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**Chapter 10, Part A Distribution and Network Models**

Supply Chain Models Transportation Problem Transshipment Problem Assignment Problem

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**Transportation, Transshipment, and Assignment Problems**

A network model is one which can be represented by a set of nodes, a set of arcs, and functions (e.g. costs, supplies, demands, etc.) associated with the arcs and/or nodes. Transportation, transshipment, assignment, shortest-route, and maximal flow problems of this chapter as well as the PERT/CPM problems (in Chapter 13) are all examples of network problems.

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**Transportation, Transshipment, and Assignment Problems**

Each of the problems of this chapter can be formulated as linear programs and solved by general purpose linear programming codes. For each of the problems, if the right-hand side of the linear programming formulations are all integers, the optimal solution will be in terms of integer values for the decision variables. However, there are many computer packages that contain separate computer codes for these problems which take advantage of their network structure.

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Supply Chain Models A supply chain describes the set of all interconnected resources involved in producing and distributing a product. In general, supply chains are designed to satisfy customer demand for a product at minimum cost. Those that control the supply chain must make decisions such as where to produce a product, how much should be produced, and where it should be sent.

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**Transportation Problem**

The transportation problem seeks to minimize the total shipping costs of transporting goods from m origins (each with a supply si) to n destinations (each with a demand dj), when the unit shipping cost from an origin, i, to a destination, j, is cij. The network representation for a transportation problem with two sources and three destinations is given on the next slide.

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**Transportation Problem**

Network Representation 1 d1 c11 1 c12 s1 c13 2 d2 c21 2 c22 s2 c23 3 d3 Sources Destinations

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**Transportation Problem**

Linear Programming Formulation Using the notation: xij = number of units shipped from origin i to destination j cij = cost per unit of shipping from si = supply or capacity in units at origin i dj = demand in units at destination j continued

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**Transportation Problem**

Linear Programming Formulation (continued) xij > 0 for all i and j

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**Transportation Problem**

LP Formulation Special Cases Total supply exceeds total demand: Total demand exceeds total supply: Add a dummy origin with supply equal to the shortage amount. Assign a zero shipping cost per unit. The amount “shipped” from the dummy origin (in the solution) will not actually be shipped. Assign a zero shipping cost per unit Maximum route capacity from i to j: xij < Li Remove the corresponding decision variable. No modification of LP formulation is necessary.

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**Transportation Problem**

LP Formulation Special Cases (continued) The objective is maximizing profit or revenue: Minimum shipping guarantee from i to j: xij > Lij Maximum route capacity from i to j: xij < Lij Unacceptable route: Remove the corresponding decision variable. Solve as a maximization problem.

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**Transportation Problem: Example #1**

Acme Block Company has orders for 80 tons of concrete blocks at three suburban locations as follows: Northwood tons, Westwood tons, and Eastwood tons. Acme has two plants, each of which can produce 50 tons per week. Delivery cost per ton from each plant to each suburban location is shown on the next slide. How should end of week shipments be made to fill the above orders?

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**Transportation Problem: Example #1**

Delivery Cost Per Ton Northwood Westwood Eastwood Plant Plant

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**Transportation Problem: Example #1**

Optimal Solution Variable From To Amount Cost x11 Plant 1 Northwood x12 Plant 1 Westwood ,350 x13 Plant 1 Eastwood x21 Plant 2 Northwood x22 Plant 2 Westwood x23 Plant 2 Eastwood Total Cost = $2,490

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**Transportation Problem: Example #2**

The Navy has 9,000 pounds of material in Albany, Georgia that it wishes to ship to three installations: San Diego, Norfolk, and Pensacola. They require 4,000, 2,500, and 2,500 pounds, respectively. Government regulations require equal distribution of shipping among the three carriers.

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**Transportation Problem: Example #2**

The shipping costs per pound for truck, railroad, and airplane transit are shown on the next slide. Formulate and solve a linear program to determine the shipping arrangements (mode, destination, and quantity) that will minimize the total shipping cost.

