Datasheets: Shipping Cost and Fixed Cost

1. Data

Kansas City
Santiago

Demand

Distribution Center
Caracas
Toronto Shanghai
Mexico City Melbourne London
Atlanta
$1.79
$2.13
$1.76
$2.34
$1.86
$1.90
$1.82
$2.13
$2.03
$1.58
$1.80
$2.14
$1.26
$1.76
5000
50000
4000
6000
40000
10000
60000

Model

Kansas City
Santiago

Demand met

Caracas
Toronto Shanghai
Mexico City Melbourne London
Atlanta
5000
0
0
0
35000
0
20000
0
0
4000
6000
0
10000
40000
5000
0
4000
6000
35000
10000
60000

Total cost
$210,570.00
Unmet demand

50000

5000

It is given that PLE produces lawn tractor in its Kansas City and Santiago
and both plants have a maximum annual capacity of 60,000 units.
The above model optimizes the transportation allocations from the existing location to meet the demand.

2. Now we will identify the best location for the new plants and transportation allocations to meet unmet de
Data

Plant
Kansas City-1
Kansas City-2
Santiago-1
Santiago-2
Auckland-1
Auckland-2
Birmingham-1
Birmingham-2
Frankfurt-1
Frankfurt-2
Mumbai-1
Mumbai-2
Singapore-1
Singapore-2

Toronto
$1.79
$1.79
$2.13
$2.13
$2.19
$2.19
$1.78
$1.78
$1.87
$1.87
$2.14
$2.14
$2.03
$2.03

Shanghai
$2.13
$2.13
$2.03
$2.03
$1.63
$1.63
$2.15
$2.15
$2.32
$2.32
$1.47
$1.47
$1.78
$1.78

Distribution Center
Mexico City Melbourne London
$1.76
$2.34
$1.86
$1.76
$2.34
$1.86
$1.58
$1.80
$2.14
$1.58
$1.80
$2.14
$2.07
$1.17
$2.60
$2.07
$1.17
$2.60
$1.79
$2.06
$1.77
$1.79
$2.06
$1.77
$2.04
$2.28
$1.64
$2.04
$2.28
$1.64
$2.22
$1.63
$1.82
$2.22
$1.63
$1.82
$2.09
$1.70
$2.68
$2.09
$1.70
$2.68

Caracas
$1.90
$1.90
$1.26
$1.26
$1.98
$1.98
$1.86
$1.86
$1.88
$1.88
$2.08
$2.08
$2.01
$2.01

Atlanta
$1.82
$1.82
$1.76
$1.76
$2.26
$2.26
$1.25
$1.25
$1.70
$1.70
$2.23
$2.23
$2.35
$2.35

Demand

50000

5000

Model

Plant
Kansas City-1
Kansas City-2
Santiago-1
Santiago-2
Auckland-1
Auckland-2
Birmingham-1
Birmingham-2
Frankfurt-1
Frankfurt-2
Mumbai-1
Mumbai-2
Singapore-1
Singapore-2
Demand Met

Toronto
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Shanghai
5000
0
5000
0
0
0
0
0
0
0
0
25000
15000
0
50000

Mexico City
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Melbourne
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

London
5000
0
0
0
0
0
0
0
0
0
0
0
0
0
5000

Caracas
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Atlanta
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Total cost
$2,877,550.00
Hence, using optimization model, 4 more plants are required to meet the unmet demand.
The best location for the new plants are Kansas City-1, Santiago-1, Mumbai-2, and Singapore-1 with the
transportation allocations as displaying in the above table.

3. Given that China market (demand at Shanghai) is too uncertain and may range from 20,000 to 60,000 unit
Data

Plant
Kansas City-1
Kansas City-2
Santiago-1
Santiago-2
Auckland-1
Auckland-2
Birmingham-1
Birmingham-2
Frankfurt-1

Demand at China market varies from =

Toronto
$1.79
$1.79
$2.13
$2.13
$2.19
$2.19
$1.78
$1.78
$1.87

Shanghai
$2.13
$2.13
$2.03
$2.03
$1.63
$1.63
$2.15
$2.15
$2.32

20000

Distribution Center
Mexico City Melbourne London
$1.76
$2.34
$1.86
$1.76
$2.34
$1.86
$1.58
$1.80
$2.14
$1.58
$1.80
$2.14
$2.07
$1.17
$2.60
$2.07
$1.17
$2.60
$1.79
$2.06
$1.77
$1.79
$2.06
$1.77
$2.04
$2.28
$1.64

to

Caracas
$1.90
$1.90
$1.26
$1.26
$1.98
$1.98
$1.86
$1.86
$1.88

60000

Atlanta
$1.82
$1.82
$1.76
$1.76
$2.26
$2.26
$1.25
$1.25
$1.70

Frankfurt-2
Mumbai-1
Mumbai-2
Singapore-1
Singapore-2
Demand

$1.87
$2.14
$2.14
$2.03
$2.03

$2.32
$1.47
$1.47
$1.78
$1.78
0

$2.04
$2.22
$2.22
$2.09
$2.09
50000

$2.28
$1.63
$1.63
$1.70
$1.70

$1.64
$1.82
$1.82
$2.68
$2.68

$1.88
$2.08
$2.08
$2.01
$2.01
5000

$1.70
$2.23
$2.23
$2.35
$2.35
0

Model
Note: Set the bounds for Shanghai as 20000 and 60000

Plant
Kansas City-1
Kansas City-2
Santiago-1
Santiago-2
Auckland-1
Auckland-2
Birmingham-1
Birmingham-2
Frankfurt-1
Frankfurt-2
Mumbai-1
Mumbai-2
Singapore-1
Singapore-2
Demand Met

Toronto
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Shanghai
0
0
0
0
0
0
0
0
0
0
0
20000
0
0
20000

Mexico City
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Melbourne
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

London
0
0
0
0
0
0
0
0
0
0
0
5000
0
0
5000

Caracas
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Atlanta
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Total cost
$997,500.00

As the China market (demand at Shanghai) is too uncertain and may range from 20,000 to 60,000 units,
it is better to consider the minimum demand (20,000) to avoid risk.
In this case, only 1 more plant is required to meet the unmet demand and the best location is Mumbai which has the maximum c
Also, this avoids construction of new plant in Kansas City to reduced distribution costs.

