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CHAPTER 9: SUPPLY CHAIN MANAGEMENT

TRUE/FALSE
1.

Materials management involves organizing and coordinating all management functions that
are responsible for every aspect of materials movements and transformations.
ANS:

2.

Internal MM systems do not require control of production materials.


ANS:

3.

Vertical integration is achieved by buying companies able to provide components that are
otherwise purchased from suppliers.
ANS:

9.

Flow shops, like job shops, have a varied and changing set of materials requirements.
ANS:

8.

Flow shops require continuous supply of specific sets of unchanging materials.


ANS:

7.

Quality standards for components and subassemblies do not have to be clearly set by the
materials manager for the producer.
ANS:

6.

Raw materials have value added by the operations. Mining, growing, refining, cleaning,
packing and shipping add value.
ANS:

5.

Logistics which are the tactics of MM production and distribution should always be in
harmony with the companys strategies.
ANS:

4.

Companies that can compete globally have achieved an organizational integration of the
information required for materials control on a global basis.
ANS:

10. Purchasing agents and their buying organizations, have the traditional role of bringing needed

supplies into the organization.


ANS:

11. Purchasing departments in the twentieth century are best described as information-gathering

agencies.
ANS:

12. The price-tag approach has been thrown out in favor of long-term relationships with special,

trusted suppliers.
ANS:

13. The performance of purchasing agents in the supply chain is related to the speed with which

goods move out of the warehouse and off the shelves in relation to the amount of inventory
that is on hand to be drawn down.
ANS:

14. DOI (days of inventory) is a measure that is equivalent to dividing total stock on-hand by the

average demand per day.


ANS:

15. Good turnover brings large rewards and a reputation for purchasing success.

ANS:

16. Purchasing records provide a history of what has been done in the past.

ANS:

17. The purchasing mission includes achieving deliveries on time, receiving inventories,

inspecting all incoming goods, certifying suppliers, and making sure the relationship with
trusted suppliers is stable.
ANS:

18. In the business environment of the United States, personal relationships are not considered to

be a reasonable basis for enterprise decisions. They exist nevertheless in less blatant forms
than in other cultures.
ANS:

19. Wal-Mart uses cross-docking to transfer goods from incoming trucks at the receiving dock to

outgoing trucks at the shipping docks.


ANS:

20. Bidding is a process by which the seller requests competing companies to specify how much

they will charge for their products.


ANS:

21. In bidding, steps must be taken to ensure that quality is not compromised by price

considerations.
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ANS:

ANS:

22. ABC classification of materials is most often done in terms of annual dollar volume. This

identifies the most important SKUs as A-class. Increasing numbers of organizations try to
prepare for shortage situations by overstocking the C-class of items. (Read Chapter 5 on
inventory control.)
ANS:

23. A variant of the dollar volume ABC classification is based on the criticality of SKUs. The

most critical are called A-critical items. (Read Chapter 5 on inventory control.)
ANS:

24. A possible description of critical parts relates to the probability of total process or product

failure when that critical part fails. (Read Chapter 5 on inventory control.)
ANS:

25. Dollar volume is the surrogate for potential savings that can be made by improving the

inventory management of specific materials. (Read Chapter 5 on inventory control.)


ANS:

26. Certification of suppliers is a process for grading suppliers to ensure that suppliers

organizations conform to standards that are essential for meeting the buyers needs.
ANS:

27. Certification of suppliers is not expensive or time-consuming.

ANS:

28. The strategic component came into play during start-up, when deciding what goods were to be

made and what services were to be offered.


ANS:

29. Strategies can be tweaked or changed significantly if they are not delivering according to

plans.
ANS:

30. Value adding occurs when purchased components are further transformed by the companys

production process.
ANS:

31. Critical can mean that when a part fails, it causes product or process failure.

ANS:

34. The bullwhip effect is the amplification of oscillation caused by competitive actions.
ANS: F
35. Simulation is a means for studying the complex interactions of various linkages along the
supply chain.
ANS: T
36. The beer game originated at MIT and has since been used to demonstrate how difficult it can
be to make good decisions without adequate and current information about what is going on at
all points of the supply chain.
ANS: T
37. The distribution chain is another name for the supply chain.
ANS: F
38. The acquisition chain is upstream in the supply chain.
ANS: T
39. Downstream in the supply chain is the distribution chain.
ANS: T
40. Upstream and Downstream are relative terms. What is upstream for one supply chain
participant can be downstream for another.
ANS: T
41. The ethics of purchasing is a moral issue and not a legal one in the USA.
ANS: F

MULTIPLE CHOICE
1. Our company makes an extensive line of products. Marketing lands a big contract for one particular

item that normally sells hundreds per year. The new contract is for thousands per year. What is
triggered by these marketplace demands?
a. hoarding of such materials
b. internal MM information system
c. materials management system
d. order to complete old work in process
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ANS: C
2. The materials management system must be synchronized and coordinated to be

a. effective.
b. interlinked.

c. tolerated.
d. computerized.

