Transportation & Supply Chain Systems

11

Transportation & Supply Chain Systems

John H. Vande Vate

Spring, 2001

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Who am I?

• John H. Vande Vate

• Professor and EMIL Director

• Office: 433

• Phone: (404) 894-3035

• Office Hours: – Tuesday, Thursday 11-12 or– By appointment

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Administrative Details

• Class Home Page:www.isye.gatech.edu/~jvandeva/Classes/6203/syllabus2001.htm

Keep up with information here!

• Text: Logistic Systems Analysis by Daganzo

• You may also want to read:– Business Logistics Management by Ballou

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Grading

• Exams: 60%– Mid-term: March 1, 2001– Final

• Projects: 30%– Groups of 3 or 4

• Class Participation: 10%– What you contribute to the class

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Objectives

• Issues and Tools for Design and Analysis of Logistics Systems– Daganzo: Analytical models based on

summary data– Class Discussions: Mathematical

Programming models incorporating more detailed data

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Motivation

• Analytic models: – Identify trade-offs– Communicate arguments– Ball park answers

• Numerical Models:– Consider the details– Manage the complexity– Refine solutions

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Algebraic Modeling Languages• AMPL

– www.ampl.com– AMPL A Modeling Language for Mathematical

Programming, Fourer, Gay and Kernighan– $– No full version generally available

• XPress-MP: – Academic version available for download at: www.isye.

gatech.edu/class/xpress/ – Full version available in the graduate and undergraduate

labs.

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More Options

• AIMMS: – This application is supported in the Lab.

– Student version??

• MPL or related tools: – Can be downloaded free from

www.maximal-usa.com/download/

– No full version available

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Good and Bad of EMIL

• Good: – Executive Master’s in International Logistics– CIO’s, VP’s, Directors and Managers from

• Agilent, Baxter, Fedex, Ford, GM, Hapag-Lloyd, Intel, Lucent, Milliken, Motorola, Ryder, UPS, …

– Meeting with Execs from • BMW, DaimlerChrysler, HP, Infineon, Quelle, …

– ...

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Good and Bad of EMIL

• Bad:– I will be out of the country

• January 19 to February 3

– Possible trip to Asia in April

• Still wanted to do this class.

1111

Resolution

Weeks of

• January 22

• January 29

No class. Your assignment is:

• Get access to and master a modeling language

• Complete a small “case” to test your skill.

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Project 1: Due February 6

• Build and solve a mathematical programming model for determining the best strategy for shipping the goods in The example of Section 1.2 of Daganzo

• Comments:– Use the data given in the text and the distances

given on the class home page– Your model must be linear (integer).– The plants and warehouse stagger shipments.

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Comments Cont’d

– Shipments between plants and and from plants to the warehouse are full truck load.

– Each DC receives all supply of each part from one plant. (Different parts may come from different plants)

– If your model is too large for the student version of the solver, drop the last dcs until it fits.

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To Turn In

• Model – with clear but concise explanation

• Solution– Summarize intelligently

• Compare with an Analytic model – What are the key differences and why are

they there.

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Tentative ScheduleWeek of Topic9-Jan-01 Introduction16-Jan-01 Costs 23-Jan-01 No Class 30-Jan-01 No Class 6-Feb-01 Finance 13-Feb-01 The Continuous Approximation Approach 20-Feb-01 1-to-1 Distribution 27-Feb-01 Location and Mode Selection1-Mar-01 Exam 6-Mar-01 Spring Beak 13-Mar-01 Vehicle Routing 20-Mar-01 1-To-Many Distribution with Transshipments 27-Mar-01 1-to-Many Models: WebVan 3-Apr-01 Many-to-Many with Transhipments 10-Apr-01 Many-to-Many Models: Ford 17-Apr-01 Workload Balancing: UPS 24-Apr-01 TBA

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Illustrative Example

• Develop a distribution strategy to minimize inventory and transportation costs

• Purpose: – Illustrate the analytical modeling approach– Outline issues covered in the course

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Overview

• Products:– Computers: CPU, Monitor, Keyboard– Televisions: TV and Console

• Distribution Centers– 100 across the US– Sell 10 TVs and 10 computers per day

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An Illustrative Example

F

F

F

Green Bay

Indianapolis Denver

Facts

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Strategies to Consider

• All direct shipments in full truckloads

• All shipments via Indianapolis in full truckloads

• All direct shipments at the optimal frequency

• All shipments via Indianapolis at the optimal frequency

• ….

2020

Simplification • Shipments on the order of 1,000 miles

F

F

F

Green Bay

Indianapolis Denver

Facts

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Inventory

• At the DC’s?– 1/2 truckload or 500 Consoles at $100 each: $ 50,000

– 1/2 truckload or 3,000 CPUs at $300 each: $900,000

– 1/2 truckload or 1,500 Monitors at $400 each: $600,000

$1,550,000

Carrying cost: 15% of $1,550,000 or $232,500

Total Carrying cost at the DCs: $23,250,000!

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Inventory at the Plants

• Two Extremes– Simultaneous shipments– Staggered shipments

• Reality?

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Simultaneous shipments– Green Bay ships once every 2.4 years

• Inventory is 1.2 years demand or 3,000 CPUs

• Inventory value is $900,000

• Inventory carrying cost is $135,000

– Denver ships 2.5 times per year• Inventory is 20% of annual demand or 500 Consoles



– Indianapolis ships 1.6 times per year• Inventory is 5,000/3.2 or about 1,500 items



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Staggered Shipments

• Each plant holds 1/2 a truck load

• Total plant inventory like one more DC

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• Transportation Costs: $ 460,000

• Inventory Costs at DCs: $ 23,250,000

• Inventory Costs at Plants: $ 232,500

Total: $ 23,942,500!

