Prof. Dr.

Guido Voigt
Supply Chain Management
Solution: exercise to chapter 2 - Network Design
 Exercise 1
Warehouse Location Problem

Exercise sheet 3 Supply Chain Management 2

Exercise 1 - Warehouse Location Problem
 Write down the explicit model (i.e., by writing out the objective function and
constraints) for the instance in the task (i.e., with the concrete data). How many
variables and constraints (constraints without non-negativity and binary conditions) does
this example have?

Exercise sheet 3 Supply Chain Management 3

Objective function: minimize cost

minimize 20𝑦 + 25𝑦 + 15𝑦 fixed cost

+5𝑥 + 4𝑥 + 3𝑥
+4𝑥 + 7𝑥 + 2𝑥 cost of producing and shipping one
+2𝑥 + 3𝑥 + 8𝑥 unit from bicycle plant i to market j

 Take into account the constraints

Exercise sheet 3 Supply Chain Management 4
 satisfy demand of market j

only produce bicycles if plant i is open (and we

don’t need to produce more than demanded)

plant i is either open or closed

no negative production and shipping

Exercise sheet 3 Supply Chain Management 5

How many variables and constraints (constraints without non-negativity and
binary conditions) does this example have?

𝑀𝑖𝑛 𝑓𝑦 + 𝑐 𝑥

𝑥 = 𝐷 for 𝑗 = 1, … , 𝑚

𝑥 ≤𝑘𝑦 for 𝑖 = 1, … , 𝑛

𝑦 ∈ 0,1 for 𝑖 = 1, … , 𝑛

𝑥 ≥0 for 𝑖 = 1, … , 𝑛; 𝑗 = 1, … , 𝑚

E XERCISE S HEET 3 S LIDE 6

Variables

i=1,2,3  n= 3
j=1,2,3  m=3

Variables:
𝑥  𝑛 ⋅ 𝑚 = 3 ⋅ 3 = 9 variables for shipment quantity
𝑦  n = 3 variables for plant opening
-----
12 variables (= 𝑛 ⋅ 𝑚 + 𝑛)

Exercise sheet 3 Supply Chain Management 7

Constraints

𝑥 = 𝐷 for 𝑗 = 1, … , 𝑚 m= 3 demand constraints

𝑥 ≤𝑘𝑦 for 𝑖 = 1, … , 𝑛 n = 3 capacity constraints

m+n = 6 constraints

Exercise sheet 3 Supply Chain Management 8

Exercise 1 - Warehouse Location Problem
Implement the model in GAMS – see gams-code on learning platform

Exercise sheet 3 Supply Chain Management 9

1d) Implementation in GAMS – Solution of capacitated model (1c)

Exercise sheet 3 Supply Chain Management 10

 Possible bicycle plants i Markets j

k1=25 1 1
Boston Washington
b1=10

2 2
k2=23 New York Philadelphia
b2=12

k3=20 3 3 b3=14
Detroit Atlanta

Exercise sheet 3 Supply Chain Management 11

Exercise 2: Gravity model

Five customers with the coordinates and demand :

6
1 2 3
5
(𝑢 , 𝑣 ) (3,5) (0,2) (4,1) 4
3
𝑏 10 8 9
2 ?
1
0
0 2 4 6

Exercise sheet 3 Supply Chain Management 12

 1 2 3
(𝑢 , 𝑣 ) (3,5) (0,2) (4,1)
𝑏 10 8 9
Center of gravity:

𝑏 ⋅𝑢 +𝑏 ⋅𝑢 +𝑏 ⋅𝑢 10 ⋅ 3 + 8 ⋅ 0 + 9 ⋅ 4
𝑥 = = = 2.44
𝑏 +𝑏 +𝑏 10 + 8 + 9

𝑏 ⋅𝑣 +𝑏 ⋅𝑣 +𝑏 ⋅𝑣 10 ⋅ 5 + 8 ⋅ 2 + 9 ⋅ 1
𝑦 = = = 2.77
𝑏 +𝑏 +𝑏 10 + 8 + 9

Exercise sheet 3 Supply Chain Management 13

 𝑏 ⋅𝑢
∑
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 n=3
𝑥 =
𝑏
∑
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀

𝑏 ⋅𝑢 𝑏 ⋅𝑢 𝑏 ⋅𝑢
+ +
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀
𝑥 =
𝑏 𝑏 𝑏
+ +
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀

Exercise sheet 3 Supply Chain Management 14

 1 2 3
(𝑢 , 𝑣 ) (3,5) (0,2) (4,1)
𝑏 10 8 9
First iteration
𝑏 ⋅𝑢 𝑏 ⋅𝑢 𝑏 ⋅𝑢
+ +
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀
𝑥 =
𝑏 𝑏 𝑏
+ +
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀

10 ⋅ 3 8⋅0 9⋅4
+ +
2.44 − 3 + 2.77 − 5 + 10 2.44 − 0 + 2.77 − 2 + 10 2.44 − 4 + 2.77 − 1 + 10
𝑥 = = 2,51
10 8 9
+ +
2.44 − 3 + 2.77 − 5 + 10 2.44 − 0 + 2.77 − 2 + 10 2.44 − 4 + 2.77 − 1 + 10

𝟎 𝟏 𝟒

Exercise sheet 3 Supply Chain Management 15

 1 2 3
(𝑢 , 𝑣 ) (3,5) (0,2) (4,1)
𝑏 10 8 9
First iteration
𝑏 ⋅𝑣 𝑏 ⋅𝑣 𝑏 ⋅𝑣
+ +
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀
𝑦 =
𝑏 𝑏 𝑏
+ +
𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀 𝑥 −𝑢 + 𝑦 −𝑣 +𝜀

10 ⋅ 5 8⋅2 9⋅1
+ +
2.44 − 3 + 2.77 − 5 + 10 2.44 − 0 + 2.77 − 2 + 10 2.44 − 4 + 2.77 − 1 + 10
𝑦 = = 2,82
10 8 9
+ +
2.44 − 3 + 2.77 − 5 + 10 2.44 − 0 + 2.77 − 2 + 10 2.44 − 4 + 2.77 − 1 + 10

𝟎 𝟏 𝟒

Attention: Stop criterion only fulfilled if both conditioned are fulfilled

(“and” condition)
Exercise sheet 3 Supply Chain Management 16
Thank you for your attention.
guido.voigt@uni-hamburg.de