CHAPTER 6

PROBLEM 1 A company imports goods at two ports: Philadelphia and New Orleans.
Shipments of one product are made to customers in Atlanta, Dallas, Columbus, and Boston. For
the next planning period, the supplies at each port, customer demands, and shipping costs per
case from each port to each customer are as follows:

CUSTOMERS
PORT
PORT ATLANTA DALLAS COLUMBUS BOSTON
SUPPLY
PHILADELPHIA 2 6 6 2 5000
NEW ORLEANS 1 2 5 7 3000
DEMAND 1400 3200 2000 1400

Develop a network representation of the distribution system (transportation problem).

A 1400
2
5000 P 6
6
D 3200
2
1 2
C 2000
5
NO
3000 7

B 1400
PROBLEM 2 Consider the following network representation of a transportation problem

Des
25
Moines

Jefferson
30 City

KansansC
15
ity

20 Omaha

St. Louis
10

Supplies Demand

The supplies, demands, and transportation costs per unit are shown on the network.

a. Develop a linear programming model for this problem; be sure to define the variables in
your model
b. Solve the linear program to determine the optimal solution.
Solution:

a) Let x11 = amount shipped from Jefferson City to Des Moines

x12 = amount shipped from Jefferson City to Kansas City
.
.
.
.
X23 = amount shipped from Omaha to St. Louis
Min 14x11 + 9x12 + 7x13 + 8x21 + 10x22 + 5x23
 x11 + x12 + x13 ≤ 30
 x21 + x22 + x23 ≤ 20
 x11 + x21 = 25
 x12 + x22 = 15
 x13 + x23 = 10
x11*x12*x13*x21*x22*x23≥ 0

b)

Optimal Solution Amount Cost

Jefferson City-Des Moines 5 70
Jefferson City-Kansas City 15 135
Jefferson City-St. Louis 10 70
Omaha-Des Moines 20 160
Total 435
PROBLEM 3 Tri-County Utilities, Inc., supplies natural gas to customers in a three-county area.
The company purchases natural gas from two companies: Southern Gas and Northwest Gas.
Demand forecasts for the coming winter season are Hamilton County, 400 units; Butler County,
200 units; and Clermont County, 300 units. Contracts to provide the following quantities have
been written: Southern Gas, 500 units; and Northwest Gas, 400 units. Distribution costs for the
counties vary, depending upon the location of the suppliers. The distribution costs per unit (in
thousands of dollars) are as follows:

TO
FROM HAMILTON BUTLER CLERMONT
SOUTHERN GAS 10 20 15
NORTHWEST GAS 12 15 18

a. Develop a network representation of this problem.

b. Develop a linear programming model that can be used to determine the plan that will
minimize total distribution costs.
c. Describe the distribution plan and show the total distribution cost.
d. Recent residential and industrial growth in Butler County has the potential for increasing
demand by as much as 100 units.
Which supplier should Tri-County contract with to supply the additional capacity?

ANSWER
HAMILTON 400
a)
10 1
SOUTHERN
500 20
1
15

BUTLER
200
2
12
15
NORTHWEST
500
2 18

CLERMONT
300
3

Supplies
Demand
 b) Develop a linear programming model that can be used to determine the plan that
willminimize total distribution costs

Min 10x11+ 20x12+ 15x13+ 12x21+ 15x22+ 18x23

x11+ x12+ x13≤ 500

x21+ x22+ x23≤ 400

x11+ x21= 400

x12+ x22= 200

x13+ x23= 300

xij ≥ 0 for all i, j

c) Describe the distribution plan and show the total distribution cost.

Southern - Hamilton amount 200 cost $2000

Southern - Clermont amount 300 cost $4500
Northwest - Hamilton amount 200 cost $2400
Northwest - Butler amount 200 cost $3000

Total Cost $11,900

d) Recent residential and industrial growth in Butler County has the potential forincreasing
demand by as much as 100 units. Which supplier should Tri-Countycontract with to
supply the additional capacity?

Southern - Hamilton 300 $3000

Southern - Clermont 300 $4500
Northwest - Hamilton 100 $1200
Northwest - Butler 300 $4500

Total Cost $13200

CASE PROBLEM 2 You are asked to make recommendations that will help Solutions Plus
prepare a bid. Your report should address, but not be limited to, the following issues:

1. If Solutions Plus wins the bid, which production facility (Cincinnati or Oakland)
should supply the cleaning fluid to the locations where the railroad locomotives are
cleaned? How much should be shipped from each facility to each location?
2. What is the breakeven point for Solutions Plus? That is, how low can the company
go on its bid without losing money?
3. If Solutions Plus wants to use its standard 15% mark-up, how much should it bid?
4. Freight costs are significantly affected by the price of oil. The contract on which
Solutions Plus is bidding is for two years. Discuss how fluctuation in freight costs
might affect the bid Solutions Plus submits.

