LP EXAMPLES

Chapter 1- of Supply Chain Modeling

By
Dr. N.S. Nilakantan
 Production Scheduling
 While scheduling production, many factors to be
considered:
 Labor capacity, inventory and storage costs, space
limitations, product demand, and labor relations etc.
 Problem resembles a product mix model for each
period in the future.
 The objective is to either maximize profit or
minimize total cost ( of production and inventory)

 In this example, the objective is to set a low-cost

production schedule for the next four months.
 Greenberg Motors Inc.(GMI)
 GMI manufactures two different electrical motors for sale
under contract to Drexel- GM3A and GM3B for use in food
processors and blenders respectively.
 Drexel’s procurement officer places , 3 times a year, a monthly
order on GMI for each of the coming four months. Drexel’s
demand for motors varies each month based on its own sales
forecasts, production capacity, and financial position.
 GMI has received the January-April order from Drexel and
must begin their own production plan.
 The demand for motors is shown below:

Model Jan Feb Mar Apr

GM3A 800 700 1000 1100

GM3B 1000 1200 1400 1400

 Greenberg Motors Inc.(GMI) – contd.
 GMI must consider following factors:
 All demands must be met. And the company would like to have 450
units of GM3A and 300 units of GM3B in end-April inventory.
 Inventory at month-end carries a holding cost of 0.36/GM3A &
0.26/GM3B.
 GMI has been able to maintain a no-layoff policy and would like to
continue with this. This is easier if labor hours do not fluctuate too
much from month to month. Maintaining a production schedule that
would require from 2240 to 2560 labour hours per month is required.
Production requires 1.3 labor hours/GM3A and 0.9 hours/GM3B.
 Warehouse limitations cannot be exceeded without great additional
costs. There is room at month-end for only 3300 units of GM3A &B
combined.
 Production cost is currently 20/GM3A and 15/GM3B and due to
increase by 10% on March 1 as a new labor agreement goes into effect.
 Formulate an LP model for minimising the total cost ( Production
+inventory) within the stipulated constraints.
 LP Model(GMI)- 1 month
to be extended for 4 months

Jan   GM3A GM3B      

  p.Cost 20 15  

  qty 1276.923 1000 40538.46tpc  

  s.t. lhs rhs

  labour 1.3 0.9 2560<= 2560

  2560>= 2240

   

  demand 800 1000  

  inv m. e 476.9231 0 476.9231<= 3300

  >= 0 0  

  inv cost 0.36 0.26 171.6923tic  

 Truck Loading Problem
 Involves deciding which items to load on a
truck so as to maximize the value of load
shipped.
 Goodman Shipping has one of their trucks
( cap. 10000 kgs), about to be loaded. Awaiting
shipments are the following items:
Item 1 2 3 4 5 6
Value 22500 24000 8000 9500 11500 9750
Wt(kg.) 7500 7500 3000 3500 4000 3500

 Objective – to maximize the total value of the

items loaded onto the truck without exceeding
the truck’s capacity.
 LP Model (Goodman)
  1 2 3 4 5 6total    

value 22500 24000 8000 9500 11500 9750     

wt 7500 7500 3000 3500 4000 3500     

2.6666 2.7142 2.7857
value/kg 3 3.2 67 86 2.875 14     
maxi
              31500 mize  
qty 2500 7500 0 0 0 0     
<= <= <= <= <= <= <= 10000<= 10000
wt 7500 7500 3000 3500 4000 3500     
 Blending Problems
 Decision is made about blending two or more resources to produce one or more
products.
 Resources contain one or more essential ingredients that must be blended so that
each final produce contains specific percentages of each ingredient. This is typical
in petroleum and allied industries.
 Low-knock Oil Company produces two grades of cut-rate gasoline for industrial
distribution. The grades, regular and economy, are produced by refining a blend of
two types of crude oil, X100 and X220. each crude oil differs not only in cost/barrel,
but in composition as well. The following table indicates the %age of ingredients in
each crude oil and cost per barrel for each:

