HANOI UNIVERSITY OF SCIENCE AND TECHNOLOGY

SCHOOL OF ECONOMICS AND MANAGEMENT

REPORT OPTIMIZATION

GROUP 6
1. Nguyễn Linh Chi 20198007 EM-NU64A

2. Nguyễn Thị Thảo Nguyên 20187039 EM-NU17B

3. Nguyễn Thị Thanh Huyền 20187022 EM-NU17A

4. La Thị Hồng Hạnh 20198013 EM-NU64B

5. Đào Minh Phương 20198039 EM-NU64A

6. Nguyễn Thị Thuỳ Linh 20198025 EM-NU64A

Lecturer Dr. Nguyen Thi Xuan Hoa

Lecturer’s Signature
Department Industrial Management
School Economics and Management

HANOI, June 2021

1
 Acknowledgement

Before embarking on/ culminating in exploring the topic of optimization essay, we

would like to express my sincere thanks to the lecturer of the optimization subject,
Mrs. Nguyen Thi Xuan Hoa. During the research process, she spent her precious time
answering all questions as well as caring and assisting us in a very wholehearted way
so that can acquire valuable knowledge, take approaches to the topic quickly and
accurately. Therefore, thanks to the knowledge that she imparted to us these sources,
she was able to search and use the right references selectively to support the
completion of the topic on her schedule.

In the process of finding/ researching this topic, we have tried to complete it

well, but perhaps due to limited knowledge as well as other objective factors, our
arising problems can be inevitable. We are expecting the feedback, and further
instructions of teachers and readers so that we can draw on experience and solve them
in the next topics.

Best regards!

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 Table of content
Acknowledgement ...........................................................................................................2
Table of content ...............................................................................................................3
List of table......................................................................................................................4
List of figure ....................................................................................................................5
Problem 1: Original Sunhouse ........................................................................................6
1. Background about case study ...............................................................................6
2. Optimization model ..............................................................................................7
3. Solve optimization model ....................................................................................8
4. Disadvantges of original problem ......................................................................12
Problem 2: Expanding the original problem .................................................................13
1. Background about case study .............................................................................13
2. Optimization model ............................................................................................14
3. Solve optimization model ..................................................................................15
4. Optimize the delivery process ............................................................................17

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 List of table
Table 1. 1 Distance between factory and dealer..............................................................6
Table 1. 2 Delivery cost of Sunhouse .............................................................................7
Table 1. 3 Demand and price of dealers ..........................................................................7

Table 2. 1 The demand of dealers .................................................................................13

Table 2. 2 Delivery cost of Sunhouse ...........................................................................14
Table 2. 3 The number of product .................................................................................16
Table 2. 4 The maximum profit of Sunhouse...............................................................16

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 List of figure

Figure 1. 1 The result of case study when using excel solver .........................................9
Figure 1. 2 Data of case study in LINGO .......................................................................9
Figure 1. 3 The result by LINGO ..................................................................................10
Figure 1. 4 Table Slack or Surplus in LINGO ..............................................................10
Figure 1. 5 The part of data entry in Python .................................................................11
Figure 1. 6 The result in Python ....................................................................................12

Figure 2. 1 The result of Xij and It ................................................................................15

Figure 2. 2: The optimal path table ..............................................................................17

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Problem 1: Original Sunhouse
1. Background about case study
Sunhouse group - Vietnam's leading household brand in which Sunhouse's air fryer is
one of the most profitable products. They have 6 factories (warehouses in factories)
located in 6 different cities. The company sells a large number of air fryers to 6
authorized dealers in 6 different cities. Based on delivery cost between factories and
dealers' location, demand of dealers. We know that :
The fixed monthly cost for operating any factory: 200.000.000vnđ
Production cost: 500.000vnđ/an air fryer
The capacity of 6 factory: 1000 products
The company needs to determine which factory to choose to distribute air fryers to dealers
and minimize costs to maximize profits.
DISTANCE
Dealer 1 Dealer 2 Dealer 3 Dealer 4 Dealer 5 Dealer 6
(Vĩnh (Bắc (Hải (Thái (Quảng
(Hà Nội)
Phúc) Ninh) Phòng) Nguyên) Ninh)
Factory1
25 28 30 140 45 190
(Mê Linh,HN)
Factory2
115 152 90 50 126 68
(Uông Bí,QN)
Factory 3
115 152 90 50 126 68
(LụcNam,BG)
Factory 4
64 84 40 80 72 120
(Chí Linh,HD)
Factory 5
80 102 60 100 80 132
(Quế Võ, BN)
Factory 6
48 92 51 96 88 172
(Kim Động, HY)
Table 1. 1 Distance between factory and dealer

