1657540238654-Chpter 06 An Introduction To Management Science

Anderson Sweeney Williams Camm Cochran Fry Ohlmann
An Introduction to
Management Science, 15e
Quantitative Approaches to Decision Making
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Chapter 6: Distribution and Network Models
6.1 – Supply Chain Models

6.2 – Assignment Problem
6.3 – Shortest-Route Problem
6.4 – Maximal Flow Problem
6.5 – A Production and Inventory Application
2
Transportation, Transshipment, and Assignment Problems
The models discussed in this chapter belong to a special class

of linear programming problems called network flow problems.
Examples: Supply chains, transportation and transshipment

problems, assignment problems, shortest-route problems, and
maximal flow problems.
In each case, we present a graphical representation of the

problem in the form of a network. We then show how the
problem can be formulated and solved as a linear program.
3
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.
4
Transportation Problem (1 of 12)
• The transportation problem arises frequently in planning

for the distribution of goods and services from several
supply locations to several demand locations.
• Typically, the quantity of goods available at each supply
location (origin) is limited, and the quantity of goods needed
at each of several demand locations (destinations) is known.
• The usual objective in a transportation problem is to
minimize the cost of shipping goods from the origins to the
destinations.
5
Let us consider a transportation problem faced by Foster

Generators. This problem involves the transportation of a
product from three plants to four distribution centers. Foster
Generators operates plants in Cleveland, Ohio; Bedford,
Indiana; and York, Pennsylvania.
Production capacities over the next three-month planning
period for one particular type of generator are as follows:
Three-Month Production
Origin Plant Capacity (units)
1 Cleveland 5,000
2 Bedford 6,000
3 York 2,500
Total 13,500
6
The firm distributes its generators through four regional

distribution centers located in Boston, Chicago, St. Louis, and
Lexington; the three-month forecast of demand for the
distribution centers is as follows:
Three-Month Production
Origin Plant Capacity (units)
1 Boston 6,000
2 Chicago 4,000
3 St. Louis 2,000
4 Lexington 1,500
Total 13,500
Management would like to determine how much of its production

should be shipped from each plant to each distribution center.
7
Here is a graph showing the 12

distribution routes Foster can use.
• Such a graph is called a

network.
• The circles are referred to as
nodes and the lines connecting
the nodes as arcs.
• Note that the direction of flow
(from origin to destination) is
indicated by the arrows.
8
• Each origin and destination is

represented by a node, and
each possible shipping route is
represented by an arc.
• The amount of the supply is
written next to each origin
node, and the amount of the
demand is written next to each
destination node.
• The goods shipped from the
origins to the destinations
represent the flow in the
network.
9
The objective is to determine the

routes to be used and the quantity
to be shipped via each route that
will provide the minimum total
transportation cost.
The cost for each unit shipped on
each route is shown on each arc.
10
A linear programming model can be used to solve this

transportation problem. We use double-subscripted decision
variables, with
x11 = the number of units shipped from origin 1 (Cleveland) to
destination 1 (Boston)
x12 = the number of units shipped from origin 1 (Cleveland) to
destination 2 (Chicago), and so on.
In general, the decision variables for a transportation problem

having m origins and n destinations are written as follows:
X i  number of units shipped from origin i to destination j
where i  1, 2,..., m and j  1, 2,..., n
11
Because the objective of the transportation problem is to

minimize the total transportation cost, we develop the following
cost expressions:
Transportation costs for units shipped from Cleveland
 3 x11  2 x12  7 x13  6 x14
Transportation costs for units shipped from Bedford
 7 x21  5 x22  2 x23  3 x24
Transportation costs for units shipped from York
 2 x31  5 x32  4 x33  5 x34
The sum of these expressions provides the objective function
showing the total transportation cost for Foster Generators.
12
Transportation problems need constraints because each origin

has a limited supply and each destination has a demand.
The constraints for the total number of units shipped are:
Cleveland supply x11  x12  x13  x14  5000
Bedford supply x21  x22  x23  x24  6000
York supply x31  x32  x33  x34  2500
With the four distribution centers as the destinations, four
demand constraints are needed:
Boston demand x11  x21  x31  6000
Chicago demand x12  x22  x32  4000
St. Louis demand x13  x23  x33  2000
Lexington demand x14  x24  x34  1500
13
Here is the optimal solution for the Foster Generators

