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 Markov Processes

Chapter 10
Distribution and Network Models

Learning Objectives

1. Understand the usefulness of using optimization for supply chain problems.

2. Be able to identify the special features of the transportation problem.

3. Become familiar with the types of problems that can be solved by applying a transportation model.

4. Be able to develop network and linear programming models of the transportation problem.

5. Know how to handle the cases of (1) unequal supply and demand, (2) unacceptable routes, and (3)
maximization objective for a transportation problem.

6. Be able to identify the special features of the assignment problem.

7. Become familiar with the types of problems that can be solved by applying an assignment model.

8. Be able to develop network and linear programming models of the assignment problem.

9. Be familiar with the special features of the transshipment problem.

10. Become familiar with the types of problems that can be solved by applying a transshipment model.

11 Be able to develop network and linear programming models of the transshipment problem.

12. Know the basic characteristics of the shortest route problem.

13. Be able to develop a linear programming model and solve the shortest route problem.

14. Know the basic characteristics of the maximal flow problem.

15. Be able to develop a linear programming model and solve the maximal flow problem.

16. Know how to structure and solve a production and inventory problem as a transshipment problem.

17. Understand the following terms:

network flow problem capacitated transshipment problem

transportation problem shortest route
origin maximal flow
destination source node
capacitated transportation problem sink node
assignment problem arc flow capacities
transshipment problem supply chain

17 - 1
Chapter 10

Solutions:

1. The network model is shown.

Atlanta 1400

5000 Phila. 6

6
Dallas 3200
2

1 Columbus 2000
2
New 5
3000 Orleans
7

Boston 1400

2. a.
Let x11 : Amount shipped from Jefferson City to Des Moines
x12 : Amount shipped from Jefferson City to Kansas City
•
•
•
Min 14x11 + 9x12 + 7x13 + 8x21 + 10x22 + 5x23
s.t.
x11 + x12 + x13  30
x21 + x22 + x23  20
x11 + x21 = 25
x12 + x22 = 15
x13 + x23 = 10

x11, x12, x13, x21, x22, x23,  0

b. Optimal Solution:
Amount Cost
Jefferson City - Des Moines 5 70
Jefferson City - Kansas City 15 135
Jefferson City - St. Louis 10 70
Omaha - Des Moines 20 160
Total 435

10 - 2
 Distribution and Network ModelsProcesses

3. a.

b. Let xij = amount shipped from supply node i to demand node j.

Min 10x11 + 20x12 + 15x13 + 12x21 + 15x22 + 18x23

s.t.
x11 + x12 + x13  500
x21 + x22 + x23  400
x11 + x21 = 400
x12 + x22 = 200
x13 + x23 = 300

xij  0 for all i, j

c. Optimal Solution
Amount Cost
Southern – Hamilton 200 $ 2000
Southern – Clermont 300 4500
Northwest – Hamilton 200 2400
Northwest – Butler 200 3000
Total Cost $11,900

d. To answer this question the simplest approach is to increase the Butler County demand to 300 and to
increase the supply by 100 at both Southern Gas and Northwest Gas. The new optimal solution is:

Amount Cost
Southern – Hamilton 300 $ 3000
Southern – Clermont 300 4500
Northwest – Hamilton 100 1200
Northwest – Butler 300 4500
Total Cost $13,200

From the new solution we see that Tri-County should contract with Southern Gas for the additional
100 units.

10 - 3
Chapter 10

4.
a. The optimization model can be written as

x ij = Red GloFish shipped from i to j i = M for Michigan, T for Texas; j = 1, 2, 3.

y ij = Blue GloFish shipped from i to j , i = M for Michigan, T for Texas; j = 1, 2, 3.

Minimize x M1 + 2.50x M2 + 0.50x M3 + y M1 + 2.50y M2 + 0.50y M3 + 2.00y T1 + 1.50y T2 + 2.80y T3

subject to
x M1 + x M2 + x M3 ≤ 1,000,000
y M1 + y M2 + y M3 ≤ 1,000,000
y T1 +y T2 + y T3 ≤ 600,000
x M1 ≥ 320,000
x M2 ≥ 300,000
x M3 ≥ 160,000
y M1 + y T1 ≥ 380,000
y M2 + y T2 ≥ 450,000
y M3 + y T3 ≥ 290,000
x ij ≥ 0
Solving this linear program using Excel Solver we find that we should produce 780,000 red GloFish in
Michigan, 670,000 blue GloFish in Michigan, and 450,000 blue GloFish in Texas.
Using the notation in the model, the number of GloFish shipped from each farm to each retailer can be
expressed as:
𝑥𝑀1 = 320,000
𝑥𝑀2 = 300,000
𝑥𝑀3 = 160,000
𝑦𝑀1 = 380,000
𝑦𝑀2 = 0
𝑦𝑀3 = 290,000
𝑦𝑇1 = 0
𝑦𝑇2 = 450,000
𝑦𝑇3 = 0
b. From Excel Solver, the minimum transportation cost is $2.35 million.

