Professional Documents
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e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 17, Issue 3.Ver. II (Mar. 2015), PP 15-24
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I.
Introduction
1.0 Background
BioPharma, Inc. is a global company which is dedicated in manufacturing of bulk chemicals that are
then used in the pharmaceutical industry.
The BioPharma Inc. holds patents on two chemicals which, are called Highcal and Relax internally. The six
plants located at different places can supply products produced from six various regions.
1.1 Problem
From the information provided, we can learn that the BioPharma Inc. has experienced more than one
problem and the serious ones are three:
1.
2.
3.
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15 | Page
Objective function
Subject to restrictions
Structura
l
Structural
cons
tra i nt
s
constrains
where i 0, 1, ... , n
II.
Description Of Data
A preliminary analysis on the actual data in Table 1 shed more light on the BioPharma problem. The
company has six facilities, one in each of the six regions. This forms a system of logistic supply chain. The
system can help in reduction of transport costs and avoidance of import duties on products if were to be
imported from other regions. On the other hand it is associated with some disadvantage because; plants tend to
be sized to meet local demand and do not aim to fully exploiting the economies of scale.
The capacity of six plants consolidated together equals 143,000 kilograms, while the total sales were 105,000
kilograms. This imply that the six plants together had extra capacity for more customers totaling to 143,000
105,000 = 38,000 kilograms.
Table 1 Sales by regions, 2005
Brazil
- L. America
Germany - Europe
India
- Asia(-Jpn)
Japan
- Japan
Mexico - Mexico
US
- US
Total Sales
Highcal
7.0
15.0
5.0
7.0
3.0
18.0
55.0
Relax
7.0
12.0
3.0
8.0
3.0
17.0
50.0
Total
14.0
27.0
8.0
15.0
6.0
35.0
105.0
Capacity
18
45
18
10
30
22
143.0
DOI: 10.9790/487X-17321524
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Brazil
Germany
India
Japan
Mexico
US
Relax
Fixed
Raw
Cost
Material
($)
5.00
3.60
13.00
3.90
4.00
3.60
6.00
3.90
6.00
3.60
5.00
3.60
Total plant fixed cost
Capacity
11.00
15.00
10.00
2.00
12.00
5.00
Fixed
Cost
($)
5.00
14.00
4.00
6.00
6.00
5.00
Raw
Material
Capacity
4.60
5.00
4.50
5.10
4.60
4.50
7.00
0.00
8.00
0.00
18.00
17.00
Plant
Fixed
Cost
20.00
45.00
18.00
17.00
30.00
21.00
151
Production Cost (
$/ kg)
Highcal
Relax
5.10
7.00
4.50
7.50
5.00
5.00
6.60
8.50
6.00
9.00
6.50
6.50
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x
j 1
ij
Dj .
Again, the demand constraint appears. Finally, the flows must be such that the costs of transportation are
minimized.
(3) Mathematical Statement for the Supply and demand Network Model
Let us consider a directed network G ( , ) , which consists of a finite set of nodes
1, 2, ..., n and a set of directed arcs i, j ), (k , l ), ..., (s, t which joins pairs of nodes
in (Korte B. & Vygen J., 2008). The links or edges have associated cost cij that could be based
on their distance, capacity and quality of line (Gen et al, 2008).
xij cij
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Minimize
i 1
i 1 j 1
fi yi cij xij
Subject to:
m
1.
Ki (i 1, 2, ..., m)
D j ( j 1, 2, ..., m)
i 1
n
2.
j 1
ij
ij
The total cost (fixed and variable) of setting up and operating the network can be minimized by the objective
function in conjunction with the constraints. Additional constraints for a plant can be added as follows;
the closed plant:
yi 0 and yi Ki 0 , and
the open plant:
yi 1 and yi Ki Ki
The solution achieved from the mathematical model will identify the plants that are to be kept open, their
capacity, and the allocation of regional demand to these plants.
III.
