An international company in healthcare industry is currently serving the European market from three existing factories in Dusseldorf, Amsterdam, and The Hauge. Due to the huge growth in demand in recent years and analyzing the market growth in next years, the leadership team of the company is willing to add an additional plant in Geneva or Budapest. One of the main criteria for this decision is the transportation cost. The following Table shows the transportation cost per unit product from factories to the consumer markets in Brussels, Paris, Lisbon, and Zurich. To Brussels Lisbon Paris Rome Vienna From Amsterdam 20 Dusseldorf 17 The Hauge 21 Budapest 37 Geneva 22 Demand 350 25 27 20 28 30 450 22 25 22 19 21 850 29 30 30 25 18 600 24 19 16 30 27 450 Zurich 19 15 23 14 21 300 Supply capacity 1100 850 550 500 500 (a) The company should establish the new factory in Budapest or Geneva? Why? I (b) Assume that the company has decided to build the new factory in Budapest. Also, the management team decides to limit the maximum number of products to be shipped from any one of the factories to any single market by 300 units, because of perishability nature of products. To this end, the company can accept up to 10% extra transportation cost on top of the optimal transportation costs from part (a). In this case what the new optimal transportation plan and its cost are?
An international company in healthcare industry is currently serving the European market from three existing factories in Dusseldorf, Amsterdam, and The Hauge. Due to the huge growth in demand in recent years and analyzing the market growth in next years, the leadership team of the company is willing to add an additional plant in Geneva or Budapest. One of the main criteria for this decision is the transportation cost. The following Table shows the transportation cost per unit product from factories to the consumer markets in Brussels, Paris, Lisbon, and Zurich. To Brussels Lisbon Paris Rome Vienna From Amsterdam 20 Dusseldorf 17 The Hauge 21 Budapest 37 Geneva 22 Demand 350 25 27 20 28 30 450 22 25 22 19 21 850 29 30 30 25 18 600 24 19 16 30 27 450 Zurich 19 15 23 14 21 300 Supply capacity 1100 850 550 500 500 (a) The company should establish the new factory in Budapest or Geneva? Why? I (b) Assume that the company has decided to build the new factory in Budapest. Also, the management team decides to limit the maximum number of products to be shipped from any one of the factories to any single market by 300 units, because of perishability nature of products. To this end, the company can accept up to 10% extra transportation cost on top of the optimal transportation costs from part (a). In this case what the new optimal transportation plan and its cost are?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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Transcribed Image Text:Question 1:
An international company in healthcare industry is currently serving the European market from three
existing factories in Dusseldorf, Amsterdam, and The Hauge. Due to the huge growth in demand in
recent years and analyzing the market growth in next years, the leadership team of the company is
willing to add an additional plant in Geneva or Budapest. One of the main criteria for this decision is
the transportation cost. The following Table shows the transportation cost per unit product from
factories to the consumer markets in Brussels, Paris, Lisbon, and Zurich.
To Brussels Lisbon
Paris
Rome
Vienna
From
Amsterdam 20
Dusseldorf 17
The Hauge 21
Budapest 37
Geneva 22
Demand 350
25
27
20
28
30
450
22
25
22
19
21
850
29
30
30
25
18
600
24
19
16
30
27
450
Zurich
19
15
23
14
21
300
Supply
capacity
1100
850
550
500
500
(a) The company should establish the new factory in Budapest or Geneva? Why?
(b) Assume that the company has decided to build the new factory in Budapest. Also, the management
team decides to limit the maximum number of products to be shipped from any one of the factories
to any single market by 300 units, because of perishability nature of products. To this end, the
company can accept up to 10% extra transportation cost on top of the optimal transportation costs
from part (a). In this case what the new optimal transportation plan and its cost are?
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