The current distribution plan has an optimal shipping cost of $13,600. In the plan, Shangai ships 1300 units to warehouse 2. Shuzworld H ships 100 units to the first warehouse, 200 units to the second warehouse and 1800 units to the third warehouse. Shuzworld F ships 2200 units to warehouse 1.
The new production plan causes an increase in production at the plant in Shanghai from 1300 to 2800 units. Transportation costs fall to $13,400 in the process. That translates to a $200 savings on the transportation cost, as more products from Shanghai can be transported to the warehouses at a lower shipping cost. The company is able to ship the additional 200 units from Shangai to warehouse 2 at $3. That would cost $4 if the units were to originate from Shuzworld H. under the new transportation schedule, Shangai ships 1500 units to warehouse 2, Shuzworld H ships 1800 units to the third warehouse and 300 units to the first warehouse while Shuzworld F ships 2200 units to warehouse 1. The plan utilizes the excess capacity of 1500 units Shangai to produce more than the initial 1300 units. Shuzworld H also produces an extra 200 units.
Given that the problem involved several sources and several destinations for the products, the use of transportation became necessary. Transportation as a tool is a linear programming model applicable where one wants to calculate the least cost for the shipping of supplies from different sources and destined for different locations. Through calculating the optimal shipping schedule, one is able to solve minimization and maximization problems. That leads to the most feasible distribution of inventory, (Heizer & Render 2010).
For Shuzworld, the transportation technique would enable management to determine the most efficient distribution patterns. That would influence production from each production facility as the company seeks to maximize low shipping costs between the facilities and the warehouses.
ReferenceHeizer, J. and Render, B., (2010). Operations Management (10th Ed). New Jersey: Pearson.
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