Okay, welcome to Chapter Five isn't network design and the supply chain.

So during
class we went through the factors influencing network design decisions. We covered
off competitive political factors, some of the infrastructure factors as well. We
went through the supply chain strategy. And then we'll talk a little bit about the
regional facility configuration. And we're gonna get into phase 3.4, which is
desirable sites and location choices. So we're really going to get into models for
designing the regional network configuration. We're going to use this example. So
we'll talk about some of the inputs that are required for it. The capacitated plant
location model and how we're going to optimize that model as well. And we'll also
get into models for identifying potential sites in a region, which is this example
that we'd be looking at here. Okay, So what we'll do, let me just explain the
example. So let's see Consulting. Here is the example right here. Fc consulting as
a supply chain firm, they must decide on the locations of its home offices. It's
clients are primarily located in the 16 states listed right here. So Washington
rates through to Oklahoma. And there's four potential home sites, LA, Tulsa,
Denver, Seattle. So the annual fixed cost of locating an office in Los Angeles,
hundred and 65,420, 831,000 to 30. Denver is 140, and Seattle hundred and 45. So
the expected number of trips to each state and the travel costs from each potential
site are also shown. So we can see these are the number of trips that we have to
take. If we're going from LA to watch anyone to Washington, we have to visit 40
times California, 100, Oklahoma, 55. All right. And then each consultant is
expected to take at most 25 trips per year. Okay, So when now we know the problem
and we're going to use Solver which you just learned in the last exercise for
solving. So first is the optimization model, which we know that we have to find
four possible home office locations. And we have 16 number we have 16 states that
we have to travel to. And D is the annual trips needed for each state. J, k, I is
the number of trips that can be handled from a home office. Right? There's no
restriction. So we don't have to add any more restrictions from that. Can be the
annual fixed costs setting up the home office. And this has a cost of the trip from
my home office I to state j and y i if the home office I is open to one. If the
home office is open, sorry. And zero otherwise. And I'll explain that as well. So
the number of trips from the home office I to state j wherever that happens to be,
right? So it shouldn't be an integral and non-negative because we're not going to
be able to gain savings, but it's still going to cost us. So it has to be at least
zero. It's not like we're going to be in the positive. So this is a formula we
would have and subject to these constraints that we put into place as well. Okay.
So first off, let me, uh, what I'm gonna do. The, one of the first things that we
need to do, right? We just have to understand the number of trips from each of
these cities, right? Let me I'm just going to unhide some of these cells that I've
put in here already. So now you can see in terms of it, the trips from LA, we want
to set to zero right now in terms of the chips to Denver, have it in here because
I've done the calculations for him, but in theory there'll be all set to zero. And
that's what we want to do first. And we're going to use Solver to find this out. So
next, what we want to do is. We have to also calculate, right? We know. We're going
to calculate the number of trips, number of consultants, fixed office location as
well. So let me I'm just going to show you this is going to get a little bit busy,
but it's worthwhile for us to kinda take a look at. Okay, so the first thing that
we want to do in terms of this is the number of trips, right? So if we look at the,
let's just take this number of chips from LA we know are gonna be added up. I'm
going to sum all of these, right? Because we know that he's can, consultant can do
a maximum of 25 locations. So once we sum this up, then we want to make sure in
this case, there were also rounding up because we know that each consultant can do
a maximum of 25 trips based on the question, right? So total number of trips
divided by 25 is our number of consultants. So we'd have, we can't have half
consultants. So we use Roundup with an Excel to ensure that we go to that next
whole number. So remember in this example what we're trying to do, we're trying to
minimize the overall cost. Now we don't wanna look because now we've got the number
of trips set in terms of it for each of these, right? Okay. Then we also, we want
to figure out what the fixed cost of the office would be in this sense, right? So
for LA, right, if we take a look at Sally 19th, this is the one that solver will
switch 0-1 if the office is open. So in other words, if we've minimized, because
we're going to minimize, so we want to solve or I'll show you that component of it,
but we want to minimize our costs. In this case, sometimes we may optimize for
profitability, right? So we want to maximize it. But in this case, because we're
looking at that, the optimal solution is without their office and it will be zero.
If it's zero, we can see we're not going to get the fixed cost, right? Because the
19 times the amount. So we put that in for each cost and because we know right
here, LA is 165,000 for 20 a Tulsa is 131 to 3,040 for Denver and 145 for Seattle,
right? Makes sense. Okay. So now in this case, whereas indicate what the cost of
the trips are gonna be. So I'll show you that some products for this particular
one. So what we wanna do, right? We're going to sum all the trips from column D
with a cost from calling me, right? So we get a total amount. So for the LA example
for this would be the number of trips that Solver comes up with, with going to
Washington from LA, right? In terms of it. With the cost would be right. In terms
of so. So in this example from Washington to LA, it would be hundred and 50 plus
the number of trips from LA to Oregon multiplied by 150, and so on until you have
that total cost. So once we figured out, right, in terms of the costing model would
be what that would look like. That's how you would calculate that aspect. Okay.
Okay. Next we're going to figure out is our total office costs. So this is made up
of our fixed costs plus our variable costs, right? So we've calculated both of
these. These are the last two steps that I just showed you. So we're just going to
sum the total office costs for each. So all we're gonna do from this aspect is just
some fixed costs and the costs, the total cost of the office, right? So in this
case it would just simply be cell E2, E3 plus 24. Because we already have the sum
of the total cost of the trips. So now this gets into a little bit more of a tricky
part. So now we need to take into account the fact that we only want to visit each
of the 16 offices exactly the number of times that they need. Right. So for going
from from LA to Washington where they wanna go 40 times, right. So we don't want to
visit him 30, we don't want to visit them 50. We want exactly 40, right? From
whichever office goes to see them, whether it'd be from LA calls, etc. So we need
to set up a formula to take this into account. So we'll need this constraint in
Solver. So the formula is saying really that if you add up the number of visits
from LA plus this is from Tulsa, plus from Denver, plus from Seattle. We want an
equal 40. But instead, we say the total visits -40 should be equal to zero because
we want to set that as a constraint, right? So let me show you. Let me just pop
this into this area right here. So it would look something like this. Right? So
what I was explaining is number of visits to L a plus the visits that tall, so plus
the visits and Denver plus the visits to Seattle, in our case, what we were just
looking at will be equal to 40. And what we wanna do is set the parameter so we
take 40 over and make it equal to zero, right? So it'd be just like this. We'd be
adding all of these upright here. Whatever they come up too, to make sure that they
add up to 40. Makes sense. Okay. So now what we want to do, I'm going to come in
now that we have everything set up, we want to go to solver. So when we do this, we
want to set up in terms of it some area where we're going to end up putting in.
What we're going to end up putting in. We're trying to minimize for the fixed cost
so we can put them into this area here so we get the summation of it, right? And if
we go into data, into our solver, we can see what we want to do. Now I've put all
the variables in, right? But what we wanna do is make sure that we put in all the
cells that are located by changing the variables of the cells in here and make sure
that our solver is minimized.