NOVA RICE

Project Report
DISC 322: Optimization
Instructor: Kamran Rashid
Group 4
Mirza Ameen Hyder 19110262
Jawwad Hassan 19110282
Afzaal Ahmed 19110214
Mutahhar Iqbal 19110218
Syed Muhammad Zubair Tariq 19110175
Umar Habib 19110294
Saad Qamar 19110185
Hamza Hasnain 19110211
Introduction:

We are delighted to work with NOVA Rice Company for our project. The company is located in
Malikwaal Village Hafzabad, and their head office is situated at Zafar Ali road Gulberg Lahore.
This company collects paddy rice from rural areas of the village. NOVA Rice company also has
its own agricultural land so most of the rice that it sells is harvested in this land but due to any
discrepancy if extra rice is needed then it is bought from other farmers. The company sells rice in
three types of packages i.e. 1 KG, 2 KG and 5 KG. The production cost of these packages is same
but due to differentiation in the demand, the warehouse cost (holding cost) becomes different for
each type of package.

Main target of this company is the market of Lahore so this rice is sold in Lahore through different
shopping malls i.e. Hyperstar, Metro etc. The demand of each shopping mall is different so the
transportation cost to each mall also changes with respect to the quantity of rice demanded and
their distances from the company. Moreover the company covers all of its manufacturing and non-
manufacturing cost from the revenues that it gets from the sale of its rice.
Problem:
The Nova Rice is a small rice mill located at GT road Lahore. Their business proposition is high
quality product in low price. As a cost cutting measure they do not have their own transportation
vehicle. Whenever they want to deliver their product they hire trucks from private logistical
companies in Lahore.
Company faces two types of problems in this type of transportation:
 Which logistical company to hire for transportation based on the type of vehicle they are
providing so that the total transportation cost is minimized and maximum capacity of the
vehicle hired is utilized at the maximum.
 How many vehicle to hire.
 The optimal route of transporting rice to different demand locations.
The company has always relied on intuitive decision of the operations manager (which is also
our contact person) in selecting which vehicle to hire for the purpose of transportation. They
have never applied the optimization techniques and methods in finding out the best answers to
the problem, which we have done in this project.
Data:
After negotiating much and presenting our ideas about how we can minimize their cost through
optimization methods, the operation manager gave us the figures of monthly demand of their
major clients and the options of transportations they have. Since the demand figures fluctuates
every month for each client, the average of the demand figure has been taken for reaching out a
single figure. Also there is no fix pricing mechanism of the logistics companies they are hiring
for the purpose. For the sake of simplicity they have given us the rate the companies charges
them on per kg basis.
Demand of Various Nodes
Node Location Name Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17
1 Akbari Shopping Mall (Allama Iqbal Road) 1500 1570 2000 3000 3220 2560 2500 2500 2200 2250 2000 1870
2 Metro (Airport) 3200 3350 3500 3500 3750 3700 3880 3880 3400 3220 3200 3000
3 Metro (Model Town) 3070 3838 3033 3574 3223 3338 3563 3781 3006 3624 3800 3093
4 Metro (Multan Road) 3283 3532 3166 2937 3023 2898 2961 3521 3465 3773 3034 3027
5 Emporium Mall (Johar Town) 5342 5790 5184 5420 5492 5671 5257 5914 5109 5992 5164 5298
6 Al-Fetah (Liberty) 2543 2435 3343 2436 3655 2214 3303 2213 2473 3366 2760 3192
7 Al-Fetah (DHA) 2898 2844 2202 2774 2271 2324 2722 2593 2506 2190 2550 2523
8 Rahat (Sarwar Road) 7561 8216 7702 8552 8868 8617 8807 7079 7179 7183 7647 7056
9 Hyperstar (Fortress) 6051 6745 6019 6108 6696 6121 6973 6287 6751 6343 6907 6818
10 The Global Market (College Road) 3576 3628 3994 3778 3609 3852 3890 3708 3528 3627 3926 3884

Transportation Options:
Assigned Notation Trasportation Agencies Maximum Load Capacity (Ton) Maximum Load Capacity (Kg) Cost of Transportation (Rs/Kg)
A Sealand Logistics 20 20000 3.19
B Marshall Movers 12 12000 4.79
C Delta Movers 25 25000 2.4

