Question
An electronics manufacturer wants to expand its market in Europe. The demand in Europe is forecasted as: England France Spain Germany Italy Sweden 24 32
An electronics manufacturer wants to expand its market in Europe. The demand in Europe is forecasted as:
England | France | Spain | Germany | Italy | Sweden |
24 | 32 | 28 | 19 | 35 | 27 |
*in million units
Further analysis shows the variable costs (production, inventory and holding, transportation, tax, and tariffs) of meeting demand from a source to a market per 1,000,000 units:
Demand Region | ||||||
Production and Transportation Cost per 1,000,000 units | ||||||
Supply Region | England | France | Spain | Germany | Italy | Sweden |
England | 150 | 180 | 133 | 169 | 128 | 120 |
France | 154 | 232 | 190 | 191 | 202 | 72 |
Spain | 227 | 231 | 168 | 174 | 143 | 135 |
Germany | 149 | 115 | 100 | 137 | 116 | 99 |
Italy | 236 | 178 | 122 | 94 | 243 | 226 |
Sweden | 248 | 73 | 70 | 226 | 246 | 116 |
*in thousands of dollars
The company considers two plant sizes in each location. The annualized fixed cost of plants for each location is found to be:
Fixed Cost ($) | Low Capacity | Fixed Cost ($) | High Capacity | |
England | 17,000 | 20 | 19,000 | 35 |
France | 12,000 | 20 | 22,000 | 35 |
Spain | 10,000 | 20 | 18,000 | 35 |
Germany | 9,000 | 20 | 15,000 | 35 |
Italy | 8,000 | 20 | 12,000 | 35 |
Sweden | 9,000 | 20 | 16,000 | 35 |
*in thousands of dollars
- What is the lowest cost achievable for the production and distribution network?
- What is the minimum cost configuration (where are the plants located and in what is the capacity of each plant)?
- Which plants serve which market in what volume?
NOTE: Please remember to add a constraint that will ensure having either a small capacity or a high capacity facility at a location. To do so, you can add up the binary variables of plant capacity for a location, and set it less than or equal to 1 as the right-hand side value. Please solve by Excel
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