MATH 446/546 Homework 4: Due December 4th, 2014

1. A hotel uses an external laundry service to provide clean towels. The hotel generates
600 soiled towels a day. The laundry service picks up the soiled towels and replaces
them with clean ones at regular intervals. There is a fixed charge of $81 per pickup
and delivery service, in addition to the variable cost of $0.60 per towel. It costs the
hotel $0.02 a day to store a soiled towel and $0.01 per day to store a clean one. How
often should the hotel use the pickup and delivery service? (Hint: there are two types
of inventory items in this situation. As the level of the soiled towels increases, that of
clean towels decreases at an equal rate.)

Solution:
Here our goal is to optimize an objective function. Specifically we aim to minimize
the cost of the towel inventory. Defining T to be the total number of towels on
grounds, and t0 to be the time between deliveries of clean towels (where all the
dirty towels are exchanged for clean ones).
C(T ) =

holding clean + holding dirty + placing order + cleaning dirty

time between orders

Thus,
C(T ) =

0.01(0.5)(T + (T 600t0 ))t0 + 0.02(0.5)(0 + 600t0 )t0 + 81 + 0.6(600t0 )

.
t0

where we know that T /600 = t0 . Using this in the objective function gives:
C(T ) =

(3/200)(T 2 + 24000T + 3240000)

T

Setting C 0 (T ) = 0 and solving for T gives:

C 0 (T ) = (3/100)(T + 12000)/T (3/200)(T 2 + 24000T + 3240000)/T 2
= T = 1800, and T = 1800
Reject 1800 as it is not physical. Note that C 00 (1800) = 1/60000 and we know
that C(T ) is minimized at 1800. The hotel should have 1800 towels in inventory
where the towels are picked up every three days.

2. Continue with the problem given above such that the normal charge for washing a
soiled towel is $0.60, but the laundry service will charge only $0.50 if the hotel delivers
the towels in lots of at least 2500. Should the hotel take advantage of the discount?

Solution:
Note that we now have a piece-wise defined function.

C(T ) if T < 2500
T C(T ) =
N (T ) if T 2500
with
N (T ) =

0.01(0.5)(T + (T 600t0 ))t0 + 0.02(0.5)(0 + 600t0 )t0 + 81 + 0.5(600t0 )

t0

Note N (T ) has the same optimal value as C(T ) if the price break is not considered.
The optimal value of T C(T ) depends on the zone that the price break falls in. If
the price break falls prior to the optimal value for the function seen in question one
the hotel should use the optimal value. There is a critical value found by solving:
C(1800) = N (T ) = 414 = N (T )

= T = 400 70 + 3800 7146.64

where if the price break falls between the optimal value found in part 1 and this
critical value the hotel should choose the price break, and if the price break value
is beyond 7146.64 the hotel should go again with the value found in part one.
Here we see that the price break (2500) is in the second region, and the hotel should
order take advantage of this when ordering towels. For instance by ordering 3000
Towels every 5 days.

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