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# Chapter 11 Supplement

## Operational Decision-Making Tools: DecisionTransportation and Transshipment Models

Operations Management - 6hh Edition
Roberta Russell & Bernard W. Taylor, III

## Just how do you make decisions?

 Emotional direction  Intuition  Analytic thinking  Are you an intuit, an analytic, what???  How many of you use models to make decisions??

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Problems
 Arise whenever there is a perceived difference between what is desired and what is in actuality.  Problems serve as motivators for doing something  Problems lead to decisions

42

## Model Classification Criteria

 Purpose  Perspective


## Use the perspective of the targeted decision-maker decision-

   

Degree of Abstraction Content and Form Decision Environment {This is what you should start any modeling facilitation meeting with}
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## Copyright 2006 John Wiley & Sons, Inc.

Purpose
 Planning  Forecasting  Training  Behavioral research

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Perspective
 Descriptive
 

Telling it like it is Most simulation models are of this type Telling it like it should be Most optimization models are of this type

 Prescriptive
 

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Degree of Abstraction
 Isomorphic


One-toOne-to-one One-toOne-to-many

 Homomorphic


## Content and Form

 verbal descriptions  mathematical constructs  simulations  mental models  physical prototypes

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Decision Environment
 Decision Making Under Certainty


TOOL: all of mathematical programming TOOL: Decision analysis--tables, trees, Bayesian analysis--tables, revision TOOL: Structural models, simulation models





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Mathematical Programming
 Linear programming  Integer linear programming


##  Network programming (produces all integer solutions)

    Nonlinear programming Dynamic programming Goal programming The list goes on and on


Geometric Programming
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-11 10-

## A Model of this class

 What would we include in it?

## Management Science Models

 A QUANTITATIVE REPRESENTATION OF A PROCESS THAT CONSISTS OF THOSE COMPONENTS THAT ARE SIGNIFICANT FOR THE PURPOSE BEING CONSIDERED

## Mathematical programming models covered in Ch 11, Supplement

 Transportation Model  Transshipment Model
Not included are: Shortest Route Minimal Spanning Tree Maximal flow Assignment problem many others

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Transportation Model
 A transportation model is formulated for a class of problems with the following characteristics
  

a product is transported from a number of sources to a number of destinations at the minimum possible cost each source is able to supply a fixed number of units of product each destination has a fixed demand for the product steppingstepping-stone modified distribution

 

Excels Solver

Solution

## Modified Problem Solution

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## For problems in which there is an underlying network:

 There are easy (fast) solutions


## An exception is the traveling salesman problem

 The solutions are always integer ones  {How about solving a 50,000 node problem in less than a minute on a laptop??}

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CARLTON PHARMACEUTICALS
 Carlton Pharmaceuticals supplies drugs and other medical supplies.  It has three plants in: Cleveland, Detroit, Greensboro.  It has four distribution centers in: Boston, Richmond, Atlanta, St. Louis.  Management at Carlton would like to ship cases of a certain vaccine as economically as possible.
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-24 10-

 Data


## Unit shipping cost, supply, and demand

Boston Boston \$35 \$35 37 37 40 40 1100 1100 Richmond Richmond 30 30 40 40 15 15 400 400 To To Atlanta Atlanta 40 40 42 42 20 20 750 750 St. Louis St. Louis 32 32 25 25 28 28 750 750 Supply Supply 1200 1200 1000 1000 800 800

From From Cleveland Cleveland Detroit Detroit Greensboro Greensboro Demand Demand

 Assumptions
  

## Copyright 2006 John Wiley & Sons, Inc.

Unit shipping cost is constant. All the shipping occurs simultaneously. The only transportation considered is between sources and destinations. Total supply equals total demand.

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Sources Cleveland
S1=1200

NETWORK REPRESENTATION

Destinations
D1=1100

Boston

Richmond
D2=400

Detroit
S2=1000

Atlanta
D3=750

Greensboro
S3= 800
Copyright 2006 John Wiley & Sons, Inc.

