Supply Chain Location Decision and Management

Supply Chain Location Decisions
Chapter 11
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall
11- 01

What is a Facility Location?
Facility Location
The process of determining
geographic sites for a firm’s
operations.
11- 02
Distribution center
(DC)
A warehouse or stocking
point where goods are
stored for subsequent
distribution to
manufacturers,
wholesalers, retailers, and

Location Decisions
• Location decisions affect processes and departments
– Marketing
– Human resources
– Accounting and finance
– Operations
– International operations
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 11 - 03

Location Decisions
• Factors affecting location decisions
– Sensitive to location
– High impact on the company’s ability to
meet its goals
11 - 04

Location Decisions
• Dominant factors in manufacturing
– Favorable labor climate
– Proximity to markets
– Impact on Environment
– Quality of life
– Proximity to suppliers and resources
– Proximity to the parent company’s facilities
– Utilities, taxes, and real estate costs
– Other factors

Location Decisions
• Dominant factors in services
– Impact of location on sales and customer
satisfaction
– Proximity to customers
– Transportation costs and proximity to markets
– Location of competitors
– Site-specific factors
11 - 06

What is a GIS?
GIS – Geographical
Information System
A system of computer
software, hardware, and
data that the firm’s
personnel can use to
manipulate, analyze, and
present information
relevant to a location
decision.
11- 07

Locating a Single Facility
• Expand onsite, build another facility, or
relocate to another site
– Onsite expansion
– Building a new plant or moving to a new
retail or office space
• Comparing several sites
11 - 08

Selecting a New Facility
Step 1: Identify the important location factors and
categorize them as dominant or secondary.
Step 2: Consider alternative regions; then narrow to
alternative communities and finally specific sites.
Step 3: Collect data on the alternatives.
Step 4: Analyze the data collected, beginning with the
quantitative factors.
Step 5: Bring the qualitative factors pertaining to each
site into the evaluation.
11 - 09

A new medical facility, Health-Watch, is to be located in Erie,
Pennsylvania. The following table shows the location factors,
weights, and scores (1 = poor, 5 = excellent) for one
potential site. The weights in this case add up to 100
percent. A weighted score (WS) will be calculated for each
site. What is the WS for this site?
Example 11.1
Location Factor Weight Score
Total patient miles per month 25 4
Facility utilization 20 3
Average time per emergency trip 20 3
Expressway accessibility 15 4
Land and construction costs 10 1
Employee preferences 10 5
11 - 10

The WS for this particular
site is calculated by
multiplying each factor’s
weight by its score and
adding the results:
Example 11.1
Location Factor Weight Score
Total patient miles per month 25 4
Facility utilization 20 3
Average time per emergency
trip
20 3
Expressway accessibility 15 4
Land and construction costs 10 1
Employee preferences 10 5
WS = (25 × 4) + (20 × 3) + (20 × 3) + (15 × 4) + (10 × 1) + (10 × 5)
= 100 + 60 + 60 + 60 + 10 + 50
= 340
The total WS of 340 can be compared with the total
weighted scores for other sites being evaluated.
11 - 11

Management is considering three potential locations for a
new cookie factory. They have assigned scores shown below
to the relevant factors on a 0 to 10 basis (10 is best). Using
the preference matrix, which location would be preferred?
Application 11.1
Location
Factor
Weight
The
Neighborhood
Sesame
Street
Ronald’s
Playhouse
Material Supply 0.1 5 9 8
Quality of Life 0.2 9 8 4
Mild Climate 0.3 10 6 8
Labor Skills 0.4 3 4 7
11 - 12

0.9
1.6
1.8
1.6
5.9
Management is considering three potential locations for a
new cookie factory. They have assigned scores shown below
to the relevant factors on a 0 to 10 basis (10 is best). Using
the preference matrix, which location would be preferred?
Application 11.1
0.5
1.8
3.0
1.2
6.5
0.8
0.8
2.4
2.8
6.8
Location
Factor
Weight
The
Neighborhood
Sesame
Street
Ronald’s
Playhouse
Material Supply 0.1 5 9 8
Quality of Life 0.2 9 8 4
Mild Climate 0.3 10 6 8
Labor Skills 0.4 3 4 7
11 - 13

Applying the
Load-Distance (ld) Method
• Identify and compare candidate locations
– Like weighted-distance method
– Select a location that minimizes the sum of
the loads multiplied by the distance the load
travels
– Time may be used instead of distance
11 - 14

