A European manufacturer of industrial furniture has a factory located in Munich and four warehouses in Western Europe. The warehouses collect customer orders, which are then shipped from factory. Upon receipt, the warehouse distributes customer orders using small trucks. Daily demand at each of the four warehouses along with distance from Munich is as shown:
Warehouse Daily Demand (kg) Distance (km)
Milan 25,000 800
Paris 35,000 1,000
Copenhagen 20,000 600
Madrid 20,000 1,300
All shipments are by truck. Three truck sizes are available, with capacities of 40,000 (small), 60,000 (medium), and 80,000 kg (large). Transportation costs for the three types of trucks are:
Small: 100 + 0.1x euros
Medium: 125 + .1x euros
Large: 150 + 0.1x euros
X is the distance to be traveled in kilometers. For replenishment frequency varying between one and four days for each warehouse, identify the optimal transportation option and the associated cost. What other factors should be considered before deciding on the replenishment frequency?