US
0.00
0.00
0.00
0.00
13.00
22.00
35.00
Highcal
Plants
(1=Open)
1.00
1.00
1.00
1.00
1.00
1.00
Relax
Plants
(1=Open)
1.00
1.00
1.00
1.00
1.00
1.00
DOI: 10.9790/487X-17321524
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US
0.00
0.00
0.00
0.00
13.00
22.00
35.00
Highcal
Plants
(1=Open)
Relax
Plants
(1=Open)
1.00
1.00
1.00
1.00
1.00
1.00
1.00
0.00
1.00
0.00
1.00
1.00
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The
Company's
account
The Computed
Account
Differences
14
27
8
15
6
35
105
18
15
18
2
30
22
105
-4
12
-10
13
-24
13
0
IV.
Sensitivity Analysis
DOI: 10.9790/487X-17321524
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21 | Page
Conclusion
The report has outlined a transportation model and the mathematical model thereof that can be applied
to minimize transportation total cost for the BioPharma Compan. The mathematical model is just a linear
programming formulated to solve a transport problem.
We have calculated the minimized total transportation cost for the company and about 12% of the cost
can be avoided. This is a big saving for the company and about UD$ 3.97 million per month will accumulate in
the companys bank account.
The optimal shipment plan given in Table 4 provides a reduction of the companys burden by 12% by
rearranging the network flow. Likewise, the optimal network flow agrees with the original plan by closing down
the two Relax plants at Germany and Japan. This is mainly to avoid high running costs of the plants due to their
relatively higher cost raw materials.
Further work is needed to establish the reasons why the Solver failed to give a sensitivity report.
Sensitivity report could save a lot of effort for flexibility tests for closing plants or increasing demands
References
[1].
[2].
[3].
[4].
[5].
[6].
[7].
[8].
[9].
[10].
[11].
[12].
Appendix
Microsoft Excel 12.0 Answer Report
Worksheet: [Case 2 New Approach.xls]Modell O
Report Created: 8/10/2010 4:02:53 PM
Target Cell (Min)
Cell
Name
$C$39
Cost = L. America
Adjustable Cells
Cell
$C$19
$D$19
$E$19
$F$19
$G$19
$H$19
$I$19
$J$19
$C$20
$D$20
$E$20
$F$20
$G$20
$H$20
$I$20
$J$20
$C$21
$D$21
$E$21
$F$21
$G$21
$H$21
$I$21
$J$21
$C$22
$D$22
$E$22
$F$22
$G$22
Name
Brazil L. America
Brazil Europe
Brazil Asia(-Jpn)
Brazil Japan
Brazil Mexico
Brazil US
Brazil Highcal Plants (1=Open)
Brazil Relax Plants (1=Open)
Germany L. America
Germany Europe
Germany Asia(-Jpn)
Germany Japan
Germany Mexico
Germany US
Germany Highcal Plants (1=Open)
Germany Relax Plants (1=Open)
India L. America
India Europe
India Asia(-Jpn)
India Japan
India Mexico
India US
India Highcal Plants (1=Open)
India Relax Plants (1=Open)
Japan L. America
Japan Europe
Japan Asia(-Jpn)
Japan Japan
Japan Mexico
DOI: 10.9790/487X-17321524
Original
Value
$
331.67
Final Value
$
331.67
Original
Value
14.00
3.00
0.00
0.00
0.00
0.00
1.00
1.00
0.00
15.00
0.00
0.00
0.00
0.00
1.00
0.00
0.00
3.00
8.00
7.00
0.00
0.00
1.00
1.00
0.00
0.00
0.00
8.00
0.00
Final Value
14.00
3.00
0.00
0.00
0.00
0.00
1.00
1.00
0.00
15.00
0.00
0.00
0.00
0.00
1.00
0.00
0.00
3.00
8.00
7.00
0.00
0.00
1.00
1.00
0.00
0.00
0.00
8.00
0.00
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Japan US
