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Tutorial Session Using Excel Solver Network Optimization Models - Formulation and Solution

This document presents a supply chain optimization problem for an Indian paint manufacturing company with 5 plants and 6 markets. It provides data on plant capacities and costs, market demands and transportation costs between plants and markets. The student is asked to formulate the problem as a linear program to minimize total cost without and with fixed facility costs, and represent the solutions diagrammatically. A second homework problem presents supply chain data for 5 regions of a global oil company, and asks the student to mathematically formulate and solve the problem of designing the lowest cost supply chain network using Excel solver.

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KALIDAS MANU.M
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87 views

Tutorial Session Using Excel Solver Network Optimization Models - Formulation and Solution

This document presents a supply chain optimization problem for an Indian paint manufacturing company with 5 plants and 6 markets. It provides data on plant capacities and costs, market demands and transportation costs between plants and markets. The student is asked to formulate the problem as a linear program to minimize total cost without and with fixed facility costs, and represent the solutions diagrammatically. A second homework problem presents supply chain data for 5 regions of a global oil company, and asks the student to mathematically formulate and solve the problem of designing the lowest cost supply chain network using Excel solver.

Uploaded by

KALIDAS MANU.M
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Name of the student: ……………….. Roll No. ………………….

ME3126D Supply Chain Management


Tutorial Session using Excel solver
Network Optimization Models – Formulation and Solution

PROBLEM 1 (Class work)

Consider the case of a hypothetical company called Indian paints, a paint manufacturing firm
which has five manufacturing plants located at Ahmedabad, Baddi, Hubli, Nagpur and
Vishakapatnam. The firm primarily operates in six major markets. The geographical positioning
of all plants and markets is presented in Figure 1.

Figure 1. Location of plants and markets

The marketing group prepares market estimates every quarter and expects the supply chain to
plan its operations so that the firm can minimize the total cost. Keeping in view the capacity
constraints of each plant and the existing cost structure, the supply chain group has to decide the
volume of production at each plant and allocation of market demands to plants. The relevant data
are as follows:
Table 1 Plant data
Plant Capacity Fixed facility cost
Ahmedabad 350 78000
Baddi 400 42000
Hubli 450 36000
Nagpur 300 38000
Vishakapatnam 400 34000

Table 2 Market data


Market Bangalore Chennai Delhi Mumbai Lucknow Kolkata
Quarterly demand 165 135 280 200 125 155

Table 3 Cost matrix (i.e. cost of producing and transporting unit item from a plant to a market)
Market
Plant
Bangalore Chennai Delhi Mumbai Lucknow Kolkata
Ahmedabad 910 953 775 740 864 936
Baddi 1036 1083 622 853 741 830
Hubli 727 788 977 755 1022 976
Nagpur 790 785 808 742 773 860
Vishakapatnam 838 782 1003 892 978 878

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Using the above data of a network design problem, assuming the given demand allocation problem as a
linear programming problem, formulate a mathematical model with an objective to minimize the cost in the
following scenarios:
a. without incorporating fixed cost for the facility (Solution: ₹ 7,73,770)
b. incorporating fixed cost for the facility (Solution: ₹ 8,92,585)
Also diagrammatically represent the solution obtained in (a) and (b).

PROBLEM 2 (Home work – Submission date: April 06, 2022)

For Sunoil, Vice president of supply chain decides to view worldwide demand in terms of five regions –
North America, South America, Europe, Africa and Asia. The relevant data collected are given below:

Demand Region Low High


Production and Transportation cost per 1 Capacity Capacity
Supply Fixed Fixed
million units (in thousands of dollars) (in (in
Region Cost Cost
N. S. million million
Europe Asia Africa
America America units) units)
N. America 81 92 101 130 115 6000 10 9000 20
S. America 117 77 108 98 100 4500 10 6750 20
Europe 102 105 95 119 111 6500 10 9750 20
Asia 115 125 90 59 74 4100 10 6150 20
Africa 142 100 103 105 71 4000 10 6000 20
Demand 12 8 14 16 7
Assume all variable costs grow linearly with the quantity produced or shipped. Sunoil is considering two
plant sizes in each location. Based on its capacity, there are two types of plants namely, Low capacity
plants (annual production is 10 million units) and High capacity plants (annual production is 20 million units).
All fixed costs are annualized. The Vice president wants to know what the lowest cost supply chain network
should be. Formulate the given problem mathematically and solve using excel solver.

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