Intl. Trans. in Op. Res.

11 (2004) 701714

INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH

Logistics of tractor distribution in an agriculture-driven economy: an Indian case study

G. Raghuram
Professor, Public Systems Group, Indian Institute of Management, Ahmedabad 380015, India Received December 2001; received in revised form January 2004; accepted March 2004

Abstract This paper examines critical decision areas in the context of outbound logistics and their analytical resolution (using operational research models) for a tractor company, which was among the market leaders in the tractor industry in India. Customer preferences and demands had changed in the context of the competitive environment. The challenges lay in increasing service levels to the customer through improvements in supply chain management and supporting infrastructure. Apart from value through improved service levels, cost savings of Rs 22 million per year (benchmarked against a prot before tax of Rs 1 billion per year) could be extracted through a better distribution structure involving a new central despatch yard and revised stockyard locations.
Keywords: logistics; order processing and inventory planning; distribution structure; location analysis; mathematical programming

1. Introduction Tractors are one of the most important inputs for improving agricultural productivity. As we gather from Gandhi and Patel (1997), the basic factors driving expansion of the tractor market are twofold. Expansion in irrigation and spread of high yielding varieties have led to increasing cropping intensity and a consequent demand for power and timely operations. Secondly, animal power is less eective and ecient as a source of farm power. Most developing countries that seek to improve their agricultural productivity need tractors and the attendant eciency and eectiveness in distribution logistics. As of 1999, six major players controlled the tractor industry in India. The market leader in India had also recently reached the position of the worlds largest tractor manufacturer. All had

r 2004 International Federation of Operational Research Societies. Published by Blackwell Publishing Ltd.

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been in the tractor market for more than 20 years. The tractor industry in India had become very competitive, with growth in capacity outstripping the growth in demand. One major tractor company (the company),1 which was second in market leadership, was keen on improving their position by exploiting the opportunities for growth and scope for impacting the agricultural sector in the country. Customer preferences and demands had changed in the context of the competitive environment in the tractor industry. The challenges lay in increasing service levels to the customer the agricultural farmer through improvements in supply chain management and outbound logistics, and supporting infrastructure. This paper examines critical strategic and tactical decision areas in the context of outbound logistics and their analytical resolution, using operational research (OR)based models. The implications of the analysis are signicant for the agricultural sector and thus for OR in development. Model-based optimization and trade-o analysis between customer service and costs in the context of distribution have been reported quite extensively in the OR literature. Two recent examples reported are Sery et al. (2001) in North America, and Koksalan and Sural (1999) in Turkey. Both these papers focus more on restructuring the distribution system (as is the thrust in this paper) rather than operational issues. An example that brings in the Indian context is reported in Sankaran and Raghavan (1997). More examples of similar problems in the Indian context are reported as case studies in Raghuram and Rangaraj (2000). Further details about the context that we are addressing and similar cases in the Indian agricultural context are reported in Raghuram (2001). Section 2 of the paper gives a background of the company. The signicant areas in logistics and the criteria for analysis are described in Section 3. Sections 4 and 5 report what was done in two areas of analysis, namely order processing and inventory planning, and distribution structure. Implications for the supply chain organization are brought out in Section 6. The paper concludes in Section 7, bringing out the relevance of this work to developing countries.

2. Background The company had one factory, 15 models (four accounting for 90% sales), 18 regional oces (each with a stockyard one in a given state), 300 dealers and sold 60,000 tractors per year for the past 2 years. During 19981999, the revenue was Rs 12 billion with a prot before tax of about Rs 1 billion. These gures were achieved with 7000 employees. Until 1997, the companys sales had steadily grown, ever since it started production in the mid-1980s. The promoters were familiar with the automobile industry since for many decades they had been making utility vehicles for the Indian market. In the summer of 1999, as a part of a major eort in organizational restructuring and business process re-engineering, the company decided to engage the services of the author for an assignment on supply chain management, focused on outbound logistics. After an in-depth study of the company (the manufacturing, production planning, and despatch processes), and some of
1

Some gures have been modied in this paper to protect the commercial sensitivity of the company.

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the regional oces, stockyards, and dealers, various issues and decision areas were identied. An in-company logistics team of four young executives supported the author in this exercise.