ANSWER

1. The production facility that should supply the cleaning fluid to the locations where the railroad
locomotives are cleaned is Oakland. If the Solution Plus wins the bid, Oakland will be able to
ship out 73,522 gallons.
Origin Santa Ana El Paso Pendleton Houston Kansas
City Los Angeles Glendale Jacksonville Li+le Rock
Bridgeport Sacramento TOTAL
Cincinna. 0 6800 39636 100447 24570 0 0 68486
148586 111475 0 500,000
Oakland 22418 0 40654 0 0 64761 33689 0 0 0 112000
273,522
22418 6800 80290 100447 24570 64761 33689 68486
148586 111475 112000 773522
===========
DEMAND 22,418 6,800 80,290 100,447 24,570
64,761 33,689 68,486 148,586 111,475 112,000
 JACKSONVILLE

SACRAMENTO
LOS ANGELES
KANSAS CITY

LITTLE ROCK

BRIDGEPORT
PENDLETON
SANTA ANA

GLENDALE
HOUSTON
EL PASO
ORIGIN

TOTAL
CINCINNAT 0 680 39636 10044 24570 0 0 6848 148586 11147 0 500000
I 0 7 6 5

OAKLAND 22418 0 40654 0 0 6476 33689 0 0 0 112000 273522

1

DEMAND 22418 680 80290 10044 24570 6476 33689 6848 148586 11147 112000 773522
0 7 1 6 5

2) The breakeven point for solution plus is $1,318.984.93. The minimum bid they can submit
without losing their money is $1,318.984.93.

3) If Solution Plus wants to use its standard 15% mark-up, the total cost would be $1,516,832.67.
They would be awarded the contract.

4) They will be able to meet their supply demands while keeping their freight costs within
reason. They will further be able to keep total production less than 1 000 000 gallons and keep
total production costs down.

FREIGHT + PRODUCTION COST PER GALLON

FREIGHT CPG CIN/OAK TOTAL COST

CINCINNATI OAKLAND PRODUCTION PER GALLON
SANTA ANA 0.22 1.65 1.87
EL PASO 0.84 0.74 1.20-1.65 2.04-2.39
PENDLETON 0.83 0.49 1.20-1.35 2.03-2.14
HOUSTON 0.45 1.65 2.10
KANSAS CITY 0.36 1.65 2.01
LOS ANGELES 0.22 1.65 1.87
 GLENDALE 0.22 1.65 1.87
JACKSONVILL
0.34 1.20 1.54
E
LITTLE ROCK 0.34 1.20 1.54
BRIDGE PORT 0.34 1.20 1.54
SACRAMENTO 0.15 1.65 1.8

FREIGHT COST PER GALLON

SANTA ANA x11 + x21 = 22418

ELPASO x12 + x22 = 6800
PENDLETON x13 + x23 = 80290
HOUSTON x14 + x24 = 100447
KANSAS CITY x15 + x25 = 24570
LOS ANGELES x16 + x26 = 64761
GLENDALE x17 + x27 = 33689
JACKSONVILLE x18 + x 27 = 68486
LITTLE ROCK x19 + x29 = 148586
BRIDGE PORT x20 + x30 = 111475
SACRAMENTO x21 + x31 = 112000

Origin Santa Ana El Paso Pendleton Houston Kansas

City Los Angeles Glendale Jacksonville Li+le Rock
Bridgeport Sacramento TOTAL
Cincinna. 0 6800 39636 100447 24570 0 0 68486
148586 111475 0 500,000
Oakland 22418 0 40654 0 0 64761 33689 0 0 0 112000
273,522
22418 6800 80290 100447 24570 64761 33689 68486
148586 111475 112000 773522
===========
DEMAND 22,418 6,800 80,290 100,447 24,570
64,761 33,689 68,486 148,586 111,475 112,00
Origin Santa Ana El Paso Pendleton Houston Kansas
City Los Angeles Glendale Jacksonville Li+le Rock
Bridgeport Sacramento TOTAL
Cincinna. 0 6800 39636 100447 24570 0 0 68486
148586 111475 0 500,000
Oakland 22418 0 40654 0 0 64761 33689 0 0 0 112000
273,522
22418 6800 80290 100447 24570 64761 33689 68486
148586 111475 112000 773522
===========
DEMAND 22,418 6,800 80,290 100,447 24,570
64,761 33,689 68,486 148,586 111,475 112,000
Origin Santa Ana El Paso Pendleton Houston Kansas
City Los Angeles Glendale Jacksonville Li+le Rock
Bridgeport Sacramento TOTAL
Cincinna. 0 6800 39636 100447 24570 0 0 68486
148586 111475 0 500,000
Oakland 22418 0 40654 0 0 64761 33689 0 0 0 112000
273,522
22418 6800 80290 100447 24570 64761 33689 68486
148586 111475 112000 773522
===========
DEMAND 22,418 6,800 80,290 100,447 24,570
64,761 33,689 68,486 148,586 111,475 112,00