Winnie Cheng
ESE 204
Truck Leasing Strategy

Reep Construction recently won a contract for the excavation and site preparation of a new rest area on the Pennsylvania Turnpike. The main problem is that the firm wants to minimize cost of meeting the monthly trucking requirements for this project but also follows a no-layoff policy.

The constraints of the problem are as follows:

The job requires four months to complete, with 10, 12, 14 and 8 trucks needed in months 1 through 4, respectively.

The firm signed a long-term lease with PennState Leasing last year for trucks where one of these trucks will be available for use on the new project in month 1, two for month 2, three for month 3 and one for month 4. The long-term leasing …show more content…
The objective function changes in terms of the long-term decision variable’s coefficients. The cost of drivers’ wages is calculated to be 3200 because they are paid 20 dollars an hour, and work for approximately eight hours a day for five days a week, for four weeks a month. Thus the L1 through L4 coefficients change from only 2000 (which is only the cost of fuel) to 5200 (after adding 3200 to 2000).

Objective Function | min2000L1+ 2000L2+ 2000L3+ 2000L4+4000S11+ 4000S21+ 4000S31+ 4000S41+ 3700S12 + 3700S22 +3700S32+ 3225S13+ 3225S23+ 3040S14 | First Month Constraint | L1+S11+S12+S13+S14=10 | Second Month Constraint | L2+S12+S13+S14+ S21+ S22+S23=12 | Third Month Constraint | L3++S13+S14+ S22+S23+ S31+S32=14 | Fourth Month Constraint | L4+S14+S23+S32+ S41=8 | Month 1 Long-term Lease Truck Availability | L1≤1 | Month 2 Long-term Lease Truck Availability | L2≤2 | Month 3 Long-term Lease Truck Availability | L3≤3 | Month 4 Long-term Lease Truck Availability | L4≤1 |
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The results show that the new optimal leasing plan with driver’s wages as a relevant cost would yield a minimized cost of $165,410. The plan would involve using only two of the available long-term leasing trucks in month three, and four short-term leasing trucks in the first month for three months, six short-term trucks in the first month for four months and two short-term trucks