3. Areas and criteria for analysis Signicant logistical issues were (i) order processing and inventory planning, (ii) distribution structure (including location of stockyards and central despatch yard), and (iii) transportationrelated issues (optimal mode choice, partnership with railways for appropriate rolling stock and loading and unloading facilities, investing in trucks with appropriate design, and coordination between tractor manufacturers for minimizing empty back hauls). In this paper, we report on the rst two areas of analysis. Based on an understanding of the outbound logistics, the following criteria were considered relevant for analysis:  Service parameters (to dealer and end users):     Stock out percentage. Lead times of supply. Quality of tractor (especially minor damages, missing parts, etc.). Tractor hours driven before customer delivery.

 Cost parameters:     Inventory (because of buer, transit/processing times and batch/shipment size). Transportation ( primary and secondary). Losses (repair costs and delayed sale). Stockyard.

 Managerial considerations:  Ease of implementation.  Control.

4. Order processing and inventory planning Regional ocers placed orders for delivery to stockyards, modelwise on a monthly basis. Orders were consolidated, based on dealers requirements by the 20th of the month, for receipts during the following month. Over the next 5 days, there could be discussion between the plant (production planning) and the regional oces to modify the order, keeping in view any possible production constraints. Even though the production (and the despatches) were planned and scheduled for a whole month, there were always end of month pressures for modications and additions. The marketing executives and top management were sensitive to the monthly market share points that industry analysts watched and reported. Inventory planning at the stockyards (under the charge of the regional oces) to enable high service levels to the dealers, and at the plant to respond to seasonality were key concerns. The

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following framework of forecasting, annual inventory planning, and monthly order processing was proposed to address these.

4.1 Forecasting This would be done at three levels as follows: (i) Company level: for aggregate and seasonality planning. (ii) Regional oce level: for cross-checking the periodic consolidated dealer forecasts for placing orders from the factory. Established forecasting models (Sharan, 1995) were proposed to the company, who tested for these two contexts. They validated the models using Root Mean Squared Error. Since they were happy with the results, they decided to adopt them. (iii) Dealer level: for enabling regions to position inventory in the stockyards and place orders from the factory. At the dealer level, developing models for the disaggregate level of forecasting would have been dicult. However, it became clear that tracking of potential customers would be a reasonably robust mechanism for assessing demand since a customer went through many predictable stages of the buying process, before nally purchasing a tractor. Such a system was being recommended by another consulting team who were looking at marketing issues at the dealer level.

4.2 Annual inventory plan for seasonality The monthwise sales at an aggregate level could be forecasted with a high level of accuracy. Given an average sales of 5000 tractors per month, the lowest sales of 4000 tractors were expected in February, and the highest sales of 6000 tractors in April. We evaluated the policy of a production plan that followed the demand versus one that would have a uniform monthly production. The demand-driven production plan would have no inventory because of seasonality, although there would be costs because of overtime, subcontracting, supervision, etc.; the uniform production plan would have inventory costs because of seasonality. It was easier to assess the inventory costs of the uniform production plan rather than the costs of the demand-driven production plan. Figure 1 gives the prole of the demand, uniform production, and seasonality inventory under the uniform production plan. Table 1 gives the inventory because of seasonality under the context of a uniform production plan. The seasonality inventory would clear towards the end of June, which is at the end of the AprilMayJune peak. The overall inventory cost because of seasonality was Rs 47.4 million, which amounted to Rs 790 per tractor. It was the managements judgement that the cost because of the demand-driven production plan would be higher, especially since it involved overtime, which often had long-term xed cost implications. Consequently, no attempt was made to quantify the costs because of the demand-driven production plan.

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Demand Production Inventory

705

7.000 6.000 5.000 4.000 3.000 2.000 1.000 0

ry y ly ril M ay ne ch er st r Ap Ju ua gu be ar M ar br u Ju ob Ja n Au em ct

r be D ec em

Fe

Se

Fig. 1. Prole of the demand, uniform production, and seasonality inventory under the uniform production plan.

Table 1 Inventory because of seasonality, with uniform production policy. Month January February March April May June July August September October November December Total Average per month Demand 5000 4000 4500 6000 5900 5700 4500 4000 4500 5500 5400 5000 60,000 5000 Production 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60,000 5000 Inventory because of uniform production 1100 2100 2600 1600 700 0 500 1500 2000 1500 1100 1100 15,800 1317

Inventory cost (at Rs 200,000 per tractor and 18% per annum inventory carrying cost) 1317 200,000 0.18 5 Rs 47.4 million per annum.

