Sup10 MOD

Chapter 11 Supplement
Operational Decision-Making Tools: DecisionTransportation and Transshipment Models

Operations Management - 6hh Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani University of Tennessee at Chattanooga
Just how do you make decisions?

Emotional direction Intuition Analytic thinking Are you an intuit, an analytic, what??? How many of you use models to make decisions??
Supplement 10-2 10-
Problems
Arise whenever there is a perceived difference between what is desired and what is in actuality. Problems serve as motivators for doing something Problems lead to decisions
42
Supplement 10-4 10-
Model Classification Criteria

Purpose Perspective

Use the perspective of the targeted decision-maker decision-

Degree of Abstraction Content and Form Decision Environment {This is what you should start any modeling facilitation meeting with}
Supplement 10-5 10-
Purpose
Planning Forecasting Training Behavioral research
Supplement 10-6 10-
Perspective
Descriptive

Telling it like it is Most simulation models are of this type Telling it like it should be Most optimization models are of this type
Prescriptive

Supplement 10-7 10-
Degree of Abstraction
Isomorphic

One-toOne-to-one One-toOne-to-many
Homomorphic

Supplement 10-8 10-
Content and Form

verbal descriptions mathematical constructs simulations mental models physical prototypes
Supplement 10-9 10-
Decision Environment
Decision Making Under Certainty

TOOL: all of mathematical programming TOOL: Decision analysis--tables, trees, Bayesian analysis--tables, revision TOOL: Structural models, simulation models
Decision Making under Risk and Uncertainty

Decision Making Under Change and Complexity

Supplement 10-10 10-
Mathematical Programming
Linear programming Integer linear programming

some or all of the variables are integer variables
Network programming (produces all integer solutions)

Nonlinear programming Dynamic programming Goal programming The list goes on and on

Geometric Programming
Copyright 2006 John Wiley & Sons, Inc. Supplement 10-11 10-
A Model of this class

What would we include in it?
Management Science Models

A QUANTITATIVE REPRESENTATION OF A PROCESS THAT CONSISTS OF THOSE COMPONENTS THAT ARE SIGNIFICANT FOR THE PURPOSE BEING CONSIDERED
Mathematical programming models covered in Ch 11, Supplement

Transportation Model Transshipment Model
Not included are: Shortest Route Minimal Spanning Tree Maximal flow Assignment problem many others
Transportation Model
A transportation model is formulated for a class of problems with the following characteristics

a product is transported from a number of sources to a number of destinations at the minimum possible cost each source is able to supply a fixed number of units of product each destination has a fixed demand for the product steppingstepping-stone modified distribution
Solution (optimization) Algorithms

Excels Solver
Transportation Method: Example
Transportation Method: Example
Problem Formulation Using Excel
Total Cost Formula
Using Solver from Tools Menu
Solution
Modified Problem Solution

The Underlying Network
For problems in which there is an underlying network:

There are easy (fast) solutions

An exception is the traveling salesman problem
The solutions are always integer ones {How about solving a 50,000 node problem in less than a minute on a laptop??}
CARLTON PHARMACEUTICALS
Carlton Pharmaceuticals supplies drugs and other medical supplies. It has three plants in: Cleveland, Detroit, Greensboro. It has four distribution centers in: Boston, Richmond, Atlanta, St. Louis. Management at Carlton would like to ship cases of a certain vaccine as economically as possible.
Data

Unit shipping cost, supply, and demand

Boston Boston $35 $35 37 37 40 40 1100 1100 Richmond Richmond 30 30 40 40 15 15 400 400 To To Atlanta Atlanta 40 40 42 42 20 20 750 750 St. Louis St. Louis 32 32 25 25 28 28 750 750 Supply Supply 1200 1200 1000 1000 800 800
From From Cleveland Cleveland Detroit Detroit Greensboro Greensboro Demand Demand
Assumptions