Applying the
• Is a mathematical model used to evaluate
locations based on proximity factors
(closeness factors)
11 - 15

Applying the
• Calculating a load-distance score
– Varies by industry
– Use the actual distance to calculate ld score
– Use rectangular or Euclidean distances
– Different measures for distance
– Find one acceptable facility location that minimizes
the ld score
• Formula for the ld score
ld = Σ lidi
i
11 - 16

Application 11.2
What is the distance between (20, 10) and (80, 60)?
Euclidean distance:
dAB = (xA – xB)2 + (yA – yB)2 = (20 – 80)2 + (10 – 60)2 = 78.1
Rectilinear distance:
dAB = |xA – xB| + |yA – yB| = |20 – 80| + |10 – 60| = 110
11 - 17

Euclidean Distance
03 - 18
• Euclidean distance is the straight-line
distance between two possible points
where
dAB = distance between points A and
B
xA = x-coordinate of point A
yA = y-coordinate of point A
xB = x-coordinate of point B
yB = y-coordinate of point B

Rectilinear Distance
03 - 19
• Rectilinear distance measures the distance
between two possible points with a series
of 90-degree turns

Application 11.3
Management is investigating which location would be best to
position its new plant relative to two suppliers (located in
Cleveland and Toledo) and three market areas (represented by
Cincinnati, Dayton, and Lima). Management has limited the
search for this plant to those five locations. The following
information has been collected. Which is best, assuming
rectilinear distance?
Location x,y coordinates Trips/year
Cincinnati (11,6) 15
Dayton (6,10) 20
Cleveland (14,12) 30
Toledo (9,12) 25
Lima (13,8) 40
11 - 20

Application 11.3
Location
x,y
coordinates
Trips/year
Cincinnati (11,6) 15
Dayton (6,10) 20
Cleveland (14,12) 30
Toledo (9,12) 25
Lima (13,8) 40
15(9) + 20(0) + 30(10) + 25(5) + 40(9) = 920
15(9) + 20(10) + 30(0) + 25(5) + 40(5) = 660
15(8) + 20(5) + 30(5) + 25(0) + 40(8) = 690
15(4) + 20(9) + 30(5) + 25(8) + 40(0) = 590
15(0) + 20(9) + 30(9) + 25(8) + 40(4) = 810
Cincinnati =
Dayton =
Cleveland =
Toledo =
Lima =
11 - 21

Center of Gravity Method
• A good starting point
– Find x coordinate, x*, by multiplying each point’s
x coordinate by its load (lt), summing these
products Σli xi, and dividing by Σli
– The center of gravity’s y coordinate y* found the
same way
– Generally not the optimal location
x* =
Σli
xi
Σli
i
i
y* =
Σli
yi
Σli
i
i
11 - 22

Center of gravity
• A mathematical method used for finding the
best location for a single distribution point
that services several stores or areas
• Objective: locating the best location that
minimizes distribution cost

Example 11.2
A supplier to the electric utility industry produces power
generators; the transportation costs are high. One market area
includes the lower part of the Great Lakes region and the upper
portion of the southeastern region. More than 600,000 tons are to
be shipped to eight major customer locations as shown below:
Customer Location Tons Shipped x, y Coordinates
Three Rivers, MI 5,000 (7, 13)
Fort Wayne, IN 92,000 (8, 12)
Columbus, OH 70,000 (11, 10)
Ashland, KY 35,000 (11, 7)
Kingsport, TN 9,000 (12, 4)
Akron, OH 227,000 (13, 11)
Wheeling, WV 16,000 (14, 10)
Roanoke, VA 153,000 (15, 5)
11 - 24

Example 11.2
What is the center of gravity
for the electric utilities
supplier? Using rectilinear
distance, what is the
resulting load–distance score
for this location?
Customer
Location
Tons
Shipped
x, y
Coordinates
Three Rivers, MI
5,000
(7,
13)
Fort Wayne, IN
92,000
(8,
12)
Columbus, OH
70,000
(11
, 10)
Ashland, KY
35,000
(11
, 7)
Kingsport, TN
9,000
(12
, 4)
Akron, OH
227,000
(13
, 11)
Wheeling, WV
16,000
(14
, 10)
Roanoke, VA
153,000
(15
, 5)
The center of gravity is calculated as shown below:
x* = =
Σli xi
Σli
i
i
Σli =
i
Σli xi =
i
5 + 92 + 70 + 35 + 9 + 227 + 16 + 153 = 607
5(7) + 92(8) + 70(11) + 35(11) + 9(12) + 227(13)
+ 16(14) + 153(15) = 7,504
= 12.4
7,504
607
11 - 25

