Jacobs' distribution network consists of a single factory and a single warehouse, in each of Pangea's five regions. Each factory supplies only the warehouse in its own region, and each warehouse only fulfills demand in its own region. The factories and warehouses are all operational, but only the factory in Calopeia is producing anything. The other factories will not begin production until their respective order quantities are each set to values greater than zero.

The factory in Sorange has a capacity of 70 drums per day. The factory in Tyran has a capacity of 40 drums per day. The factories in Calopeia and Entworpe each have capacities of 50 drums per day. The factory on the island of Fardo has a capacity of 20 drums per day. More capacity can be purchased at a cost of $50,000 per day. For example, expanding the capacity of a factory by 10 more drums per day would cost (10)$50,000 = $500,000. Capacity costs are incurred as soon as the capacity begins. It takes 30 days to complete the capacity expansion. Capacity cannot be retired.

The operations of each factory / warehouse combination are as follows. Each factory produces the chemical in batches, loads the chemical into small plastic drums, and then transports the drums to the warehouse by truck. The warehouse sends drums to customers as orders are received. Each warehouse only fulfills demand in its own region.

The costs are as follows:

• The cost of producing a batch of chemicals is $1500 (regardless of order size) plus $1000 times the number of drums in the batch.
• It costs $15,000 to ship drums from the factory to the warehouse. One truck can hold up to 200 drums. For practical purposes, there are an infinite number of trucks available to ship a batch. It takes 7 days to truck the drums from the factory to the warehouse.
• As an alternative to trucking, drums can be mailed from the factory to the warehouse at a cost of $150 per drum and a mailing time of one day.
• Both the production cost and the cost of transporting the drums from the factory to the warehouse are incurred as soon as production of the batch begins at the factory.
• Insurance and other out-of-pocket costs to hold finished drums are $100 per drum per year. There is no equivalent cost for work-in-process drums in the factory.
• The cost to fulfill an order from the warehouse to a customer is $150 per drum.
• Jacobs earns 10% per year on its cash, compounded daily.