Aberdeen Computer Corp. (ACC) is located in Aberdeen, Washington. The company has developed the Web-Surfer, a low-cost e-mail and Web-surfing appliance. This product is manufactured at four plants, located in Atlanta, Kansas City, Aberdeen, and Austin. After production, the Web-Surfers are shipped to three warehouses, located in Nashville, San Jose, and Houston. ACC sells the Web-Surfers through the retail channel. In particular, five different retailers currently sell the Web-Surfer-Sears, Best Buy, Fry’s, Comp USA, and Office Max. ACC makes weekly shipments to the main warehouses of these five retailers. The shipping cost from each plant to each warehouse, along with the production cost and weekly production capacity at each plant, are given in the table below.
The shipping cost from each warehouse to each customer, the variable cost (cost per unit moved through the warehouse), the capacity (maximum number of units that can be moved through the warehouse per week) for each warehouse, and the weekly demand for each customer are given in the table below.
a. Formulate and solve a linear programming model in a spreadsheet to determine the plan for weekly production and of the Web-Surfer from the various plants, through the warehouses, to the customers that will minimize total costs.
____________________________________ Fixed Cost
Plant ________________________________ ($/week)
Atlanta ………………………………………. $8,000
Kansas City …………………………………. $9,000
Aberdeen ……………………………………. $9,000
Austin ……………………………………… $10,000
___________________________________ Fixed Cost
Warehouse __________________________ ($/week)
Nashville …………………………………… $4,000
San Jose …………………………………… $5,000
Houston …………………………………… $5,000
b. Now suppose that ACC is considering saving money by closing some of its production facilities and/or warehouses. Suppose there is a fixed cost to operate each plant and each warehouse as indicated in the tables above. Add binary variables to your model in part a to incorporate the decision of which plants and warehouses to keep open so as to minimize total cost (including the fixed costs for
any plant or warehouse that is operated).
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