Assumptions:
In order to run the model on excel and to limit the scope of model we have made certain
assumptions which are listed below:
 There are only ten major clients to which the company is providing the delivery service
which are mentioned in the figure 1 of the Appendix.
 The demand of the rice from all the customers occurs around the same time frame that is
end of the month.
 The hired vehicle can move in any direction that is from any node to any other node.
 Only one vehicle could supply a customer. It must fulfill its demand at once.
 In a route a location cannot be visited twice.
 The route will start and end at the 0th node which is the supplying depot of Nova Rice
located at Zafar Ali Road Lahore.
Model:
Decision Variables:
XijK = whether to supply from ith node to jth node by vehicle K.
Where
i = {0,1,2,3,4,5,6,7,8,9,10}
j = {1,2,3,4,5,6,7,8,9,10,0}
K = {A, B, C}
XijK is binary variable.
Explanation:
There are total 330 different decision variables which has come out of different combinations of
routes with the three vehicle options A, B and C.
Note: Since the number of variable are so large ordinary solver cannot solve the model hence
extended solver named as OpenSolver has been used for getting the solution of the model.
Objective Function:
There are two Objective Functions:
Since the number of variable are very huge we have used summation operator to write our
objective functions.
Transportation Cost:

Min: ∑10 10 𝐶
𝑖=0 𝑚𝑖 ∑𝑗=1,𝑖 ≠𝑗 ∑𝑘=𝐴 𝑋𝑖𝑗𝑘 *Ck
where
mi = the demand of the ith node.
Ck = cost of transportation (Rs/Kg)
Xijk = whether the kth vehicle will supply the rice from ith node to jth node or not.1
Explanation:
Since the transportation providers are charging the Nova Rice on per kg basis, the transportation
cost will be calculated as the demand of that node to which the vehicle is going to deliver the rice
multiplied by the decision variable (since only one will be chosen along all the different
combinations) multiplied by the cost of the vehicle which is chosen for transportation by the
model,
Capacity Utilization:

Min: ∑10
𝑗=1 𝑋𝑜𝑗𝐴 ∗ 𝑄𝐴 − ∑ 10
𝑖=0 𝑚𝑖 ∑ 10
𝑗=1,𝑖 ≠𝑗 𝑋𝑖𝑗𝐴
+ ∑10
𝑗=1 𝑋𝑜𝑗𝐵 ∗ 𝑄𝐵 − ∑ 10
𝑖=0 𝑚𝑖 ∑ 10
𝑗=1,𝑖 ≠𝑗 𝑋𝑖𝑗𝐵
+ ∑10
𝑗=1 𝑋𝑜𝑗𝐶 ∗ 𝑄𝐶 − ∑ 10
𝑖=0 𝑚𝑖 ∑ 10
𝑗=1,𝑖 ≠𝑗 𝑋𝑖𝑗𝐶

Where
Qk = the maximum quantity of rice in kilo grams a truck can carry. k = {A, B, C}
Explanation:
The number of vehicle implied by the Nova Rice will be calculated by counting how many
variables of type Xoj are equal to one in all three vehicle types since the greater the number of
initial nodes (0-1 and 0-2) the greater the number of vehicle will be. The total trucks chosen will
be multiplied by their respective capacities to calculate the total capacity the company have in
kilograms in each vehicle. The actual amount of kilograms will be calculated by multiplying
decision variables which are equal to one by the respective demand they of the node they are
delivering to. This will calculate the actual kilograms of rice that are loaded in the trucks.
Minimizing the difference of these two will result in maximum capacity utilization of the trucks
employed.
Also we tried to do the goal programming but due to some technical error by solver we are
unable to do so, hence we have done minimization on the sum of deviation of targeted values of
each objective function. As shown below:
Min: w1 (Transportation Cost Actual – Targeted Transportation Cost) / (Targeted Transportation Cost)

+ w2 (Capacity Utilization Actual – Targeted Capacity Utilization) / (Targeted Capacity Utilization)

Whereas W1 and W2 are weights which shows the how much priority a company gives to each
of the objective. We have simply put them equal to 100 and 5 since company top most priority is
cost and capacity maximization is not of much concern them.
Constraints:
1. One node should be visited only once by only one vehicle:
10
𝐶 10
∑∑ ∑ 𝑋𝑖𝑗𝑘 = 1
𝑘=𝐴 𝑗=1,𝑗≠𝑖
𝑖=0

2. A route should start and end at the initial supply point located at the zafar ali road. Also
the first supply node cannot be the final supply node before the end of the route.
 10
𝐶 10
∑∑ ∑ 𝑋𝑖𝑗𝑘 ≤ 1
𝑘=𝐴 𝑗=1,𝑗≠𝑖
𝑖=0
10 10
∑ 𝑋𝑜𝑗𝐴 = ∑ 𝑋𝑖𝑜𝐴
𝑗=1 𝑖=1

10 10
∑ 𝑋𝑜𝑗𝐵 = ∑ 𝑋𝑖𝑜𝐵
𝑗=1 𝑖=1

10 10
∑ 𝑋𝑜𝑗𝐶 = ∑ 𝑋𝑖𝑜𝐶
𝑗=1 𝑖=1

3. The total quantity in kilograms loaded into specific type of trucks should not exceed the
total capacity of the corresponding trucks.