c. We have to add variables xT1, xT2 and xT3 for Red GloFish shipped between Texas and Retailers 1, 2
and 3. The revised objective function is

Minimize x M1 + 2.50x M2 + 0.50x M3 + y M1 + 2.50y M2 + 0.50y M3 + 2.00y T1 + 1.50y T2 + 2.80y T3

+ x T1 + 2.50x T2 + 0.50x T3
We replace the third constraint above with
x T1 +x T2 + x T3 + y T1 +y T2 + y T3 ≤ 600,000
And we change the constraints
xM1 ≥ 320,000
xM2 ≥ 300,000
xM3 ≥ 160,000
to
xM1 + xT1 ≥ 320,000

10 - 4
 Distribution and Network ModelsProcesses

xM2 + xT2 ≥ 300,000

xM3 + xT3 ≥ 160,000

Using this new objective function and constraint the optimal solution is $2.2 million, so the savings are
$150,000.

5. a.

b. Let xij = number of hours from consultant i assigned to client j.

10 - 5
Chapter 10

Max 100x11 + 125x12 + 115x13 + 100x14 + 120x21 + 135x22 + 115x23

+ 120x24 + 155x31 + 150x32 + 140x33 + 130x34
s.t. x11 + x12 + x13 + x14  160
x21 + x22 + x23 + x24  160
x31 + x32 + x33 + x34  140
x11 + x21 + x31 = 180
x12 + x22 + x32 = 75
x13 + x23 + x33 = 100
x14 + x24 + x34 = 85

xij  0 for all i, j

Optimal Solution
Hours
Assigned Billing
Avery - Client B 40 $ 5,000
Avery - Client C 100 11,500
Baker - Client A 40 4,800
Baker - Client B 35 4,725
Baker - Client D 85 10,200
Campbell - Client A 140 21,700
Total Billing $57,925

c. New Optimal Solution

Hours
Assigned Billing
Avery - Client A 40 $ 4,000
Avery - Client C 100 11,500
Baker - Client B 75 10,125
Baker - Client D 85 10,200
Campbell - Client A 140 21,700
Total Billing $57,525

6. The network model, the linear programming formulation, and the optimal solution are shown. Note
that the third constraint corresponds to the dummy origin. The variables x31, x32, x33, and x34 are
the amounts shipped out of the dummy origin; they do not appear in the objective function since they
are given a coefficient of zero.

10 - 6
 Distribution and Network ModelsProcesses

Demand

D1 2000
Supply 32

5000 34
C.S.

32
40
D2 5000
34
30

3000 D. 28

38
D3 3000
0
0

0
4000 Dum

D4 2000

Note: Dummy origin has supply of 4000.

Max 32x11 + 34x12 + 32x13 + 40x14 + 34x21 + 30x22 + 28x23 + 38x24

s.t.
x11 + x12 + x13 + x14  5000
x21 + x22 + x23 + x24  3000
x31 + x32 + x33 + x34  4000 Dummy
x11 + x21 + x31 = 2000
x12 + x22 + x32 = 5000
x13 + x23 + x33 = 3000
x14 + x24 + x34 = 2000
xij  0 for all i, j

10 - 7
 Chapter 10

Optimal Solution Units Cost

Clifton Springs - D2 4000 $136,000

Clifton Springs - D4 1000 40,000
Danville - D1 2000 68,000
Danville - D4 1000 38,000
Total Cost: $282,000

Customer 2 demand has a shortfall of 1000

Customer 3 demand of 3000 is not satisfied.

7.
a. Let xij = MW produced at plant i for city j; i = L for Los Angeles, T for Tulsa, S for Seattle, j = 1, …, 10.