Japan Highcal Plants (1=Open)
Japan Relax Plants (1=Open)
Mexico L. America
Mexico Europe
Mexico Asia(-Jpn)
Mexico Japan
Mexico Mexico
Mexico US
Mexico Highcal Plants (1=Open)
Mexico Relax Plants (1=Open)
US L. America
US Europe
US Asia(-Jpn)
US Japan
US Mexico
US US
US Highcal Plants (1=Open)
US Relax Plants (1=Open)
Name
Brazil Excess Capacity
Germany Excess Capacity
India Excess Capacity
Japan Excess Capacity
Mexico Excess Capacity
US Excess Capacity
L. America
Europe
Asia(-Jpn)
Japan
Mexico
US
Brazil L. America
Brazil Europe
Brazil Asia(-Jpn)
Brazil Japan
Brazil Mexico
Brazil US
Germany L. America
Germany Europe
Germany Asia(-Jpn)
Germany Japan
Germany Mexico
Germany US
India L. America
India Europe
India Asia(-Jpn)
India Japan
India Mexico
India US
Japan L. America
Japan Europe
Japan Asia(-Jpn)
Japan Japan
Japan Mexico
Japan US
Mexico L. America
Mexico Europe
Mexico Asia(-Jpn)
Mexico Japan
Mexico Mexico
Mexico US
US L. America
US Europe
US Asia(-Jpn)
US Japan
US Mexico
US US
Brazil Highcal Plants (1=Open)
DOI: 10.9790/487X-17321524
0.00
1.00
0.00
0.00
6.00
0.00
0.00
6.00
18.00
1.00
1.00
0.00
0.00
0.00
0.00
0.00
17.00
0.00
1.00
Cell Value
1.00
0.00
0.00
0.00
0.00
0.00
0
0
0
0
0
0
14.00
3.00
0.00
0.00
0.00
0.00
0.00
15.00
0.00
0.00
0.00
0.00
0.00
3.00
8.00
7.00
0.00
0.00
0.00
0.00
0.00
8.00
0.00
0.00
0.00
6.00
0.00
0.00
6.00
18.00
0.00
0.00
0.00
0.00
0.00
17.00
1.00
0.00
1.00
0.00
0.00
6.00
0.00
0.00
6.00
18.00
1.00
1.00
0.00
0.00
0.00
0.00
0.00
17.00
0.00
1.00
Formula
$C$29>=0
$C$30>=0
$C$31>=0
$C$32>=0
$C$33>=0
$C$34>=0
$C$36=0
$D$36=0
$E$36=0
$F$36=0
$G$36=0
$H$36=0
$C$19>=0
$D$19>=0
$E$19>=0
$F$19>=0
$G$19>=0
$H$19>=0
$C$20>=0
$D$20>=0
$E$20>=0
$F$20>=0
$G$20>=0
$H$20>=0
$C$21>=0
$D$21>=0
$E$21>=0
$F$21>=0
$G$21>=0
$H$21>=0
$C$22>=0
$D$22>=0
$E$22>=0
$F$22>=0
$G$22>=0
$H$22>=0
$C$23>=0
$D$23>=0
$E$23>=0
$F$23>=0
$G$23>=0
$H$23>=0
$C$24>=0
$D$24>=0
$E$24>=0
$F$24>=0
$G$24>=0
$H$24>=0
$I$19=binary
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Status
Not Binding
Binding
Binding
Binding
Binding
Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Not Binding
Binding
Binding
Binding
Binding
Binding
Not Binding
Binding
Binding
Binding
Binding
Binding
Not Binding
Not Binding
Not Binding
Binding
Binding
Binding
Binding
Binding
Not Binding
Binding
Binding
Binding
Not Binding
Binding
Binding
Not Binding
Not Binding
Binding
Binding
Binding
Binding
Binding
Not Binding
Binding
Slack
1.00
0.00
0.00
0.00
0.00
0.00
0
0
0
0
0
0
14.00
3.00
0.00
0.00
0.00
0.00
0.00
15.00
0.00
0.00
0.00
0.00
0.00
3.00
8.00
7.00
0.00
0.00
0.00
0.00
0.00
8.00
0.00
0.00
0.00
6.00
0.00
0.00
6.00
18.00
0.00
0.00
0.00
0.00
0.00
17.00
0.00
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DOI: 10.9790/487X-17321524
1.00
1.00
0.00
1.00
1.00
1.00
0.00
1.00
1.00
0.00
1.00
$J$19=binary
$I$20=binary
$J$20=binary
$I$21=binary
$J$21=binary
$I$22=binary
$J$22=binary
$I$23=binary
$J$23=binary
$I$24=binary
$J$24=binary
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Binding
Binding
Binding
Binding
Binding
Binding
Binding
Binding
Binding
Binding
Binding
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
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