New offices at atlantic management systems

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Reference no: EM131112084

Integer Programming Group Exercise (extracted from Bernard W. Taylor III's  "Introduction to Management Science" textbook)

New Offices at Atlantic Management Systems

Atlantic Management System is a consulting firm that specializes in developing computerized decision support systems for computed manufacturing companies.  The firm currently has offices in Chicago, Charlotte, Pittsburgh, and Houston.  It is considering opening new offices in one or more cities - including Atlanta, Boston, Washington, DC, St Louis, Miami, Denver and Detroit - and it has $14 million available for this purpose.  Because of the highly specialized nature its high-tech consulting work, the firm must necessarily staff any new offices with a minimum number of its employees from its existing offices.  However, it has a limited number of employees available to transfer to any new offices,  In addition, the cost of transferring employees depends on the city they are leaving and the city to which they might move. Following are the costs for opening a new office in each of the prospective cities and the start-up staffing needs at each office.

Prospective Office

Setup Cost ($1 million)

Staffing Needs (employees)

1. Atlanta (ATL)

2. Boston (BOS)

3. Denver (DEN)

4. Detroit (DET)

5. Miami (MIA)

6. St. Louis (STL)

7. Washington, DC (DC)

$1.7

$3.6

$2.1

$2.5

$3.1

$2.7

$4.1

9

14

8

12

11

7

18

The number 0f employees available for transfer from each of the current offices are as follows:

Existing Office

Available Employees

Chicago

Charlotte

Pittsburgh

Houston

24

19

16

21

The costs (in thousands of dollars) of transferring an employee from an existing office to a new office differ according to housing costs and moving expenses plus cost of living adjustments.  They are as follows:

(Costs in $1,000)

Current Office

ATL

 

BOS

DEN

DET

MIA

STL

DC

1. Chicago

2. Charlotte

3. Pittsburgh

4. Houston

$19

14

16

22

$32

47

39

26

$27

31

26

21

$14

28

23

18

$23

35

31

28

$14

18

19

24

$41

53

48

43

The firm has ranked the possible new offices according to their profit potential, with Washington, DC being the best (i.e.., greatest potential) as follows:

New Office

Rank

Washington, DC

Miami

Atlanta

Boston

Denver

St. Louis

Detroit

1

2

3

4

5

6

7

In addition, the firm wants at least one new office in the Midwest (i.e., Detroit and/or St. Louis) and one new office in the Southeast (i.e., Atlanta or Miami).

Formulate and solve an integer programming model to help Atlantic Systems determine how many new offices it should open, where they should be located, and how to transfer employees.

Reference no: EM131112084

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