UPS

OPERATIONS RESEARCH
LILIANA MATUTE
PROBLEMS CHAPTER 8

In Cambodia, 6 workers, each paid the equivalent of $3 per day, can produce
40 units per day. In China, 10 workers, each with a salary equivalent to $2 per day,
they can produce 45 units. In Billings, Montana, 2 workers, each with a salary of
$60 per day, they can produce 100 units daily. Based only on labor costs,
In what place would it be cheaper to produce an item?
Cambodia: 40/18=2.22
China: 45/20=2.25
Billings: 100/120= 0.83
In China, it would be cheaper to produce an item because the labor cost is the lowest.
low.

8.3 You were asked to analyze the quotes for 200 polished discs that are used in
solar energy panels. These quotes have been sent by three suppliers: Thailand
Polishing, India Shine, and Sacramento Glow. The quote for Thailand Polishing is 2,000 baht.
the India Shine of 2,000 rupees, and the Sacramento Glow of 200 dollars. You researched in your
local bank and found that 1 dollar = 10 bahts and 8 rupees. Which company would you choose?
Supplier cost units cost in dollars total cost (unit * cost in dollars)
Thailand Polishing: 200 2000 bahts $200 $40000
India Shine: 200 2000 rupees $250 $50000
Sacramento Glow: 200 200 dólares $200 $40000
It would be chosen between Thailand Polishing and Sacramento Glow, as both quotes present the ...
same costs.

8.5 Subway, with more than 20,000 locations in the United States, is planning to install a
new restaurant in Buffalo, New York. Three locations have been considered. The table
next provides the factors for each site. Where should Subway install the new
restaurant?

Church Shopping Center

Factor Maitland weighting
Bautista Of the North
Space .30 (.30)(60)=18(.30)(70)=21 (.30)(80)=24
Costs .25 (.25)(40)=10(.25)(80)=20 (0.25)(30)=7.5
Traffic density .20 (.20)(50)=10(.20)(80)=16 (.20)(60)=12
Entry into the area .15 (.15)(50)=7.5(.15)(70)=10.5(.15)(40)=6
Zoning laws .10 (.10)(80)=8(.10)(20)=2(.10)(90)=9
TOTAL 53.5 69.5 58.5
The new restaurant should be installed in the Baptist Church.

8.7 Insurance Company of Latin America (ILA) is considering opening an office in the United States
United. The two cities considered are Philadelphia and New York. The rating of the
factors (the highest points are better) for the two cities are shown in the table
Next. In which city should ILA be located?

Factor Philadephia weighting New York

Customer convenience .25 (.25)(70)=17.5(.25)(80)=20
Accessibility to banks .20 (.20)(40)=8 (.20)(90)=18
Soporte de computadoras .20 (.20)(85)=17 (0.20)(75)=15
Rental costs .15 (.15)(90)=13.5(.15)(55)=8.25
Labor costs .10 (0.10)(80)=8 (0.10)(50)=5
Taxes .10 (0.10)(90)=9 (.10)(50)=5
TOTAL 73 71.25
The new office must be installed in Philadelphia

8.9 A location analysis for Temponi Controls, a small parts factory for
high-tech cable systems have been reduced to four locations. Temponi will need
train assembly, testing, and maintenance personnel for robots in local centers
Training. Cecilia Temponi, the president, has requested each potential site for the programs.
training, the preferential tax rate, and other industrial incentives that may
offer. The critical factors, their weights, and the rating for each location are
shown in the following table. High ratings represent favorable values.
a) Calculate the composite rating (weighted average) for each location.

Akron Biloxi Carthage Denver

Factor Weighting
OH MS TX CO
Availability
by hand of .15 (.15)(90)=13.5(.15)(80)=12 (.15)(90)=13.5(.15)(80)=12
work
Quality of
schools .10 (.10)(95)=9.5(.10)(75)=7.5(.10)(65)=6.5(.10)(85)=8.5
techniques
Cost of
.30 (.30)(80)=24 (.30)(85)=25.5(.30)(95)=28.5(.30)(85)=25.5
operation
Cost del
land y .15 (.15)(60)=9 (.15)(80)=12 (.15)(90)=13.5(.15)(70)=10.5
construction
Incentives
.20 (0.20)(90)=18 (0.20)(75)=15 (.20)(85)=17(.20)(60)=12
industrial
Cost of the
.10 (.10)(75)=7.5(.10)(80)=8 (.10)(85)=8.5(.10)(75)=7.5
labor
TOTAL 81.5 80 87.5 76

b) Which place would you choose?