ANS: A
3. Co-produced products have much of their additional value-added supplied by the

a. original producer.
b. original employees.

c. suppliers.
d. game-playing teammates.

ANS: C
4. It is to be expected that analysis will continue to indicate that materials have the _____ leverage for

making cost savings.


a. greatest
b. most variable

c. least
d. more flexible

ANS: A
5. Penalties for mistakes made in ordering materials (generally) do not depend on

a.
b.
c.
d.

the kind of product, e.g., freshness dating.


the life-cycle stage of the product.
the process configuration being used.
the software order-placing system.

ANS: D
6. _____ are needed to evaluate and balance the disadvantages of having large amounts of stock on-hand

(SOH) against the benefits of large order quantities placed long in advance of delivery so that
substantial quantity discounts can be obtained.
a. Life-cycle models
c. Order size models
b. Trade-off models
d. all of the above
ANS: B
7. _____ involve smaller order quantities of far more kinds of materials than _____.

a. Job shops; flow shops


b. Flexible shops; flow shops

c. Flow shops; job shops


d. Job shops; intermittent flow shops

ANS: A
8. The cost of materials is often less crucial than _____

a. on-time delivery.
b. project completion date.

c. carrying costs.
d. TQM.

ANS: A
9. Management issues such as what items to buy, when to buy them, from whom to buy, how much to

buy at one time, and how much to pay, are captured by what systems?
a. expediting systems
c. linear programming systems
b. intelligent information systems
d. purchasing discount systems
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ANS: B
10. Which function is part of the responsibilities of the materials control department?

a.
b.
c.
d.
e.

inspecting incoming materials


expediting flows
arranging for and regulating shipments
international accounts payable department
all of the above

ANS: E
11. _____ has become a global system.

a. Freshness dating
b. EDI use

c. Out-sourcing
d. Invoicing

ANS: C
12. What captures the essence of supply chain objectives regarding throughput and value added?

a. turnover
b. inventory turns
c. number of links in the chain

d. both b and c
e. both a and b

ANS: E
13. Failing to achieve high turnover rates can be caused by

a.
b.
c.
d.
e.

carrying excessive inventories.


overestimating demand.
prices being too high for customers.
smart competitive moves.
all of the above

ANS: E

14. _____ provide a useful history of _____.

a.
b.
c.
d.
e.

Purchasing records; discounts obtained


Suppliers records; days of inventory (DOI)
Accounting records; inventory turns
Quality control records; purchase prices
Legal records; ethical issues

ANS: A
15. Coordinating the goals of materials management with those of process management is one of the

greatest responsibilities of the _____


a. CEO.
b. P/OM department.
c. CFO.

d. legal department.
e. marketing department.

ANS: B
16. It is neither ethical nor legal for vendors to use bribes to influence purchasing decisions in _____

a. Japan.
b. Argentina.

c. the U.S.A.
d. Egypt.

ANS: C
17. The receiving facility is often called the _____, and another location for shipping is called a _____.

a.
b.
c.
d.

shipping dock; receiving dock


receiving dock; shipping dock
cross-docking block; dock-crossing block
receiving distribution center; shipping floor

ANS: B
18. Cross-docking is the transfer of goods from _____

a.
b.
c.
d.

incoming trucks at receiving docks to outgoing trucks at shipping docks.


incoming trucks at receiving floors to forklift trucks on the shipping floors.
incoming trucks at shipping docks to outgoing trucks at receiving docks.
outgoing trucks at shipping docks to incoming trucks at receiving docks.

ANS: A
19. Bidding models show that as the number of bidders competing _____, the size of the winning bid

decreases.
a. decreases
b. changes

c. increases
d. is unknown

ANS: C
20. Material shortages hit particularly hard at the _____, because it has the least flexibility in adapting to

changes in the use of materials.


a. flow shop
b. job shop

c. custom shop
d. general-purpose equipment shop

ANS: A
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21. The ABC classification for materials is best described by the _____.

a.
b.
c.
d.

probability of parts failing in rank order from highest to lowest


dollar volume of inventory items in rank order from highest to lowest
important many and the trivial few
trivial many versus the even more trivial few

(Read Chapter 5 on inventory control.)