Transportation Problem:
Optimal Objective Value = 39500.00000
Variable Value Reduced Cost
X11 3500.00000 0.00000
X12 1500.00000 0.00000
X13 0.00000 8.00000
X14 0.00000 6.00000
X21 0.00000 1.00000
X22 2500.00000 0.00000
X23 2000.00000 0.00000
X24 1500.00000 0.00000
X31 2500.00000 0.00000
X32 0.00000 4.00000
X33 0.00000 6.00000
X34 0.00000 6.00000
14
The minimal cost transportation schedule is:
Route (From) Route (To) Units Shipped Cost per Unit Total Cost
Cleveland Boston 3500 $3 $10,500
Cleveland Chicago 1500 $2 $ 3,000
Bedford Chicago 2500 $5 $12,500
Bedford St. Louis 2000 $2 $ 4,000
Bedford Lexington 1500 $3 $ 4,500
York Boston 2500 $2 $ 5,000
$39,500
15
And the network diagram for
the optimal solution is:
For example, 3500 units

should be shipped from
Cleveland to Boston, and
1500 units should be
shipped from Cleveland to
Chicago.
16
Transshipment Problem (1 of 13)
The transshipment problem is an extension of the transportation

problem in which intermediate nodes, referred to as transshipment
nodes, are added to account for locations such as warehouses.
• In this general type of distribution problem, shipments may be
made between any pair of the three general types of nodes:
origin nodes, transshipment nodes, and destination nodes.
• As was true for the transportation problem, the supply available
at each origin is limited, and the demand at each destination is
specified.
• The objective in the transshipment problem is to determine how
many units should be shipped over each arc in the network so
that all destination demands are satisfied with the minimum
possible transportation cost.
17
Consider the transshipment

problem faced by Ryan
Electronics. Ryan is an
electronics company with
production facilities in Denver
and Atlanta. Components
produced at either facility may
be shipped to either of the firm’s
regional warehouses, which are
located in Kansas City and
Louisville. From the regional
warehouses, the firm supplies
retail outlets in Detroit, Miami,
Dallas, and New Orleans.
18
We need a constraint for

each node and a variable for
each arc. Let xij denote the
number of units shipped
from node i to node j.
For example, x13 denotes the
number of units shipped
from the Denver plant to the
Kansas City warehouse, x14
denotes the number of units
shipped from the Denver
plant to the Louisville
warehouse, and so on.
19
Because the supply at the

Denver plant is 600 units, the
amount shipped from the
Denver plant must be less
than or equal to 600.
Mathematically, we write this
supply constraint as
x13  x14  600.
Similarly, for the Atlanta plant
we have
x23  x24  400.
20
We now consider how to write the constraints corresponding to

the two transshipment nodes.
For node 3 (the Kansas City warehouse), we must guarantee
that the number of units shipped out must equal the number of
units shipped into the warehouse. If the number of units shipped
out of node 3 equals x35  x36  x37  x38
And the number of units shipped into node 3 equals x13  x23
we obtain x35  x36  x37  x38  x13  x23
Placing all the variables on the left-hand side provides the
constraint corresponding to node 3 as
 x13  x23  x35  x36  x37  x38  0
Similarly, the constraint corresponding to node 4 is
 x14  x24  x45  x46  x47  x48  0
21
To develop the constraints associated with the destination

nodes, we recognize that for each node the amount shipped to
the destination must equal the demand.
For example, to satisfy the demand for 200 units at node 5 (the
Detroit retail outlet), we write x35  x45  200.
Similarly, for nodes 6, 7, and 8, we have
x36  x46  150
x37  x47  350
x38  x48  300
As usual, the objective function reflects the total shipping cost
over the 12 shipping routes.
22
Combining the objective function and constraints leads to a 12-

variable, 8-constraint linear programming model of the Ryan
Electronics transshipment problem.
23
The optimal solution for the Ryan Electronics Transshipment

problem is shown here.
X13 550.00000 0.00000
X14 50.00000 0.00000
X23 0.00000 3.00000
X24 400.00000 0.00000
X35 200.00000 0.00000
X36 0.00000 1.00000
X37 350.00000 0.00000
X38 0.00000 0.00000
X45 0.00000 3.00000
X46 150.00000 0.00000
X47 0.00000 4.00000
X48 300.00000 0.00000
24
The optimal solution for the Ryan Electronics Transshipment