DELIVERY COST (Cij)

Dealer 1 Dealer 2 Dealer 3 Dealer 4 Dealer 5 Dealer 6
(Vĩnh (Bắc (Hải (Thái (Quảng
(Hà Nội)
Phúc) Ninh) Phòng) Nguyên) Ninh)
Factory1
1.050.000 1.300.000 1.330.000 2.275.000 1.650.000 3.265.000
(Mê Linh,HN)
Factory2
1.965.000 2.520.000 1.690.000 1.210.000 2.130.000 1.360.000
(Uông Bí,QN)
Factory 3
1.230.000 1.450.000 980.000 1.390.000 1.220.000 1.740.000
(LụcNam,BG)
Factory 4
1.230.000 1.500.000 1.020.000 1.440.000 1.390.000 2.100.000
(Chí Linh,HD)
Factory 5
990.000 1.220.000 660.000 1.620.000 1.140.000 2.290.000
(Quế Võ, BN)

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 Factory 6
940.000 1.575.000 1.050.000 1.610.000 1.520.000 2.780.000
(Kim Động, HY)
Table 1. 2 Delivery cost of Sunhouse

Dealer Demand (units) Price (vnd)

1 Hà Nội 550 900.000

2 Vĩnh Phúc 530 900.000

3 Bắc Ninh 370 1.200.000

4 Hải Phòng 420 1.100.000

5 Thái Nguyên 330 1.200.000

6 Quảng Ninh 450 1.100.000

Table 1. 3 Demand and price of dealers

2. Optimization model
a. Variables
1 if factory i manufactures and distributes to dealer j
Xij = !
0 otherwise

1 if factory i is decided to operate

Yi= !
0 otherwise

b. Objective function
Revenue = Total production * Price
Total cost = Total production* production cost+Delivery cost* Xij+Operating
cost* Yi
Profit= Revenue – Total cost
® Profit= 1.444.000.000 – Cij*Xij – 200.000.000*Yi
c. Constraints
Constraint 1: Each dealer only receives air fryers from a factor in a month

x11+x21+x31+x41+x51+x61=1
x12+x22+x32+x42+x52+x62=1
x13+x23+x33+x43+x53+x63=1
x14+x24+x34+x44+x54+x64=1
x15+x25+x35+x45+x55+x65=1
x16+x26+x36+x46+x56+x66=1

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Constraint 2: A factory can deliver products to many dealers

x11+x12+x13+x14+x15+x16 £ 6y1
x21+x22+x23+x24+x25+x26 £ 6y2
x31+x32+x33+x34+x35+x36 £ 6y3
x41+x42+x43+x44+x45+x46 £ 6y4
x51+x52+x53+x54+x55+x56 £ 6y5
x61+x62+x63+x64+x65+x66 £ 6y6
Constraint 3: The total demand must be less than or equal to capacity

550x11+530x12+370x13+420x14+330x15+440x16 £ 1000y1
550x21+530x22+370x23+420x24+330x25+440x26 £ 1000y2
550x31+530x32+370x33+420x34+330x35+440x36 £ 1000y3
550x41+530x42+370x43+420x44+330x45+440x46 £ 1000y4
550x51+530x52+370x53+420x54+330x55+440x56 £ 1000y5
550x61+530x62+370x63+420x64+330x65+440x66 £ 1000y6
Constraint 4: Xij and Yi =1 or 0
3. Solve optimization model
a. Excel solver

