Real Estate MarketAlternativeMGMT250 Notes October 7, 20041. Schedule and Announcementsb. Groups for Fabtek case need to be between 3-5 people in size. Many groups have shifted. Please make sure your group has 3-5 people in it. Please see me as soon as possible (or immediately, whichever is sooner) if you have too many or too few people. c. Today, we will go over homework for location analysis.d. We will work more on the Transportation Tableau Solution technique.e. Look at Computer Software to solve Transportation Tableau from CD ROM in Book (if time allows).f. Next time review for exam. Outline is provided at end. Midterm exam on Tuesday after you return. Please DO review questions for next class.g. Midterm Exam: You are allowed a sheet of paper 8 1/2 by 11, with anything written on it, it must be hand written, no xerox copying. It will be multiple choice for first part (about 15-20 questions) and problem oriented for second part.h. Remember November 9, we have tour.2. Let’s go over Homework problems….3. Location Planning and Analysis, The Transportation Tableau (CONTINUED).Transportation Solution Methodology: Each node is a supply or destination node, each arc is a shipping route with a cost per unit shipped.Let us make up an example. We have 3 plants that assemble computers located in Auburn, Boston and Chicago, we have retail outlets for these computers located in Exeter, Fort Lauderdale, and Grafton. The capacities of the assembly plants are 200, 100, and 150 respectively. The expected demands at each of the retail outlets is 150, 100 and 120, respectively. The costs for shippingin dollars per unit from Auburn to each of the outlets in order are 3, 7, and 7, respectively. The costs for shipping in dollars per unit from Boston to each of the outlets is 12, 4, and 8. Finally the costs for shipping in dollars per unit from Chicago to each of the locations is 8, 10 and 16, respectively. What is the best way to ship among the various locations?Graphically the problem requires finding the minimum cost shipping or delivery routes between a source and its destination or a supplier and its demander. (see board for graphic of problem). We can also put this problem in “Tableau form”. The steps to solve the problem are to: 1. Set up the Tableau: Make certain supply and demand are equal. If they are not, determine the difference among the two amounts. Create a dummy source or destination with a supply (or demand) equal to the difference, so that demand and supply are equal. The costs for shipping over cells that appear in the dummy column or row are set to zero.2. Develop an initial solution using one of many techniques (let us use the inituitive approach). Steps: a. find the cell with the lowest cost, allocate to this cell the minimum of the row or column amount for that cell.b. decrease both the “rim” amounts by the allocation amount, put a line through the one that has been fully allocated (if both havebeen fully allocated, select one line to put through, arbitrarily). c. find the “uncovered” cell with the lowest cost, and repeat the allocation and crossing out of columns and rows. (if a rim requirement has only 0 left, then allocate an “e” value (which is actually assumed to be zero).d. repeat steps b and c,until all units have been allocated.Let’s make the initial allocation. What is the cost of this initial “solution?”3. Is this Solution the Best One? (Evaluating Empty Cells with the MODI approach).The Modified Distribution Method determines if there is a way to reduce the costs by determining if there is a negative value in the unoccupied cell evaluations.After you have determined a feasible, non-degenerate solution, you evaluate the tableau by:1. Determining row and column “indices” by:a. assign a value of zero to the outside of row 1. b. Determine the column index for each occupied cell in row 1 using the following equation: Column Index = Cell Cost Value - Row Index.c. Once you have a column index you may be able to calculate the row index for a new row (using the equation from b).d. Continue until all row and column indices have been calculated.2. Obtain cell evaluations for the empty cells using the equation:Cell Evaluation = Cell Cost - (Row Index + Column Index).The results of the cell evaluations will tell you if it is an optimal solution or not. What the rules for this evaluation?Is the initial solution to our tableau optimal?4. Obtaining an Improved SolutionDoes a negative cell evaluation exist in any of the unoccupied cells?If one does not exist then, stop, solution is optimal, otherwise:1. Identify the largest negative cell evaluation. This is the cell that will improve the solution the most.Once the cell for the greatest improvement has been identified use the reallocation method to improve the solution.To improve solution:1. Develop a “stepping stone” path from the unoccupied cell back to itself. The stepping stones are occupied cells where youcan “turn” to get back to unoccupied evaluation cell.2. Label any “odd numbered stepping stone cell” in our path (beginning with the unoccupied evaluation cell) a “+” cell or a recipient cell. Label any “even numbered stepping stone cell” in our path a “-” cell, or donor cell. 3. The amount that will be reallocated is the minimum value from among all the donor cells.4. This reallocation is completed by adding the value identified in step 3 to all the recipient cells, and subtracting this value from all the donor cells. The cell with the smallest value identified in step 3 becomes “unoccupied”.What is the new cost of the improved solution? How else could you have calculated it?5. Repeat steps 3 and 4 until solution is optimal (e.g. no more negative evaluation cells).How to use as Location Problem?MIDTERM REVIEW MATERIALMIDTERM MULTIPLE CHOICE BREAKDOWN (MAY NOT BE EXACT, BUT SIMILAR)1 question on uncertainty and decision making (definitional).1 introductory question on operations management practice1 question on level of decision making/planning.2 questions on strategic planning elements and levels.3 Break-even (profit/revenue/cost) questions.2 on elements of a system2 on productivity1 ISO 9000 questions1 factor rating question 2 product/process matrix (e.g. where would mcdonald’s fit on matrix and what performance metrics would they use?).1 on types of tools for quality1 on effective/design capacity efficiency/utilization1