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Case 6

Heart Beats manufactures a heart monitoring device, produced in two factories and shipped to two warehouses for distribution to four wholesalers. The goal is to minimize shipping costs while adhering to production capacities and demand constraints. A network optimization model is formulated using Excel and Solver to determine the most cost-effective shipping plan.

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66 views4 pages

Case 6

Heart Beats manufactures a heart monitoring device, produced in two factories and shipped to two warehouses for distribution to four wholesalers. The goal is to minimize shipping costs while adhering to production capacities and demand constraints. A network optimization model is formulated using Excel and Solver to determine the most cost-effective shipping plan.

Uploaded by

phamthuylamt
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Case 6.S1.

Distribution at Heart Beats

Heart Beats is a manufacturer of medical equipment. The company’s primary product

is a device used to monitor the heart during medical procedures. This device is

produced in two factories and shipped to two warehouses. The product is then shipped

on demand to four third-party wholesalers. All shipping is done by truck. The product

distribution network is shown below. The annual production capacity at factories 1

and 2 is 400 and 250, respectively. The annual demand at wholesalers 1, 2, 3, and 4 is

200, 100, 150, and 200, respectively. The cost of shipping one unit in each shipping

lane is shown on the arcs. Because of limited truck capacity, at most 250 units can be

shipped from Factory 1 to Warehouse 1 each year. Formulate and solve a network

optimization model in a spreadsheet to determine how to distribute the product at the

lowest possible annual cost.

SOLVER:

The Heart Beats has two factories producing medical equipment that needs to be

shipped to two warehouses. The product is then shipped on demand to four third party

wholesalers by truck.

Data:

Factory 1 is producing 400 units

Factory 2 is producing 250 units


The wholesalers 1 demands 200 units annually

The wholesalers 2 demands 100 units annually

The wholesalers 3 demands 150 units annually

The wholesalers 4 demands 200 units annually

Objective: Minimize the total shipping cost through the distribution network.

Total Cost = Number of Units shipped x Cost per Unit

Decisions: Determine the shipping plan (the number of units to ship along each

shipping lane).

Constraints: Limited truck capacity, at most 250 units can be shipped from Factory 1

to Warehouse 1 each year. Beside, the actual net amount of flow generated at each

node must equal the specified amount of the supply from factories or the demands of

each wholesalers

Explanation

This is a minimum - cost flow problem. Firstly, we open Excel and enter the data that

is given in the product distribution network, including the shopping cost per unit

shown on the arcs (picture given), the volumes of supply from factories and demand

of wholesalers. We also add the limited truck capacity traveling from Factory 1 to

Warehouse 1 as a constraint

The equations entered into NetFlow (J4:J11) use the difference of two SUMIF

functions to calculate the net flow (outflow minus inflow) generated at each node. In

each case, the first SUMIF function calculates the flow leaving the node and the

second one calculates the flow entering the node.

For example, consider the F1 node (I4). SUMIF(From,I4,Ship) sums each individual
entry in Ship (D4:D11) if that entry is in a row where the entry in From (B4:B11) is

the same as in I4. Since cell I4 means F1 and the only rows that have F1 in the From

column are rows 4 and 5, the sum in the Ship column is only over these same rows, so

this sum is D4 + D5. Similarly, SUMIF(To,I4,Ship) sums each individual entry in

Ship (D4:D11) if that entry is in a row where the entry in To (C4:C11) is the same as

in I4. However, F1 never appears in the To column, so this sum is 0. Therefore, the

overall equation for J4 yields J4 = D4 + D5 = 250 + 150 = 400, which is the net

flow generated at the F1 node.

We will have:

The goal is to minimize the total cost of shipping the product from the factories to the

wholesalers. The cost is the SUMPRODUCT of the Unit Costs with the Ship, or Total

Cost = SUMPRODUCT(UnitCost, Ship). This formula is entered into TotalCost

(D13)

When entering the data into Solver, we will set the objective as cell D13 (TotalCost)

and our target is to minimize the cost (Min) by changing variable cells from

D4:D11(the Number of Unit shipped - or Ship). The constraints of this problem

including:

D4 <= F4 (The number of Units shipped from Factory 1 to Warehouse 1 does

not exceed 250)

J4:J11 = L4:L11 (The Net Flow must equal to the Supply or Demand of

Factories/Wholesalers
Then we click Solver and there is the result:

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