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 Figure 1. 1 The result of case study when using excel solver

After entering the data and running the functions with excel solver, we see that profit
of Sunhouse gets : 837.110.000vnđ
§ Factory 2 ( Uống Bí, Quảng Ninh), Factory 3( Lục Nam, Bắc Giang) and
Factory 5( Quế Võ, Bắc Ninh) are decided to operate.
§ Factory 2 will delivery products to Dealer 4( Hải Phòng) and Dealer 6( Quảng
Ninh)
§ Factory 3 will delivery air fryers to Dealer 2( Vĩnh Phúc) and Dealer 5( Thái
Nguyên)
§ Factory 5 will ship products to Dealer 1(Hà Nội) and Dealer 3 ( Bắc Ninh)
b. LINGO solution

Figure 1. 2 Data of case study in LINGO

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 Figure 1. 3 The result by LINGO

Figure 1. 4 Table Slack or Surplus in LINGO

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When using LINGO to solve this case study, we see clearly that:
• Objective function is also equal to: 837.110.000vnđ and all other results are
same with excel solution.
• Otherwise, This Case Study belongs to model class PILP ( Pure Integer
Linear Programming – all expressions are linear and all variables are
restricted to interger values ) with 42 variables and 49 constraints.
• In Slack or Surplus , this table also have variables having equal or greater
than 0. It means that constraints are exactly satisfied as equality à This is
an feasible model

c. PYTHON

Figure 1. 5 The part of data entry in Python

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 Figure 1. 6 The result in Python
When using Python to solve this case study, we see clearly that:
• Objective function is also equal to: 837.110.000vnđ and all other results are
same with excel solution and lingo
4. Disadvantges of original problem
The way to build the problem has not completely solved the problems :
• Delivery products between factories and dealers
• Long delivery time and few deliveries in 1 month
• Lack of other fixed costs
• Knowing that sunhouse's factories produce not only air fryers butalso other
kind of product, but leaving factories that do not produce fryers for 1 month
is a waste.

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Problem 2: Expanding the original problem
1. Background about case study
Sunhouse group - Vietnam's leading household brand in which Sunhouse's air fryer is
one of the most profitable products. They have 3 factories (warehouses in factories)
located in 3 different cities and delivery products to dealers weekly ( make to stock) .
The company sells a large number of air fryers to 6 authorized dealers in 6 different
cities. Based on delivery cost between factories and dealers' location, demand of
dealers and some fixed costs:
• The holding cost for any factory: 3.500 VND (unit/week)
• Labor cost: 110.000.000 vnd/factory/week
• Operating cost: 40.000.000 vnd/factory/week
• Production cost: 600.000 vnd/unit
• Price of air fryer: 1.000.000 vnd/unit
• Capacity: 2.500

The company needs to determine which factory to choose to distribute air fryers to
dealers and minimize costs to maximize profits in this month.

Demand
Dealer 1 Dealer 2 Dealer 3 Dealer 4 Dealer 5 Dealer 6
(HN) (VP) (BN) (HP) (TN) (QN)
Week 1 525 510 550 655 500 665
Week 2 550 575 595 570 625 630
Week 3 580 535 515 520 580 575
Week 4 635 590 545 605 545 530
Table 2. 1 The demand of dealers

Delivery cost
525 510 550 655 500 665
Dealer 1 Dealer 2 Dealer 3 Dealer 4 Dealer 5 Dealer 6
(HN) (VP) (BN) (HP) (TN) (QN)
Factory 1
1.040.000 1.100.000 1.310.000 1.550.000 1.320.000 1.835.000
(Mê Linh)
Factory 2
Week 1 1.110.000 1.020.000 1.165.000 1.380.000 1.390.000 1.670.000
(Chí Linh)
Factory 3
830.000 810.000 655.000 1.040.000 1.055.000 1.140.000
(Quế Võ)
550 575 595 570 625 630
Factory 1
1.090.000 1.260.000 1.405.000 1.355.000 1.480.000 1.740.000
(Mê Linh)
Factory 2
Week 2 1.165.000 1.215.000 1.260.000 1.205.000 1.520.000 1.585.000
(Chí Linh)
Factory 3
870.000 910.000 705.000 900.000 1.080.000 1.080.000
(Quế Võ)