4.3 Periodic order processing: regional oce to factory (stockyardwise, modelwise) This was addressed by designing a system that would determine modelwise inventory levels at stockyards, with a periodic ordering on the factory. This order interval was 1 month. The lead time for order fullment was currently anywhere from 25 to 40 days. Both the order interval and the lead time were viewed as causing inexibilities in the system that would prevent the company from making a higher level pitch in a competitive environment. There was also signicant end-ofmonth skew in order fullment, driven by monthly targets, but causing undue stress in the supply chain. Sixty percent of the supplies were in the last week. Given general industry trends and best practices, the company decided to reduce the order interval and lead times by working on better production planning responses and exible manufacturing strategies. The main features of the system were:

ov

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em

be

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(i) Periodic inventory plan with safety stock for stockyards. Safety stock to provide 98% service level, modelwise. (ii) Order quantity 5 expected demand during protection interval 1 safety stock current stock (including stock in transit). (iii) Protection interval 5 order interval 1 lead time. (iv) Attempt to reduce order interval from a month to 2 weeks and then to a week, and the lead time from the current to 2 weeks. 5. Distribution structure There were two concerns here, namely, the need for a central despatch yard and location (and number) of stockyards. 5.1 Central despatch yard Currently, all despatches were made from the factory to the stockyards through a daily allocation process that took into account the unmet demand at stockyards, ready for despatch inventory and availability of the special-purpose trucks based on the transporters inputs. Once assigned to a transporter, they moved the tractors to their godowns, since there was no space in the factory for holding nished stocks. It was often noticed that the transporters actually moved the tractors out of their godowns after an average of 2 days, primarily because of the non-availability of the intended trucks for despatch. Transporters tried to hedge against under-utilization of their special-purpose trucks by reporting availability of trucks ahead of when they actually were. Apart from the additional inventory carrying cost, the company was concerned about the extended period of lack of control over the tractors. A central despatch yard at a suitable highway location, 20 km away from the plant, was being considered to address this. (There was no space adjacent to or near the existing plant for such expansion). The analysis for the economics of a central despatch yard is given below. At an inventory saving of 2 days per tractor, the annual savings would be Rs 12 million. The annual operating cost would be Rs 2 million (including the additional transportation cost to move the tractors to the central despatch yard rather than the payment to the transporters to move the tractors to their godowns), thus oering a net saving of Rs 10 million per year. This was very good compared with the investment cost of Rs 15 million. There were issues as to whether the 2 days would be entirely saved, just because the allocation would now be made after physically seeing the truck that would transport the tractors. The qualitative benet of the increased exibility in allocation and reduction in losses because of being able to inspect the transporting truck were considered signicant. It was also felt that the transporters would welcome this move, since they would save on the storage space in their godowns, while of course giving up the margin on the payment for moving the tractors to their godowns. The decision was to recommend the central despatch yard, which was accepted by the management. 5.2 Stockyard location analysis For better servicing of dealers, location of stockyards was another issue. One of the debates was whether a stockyard should be close to the entry point in a state or close to the marketing oce, which was usually in a large commercial centre near the centre of the state.

