Delta Hardware Store Case

In: Business and Management

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• • • • • • Regional Paint Retailer with 3 warehouses Restocks warehouses every month Has one Plant which is insufficient Not cost effective to expand the Plant Consider subcontracting to meet demand Determine a least cost distribution scheme

DELTA HARDWARE STORE Mathematical Modeling
1. 2. 3. 4. Identifying decision variables Quantifying objective function Constructing a model shell Data gathering

DELTA HARDWARE STORE Identifying decision variables
Factors that the decision maker has control over are controllable inputs or decision variables that need to be determined by solving the problem.

DELTA HARDWARE STORE Defining Decision Variables
Decision Variable is an item under the Decision maker authority to decide numerical value of it

DELTA HARDWARE STORE Defining Decision Variables
Let Xij = Amount of paint to be shipped this month from i to j Where i indicates the plant or the subcontractor And j indicates one of the warehouses

Objective of all optimization models is to figure out how to do the best with the available resources. Best implies Maximizing (profit) or Minimizing (cost)

Minimize total monthly costs of manufacturing, purchasing, and shipping

1 2 Limitations of resources a. Plant Monthly Capacity b. Limit amount order from subcontractor Requirements
a. Fulfilled each warehouse demand

A model shell enables the modeler to focus directly on the required data needed for the model

M = the cost of manufacturing 1000 gallons of the paint at the plant C = the cost of purchasing a 1000 gallons of the paint from subcontractor Tij = Transportation cost per 1000 gallons from i to j Qi =…...

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