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Louis is selected as the new site for a refinery in column G of Fig. 1.
total annual shipping cost in millions of dollars. In particular, if Los Angeles were to be chosen as the site for the new refinery (Fig. 2), the total annual cost of shipping crude oil in the optimal manner would be $880 million. If Galveston were chosen instead (Fig. 3), this cost would be $920 million, whereas it would be $960 million if St. Louis were chosen (Fig. 4).
The analysis of the cost of shipping finished product is similar. Figure 5 shows the spreadsheet model for this transportation problem, where rows 5–7 come directly from the first three rows of Table 5. The New Site row would be filled in from one of the next three rows of Table 5, depending on which potential site for the new refinery is currently under evaluation. Since the units for finished product leaving a refinery are equivalent to the units for crude oil coming in, the data in Supply (J13 : J16) come from the left side of Table 3.
The changing cells ShipmentQuantity (D13 : G16) in Figs. 6, 7, and 8 show the optimal plan for shipping finished product for each of the sites being considered for the …show more content…
5.
Adding across these three columns gives the total variable cost for each alternative.
Conclusion: From a purely financial viewpoint, St. Louis is the best site for the new refinery. This site would save the company about $200 million annually as compared to the Galveston alternative and about $150 million as compared to the Los Angeles alternative.
hil61217_ch08_supplement.qxd
5/12/04
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SUPPLEMENT TO CHAPTER 8
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A CASE STUDY
A
B
C
D
E
F
G
Texago Corp. Site-Selection Problem (Shipping to D.C.’s When Choose St. Louis)
Unit Cost ($millions)
New Orleans
Refineries
Charleston
Seattle
St. Louis
Shipment Quantity
(millions of
total annual shipping cost in millions of dollars. In particular, if Los Angeles were to be chosen as the site for the new refinery (Fig. 2), the total annual cost of shipping crude oil in the optimal manner would be $880 million. If Galveston were chosen instead (Fig. 3), this cost would be $920 million, whereas it would be $960 million if St. Louis were chosen (Fig. 4).
The analysis of the cost of shipping finished product is similar. Figure 5 shows the spreadsheet model for this transportation problem, where rows 5–7 come directly from the first three rows of Table 5. The New Site row would be filled in from one of the next three rows of Table 5, depending on which potential site for the new refinery is currently under evaluation. Since the units for finished product leaving a refinery are equivalent to the units for crude oil coming in, the data in Supply (J13 : J16) come from the left side of Table 3.
The changing cells ShipmentQuantity (D13 : G16) in Figs. 6, 7, and 8 show the optimal plan for shipping finished product for each of the sites being considered for the …show more content…
5.
Adding across these three columns gives the total variable cost for each alternative.
Conclusion: From a purely financial viewpoint, St. Louis is the best site for the new refinery. This site would save the company about $200 million annually as compared to the Galveston alternative and about $150 million as compared to the Los Angeles alternative.
hil61217_ch08_supplement.qxd
5/12/04
17:22
Page 8S-9
SUPPLEMENT TO CHAPTER 8
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
A CASE STUDY
A
B
C
D
E
F
G
Texago Corp. Site-Selection Problem (Shipping to D.C.’s When Choose St. Louis)
Unit Cost ($millions)
New Orleans
Refineries
Charleston
Seattle
St. Louis
Shipment Quantity
(millions of