problem is shown here.
Route (From) Route (To) Units Shipped Cost per Unit Total Cost
Denver Kansas City 550 $2 $1100
Denver Louisville 50 $3 $ 150
Atlanta Louisville 400 $1 $ 400
Kansas City Detroit 200 $2 $ 400
Kansas City Dallas 350 $3 $ 1050
Louisville Miami 150 $4 $ 600
Louisville New Orleans 300 $5 $1500
$5200
25
For an illustration of a
more general type of
transshipment problem,
let us modify the Ryan
Electronics problem.
Suppose that it is
possible to ship directly
from Atlanta to New
Orleans at $4 per unit
and from Dallas to New
Orleans at $1 per unit.
26
The new variables x28 and x78 appear in the objective function
and in the constraints corresponding to the nodes to which the
new arcs are connected.
27
The value of the optimal solution has been reduced $600 by allowing these
additional shipping routes. The value of x28 = 300 indicates that 300 units are
being shipped directly from Atlanta to New Orleans. The value of x78 = 0
indicates that no units are shipped from Dallas to New Orleans in this solution.
X13 550.000 0.00000
X14 50.000 0.00000
X23 0.000 3.00000
X24 100.000 0.00000
X35 200.000 0.00000
X36 0.000 1.00000
X37 350.000 0.00000
X38 0.000 2.00000
X45 0.000 3.00000
X46 150.000 0.00000
X47 0.000 4.00000
X48 0.000 2.00000
X28 300.000 0.00000
X78 0.000 0.00000
28
As with transportation problems, transshipment problems may be

formulated with several variations, including
1. Total supply not equal to total demand
2. Maximization objective function
3. Route capacities or route minimums
4. Unacceptable routes
The linear programming model modifications required to
accommodate these variations are identical to the modifications
required for the transportation problem. When we add one or
more constraints of the form xij ≤ Lij to show that the route from
node i to node j has capacity Lij, we refer to the transshipment
problem as a capacitated transshipment problem.
29
Assignment Problem (1 of 11)
The assignment problem arises in a variety of decision-

making situations; typical assignment problems involve
assigning jobs to machines, agents to tasks, sales personnel to
sales territories, contracts to bidders, and so on.
• A distinguishing feature of the assignment problem is that
one agent is assigned to one and only one task.
• Specifically, we look for the set of assignments that will
optimize a stated objective, such as minimize cost, minimize
time, or maximize profits.
30
Let’s consider the case of Fowle Marketing Research, which has

received requests for market research studies from 3 new clients.
• The company faces the task of assigning a project leader
(agent) to each client (task).
• Three individuals have no other commitments and are
available for the project leader assignments.
• The time required to complete each study will depend on the
experience and ability of the project leader assigned.
• The three projects have approximately the same priority, and
management wants to assign project leaders to minimize the
total number of days required to complete all three projects.
• A project leader is to be assigned to one client only.
31
Fowle’s management must first consider all possible project

leader–client assignments and then estimate the corresponding
project completion times. With three project leaders and three
clients, nine assignment alternatives are possible.
Here are the estimated project completion times (days) for each
possible project leader–client assignment:
Client
Project Leader 1 2 3
1. Terry 10 15 9
2. Carle 9 18 5
3. McClymonds 6 14 3
32
Note the similarity

between the network
models of the assignment
problem and the
transportation problem.
33
The assignment problem is a special case of the transportation

problem in which all supply and demand values equal 1, and the
amount shipped over each arc is either 0 or 1.
• If x11 = 1, we interpret this as “project leader 1 (Terry) is
assigned to client 1.”
• If x11 = 0, we interpret this as “project leader 1 (Terry) is not
assigned to client 1.”
Using this notation and the completion time data, we develop
completion time expressions:
Days required for Terry's assignment  10 x11  15 x12  9 x13
Days required for Carle's assignment  9 x21  18 x22  5 x23
Days required for McClymonds's assignment  6 x31  14 x32  3x33
34
The sum of the completion times for the 3 project leaders provide
the total days required to complete the three assignments. Thus,
the objective function is
Min 10 x11  15 x12  9 x13  9 x21  18 x22  5 x23  6 x31  14 x32  3x33 .
The constraints reflect the conditions that each project leader
can be assigned to at most one client and each client must have
one assigned project leader. These constraints are:
x11  x12  x13  1 Terry's assignment
x21  x22  x23  1 Carle's assignment
x31  x32  x33  1 McClymonds's assignment
x11  x12  x13  1 Client 1
x12  x22  x32  1 Client 2
x13  x23  x33  1 Client 3
35
Combining the objective function and constraints into one model
provides the following nine-variable, six-constraint linear
programming model:
36
The optimal solution is:
X11 0.00000 0.00000
X12 1.00000 0.00000
X13 0.00000 2.00000
X21 0.00000 1.00000
X22 0.00000 5.00000
X23 1.00000 0.00000
X31 1.00000 0.00000
X32 0.00000 3.00000
X33 0.00000 0.00000
Project Leader Assigned Days