Solver Model for the Case study:

Capacity

60000
60000

Total shipped

60000
60000

ns to meet unmet demand.

Solver Model for the Case study:

Capacity
10000
20000
5000
10000
15,000
20,000
15,000
20,000
15,000
20,000
15,000
25,000
15,000
20,000

Fixed Cost
Capacity (If condition-Solver model)
605,000
10000
985,000
0
381,000
5000
680,000
0
917,000
0
1,136,000
0
962,000
0
1,180,000
0
874,000
0
1,093,000
0
750,000
0
959,000
25000
839,000
15000
1,058,000
0

Total shipped
10000
0
5000
0
0
0
0
0
0
0
0
25000
15000
0

Total Cost for

each city

$624,950.00
$0.00
$391,150.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$995,750.00
$865,700.00
$0.00

Surplus
variable
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Binary variables
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
Y11
Y12
Y13
Y14

Total

1
0
1
0
0
0
0
0
0
0
0
1
1
0
4

20,000 to 60,000 units.

Capacity
10000
20000
5000
10000
15,000
20,000
15,000
20,000
15,000

Fixed Cost
Capacity (If condition-Solver model)
605,000
0
985,000
0
381,000
0
680,000
0
917,000
0
1,136,000
0
962,000
0
1,180,000
0
874,000
0

20,000
15,000
25,000
15,000
20,000

Total shipped
0
0
0
0
0
0
0
0
0
0
0
25000
0
0

hich has the maximum capacity of 25,000.

1,093,000
750,000
959,000
839,000
1,058,000

Total Cost for

each city

$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$997,500.00
$0.00
$0.00

0
0
25000
0
0

Surplus
variable
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Binary variables
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
Y11
Y12
Y13
Y14

Total

0
0
0
0
0
0
0
0
0
0
0
1
0
0
1

Case study:

Condition
1
1
0
0
0
1
1

Condition
0
0
0
0
0
1
0

Unit Shipping Cost

Plant
Singapore
Birmingham
Frankfurt
Mumbai
Kansas City
Auckland
Santiago
Singapore
Birmingham
Frankfurt
Mumbai
Kansas City
Auckland
Santiago
Singapore
Birmingham
Frankfurt
Mumbai
Kansas City
Auckland
Santiago
Singapore
Birmingham
Frankfurt
Mumbai
Kansas City
Auckland
Santiago
Singapore
Birmingham
Frankfurt
Mumbai
Kansas City
Auckland
Santiago
Singapore
Birmingham
Frankfurt
Mumbai
Kansas City
Auckland
Santiago
Singapore
Birmingham
Frankfurt
Mumbai
Kansas City
Auckland

Customer
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Shanghai
Shanghai
Shanghai
Shanghai
Shanghai
Shanghai
Shanghai
Mexico City
Mexico City
Mexico City
Mexico City
Mexico City
Mexico City
Mexico City
Melbourne
Melbourne
Melbourne
Melbourne
Melbourne
Melbourne
Melbourne
London
London
London
London
London
London
London
Caracas
Caracas
Caracas
Caracas
Caracas
Caracas
Caracas
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta

Mowers
$1.71
$1.34
$1.52
$1.67
$1.36
$1.86
$1.49
$1.44
$1.60
$1.65
$1.21
$1.58
$1.18
$1.47
$1.72
$1.29
$1.54
$1.56
$1.32
$1.50
$1.22
$1.43
$1.52
$1.73
$1.38
$1.72
$0.91
$1.49
$1.88
$1.47
$1.37
$1.44
$1.49
$1.98
$1.58
$1.50
$1.37
$1.59
$1.61
$1.54
$1.54
$1.00
$1.73
$1.02
$1.42
$1.57
$1.31
$1.74

Tractors
$2.03
$1.78
$1.87
$2.14
$1.79
$2.19
$2.13
$1.78
$2.15
$2.32
$1.47
$2.13
$1.63
$2.03
$2.09
$1.79
$2.04
$2.22
$1.76
$2.07
$1.58
$1.70
$2.06
$2.28
$1.63
$2.34
$1.17
$1.80
$2.68
$1.77
$1.64
$1.82
$1.86
$2.60
$2.14
$2.01
$1.86
$1.88
$2.08
$1.90
$1.98
$1.26
$2.35
$1.25
$1.70
$2.23
$1.82
$2.26

Santiago

Atlanta

$1.31

$1.76

Fixed Costs of Capacity Increase or New Construction

Current Plants
Kansas City
Kansas City
Santiago
Santiago
Proposed Locations
Auckland
Auckland
Birmingham
Birmingham
Frankfurt
Frankfurt
Mumbai
Mumbai
Singapore
Singapore

Additional Capacity
10000
20000
5000
10000

Cost
$ 605,000
$ 985,000
$ 381,000
$ 680,000

Maximum capacity
15,000
20,000
15,000
20,000
15,000
20,000
15,000
25,000
15,000
20,000

Cost
$ 917,000
$ 1,136,000
$ 962,000
$ 1,180,000
$ 874,000
$ 1,093,000
$ 750,000
$ 959,000
$ 839,000
$ 1,058,000