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**Transportation Problem: Example #2**

Destination Mode San Diego Norfolk Pensacola Truck $ $ $ 5 Railroad Airplane

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**Transportation Problem: Example #2**

Define the Decision Variables We want to determine the pounds of material, xij , to be shipped by mode i to destination j. The following table summarizes the decision variables: San Diego Norfolk Pensacola Truck x x x13 Railroad x x x23 Airplane x x x33

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**Transportation Problem: Example #2**

Define the Objective Function Minimize the total shipping cost. Min: (shipping cost per pound for each mode per destination pairing) x (number of pounds shipped by mode per destination pairing). Min: 12x11 + 6x12 + 5x x x22 + 9x23 + 30x x x33

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**Transportation Problem: Example #2**

Define the Constraints Equal use of transportation modes: (1) x11 + x12 + x13 = 3000 (2) x21 + x22 + x23 = 3000 (3) x31 + x32 + x33 = 3000 Destination material requirements: (4) x11 + x21 + x31 = 4000 (5) x12 + x22 + x32 = 2500 (6) x13 + x23 + x33 = 2500 Non-negativity of variables: xij > 0, i = 1, 2, 3 and j = 1, 2, 3

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**Transportation Problem: Example #2**

Computer Output Objective Function Value = Variable Value Reduced Cost x x x x x x x x x

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**Transportation Problem: Example #2**

Solution Summary San Diego will receive 1000 lbs. by truck and 3000 lbs. by airplane. Norfolk will receive 2000 lbs. by truck and 500 lbs. by railroad. Pensacola will receive 2500 lbs. by railroad. The total shipping cost will be $142,000.

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**Transshipment Problem**

Transshipment problems are transportation problems in which a shipment may move through intermediate nodes (transshipment nodes) before reaching a particular destination node. Transshipment problems can be converted to larger transportation problems and solved by a special transportation program. Transshipment problems can also be solved by general purpose linear programming codes. The network representation for a transshipment problem with two sources, three intermediate nodes, and two destinations is shown on the next slide.

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**Transshipment Problem**

Network Representation c36 3 c13 1 c37 6 s1 d1 c14 c15 c46 4 c47 Demand Supply c23 2 c24 c56 7 d2 s2 c25 5 c57 Sources Destinations Intermediate Nodes

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**Transshipment Problem**

Linear Programming Formulation Using the notation: xij = number of units shipped from node i to node j cij = cost per unit of shipping from node i to node j si = supply at origin node i dj = demand at destination node j continued

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**Transshipment Problem**

Linear Programming Formulation (continued) xij > 0 for all i and j continued

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**Transshipment Problem**

LP Formulation Special Cases Total supply not equal to total demand Maximization objective function Route capacities or route minimums Unacceptable routes The LP model modifications required here are identical to those required for the special cases in the transportation problem.

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**Transshipment Problem: Example**

The Northside and Southside facilities of Zeron Industries supply three firms (Zrox, Hewes, Rockrite) with customized shelving for its offices. They both order shelving from the same two manufacturers, Arnold Manufacturers and Supershelf, Inc. Currently weekly demands by the users are 50 for Zrox, 60 for Hewes, and 40 for Rockrite. Both Arnold and Supershelf can supply at most 75 units to its customers. Additional data is shown on the next slide.

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**Transshipment Problem: Example**

Because of long standing contracts based on past orders, unit costs from the manufacturers to the suppliers are: Zeron N Zeron S Arnold Supershelf The costs to install the shelving at the various locations are: Zrox Hewes Rockrite Thomas Washburn

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**Transshipment Problem: Example**

Network Representation ZROX Zrox 50 1 5 Arnold Zeron N 75 ARNOLD 5 8 8 Hewes 60 HEWES 3 7 Super Shelf Zeron S 4 75 WASH BURN 4 4 Rock- Rite 40

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**Transshipment Problem: Example**

