P an American A lliance for S upply I mprovement: Beverly Kris Jaeger Alejandro MacCawley
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Pan American Advanced Studies Institute Simulation and Optimization of Globalized Physical Distribution Systems Santiago, Chile August, 2013 P an American A lliance for S upply I mprovement: Beverly Kris Jaeger Alejandro MacCawley Marie-Eve Rancourt Carlos Solorio-Magana Shanthi Muthuswamy PASI Project: Case #2
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Pan American Advanced Studies Institute Simulation and Optimization of Globalized Physical Distribution Systems Santiago, Chile August, 2013. PASI Project: Case #2. P an American A lliance for S upply I mprovement: Beverly Kris Jaeger Alejandro MacCawley Marie-Eve Rancourt - PowerPoint PPT Presentation
Transcript of P an American A lliance for S upply I mprovement: Beverly Kris Jaeger Alejandro MacCawley
Pan American Advanced Studies InstituteSimulation and Optimization of Globalized Physical Distribution Systems
Santiago, Chile August, 2013
Pan American Alliance for Supply Improvement: Beverly Kris Jaeger
Alejandro MacCawley Marie-Eve Rancourt
Carlos Solorio-Magana Shanthi Muthuswamy
PASI Project: Case #2
There’s a challenge to be met …
Agenda Introduction
Current State The Mission
Methods Models & Paths Calculations & Computations
Solution Options Implications Further considerations
PASI Objectives
Interpretations & Assumptions
Problem Overview: Case 2
What do we ‘know’?Introduction
Problem Overview
6 Manufacturing Plants Newark NJ, St Louis MO, Springfield MO Memphis TN, Fort Worth TX , & Mexicali
5 Current Distribution Centers Canada: Toronto USA: Salt Lake, Tulsa OK Allentown PA, Atlantic City, NJ
2 Candidate DCs• Oakland CA• Los Angeles
DC
Introduction
?
Problem Overview
DC Leases Expiring in 18 months:• Toronto• Salt Lake City
Customers • Retailers across US and Canada• US Customers must be serviced
by a US-based Distribution Center
Introduction
DC
Mfg Loc
DC Ex
DC Poss.
Cust. Base
Mfg
DC
To
Tu
SL
AT
NWAL
SL
SP
MC
MP
FW
O
LA
?
C
CC
CU
Introduction
Problem Formulation
Decisions
Active/open DC (yj)
Size of new DC (S)
Outbound flows (xjk)
• Inbound flows given (% from each plant)
Objective
Minimize: Fixed & variables costs
for the active DC(s)• The fixed cost of new
DC is a function of S Transportation costs
• Inbound and outbound
Introduction
What is our mission?
Measurable challenges• Reduce total supply chain costs • Reduce delivery times
Introduction Solution(s)Solution(s)
The Challenges, Q1 & Q2
Q1: ID optimal location in Western NA Salt Lake City (SL) Los Angeles (LA) Oakland (O)
Q2: ID optimal location serving Western CAN• Salt Lake City• Toronto (T)• LA or O
Introduction
Q1 & Q2: Global Approach
Salt Lake City USA (as is currently) CAN
Oakland USA (candidate) CAN
Los Angeles USA (candidate) CAN
Introduction
O
LA
SL
Salt Lake City USA Toronto CAN
Oakland USA Toronto CAN
Los Angeles USA Toronto CAN
Introduction
O
LA
SL T
T
T
Q1 & Q2: Global Approach
The Challenges, Specific
For location serving Western North America: Sizing of DC for peak inventory Impact to inventory, freight, transit time, & DC costs
For location serving Western CAN:• Sizing of DC to support customer demand• Associated costs for DC
Introduction
Our Approach as a Team
Method
Fundamental Phases
Plant to DC
Within DC
DC to Customer
Method
DC
DC
DC
Fundamental Phases
Plant to DC
Within DC
DC to Customer
Method
DC
Plant to DC
Method
DC
Plant to DC
Method
DC
Shipping distance & rates/mile
Plant to DC
Given factors:• Truck can drive 500
miles/day• Average of 40K
lbs/shipment• Ship combination of TL &
LTL• 100% of freight paid by
Plant
Assumptions:• Only ground freight usedMethod
DC
Plant to DC: Inbound Trans.