Example 11.2
x* = =
Σli yi
Σli
i
i
Σli yi =
i
5(13) + 92(12) + 70(10) + 35(7) + 9(4) + 227(11)
+ 16(10) + 153(5) = 5,572
= 9.2
5,572
607
11 - 26
for this location?
Customer
Location
Tons
Shipped
x, y
Coordinates
Three Rivers, MI
5,000
(7,
13)
Fort Wayne, IN
92,000
(8,
12)
Columbus, OH
70,000
(11
, 10)
Ashland, KY
35,000
(11
, 7)
Kingsport, TN
9,000
(12
, 4)
Akron, OH
227,000
(13
, 11)
Wheeling, WV
16,000
(14
, 10)
Roanoke, VA
153,000
(15
, 5)

Example 11.2
The resulting load-distance score is
ld = Σ lidi =
i
5(5.4 + 3.8) + 92(4.4 + 2.8) + 70(1.4 + 0.8) + 35(1.4
+ 2.2) + 90(0.4 + 5.2) + 227(0.6 + 1.8) + 16(1.6 +
0.8) + 153(2.6 + 4.2)
= 2,662.4
where di = |xi – x*| + |yi – y*|
11 - 27
for this location?
Customer
Location
Tons
Shipped
x, y
Coordinates
Three Rivers, MI
5,000
(7,
13)
Fort Wayne, IN
92,000
(8,
12)
Columbus, OH
70,000
(11
, 10)
Ashland, KY
35,000
(11
, 7)
Kingsport, TN
9,000
(12
, 4)
Akron, OH
227,000
(13
, 11)
Wheeling, WV
16,000
(14
, 10)
Roanoke, VA
153,000
(15
, 5)

Application 11.4
A firm wishes to find a central location for its service. Business
forecasts indicate travel from the central location to New York
City on 20 occasions per year. Similarly, there will be 15 trips to
Boston, and 30 trips to New Orleans. The x, y-coordinates are
(11.0, 8.5) for New York, (12.0, 9.5) for Boston, and (4.0, 1.5) for
New Orleans. What is the center of gravity of the three demand
points?
x* = =
Σli xi
Σli
i
i
y* = =
Σli yi
Σli
i
i
[(20 × 11) + (15 × 12) + (30 × 4)]
(20 + 15 + 30)
= 8.0
[(20 × 8.5) + (15 × 9.5) + (30 × 1.5)]
(20 + 15 + 30)
= 5.5
11 - 28

Using Break-Even Analysis
• Compare location alternatives on the basis of
quantitative factors expressed in total costs
– Determine the variable costs and fixed costs for
each site
– Plot total cost lines
– Identify the approximate ranges for which each
location has lowest cost
– Solve algebraically for break-even points over
the relevant ranges
11 - 29

Example 11.3
An operations manager narrowed the search for a new facility
location to four communities. The annual fixed costs (land,
property taxes, insurance, equipment, and buildings) and the
variable costs (labor, materials, transportation, and variable
overhead) are as follows:
Community Fixed Costs per Year Variable Costs per Unit
A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30
11 - 30

Example 11.3
Step 1:Plot the total cost curves for all the
communities on a single graph. Identify on
the graph the approximate range over which
each community provides the lowest cost.
Step 2:Using break-even analysis, calculate the
break-even quantities over the relevant
ranges. If the expected demand is 15,000
units per year, what is the best location?
11 - 31

Example 11.3
To plot a community’s total cost line, let us first compute the
total cost for two output levels: Q = 0 and Q = 20,000 units
per year. For the Q = 0 level, the total cost is simply the fixed
costs. For the Q = 20,000 level, the total cost (fixed plus
variable costs) is as follows:
Community Fixed Costs
Variable Costs
(Cost per Unit)(No. of Units)
Total Cost
(Fixed + Variable)
A $150,000
B $300,000
C $500,000
D $600,000
11 - 32

