Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Transcribed Image Text:Aberdeen Computer Corp. (ACC) is located in Aberdeen, Washington. The company has developed the WebSurfer, a cost-effective email and web-surfing appliance. Manufactured at four plants located in Atlanta, Kansas City, Aberdeen, and Austin, these products are shipped to three warehouses in Nashville, San Jose, and Houston after production. ACC distributes WebSurfers to major retailers such as Sears, Best Buy, Fry’s, Comp USA, and Office Max through these warehouses. Below is the table containing shipping costs from each plant to each warehouse, including production cost per unit and weekly production capacity at each plant.
**Table: Plant Shipping Costs, Production Costs, and Capacity**
| Plant | Shipping Cost ($/unit) | | | Production Cost ($/unit) | Capacity (units/week) |
|-------------|------------------------|-----------|----------------|--------------------------|-----------------------|
| | Nashville | San Jose | Houston | | |
| Atlanta | $30 | $40 | $50 | $208 | 200 |
| Kansas City | $25 | $45 | $40 | $214 | 300 |
| Aberdeen | $45 | $30 | $55 | $215 | 250 |
| Austin | $30 | $50 | $30 | $210 | 400 |
The next table provides data on shipping cost from each warehouse to each customer, variable cost per unit moved through warehouses, maximum capacity for each warehouse, and weekly customer demand.
**Table: Warehouse Shipping Costs and Demands**
| Warehouse | Shipping Cost ($/unit) | | | | | Variable Cost | Capacity (units/week) |
|-----------|------------------------|---------|-----------|-----------|-----------|---------------|------------------------|
| | Best Buy | Fry’s | Comp USA | Office Max| | ($/unit) | |
| Nashville | $40 | $45 | $30 | $25 | $20 | $4 | 300 |
| San Jose | $15 | $50 | $25 | $15 | $40 | $5 | 500 |
| Houston | $50 | $35 | $15 | $40 | $50 |
Transcribed Image Text:### Decision-Making for Cost Optimization
**Scenario:**
ACC is considering ways to reduce costs by potentially closing some production facilities and/or warehouses. Each plant and warehouse incurs a fixed operating cost weekly.
**Objective:**
Incorporate binary variables into your model to determine which plants and warehouses should remain open to minimize total cost, which includes fixed costs for any operational facility.
### Fixed Costs for Facilities:
#### Plants:
- **Atlanta**: $8,000 per week
- **Kansas City**: $9,000 per week
- **Aberdeen**: $9,000 per week
- **Austin**: $10,000 per week
#### Warehouses:
- **Nashville**: $4,000 per week
- **San Jose**: $5,000 per week
- **Houston**: $5,000 per week
By evaluating these fixed costs, ACC can make informed decisions about which facilities to operate in order to achieve cost efficiency.
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