Method & Model
Fundamental Phases
Plant to DC
Within DC
DC to Customer
Method
DC
DC
DC
Fundamental Phases
Plant to DC
Within DC
DC to CustomerDC
Method
DC to Customer
Method
DC
DC to Customer
Method
DC
DC to Customer
Given factors:• Truck can drive 500 miles/day• Average of 25,000 lbs/shipment• Ship combination of LTL &TL• 100% OB freight paid by Plant• US DC serves US customer
Assumptions• No stop charges• Pallet weight includes tare & product
Method & Model
DC
DC to Customer Model:
Method & Model
Fundamental Phases
Plant to DC
Within DC
DC to Customer
DC
DC
DC
Method & Model
Fundamental Phases
Plant to DC
Within DC
DC to Customer
DC
Method & Model
Existing DC Costs
Method
DC
Size and costs for the two new candidates, LA and Oakland???
DC “Costs”
Given factors:• Average 11 sq ft /pallet stored• Averages 1,500 lbs of product
per pallet in DC inventory• Average 9 turns/year for the
network ~40 days of Supply• Peak Inventory levels up to 12%
over the average level• Toronto is 100% utilized now• Candidate DC space costs for
LA & Oakland are given
Method & Model
DC
{ $6.25 per square foot for fixed{ $0.095 per lb for variable cost
Size for the new DC inventory DC
Modeling warehouse capacity
Warehouse capacity (fast movers)
Convert in squared feet: Sf = 11/1,500 qf
Warehouse capacity (s l o w m o v e r s)
Convert in squared feet: Ss = 11/1,500 qs
DC Design & Justification
Unknowns, affecting stacking height:• Height of packed goods• Fragility of packed goods Stack a max of 3 high with block stacking
Unknowns, affecting configuration• Perishable items• ABC Control Breakdown • Slow vs. fast mover profile Block stacking for fast, Pallet rack for slow
Method & Model
DC Facility Sizing Convention
40% Bulk/Reserve + Fast Pick • Fast movers – block stacking; Slow movers – pallet racks
60% Other storage support• Clearance, Aisles, Shipping/Receiving, Pallet & Vehicle Stow
Method & Model
Slow movers
Fast movers 3
3
S* = 246,000
Toronto Extra Capacity Calculation
Method Options
Toronto is currently at full capacity Extra DC size calculated in sq ft: 44,554
DC fixed and variable costs calculated using only the extra space added to serve West CAN
Salt Lake City New Option
Current DC size at SLC in sq ft: 500,000 New DC size calculated in sq ft: 246,000
Lease expires in 18 months SLC new option: Rent only ½ the current space
Advantages• No new hiring, training• No new scoping required• CODB known, unchanged• Laws and regulations known
Method Options
OutcomesMethod & Model
Outcomes: Total Landed Costs
Outcomes
Outcomes: Total Landed Costs
Outcomes: Total Landed Costs by number of DCs
Outcomes
Outcomes for Service Time
Outcomes
Computed Demand: 84% from US customers, 16% from Canadian customers
Outcomes for ROI
Outcomes
Summary
Computed Landed Costs Computed Service Times Two Options:
• LA US, Toronto Canada• SLC New US, Toronto Canada
“Solutions”
Mfg Loc
DC Ex
DC Poss.
Cust. Base
Mfg
DC
To
Tu
SL
AT
NWAL
SL
SP
MC
MP
FW
O
LA
?
C
CC
CU
Introduction
Mfg Loc
DC Ex
DC Poss.
Cust. Base
Mfg
DC
To
Tu
SL
AT
NWAL
SL
SP
MC
MP
FW
O
LA
?
C
CC
CU
Introduction
SL
Considerations & Recommendations
Product life cycles and turnover Safety stock and demand variability
Load consolidation opportunities Other transportation alternatives
Opportunities for DCs in other locations Investigation into additional landed cost factors
External factors: workforce, unions, government, political unrest, regulations, CODB …
Considerations & Recommendations
Size and orientation of racks and shelving Storage configuration profile: Selective racks,
push-backs, drive-through, block stacks, combo
Number and width and orientation of aisles Clearance height available within the building
Fast-pick areas, Storage and retrieval systems Special support areas, regional consideration
PASI & Project Objectives
Apply concepts practically• Real-world problem• With interpretations assumptions & considerations
Collaborate across:• Cultures & Universities• Backgrounds & Perspectives
Experience & Enjoy!
PASI & Project Objectives
Apply concepts practically• Real-world problem• With interpretations assumptions & considerations
Collaborate across:• Cultures & Universities• Backgrounds & Perspectives
+ Experience & Enjoy!
Thank You
Alice, Jorge
& PASI!!
PASI Case 2 Data by PASIs