The Next Step:

Trade-off Inventory and Transportation

Total Cost

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Costs, Inventory and Transport

Week of Topic9-Jan-01 Introduction16-Jan-01 Costs 23-Jan-01 No Class 30-Jan-01 No Class 6-Feb-01 Finance 13-Feb-01 The Continuous Approximation Approach 20-Feb-01 1-to-1 Distribution 27-Feb-01 Location and Mode Selection1-Mar-01 Exam 6-Mar-01 Spring Beak 13-Mar-01 Vehicle Routing 20-Mar-01 1-To-Many Distribution with Transshipments 27-Mar-01 1-to-Many Models: WebVan 3-Apr-01 Many-to-Many with Transhipments 10-Apr-01 Many-to-Many Models: Ford 17-Apr-01 Workload Balancing: UPS 24-Apr-01 TBA

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The Big Picture: Finance


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Extending the Analysis


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Simple Location Models


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Back to Our Example

• Using Transshipment to Reduce Inventory

• Strategy 2: Assemble Products in Indianapolis and distribute by truckload from there

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Via Indianapolis

F

F

F

Green Bay

Indianapolis Denver

Facts

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Inventory Effects

• Inventory at a DC:– Visited by truck 4.6 times per year – Same as before– So inventory costs at DC are the same as

before, right?

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Wrong!

Product Value Number per year

Number per shipment

Average Inventory

Average Value of Inventory

Inventory Carrying

CostTV 500.00$ 2,500 543 272 135,869.57$ 20,380.43$ Computer 700.00$ 2,500 543 272 190,217.39$ 28,532.61$

Total: 48,913.04$

• Total Inventory Carrying Cost at DCs:

$4,891,300

compared with

$23,250,000

under earlier strategy. Explain!

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The Difference

Product Value Number per year

Number per shipment

Average Inventory


Inventory Carrying

CostTV 500.00$ 2,500 543 272 135,869.57$ 20,380.43$ Computer 700.00$ 2,500 543 272 190,217.39$ 28,532.61$

Total: 48,913.04$

Part Value Number per year

Number per shipment

Average Inventory


Inventory Carrying Cost

CPU $300 2500 6,000 3,000 900,000.00$ 135,000.00$ Monitor/Keyboard $400 5000 3,000 1,500 600,000.00$ 90,000.00$ Console $100 2500 1,000 500 50,000.00$ 7,500.00$

Total: 232,500.00$

Other resolutions?

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Inventory at the Plants• Denver

– 1/2 truckload of Consoles

– Same as before, right? $7,500

• Green Bay– 1/2 truckload of CPUs

– Same as before: $135,000

• Indianapolis– 1/2 truckload of Consoles :$ 7,500

– 1/2 truckload of CPUs :$135,000

– 1/2 truckload of TVs and Computers:$ 48,900

$191,400

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With Transshipment– Transportation Costs: $ 751,800– Inventory Costs at DCs: $ 4,891,300– Inventory Costs at Plants: $ 333,900

Total: $ 5,977,000

Without Transshipment– Transportation Costs: $ 460,000– Inventory Costs at DCs: $ 23,250,000– Inventory Costs at Plants: $ 232,500

Total: $ 23,942,500!

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Other Advantages/Disadvantages

• Disadvantages– Capital Cost of Warehouse – Extra handling at Warehouse

• Advantages– Economies of Scale in Assembly– Reduced demands on DC labor

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1-Many Distribution with Transhipment

Week of Topic9-Jan-01 Introduction16-Jan-01 Costs 23-Jan-01 No Class 30-Jan-01 No Class 6-Feb-01 Finance 13-Feb-01 The Continuous Approximation Approach 20-Feb-01 1-to-1 Distribution 27-Feb-01 Location and Mode Selection1-Mar-01 Exam 6-Mar-01 Spring Beak 13-Mar-01 Vehicle Routing 20-Mar-01 1-To-Many Distribution with 27-Mar-01 1-to-Many Models: WebVan 3-Apr-01 Many-to-Many with Transhipments 10-Apr-01 Many-to-Many Models: Ford 17-Apr-01 Workload Balancing: UPS 24-Apr-01 TBA

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1-Many Distribution

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Vehicle Routing

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Transshipment

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Vehicle Routing

Week of Topic9-Jan-01 Introduction16-Jan-01 Costs 23-Jan-01 No Class 30-Jan-01 No Class 6-Feb-01 Finance 13-Feb-01 The Continuous Approximation Approach 20-Feb-01 1-to-1 Distribution 27-Feb-01 Location and Mode Selection1-Mar-01 Exam 6-Mar-01 Spring Beak 13-Mar-01 Vehicle Routing 20-Mar-01 1-To-Many Distribution with 27-Mar-01 1-to-Many Models: WebVan 3-Apr-01 Many-to-Many with Transhipments 10-Apr-01 Many-to-Many Models: Ford 17-Apr-01 Workload Balancing: UPS 24-Apr-01 TBA

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Many-to-Many Distribution

% Laurel

%

%

Orillia

Portland

% Benicia

% Mira Loma% El Mirage

% Belen

% Salt Lake% Denver

%

% b

Omaha

Kansas City St. Louis

% Oklahoma City%Amarillo

%

%

Alliance

Houston

%Reisor

b

bAtlanta

bLouisville b

Norfolk

Ford Motor CompanyNorth American Vehicle Distribution

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Many-to-Many Distribution


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Other Issues

• Workload balancing: UPS case

• Combinatorial Bidding: Home Depot Case

• Yield/Demand Management

• ….

Transportation & Supply Chain Systems

Documents

Transcript of Transportation & Supply Chain Systems