Create an AMPL model that used as a tool to find the cost

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Business Optimisation Assignment -

Problem 1 - A supplier of construction material is starting up business in Eastern Europe, where a number of production plants will be built.

The supply chain director of the company needs to come up with a suggested supply network design, including the number of plants to build, as well as the locations of these plants.

Seven possible locations for the plants are identified. These are Bratislava, Lvov, Krakow, Sibiu, Kharkiv, Pleven, and Nizhniy. Not all sites need to be used.

The market is divided into 12 different regions. We name these regions from A to L. The estimated yearly demand (in 1000 tons per year) for these market regions are given in the following table:

Region

A

B

C

D

E

F

G

H

I

J

K

L

200

150

225

120

155

180

170

230

230

190

265

300

The potential production capacities for the different production sites are restricted by the local availability of raw materials and are as follows (in 1000 tons per year):

Bratislava

370

Lvov

200

Krakow

300

Sibiu

670

Kharkiv

750

Pleven

450

Nizhniy

300

The variable cost (cost per ton) is the sum of raw material, variable production cost, and transportation cost from a given production plant to a given market region.

The variable costs (in EUR per ton):

From \ to

Region

A

B

C

D

E

F

G

H

I

J

K

L

Bratislava

52

49

49

39

28

30

22

20

27

14

16

18

Lvov

48

37

38

27

24

28

24

14

29

13

29

25

Krakow

34

21

20

29

21

20

28

11

15

14

20

13

Sibiu

30

15

20

14

12

22

13

20

10

27

11

20

Kharkiv

27

15

15

29

23

11

21

13

29

47

20

47

Pleven

16

19

21

20

21

19

25

13

37

47

55

59

Nizhniy

19

30

19

10

11

25

28

30

47

50

66

63

a) Create an AMPL model that can be used as a tool to find the cost optimal supply network design for the company. How many factories should be built, at which locations, and how much should be supplied from each factory to each market?

b) Now assume that at each factory, there is also a "fixed" cost that does not depend on the factory's production volume.

The fixed costs are given in the following table (mill. EUR per year):

Bratislava

16

Lvov

13

Krakow

20

Sibiu

12

Kharkiv

18

Pleven

15

Nizhniy

17

The above costs are incurred only if the corresponding factory is built.

Modify your AMPL model to take into account the fixed costs and find the cost optimal network design. Try to avoid non-linearities in your model.

How many factories should be built, at which locations, and how much should be supplied from each factory to each market?

c) Modify your AMPL model to take into account the following "single-sourcing" restriction: Each market should be supplied by only one production plant. Try to avoid non-linearities in your model.

How many factories should be built, at which locations, and how much should be supplied from each factory to each market? What is the additional cost of imposing such a "single-sourcing" policy?

d) Modify your AMPL model from c) so that it allows a solution in which one of the markets is supplied by multiple production plants. Try to avoid non-linearities in your model.

How many factories should now be built, at which locations, and how much should be supplied from each factory to each market? How much are the total costs reduced compared to the solution in c)?

Problem 2 - A company is preparing the introduction of a new product and wants to develop an optimisation model that can help determine the best choice of online advertising channels.

The total market has been divided into 14 market segments and there are 20 different advertising channels available to reach the various segments. Advertising cost per channel is shown in the following table:


Costs

Ch. 1

12

Ch. 2

45

Ch. 3

86

Ch. 4

56

Ch. 5

72

Ch. 6

73

Ch. 7

82

Ch. 8

40

Ch. 9

25

Ch. 10

53

Ch. 11

28

Ch. 12

27

Ch. 13

53

Ch. 14

77

Ch. 15

64

Ch. 16

33

Ch. 17

75

Ch. 18

84

Ch. 19

75

Ch. 20

83

The following table shows which channels can reach which segments of the market (1 means that the channel reaches the market):


S. 1

S. 2

S. 3

S. 4

S. 5

S. 6

S. 7

S. 8

S. 9

S. 10

S. 11

S. 12

S. 13

S. 14

Ch. 1

1

0

0

0

0

0

0

0

0

0

0

0

0

0

Ch. 2

1

0

0

0

0

1

0

1

0

0

0

1

0

0

Ch. 3

0

0

0

0

1

0

0

1

0

0

0

0

0

0

Ch. 4

0

0

0

0

0

1

1

1

0

0

0

0

0

0

Ch. 5

0

0

1

1

1

0

1

0

0

0

0

0

0

0

Ch. 6

1

0

0

0

1

0

0

0

0

0

0

0

0

0

Ch. 7

1

1

0

0

0

0

0

0

0

0

1

0

0

0

Ch. 8

0

0

0

1

0

1

0

0

0

0

0

1

0

1

Ch. 9

0

0

0

0

1

1

0

0

0

0

1

1

0

0

Ch. 10

0

0

0

0

0

0

0

1

1

0

0

1

0

0

Ch. 11

0

0

0

0

0

0

0

0

0

0

0

0

1

0

Ch. 12

0

0

0

0

0

1

1

1

0

1

0

0

1

0

Ch. 13

0

0

1

0

0

1

1

0

0

0

0

0

0

0

Ch. 14

0

0

1

0

0

0

1

0

0

0

1

0

0

0

Ch. 15

0

1

0

0

0

0

0

1

0

0

0

0

0

0

Ch. 16

0

0

0

0

0

0

0

0

0

0

1

1

0

0

Ch. 17

0

1

0

0

1

0

0

0

0

0

0

0

0

0

Ch. 18

0

0

0

1

0

0

0

0

0

0

0

0

1

0

Ch. 19

0

0

0

0

0

0

1

1

0

0

0

0

0

1

Ch. 20

0

1

0

0

0

0

0

0

0

0

0

0

0

0

In the following, try to avoid non-linearities in your models.

a) Create an AMPL model that chooses the optimal mix of advertising channels in such a way that total costs are minimized and all market segments are covered by at least one advertising channel.

b) The company believes that the effects of channel 7 and 8 reinforce each other so that if one of these channels is chosen than the other channel must also be chosen. In other words, we want to forbid solutions where channel 7 is chosen and channel 8 is not chosen, and vice versa. How much does this requirement increase the total costs compared with the solution in a)?

c) Disregard the information given in b), but assume the following:

If at least one of channel 11 and channel 12 is chosen, then at least one of channel 16 and channel 17 must be chosen.