It is recommended to train the staff in Carthage TX.
c) Would you reach the same conclusion if the weights of the operating cost and the cost of
the labor? Please recalculate the necessary figures and explain your answer.
Akron Biloxi Carthage Denver
Factor Weighting
OH MS TX CO
Availability of
.15 (0.15)(90)=13.5(0.15)(80)=12(0.15)(90)=13.5(0.15)(80)=12
labor
Quality of
.10 (.10)(95)=9.5(.10)(75)=7.5(.10)(65)=6.5(.10)(85)=8.5
technical schools
Cost of
.10 (.10)(80)=8 ["(.10)(85)=8.5","(.10)(95)=9.5","(.10)(85)=8.5"]
operation
Cost of the land
.15 (.15)(60)=9 (.15)(80)=12(.15)(90)=13.5(.15)(70)=10.5
and construction
Incentives
.20 (.20)(90)=18 (.20)(75)=15(.20)(85)=17 (.20)(60)=12
industrial
Cost of labor
.30 (.30)(75)=22.5(.30)(80)=24(.30)(85)=25.5(.30)(75)=22.5
of work
TOTAL 80.5 79 85.5 74
Even if the operation cost and labor cost were reversed, it would still be chosen.
Carthage TX.

8.11 A company is planning the expansion and construction of a new plant in some
from three countries in Southeast Asia. David Pentico, the administrator in charge of taking the
decision, determined that five critical success factors (CSF) are considered to evaluate the
candidate countries. Pentico used a rating system from 1 (the least desirable country) to 5 (the
more desirable) to evaluate each FCE. What country should be chosen for the new plant?

Factors Taiwan weighting Thailand Singapore

Technology .2 (0.2)(4)=0.8(0.2)(5)=1(0.2)(1)=0.2
Educational level .1 (.1)(4)=0.4(.1)(1)=0.1(.1)(5)=0.5
Political and legal aspects .4 (.4)(1)=0.4(.4)(3)=1.2(.4)(3)=1.2
Social and cultural aspects.1 (0.1)4=0.4 (0.1)(2)=0.2(0.1)(3)=0.3
Economic factors .2 0.2 times 3 equals 0.6, 0.2 times 3 equals 0.6, 0.2 times 2 equals 0.4
TOTAL 2.6 3.1 2.6

The country that should be chosen to build the new plant is Thailand.

8.13 Daniel Tracy, owner of Martin Manufacturing, must expand by

construction of a new factory. The search for a new location for this factory has
reduced to four sites: A, B, C or D. The following table shows the results obtained
so far by Tracy using the factor grading method to analyze the problem.
The scale used to rate each factor is from 1 to 5.
Which site should Tracy choose?

Factor Weighting A B C D
Quality of M.O. 10 ["(10)(5)=50","(10)(4)=40","(10)(4)=40","(10)(5)=50"]
Construction cost 8 (8)(2)=16(8)(3)=24(8)(4)=32(8)(1)=8
Transportation costs 8 (8)(3)=24(8)(4)=32(8)(3)=24(8)(2)=16
Proximity of the markets 7 (7)(5)=35(7)(3)=21(7)(4)=28(7)(4)=28
Taxes 6 (6)(2)=12(6)(3)=18(6)(3)=18(6)(4)=24
Weather 6 (6)(2)=12(6)(5)=30(6)(5)=30(6)(4)=24
Energy costs 5 (5)(5)=25(5)(4)=20(5)(3)=15(5)(3)=15
TOTAL 174 185 187 165

The construction of the new factory must be done at Location C.

