PROBLEM 2.

Boo is the Operations Manager for the Procter and Gamble for the
Visayas Region. He supervises three factories (Iloilo, Bacolod, and Cebu) that
supply three warehouses (Bohol, Leyte, and Negros) in the region. Iloilo can
produce 300 cases, Bacolod can produce 500 cases and Cebu can produce 400
cases per week. Meanwhile, Bohol’s demand is 600 cases, Leyte’s demand is 400
cases and Negros’s demand is 200 cases per week The shipping costs per case
form Iloilo to Bohol (in thousands) is Php8, to Leyte is Php2 and to Negros is
Php10.The shipping costs from Bacolod to Bohol (in thousands) is Php4, to Leyte is
Php7, and to Negros is Php6. The shipping cost per case from Cebu to Bohol (in
thousands) is Php5, to Leyte is Php9, and to Negros is Php3.

Factory Capacity
Iloilo 300 The estimated shipping costs per
Bacolod 500 case for the various routes are:
Cebu 400 From/To Bohol Leyte Negros
Iloilo 8 2 10
Demand per warehouse: Bacolod 4 7 6
Warehouse Demand Cebu 5 9 3
Bohol 600
Leyte 400
Negros 200

Required: Determine the optimal shipping plan that will minimize total shipping costs.
(Use the table below for your allocation.

1st iteration
From/To Bohol Leyte Negros CAPACITY
Iloilo 8 300 2 10 300

Bacolod 500 4 7 6 500

Cebu 100 5 100 9 200 3 400

DEMAND 600 400 200 1200

1st allocation 2nd allocation 3rd allocation

FROM –TO
ILOILO 8-2= 6 ---
BACOLOD 6-4=2 6-4=2 6-4=2 (lowest cost)
CEBU 5-3=2 5-3=2 5-3=2
BOHOL 5-4=1 5-4=1 5-4-1
LEYTE 7-2=5 9-7=2 9-7=2
NEGROS 6-3=3 6-3=3 ---
After the 3rd allocation, you can fully allocate all the squares by taking into consideration
the demand and capacity.

Test of unallocated cells: Cost of the above allocation

Cell Cell Amount
I-B +8(I-B)-2(I-L)+9(C-L)- 5(C-B) +10 Iloilo-Leyte 300x2=600
I-N +10(I-N)-3(C-N)+9(C-L)-2(I-L) +14 Bacolod – Bohol 500x4=2000
B-L +7(B-L)-9 (C-L)+5(C-B)-4(B-B) -1 Cebu – Bohol 100x5=500
B-N +6(B-N)-3(C-N)+5(C-B)-4(B-B) +4 Cebu –Leyte 100x9=900
Cebu- Negros 200x3=600

Total cost 4600.00

2nd iteration (if needed)since there is a negative value, the solution is not optimal.
Retrace the closed path with the negative value ( 10 as our basis)
From/To Bohol Leyte Negros CAPACITY
Iloilo 8 300 2 10 300
Test of unallocated cells:
Cost of the above
Bacolod 500-10
4 +10 7 6 500 allocation
=490
Cell Amount Cell Amount
B-B 490X4 1960
Cebu 100+10
5 100-10 9 200 3 400
=110 =90 B-L 10X7 70
DEMAND 600 400 200 C-B 110X5
1200 550
C-L 90X9 810
C-N 200X3 600

Total cost 3990.00

Now retrace the unallocated cells. If a negative value occurs, there is a need for a 3 rd
iteration and until the solution becomes optimal.