Unit shipping cost is constant. All the shipping occurs simultaneously. The only transportation considered is between sources and destinations. Total supply equals total demand.
Sources Cleveland
S1=1200
NETWORK REPRESENTATION
Destinations
D1=1100
Boston
Richmond
D2=400
Detroit
S2=1000
Atlanta
D3=750
Greensboro
S3= 800
St.Louis
D4=750
The Associated Linear Programming Model

The structure of the model is:

Minimize <Total Shipping Cost> ST [Amount shipped from a source] = [Supply at that source] [Amount received at a destination] = [Demand at that destination]
Decision variables
Xij = amount shipped from source i to destination j. where: i=1 (Cleveland), 2 (Detroit), 3 (Greensboro) j=1 (Boston), 2 (Richmond), 3 (Atlanta), 4(St.Louis)
Supply from Cleveland X11+X12+X13+X14 = 1200 Supply from Detroit X21+X22+X23+X24 = 1000 Supply from Greensboro X31+X32+X33+X34 = 800
The supply constraints

X11 X12 X13 X14
Boston
D1=1100
Cleveland
S1=1200
X21
X31
Richmond
D2=400
X32
X22
Detroit
S2=1000
X23
Atlanta
X33 D3=750
X24
Greensboro
S3= 800
St.Louis
X34
D4=750
The complete mathematical programming model

Minimize 35X11+30X12+40X13+ 32X14 +37X21+40X22+42X23+25X24+ 40X31+15X32+20X33+38X34 ST Supply constrraints: X11+ X12+ X13+ X14 X21+ X22+ X23+ X24 X31+ X32+ X33+ X34 Demand constraints: X11+ X12+ X13+ X14+ All Xij are nonnegative
= 1200 = 1000 = 800 = 1000 = 400 = 750 = 750
X21+ X22+ X23+ X24+
X31 X32 X33 X34
Excel Optimal Solution

CARLTON PHARMACEUTICALS UNIT COSTS BOSTON RICHMOND ATLANTA ST.LOUIS CLEVELAND $ 35.00 $ 30.00 $ 40.00 $ 32.00 DETROIT $ 37.00 $ 40.00 $ 42.00 $ 25.00 GREENSBORO $ 40.00 $ 15.00 $ 20.00 $ 28.00 DEMANDS 1100 400 750 750
SUPPLIES 1200 1000 800
SHIPMENTS (CASES) BOSTON RICHMOND ATLANTA ST.LOUIS CLEVELAND 850 350 0 0 DETROIT 250 0 0 750 GREENSBORO 0 50 750 0 TOTAL 1100 400 750 750
TOTAL 1200 1000 800
TOTAL COST =
84000
WINQSB Sensitivity Analysis
If this path is used, the total cost will increase by $5 per unit shipped along it
Shadow prices for warehouses - the cost resulting from 1 extra case of vaccine demanded at the warehouse
Shadow prices for plants - the savings incurred for each extra case of vaccine available at the plant
Transshipment Model
Transshipment Model: Solution
Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and backnot for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.
DEPOT MAX A General Network Problem Depot Max has six stores.

Stores 5 and 6 are running low on the model 65A Arcadia workstation, and need a total of 25 additional units. Stores 1 and 2 are ordered to ship a total of 25 units to stores 5 and 6. Stores 3 and 4 are transshipment nodes with no demand or supply of their own.
Other restrictions

There is a maximum limit for quantities shipped on various routes. There are different unit transportation costs for different routes.
Depot Max wishes to transport the available workstations at minimum total cost.
DATA:
20 10
1
6 5
3
12
0 e X ij e U ij
5
11
Arcs: Upper bound and lower bound constraints: 7
15
15
Net flow out of the node] = [Supply Intermediate transshipment nodes: at the node] Transportation X12 + out (Node 1) [Total flow X13 + X15 - X21 [Total Demand nodes: of the node] = = 10 flow into the node] unit cost = for [Net flow X21 += X13 X12[Demand15 the node] (Node 2) into the node] X34+X35 X24 - = (Node 3) X15 + X35 +X65+- X34 = 12 (Node 5) X46 = X24 X56 (Node 4) X46 +X56 - X65 = 13 (Node 6) Supplement 10-38 Copyright 2006 John Wiley & Sons, Inc. 10-
Supply nodes: Network presentation
The Complete mathematical model