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 580 535 515 520 580 575
Factory 1
1.140.000 1.170.000 1.225.000 1.240.000 1.375.000 1.600.000
(Mê Linh)
Factory 2
Week 3 1.225.000 1.130.000 1.095.000 1.105.000 1.230.000 1.450.000
(Chí Linh)
Factory 3
920.000 845.000 615.000 825.000 995.000 990.000
(Quế Võ)
635 590 545 605 545 530
Factory 1
1.250.000 1.300.000 1.295.000 1.435.000 1.295.000 1.470.000
(Mê Linh)
Factory 2
Week 4 1.340.000 1.250.000 1.155.000 1.280.000 1.155.000 1.340.000
(Chí Linh)
Factory 3
1.005.000 940.000 645.000 955.000 940.000 915.000
(Quế Võ)
Table 2. 2 Delivery cost of Sunhouse

2. Optimization model
a. Variables
• Xijt =
1 if factory i manufactures and distributes to dealer j on week t
!
0 otherwise

1 if factory i operates on week t

• Yit = !
0 otherwise

• Ait is the number of air fryer produced at factory i on week t

• Iit is the amount of inventory at factory i on week t

b. Objective function
• Revenue = ∑%&#$ ∑!"#$ 𝐷𝑗𝑡 ∗ 1,000,000 =
13705000000

• Total production cost = ∑'(#$ ∑!"#$ 𝐴𝑖𝑡 ∗ 600,000

• Total delivery cost = ∑'(#$ ∑%&#$ ∑!"#$ 𝐶𝑖𝑗𝑡 ∗ 𝑋𝑖𝑗𝑡

• Total operating cost = ∑'(#$ ∑!"#$ 𝑌𝑖𝑡 ∗ 110,000,000

• Total labor cost = ∑'(#$ ∑!"#$ 𝑌𝑖𝑡 ∗ 40,000,000

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 • Total inventory cost = ∑'(#$ ∑!"#$ 𝐼𝑖𝑡 ∗ 3,500

Profit= Revenue – Total cost

® Profit = 𝟏𝟑. 𝟕𝟎𝟓. 𝟎𝟎𝟎. 𝟎𝟎𝟎 – ( ∑𝟑𝒊#𝟏 ∑𝟒𝒕#𝟏 𝑨𝒊𝒕 ∗ 𝟔𝟎𝟎. 𝟎𝟎𝟎 + ∑𝟑𝒊#𝟏 ∑𝟔𝒋#𝟏 ∑𝟒𝒕#𝟏 𝑪𝒊𝒋𝒕 ∗
𝑿𝒊𝒋𝒕 + ∑𝟑𝒊#𝟏 ∑𝟒𝒕#𝟏 𝒀𝒊𝒕 ∗ 𝟏𝟓𝟎. 𝟎𝟎𝟎. 𝟎𝟎𝟎 + ∑𝟑𝒊#𝟏 ∑𝟒𝒕#𝟏 𝑰𝒊𝒕 ∗ 𝟑. 𝟓𝟎𝟎 )

c. Constraints
Constraint 1: Each dealer only receives air fryers from a factor in a month
∑𝟑𝒊#𝟏 𝑿𝒊𝒋𝒕 , j=1,2,3,4,5,6; t=1,2,3,4