ANS: B
22. Critical parts refers to

a. parts that shut down the line or seriously delay project completion.
b. parts that combine in many critical ways to form modular systems.
c. products that impact the bottom line in such a way as to cause bankruptcy if projections
are not achieved.
d. products that require special coordination between marketing and P/OM for their
successful introduction.
ANS: A
23. In what way can suppliers be monitored for their compliance with total quality management programs?

a.
b.
c.
d.
e.

ISO 9000 standards


Baldrige Awardsaward criteria
Lead time management programs.
all of the above
none of the above

ANS: D
24. The step-by-step procedure for dealing with criticality relationships is:

a. Systematically rank order parts by their cost; list the most expensive partscostly spare
parts must be shared between depots; inspect spare parts regularly.
b. Make sure to list all critical parts; rank order all critical parts according to their level of
criticality; provide spare parts and backup materials for the most critical parts; regularly
inspect spare parts.
c. Regularly inspect spare parts; list the most critical parts; rank order parts according to their
criticality; provide spare parts and backup materials.
d. Rank order parts according to their criticality; list the most critical parts; provide spare
parts and backup materials; regularly inspect spare parts.
ANS: B
25. MM connects the _____ sourcing of supplies to the _____ scheduling of product to be delivered to the

customer.
a. external; internal
b. internal; external

c. efficient; inefficient
d. none of the above

ANS: A
26. _____ occurs when purchased components are further transformed by the companys production

process.
a. Acquisition

c. Value Adding
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b. RM

d. Extraction

ANS: C
27. Organizations that are in the business of supplying raw materials at the very start of the upstream

acquisition process are themselves dependent on


a. purchasing.
c. acquisition.
b. forecast.
d. both a and c
ANS: A
28. Components (C) and subassemblies (SA) are purchased materials that have _____ value added than

the raw materials of which they are made.


a. less
b. greater

c. same
d. none of the above

ANS: B
29. Analysis is based on running the numbers for alternative taxes and _____ in the countries where

finished goods are purchased and sold.


a. demand
b. WIP

c. tariffs
d. production capacity

ANS: C
30. It is to be expected that analysis will continue to indicate that for most suppliers, their materials costs

have averaged _____ their labor costs.


a. less than
b. more than

c. the same as
d. none of the above

ANS: B
31. Alternatively, carrying large amounts of inventory can be _____, requiring more storage space than is

justified, and running up carrying costs.


a. necessarily costly
b. unpredictable

c. unexpectedly inexpensive
d. unnecessarily costly

ANS: D
32. _____ is reflected in the dollar demand, which is a good measure of item importance.

a. Frequency of usage
b. Quality

c. Forecasting
d. WIP

ANS: A
33. Expectations of buyers for the performance of their suppliers change when there is continuity of their

a. supply coordination.
b. supply-and-demand relationship.

c. none of the above


d. both a and b

ANS: B
34. Companies that can _____ have achieved an organizational integration of the information required for

materials control on an international basis.


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a. compete locally
b. compete globally

c. both a and b
d. neither a nor b

ANS: B
35. _____ purchasing may not be best for every organization, but it is more likely to be the best approach

when the information systems infrastructure supports a global network.


a. Centralization of
c. Information planning for
b. Downsizing of
d. Outsourcing of
ANS: A
36. _____ means following up on orders and doing whatever can be done to move materials faster.

a. Last-in first-out
b. First-in first-out

c. Expediting
d. WIP

ANS: C
37. The importance of the buying function depends upon the extent to which the company requires

a. suppliers.
b. outside suppliers.

c. raw materials suppliers.


d. all of the above

ANS: B
38. The performance of the _____ in the supply chain is related to the speed (or velocity) with which

goods sell and amount of inventory that is on hand to be drawn down.


a. purchasing agent
c. marketing manager
b. company lawyer
d. WIP manager
ANS: A
39. Bullwhip effect refers to

a. shortages
b. overstock

c. both a. and b.
d. safety stock

ANS: C
40. Simulation is used to

a. demonstrate the damping effect of good purchasing decisions


b. the flow of materials upstream
c. the flow of materials downstream
d. effect of purchasing decisions on SOH
ANS: D

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41. The beer game is so named because:

a. the distribution of beer is complex,


b. the first application of simulation to the acquisition chain was Budweiser,
c. students understand the product,
d. the creators at MIT named it that way
ANS: D.