Minimize 5 X12 10 X13 20 X15 6 X21 15 X24 12 X34 7 X35 15 X46 11X56 7 X 65 ST X12 + X13 + X15 - X21 - X12 - X13 - X24 - X15 + X21 + X24 + X34 + X35 - X34 - X35 - X46 + X46 = 10 = 15 = 0 = 0 + X56 - X65 = -12 - X56 + X65 = -13
0 e X12 e 3; 0 e X13 e 12; 0 e X15 e 6; 0 e X21 e 7; 0 e X24 e 10; 0 e X34 e 8; 0 e X35 e 8; 0 e X46 e 17; 0 e X56 e 7; 0 e X65 e 5
WINQSB Input Data
WINQSB Optimal Solution
MONTPELIER SKI COMPANY Using a Transportation model for production scheduling

Montpelier is planning its production of skis for the months of July, August, and September. Production capacity and unit production cost will change from month to month. The company can use both regular time and overtime to produce skis. Production levels should meet both demand forecasts and end-ofend-of-quarter inventory requirement. Management would like to schedule production to minimize its costs for the Wiley & Sons, Inc. quarter. Copyright 2006 John quarter. Supplement 10-42 10-
Data:

Initial inventory = 200 pairs Ending inventory required =1200 pairs Production capacity for the next quarter = 400 pairs in regular time. = 200 pairs in overtime. Holding cost rate is 3% per month per ski. Production capacity, and forecasted demand for this quarter (in pairs of skis), and production cost per unit (by months)
Month Month July July August August September September Forecasted Forecasted Demand Demand 400 400 600 600 1000 1000 Production Production Costs Production Production Costs Capacity Regular Time Overtime Capacity Regular Time Overtime 1000 25 30 1000 25 30 800 26 32 800 26 32 400 29 37 400 29 37
Analysis of demand:

Net demand to satisfy in July = 400 - 200 = 200 pairs

Initial inventory
Analysis of Unit costs

Forecasted demand In house inventory inventory] Analysis of Supplies: in July in Regular time and sold in Example: A unit produced September costs 25+ (3%)(25)(2 months) = $26.50 Production capacities are thought of as supplies. There are two sets of supplies:

Net demand[Unit production cost] + in August = 600 Unit cost = Net demand in September = 1000 + 1200 = 2200 pairs [Unit holding cost per month][the number of months stays in
Set 1- Regular time supply (production capacity) 1Set 2 - Overtime supply

Production Month/period
1000 July July R/T R/T July O/T
Network representation
25 25.75 26.50 0 30 30.90 31.80 +M 0
Month sold
July 200
500
Production Capacity
800
Aug. R/T
+M +M 32 32.96 29 0 0 +M
+M
Aug. 600
26
Demand
26.78
400 Aug. O/T
+M
Sept. 2200
0 37
400
Sept. R/T Sept. O/T

Dummy
300
200
Source: July production in R/T Destination: Julys demand. Unit cost= $25 (production)
Source: Aug. production in O/T Destination: Sept.s demand
32+(.03)(32)=$32.96 Unit cost =Production+one month holding cost
Summary of the optimal solution

In July produce at capacity (1000 pairs in R/T, and 500 pairs in O/T). Store 1500-200 = 1300 at the end of July. 1500In August, produce 800 pairs in R/T, and 300 in O/T. Store additional 800 + 300 - 600 = 500 pairs. In September, produce 400 pairs (clearly in R/T). With 1000 pairs retail demand, there will be (1300 + 500) + 400 - 1000 = 1200 pairs available for shipment to Ski Chalet.
Inventory +
Production -
Demand
Problem 4-25 4-
6.3 The Assignment Problem

