Problem 3: Location Selection for EXP Logistics EXP logistics is a third party logistic company that operates several distribution centers at multiple locations. The company recently decided to expand its warehouse coverage in Texas and planned to construct new warehouses in several candidate sites. The company has two types of warehouses: Mega warehouses and Regular warehouses. Mega warehouses have larger capacity than Regular warehouses. There are 8 different sites available for the company to build new warehouses. The company can build either type of warehouses at a given site. However, the company can build at most one warehouse at any location. The following table summarizes the estimated net present value (NPV) of the cash flows (in million) resulting from locating each type of warehouse at each of the sites and also indicates which sites are within 20 miles of each other. Site 1 2 3 4 5 6 7 8 Mega Warehouse NPV Regular Warehous NPV Other Sites within 20 miles 2,3,5,6 1,3,4,7 1,2,5,6 2,5,6,8 1,3,4,6 1,3,4,5,7 2,6,8 4,7 17.9 12.1 16.3 17.9 17.3 13.4 20.4 20 16.9 10.9 14.4 15.1 15 10.8 17.4 17.7
Problem 3: Location Selection for EXP Logistics EXP logistics is a third party logistic company that operates several distribution centers at multiple locations. The company recently decided to expand its warehouse coverage in Texas and planned to construct new warehouses in several candidate sites. The company has two types of warehouses: Mega warehouses and Regular warehouses. Mega warehouses have larger capacity than Regular warehouses. There are 8 different sites available for the company to build new warehouses. The company can build either type of warehouses at a given site. However, the company can build at most one warehouse at any location. The following table summarizes the estimated net present value (NPV) of the cash flows (in million) resulting from locating each type of warehouse at each of the sites and also indicates which sites are within 20 miles of each other. Site 1 2 3 4 5 6 7 8 Mega Warehouse NPV Regular Warehous NPV Other Sites within 20 miles 2,3,5,6 1,3,4,7 1,2,5,6 2,5,6,8 1,3,4,6 1,3,4,5,7 2,6,8 4,7 17.9 12.1 16.3 17.9 17.3 13.4 20.4 20 16.9 10.9 14.4 15.1 15 10.8 17.4 17.7
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Transcribed Image Text:Problem 3: Location Selection for EXP Logistics
EXP logistics is a third party logistic company that operates several distribution centers at multiple
locations. The company recently decided to expand its warehouse coverage in Texas and planned to
construct new warehouses in several candidate sites. The company has two types of warehouses: Mega
warehouses and Regular warehouses. Mega warehouses have larger capacity than Regular warehouses.
There are 8 different sites available for the company to build new warehouses. The company can build
either type of warehouses at a given site. However, the company can build at most one warehouse at
any location. The following table summarizes the estimated net present value (NPV) of the cash flows (in
million) resulting from locating each type of warehouse at each of the sites and also indicates which
sites are within 20 miles of each other.
Site
1
2
3
4
5
6
7
8
Mega Warehouse NPV Regular Warehous NPV Other Sites within 20
miles
2,3,5,6
1,3,4,7
1,2,5,6
2,5,6,8
1,3,4,6
1,3,4,5,7
2,6,8
4,7
17.9
12.1
16.3
17.9
17.3
13.4
20.4
20
16.9
10.9
14.4
15.1
15
10.8
17.4
17.7
Transcribed Image Text:The company does not want to build a warehouse when there is already any warehouse within 20 miles.
For example, the company would not build a warehouse in site 1 if there is another warehouse (of any
type) in sties 2, 5 or 6. The company can build at most 1 warehouse (of any type) at any site (so building
1 Mega and 1 Regular warehouse at the same site is not allowed). But the company wants to ensure at
least 1 Mega warehouse and 1 Regular warehouse are built in total (from all sites combined). The
company can choose not to build any warehouse at a site as well. Create a spreadsheet model to
determine which (if any) warehouse it should build at each site to maximize total NPV. Where should
the company build which type of warehouse? What is the resulting optimal NPV? You do NOT need to
provide a mathematical formulation.
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