Introduction to Supply Chain Management

Business Finance – Management Homework02

Introduction to Supply Chain Management

Assignment # 2

Question 01

Wheat is harvested in the Midwest and stored in grain elevators in three different cities- Kansas City, Omaha, and Des Moines. These grain elevators supply three flour mills, located in Chicago, St. Louis, and Cincinnati. Grain is shipped to the mills in railroad cars, each car capable of holding one ton of wheat. Each grain elevator is able to supply the following number of tons (i.e railroad cars) of wheat to the mills on a monthly basis.

Grain Elevator Capacity

(Cases per week)

1. Kansas City 150

2. Omaha 175

3. Des Moines 275

Each mill demands the following numbers of tons of wheat per month.

Mill Demand

A. Chicago 200

B. St. Louis 100

C. Cincinnati 300

The cost of transporting one ton of wheat from each grain elevator (source) to each mill (destination) differs according to the distance and rail system. These costs are shown in the following table. For example, the cost of shipping one ton of wheat from the grain elevator at

Omaha to the mill at Chicago is $7.

Mill

Grain Elevator A. Chicago B. St. Louis C. Cincinnati

1. Kansas City $6 $8 $10

2. Omaha 7 11 11

3. Des Moines 4 5 12

The problem is to determine how many tons of wheat to transport from each grain elevator to each mill on a monthly basis in order to minimize the total cost of transportation (Use North- west corner method and Least-cost method).

Question 02

A soft drink manufacturer has recently begun negotiations with brokers in areas where it intends to distribute new products. Before making final agreements, however, the firm wants to determine shipping routes and costs. The firm has three plants with capacities as follows:

Plants Capacity

(Cases per week)

Metro 40,000

Ridge 30,000

Colby 25,000

The estimated shipping costs per case for the various routes are:

Warehouses Demand

(Cases per week)

RS1 24,000

RS2 22,000

RS3 23,000

RS4 16,000

RS5 10,000

To

From RS1 RS2 RS3 RS4 RS5

Metro 0.80 0.75 0.60 0.70 0.90

Ridge 0.75 0.80 0.85 0.70 0.85

Colby 0.70 0.75 0.70 0.80 0.80

 

Use the north-west corner method and least cost method to find the minimum cost.

Explanation & Answer

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