St.Louis
D4=750
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

## The structure of the model is:

Minimize <Total Shipping Cost> ST [Amount shipped from a source] = [Supply at that source] [Amount received at a destination] = [Demand at that destination]

Decision variables
Xij = amount shipped from source i to destination j. where: i=1 (Cleveland), 2 (Detroit), 3 (Greensboro) j=1 (Boston), 2 (Richmond), 3 (Atlanta), 4(St.Louis)
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-27 10-

Supply from Cleveland X11+X12+X13+X14 = 1200 Supply from Detroit X21+X22+X23+X24 = 1000 Supply from Greensboro X31+X32+X33+X34 = 800

## The supply constraints

X11 X12 X13 X14

Boston
D1=1100

Cleveland
S1=1200

X21

X31

Richmond
D2=400
X32

X22

Detroit
S2=1000
X23

Atlanta
X33 D3=750

X24

Greensboro
S3= 800
Copyright 2006 John Wiley & Sons, Inc.

St.Louis
X34

D4=750
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## The complete mathematical programming model

Minimize 35X11+30X12+40X13+ 32X14 +37X21+40X22+42X23+25X24+ 40X31+15X32+20X33+38X34 ST Supply constrraints: X11+ X12+ X13+ X14 X21+ X22+ X23+ X24 X31+ X32+ X33+ X34 Demand constraints: X11+ X12+ X13+ X14+ All Xij are nonnegative
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-29 10-

## Excel Optimal Solution

CARLTON PHARMACEUTICALS UNIT COSTS BOSTON RICHMOND ATLANTA ST.LOUIS CLEVELAND \$ 35.00 \$ 30.00 \$ 40.00 \$ 32.00 DETROIT \$ 37.00 \$ 40.00 \$ 42.00 \$ 25.00 GREENSBORO \$ 40.00 \$ 15.00 \$ 20.00 \$ 28.00 DEMANDS 1100 400 750 750

## SUPPLIES 1200 1000 800

SHIPMENTS (CASES) BOSTON RICHMOND ATLANTA ST.LOUIS CLEVELAND 850 350 0 0 DETROIT 250 0 0 750 GREENSBORO 0 50 750 0 TOTAL 1100 400 750 750

TOTAL COST =

84000

## WINQSB Sensitivity Analysis

If this path is used, the total cost will increase by \$5 per unit shipped along it

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Shadow prices for warehouses - the cost resulting from 1 extra case of vaccine demanded at the warehouse

Shadow prices for plants - the savings incurred for each extra case of vaccine available at the plant

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Transshipment Model

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Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and backnot for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.

## Supplement 10-35 10-

DEPOT MAX A General Network Problem  Depot Max has six stores.


Stores 5 and 6 are running low on the model 65A Arcadia workstation, and need a total of 25 additional units. Stores 1 and 2 are ordered to ship a total of 25 units to stores 5 and 6. Stores 3 and 4 are transshipment nodes with no demand or supply of their own.
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## Copyright 2006 John Wiley & Sons, Inc.

 Other restrictions


There is a maximum limit for quantities shipped on various routes. There are different unit transportation costs for different routes.

 Depot Max wishes to transport the available workstations at minimum total cost.

DATA:

20 10

1
6 5

3
12
0 e X ij e U ij

5
11

## Arcs: Upper bound and lower bound constraints: 7

15

15

Net flow out of the node] = [Supply Intermediate transshipment nodes: at the node] Transportation X12 + out (Node 1) [Total flow X13 + X15 - X21 [Total Demand nodes: of the node] = = 10 flow into the node] unit cost = for [Net flow X21 += X13 X12[Demand15 the node] (Node 2) into the node] X34+X35 X24 - = (Node 3) X15 + X35 +X65+- X34 = 12 (Node 5) X46 = X24 X56 (Node 4) X46 +X56 - X65 = 13 (Node 6) Supplement 10-38 Copyright 2006 John Wiley & Sons, Inc. 10-

##  The Complete mathematical model

Minimize 5 X12  10 X13  20 X15  6 X21 15 X24  12 X34  7 X35  15 X46  11X56  7 X 65 ST X12 + X13 + X15 - X21 - X12 - X13 - X24 - X15 + X21 + X24 + X34 + X35 - X34 - X35 - X46 + X46 = 10 = 15 = 0 = 0 + X56 - X65 = -12 - X56 + X65 = -13

0 e X12 e 3; 0 e X13 e 12; 0 e X15 e 6; 0 e X21 e 7; 0 e X24 e 10; 0 e X34 e 8; 0 e X35 e 8; 0 e X46 e 17; 0 e X56 e 7; 0 e X65 e 5
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-39 10-

