5) Discuss the effects of beer demand variation on transportation costs.

In year 1, the total cost of the current plan is 11,24 million dollars with demands of

the first year. According to the LP Simplex Solver in Excel, the total cost of the new plan in

year 1 is found as 9,91 million dollars. This shows that it is a good idea to go with the new

shipment plan in year 1 since it decreases the total cost by 11.8%. However, in years 2 and 3,

we see that the annual demands at the distribution center vary. The LP Simplex Solver

calculates the total cost of the new plan with the new demands in year 2 as 17,53 million

dollars and year 3 as 16,76 million dollars. It is important to note that these amounts are

much higher than the current plan’s total transportation cost which was 11,24 million

dollars. Therefore, the annual demands in years 2 and 3 make it infeasible for us to use these

shipment plans. Efes should develop a different strategy to decrease the total costs because

the demand amounts are so high that they affect the costs negatively.