Develop an appropriate integer optimization model


Problem 1. Frijo-Lane Food Products owns farms in the Southwest and Midwest, where it grows and harvests potatoes. It then ships these potatoes to three processing plants in Atlanta, Baton Rouge, and Chicago, where different varieties of potato products, including chips, are produced. Recently, the company has experienced a growth in its product demand, so it wants to buy one or more new farms to produce more potato products.  The company is considering six new farms with the following annual fixed costs and projected harvest:

                             Fixed Annual              Projected Annual Harvest

Farm                     Costs ($1,000s)               (thousands of tons)

  1                                $405                                  11.2

  2                                  390                                  10.5

  3                                  450                                  12.8

  4                                  368                                   9.3

  5                                  520                                   10.8

  6                                  465                                    9.6

The company currently has the following additional available production capacity (tons) at its three plants, which it wants to utilize:

                           Available Capacity

Plant                   (thousands of tons)

  A                               12

  B                               10

  C                               14

The shipping costs ($) per ton from the farms being considered for purchase to the plants are as follows:

                                        Plant (shipping costs, $/ton)

Farm                                  A                    B             C

   1                                    18                   15            12

   2                                    13                   10            17

   3                                    16                   14            18

   4                                    19                   15            16

   5                                    17                   19            12

   6                                    14                   16            12     

The company wants to know which of the six farms it should purchase to meet available production capacity at the minimum total cost, including annual fixed costs and shipping costs.

Develop an appropriate mixed integer optimization model to solve this problem and implement it on Solver.  Discuss your solution in a one-page business memo to the COO.

Problem 2. American Parcel Service (APS) has determined that it needs to add several new package distribution hubs to service cities east of the Mississippi River. The company wants to construct the minimum set of new hubs in the following 12 cities so that there is a hub within 300 miles of each city (i.e., every city is covered by a hub):

      City                                  Cities Within 300 Miles

    1.   Atlanta                Atlanta, Charlotte, Nashville
    2.   Boston                Boston, New York
    3.   Charlotte             Atlanta, Charlotte, Richmond
    4.   Cincinnati            Cincinnati, Detroit, Indianapolis, Nashville, Pittsburgh
    5.   Detroit                Cincinnati, Detroit, Indianapolis, Milwaukee, Pittsburgh
    6.   Indianapolis         Cincinnati, Detroit, Indianapolis, Milwaukee, Nashville, St.Louis     
    7.   Milwaukee           Detroit, Indianapolis, Milwaukee
    8.   Nashville             Atlanta, Cincinnati, Indianapolis, Nashville, St. Louis
    9.   New York            Boston, New York, Richmond
  10.   Pittsburgh            Cincinnati, Detroit, Pittsburgh, Richmond
  11.   Richmond            Charlotte, New York, Pittsburgh, Richmond
  12.   St. Louis              Indianapolis, Nashville, St. Louis          

Develop an appropriate integer optimization model and solve it with Solver.  Hint: your only decision variables are whether or not to select a city as a hub.

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