A toy manufacturer currently has two warehouses (1 and 2) that are operational and meet the demand of backyard play sets at three retail outlets A, B and C. The supply of the play sets at warehouse 1 and 2 are 500 and 400 units respectively. The demand of play sets at warehouses A, B and C are 400, 600, and 350 units respectively. The unit cost of transportation from warehouse 1 and 2 to retail outlets A, B and C are shown in the table below. The toy manufacturer wants to open a third warehouse which will have a supply of 500 units of backyard play sets per week. Two locations, N1 and N2, are being considered for the new warehouse. Transportation costs from location N1 to stores A, B, and C are $6, $8, and $7 per unit, respectively; from location N2, the costs are $10, $6, and $4, respectively. Which of the two locations is the preferred location for the new warehouse? Hint: You will have to model and solve two LP transportation problems.
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Retail Outlet A
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Retail Outlet B
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Retail Outlet C
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Warehouse 1
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8
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3
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7
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Warehouse 2
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5
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10
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9
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