Network Optimization Problem

Irwin/McGraw-Hill
 Distribution Unlimited Co. Problem

• The Distribution Unlimited Co. has two factories producing a product that
needs to be shipped to two warehouses
– Factory 1 produces 80 units.
– Factory 2 produces 70 units.
– Warehouse 1 needs 60 units.
– Warehouse 2 needs 90 units.

• There are rail links directly from Factory 1 to Warehouse 1 and Factory 2 to
Warehouse 2.

• Independent truckers are available to ship up to 50 units from each factory to

the distribution center, and then 50 units from the distribution center to each
warehouse.

Question: How many units (truckloads) should be shipped along each

shipping lane?

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 The Distribution Network

80 units F1 W1 60 units
produced needed

DC

70 units F2 W2 90 units
produced needed

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Data for Distribution Network

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A Network Model

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 The Optimal Solution

[80] [- 60]
(30)
F1 W1
(50) (30)
[0]

DC
(30) (50)
(40)
F2 W2
[70] [- 90]

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 Spreadsheet Model

B C D E F G H I J K L
3 From To Ship Capacity Unit Cost Node s Ne t Flow Supply/De mand
4 F1 W1 30 $700 F1 80 = 80
5 F1 DC 50 <= 50 $300 F2 70 = 70
6 DC W1 30 <= 50 $200 DC 0 = 0
7 DC W2 50 <= 50 $400 W1 -60 = -60
8 F2 DC 30 <= 50 $400 W2 -90 = -90
9 F2 W2 40 $900
10
11 Total Cost $110,000

J
3 Ne t Flow
4 =SUMIF(From,I4,Ship)-SUMIF(To,I4,Ship)
5 =SUMIF(From,I5,Ship)-SUMIF(To,I5,Ship)
6 =SUMIF(From,I6,Ship)-SUMIF(To,I6,Ship)
7 =SUMIF(From,I7,Ship)-SUMIF(To,I7,Ship)
8 =SUMIF(From,I8,Ship)-SUMIF(To,I8,Ship)

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 Typical Applications of Minimum-Cost Flow Problems

Kind of Supply Transshipment Demand

Application Nodes Nodes Nodes

Operation of a Intermediate storage

Sources of goods Customers
distribution network facilities

Solid waste Sources of solid

Processing facilities Landfill locations
management waste

Operation of a Intermediate
Vendors Processing facilities
supply network warehouses

Coordinating product Production of a Market for a specific

Plants
mixes at plants specific product product

Cash flow Sources of cash at a Short-term Needs for cash at a

management specific time investment options specific time

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