Reference no: EM132819744

Royal Canin location of a new factory, warehouse or distribution center is a strategic issue with substantial cost implications. Each new potential plant, warehouse or distribution center will require a different allocation of shipments depending on its own production and shipping costs and the costs of each existing facility. The choice of a new location depends on which will yield the minimum cost for the entire system. Royal Canin has three plants located at Des Moines, Evansville and Fort Lauderdale. Des Moines has 76 units of capacity, Evansville 82 units of capacity and Fort Lauderdale 77 units of capacity per period. All three plants supply three warehouses located at Albuquerque, Boston and Cleveland. The warehouse at Albuquerque requires 72 units per period; the warehouse at Boston requires 102 units per period; and the one at Cleveland requires 41 units per period. The costs of transporting each plant to each warehouse are as follows: Des Moines $4, $8, $8; Evansville $16, $24, $16; Fort Lauderdale $8, $16, $24.

Formulate an initial feasible solution to Royal Canin transportation problem using the northwest corner rule.

Use the stepping stone method to find the optimal solution that will minimize transportation cost of this problem.