Modeling to Reduce Transportation Costs by Linear Programming: A Case Study of the InnoFarm Biotech Company Limited
Keywords:
Transportation Cost, Linear Programming, Optimization, Microsoft Excel SolveAbstract
This research applied the linear programming model to analyze the allocation of organic fertilizer transport by InnoFarm Biotech Company Limited from the warehouses in three provinces, including Chanthaburi, Rayong and Trat, to seven distribution points, with the goal to minimize total transportation costs. The secondary data from relevant sources was employed while the problem was analyzed using the Solver function in Microsoft Excel. The results of this study informed a more efficient shipping allocation which is outlined as followed. Firstly, from the warehouse in Chanthaburi, the Company should ship 2,100 sacks of organic fertilizer to distribution point number 1, and 1,200 sacks to distribution point number 2. Then, from the warehouse in Rayong, 1,100 sacks of organic fertilizer must be shipped to the distribution point number 3 while the other 1,000 sacks, and 900 sacks, must be sent to distribution point number 4, and 5, respectively. Finally, from the warehouse in Trat, the shipment of 400 sacks, 800 sacks, and 600 sacks of organic fertilizer, must be allocated to the distribution point number 3, 6, and 7, respectively. The revised allocation strategy allowed all distribution locations to have the amount of products at their maximum capacity and also assisted the Company in reducing the transportation cost to 50,067 Thai Baht per week. According to the research, current operations does not employ any calculation tool in allocating the shipment of organic fertilizer. In fact, the Company mostly relies on existing experience and tend to transport products to distribution points located in the same province at once in order to minimize travel distance and costs. However, such technique is perceived as inefficient transportation route management and costs 56,317 Thai Baht per week. In conclusion, the shipment allocation strategy developed from the findings of this research allows the InnoFarm Biotech Company Limited to reduce overall transportation costs by 6,250 Thai Baht (11 percent) per week, while also assists in the planning of organic fertilizer transport from warehouses to distribution points to be more appropriately and more efficient.
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