Online retailing companies such as Amazon need to have access to a huge network of inventories in various locations in order to ship their products in a timely fashion to their customers. In the last few years, due to the expansion of the services such as (Amazon Prime) and the introduction of new services (such as Amazon Prime Now), the importance of effectively selecting the location of new warehouses and/or choosing the right local warehouse to work with has dramatically increased.
Because of the emerging demand, Amazon decided to start new warehouses in the Gulf Coast. Based on their studies, four potential locations for warehouses have been identified, each of which having a specific capacity and also a specific average cost-per-unit for shipping to any of the five Gulf Coast states. The capacity of each warehouse and its operating cost, in addition to the average cost-per-unit for shipping a product to any of the states are given in the following table.
The average demand for each of the states is given in this table.
|Demand||8,000 units||3,500 units||4,000 units||2,000 units||7,000 units|