The Bedrock company has introduced a new additional to its product range.

The
company will manufacture the new items at its three plants, P1, P2 and P3, which
have annual production capacities of 1500, 2000 and 1000 with unit production costs
of $4, $3 and $2 respectively. The product will be distributed through the companys
two warehouses W1 and W2, which involve unit-handling costs of $3 and $4
respectively. Customer demand is concentrated in three main shopping centers located
at S1, S2 and S3. With estimated annual requirements of 1000, 1200 and 900
respectively. The unit transportation costs (in $) from plant to warehouse and unit
delivery coats from warehouse to customer are given in the table.
P1

P2

P3

W1

12

W2

S1

S2

S3

The Bedrock Company wants to determine an optimal production and distribution

schedule. Create an Excel model to find optimal solution.

Answer:
The new items are manufacturing at three plants plant1 (P1), plant2 (P2), plant3 (P3),
whereas distribution is done through companys warehouses that are warehouse1
(w1), Warehouse2 (W2). As we know that the Customer demand is concentrated in
three main shopping centers Shopping1 (S1), Shopping (S2), Shopping3 (S3).

Plant

Production Capacity

Unit Cost

P1
P2
P3

1500
2000
1000

$4.00
$3.00
$2.00

Warehouse
W1
W2

Unit Handling Cost

$3.00
$4.00

P1
P2
P2
P3
P3
w1
w1
w1
w2
w2

S1
S2
S3

1000
1200
900

Solution: Plants To Ware House

W1
0
1000
0

P1
P2
P3

T
o
w
1
w
2
w
1
w
2
w
1
w
2
S
1
S
2
S
3
S
1
S

Demand

Solution: Plants To Shopping Centers

S1
S2
0
1100
1000
0
0
100

P1
P2
P3

Fro
m
P1

Shop

Unit
Cost
13

p1

p2

p3

-1

-1

10

S3
0
0
900

W2
1100
0
1000

w
2
0

s1

s2

s3

w
1
1

Optimal Unit
Cost
0

1100

-1

1000

-1

14

-1

-1

1000

-1

1000

-1

12

-1

-1

-1

1200

w2

2
S
3

12

Actual

110
0
150
0

Constrai
nts

100 100
0
0
200 100
0
0
Supply

-1

100 120
0
0

90
0

100 120
0
0

90
0

900

Demand

So we can say that optimal production and distribution

schedule can be:
1) Production from plant1 then to warehouse2 and then
distributed to shopping2.
2) Production from plant3 then to warehouse2 and then
distribution to shopping2 and shopping3.
3) Production from plant2 then to warehouse1 and then
distribution to shopping1.