8.15 A British hospital chain wants to enter the U.S. market by building
a medical facility in the Midwest, a region where its director, Doug Moodie, is
feel comfortable having studied medicine at Northwestern University. After the analysis
Preliminary analysis decided to evaluate four cities. These were rated and weighted according to
the factors shown in the following table:

Factor Chicago weighting Milwaukee Madison Detroit

Costs 2 (2)(8)=16(8)(5)=40 (8)(6)=48 (8)(7)=56
Need of a
1.5 (1.5)(4)=6(1.5)(9)=13.5(1.5)(8)=12(1.5)(4)=6
installation
Availability of personnel 1 ["(1)(7)=7","(1)(6)=6","(1)(4)=4","(1)(7)=7"]
Local incentives 0.5 (0.5)(8)=4(0.5)(6)=3(0.5)(5)=2.5(0.5)(9)=4.5
TOTAL 33 32.5 30.5 31.5

a) Which city should Moodie choose?

The new hospital must be built in Chicago.
b) Suppose that now a minimum of 5 points is required for all factors. Which city
Should it be selected?
In case a minimum score of 5 is required, the city of Chicago would be selected.

8.17 Peter Billington Stereo, Inc. produces radios for automobile manufacturers and is going to open
a new plant. The company has not yet decided between Detroit or Dallas as the suitable site. The
fixed costs in Dallas are lower because the cost of land is less, but the costs
variables are higher because shipping distances increase. With the following costs,
Analyze which location is preferable for each volume:

The crossing point for Dallas and Detroit is:

They have the same production cost, but for the volume of Dalla it is
preferably the location.

8.19 Hugh Leach Corp., a manufacturer of machine tools, wishes to move to a more
large and has identified two location alternatives: Bonham and McKinney. Bonham would have
fixed costs of $800,000 per year and variable costs of $14,000 per standard unit produced.
McKinney would have annual fixed costs of $920,000 and variable costs of $13,000 per unit.
standard. Finished products are sold for $29,000 each.
Fig. 1. Volume of both locations and crossover point.

a) For what production volume would both locations have the same profit?

Crossing point

It has the same production cost

And the same utility

8.21 A chain of healthcare companies in Louisiana needs to locate

a central office from which I can conduct internal audits and other periodic reviews
of its facilities. These facilities are scattered throughout the state, as
detail in the following table. Each site, except for Houma, is visited three times a year by a
A team of workers will go by car from the headquarters. Houma is visited five times.
times a year. What coordinates represent a good central location for this office?
What other factors can influence the office location decision-making? In
What place would you locate this office? Explain your answer.
 9
3,8, 8,5
8 Convigton
5, 8,4
7 Donalsonville
2,8, 6,5
6 Houma
5 Monroe
5.953846154
4 4.353846154 Natchitoches
9, 2, 3, 5 New Iberia
3
5,5, 2,4 7,3, 2,5 Opelousas
2
7,8, 1,4 office coordinate
1
Ruston
0
0 2 4 6 8 10
Fig. 2. Coordinates on the map of the cities and coordinates for the headquarters.

Determination of the center of gravity:

Coordinate in x:

Y coordinate:

The location of the new office can also be decided based on availability and condition.
from the roads.

8.23 Todd's Video, an important video rental and sales chain with headquarters in
New Orleans is about to open its first store in Mobile, Alabama, and wants to choose a
location in the center of the Mobile population base. Todd examines the seven sections of
census conducted in Mobile, trace the coordinates of the center of each one on the map, and look for the
population base of each section to use it as weighting. The information collected is
show in the following table. At what coordinates of the center of gravity should it be located
new store?
Determination of the center of gravity:
Coordinate in x:

Y coordinate:

9
5, 8, 4
8
Section 101
7
2, 8, 6, 5 Section 102
6
section 103
5
5.953846154 section 104
4 4.353846154
9,2, 3,5 section 105
3 section 106
5, 5, 2, 4 7,3, 2,5
2 section 107
7,8, 1,4
1 new store coordinates
0
0 2 4 6 8 10

Fig.2. Coordinates on the map of the sections and coordinates for the new store.

8.25 The unification of Europe has brought changes to airline regulations that
they greatly affect major European carriers, such as British
International Air, KLM, Air France, Alitalia and Swiss. With ambitious expansion plans, British
International Air (BIA) has decided that it needs a second service hub on the continent,
to complement the operations in the large repair workshops based in Heathrow
(London). The choice of location is crucial and, given the potential offer of 4,000 new
jobs for skilled workers, almost every city in Western Europe is
actively competing to attract BIA's business. After the initial investigations
carried out by Holmes Miller, head of the operations department, BIA reduced the list to
9 cities. Rated each one based on 12 factors, which are shown in the table presented at the beginning.
from this page.
c) After Miller made the change in section (b), Germany announced that it has
reconsidered your offer of financial incentives, with an additional package of 200 million
euros to convince BIA. In accordance with this, BIA raised Germany's rating to 10 for
that factor. Is there any change in the upper classification of item (b)?

