Transportation issues, Civil Engineering

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"We have one other pressing challenge that you could review for us," Alistair Wu says. "As you know, the Shanghai plant was our first facility in China, but we also have two other production plants, at Hangzhou and Fuzhou. We call them the Shuzworld H and Shuzworld F."

"One of our major lines of women's shoes is produced at all three plants. In turn, the shoes are sent to Shuzworld's three central warehouses for further distribution to regional warehouses and then to the stand-alone retail and mall stores."

Wu reaches into his elegant leather briefcase and produces two charts, which he hands to you.

"This first chart shows our monthly production capacity for these shoes at each of our factories and our monthly requirements to meet demand at each of our warehouses," he explains. "We are producing at normal capacity at all three factories in order to meet our current demand."

Factory

Capacity

Warehouse

Requirements

Shanghai

1300

1

2500

Shuzworld H

2300

2

1500

Shuzworld F

2200

3

1800

Totals

5800

 

5800

He asks you to look at the next chart. "Here you can see what it costs us to ship on a per unit basis. For example, our most expensive route is to ship from Shuzworld F to Warehouse 3 and costs $6 per shipping unit."

To/From

Warehouse 1

Warehouse 2

Warehouse 3

Shanghai

$4

$3

$3

Shuzworld H

$3

$4

$2

Shuzworld F

$2

$4

$6

"We've decided to increase production at Shanghai from 1,300 units to 2,800 units," Wu continues. "There's no increase in demand right now, by the way, but this will enable us to meet the growth we expect in the near future. Meanwhile we will have some flexibility in case we have a problem at one of the factories. This move may also mean we can change our transportation schedule in the event that turns out to be advantageous. We want to know what the lowest possible monthly transportation cost can be and what shipping plan we should adopt to achieve that. Can you help us with this?"

Task:

A. Develop a distribution pattern that meets availability and demand constraints and minimizes total shipping costs for Shuzworld, utilizing the appropriate decision analysis tool.


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