## MONTPELIER SKI COMPANY Using a Transportation model for production scheduling



Montpelier is planning its production of skis for the months of July, August, and September. Production capacity and unit production cost will change from month to month. The company can use both regular time and overtime to produce skis. Production levels should meet both demand forecasts and end-ofend-of-quarter inventory requirement. Management would like to schedule production to minimize its costs for the Wiley & Sons, Inc. quarter. Copyright 2006 John quarter. Supplement 10-42 10-

 Data:
  

Initial inventory = 200 pairs Ending inventory required =1200 pairs Production capacity for the next quarter = 400 pairs in regular time. = 200 pairs in overtime. Holding cost rate is 3% per month per ski. Production capacity, and forecasted demand for this quarter (in pairs of skis), and production cost per unit (by months)
Month Month July July August August September September Forecasted Forecasted Demand Demand 400 400 600 600 1000 1000 Production Production Costs Production Production Costs Capacity Regular Time Overtime Capacity Regular Time Overtime 1000 25 30 1000 25 30 800 26 32 800 26 32 400 29 37 400 29 37
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## Copyright 2006 John Wiley & Sons, Inc.

 Analysis of demand:


## Net demand to satisfy in July = 400 - 200 = 200 pairs

Initial inventory

## Analysis of Unit costs



Forecasted demand In house inventory inventory]  Analysis of Supplies: in July in Regular time and sold in Example: A unit produced September costs 25+ (3%)(25)(2 months) = \$26.50  Production capacities are thought of as supplies.  There are two sets of supplies:
 

Net demand[Unit production cost] + in August = 600 Unit cost =  Net demand in September = 1000 + 1200 = 2200 pairs [Unit holding cost per month][the number of months stays in

## Set 1- Regular time supply (production capacity) 1Set 2 - Overtime supply

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## Copyright 2006 John Wiley & Sons, Inc.

Production Month/period
1000 July July R/T R/T July O/T

Network representation
25 25.75 26.50 0 30 30.90 31.80 +M 0

Month sold
July 200

500

Production Capacity

800

Aug. R/T

+M +M 32 32.96 29 0 0 +M

+M
Aug. 600

26

Demand

26.78
400 Aug. O/T

+M
Sept. 2200

0 37

400

## Sept. R/T Sept. O/T

Copyright 2006 John Wiley & Sons, Inc.

Dummy

300

200

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Source: July production in R/T Destination: Julys demand. Unit cost= \$25 (production)

##  Summary of the optimal solution



In July produce at capacity (1000 pairs in R/T, and 500 pairs in O/T). Store 1500-200 = 1300 at the end of July. 1500In August, produce 800 pairs in R/T, and 300 in O/T. Store additional 800 + 300 - 600 = 500 pairs. In September, produce 400 pairs (clearly in R/T). With 1000 pairs retail demand, there will be (1300 + 500) + 400 - 1000 = 1200 pairs available for shipment to Ski Chalet.

Inventory +

Production -

Demand
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Problem 4-25 4-

## 6.3 The Assignment Problem

 Problem definition


m workers are to be assigned to m jobs A unit cost (or profit) Cij is associated with worker i performing job j. Minimize the total cost (or maximize the total profit) of assigning workers to job so that each worker is assigned a job, and each job is performed.

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BALLSTON ELECTRONICS
 Five different electrical devices produced on five production lines, are needed to be inspected.  The travel time of finished goods to inspection areas depends on both the production line and the inspection area.  Management wishes to designate a separate inspection area to inspect the products such that the total travel time is minimized.
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-55 10-

##  Data: Travel time in minutes from assembly lines to inspection areas.

A A 10 10 11 11 13 13 14 14 19 19 B B 4 4 7 7 8 8 16 16 17 17 Inspection Area Inspection Area C C 6 6 7 7 12 12 13 13 11 11 D D 10 10 9 9 14 14 17 17 20 20 E E 12 12 14 14 15 15 17 17 19 19

## Assembly Assembly Lines Lines

1 1 2 2 3 3 4 4 5 5

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NETWORK REPRESENTATION
Assembly Line S1=1 1 Inspection Areas A D1=1

S2=1

B D2=1

S3=1

C D3=1

S4=1

D4=1

S5=1

5
Copyright 2006 John Wiley & Sons, Inc.

D5=1
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##  Assumptions and restrictions



The number of workers equals the number of jobs. Given a balanced problem, each worker is assigned exactly once, and each job is performed by exactly one worker. For an unbalanced problem dummy workers (in case there are more jobs than workers), or dummy jobs (in case there are more workers than jobs) are added to balance the problem.
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## Copyright 2006 John Wiley & Sons, Inc.

