A&B Transport Co. is a company that manages a food supply chain. The problem involves the delivery of cargo (canned peas) from four canneries (loading ports) to three destination ports, using tankers. Since the shipping costs are a major expense for the company, management is initiating a study to reduce them as much as possible. For the upcoming season, has come up with an estimation of the available output from each cannery. Furthermore, each destination port has also specific requirements for the total supply of peas that have to be satisfied. This information (in units of tanker loads), along with the shipping cost per tanker load for each loading - destination port combination, is given in Tables 1 and 2. The problem for the A&B Transport Co. is to determine the shipping strategy given the various loading - destination port combinations, so that the total shipping costs are minimised. Question 1 . A&B Transport Co is thinking of including in its strategy the shipment of products from Loading port 1 to Destination Port 1, since unit transportation costs are not very high in this case. Do you agree with this idea? How would this affect the current strategy and the shipping costs? What would you suggest? Question 2 . At which of the 3 Destination ports would it be cheapest to meet increased requirements, and how much would it cost per unit? Question 3 . Assume that you were not given the reduced cost value (and the allowable increase/decrease as well) for the amount shipped from loading port 1 to destination port 1. Could you calculate this value using other information given in the sensitivity report?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

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A&B Transport Co. is a company that manages a food supply chain. The problem involves the delivery of cargo (canned peas) from four canneries (loading ports) to three destination ports, using tankers. Since the shipping costs are a major expense for the company, management is initiating a study to reduce them as much as possible. For the upcoming season, has come up with an estimation of the available output from each cannery. Furthermore, each destination port has also specific requirements for the total supply of peas that have to be satisfied. This information (in units of tanker loads), along with the shipping cost per tanker load for each loading - destination port combination, is given in Tables 1 and 2. The problem for the A&B Transport Co. is to determine the shipping strategy given the various loading - destination port combinations, so that the total shipping costs are minimised.

Question 1 . A&B Transport Co is thinking of including in its strategy the shipment of products from Loading port 1 to Destination Port 1, since unit transportation costs are not very high in this case. Do you agree with this idea? How would this affect the current strategy and the shipping costs? What would you suggest?
Question 2 . At which of the 3 Destination ports would it be cheapest to meet increased requirements, and how much would it cost per unit?
Question 3 . Assume that you were not given the reduced cost value (and the allowable increase/decrease as well) for the amount shipped from loading port 1 to destination port 1. Could you calculate this value using other information given in the sensitivity report?

DESTINATION PORTS
LOADING PORTS
(CANNERIES)
1
2
3
1
90
30
120
2
60
60
90
3
30
180
60
4
120
150
30
The transportation strategy to be followed as well as sensitivity information of the strategy are
presented in the following report.
Sensitivity Report
Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name
Value
Cost
Coefficient
Increase
Decrease
$D$19 LP1 | DP1
0
60
90
1E+30
60
$E$19 LP1 | DP2
22
0
30
30
1E+30
$F$19 LP1 | DP3
0
60
120
1E+30
60
$D$20 LP2 | DP1
3
0
60
60
0
$E$20 LP2 | DP2
23
0
60
150
30
5
0
90
0
60
0
30
0
1E+30
150
180
1E+30
150
$F$20 LP2 | DP3
$D$21 LP3 | DP1
SE$21 LP3 | DP2
$F$21 LP3 | DP3
$D$22 LP4 | DP1
$E$22 LP4 | DP2
0
60
1E+30
0
120
120
1E+30
120
150
150
1E+30
150
SF$22 LP4 | DP3
0
30
60
1E+30
Constraints
Final
Shadow
Constraint
Allowable
Allowable
Cell Name
Value
Price
R.H. Side
Increase
Decrease
$C$25 Loading Port 1
22
-30
22
23
10
$C$26
Loading Port 2
31
0
41
1E+30
10
$C$27 Loading Port 3
27
-30
27
3
10
$C$28 Loading Port 4
10
-60
10
5
10
$C$29
Destination Port 1
30 60
30
10
3
$C$30
Destination Port 2
60
45
10
23
$C$31 Destination Port 3
90
15
10
5
NOOOO9
27
10
145 15

Table 1. Availability and requirements data for P&T Transport Co
AVAILABILITY
LOADING PORTS
(CANNERIES)
DESTINATION
PORTS
(TANKER LOADS)
1
22
1
2
41
2
3
27
3
4
10
Table 2. Unit transportation costs ('000 € / tanker load)
REQUIREMENTS
(TANKER LOADS)
30
45
15

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