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A company wants to expand their business due to success. They want to set up their own distributions network in the US. For manufacturing they

A company wants to expand their business due to success.

They want to set up their own distributions network in the US.

For manufacturing they want 1-2 plants.

Until their own plants are ready another company “X” will do their manufacturing for 2 years, in Baltimore and/or Lincoln (Nebraska). Demand for these 2 years: 50 and 100 million units respectively.

In order to accept this, it require that company “X” are awarded an annual volume of 100 million for the following four years (after the two introductory years).

For their own future manufacturing plants they have 2 possible cities: Seattle and Savannah (Georgia).

For their own future distribution center they have 3 possible cities: Atlanta, Sacramento and Chicago

Demand: volume of 150 million units in year 3, and 200 million units in year 4, and continue of 200 million after that

Data:


Demand (millions of units/year)

Region

West

Midwest

North-east

South-east

Demand

70

25

50

55

Distribution cost from Atlanta (USD/unit)

5

2,5

3

1

Distribution cost from Atlanta (USD/unit)

4

2

2

3

Distribution cost from Atlanta (USD/unit)

1,5

3,5

5

5


From plant to warehouse

Warehouse

Atlanta

Chicago

Sacramento

Distribution cost from Seattle (USD/unit)

5

3,5

1

Distribution cost from Savannah (USD/unit)

1

3

5

Distribution cost from Baltimore(USD/unit)

2,5

2,5

5

Distribution cost from Lincoln (USD/unit)

3,5

1,5

3


Capacities

Facility

Capacity
(miilion units/year)

Fixed annual costs
(million USD)

Altanta warehouse

100

110

Chicago warehouse

100

100

Sacramento warehouse

100

120

Seattle manufacturing plant

120

540

Savannah manufacturing plant

70

350

Baltimore manufacturing plant

120

Outsourced to company “x”

Lincoln manufacturing plant

100

Outsourced to company “x”


Task:

  1. Propose a design for production and distribution network. Any plants shall be able to deliver to any warehouse. The system must be designed for an annual volume of 200 million units, where 100 million units will be manufactured by company “x”
  2. Formulate the problem with the goal to minimize costs
    • Include: objective function, constraints
    • DO NOT NEED TO BE SOLVED ONLY FORUMLATED!
  3. How will the problem formulation change if the company buy the plants from company “x”
    1. How will that affect the design

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