Client
Terry 2 15
Carle 3 5
McClymonds 1 6
37
Because the assignment problem can be viewed as a special

case of the transportation problem, the problem variations that
may arise in an assignment problem parallel those for the
Specifically, we can handle
1. Total number of agents (supply) not equal to the total
number of tasks (demand)
2. A maximization objective function
3. Unacceptable assignments
38
If the total number of agents (supply) are not equal to the total
number of tasks (demand):
• This is analogous to total supply not equaling total demand in a
• The extra agents simply remain unassigned in the linear
programming solution.
• If the number of tasks exceeds the number of agents, the linear
programming model will not have a feasible solution. By adding two
dummy project leaders, we can create a new assignment problem
with the number of project leaders equal to the number of clients.
The objective function coefficients for the assignment of dummy
project leaders would be zero so that the value of the optimal
solution would represent the total number of days required by the
assignments actually made.
39
If the assignment alternatives are evaluated in terms of revenue

or profit rather than time or cost, the linear programming
formulation can be solved as a maximization rather than a
minimization problem.
If one or more assignments are unacceptable, the corresponding

decision variable can be removed from the linear programming
formulation. This situation could happen if an agent did not have
the experience necessary for one or more of the tasks.
40
Shortest-Route Problem
The shortest-route problem is concerned with finding the

shortest path in a network from one node (or set of nodes) to
another node (or set of nodes).
• If all arcs in the network have nonnegative values then a
labeling algorithm can be used to find the shortest paths
from a particular node to all other nodes in the network.
• The criterion to be minimized in the shortest-route problem
is not limited to distance even though the term "shortest" is
used in describing the procedure. Other criteria include
time and cost. (Neither time nor cost are necessarily
linearly related to distance.)
41
Maximal Flow Problem
The objective in a maximal flow problem is to determine the

maximum amount of flow (vehicles, messages, fluid, etc.) that
can enter and exit a network system in a given period of time.
• In this problem, we attempt to transmit flow through all arcs of the
network as efficiently as possible.
• The amount of flow is limited due to capacity restrictions on the
various arcs of the network. For example, highway types limit
vehicle flow in a transportation system, while pipe sizes limit oil flow
in an oil distribution system.
• The maximum or upper limit on the flow in an arc is referred to as
the flow capacity of the arc.
• Even though we do not specify capacities for the nodes, we do
assume that the flow out of a node is equal to the flow into the
node.
42
A Production & Inventory Application
• Transportation and transshipment models can be

developed for applications that have nothing to do with the
physical movement of goods from origins to destinations.
• A transshipment model can be used to solve a production
and inventory problem.
Ex: Contois Carpets is a small manufacturer of carpeting for home
and office installations. Production capacity, demand, production
cost per square yard, and inventory holding cost per square yard
for the next four quarters are determined. Production capacity,
demand, and production costs vary by quarter, whereas the cost of
carrying inventory from one quarter to the next is constant at $0.25
per yard. Contois wants to determine how many yards of carpeting
to manufacture each quarter to minimize the total production and
inventory cost for the four-quarter period.
43
End of Presentation: Chapter 6
44

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Anderson Sweeney Williams Camm Cochran Fry Ohlmann

6.1 – Supply Chain Models

The models discussed in this chapter belong to a special class

Examples: Supply chains, transportation and transshipment

In each case, we present a graphical representation of the

• A supply chain describes the set of all interconnected

• The transportation problem arises frequently in planning

Let us consider a transportation problem faced by Foster

The firm distributes its generators through four regional

Management would like to determine how much of its production

Here is a graph showing the 12

• Such a graph is called a

• Each origin and destination is

The objective is to determine the

A linear programming model can be used to solve this

In general, the decision variables for a transportation problem

Because the objective of the transportation problem is to

Transportation problems need constraints because each origin

Here is the optimal solution for the Foster Generators

The minimal cost transportation schedule is:

For example, 3500 units

The transshipment problem is an extension of the transportation

Consider the transshipment

We need a constraint for

Because the supply at the

We now consider how to write the constraints corresponding to

To develop the constraints associated with the destination

Combining the objective function and constraints leads to a 12-

The optimal solution for the Ryan Electronics Transshipment

The optimal solution for the Ryan Electronics Transshipment

As with transportation problems, transshipment problems may be

The assignment problem arises in a variety of decision-

Let’s consider the case of Fowle Marketing Research, which has

Fowle’s management must first consider all possible project

Note the similarity

The assignment problem is a special case of the transportation

Project Leader Assigned Days

Because the assignment problem can be viewed as a special

If the assignment alternatives are evaluated in terms of revenue

If one or more assignments are unacceptable, the corresponding

The shortest-route problem is concerned with finding the

The objective in a maximal flow problem is to determine the

• Transportation and transshipment models can be

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