Supply Chain Models

Transportation Problem
Transshipment Problem
Assignment Problem
 A network model is one which can be represented by a
set of nodes, a set of arcs, and functions (e.g. costs,
supplies, demands, etc.) associated with the arcs
and/or nodes.
 Transportation, transshipment, assignment, are all
examples of network problems.
 Each of the problems of this chapter can be
formulated as linear programs and solved by general
purpose linear programming codes.
 For each of the problems, if the right-hand side of the
linear programming formulations are all integers, the
optimal solution will be in terms of integer values for
the decision variables.
Supply Chain Models
 A supply chain describes the set of all
interconnected resources involved in producing and
distributing a product.
 In general, supply chains are designed to satisfy
customer demand for a product at minimum cost.
 Those that control the supply chain must make
decisions such as where to produce a product, how
much should be produced, and where it should be
sent.
Transportation Problem
 The transportation problem seeks to minimize the
total shipping costs of transporting goods from m
origins (each with a supply si) to n destinations (each
with a demand dj), when the unit shipping cost from
an origin, i, to a destination, j, is cij.
 The network representation for a transportation
problem with two sources and three destinations.
Transportation Problem

 Linear Programming Formulation

Using the notation:
xij = number of units shipped from
origin i to destination j
cij = cost per unit of shipping from
origin i to destination j
si = supply or capacity in units at origin i
dj = demand in units at destination j
xij > 0 for all i and j
 LP Formulation Special Cases
• Total supply exceeds total demand:
No modification of LP formulation is necessary.

• Total demand exceeds total supply:

Add a dummy origin with supply equal to the
shortage amount. Assign a zero shipping cost
per unit. The amount “shipped” from the
dummy origin (in the solution) will not actually
be shipped.
 A manufacturer of TV sets has three manufacturing plants
and three main distributors. Per unit costs of shipping from
plant 1 to distributors: 1, 2 and 3 are PhP4, PhP2 and PhP8,
respectively. The corresponding cost of shipping from plant
2 is PhP5, PhP1 and PhP9. The cost from plant 3 is Php7,
PhP6 and PhP3. Next month, the company expects to have
100 TV sets available at plant 1; 200 sets available at plant 2;
and 200 sets available at plant 3. The monthly
requirements of distributors: 1, 2 and 3 are 50, 150 and 300
sets, respectively. Find the least-cost way of shipping from
the three plants to the three distributors.
Mathematical Model
Let x11 = no. of TV sets to be shipped from plant 1 to distributor 1
x12 = no. of TV sets to be shipped from plant 1 to distributor 2
x13 = no. of TV sets to be shipped from plant 1 to distributor 3
x21 = no. of TV sets to be shipped from plant 2 to distributor 1
x22 = no. of TV sets to be shipped from plant 2 to distributor 2
x23 = no. of TV sets to be shipped from plant 2 to distributor 3
x31 = no. of TV sets to be shipped from plant 3 to distributor 1
x32 = no. of TV sets to be shipped from plant 3 to distributor 2
x33 = no. of TV sets to be shipped from plant 3 to distributor 3
Min: C = 4x11 + 2x12 + 8x13 + 5x21 + 1x22 + 9x23 + 7x31 + 6x32 + 3x33
Subject to:
x11 + x12 + x13 = 100
x21 + x22 + x23 = 200
x31 + x32 + x33 = 200
x11+ x21 + x31 = 50
x12+ x22 + x32 = 150
x13+ x23+ x33 = 300
xij≥ 0 for all i and j.
Transshipment Problem
 Transshipment problems are transportation problems
in which a shipment may move through intermediate
nodes (transshipment nodes) before reaching a
particular destination node.
 Transshipment problems can be converted to larger
transportation problems and solved by a special
transportation program.
 Transshipment problems can also be solved by general
purpose linear programming codes.
 The network representation for a transshipment
problem with two sources, three intermediate nodes,
and two destinations.
 Linear Programming Formulation
Using the notation:
xij = number of units shipped from node i to
node j
cij = cost per unit of shipping from node i to
node j
si = supply at origin node i
dj = demand at destination node j
s.t. Origin nodes i