𝑀𝑖𝑛 356.26𝑥𝐿1 + 356.25𝑥𝐿2 + 178.13𝑥𝐿3 + 356.25𝑥𝐿4 + 237.50𝑥𝐿5 + 415.63𝑥𝐿6

+ 356.25𝑥𝐿7 + 356.25𝑥𝐿8 + 178.13𝑥𝐿9 + 356.25𝑥𝐿10 + 593.75𝑥𝑇1
+ 593.75𝑥𝑇2 + 475.00𝑥𝑇3 + 475.00𝑥𝑇4 + 475.00𝑥𝑇5 + 415.63𝑥𝑇6
+ 415.63𝑥𝑇7 + 356.25𝑥𝑇8 + 475.00𝑥𝑇9 + 296.88𝑥𝑇10 + 59.38𝑥𝑆1
+ 178.13𝑥𝑆2 + 296.88𝑥𝑆3 + 296.88𝑥𝑆4 + 356.25𝑥𝑆5 + 296.88𝑥𝑆6
+ 356.25𝑥𝑆7 + 475.00𝑥𝑆8 + 593.75𝑥𝑆9 + 593.75𝑥𝑆10
subject to
𝑥𝐿1 + 𝑥𝑇1 + 𝑥𝑆1 ≥ 950.00
𝑥𝐿2 + 𝑥𝑇2 + 𝑥𝑆2 ≥ 831.25
𝑥𝐿3 + 𝑥𝑇3 + 𝑥𝑠3 ≥ 2375.00
𝑥𝐿4 + 𝑥𝑇4 + 𝑥𝑆4 ≥ 593.75
𝑥𝐿5 + 𝑥𝑇5 + 𝑥𝑆5 ≥ 950.00
𝑥𝐿6 + 𝑥𝑇6 + 𝑥𝑆6 ≥ 593.75
𝑥𝐿7 + 𝑥𝑇7 + 𝑥𝑆7 ≥ 1187.50
𝑥𝐿8 + 𝑥𝑇8 + 𝑥𝑆8 ≥ 712.50
𝑥𝐿9 + 𝑥𝑇9 + 𝑥𝑆9 ≥ 1187.50
𝑥𝐿10 + 𝑥𝑇10 + 𝑥𝑆10 ≥ 1543.75
𝑥𝑖𝑗 ≥ 0, 𝑖 = 𝐿, 𝑇, 𝑆, 𝑗 = 1, … , 10

By solving this linear program in Excel Solver, we find the optimal solution is to produce 6412.50 MWs in
Los Angeles, 1543.75 MWs in Tulsa, and 2968.75 MWs in Seattle. The total distribution cost of this
solution is $2,552,382.81.

b. We must add the following constraints to the linear program shown above:
𝑥𝐿1 + 𝑥𝐿2 + 𝑥𝐿3 + 𝑥𝐿4 + 𝑥𝐿5 + 𝑥𝐿6 + 𝑥𝐿7 + 𝑥𝐿8 + 𝑥𝐿9 + 𝑥𝐿10 ≤ 4000
𝑥𝑇1 + 𝑥𝑇2 + 𝑥𝑇3 + 𝑥𝑇4 + 𝑥𝑇5 + 𝑥𝑇6 + 𝑥𝑇7 + 𝑥𝑇8 + 𝑥𝑇9 + 𝑥𝑇10 ≤ 4000
𝑥𝑆1 + 𝑥𝑆2 + 𝑥𝑆3 + 𝑥𝑆4 + 𝑥𝑆5 + 𝑥𝑆6 + 𝑥𝑆7 + 𝑥𝑆8 + 𝑥𝑆9 + 𝑥𝑆10 ≤ 4000
Solving the LP with these added constraints in Excel Solver yields an optimal production of 4000 MWs in
Los Angeles, 2925 MWs in Tulsa, and 4000 MWs in Seattle at a total cost of $2,652,949.22. Therefore,
the increase in cost associated with the additional constraints is $2,652,949.22 - $2,552,382.81 =
$100,566.41.

10 - 8
 Distribution and Network ModelsProcesses

8. a.

1
Boston 50
7
1 11
100
Denver
8
13 2
70
20 Dallas
17
2
100 Atlanta 12

10
3
Los 60
8 Angeles
18
3 13
150
Chicago
16
4
St. Paul 80

b. There are alternative optimal solutions.