Example 11.3
$62(20,000) =
$1,240,000
$1,390,000
Community Fixed Costs
Variable Costs
(Cost per Unit)(No. of Units)
Total Cost
(Fixed + Variable)
A $150,000
B $300,000
C $500,000
D $600,000
$38(20,000) = $760,000 $1,060,000
$24(20,000) = $480,000 $980,000
$30(20,000) = $600,000 $1,200,000
11 - 33
To plot a community’s total cost line, let us first compute the
total cost for two output levels: Q = 0 and Q = 20,000 units
per year. For the Q = 0 level, the total cost is simply the fixed
costs. For the Q = 20,000 level, the total cost (fixed plus
variable costs) is as follows:

B best
Example 11.3
The figure shows the
graph of the total cost
lines.
| | |
| | |
| | |
| | |
0 2 4
6 8 10
12 14 16
18 20 22
1,600 –
1,400 –
1,200 –
1,000 –
800 –
600 –
400 –
200 –
–
Annual
cost
(thousands
of
dollars
)
Q (thousands of units)
A
B
C
D
6.25 14.3
Break-even
point
Break-even
point
(20, 980)
(20, 1,390)
(20, 1,200)
(20, 1,060)
• A is best for low volumes
• B for intermediate
volumes
• C for high volumes.
• We should no longer
consider community D,
because both its fixed
and its variable costs are
higher than community
C’s.
11 - 34

Example 11.3
(A) (B)
$150,000 + $62Q = $300,000 + $38Q
Q = 6,250 units
The break-even quantity between B and C lies at the end of
the range over which B is best and the beginning of the final
range where C is best.
(B) (C)
$300,000 + $38Q = $500,000 + $24Q
Q = 14,286 units
11 - 35
The break-even quantity between A and B lies at the end of
the first range, where A is best, and the beginning of the
second range, where B is best.

Example 11.3
(A) (B)
$150,000 + $62Q = $300,000 + $38Q
Q = 6,250 units
The break-even quantity between B and C lies at the end of the
range over which B is best and the beginning of the final range
where C is best.
(B) (C)
$300,000 + $38Q = $500,000 + $24Q
Q = 14,286 units
11 - 36
The break-even quantity between A and B lies at the end of
the first range, where A is best, and the beginning of the
second range, where B is best.
No other break-even quantities are
needed. The break-even point
between A and C lies above the
shaded area, which does not mark
either the start or the end of one
of the three relevant ranges.

By chance, the Atlantic City Community Chest has to close
temporarily for general repairs. They are considering four
temporary office locations:
Application 11.5
Property Address Move-in Costs Monthly Rent
Boardwalk $400 $50
Marvin Gardens $280 $24
St. Charles Place $360 $10
Baltic Avenue $60 $60
Use the graph on the next slide to determine for what length of
lease each location would be favored?
Hint: In this problem, lease length is analogous to volume.
11 - 37

Application 11.5
| | | |
| | | |
|
0 1 2 3
4 5 6 7
Months →
Total
Cost
→
500 –
–
400 –
–
300 –
–
200 –
–
100 –
–
–
Boardwalk
St Charles Place
Marvin
Gardens
Baltic Avenue
Fs + csQ = FB + cBQ
Q =
FB – Fs
cs – cB
= = 6 months
– 300
– 50
=
$60 – $360
$10 – $60
The short answer: Baltic
Avenue if 6 months or less,
St. Charles Place if longer
11- 38

Locating a facility within a
Supply Chain Network
• When a firm with a network of existing
facilities plans a new facility, one of two
conditions exists
– Facilities operate independently
– Facilities interact
11 - 39

• A five step GIS framework
Step 1: Map the data
Step 2: Split the area
Step 3: Assign a facility location
Step 4: Search for alternative sites
Step 5: Compute ld scores and check capacity
Locating Within a Network
11 - 40

The Transportation Method
• A special case of linear programming
– Represented as a standard table, sometimes
called a tableau
– Rows of the table are linear constraints that
impose capacity limitations
– Columns are linear constraints that require a
certain demand level to be met
– Each cell in the tableau is a decision variable,
and a per-unit cost is shown in each cell

Transportation Method for Location
• Basic steps in setting up the initial tableau
– Create a row for each plant and a column for each
warehouse
– Add a column for plant capacities and a row for
warehouse demands
– Each cell not in the requirements row or capacity
column represents a shipping route from a plant to a
warehouse.
• The sum of the shipments in a row must equal the
corresponding plant’s capacity and the sum of
shipments in a column must equal the
corresponding warehouse’s demand

Plant
Warehouse
Capacity
San Antonio, TX
(1)
Hot Spring, AR
(2)
Sioux Falls, SD
(3)
Phoenix
5.00 6.00 5.40
400
Atlanta
7.00 4.60 6.60
500
Requirements 200 400 300
900
900

