Hutchinson Gas Service Company Case

Summary

The main objective of this case study were to analyze, and formulate two alternative transportation problem. And then computing the present values of the two alternatives. The first alternative states that the company has facilities in Indianapolis, Lafayette, South Bend and Terre Haute, and ships from those facilities to costumer. The second alternative, which is given to our group, was suggesting to open a new facility at Marion. For both alternatives transportation problems formulated and plugged into LINDO to find out the total weekly costs. Minimum weekly costs for alternative 1 and alternative 2 are $3642.35 and $ 3437.1 respectively . As is it seen from the costs, opening another facility decreases the weekly total variable costs by $205. The present value costs for the alternatives are; $ 490,385.83 and $510,651.21 respectively. Even though a smaller value is expected for the present value of the alternative two, it is higher than the fist alternative. The reason is $47,800 fee for opening Marion is added to the second alternative. Thus it increased the present value.

Introduction

The Hutchinson Gas Service Company markets a product line that consists of inert and chemically pure gases used in industrial processes, chemical laboratories, and hospitals. The company fills and ships these gases in special high pressure tanks, then collects the empty ones for reuse. Due to the high- pressure transportation, safety is a major issue. Each empty tank has to be serviced, tested and processed upon their return to the facility; and all this process adds to the operating costs of the company. Currently, the company operates from four tank servicing facilities across Indiana; Lafayette, Terre Haute, South Bend and Indianapolis. The owner, George Hutchinson, recently signed an option for an extra facility in Marion. A decision has to be made, keeping in mind all the operating costs of the company, whether to exercise this option or not. This case study formulates a decision process, taking into account all the variables that affect the productivity of the company, recommends a final optimal plan through careful analysis and linear programming. The results of the case study will suggest whether Mr. Hutchinson’s current distribution plan can be improved or not.

Problem Statement

The objective of this case study is to compare the current distribution plan costs to a possible new plan after opening a new facility in Marion, to see which one is more cost and time efficient. The current distribution plan and total variable costs are given in the case study description. The Marion facility is added as new variables and constraints to find the cost of a new distribution plan.

Customer Facility Indianapolis Lafayette South Bend Terre