Constraint 2: A factory can deliver products to many dealers

∑𝟔𝒋#𝟏 𝑿𝒊𝒋𝒕 ≤ 𝒀𝒊𝒕 , i=1,2,3; t=1,2,3,4

Constraint 3: The total demand must be less than or equal to capacity

∑𝟔𝒋#𝟏 𝑫𝒊𝒋𝒕 ∗ 𝑿𝒊𝒋𝒕 £ 2500* Yit

Constraint 4: The amount of inventory

• 𝐈𝐢𝐭 = 𝐈𝐢𝐭 − 𝟏 + 𝐀𝐢𝐭 ∗ 𝐘𝐢𝐭 − ∑𝟔𝐣#𝟏 𝐃𝐢𝐣𝐭 ∗ 𝐗𝐢𝐣𝐭 , i=1,2,3; t=1,2,3,4
• 𝐀𝐢𝐭 ≤ 𝟐𝟓𝟎𝟎
• 𝐀𝐢𝐭, 𝐈𝐢𝐭 𝐢𝐬 𝐩𝐨𝐬𝐢𝐭𝐢𝐯𝐞 𝐢𝐧𝐭𝐞𝐠𝐞𝐫
•
Constraint 5: Xij and Yi =1 or 0

3. Solve optimization model

Xij=1 1 if plant i manufactures and distributes to city j

Dealer 1 (HN) Dealer 2 (VP) Dealer 3 (BN) Dealer 4 (HP) Dealer 5 (TN) Dealer 6 (QN) Yij It
0 0 0 0 0 0 0 0
0 1 0 0 1 0 1 1138
1 0 1 1 0 1 1 0
0 0 0 1 0 1 1 950
0 0 0 0 0 0 0 1138
1 1 1 0 1 0 1 0
0 0 0 0 0 0 0 950
0 0 1 1 1 1 1 0
1 1 0 0 0 0 1 0
1 1 1 1 1 1 1 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
Figure 2. 1 The result of Xij and It

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 Ait- the number of product
Product
Factory 1 (Mê Linh, HN) 0
Week 1 Factory 2 (Chí Linh, HD) 2.148
Factory 3 (Quế Võ, BN) 2.395
Factory 1 (Mê Linh, HN) 2.150
Week 2 Factory 2 (Chí Linh, HD) 0
Factory 3 (Quế Võ, BN) 2.345
Factory 1 (Mê Linh, HN) 0
Week 3 Factory 2 (Chí Linh, HD) 1.052
Factory 3 (Quế Võ, BN) 1.115
Factory 1 (Mê Linh, HN) 2.500
Week 4 Factory 2 (Chí Linh, HD) 0
Factory 3 (Quế Võ, BN) 0
Table 2. 3 The number of product

The holding cost for any factory 3.500

labor cost 110.000.000
Operating cost 40.000.000
Production cost 600.000
price of air fryer 1.000.000
Capacity 2.500
Revenue 13.705.000.000
Total production cost 8.223.000.104
Total delivery cost 27.425.000
Total operating cost 280.000.000
Total labor cost 770.000.000
Total inventory cost 14.616.691
PROFIT 4.389.958.205
Table 2. 4 The maximum profit of Sunhouse
After entering the data and running the functions with excel solver, we see that profit
of Sunhouse gets : 4.389.958.205vnđ
§ In 4 weeks , all 3 factories are decided to operate.
§ At week 1, Factory 2 will ship products to dealers 2, 5 ( inventory is
1138)while Factory 3 will delivery to the other factories. ( inventory is 0)
§ At week 2, Factory 1will ship products to dealers 4,6 ( inventory is 950)while
Factory 3 will delivery to the other factories. ( inventory is 0)
§ At week 3, Factory 3 will ship products to dealers 1,2 ( inventory is 0)while
Factory 2 will delivery to the other factories. ( inventory is 0)
§ At week 4, Factory 1 will ship products to all dealers ( inventory 0)

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 4. Optimize the delivery process
This case study has not totally solved the shipping problem. We can solve it by
combining dealers' products on the same trip and choosing the most optimal route. The
below table is the most optimal path between the factories and the dealers.
• The total delivery cost is 19.878.250 (decrease by 8 millions )

Figure 2. 2: The optimal path table

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