Supply Chain Modelling and Design


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School of Accounting, Information Systems and Supply Chain

OMGT2287 Supply Chain Modelling and Design
Assessment 1 Case Study Brief

The company produces onions at three plants, which can be delivered directly to the two
customers, or it can first be shipped to the two warehouses and then to the customers.
Shipments between plants are allowed. This also applies to between warehouses and between
customers.
The cost of producing the onions at each plant is different. As a result, the company is
concerned with both production and shipping costs while meeting customer demands. The
production capacity of each plant (in tonnes per year), the product cost at each plant (in dollars
per tonne) and the customer demand (in tonnes per year) are summarised in the tables below.

Plant Capacity Cost Customer Demand
Plant 1 400 $300 Customer 1 600
Plant 2 300 $310 Customer 2 450
Plant 3 500 $280

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The cost (in thousands of dollars) of shipping a tonne of the product between each pair of
locations is listed in the table below where a blank indicates that the company cannot ship on
that route.

From node To node
Plant 1 Plant 2 Plant 3 Warehouse 1 Warehouse 2 Customer 1 Customer 2
Plant 1 1 1 4 5 6 7
Plant 2 1 1 3 4 7 8
Plant 3 1 1 5 3 8 5
Warehouse 1 2 2 3
Warehouse 2 2 3 2
Customer 1 1
Customer 2 1

The management has set the maximum route capacities between nodes (in tonnes) as shown in
the table below.

From node To node
Plant 1 Plant 2 Plant 3 Warehouse 1 Warehouse 2 Customer 1 Customer 2
Plant 1 200 200 250 250 200 200
Plant 2 200 200 250 250 200 200
Plant 3 200 200 250 250 200 200
Warehouse 1 200 300 300
Warehouse 2 200 300 300
Customer 1 200
Customer 2 200

Since sometimes demands fluctuate, the company plans to have safety stock of 50 and 25
tonnes at Warehouses 1 and 2 respectively.

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Based on the information above, the management wants you to design a network flow solution
for their strategic plan to minimise the total costs that can meet the demands. Any change in the
current scenario (e.g. plant capacities or route capacities) can be proposed if it is reasonable
and based on the evidence that you find.

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