Crude oil Ingredient A (%) Ingredient B (%) Cost/brl

X100 35 55 30.00
X220 60 25 34.80
 Weekly demand for regular is at least 25000 brls and for economy at least 32000
brls. At least 45% of each barrel of regular must be A. At most 50% of each barrel
must contain B. we assume one barrel of crude oil will yield one barrel of gasoline.
 Model the problem to decide how many barrels of each type of crude oil to buy
each week for blending to satisfy demand at minimum cost.
 LP for Blending
Ingredien Ingredien
crude oil tA tB          
X100 35% 55%         
X220 60% 25%         
               
Blending Regular Economy sum amount reqt    
X100 15000.00 26666.67 41666.67 11250>= 11250Ing A
X220 10000.00 5333.33 15333.33 16000<= 16000Ing B
sum 25000.00 32000.00         
>= >= >=          
demand 25000 32000         
total
        cost      
178360  minimiz
cost of crude       0e    
X100     30       
X220     34.8       
 Transportation Models

 Transportation model
 The transportation problem deals with the
distribution of goods from several points of
supply (sources) to a number of points of demand
(destinations)
 Usually we are given the capacity of goods at each
source and the requirements at each destination
 Typically the objective is to minimize total
transportation and production costs
 An Example

 The Executive Furniture Corporation

manufactures office desks at three locations:
Des Moines, Evansville, and Fort Lauderdale
 The firm distributes the desks through regional
warehouses located in Boston, Albuquerque,
and Cleveland
 Estimates of the monthly production capacity
of each factory and the desks needed at each
warehouse are shown in next slide.
 Example in network format

Factories Warehouses
(Sources) (Destinations)

100 Units Des Moines Albuquerque 300 Units

300 Units Evansville Boston 200 Units

300 Units Fort Lauderdale Cleveland 200 Units

Capacities Shipping Routes Requirements

 Setting Up a Transportation Problem

 Production costs are the same at the three factories so

the only relevant costs are shipping from each source to
each destination
 Costs are constant no matter the quantity shipped
 The transportation problem can be described as how to
select the shipping routes to be used and the number of desks
to be shipped on each route so as to minimize total
transportation cost
 Restrictions regarding factory capacities and
warehouse requirements must be observed
 Setting Up a Transportation Problem

 The first step is setting up the transportation table

 Its purpose is to summarize all the relevant data
and keep track of algorithm computations

Transportation costs per desk for Executive Furniture

TO
FROM ALBUQUERQUE BOSTON CLEVELAND

DES MOINES $5 $4 $3

EVANSVILLE $8 $4 $3

FORT LAUDERDALE $9 $7 $5
 Solution
Albuqurqu Clevelan
  e Boston d Supply    
Des Moines 5 4 3 100   
Evansville 8 4 3 300   
Fort Lauderdale 9 7 5 300   
Demand 300 200 200700/700    
             
Model            
Albuqurqu Clevelan
  e Boston d sum <=  
Des Moines 100 0 0 100<= 100
Evansville 0 200 100 300<= 300
Fort Lauderdale 200 0 100 300<= 300
sum 300 200 200     
= = = =      
  300 200 200     
             

