Problem 4C from Chapter 5 of Spreadsheet Modeling & Decision Analysis (8^th Edition):

CASE 5.4 deo camcorder orporation (MEC). Tising for the consu The Major Electric Corporation Henry Lee is the Vice President of Purchasing for the consumer electronics division of the Major Electric Corporation (MEC). The company recently introduced a new type of video camcorder that has taken the market by storm. Although Henry is pleased with the strong demand for this product in the market place, it has been a challenge to keep up with MEC's distributors' orders of this camcorder. His current challenge is how to meet requests from MEC's major distributors in Pittsburgh, Denver, Baltimore, and Houston who have placed orders of 10,000, 20,000, 30,000, and 25,000 units, respectively, for delivery in 2 months (there is a 1-month manufacturing and one- month shipping lead time for this product). MEC has contracts with companies in Hong Kong, Korea, and Singapore who manufacture camcorders for the company under the MEC label. These contracts require MEC to order a specified minimum number of units each month at a guaranteed per unit cost. The contracts also specify the maximum number of units that may be ordered at this price. The following table summarizes these contracts: Supplier Hong Kong Korea Singapore Monthly Purchasing Contract Provisions Unit Cost Minimum Required Maximum Allowed $375 20,000 30,000 $390 25,000 40,000 $365 15,000 30,000 MEC also has a standing contract with a shipping company to transport product from each of these suppliers to ports in San Francisco and San Diego. The cost of shipping from each supplier to each port is given in the following table along with the minimum required and maximum allowable number of shipping containers each month: Supplier Hong Kong Korea Singapore Monthly Shipping Contract Provisions San Francisco Shipping Requirements San Diego Shipping Requirements Cost per Minimum Maximum Cost per Minimum Maximum Container Containers Containers Container Containers Containers $2,000 5 20 $2,300 $1,800 10 30 $2,100 10 30 $2,400 $2,200 25 Under the terms of this contract, MEC guarantees it will send at least 20 but no more than 65 shipping containers to San Francisco each month, and at least 30 but no more than 70 shipping containers to San Diego each month. Each shipping container can hold 1,000 video cameras and will ultimately be trucked from the seaports on to the distributors. Again, MEC has a standing contract with a trucking company to provide trucking services each month. The cost of trucking a shipping container from each port to each distributor is summarized in the following table. Unit Shipping Cost per Container Pittsburgh Denver Baltimore $1,100 $850 $1,200 $1,200 $1,000 $1,100 Houston $1,000 San Francisco San Diego $900 As with the other contracts, to obtain the prices just given, MEC is required to use a certain minimum amount of trucking capacity on each route each month and may not exceed certain maximum shipping amounts without incurring cost penalties. These minimum and maximum shipping restrictions are summarized in the following table. Minimum Required and Maximum Allowable Number of Shipping Containers per Month Pittsburgh Denver Baltimore Houston Min Max Min Max Min Max Min Max 3 7 6 12 10 18 5 15 4 6 5 14 5 20 10 20 San Francisco San Diego Henry is left with the task of sorting through all this information to determine the least cost purchasing and distribution plan to fill the distributor's requests. But because he and his wife have tickets to the symphony for this evening, he has asked you to take a look at this problem and give him your recommendations at 9:00 tomorrow morning. a. Create a network flow model for this problem. (Hint: Consider inserting intermediate nodes in your network to assist in meeting the minimum monthly purchase restrictions for each supplier and the minimum monthly shipping requirements for each port.) b. Implement a spreadsheet model for this problem and solve it. c. What is the optimal solution? CASE 5.4 deo camcorder orporation (MEC). Tising for the consu The Major Electric Corporation Henry Lee is the Vice President of Purchasing for the consumer electronics division of the Major Electric Corporation (MEC). The company recently introduced a new type of video camcorder that has taken the market by storm. Although Henry is pleased with the strong demand for this product in the market place, it has been a challenge to keep up with MEC's distributors' orders of this camcorder. His current challenge is how to meet requests from MEC's major distributors in Pittsburgh, Denver, Baltimore, and Houston who have placed orders of 10,000, 20,000, 30,000, and 25,000 units, respectively, for delivery in 2 months (there is a 1-month manufacturing and one- month shipping lead time for this product). MEC has contracts with companies in Hong Kong, Korea, and Singapore who manufacture camcorders for the company under the MEC label. These contracts require MEC to order a specified minimum number of units each month at a guaranteed per unit cost. The contracts also specify the maximum number of units that may be ordered at this price. The following table summarizes these contracts: Supplier Hong Kong Korea Singapore Monthly Purchasing Contract Provisions Unit Cost Minimum Required Maximum Allowed $375 20,000 30,000 $390 25,000 40,000 $365 15,000 30,000 MEC also has a standing contract with a shipping company to transport product from each of these suppliers to ports in San Francisco and San Diego. The cost of shipping from each supplier to each port is given in the following table along with the minimum required and maximum allowable number of shipping containers each month: Supplier Hong Kong Korea Singapore Monthly Shipping Contract Provisions San Francisco Shipping Requirements San Diego Shipping Requirements Cost per Minimum Maximum Cost per Minimum Maximum Container Containers Containers Container Containers Containers $2,000 5 20 $2,300 $1,800 10 30 $2,100 10 30 $2,400 $2,200 25 Under the terms of this contract, MEC guarantees it will send at least 20 but no more than 65 shipping containers to San Francisco each month, and at least 30 but no more than 70 shipping containers to San Diego each month. Each shipping container can hold 1,000 video cameras and will ultimately be trucked from the seaports on to the distributors. Again, MEC has a standing contract with a trucking company to provide trucking services each month. The cost of trucking a shipping container from each port to each distributor is summarized in the following table. Unit Shipping Cost per Container Pittsburgh Denver Baltimore $1,100 $850 $1,200 $1,200 $1,000 $1,100 Houston $1,000 San Francisco San Diego $900 As with the other contracts, to obtain the prices just given, MEC is required to use a certain minimum amount of trucking capacity on each route each month and may not exceed certain maximum shipping amounts without incurring cost penalties. These minimum and maximum shipping restrictions are summarized in the following table. Minimum Required and Maximum Allowable Number of Shipping Containers per Month Pittsburgh Denver Baltimore Houston Min Max Min Max Min Max Min Max 3 7 6 12 10 18 5 15 4 6 5 14 5 20 10 20 San Francisco San Diego Henry is left with the task of sorting through all this information to determine the least cost purchasing and distribution plan to fill the distributor's requests. But because he and his wife have tickets to the symphony for this evening, he has asked you to take a look at this problem and give him your recommendations at 9:00 tomorrow morning. a. Create a network flow model for this problem. (Hint: Consider inserting intermediate nodes in your network to assist in meeting the minimum monthly purchase restrictions for each supplier and the minimum monthly shipping requirements for each port.) b. Implement a spreadsheet model for this problem and solve it. c. What is the optimal solution