• Dummy plants or warehouses
– The sum of capacities must equal the sum of demands
– If capacity exceeds requirements we add an extra column
(a dummy warehouse)
– If requirements exceed capacity we add an extra row (a
dummy plant)
– Assign shipping costs to equal the stockout costs of the
new cells
• Finding a solution
– The goal is to find the least-cost allocation pattern that
satisfies all demands and exhausts all capacities

Example 11.4
The optimal solution for the Sunbelt Pool Company, found
with POM for Windows, is shown below and displays the
data inputs, with the cells showing the unit costs, the
bottom row showing the demands, and the last column
showing the supply capacities.

Example 11.4
Below shows how the existing network of plants supplies the
three warehouses to minimize costs for a total of $4,580.
All warehouse demand is satisfied:
Warehouse 1 in San Antonio is fully supplied by Phoenix
Warehouse 2 in Hot Springs is fully supplied by Atlanta.
Warehouse 3 in Sioux Falls receives 200 units from
Phoenix and 100 units from Atlanta, satisfying its 300-unit
demand.

Example 11.4
Below shows the total quantity and cost of each shipment.
The total optimal cost reported in the upper-left corner of
the previous table is $4,580, or 200($5.00) + 200($5.40) +
400($4.60) + 100($6.60) = $4,580.

An electronics manufacturer must expand by building a
second facility. The search is narrowed to four locations, all
of which are acceptable to management in terms of
dominant factors. Assessment of these sites in terms of
seven location factors is shown in the following table.
For example, location A has a factor score of 5 (excellent) for
labor climate; the weight for this factor (20) is the highest of
any. Calculate the weighted score for each location. Which
location should be recommended?
Solved Problem 1
11 - 49

Solved Problem 1
FACTOR INFORMATION FOR ELECTRONICS MANUFACTURER
Factor Score for Each Location
Location Factor Factor Weight A B C D
1. Labor climate 20 5 4 4 5
2. Quality of life 16 2 3 4 1
3. Transportation system 16 3 4 3 2
4. Proximity to markets 14 5 3 4 4
5. Proximity to materials 12 2 3 3 4
6. Taxes 12 2 5 5 4
7. Utilities 10 5 4 3 3
11 - 50

Based on the weighted scores shown below, location C is the
preferred site, although location B is a close second.
Solved Problem 1
CALCULATING WEIGHTED SCORES FOR ELECTRONIC MANUFACTURER
Weighted Score for each Location
1. Labor climate 20
2. Quality of life 16
3. Transportation system 16
4. Proximity to markets 14
5. Proximity to materials 12
6. Taxes 12
7. Utilities 10
Totals 100 11 - 51

CALCULATING WEIGHTED SCORES FOR ELECTRONIC MANUFACTURER
Weighted Score for each Location
1. Labor climate 20
2. Quality of life 16
3. Transportation system 16
4. Proximity to markets 14
5. Proximity to materials 12
6. Taxes 12
7. Utilities 10
Totals 100
Solved Problem 1
100 80 80 100
32 48 64 16
48 64 48 32
70 42 56 56
24 36 36 48
24 60 60 48
50 40 30 30
348 370 374 330
11 - 52
Based on the weighted scores shown below, location C is the
preferred site, although location B is a close second.

The operations manager for Mile-High Lemonade narrowed the
search for a new facility location to seven communities. Annual
fixed costs (land, property taxes, insurance, equipment, and
buildings) and variable costs (labor, materials, transportation, and
variable overhead) are shown in the following table.
Solved Problem 2
a. Which of the communities can be eliminated from further
consideration because they are dominated (both variable and
fixed costs are higher) by another community?
b. Plot the total cost curves for all remaining communities on a
single graph. Identify on the graph the approximate range over
which each community provides the lowest cost.
c. Using break-even analysis, calculate the break-even quantities
to determine the range over which each community provides
the lowest cost.
11 - 53

Solved Problem 2
FIXED AND VARIABLE COSTS FOR MILE-HIGH LEMONADE
Community Fixed Costs per Year Variable Costs per Barrel
Aurora $1,600,000 $17.00
Boulder $2,000,000 $12.00
Colorado Springs $1,500,000 $16.00
Denver $3,000,000 $10.00
Englewood $1,800,000 $15.00
Fort Collins $1,200,000 $15.00
Golden $1,700,000 $14.00
11- 54