Linear Programming Formulation Decision Variables Defined xij = amount shipped from manufacturer i to supplier j xjk = amount shipped from supplier j to customer k where i = 1 (Arnold), 2 (Supershelf) j = 3 (Zeron N), 4 (Zeron S) k = 5 (Zrox), 6 (Hewes), 7 (Rockrite) Objective Function Defined Minimize Overall Shipping Costs: Min 5x13 + 8x14 + 7x23 + 4x24 + 1x35 + 5x36 + 8x37 + 3x45 + 4x46 + 4x47

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**Transshipment Problem: Example**

Constraints Defined Amount Out of Arnold: x13 + x14 < 75 Amount Out of Supershelf: x23 + x24 < 75 Amount Through Zeron N: x13 + x23 - x35 - x36 - x37 = 0 Amount Through Zeron S: x14 + x24 - x45 - x46 - x47 = 0 Amount Into Zrox: x35 + x45 = 50 Amount Into Hewes: x36 + x46 = 60 Amount Into Rockrite: x37 + x47 = 40 Non-negativity of Variables: xij > 0, for all i and j.

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**Transshipment Problem: Example**

Computer Output Objective Function Value = Variable Value Reduced Cost X X X X X X X X X X

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**Transshipment Problem: Example**

Solution Zrox ZROX 50 50 75 1 5 Arnold Zeron N 75 ARNOLD 5 25 8 8 Hewes 60 35 HEWES 3 7 4 Super Shelf Zeron S 40 75 WASH BURN 4 75 4 Rock- Rite 40

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Assignment Problem An assignment problem seeks to minimize the total cost assignment of m workers to m jobs, given that the cost of worker i performing job j is cij. It assumes all workers are assigned and each job is performed. An assignment problem is a special case of a transportation problem in which all supplies and all demands are equal to 1; hence assignment problems may be solved as linear programs. The network representation of an assignment problem with three workers and three jobs is shown on the next slide.

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**Assignment Problem Network Representation c11 c12 c13 Agents Tasks c21**

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**Assignment Problem Linear Programming Formulation Using the notation:**

xij = if agent i is assigned to task j 0 otherwise cij = cost of assigning agent i to task j continued

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**Assignment Problem Linear Programming Formulation (continued)**

xij > 0 for all i and j

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**Assignment Problem LP Formulation Special Cases**

Number of agents exceeds the number of tasks: Number of tasks exceeds the number of agents: Add enough dummy agents to equalize the number of agents and the number of tasks. The objective function coefficients for these new variable would be zero. Extra agents simply remain unassigned.

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**Assignment Problem LP Formulation Special Cases (continued)**

The assignment alternatives are evaluated in terms of revenue or profit: Solve as a maximization problem. An assignment is unacceptable: Remove the corresponding decision variable. An agent is permitted to work t tasks:

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**Assignment Problem: Example**

An electrical contractor pays his subcontractors a fixed fee plus mileage for work performed. On a given day the contractor is faced with three electrical jobs associated with various projects. Given below are the distances between the subcontractors and the projects. Projects Subcontractor A B C Westside Federated Goliath Universal How should the contractors be assigned so that total mileage is minimized?

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**Assignment Problem: Example**

Network Representation 50 West. A 36 16 Subcontractors Projects 28 Fed. 30 B 18 35 32 Gol. C 20 25 25 Univ. 14

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**Assignment Problem: Example**

Linear Programming Formulation Min 50x11+36x12+16x13+28x21+30x22+18x23 +35x31+32x32+20x33+25x41+25x42+14x43 s.t. x11+x12+x13 < 1 x21+x22+x23 < 1 x31+x32+x33 < 1 x41+x42+x43 < 1 x11+x21+x31+x41 = 1 x12+x22+x32+x42 = 1 x13+x23+x33+x43 = 1 xij = 0 or 1 for all i and j Agents Tasks

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**Assignment Problem: Example**

The optimal assignment is: Subcontractor Project Distance Westside C Federated A Goliath (unassigned) Universal B Total Distance = 69 miles

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End of Chapter 10, Part A

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