SHORT ANSWER
1. Explain analytic processes. How are they different from synthetic processes?
ANS:
The text does this very well, so we will take a look at one particular aspect at this time.
The analytic process start with tons of raw materials and reduces them to smaller amounts of work-inprocess based on the thought that less bulky goods require less storage space. The opposite effect
occurs for many manufactured products, which employ synthetic processes. They assemble
components into bigger and heavier subassemblies and eventually finished products like farm tractors,
diesel locomotives, automobiles, and commercial airliners. There is clearly an advantage in having
such large and heavy finished goods near to their marketplace so they do not have to be transported
great distances to the customers.
2. To which geographic location has outsourcing moved the labor component?
ANS:
In the 1990s, outsourcing the labor component meant moving plants to Mexico. Later, the plants were
moved to Thailand, Indonesia, Pakistan, Taiwan, and the Republic of China. There have been rotations
from one location to another as problems have surfaced in locations that are far from corporate
headquarters. At the current time, China has become one of the largest sources for labor-intensive
production. India has the award for information services and software.
3. When purchasing is a centralized operation that buys for many different subsidiaries, problems
can surface because some like what they get and others do not. What should be done to
prevent antagonism under such circumstances?
ANS:
When there is antagonism between the buyers and those for whom they buy, many problems can
surface. To prevent this from happening, close communication must be established and the needs of all
parties taken into consideration. Working with purchasing, a good relationship should be established
between subsidiaries and the suppliers. There is increasing belief in a materials system with fewer
suppliers and a greater trust relationship between all parties.

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4. The determination of what to make and what to buy depends on what factors?
ANS:
The importance of the buying function depends upon the extent to which the company requires outside
suppliers. The determination of what to make and what to buy is a P/OM decision; however,
purchasing department information can be crucial. It is evident that the decision often depends on the
terms to buy, including price, quality, delivery, and innovations, among others, which purchasing
learns about and communicates the P/OM team. There is also a need to know about new technology
that makes buying from someone a knowledge drain which cannot be supported.
5. What happens to large unsold inventories?
ANS:
Fashion is fickle. Womens clothing styles change in complex ways. Manufacturers have been caught
with large unsold inventories as a result of committing to a style that did not gain acceptance. When
turnover is poor for retail or mail order, the goods are marked down and sold quickly at large discounts
that provide no profit, and often at a loss. Books and toys that do not sell are marked down and
remaindered.
6. How is DOI calculated?
ANS:
DOI is equivalent to dividing total stock on-hand by the average demand per day.It is the expected
length of time before running out of stockif no further stock is added. DOI changes when new stock
is added (DOI goes up) and when daily demand speeds up (DOI goes down). When daily demand
slows down (DOI goes up). Read Chapter 5 on inventory control.
7. What are Purchasing Records?
ANS:
Purchasing records provide a history of what has been done in the past. Documenting history is useful,
including what the costs were, who the major suppliers were, what discounts were obtained, what
quality levels achieved, and delivery periods for specific items. Without documentation, the supplier
history of a company can be lost. At the same time, the history must be updated regularly since things
change at a rapid rate.
8. Name some of activities accomplished by the purchasing mission.
ANS:
Purchasing is usually responsible for the following functions, which might be called the purchasing
mission: Ordering what is needed in the right quantities and then meeting all quality standards at the
best possible pricesalways achieving delivery reliability. This mission must be coordinated with
P/OM and marketing with respect to what is going to be needed when. Purchasing must be assisted by
P/OM in predicting the amount of scrap. By increasing order sizes to compensate, costly reorders can
be avoided for a small number of units needed to complete orders. Receiving inventories is part of the
materials management function. Often, but not always, receiving is the responsibility of purchasing.
Some organization must determine that deliveries are on time and that P/OM will have what it needs as
it schedules production runs.