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The primary transportation (factory to stockyards) mode was decided as road, using long platform trucks that could carry up to ve tractors. The secondary transportation (stockyards to dealers) from the stockyards to the dealers would now begin to use trucks that could carry two tractors rather than move under their own power. This was expected to reduce transit damages and also oer the tractor in mint condition to the dealer. As a policy to reduce supply chain costs, it was decided that the dealer would be expected to hold inventory of A category tractors only, while stockyards would hold the B and C category tractors. This would require that each dealer must have a stockyard with reasonable access. Because of tax considerations, by and large each state in the country had to have at least one stockyard. The current policy for stockyard locations was proximity to regional marketing oce, which was usually in a major city in the centre of the state. Keeping in view the various considerations discussed above, both the number and location of stockyards were questioned and relaxed where logistical servicing of dealer gained importance. A mathematical programming model was used for analysis (see Appendix). The model could focus on one state at a time, since logistically, there were no linkages between states. The application of this model for the state of Gujarat is illustrated. A map of Gujarat showing all locations is given in Fig. 2. Five potential locations for stockyards were considered (the current stockyard location was Ahmedabad). The considerations for a candidate location were (i) the availability of secondary transportation and (ii) proximity to dealers so that service levels to the dealers could be maintained. The stockyard management would be outsourced to a third party, as was the practice in the industry. Further, the operating costs were governed mostly by the extent of land required for parking the tractors and the real estate costs. The volume of throughput did not inuence the cost structure (although such cost structures can be negotiated), since volumes were expected to be at levels where the minimum manning at the stockyards would suce. Data are provided for the ve potential stockyard locations, monthly operating costs (as specied by the third party) and distance from factory (Table 2), and location of the 19 dealers of the company in Gujarat, along with the expected monthly demand and distances from the potential stockyards (Table 3). The total Gujarat demand was expected to be 500 tractors per month. The mathematical programming model for Gujarat had ve zero-one variables to decide on the stockyard locations and 95 zero-one variables to decide on dealer stockyard assignment. The objective function optimized the total relevant cost consisting of the primary and secondary transportation costs and the stockyard operating costs. There were 19 constraints to ensure that each dealer was assigned to a stockyard, and ve constraints to ensure that a stockyard was open, if required for being assigned to a stockyard. There could be a few additional constraints, depending on stockyard capacities, minimum throughput volumes (for outsourcing) and limitations for control, etc. Since this model facilitated a tactical decision, it would be run whenever there were signicant changes in (i) demand patterns within a state, (ii) stockyard location costs or (iii) ability to service the dealers with appropriate service levels. In general, this was not expected to occur within say two years. The model was run using the solver function in MS-Excel, on a regular personal computer. The model results were validated by a spreadsheet evaluation of the solution. The primary transportation cost was expected to vary depending on the truck technology. More sophisticated trucks, which the company was in the process of acquiring, would bring down the costs from the current Rs 3.0 to Rs 2.5 per tractor per km. The secondary transportation cost was

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Fig. 2. Stockyard and dealer locations.

expected to vary depending on the service level oered. Using trucks rather than the tractor power for secondary transportation would increase the costs from the current Rs 3.0 to Rs 3.5 per tractor per km. It was also a matter of concern that a dealer should not have to be more than 500 km from a stockyard. Some of the more aggressive marketing executives felt that this should not exceed even 350 km, which would be a one-day transportation lead time. Another issue was a possible minimum on what a stockyard should handle per month, especially if stockyard management were to be outsourced. The company executives felt that a number of 200 tractors per month was a reasonable gure, to enable it to be attractive to the outsourcee. The minimum restriction would become relevant if the cost structure for stockyard management included a per tractor handling fee, which could then easily be added to the primary or secondary transportation cost coecient, without disturbing the linearity. Table 4 gives the results (optimal stockyard locations with total costs) of the analysis based on the mathematical programming model for various scenarios aecting the stockyard location. Ten scenarios were considered on the dimensions of cost structure (current and future), secondary distance limit (none, 350 and 500 km), and the minimum number of tractors to be handled at a stockyard (0 and 200). The minimum number of tractors was taken at zero for the case of the most

G. Raghuram / Intl. Trans. in Op. Res. 11 (2004) 701714 Table 2 Potential stockyard locations (i), operating cost (Ci) and distance from factory (di). Sr. no. 1 2 3 4 5 Stockyard location Valsad Surat Vadodara Ahmedabad Rajkot Operating cost (Rs per month) 25,000 20,000 30,000 30,000 25,000

709

Distance from factory (km) 136 263 448 545 761

Table 3 Dealer location ( j), demand (Dj ) and distance (dij ). Distance (dij ) No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Dealer location Amreli Anand Bardoli Bharuch Bhavnagar Dharampur Dholka Godhra Himmatnagar Jamnagar Junagadh Nadiad Mehsana Morbi Palanpur Patan Porbandar Rajpipla Surendranagar Demand (no. per month) 35 30 25 40 25 20 20 20 35 20 30 45 20 20 20 30 20 25 20 Valsad 633 272 62 163 514 32 385 315 424 616 630 293 419 647 491 456 715 204 431 Surat 566 205 31 96 447 109 318 248 357 549 563 226 352 570 424 389 648 141 364 Vadodara 399 38 125 71 280 266 151 81 190 382 396 59 185 403 257 238 481 82 200 Ahmedabad 258 73 225 182 200 377 40 136 79 313 327 52 74 292 146 125 412 195 116 Rajkot 105 255 492 365 175 560 162 321 304 88 102 234 299 67 371 255 187 255 111

restrictive secondary distance limit of 350 km. For each of the cost structures, the existing location scenario was also analysed. The model also gave the allocation of dealers to stockyards for these scenarios. Given the current cost structure in Gujarat (where primary and secondary transport costs are similar), the total relevant cost for the existing location was about Rs 1,120,000 per month. A saving of nearly Rs 300,000 per month was possible by relocating the stockyard to Valsad. With a secondary distance limit of 500 km, the possible saving was about Rs 230,000 per month and with a limit of 350 km, about Rs 180,000 per month. It should be noted that for the current cost structure, the selection of Valsad by the model as the location or one of the locations (depending

