Example for multifacility plant location (Brute Force Approach)
Demand cost table
Location
Customer 1 2 3 4 5
A 500 300 200 800 500
B 150 250 100 300 350
C 750 300 0 150 0
D 400 200 1600 400 600
E 900 600 1200 0 1200
Total 2700 1650 3100 1650 2650
Location Pairs
Customer 1&2 1&3 1&4 1&5 2&3 2&4 2&5
A 300 200 500 500 200 300 300
B 150 100 150 150 100 250 250
C 300 0 150 0 0 150 0
D 200 400 400 400 200 200 200
E 600 900 0 900 600 0 600
Total 1550 1600 1200 1950 1100 900 1350
Then we choose location pairs 3&4 because min cost is 700
We allocate customers A, B, and C to location 3
We allocate customers D,E to location 4
3&4 3&5 4&5
200 200 500
100 100 300
0 0 0
400 600 400
0 1200 0
700 2100 1200 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0
Example for Location problem with fix cost
Cost to meet demand
Location
Customer A B C D E
1 100 500 1,800 1,300 1,700
2 1,500 200 2,600 1,400 1,800
3 2,500 1,200 1,700 300 1,900
4 2,800 1,800 700 800 800
5 10,000 12,000 800 8,000 900
Fix cost 3,000 2,000 2,000 3,000 4,000
Total cost 19,900 17,700 9,600 14,800 11,100
If only 1 warehouse should be located choose C because it has the lowest cost
If more than 1 warehouses should be selected use savings method
Suppose we chose C and A
What will be the total cost reduction if any?
Step 1. Compare the costs of C and A
Serving 1&2 customer will be less costy from location A. Total savings = 1100+ 1700 = 2800
The rest is cheaper from location C
Savings for location A
Location
Customer A B C D E
1 1,700
2 1,100
3 2,500 2800
4 2,800
5 10,000
Fix cost 3,000
Step 2: Compare it with fix cost of A which is 3000 > 2800
No savings
Step 3: Compare C&B now
Serving 1,2&3 customer will be less costy from location B. Total savings = 1300+ 2400+500= 4,200
The rest is cheaper from location C
Savings for location B
Location
Customer A B C D E
1 1,300
2 2,400
3 500
4 1,800
5 12,000
Fix cost 2,000
Step 4: Compare it with fix cost of B which is 2000 < 4200
Savings of 2,200
Step 5: Compare C&D now
Serving 1,2&3 customer will be less costy from location D. Total savings =500+ 1200+1400= 3,100
The rest is cheaper from location C
Savings for location D
Location
Customer A B C D E
1 500
2 1,200
3 1,400
4 800
5 8,000
Fix cost 3,000
Step 6: Compare it with fix cost of D which is 3000 < 3100
Savings of 100
Step7: Compare C&E now
Serving 1,2 customer will be less costy from location E. Total savings =100+800 = 900
The rest is cheaper from location C
Savings for E
Location
Customer A B C D E
1 100
2 800
3 1,900
4 800
5 900
Fix cost 4,000
Step 8: Compare it with fix cost of E which is 4000 >900
No saving
Customer 1 will be served by B
Customer 2 will be served by B
Customer 3 will be served by B
Customer 4 will be served by C
Customer 5 will be served by C
0+ 1700 = 2800
0+ 2400+500= 4,200
1200+1400= 3,100
Transportation Model with minimizing cost
Factory Supply Warehouse Demand
Indianapolis 15 Columbus 10
Phoenix 6 St. Louis 12
New York 14 Denver 15
Atlanta 11 Los Angeles 9
Shipping Costs per Case (in Dollars)
Factory
From Columbus St. Louis Denver Los Angeles Supply
Indianapolis 25 35 36 60 15
Phoenix 55 30 25 25 6
New York 40 50 80 90 14
Atlanta 30 40 66 75 11
Destination
requirement 10 12 15 9 46
Candidate Total
Solution Columbus St. Louis Denver Los Angeles Shipped
Indianapolis 0 0 15 0 15
Phoenix 0 0 0 6 6
New York 10 4 0 0 14
Atlanta 0 8 0 3 11
Destination
requirement 10 12 15 9 46
Cost
Calculations Columbus St. Louis Denver Los Angeles Total Cost
Indianapolis 0 0 540 0
Phoenix 0 0 0 150
New York 400 200 0 0
Atlanta 0 320 0 225
400 520 540 375 1835
Transportation Model with minimizing cost and adding a new facility
Factory Supply Warehouse Demand
İstanbul 15 Bursa 12
İzmir 6 Antalya 15
Gaziantep 14 Ankara 14
Adana 11 Bodrum 13
Konya 8
total 54 54
Shipping Costs per Case (in Dollars)
Factory
From Bursa Antalya Ankara Bodrum Supply
İstanbul 25 45 36 60 15
İzmir 40 50 35 25 6
Gaziantep 80 50 60 90 14
Adana 55 40 66 75 11
Konya 50 22 15 50 8
Destination
requirement 12 15 14 13 54
Candidate Total
Solution Bursa Antalya Ankara Bodrum Shipped
İstanbul 12 0 3 0 15
İzmir 0 0 0 6 6
Gaziantep 0 4 10 0 14
Adana 0 11 0 0 11
Konya 0 0 1 7 8
Destination
requirement 12 15 14 13 54
Cost
Calculations Bursa Antalya Ankara Bodrum Total Cost
İstanbul 300 0 108 0 408
İzmir 0 0 0 150 150
Gaziantep 0 200 600 0 800
Adana 0 440 0 0 440
Konya 0 0 15 350 365
Total Cost 300 640 708 150 1798