10 10 10

∑ 𝑋𝑜𝑗𝐴 ∗ 𝑄𝐴 ≤ ∑ 𝑚𝑖 ∑ 𝑋𝑖𝑗𝐴
𝑗=1 𝑖=0 𝑗=1,𝑖 ≠𝑗

10 10 10

∑ 𝑋𝑜𝑗𝐵 ∗ 𝑄𝐵 ≤ ∑ 𝑚𝑖 ∑ 𝑋𝑖𝑗𝐵
𝑗=1 𝑖=0 𝑗=1,𝑖 ≠𝑗

10 10 10

∑ 𝑋𝑜𝑗𝐶 ∗ 𝑄𝐶 ≤ ∑ 𝑚𝑖 ∑ 𝑋𝑖𝑗𝐶
𝑗=1 𝑖=0 𝑗=1,𝑖 ≠𝑗

4. A location should be visited once in a route.

Node 1. ∑𝐶𝑘=𝐴(∑10 10
𝑗=2 𝑋1𝑗𝐾 + ∑𝑖=2 𝑋𝑖1𝑘) = 1

Node 2: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋2𝑗𝐾 + ∑𝑖=1 𝑋𝑖2𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

Node 3: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋3𝑗𝐾 + ∑𝑖=1 𝑋𝑖3𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

Node 4: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋4𝑗𝐾 + ∑𝑖=1 𝑋𝑖4𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

Node 5: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋5𝑗𝐾 + ∑𝑖=1 𝑋𝑖5𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

Node 6: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋6𝑗𝐾 + ∑𝑖=1 𝑋𝑖6𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗
 Node 7: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋7𝑗𝐾 + ∑𝑖=1 𝑋𝑖7𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

Node 8: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋8𝑗𝐾 + ∑𝑖=1 𝑋𝑖8𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

Node 9: ∑𝐶𝑘=𝐴(∑10 10
𝑗=1, 𝑋9𝑗𝐾 + ∑𝑖=1 𝑋𝑖9𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

Node 10: ∑𝐶𝑘=𝐴(∑10 10

𝑗=1, 𝑋10𝑗𝐾 + ∑𝑖=1 𝑋𝑖10𝑘) = 1 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

5. The Decision Variables are Binary:

1
Xijk
0

Solution:
As mentioned above we were unable to incorporate the goal programming in the model due to
some technical error of solver. Hence the weighted deviation of each objective is minimized by
introducing the weights as specified by the company.
The target value of each objective is as:

Target
Tranportation 99112.4
Capacity Difference 18703.167

Whereas the actual figures for each objective are:

Actual
Trasportation Cost 99112.4
Capacity Difference 83703.17
The deviations are as mentioned below:

Dev Per. Dev Dev Weight Per. Weighted Dev

Trasportation Cost 0 0 100 0 17.38
Capacity Difference 64999.99967 3.475347 5 17.38
Hence this shows that the deviation of transportation cost is almost 0 since the weight of the
objective function was very high as compared to the weight of the capacity difference.
The monthly transportation cost comes out to 99,112 rupees. Only Vehicle C is hired for
transportation purpose whereas quantity of vehicle hired are 5.
Vehicle used
A 0
B 0
C 5

Optimum Path:
After solving the model following decision variables have been assigned value of 1:
X(0,1), X(2,9), X(6,0) X(0,2), X(9,0), X(0,5), X(5,10), X(10,0), X(0,7), X(7,3), X(3,0), X(0,8),
X(8,4), X(4,0)

Graphically it can be shown as:

Truck 1:

0 1 6 0

Truck 2:

0 2 9 0

Truck 3:

0 5 10 0

Truck 5:

0 8 4 0
Sensitivity Report:
Since our model is based on binary variables therefore there is no sensitivity analysis report that
can be generated.
Conclusion:
Through successful application of optimization techniques we came up with the optimal path that
a truck should follow, how many trucks should be hired by the company and of which type
which could minimize the cost of transportation and maximize the capacity utilization of trucks
that are hired.
The model can be further used in future with more variations and complexity and can serve the
decision making purpose of Nova Rice Company.