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Optimization - Sun Oil Partial Attempt

The document outlines a mathematical model for the Sun Oil case, focusing on the costs associated with running multiple plants to meet market demands. It includes decision variables, constraints related to supply and demand, and the objective function to minimize costs. Key inputs include production costs, capacities, and annual demands across various regions.

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sammush79
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5 views2 pages

Optimization - Sun Oil Partial Attempt

The document outlines a mathematical model for the Sun Oil case, focusing on the costs associated with running multiple plants to meet market demands. It includes decision variables, constraints related to supply and demand, and the objective function to minimize costs. Key inputs include production costs, capacities, and annual demands across various regions.

Uploaded by

sammush79
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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Case of Sun Oil

List of Symbols n = Number of plants Dj = Annual Demand for market 'j' (such that j = 1,2,3,…,m)
m = Number of markets fi = Fixed Cost of plant 'i' (such that i = 1,2,3,…,n)
yi = decision variable (1 if plant open, 0 if closed)
Ki = Capacity of plant 'i' xij = Quantity shipped from plant 'i' to market 'j'
cij = Cost of producing and shipping one unit from plant 'i' to market 'j'

Mathematical Model
The cost of running the business will be a sum of two costs
1. We can have all / some of the / just one plant running at a time. Therefore n
using the decision variable, depending upon how many plants are running at a
time, the total fixed cost will be
∑ f i yi
i=1
2. With a given number of plants running, the cost of producing and shipping n m
all units produced to various markets will be
∑ ∑ c ij x ij
i=1 j=1

Restrictions
1. Supply to each market will be equal to its demand n
∑ x ij =D j
i=1
2. A running plant cannot produce beyond its capacity m
∑ x ij≤K j y i
j=1
3. Each plant will either be open or close y i ∈(1, 0 )

Inputs - Costs, Capacities and Demands

Supply Region Demand Region Low Capacity High Capacity


Production & Transportation Cost per 1M units Fixed Cost Capacity Fixed Cost Capacity
N. America S. America Europe Asia Africa
North America 81 92 101 130 115 6000 10 9000 20
South 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
Decision Variables

Supply Region Demand Region Plants Plants


Production Allocation (1000 units) (1 = open) (1 = open)
N. America S. America Europe Asia Africa
North America 0 0 0 0 0 0 0
South America 0 0 0 0 0 0 0
Europe 0 0 0 0 0 0 0
Asia 0 0 0 0 0 0 0
Africa 0 0 0 0 0 0 0

Constraints

Supply Region Excess Capacity


North America 0
South America 0
Europe 0
Asia 0
Africa 0

Demand Region
N. America S. America Europe Asia Africa
Unmet Demand 12 8 14 16 7

Objective Function
Cost ($) = 0

Variable, Production & Tpt Cost X $1000


Annual Demand X 1,000,000
Cells Containing Formula

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