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Distribution Optimization Example

Horizon Computers manufactures laptops across Europe and partially assembles them in factories in Puerto Rico, Mexico, and Panama before shipping to the US. Shipping fully assembled laptops directly from Europe to US distributors is more expensive than partial assembly in other countries due to tariffs. The document provides cost data for manufacturing and shipping laptops to meet demand from 3 US distributors. The optimal solution is to partially assemble laptops from each European plant in Puerto Rico, Mexico, and Panama to minimize total distribution costs.

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greatguy_07
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798 views

Distribution Optimization Example

Horizon Computers manufactures laptops across Europe and partially assembles them in factories in Puerto Rico, Mexico, and Panama before shipping to the US. Shipping fully assembled laptops directly from Europe to US distributors is more expensive than partial assembly in other countries due to tariffs. The document provides cost data for manufacturing and shipping laptops to meet demand from 3 US distributors. The optimal solution is to partially assemble laptops from each European plant in Puerto Rico, Mexico, and Panama to minimize total distribution costs.

Uploaded by

greatguy_07
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Horizon Computers manufactures laptops in Germany,

Belgium, and Italy. Because of high tariffs between


international trade groups, it is sometimes cheaper to
ship partially completed laptops to factories in Puerto
Rico, Mexico, and Panama and have them completed
before final shipment to U.S. distributors in Texas,
Virginia, and Ohio. The cost ($/unit) of the completed
laptops plus tariffs and shipment costs from the
European plants directly to the United States and
supply and demand are as follows:
U.S. Distributor
European
Plant
1.
Germany
2.
Belgium
3. Italy
Demand
(1,000s)

7. Texas 8. Virginia

9. Ohio

Supply
(1,000s)

$2,600

$1,900

$2,300

5.2

2,200

2,100

2,600

6.3

1,800
2.1

2,200
3.7

2,500
7.8

4.5

Alternatively, the unit costs of shipping partially


completed laptops to plants for finishing before sending
them to the United States are as follows:
Factory
European 4. Puerto
Plant
Rico
5. Mexico
1.
Germany
2.
Belgium
3. Italy

6.
Panama

$1,400

$1,200

$1,100

1,600

1,100

900

1,500

1,400

1,200

U.S. Distributor
Factory
4. Puerto
Rico
5. Mexico
6.
Panama

7. Texas 8. Virginia

9. Ohio

$800

$700

$900

600
900

800
700

1,100
1,200

Determine the optimal shipments of laptops that will


meet demand at the U.S. distributors at the minimum
total cost.

solution

Solution
(Linear Programming methodology and Solver add-in as the engine)
U.S. Distributor
European Plant
1. Germany
2. Belgium
3. Italy
Demand (1,000s)

7. Texas

8. Virginia

2.10
2.10

2.10

(0.00)
(0.00)

9. Ohio

3.70

5.20
5.20

Supply
(1,000s)
5.20
2.10

<=
<=
<=

7.80

cost

Factory
European Plant

4. Puerto Rico

1. Germany
2. Belgium
3. Italy

5. Mexico

6. Panama
-

(0.00)
6.30
(0.00)
6.30

(0.00)
6.30
(0.00)

<=
<=
<=

U.S. Distributor
Factory

7. Texas

4. Puerto Rico
5. Mexico
6. Panama

cost
8. Virginia

9. Ohio

3.70
3.70
=

2.10

2.60
2.60

`
6.30

=
3.70

7.80

cost

Total distribution cost (minimize)

total demand
2.10
=
2.10

total suply
5.20
6.30
2.10
3.70
=

7.80

<=
<=
<=

=
3.70

7.80

For more information and assistance contact Maxim Morozov


[email protected]
Tel +32 478 516447 (Belgium)

Costs
European Plant
5.20
6.30
4.50

1. Germany
2. Belgium
3. Italy

7. Texas
2,600
2200
1800

8. Virginia
1,900
2100
2200

9. Ohio
2,300
2600
2500

15,740

European Plant
5.20
6.30
4.50

1. Germany
2. Belgium
3. Italy

4. Puerto Rico

5. Mexico

6. Panama

1,400
1,600
1,500

1,200
1,100
1,400

1,100
900
1,200

7. Texas

8. Virginia

9. Ohio

800
600
900

700
800
700

900
1,100
1,200

5,670
Factory
4. Puerto Rico
5. Mexico
6. Panama
5,710
27,120

5.20
6.30
4.50

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