Location
Italy France Germany

Factor Milan Rome Genoa Paris Lyon Niza Munich Bonn Berlín
of
importance
Incentives 85 8 8 8 7 7 7 7 7 7
Financial
Labor 80 4 6 5 9 9 7 10 8 9
qualified
Installation 70 5 3 2 9 6 5 9 9 2
existing
Wage rates 70 9 8 9 4 6 6 4 5 5
Competition 70 7 3 8 2 8 7 4 8 9
for the jobs
Ease of 65 5 4 6 2 8 8 4 8 9
access del
air traffic
Cost of goods 40 6 4 7 4 6 6 3 4 5
roots
Links of 25 6 7 6 9 9 9 10 9 8
communication
Attractive for 15 4 8 3 9 6 6 2 3 3
relocation d
executives
Considerations 10 6 6 6 8 8 8 8 8 8
policies
Possibilities of 10 10 2 8 1 5 4 4 5 6
expansion
Force of the 10 1 1 1 5 5 5 6 6 6
unions
Total 3415 2945 3425 3155 3970 3660 3425 3835 3665

a) Help Miller rate the three most important cities that BIA should consider for
decide on the location of their new aircraft service center.
The three most important cities would be: Lyon, Bonn, and Berlin.
b) After some further investigations, Miller decided that the existence of hangars
repairs is not as important as I had thought. If you reduce the weight of that factor to
30, does the ranking change?

Location
Italy France Germany

Factor Milan Rome Genoa Paris Lyon Nice Munich Bonn Berlin
of
importance
Incentives 85 8 8 8 7 7 7 7 7 7
Financial
Labor 80 4 6 5 9 9 7 10 8 9
qualified
Installation 30 5 3 2 9 6 5 9 9 2
existing
Wage rates 70 9 8 9 4 6 6 4 5 5
Competition 70 7 3 8 2 8 7 4 8 9
for the jobs
Ease of 65 5 4 6 2 8 8 4 8 9
access del
air traffic
Cost of goods 40 6 4 7 4 6 6 3 4 5
roots
Links of 25 6 7 6 9 9 9 10 9 8
communication
Attractive for 15 4 8 3 9 6 6 2 3 3
relocation of
executives
Considerations 10 6 6 6 8 8 8 8 8 8
policies
Possibilities of 10 10 2 8 1 5 4 4 5 6
expansion
Force of the 10 1 1 1 5 5 5 6 6 6
unions
Total 3215 2825 3345 2795 3730 3460 3065 3555 3585

The most important cities are: Lyon, Berlin, and Bonn.

c) After Miller made the change in subsection (b), Germany announced that it has
reconsidered your financial incentive offer, with an additional package of 200 million
euros to convince BIA. According to this, BIA raised Germany's rating to 10 for
that factor. Is there any change in the upper classification of item (b)?

Location
Italy France Germany

Factor Milan Rome Genoa Paris Lyon Nice Munich Bonn Berlin
of
importance
Incentives 85 8 8 8 7 7 7 10 10 10
Financial
Labor 80 4 6 5 9 9 7 10 8 9
qualified
Installation 30 5 3 2 9 6 5 9 9 2
existing
Salary rates 70 9 8 9 4 6 6 4 5 5
Competition 70 7 3 8 2 8 7 4 8 9
for the jobs
Ease of 65 5 4 6 2 8 8 4 8 9
access delete
air traffic
Cost of goods 40 6 4 7 4 6 6 3 4 5
roots
Links of 25 6 7 6 9 9 9 10 9 8
communication
Attractive for 15 4 8 3 9 6 6 2 3 3
relocation of
executives
Considerations 10 6 6 6 8 8 8 8 8 8
policies
Possibilities of 10 10 2 8 1 5 4 4 5 6
expansion
Force of the 10 1 1 1 5 5 5 6 6 6
unions
Total 3215 2825 3345 2795 3730 3460 3320 3810 3840

The three most important cities are as follows: Berlin, Bonn, and Lyon.