total cost 3900Minimize       

 Facility Location Analysis
 Transportation method is found useful in deciding where
to locate a new factory or warehouse.
 Even though a wide variety of subjective factors are
considered, including quality of labor supply, presence of
labor unions, community attitude and appearance,
utilities, and recreational and educational facilities for
employees, a final decision also involves minimizing total
shipping and production costs.
 This means that each alternative facility location should be
analyzed within the framework of one overall distribution
system. The new location that will yield the minimum cost
for the entire system will be the one recommended.
 Hardgrave machines (HM)
 HM produces computer components at its plants at Cincinnati,
Salt Lake City, and Pittsburgh. These plants have not been able to
keep up with the demand for orders at HM’s 4 warehouses in
Detroit, Dallas, New York , and Los Angeles.
 HM has decided to build a new plant to expand its productive
capacity. Two sites are being considered: Seattle and
Birmingham. Both cities are attractive in terms of labor supply,
municipal services, and ease of financing.
 Table 1 below provide the details of production costs and output
requirements for each of the three existing plants, demand at the
warehouses, and estimated production costs of the new proposed
plants.
 Transportation costs from each plant to each warehouse are
summarised in table 2.
 Which of the new locations will yield the lowest cost for the firm
in combination with the existing plants and warehouses?
 warehouse Monthly Production plant Monthly Cost to produce
demand supply /unit
Detroit 10000 Cincinnati 15000 48
Dallas 12000 Salt Lake City 6000 50
New York 15000 Pittsburgh 14000 52
Los Angeles 9000 Total 35000
Total 46000 Seattle ? 53
Supply needed 46000-35000= Birmingham ? 49
from new plant 11000

Shipping Costs

From -to Detroit Dallas New York Los Angeles

Cincinnati 25 55 40 60
Salt Lake City 35 30 50 40

Pittsburgh 36 45 26 66
Seattle 60 38 65 27
Birmingham 35 30 41 50
 Seattle Location
Seattle Location              
New Los COP
Shipping costs Detroit Dallas York Angeles supply /unit  
Cincinnati 25 55 40 60 15000 48 
Salt Lake City 35 30 50 40 6000 50 
Pittsburgh 36 45 26 66 14000 52 
Seattle 60 38 65 27 11000 53 
Demand 10000 12000 15000 900046000/46000    
Model              
New Los
  Detroit Dallas York Angeles sum    
Cincinnati 10000 4000 1000 0 15000<= 15000
Salt Lake City 0 6000 0 0 6000<= 6000
Pittsburgh 0 0 14000 0 14000<= 14000
Seattle 0 2000 0 9000 11000<= 11000
sum 10000 12000 15000 9000     
= = = = =      
  10000 12000 15000 9000     
cost to be
minimized              
transportation 1373000           
production cost 2331000           
 Birmingham Location
Birmingham
Location              
New Los COP
Shipping costs Detroit Dallas York Angeles supply /unit  
Cincinnati 25 55 40 60 15000 48 
Salt Lake City 35 30 50 40 6000 50 
Pittsburgh 36 45 26 66 14000 52 
Birmingham 35 30 41 50 11000 49 
Demand 10000 12000 15000 900046000/46000    
Model              
New Los
  Detroit Dallas York Angeles sum    
Cincinnati 10000 0 1000 4000 15000<= 15000
Salt Lake City 0 1000 0 5000 6000<= 6000
Pittsburgh 0 0 14000 0 14000<= 14000
Birmingham 0 11000 0 0 11000<= 11000
sum 10000 12000 15000 9000     
= = = = =      
  10000 12000 15000 9000     
cost to be
minimized              
transportation 1454000           
production cost 2287000           
Facility Location Leads to Improved Supply-
Chain Reliability
 Supply chains are interconnected network of delivery routes leading from
multiple sources ( warehouses, factories etc.) to multiple destinations ( stores,
outlets, other warehouses etc.) along-which products and commodities
travel.
 Researchers, in trying to help companies plan for emergencies, have
investigated the problem of supply chain disruption. What would happen if
one of the sources were to catastrophically fail due to an earthquake, a
tornado, or worse?
 The answer lies in the area of facility location problem: which warehouses
should deliver to which store addresses the issue.
 Analysing the transportation problem with current sources eliminated one by
one, analysts were able to measure the impact of such disruption.
 Researchers concluded that “backup assignments” of warehouses to stores
should be planned ahead of time to help mitigate the impact of possible
catastrophes.
 Source: Snyder and Daskin (2005): “ Reliability Models for Facility Location –
The Expected Failure Cost Case,” Transportation Science 39, 3 (2005): 400-
416.