Solved Problem 2
Location
costs
(in
millions
of
dollars)
Barrels of lemonade per year (in hundred thousands)
10 –
8 –
6 –
4 –
2 –
– | | | | | |
|
0 1 2 3 4 5
6
Fort Collins Boulder Denver
Golden
Break-even
point
Break-even
point
2.67
11- 55

Solved Problem 2
a. Aurora and Colorado Springs are dominated by Fort
Collins, because both fixed and variable costs are higher
for those communities than for Fort Collins. Englewood is
dominated by Golden.
a. Fort Collins is best for low volumes, Boulder for
intermediate volumes, and Denver for high volumes.
Although Golden is not dominated by any community, it
is the second or third choice over the entire range.
Golden does not become the lowest-cost choice at any
volume.
11 - 56

Solved Problem 2
c. The break-even point between Fort Collins and Boulder is
$1,200,000 + $15Q =
$2,000,000 + $12Q
Q = 266,667 barrels
per year
The break-even point between Denver and Boulder is
$3,000,000 + $10Q =
$2,000,000 + $12Q
Q = 500,000 barrels
per year
11 - 57

Solved Problem 3
The new Health-Watch facility is targeted to serve seven census
tracts in Erie, Pennsylvania, whose latitudes and longitudes are
shown below. Customers will travel from the seven census-tract
centers to the new facility when they need health care. What is the
target area’s center of gravity for the Health-Watch medical facility?
LOCATION DATA AND CALCULATIONS FOR HEALTH WATCH
Census Tract Population Latitude Longitude
Population ×
Latitude
Population ×
Longitude
15
2,711
42.134 –80.041 114,225.27 –216,991.15
16
4,161
42.129 –80.023 175,298.77 –332,975.70
17
2,988
42.122 –80.055 125,860.54 –239,204.34
25
2,512
42.112 –80.066 105,785.34 –201,125.79
26
4,342
42.117 –80.052 182,872.01 –347,585.78
27 42.116 –80.023 281,629.69 –535,113.80
11 - 58

Solved Problem 3
11- 59

Solved Problem 3
Next we solve for the center of gravity x* and y*. Because the
coordinates are given as longitude and latitude, x* is the longitude
and y* is the latitude for the center of gravity.
x* = = 42.1178
1,271,536.05
30,190
y* = = – 80.0418
– 2,416,462.81
30,190
The center of gravity is (42.12 North, 80.04 West), and is
shown on the map to be fairly central to the target area.
11 - 60

Solved Problem 4
• The Arid Company makes canoe paddles to serve distribution centers
in Worchester, Rochester, and Dorchester from existing plants in
Battle Creek and Cherry Creek.
• Arid is considering locating a plant near the headwaters of Dee
Creek.
• Annual capacity for each plant is shown in the right-hand column of
the tableau.
• Transportation costs per paddle are shown in the tableau in the small
boxes.
• For example, the cost to ship one paddle from Battle Creak to
Worchester is $4.37.
• The optimal allocations are also shown. For example, Battle Creek
ships 12,000 units to Rochester.
• What are the estimated transportation costs associated with this
allocation pattern?
11 - 61

Solved Problem 4
Source
Destination
Capacity
Worchester Rochester Dorchester
Battle Creek
$4.37 $4.25 $4.89
12,000
Cherry Creek
$4.00 $5.00 $5.27
10,000
Dee Creek
$4.13 $4.50 $3.75
18,000
Demand 6,000 22,000 12,000 40,000
11 - 62

Solved Problem 4
Source
Destination
Capacity
Worchester Rochester Dorchester
Battle Creek
$4.37 $4.25 $4.89
12,000
Cherry Creek
$4.00 $5.00 $5.27
10,000
Dee Creek
$4.13 $4.50 $3.75
18,000
Demand 6,000 22,000 12,000 40,000
12,000
6,000 4,000
6,000 12,000
11 - 63

Solved Problem 4
The total cost is $167,000
Ship 12,000 units from Battle Creek
to Rochester @ $4.25
Cost = $51,000
Ship 6,000 units from Cherry Creek
to Worchester @ $4.00
Cost = $24,000
Ship 4,000 units from Cherry Creek
Cost = $20,000
Ship 6,000 units from Dee Creek
Cost = $27,000
Ship 12,000 units from Dee Creek
to Dorchester @ $3.75
Cost = $45,000
Total = $167,000
11- 64

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Supply Chain Location Decision and Management

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