How much does this requirement increase the total costs compared with the solution in a)?

d) Disregard the information given in b) and c), but assume the following: If both channel 12 and channel 13 are chosen, then also channel 18 must be chosen. How much does this requirement increase the total costs compared with the solution in a)?

e) In the solution in a), some of the market segment are covered more than once (that is, they are covered by more than one channel). Based on the model in a), add constraints that ensure that at least six market segments are covered more than once.

f) The following table shows expected revenue per segment.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

571

384

773

844

934

113

313

190

629

965

924

505

973

779

Assume that the revenue per segment is achieved if the segment is covered at least once.

Assume that there are not multiple revenues per segment.

Modify the model in a) so that total revenues are maximized, given a total advertising budget of 200.

Problem 3 - In maritime logistics, the ability to increase the average size of ships (vessels) is advantageous both of economic and environmental reasons. Larger ships have both a lower cost and a lower CO2 emission per ton transported, as long as the cargo capacity is fully utilized. The ship/cargo size is however often restricted by limited storage capacities in ports, as in the following case.

A port terminal contains 32 storage tanks of varying sizes. 20 different products are stored in the tanks. The products have different densities (in tons per m3) and demands, as shown in the following table:

 

Density

Demand

Product 01

1.46

2633

Product 02

1.49

2355

Product 03

1.27

1035

Product 04

1.45

2538

Product 05

1.66

2981

Product 06

1.79

437

Product 07

1.28

459

Product 08

1.72

1479

Product 09

1.90

1810

Product 10

1.62

774

Product 11

1.82

1760

Product 12

1.48

148

Product 13

1.30

1864

Product 14

1.40

1344

Product 15

1.90

792

Product 16

1.77

728

Product 17

1.87

552

Product 18

1.54

144

Product 19

1.22

1063

Product 20

.50

672

For each product, the maximum time between replenishments (deliveries by ship) is determined by the products's storage capacity and its daily demand.

The current allocation is as follows:

Tank

Volum (m3)

Product

Tank 01

2500

Product 13

Tank 02

3800

Product 15

Tank 03

3400

Product 8

Tank 04

1600

Product 18

Tank 05

1800

Product 3

Tank 06

6600

Product 2

Tank 07

5200

Product 1

Tank 08

2200

Product 3

Tank 09

4000

Product 7

Tank 10

4300

Product 1

Tank 11

5000

Product 4

Tank 12

4000

Product 11

Tank 13

2500

Product 9

Tank 14

2100

Product 17

Tank 15

4200

Product 19

Tank 16

5600

Product 16

Tank 17

5500

Product 14

Tank 18

5800

Product 12

Tank 19

7000

Product 10

Tank 20

7700

Product 14

Tank 21

3400

Product 8

Tank 22

5200

Product 5

Tank 23

4600

Product 13

Tank 24

6600

Product 4

Tank 25

7000

Product 5

Tank 26

5600

Product 20

Tank 27

3000

Product 19

Tank 28

2600

Product 16

Tank 29

2600

Product 13

Tank 30

4800

Product 9

Tank 31

6700

Product 6

Tank 32

1200

Product 3

In the current setup, product 4 has been allocated Tank 11 (5000 m3) and Tank 24 (6600 m3), which gives a total capacity of 11600 m3.

Since Product 4 has a density of 1,45 tons per m3 its capacity in tons is 16820 tons.

Product 4 has a daily demand of 2538 tons, so that 16820 tons covers 16820 / 2538 = 6,63 days.

Hence, there needs to be a transport of Product 4 at least every 6,63 days on average. The cycle time for Product 4 is said to be 6,63 days.

The bottleneck product in the current setup is Product 11, which has been allocated Tank 12. Capacity in tons = 4000 × 1,82 = 7280 tons. Demand for Product 11 is 1760 tons per day. Hence, Product 11 must be replenished at least every 7280 / 1760 = 4,14 days on average. The cycle time for Product 11 is 4,14 days. Since this is the lowest cycle time for all products.

It determines the maximum time between deliveries for the whole terminal. In this case, the terminal needs a replenishment on average every 4,14 days. This limits the total quantity that can be delivered and hence the maximum vessel size that can be used efficiently.

To minimize costs and emissions we want to maximize the time between replenishments, that is, maximize the minimum cycle time.

In the following, try to avoid non-linearities in your models.

a) Assume first that that the company pays a fixed fee per storage tank used (independent of tank size) and hence wants to simply minimize the number of storage tanks used, not explicitly taking into account demand or trying to calculate cycle times. Assume just that each product should have a minimum of 6500 tons storage capacity. Formulate an AMPL model and find the solution that minimizes the number of tanks used. How many tanks are needed?

b) Now consider the situation explained in the introduction. Assume that all tanks are used. The only goal is to maximize the time between deliveries to the terminal, that is, maximize the minimum cycle time (the cycle time for the bottleneck product). The optimal solution to this problem will help utilizing large ships with low costs and low emissions per ton transported. Formulate and solve an AMPL model to find the optimal solution. Which product is the bottleneck product in your solution and what is the minimum cycle time?

Attachment:- Business Optimisation Assignment Files.rar

Reference no: EM132376852

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