Running head: Stateline Shipping and Transport Company Case Problem

Stateline Shipping and Transport Company Case Problem Karla Alvarez

Professor Albert Yin MAT 540 Quantitative Methods June 16, 2013

Stateline Shipping and Transport Company Case Problem Stateline Shipping and Transport Company Case Problem The manager of the South-Atlantic office of the Stateline Shipping and Transport Company, Rachel Sundusky, is in the process of negotiating a new shipping contract with

Polychem. Polychem is a company that manufactures chemicals for industrial use and wants Stateline to pick up and transport waste products from its six plants to three waste disposal sites.

1. 2. 3. 4. 5. 6.

Plants Kingsport Danville Macon Selma Columbus Allentown

Supply (barrels) 35 26 42 53 29 38

Waste Disposal Sites A. Whitewater B. Los Canos C. Duras

Demand (barrels) 65 80 105

Shipping Costs ($/per barrel)

Plants 1. 2. 3. 4. 5. 6. Kingsport Danville Macon Selma Columbus Allentown Waste Disposal Sites B. Los A. Whitewater Canos 12 15 14 9 13 20 17 16 7 14 22 16

C. Duras 17 10 11 19 12 18

The objective of Stateline Shipping and Transportation Company is to develop a shipping schedule that minimizes the total cost of transportation. This objective can be expressed as a mathematical function where Z represents the cost. Minimize Z = 12X1A + 15X1B + 17X1C + 14X2A + 9X2B + 10X2C + 13X3A + 20X3B + 11X3C + 17X4A + 16X4B + 19X4C + 7X5A + 14X5B + 12X5C + 22X6A + 16X6B + 18X6C

Stateline Shipping and Transport Company Case Problem

The cost for this transportation model is subject to the constraints of supply for each of the plants, and demand for each of the waste disposal sites. These constraints can be written as follows: X1A + X1B + X1C = 35 X2A + X2B + X2C = 26 X3A + X3B + X3C = 42 X4A + X4B + X4C = 53 X5A + X5B + X5C = 29 X6A + X6B + X6C = 38 X1A + X2A + X3A + X4A + X5A + X6A <= 65 X1B + X2B + X3B + X4B + X5B + X6B <= 80 X1C + X2C + X3C + X4C + X5C + X6C <= 105 Xij >= 0, i = 1,2,3,4,5,6; j = A, B, C After developing and solving a transportation model for shipping the waste directly from the six plants to the three waste disposal sites, the results indicated that the optimal transportation procedure is to transport 35 barrels from Kingsports plant, 1 barrel from Selma, and 29 barrels from Columbus to the Whitewater waste disposal site. Transportation to Los Canos waste disposal site should be from the plant in Selma (52 barrels) and Allentown (28 barrels); and the plants in Danville, Macon and Allentown should transport 26, 42, and 10 barrels respectively of their waste products to the waste disposal site in Duras. This would minimize transportation cost to $2,822.

Stateline Shipping and Transport Company Case Problem

Waste Disposal Sites A. B. Los C. Whitewater Canos Duras 35 0 0 1 29 0 65 65 2822 0 0 0 52 0 28 80 80 0 26 42 0 0 10 105 78

Plants 1. Kingsport 2. Danville 3. Macon 4. Selma 5. Columbus 6. Allentown Demand Shipped Cost

Supply 35 26 42 53 29 38

Shipped 35 26 42 53 29 38

However, Stateline Shipping and Transportation Company is also considering using each of the plants and waste disposal sites as intermediate shipping points. Therefore, a transshipment model was developed with the objective of minimizing total cost of transportation. Shown below are the shipping costs ($ per barrel) from each plant to every other plan and each waste disposal site, and from each waste disposal site to each plant and every other waste disposal site:
Waste Disposal Sites A. C. Whitewa B. Los Dura ter Canos s 12 14 13 17 7 22 15 9 20 16 14 16 17 10 11 19 12 18 Plants 3. 4. Macon Selma 4 11 9 10 Waste Disposal Site A. Whitewater B. Los Canos C. Duras Waste Disposal Site A. Whitewater 0 12 10 B. Los Canos 12 0 15 C. Duras 10 15 0

