This analysis examines freight cost and cleaning fluid supplies at two locations; Cincinnati and Oakland, to determine the optimal distribution network to supply the cleaning fluid to Great North American at minimal cost to Solutions Plus. Based on projected cost a bid recommendation is made and decision factors related to the analysis are discussed. Keywords: Solutions Plus, Cost minimization, Breakeven, Bid, Shipping Cost
Solutions Plus is an industrial chemicals company that produces cleaning fluids and solvents for many applications. Great North American railroad is taking bids for delivery of a cleaning fluid for its locomotives at eleven different locations. Solutions Plus can produce the cleaning fluid for $1.20 per gallon at their Cincinnati plant. The management team has elected to limit capacity at the Cincinnati plant to 500,000 gallons. Solutions Plus also negotiated with an industrial chemical company in Oakland, California to produce and ship up to 50,000 gallons of the locomotive cleaning fluid at $1.65 per gallon. Higher cost at the Oakland plant can be offset by lower shipping costs to some of the customer’s locations. Total supply of cleaning fluid available to Solutions Plus equates to 550,000 gallons. Great North American railroad demand for the cleaning fluid for the eleven locations is approximately 990,000 gallons. Bid Recommendation
The available data was analyzed to make a decision on how to distribute the available resources based on the freight and production costs of the cleaning fluid at each plant. Based on the cost information provided, Solutions Plus has determined that not all locations can be serviced. Thus, considerations for the transportation problem are evaluated in order to find a feasible solution that also minimizes total cost for Solutions Plus. The main issues that constrain the feasible solution are total supply is not equal to total demand, and...