Solution #1 Solution # 2

Denver to St. Paul: 10 Denver to St. Paul: 10

Atlanta to Boston: 50 Atlanta to Boston: 50
Atlanta to Dallas: 50 Atlanta to Los Angeles: 50
Chicago to Dallas: 20 Chicago to Dallas: 70
Chicago to Los Angeles: 60 Chicago to Los Angeles: 10
Chicago to St. Paul: 70 Chicago to St. Paul: 70

Total Profit: $4240

If solution #1 is used, Forbelt should produce 10 motors at Denver, 100 motors at Atlanta, and 150
motors at Chicago. There will be idle capacity for 90 motors at Denver.

If solution #2 is used, Forbelt should adopt the same production schedule but a modified shipping
schedule.

10 - 9
Chapter 10

9. The linear programming formulation and optimal solution are shown.

Let x1A = Units of product A on machine 1

x1B = Units of product B on machine 1
•
•
•
x3C = Units of product C on machine 3

Min x1A + 1.2x1B + 0.9x1C + 1.3x2A + 1.4x2B + 1.2x2C + 1.1x3A + x3B + 1.2x3C
s.t.
x1A + x1B + x1C  1500
x2A + x2B + x2C  1500
x3A + x3B + x3C  1000
x1A + x2A + x3A = 2000
x1B + x2B + x3B = 500
x1C + x2C + x3C = 1200
xij  0 for all i, j

Optimal Solution Units Cost

1-A 300 $ 300

1-C 1200 1080
2-A 1200 1560
3-A 500 550
3-B 500 500
Total: $3990

Note: There is an unused capacity of 300 units on machine 2.

10. a. The total cost is the sum of the purchase cost and the transportation cost. We show the calculation
for Division 1 - Supplier 1 and present the result for the other Division-Supplier combinations.

Division 1 - Supplier 1
Purchase cost (40,000 x $12.60) $504,000
Transportation Cost (40,000 x $2.75) 110,000
Total Cost: $614,000

10 - 10
 Distribution and Network ModelsProcesses

Cost Matrix ($1,000s)

Supplier

1 2 3 4 5 6

1 614 660 534 680 590 630

2 603 639 702 693 693 630

Division
3 865 830 775 850 900 930

4 532 553 511 581 595 553

5 720 648 684 693 657 747

b. Optimal Solution:

Supplier 1 - Division 2 $ 603

Supplier 2 - Division 5 648
Supplier 3 - Division 3 775
Supplier 5 - Division 1 590
Supplier 6 - Division 4 553
Total $3,169

11. a. Network Model

Demand

6
300
C1
Supply
1 4
450
P1 6
7 4
4 7
8 300
W1 C2
8 4
2
600
P2 5 3
6
5 7 8
300
W2 C3
5
7
3 6
380
P3

9
400
C4

10 - 11
Chapter 10

b. & c.
The linear programming formulation and solution is shown below.

LINEAR PROGRAMMING PROBLEM

MIN 4X14 + 7X15 + 8X24 + 5X25 + 5X34 + 6X35 + 6X46 + 4X47 + 8X48 + 4X49 + 3X56 + 6X57 + 7X58
+ 7X59

S.T.

1) X14 + X15 < 450

2) X24 + X25 < 600
3) X34 + X35 < 380
4) X46 + X47 + X48 + X49 - X14 - X24 - X34 = 0
5) X56 + X57 + X58 + X59 - X15 - X25 - X35 = 0
6) X46 + X56 = 300
7) X47 + X57 = 300
8) X48 + X58 = 300
9) X49 + X59 = 400

OPTIMAL SOLUTION

Objective Function Value = 11850.000

Variable Value Reduced Costs

-------------- --------------- ------------------
X14 450.000 0.000
X15 0.000 3.000
X24 0.000 3.000
X25 600.000 0.000
X34 250.000 0.000
X35 0.000 1.000
X46 0.000 3.000
X47 300.000 0.000
X48 0.000 1.000
X49 400.000 0.000
X56 300.000 0.000
X57 0.000 2.000
X58 300.000 0.000
X59 0.000 3.000

There is an excess capacity of 130 units at plant 3.

10 - 12
 Distribution and Network ModelsProcesses

12. a. Three arcs must be added to the network model in problem 23a. The new network is shown.

Demand

6
300
C1
Supply
1 4
450
P1 6
7 4
4 7
8 300
W1 C2
8 4
2
600 2 2
P2 5 3
6
5 7 8
300
W2 C3
5
7
3 6
380
P3
7 9
400
C4

b.&c.
The linear programming formulation and optimal solution is shown below.