Plants 1. Kingsport 2. Danville 3. Macon 4. Selma 5. Columbus 6. Allentown

Plants 1. Kingsport 2. Danville

1. Kingsport 0 6

2. Danville 6 0

5. Columbus 7 12

6. Allentown 8 7

Stateline Shipping and Transport Company Case Problem

3. Macon 4. Selma 5. Columbus 6. Allentown 5 9 7 8 11 10 12 7 0 3 7 15 3 0 3 16 7 3 0 14 15 16 14 0

The objective function for this model, where Z represents the cost, is shown below as well as the constraints for this transshipment model. The first nine constraints of this model represent the supply at each plant and waste disposal site. The last nine constraints represent the demand at each plant and waste disposal site. The demand constraints are inequalities because the total demand, 250 barrels (= 65+80+105), exceeds the total supply, 223 barrels (= 35+26+42+53+29+38). If demand exceeds supply, then the demand constraints will be <=.

Stateline Shipping and Transport Company Case Problem

From the solution of this transshipment model, we can see that the new optimal transportation procedure using the intermediate sites is to transport from:
1. Kingsport plant: 16 barrels to Danville (X12), and 19 barrels to Macon (X13). 2. Danville plant: 80 barrels to Los Canos waste disposal site (X2B). 3. Macon plant: 78 barrels to Duras (X3C). 4. Selma plant: 17 barrels to Macon (X43), and 36 barrels to Columbus (X45).

Stateline Shipping and Transport Company Case Problem

5. Columbus plant: 65 barrels to Whitewater (X5A). 6. Allentown plant: 38 barrels to Danville plant (X62).

The total cost for the shipment of Polychems waste product is $2,630. We can see that using the plants as intermediate shipping points where trucks would be able to drop a load at a plant to be picked up and carried on to the final destination by another truck is $192 cheaper than shipping them directly. The original transportation cost is $2,822 and the new transportation cost, using the intermediate sites, is $2,630. With the transportation model, Stateline was going to ship only 26 barrels out of the Danville plant to Duras waste disposal site; but now with the transshipment model, Danville plant is shipping out a total of 80 barrels (its own 26 plus 16 from Kingsport, and 38 from Allentown) to Los Canos waste disposal site. This new route is more efficient. Additionally, we noticed that if Stateline shipped directly from Macon plant to Duras waste disposal site, the maximum barrels they could transport is 42 barrels. However, if they use the Macon plant as an intermediate site, Kingsport plant could ship to Macon 19 barrels, and Selma sends 17 barrels which adds up to 78 barrels; 36 more barrels to be transported from Macon plant to Duras waste disposal site. Another more efficient transportation route is seen when Columbus plant is used as an intermediate site for Selma plant. In the transportation model, Columbus would shipped only 29 barrels of waste product to Whitewater instead of 65 barrels that would now shipped after adding the 36 barrels received from Selma plant. As to the limits of the study, the transportation and transshipment model are not considering the fact that what is being transported are chemical wastes that will be hauled and hazardous to humans and the environment if they leak. These models are not taking in consideration that a number of towns and communities in the region where the plants are located

Stateline Shipping and Transport Company Case Problem

prohibit hazardous materials from being shipped through their municipal limits. Therefore, the shipping costs may not be accurate. For example, shipping from Macon plant to Duras waste disposal site is estimated at $11, this is the shortest route cost; if the shipping company needs to consider a longer route the cost would be higher. Also, transporting waste products needs to be handled carefully and at reduced speeds which increases transportation time and therefore the cost. Drivers are paid by the hour, and they also get paid differential according to the shift they work. If a regular shipment from Macon to Duras takes them 6 hours at a regular speed, reduced speed and traversing circuitous routes could double their travel time and pay which adds to the cost of Stateline Shipping and Transportation Company. These limits should be accounted in the shipping contract with Polychem.