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Will just-in-time be used, or will extra stock be carried just-in-case? These decisions require
communication and coordination between P/OM and the PAs. It is essential to inspect the incoming
goods to make sure that their qualities meet specifications, and that the right quantities have been
delivered. Purchasing is a specialist in knowing which suppliers to use. Sometimes, the PAs are in
charge of certification of suppliers. See Enrichment Activity 12. Keep in touch with change. That is
essential. Purchasing is the materials management function to consult when engineering design
changes (EDCs) occur that demand changes in the specifications of purchased materials. What
happens to the stock on-hand that is outmoded? How fast can the new specifications be made and
shipped? If the company is constantly changing designs (which many are doing) then knowing which
suppliers can cope with shifting demands is crucial. Stability of supply relationships can have
inestimable value. Purchasing must be adept at coordinating the materials that are needed for start-ups.
The management dynamics that are associated with start-ups are entirely different from those that
operate successfully for mature products.
9. Are legal contracts just as important in Japan as they are in the USA? What about China?
ANS:
There is a cultural difference in the importance of legal contracts in the United States as compared to
many other countries. For example, on a per capita basis, Japan has about 6 percent of the lawyers that
practice in the United States. The Chinese do not value legal contracts in the same way that the United
States does. These differences have significant impact on the way P/OM proceeds in other countries.
We are just learning about China. It seems that politicians in the government have rules and laws that
they uphold. American lawyers do not know very much about all that, but although the learning curve
is steep, there is much learning going on.
10. Explain cross-docking.
ANS:
Cross-docking is transferring goods from incoming trucks at the receiving dock to outgoing trucks at
the shipping docks. This means that a large percentage of goods never enters the warehouse but
crosses from one dock to the other. Such cross-docking has been credited with saving substantial
amounts of money and time. It is often cited as an example of how P/OMs creativity improved the
logistics of distribution operations.
11. Explain the bullwhip effect.
ANS: When SOH and orders for replenishment are not transparent along the supply chain,
there is an amplification of corrective actions which without proper feedback create increasing
oscillations of over and under stock conditions. The amplification of these distortions is the
reverse of what is needed which is damping of wild swings through feedback of information.
12. Downstream and upstream are obvious references to flow patterns of rivers. How is that
relevant to supply chains?

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ANS: There are


many similarities. The headwaters are where the rivers start. They are the sources of the most basic
materials that eventual get transformed into components and ultimately airplanes that fly and autos that
drive. Mining, agriculture and forestry are good analogs for the headwaters. Moving downstream the
analogies continue until eventually, way downstream, the rivers empty into the oceans which is where
the final consumers get delivery PROBLEMS
1. Assume that downsizing could save the EnviroGuard Pest Control $10,000 in annual labor costs. The
downsizing study costs $25,000. If, instead, the study focused on materials savings, what would be the
net payoff for the first year? Assume that average firm ratios for labor and materials costs apply. Also,
assume that $25,000 will cover the cost of either the labor study or the materials study but not both.
Hint: material costs average about three times labor costs.
ANS:
Since material costs average about three times labor costs, the savings in material cost would be
$10,000 x 3 = $30,000. The materials savings study cost is $25,000 so the net payoff is $5,000. It is
recommended to study materials savings.
2. If the ratio of labor costs to materials costs is 1/4 and labor costs are decreasing by 20 percent per year
while material costs are increasing by 10 percent per year, what is the ratio at the end of the second
year? (Note: This means that at the present time labor costs are 25 percent of materials costs.)
ANS:
At present: Labor costs (L)/Material costs (M) = L/M = 0.25
Labor costs two years from now are L* = (.80)(.80)L = 0.64L
Material costs two years from now are M* = (1.1)(1.1)M = 1.21M
Thus the ratio of L*/M* = 0.64L/1.21M = (0.64/1.21) x L/M = 0.5289 .25 = 0.132
This is equivalent to a ratio of about 1:7.6.
Material costs have become much more significant in the two year period.
3. If labor is 20 percent and materials 80 percent of COGSsay $20 and $80, then a 10 percent reduction
in labor costs yields $18 added to $80 totals $98. This produces a 2 percent reduction in total costs
[i.e., (100 98)/100 = 0.02]. Make the same comparison for a 20 percent reduction in materials costs.
ANS:
Applying the 20 percent reduction to materials cost, starting with $20 for labor and $80 for materials
makes them now $20 for labor and $64 for materials for a total of $84. Thus the reduction in total cost
is ($100-$84)/100 = 0.16 or 16 percent.
That is great leverage for the value of material reductions. A 20 percent reduction in material costs
results in a 16 percent reduction in total costs, whereas, a 10 percent reduction in labor costs results in
a 2 percent reduction in total costs. Go for the materials savings.