Transshipment nodes

Destination nodes j

xij > 0 for all i and j

 LP Formulation Special Cases
 Total supply not equal to total demand
 Maximization objective function
 Route capacities or route minimums
 Unacceptable routes
 The LP model modifications required here are
 identical to those required for the special cases in
the transportation problem.
The Northside and Southside facilities of Zeron
Industries supply three firms (Zrox, Hewes, Rockrite)
with customized shelving for its offices. They both
order shelving from the same two manufacturers,
Arnold Manufacturers and Supershelf, Inc.
Currently weekly demands by the users are 50 for
Zrox, 60 for Hewes, and 40 for Rockrite. Both Arnold
and Supershelf can supply at most 75 units to its
customers.
Additional data is shown on the next slide.
Because of long standing contracts based on past
orders, unit costs from the manufacturers to the
suppliers are:
Zeron N Zeron S
Arnold 5 8
Supershelf 7 4
The costs to install the shelving at the various
locations are:
Zrox Hewes Rockrite
Thomas 1 5 8
Washburn 3 4 4
 Linear Programming Formulation
 Decision Variables Defined
xij = amount shipped from manufacturer i to supplier j
xjk = amount shipped from supplier j to customer k
where i = 1 (Arnold), 2 (Supershelf)
j = 3 (Zeron N), 4 (Zeron S)
k = 5 (Zrox), 6 (Hewes), 7 (Rockrite)
 Objective Function Defined
Minimize Overall Shipping Costs:
Min: C= 5x13 + 8x14 + 7x23 + 4x24 + 1x35 + 5x36 + 8x37
+ 3x45 + 4x46 + 4x47
 Constraints Defined
Amount Out of Arnold: x13 + x14 < 75
Amount Out of Supershelf: x23 + x24 < 75
Amount Through Zeron N: x13 + x23 - x35 - x36 - x37 = 0
Amount Through Zeron S: x14 + x24 - x45 - x46 - x47 = 0
Amount Into Zrox: x35 + x45 = 50
Amount Into Hewes: x36 + x46 = 60
Amount Into Rockrite: x37 + x47 = 40

Non-negativity of Variables: xij > 0, for all i and j.

 Computer Output
Objective Function Value = 1150.000
Variable Value Reduced Cost
X13 75.000 0.000
X14 0.000 2.000
X23 0.000 4.000
X24 75.000 0.000
X35 50.000 0.000
X36 25.000 0.000
X37 0.000 3.000
X45 0.000 3.000
X46 35.000 0.000
X47 40.000 0.000
Assignment Problem
 An assignment problem seeks to minimize the total
cost assignment of m workers to m jobs, given that the
cost of worker i performing job j is cij.
 It assumes all workers are assigned and each job is
performed.
 An assignment problem is a special case of a
transportation problem in which all supplies and all
demands are equal to 1; hence assignment problems
may be solved as linear programs.
 The network representation of an assignment problem
with three workers and three jobs.
 Linear Programming Formulation
Using the notation:

xij = 1 if agent i is assigned to task j

0 otherwise

cij = cost of assigning agent i to task j

xij > 0 for all i and j
 LP Formulation Special Cases
• Number of agents exceeds the number of tasks:
Extra agents simply remain unassigned

• Number of tasks exceeds the number of agents:

Add enough dummy agents to equalize the
number of agents and the number of tasks.

The objective function coefficients for these

new variable would be zero.
An electrical contractor pays his subcontractors a fixed fee
plus mileage for work performed. On a given day the
contractor is faced with three electrical jobs associated
with various projects. Given below are the distances
between the subcontractors and the projects.
Projects
Subcontractor A B C
Westside 50 36 16
Federated 28 30 18
Goliath 35 32 20
Universal 25 25 14
How should the contractors be assigned so that total
mileage is minimized?
 Linear Programming Formulation
Min 50x11+36x12+16x13+28x21+30x22+18x23
+35x31+32x32+20x33+25x41+25x42+14x43
s.t. x11+x12+x13 < 1
x21+x22+x23 < 1
x31+x32+x33 < 1
x41+x42+x43 < 1
x11+x21+x31+x41 = 1
x12+x22+x32+x42 = 1
x13+x23+x33+x43 = 1
xij = 0 or 1 for all i and j
 The optimal assignment is:

Subcontractor Project Distance

Westside C 16
Federated A 28
Goliath (unassigned)
Universal B 25
Total Distance = 69 miles