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1. __Introduction:__ Custom Vans, Inc. focuses on transforming standard vans into campers. Customization costs can range anywhere from less than $1000 to greater than $5000, depending on the amount of work and customization. Tony Rizzo expanded his small operation in Gary, Indiana, to Chicago, Milwaukee, Minneapolis, and Detroit within four years. Tony’s major factor in success has been his innovation which allowed him to become the largest and most profitable custom van operation in the Midwest. Tony designs and develops unique features and devices that are in high demand by van owners. One device that he created which has caused a lot of attention is the “Shower-Rific.” This small, self-contained shower made of fiberglass includes a towel rack, soap and shampoo holders, and a special plastic door. The capacity of Shower-Rifics manufactured in Gary, Indiana (300 units) and Fort Wayne, Indiana (150 units) never seem to be enough. With the current manufacturing plants not being able to meet demand and with rapidly increasing demand within the next year, Tony has decided that he needs to open two new manufacturing plants as soon as possible. Tony is faced with a tough decision: he needs to set up two new manufacturing plants but has three potential locations. Through transportation modeling, which accounts for transportation costs and demands for the different locations, and by examining potential pros and cons to each location we will help select the two locations that would minimize total costs to the company.

2. __Analysis:__ To determine both whether the shipping system can be improved and where the two new manufacturing plants should be located, we set up three transportation models: one with the addition of Detroit and Rockford, one with the addition of Detroit and Madison, and one with the addition of Rockford and Madison. With the three models we were able to compare the total costs for each combination of plants.

Using the Northwest Corner Method, we solved for the initial feasible solution. We then used the stepping stone algorithm to find the optimal solutions. When we generated our results in WinQSB to verify our calculations, we selected the Northwest Corner method as the initial solution method. The optimal solutions of the Detroit-Rockford Combination, the Detroit-Madison Combination, and the Rockford-Madison Combination were $10,800, $10,200, and $10,550, respectively. Provided that the objective was to minimize cost, the Detroit-Madison Combination proves to the best choice with the lowest cost of $10,200.

An examination of the Range of Feasibility may present a way to further reduce shipping costs by allocating production levels between the plants within a certain allowable amount. In this case Custom Vans, Inc. may be able to further reduce shipping costs by allocating production to Gary, and/or Detroit __up to__ 100, 50 more units respectively. By shifting production to one (or all) of these facilities shipping costs can be reduced by $10, and $14 respectively. Although shifting production to Madison would reduce shipping cost by $28 per unit, the facility is at its maximum allowable amount; therefore no units of production can be shifted to Madison. Note also that shifting production to Fort Wayne will not further reduce shipping costs.

The Range of Optimality shows us how much money we are saving (reduced cost) by exhausting the routes used in the optimal solution. These routes are: Gary to Chicago; Gary to Milwaukee; Gary to Minneapolis; Fort Wayne to Chicago; Fort Wayne to Detroit; Detroit to Detroit; Madison to Minneapolis. By __not__ shipping from: Gary to Detroit we have reduced costs by $20; Detroit to anywhere but Detroit we have reduced costs by $20; Madison to Chicago we have reduced costs by $15; Madison to Detroit we have reduced costs by $50.

Both new plants, Detroit and Madison, would be beneficial in terms of satisfying demand and minimizing transportation costs.

^Here is my work of how I came up with the solution being Detroit and Madison (Lowest Cost). Let me know if you have any questions. Thanks, Beth ^Molly's QSB results. I came up with solution of Rockford and Madison. We need to figure out why our results differ.

^Molly's updated QSB results. (Includes more QSB Screens fro Analysis.)

3. __Recommendations:__ Since the total cost is lowest in the Gary–Fort Wayne–Detroit–Madiso n combination, the new plants should be located and assembled in Detroit, Michigan and Madison, Wisconsin.