Chapter 6, Problem 93P

This problem is based on Motorola’s online method for choosing suppliers. Suppose Motorola solicits bids from five suppliers for eight products. The list price for each product and the quantity of each product that Motorola needs to purchase during the next year are listed in the file P06_93.xlsx. Each supplier has submitted the percentage discount it will offer on each product. These percentages are also listed in the file. For example, supplier 1 offers a 7% discount on product 1 and a 30% discount on product 2. The following considerations also apply:

• There is an administrative cost of $5000 associated with setting up a supplier’s account. For example, if Motorola uses three suppliers, it incurs an administrative cost of $15,000.
• To ensure reliability, no supplier can supply more than 80% of Motorola’s demand for any product.
• A supplier must supply an integer amount of each product it supplies.

Develop a linear integer model to help Motorola minimize the sum of its purchase and administrative costs.