Problem definition

m workers are to be assigned to m jobs A unit cost (or profit) Cij is associated with worker i performing job j. Minimize the total cost (or maximize the total profit) of assigning workers to job so that each worker is assigned a job, and each job is performed.
BALLSTON ELECTRONICS
Five different electrical devices produced on five production lines, are needed to be inspected. The travel time of finished goods to inspection areas depends on both the production line and the inspection area. Management wishes to designate a separate inspection area to inspect the products such that the total travel time is minimized.
Data: Travel time in minutes from assembly lines to inspection areas.

A A 10 10 11 11 13 13 14 14 19 19 B B 4 4 7 7 8 8 16 16 17 17 Inspection Area Inspection Area C C 6 6 7 7 12 12 13 13 11 11 D D 10 10 9 9 14 14 17 17 20 20 E E 12 12 14 14 15 15 17 17 19 19
Assembly Assembly Lines Lines
1 1 2 2 3 3 4 4 5 5
NETWORK REPRESENTATION
Assembly Line S1=1 1 Inspection Areas A D1=1
S2=1
B D2=1
S3=1
C D3=1
S4=1
D4=1
S5=1
5
D5=1
Assumptions and restrictions

The number of workers equals the number of jobs. Given a balanced problem, each worker is assigned exactly once, and each job is performed by exactly one worker. For an unbalanced problem dummy workers (in case there are more jobs than workers), or dummy jobs (in case there are more workers than jobs) are added to balance the problem.
Computer solutions

A complete enumeration is not efficient even for moderately large problems (with m=8, m! > 40,000 is the number of assignments to enumerate). The Hungarian method provides an efficient solution procedure.
Special cases

A worker is unable to perform a particular job. A worker can be assigned to more than one job. A maximization assignment problem.
6.5 The Shortest Path Problem

For a given network find the path of minimum distance, time, or cost from a starting point, the start node, to a destination, the terminal node. node, node. Problem definition

There are n nodes, beginning with start node 1 and ending with terminal node n. Bi-directional arcs connect connected nodes i and j Biwith nonnegative distances, d i j. Find the path of minimum total distance that connects node 1 to node n.
Fairway Van Lines

Determine the shortest route from Seattle to El Paso over the following network highways.
1
180
Seattle
497
599
2
420 345
Butte
691
Boise 4 Reno 6
432
432
Salt Lake City 7

440
Cheyenne 8
102
Portland
138
526
5 Sac.
621 291 280
11
155
Las Vegas
108
Denver 9
452 469
Bakersfield
114
10 14
386
Kingman 15 Albuque.
403
Barstow
207
13 Los Angeles
118
12
Phoenix 16
San Diego
17
425
Tucson
18
314
19
El Paso
Solution - a linear programming approach

Decision variables
1 if a truck travels on the highway from city i to city j X ij ! 0 otherwise
Objective = Minimize 7 dijXij
Subject to the following constraints: 1

180
Butte
Seattle
497
599
2
345
Boise 4 Salt Lake City
432
Portland
[The number of highways traveled out of Seattle (the start node)] = 1 X12 + X13 + X14 = 1 In a similar manner: [The number of highways traveled into El Paso (terminal node)] = 1 X12,19 + X16,19 + X18,19 = 1 [The number of highways used to travel into a city] = [The number of highways traveled leaving the city]. For example, in Boise (City 4): X14 + Nonnegativity constraints Wiley & Sons, Inc. X34 +X74 = X41 + X43 + X47. Supplement 10-64 Copyright 2006 John 10-
Solution - a network approach

The Dijkstras algorithm: Find the shortest distance from the START node to every other node in the network, in the order of the closet nodes to the START. Once the shortest route to the m closest node is determined, the shortest route to the (m+1) closest node can be easily determined.

