Problem: Moving resources along routes with limited capacities at minimum expense.
This model is an example of a
"network" problem - requiring the movement of resources, at minimum cost,
along different routes with which varying costs are associated. With the addition of
limits to capacity along the routes, it becomes "capacitated". Oil and gas
pipelines, truck and air routes may be utilised at their highest cost-efficiency by
applying the principles demonstrated in this model.
You must decide how many barrels per month to pump along each pipeline. At present, no
pipeline is operating between Well 1 and Pumping Station C, between Pumping Station A and
Refineries 3 and 4, and between Pumping Station C and Refinery 1. The decision on how much
material to send along a given pipeline is governed by the monthly cost per unit on that
pipeline and by the necessity of satisfying refinery demand without exceeding monthly well
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