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4. Calculate the inventory turnover rate when monthly net sales are $100 million and average inventory
evaluated at the selling price is $225 million. What might this product be and comment on this level of
turnover for such a product.
ANS:
Inventory Turns = Annual Net Sales/Average Inventory Per Year
= 12(100)M/225M
= 5.33 turns per year
This could be typical of suites of furniture in a relatively high-priced showroom. Thomasville
Furniture targeted the goal of eight inventory turns some years ago and it may have been achieved.
5. Calculate the days of inventory (DOI) if average inventory is $100 million (calculated in terms of
costs) and the monthly cost of goods sold (COGS) is $85 million. Use 30 days per month.
ANS:
DOI is calculated as: Average Dollar Inventory/Cost of Goods Sold Per Day
DOI = $100 M/($85 M/30 days) = $100 M/(2.833) = 35.29 days of inventory (which is roughly
equivalent to 10 turns per year {365 days per year/35.29}).

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6. Use the weighted sum method to score the vendors in the table below and compare the results..

Vendor Scoring Certification Model


Weights add to 100; Best cell score is 10; Best total score is 1000.
Factors

Weights

Vendor A

Vendor B

Vendor C

Vendor D

Price/unit (1)

20

10

Average Quality Level (2)

25

Quality Consistency (3)

10

Delivery LT (4)

JIT ability (5)

Design Flexibility (6)

Design Change Speed (7)

Product line Diversity (8)

Services Promised (9)

Attitude Perceived (10)

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Weight and Factor Scales used: 1 to 10 for each cell entry; 10 being best.
ANS;
Vendor A Vendor B Vendor C Vendor D
Answer
100
547
661
565
461
Vendor B with a total score of 661 is the best; followed by Vendor C(565) and Vendor A (547). Vendor
D is the worst at 461.

See Excel File TB: Ch. 10 Facilities Problem 9 for detailed calculations.
Additional problems can be generated by changing the values of the variables.
7. Consider the data given in the following table and find the optimal distribution policy.
Distributors

Plants

Capacity

P1

$3.00

$3.00

$2.50

$1.50

25,000

P2

$1.00

$2.50

$2.25

$3.00

40,000

P3

$2.50

$1.50

$4.00

$3.00

30,000

Demand

25,000

13,500

21,800

34,700

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Plants

Distributors
A

Total
Shipped

Constraint
Type

Capacity

P1

25,000

25,000

25,000

P2

18,200

21,800

40,000

40,000

P3

6,800

13,500

9,700

30,000

30,000

Total
Received

25,000

13,500

21,800

34,700

95,000

Constraint
Type

25,000

13,500

21,800

34,700

Demand

95,000

95,000

Plants

Unit Cost of Transportation


A

P1

$3.00

$3.00

$2.50

$1.50

P2

$1.00

$2.50

$2.25

$3.00

P3

$2.50

$1.50

$4.00

$3.00

Plants

Total Transportation Cost


A

Total
Cost

P1

$0

$0

$0

$37,500

$37,500

P2

$18,200

$0

$49,050

$0

$67,250

P3

$17,000

$20,250

$0

$29,100

$66,350

Total Cost

$35,200

$20,250

$49,050

$66,600

$171,100

See Excel File TB SCM Transportation Model Problems 8 & 9 for detailed calculations.
Additional problems can be generated by changing the values of the variables.

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8.

Find the optimal solution to problem 8 if the shipment from P1 to D is not feasible.

ANS
Since P1 to D is not feasible, make cost from P1 to D very high, say 99,000 and solve the problem.
The solution is given below.

Plants

Distributors
A

Total
Shipped

Constraint
Type

Capacity

P1

3,200

21,800

25,000

25,000

P2

25,000

15,000

40,000

40,000

P3

10,300

19,700

30,000

30,000

Total
Received

25,000

13,500

21,800

34,700

95,000

Constraint
Type

25,000

13,500

21,800

34,700

Demand

95,000

95,000

Plants

Unit Cost of Transportation


A

P1

$3.00

$3.00

$2.50

$99,000.00

P2

$1.00

$2.50

$2.25

$3.00

P3

$2.50

$1.50

$4.00

$3.00

Plants

Total Transportation Cost


A

Total
Cost

P1

$0

$9,600

$54,500

$0

$64,100

P2

$25,000

$0

$0

$45,000

$70,000

P3

$0

$15,450

$0

$59,100

$74,550

Total Cost

$25,000

$25,050

$54,500

$104,100

$208,650

See Excel File TB SCM Transportation Model Problems 8 & 9 for detailed calculations.
Additional problems can be generated by changing the values of the variables.

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