 Computer solutions


A complete enumeration is not efficient even for moderately large problems (with m=8, m! > 40,000 is the number of assignments to enumerate). The Hungarian method provides an efficient solution procedure.

 Special cases
  

A worker is unable to perform a particular job. A worker can be assigned to more than one job. A maximization assignment problem.
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## 6.5 The Shortest Path Problem

 For a given network find the path of minimum distance, time, or cost from a starting point, the start node, to a destination, the terminal node. node, node.  Problem definition


There are n nodes, beginning with start node 1 and ending with terminal node n. Bi-directional arcs connect connected nodes i and j Biwith nonnegative distances, d i j. Find the path of minimum total distance that connects node 1 to node n.
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## Fairway Van Lines

Determine the shortest route from Seattle to El Paso over the following network highways.

1
180

Seattle
497

599

2
420 345

Butte
691

Boise 4 Reno 6
432

432

440

Cheyenne 8
102

Portland
138

526

5 Sac.

## 621 291 280

11
155

Las Vegas
108

Denver 9
452 469

Bakersfield
114

10 14
386

Kingman 15 Albuque.
403

Barstow

207

13 Los Angeles
118

12

Phoenix 16

San Diego

17

425

## Copyright 2006 John Wiley & Sons, Inc.

Tucson

18

314

19
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El Paso

##  Solution - a linear programming approach

Decision variables
1 if a truck travels on the highway from city i to city j X ij ! 0 otherwise

180

Butte

Seattle
497

599

2
345

## Boise 4 Salt Lake City

432

Portland

[The number of highways traveled out of Seattle (the start node)] = 1 X12 + X13 + X14 = 1 In a similar manner: [The number of highways traveled into El Paso (terminal node)] = 1 X12,19 + X16,19 + X18,19 = 1 [The number of highways used to travel into a city] = [The number of highways traveled leaving the city]. For example, in Boise (City 4): X14 + Nonnegativity constraints Wiley & Sons, Inc. X34 +X74 = X41 + X43 + X47. Supplement 10-64 Copyright 2006 John 10-

##  Solution - a network approach

The Dijkstras algorithm:  Find the shortest distance from the START node to every other node in the network, in the order of the closet nodes to the START.  Once the shortest route to the m closest node is determined, the shortest route to the (m+1) closest node can be easily determined.


This algorithm finds the shortest route from the start to all the nodes in the network.
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-66 10-

SLC BUT 599 BUT.

+ 420 = SLC.

691 =

SEA.

497

1
180

Seattle
497

599

2
420

Butte
691

Boise 4 Reno 6
345 526 432

3 432 Portland
138

440

Cheyene 8
102

POR.
POR

180

5 Sac.

## 621 291 280

10 Bakersfield
114

13 Los Angeles
118

and so on until the Kingman Barstow whole network 15 12 14 Albuque. is covered. Pheonix
108 155 452 207 469 386

11

Las Vegas

Denver 9

16 17
425

403

San Diego

18 Tucson

19

314 Supplement

## 6.6 The Minimal Spanning Tree

 This problem arises when all the nodes of a given network must be connected to one another, without any loop.  The minimal spanning tree approach is appropriate for problems for which redundancy is expensive, or the flow along the arcs is considered instantaneous.
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-68 10-

## THE METROPOLITAN TRANSIT DISTRICT

 The City of Vancouver is planning the development of a new light rail transportation system.  The system should link 8 residential and commercial centers.  The Metropolitan transit district needs to select the set of lines that will connect all the centers at a minimum total cost.  The network describes:



feasible lines that have been drafted, minimum possible cost for taxpayers per line.
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University 5

## 34 West Side 1 35 2 City Center 6 41 Shopping Center 45 8 East Side

7
Copyright 2006 John Wiley & Sons, Inc.

South Side
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##  Solution - a network approach



 

The algorithm that solves this problem is a very easy (trivial) procedure. It belongs to a class of greedy algorithms. The algorithm:
Start by selecting the arc with the smallest arc length.  At each iteration, add the next smallest arc length to the set of arcs already selected (provided no loop is constructed).  Finish when all nodes are connected.


 Computer solution
Input consists of the number of nodes, the arc length, Copyright 2006 John Wiley & Sons, Inc. Supplement 10-71 10and the network description.


North Side

University 5

Loop

45 8 East Side

## Total Cost = \$236 million

7
Copyright 2006 John Wiley & Sons, Inc.

South Side
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