LINEAR PROGRAMMING PROBLEM

MIN 4X14 + 7X15 + 8X24 + 5X25 + 5X34 + 6X35 + 6X46 + 4X47 + 8X48 + 4X49 + 3X56 + 6X57 + 7X58
+ 7X59 + 7X39 + 2X45 + 2X54

S.T.

1) X14 + X15 < 450

2) X24 + X25 < 600
3) X34 + X35 + X39 < 380
4) X45 + X46 + X47 + X48 + X49 - X14 - X24 - X34 - X54 = 0
5) X54 + X56 + X57 + X58 + X59 - X15 - X25 - X35 - X45 = 0
6) X46 + X56 = 300
7) X47 + X57 = 300
8) X48 + X58 = 300
9) X39 + X49 + X59 = 400

10 - 13
Chapter 10

OPTIMAL SOLUTION

Objective Function Value = 11220.000

Variable Value Reduced Costs

-------------- --------------- ------------------
X14 320.000 0.000
X15 0.000 2.000
X24 0.000 4.000
X25 600.000 0.000
X34 0.000 2.000
X35 0.000 2.000
X46 0.000 2.000
X47 300.000 0.000
X48 0.000 0.000
X49 20.000 0.000
X56 300.000 0.000
X57 0.000 3.000
X58 300.000 0.000
X59 0.000 4.000
X39 380.000 0.000
X45 0.000 1.000
X54 0.000 3.000

The value of the solution here is $630 less than the value of the solution for problem 23. The new
shipping route from plant 3 to customer 4 has helped (x39 = 380). There is now excess capacity of
130 units at plant 1.

10 - 14
 Distribution and Network ModelsProcesses

13. a. Network Model

Supply DC Capacity Demand

500

25 4 30
1 8
Iowa 200
Detroit 25 27.5 Just
350
Sports
35 500 30
40 20
5
32.5
35 45 Maryland
2 6 40 9
350 500
LA 35 Sports
500
35 Stuff
42.5 6 40
40 Idaho 32.5
40
500 25
3 42.5 27.5 10
700 Austin Sports 650
7
32.5 42.5 Dude
Ark

b. Let 𝑥𝑖𝑗 = units shipped from node i to node j

𝑀𝑖𝑛 25𝑥1,4 + 25𝑥1,5 + 35𝑥1,6 + 40𝑥1,7 + 35𝑥2,4 + 45𝑥2,5 + 35𝑥2,6 + 42.5𝑥2,7 + 40𝑥3,4
+ 40𝑥3,5 + 42.50𝑥3,6 + 32.50𝑥3,7 + 30𝑥4,8 + 27.50𝑦𝑥4,9 + 30𝑥4,10
+ 20𝑥5,8 + 32.50𝑥5,9 + 40𝑥5,10 + 35𝑥6,8 + 40𝑥6,9 + 32.50𝑥6,10
+ 27.50𝑥7,8 + 25𝑥7,9 + 42.50𝑥7,10

subject to
𝑥1,4 + 𝑥1,5 + 𝑥1,6 + 𝑥1,7 ≤ 350
𝑥2,4 + 𝑥2,5 + 𝑥2,6 + 𝑥2,7 ≤ 350
𝑥3,4 + 𝑥3,5 + 𝑥3,6 + 𝑥3,7 ≤ 700
𝑥1,4 + 𝑥2,4 + 𝑥3,4 = 𝑥4,8 + 𝑥4,9 + 𝑥4,10
𝑥1,5 + 𝑥2,5 + 𝑥3,5 = 𝑥5,8 + 𝑥5,9 + 𝑥5,10
𝑥1,6 + 𝑥2,6 + 𝑥3,6 = 𝑥6,8 + 𝑥6,9 + 𝑥6,10
𝑥1,7 + 𝑥2,7 + 𝑥3,7 = 𝑥7,8 + 𝑥7,9 + 𝑥7,10
𝑥1,4 + 𝑥2,4 + 𝑥3,4 ≤ 500
𝑥1,5 + 𝑥2,5 + 𝑥3,5 ≤ 500
𝑥1,6 + 𝑥2,6 + 𝑥3,6 ≤ 500
𝑥1,7 + 𝑥2,7 + 𝑥3,7 ≤ 500
𝑥4,8 + 𝑥5,8 + 𝑥6,8 + 𝑥7,8 ≥ 200
𝑥4,9 + 𝑥5,9 + 𝑥6,9 + 𝑥7,9 ≥ 500
𝑥4,10 + 𝑥5,10 + 𝑥6,10 + 𝑥7,10 ≥ 650

10 - 15
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