This algorithm finds the shortest route from the start to all the nodes in the network.
An illustration of the Dijkstras algorithm

SLC BUT 599 BUT.
+ 420 = SLC.
CHY. 345 + SLC = SLC. SLC
691 =
SEA.
BOI BOI BOI.
497
1
180
Seattle
497
599
2
420
Butte
691
Boise 4 Reno 6
345 526 432
3 432 Portland
138
Salt Lake City 7

440
Cheyene 8
102
POR.
POR
180
+ 432 = BOIBOI 180 + 602 = SACSAC.
5 Sac.
621 291 280
10 Bakersfield
114
13 Los Angeles
118
and so on until the Kingman Barstow whole network 15 12 14 Albuque. is covered. Pheonix
108 155 452 207 469 386
11
Las Vegas
Denver 9
16 17
425
403
San Diego
18 Tucson
19
314 Supplement
10-67 10El Paso -
6.6 The Minimal Spanning Tree

This problem arises when all the nodes of a given network must be connected to one another, without any loop. The minimal spanning tree approach is appropriate for problems for which redundancy is expensive, or the flow along the arcs is considered instantaneous.
THE METROPOLITAN TRANSIT DISTRICT

The City of Vancouver is planning the development of a new light rail transportation system. The system should link 8 residential and commercial centers. The Metropolitan transit district needs to select the set of lines that will connect all the centers at a minimum total cost. The network describes:

feasible lines that have been drafted, minimum possible cost for taxpayers per line.
SPANNING TREE NETWORK North Side PRESENTATION 3
50 Business District 39 4
University 5
34 West Side 1 35 2 City Center 6 41 Shopping Center 45 8 East Side
7
South Side
Solution - a network approach

The algorithm that solves this problem is a very easy (trivial) procedure. It belongs to a class of greedy algorithms. The algorithm:
Start by selecting the arc with the smallest arc length. At each iteration, add the next smallest arc length to the set of arcs already selected (provided no loop is constructed). Finish when all nodes are connected.

Computer solution
Input consists of the number of nodes, the arc length, Copyright 2006 John Wiley & Sons, Inc. Supplement 10-71 10and the network description.

OPTIMAL SOLUTION NETWORK REPRESENTATION

North Side
50 Business District 39 4
University 5
34 West Side 1 35 2 City Center 6 41 Shopping Center
Loop
45 8 East Side
Total Cost = $236 million

7
South Side

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Chapter 11 Supplement

Operational Decision-Making Tools: DecisionTransportation and Transshipment Models

Copyright 2006 John Wiley & Sons, Inc.

Beni Asllani University of Tennessee at Chattanooga

Just how do you make decisions?

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-2 10-

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-4 10-

Model Classification Criteria

Use the perspective of the targeted decision-maker decision-

Copyright 2006 John Wiley & Sons, Inc.

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-6 10-

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-7 10-

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-8 10-

Content and Form

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-9 10-

 Decision Making under Risk and Uncertainty

 Decision Making Under Change and Complexity

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-10 10-

some or all of the variables are integer variables

 Network programming (produces all integer solutions)

A Model of this class

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-12 10-

Management Science Models

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-13 10-

Mathematical programming models covered in Ch 11, Supplement

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-14 10-

 Solution (optimization) Algorithms

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-15 10-

Transportation Method: Example

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-16 10-

Transportation Method: Example

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-17 10-

Problem Formulation Using Excel

Total Cost Formula

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-18 10-

Using Solver from Tools Menu

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-19 10-

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-20 10-

Modified Problem Solution

The Underlying Network

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-22 10-

For problems in which there is an underlying network:

An exception is the traveling salesman problem

Copyright 2006 John Wiley & Sons, Inc.

Supplement 10-23 10-

Unit shipping cost, supply, and demand

Decision Making under Risk and Uncertainty

Decision Making Under Change and Complexity

Network programming (produces all integer solutions)

Solution (optimization) Algorithms

The Complete mathematical model

Summary of the optimal solution

Data: Travel time in minutes from assembly lines to inspection areas.