Develop optimization models for the following situations.

Define your decision variables so

that the model is readable and mention any additional assumptions you are making (If you
think some data is missing, assume them, but clearly state them).

Question 1
A substantial part of United Parcel Services freight traffic moves as a trailer-on-flatcars (i.e.
with truck trailers travelling most of the way on railroad flatcars). The required number of
truckloads di,j to be shipped between points i, j = 1, 2,,, n in this way is known, but UPS
can use either its own trailer at unit cost ci,j or rent trailers from railroad company at unit cost
ri,j. Rented trailers can be left anywhere, but UPS wishes to balance the number of its own
trailers available at every point. That is, the number of company trailers inbound at any point
should be equal the number outbound. If necessary, trailers may be returned empty from i to j at
unit cost ei,j to meet this requirement. Develop an optimization model to find a minimum total
cost shipping plan.

Check if your model is a (single commodity) network flow problem. If, yes how (identify the
arcs, flow, capacity etc.)?

Question 2
As commercial airliner makes stops j = 1, , n of its daily routine and returns to where it started
it takes on fuel for the next leg. Fuel is added at stop j to assure that the plane will arrive at stop j
+ 1 with at least the required safety reserve rj+1. Fuel unit costs cj (Rupees per Kg) vary
considerably from stop to stop, so it is sometimes economical to carry more fuel than the
minimum required in order to buy less at high-cost stops. However, the take-off fuel load at any j
must not exceed safety limit tj. The amount of fuel at takeoff also affects the weight of the
aircraft and thus its fuel consumption during flight. For each leg from stop j to j + 1, the fuel
required can be estimated as constant j plus a slope j times the onboard fuel at takeoff from j.

Formulate this fuel management problem as a linear program. Assume that stop 1 is the
successor of stop n, and use non-zero lower bounds if needed

Please move to next page for last question

 3. Case: Andrew-Carter, Inc.

Andrew-Carter, Inc. (A-C) is a major Canadian producer and distributor of outdoor lighting fixtures. Its
fixture is distributed throughout North America and has been in high demand for several years. The
company operates three plants that manufacture the fixture and distribute it to five distribution centers.

During the past few years, A-C has seen a major drop in demand for its fixture as the housing market has
declined. Based on the forecast of interest rates, the head of operations feels that demand for housing and
thus for its product will remain depressed for the foreseeable future. A-C is considering closing one of its
plants, as it is now operating with a forecasted excess capacity of 34,000 units per week. The forecasted
weekly demands for the coming year are 9,000 units, 13,000 units, 11,000 units, 15,000 units, and 8,000
units for warehouses 1 to 5, respectively. The regular time plant capacities (in units per week) are 27,000
units, 20,000 units, and 25,000 units for plants 1 to 3, respectively. The overtime plant capacities (in units
per week) are 7,000 units, 5,000 units, and 6,000 units for plants 1 to 3, respectively.

If A-C shuts down any plants any plants, its weekly costs will change, as fixed costs are lower for a non-
operating plant. Table 1 shows production costs at each plant, both variable at regular time and overtime,
and fixed when operating and shut down. Table 2 shows distribution costs from each plant to each
distribution center.

Table 1
Fixed Cost
Plant Variable Cost Operating Not Operating
Plant 1, regular time $2.80 $14,000 $6,000
Plant 1, overtime $3.52
Plant 2, regular time $2.78 $12,000 $5,000
Plant 2, overtime $3.48
Plant 3, regular time $2.72 $15,000 $7,500
Plant 3, overtime $3.42

Table 2
Distribution Center
From \ To Wing 1 Wing 2 Wing 3 Wing 4 Wing 5
Plant 1 $0.50 $0.44 $0.49 $0.46 $0.56
Plant 2 0.40 0.52 0.50 0.56 0.57
Plant 3 0.56 0.53 0.51 0.54 0.35

Now answer the following:

(i) Evaluate the various configurations of operating and closed plants that will meet weekly demand.
Determine which configuration minimizes total costs.

(ii) Discuss the implications of closing a plant.

Source: Professor Michael Ballot, University of the Pacific