB 41 24 984
XC 41 16 656
YA 72 8 576
YB 5 16 80
Total Transportation Cost $2,744