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Table 4 Scenario analysis for Gujarat: total relevant cost and stockyard sites Secondary distance limit Min no. of tractors to be serviced by a stockyard: 200 per month Cost (Rs per tractor per km) Current Primary ( pi): 3.0 Secondary (sij ): 3.0 Future Primary ( pi) : 2.5 Secondary (sij ): 3.5 Current 1,119,855 Ahmedabad None 822,880 Valsad 350 km 943,085 Valsad Ahmedabad Rajkot 878,209 Valsad Ahmedabad Rajkot 500 km 887,380 Valsad Vadodara 875,454 Valsad Ahmedabad None 822,800 Valsad 500 km 899,080 Valsad Vadodara 875,484 Valsad Ahmedabad

1,028,999 Ahmedabad

873,533 Valsad Rajkot

875,484 Valsad Ahmedabad

Table 5 Recommendations for stockyard locations State Andhra Pradesh Tamil Nadu Karnataka Gujarat Madhya Pradesh Rajasthan Existing Hyderabad Chennai Bangalore Ahmedabad Bhopal Jaipur Sri Ganganagar Jalandhar Karnal Recommended locations Hyderabad Vijaywada Hosur Trichy Belgaum Davangere Valsad Ahmedabad Indore Raipur Kota Jodhpur Sri Ganganagar Patiala Gurgaon

Punjab Haryana

on the restriction on the secondary distance) is trivial because of the triangular inequality, since Valsad is at the entry point to the state on the highway from the factory. With the expected future cost structure, the total relevant cost for the existing stockyard location was about Rs 1,030,000 per month (an automatic saving of Rs 90,000 per month because of cost structure alone). A further saving of about Rs 150,000 per month was possible if the stockyards could be located elsewhere, even with the additional constraints for service level. Of the scenarios considered, the locations at Valsad and Ahmedabad were preferred. This was

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also driven by (i) the convenience of retaining the existing location and (ii) expected opportunities for growth in the markets near Valsad. Similar models were run for other states. The total savings, across the states where stockyard locations were revised, were about Rs 1 million per month, i.e. Rs 12 million per year. The nal recommendations for stockyard locations of the major states, based on the model output and implications in terms of the criteria considered, are given in Table 5. Apart from the specic recommendations, one of the greatest benets of the modelling exercise was in convincing the organization that a variety of factors can be considered for analysis, often leading to counterintuitive solutions. Also, the scenario analysis demonstration prompted the in-company logistics team to carry out a sensitivity analysis by examining marginal violations of desirable parameter values by considering more scenarios by varying parameter values.

6. Supply chain organization In order to ensure (i) smooth and sustained implementation of the recommendations and (ii) better supply chain coordination for higher service levels to the dealers and customers, the company reviewed the supply chain organization. It was decided that the distribution unit right up to stockyards would be under a new supply chain organization, which would include the production units (Fig. 3). This was built on the premises that (i) marketings role is to understand the customer requirements, and interface with the customer, both directly as well as through the dealer, and (ii)

Current President

Proposed President

Production

Marketing
Supply chain responsibility

Marketing

Engine unit Transmission unit Tractor unit

Distribution unit

Engine unit Transmission unit Tractor unit

Distribution unit

Transport management

Stockyard management

Transport management

Stockyard management

Fig. 3. Organization structure.

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the responsibility of the supply chain organization would be to service the dealer requirements. In fact, through this, the organization attempted a change of philosophy in being more like a service organization. Thus, dealer interface became the front oce function, and servicing the dealer right from the raw material vendor through a series of transport, storage, and conversion activities became the back oce supply chain function.

7. Relevance to developing countries As already mentioned, most developing countries that seek to improve their agricultural productivity need tractors and the supporting logistics and distribution system. India, which has been an agriculture-dominated country, is increasingly yielding the agricultural labour to the service sector, which is already a dominant sector in the Indian economy. The entire agricultural development, which apart from making India self-sucient in agriculture, is today focused on exports. In this context, the signicance of better utilization of agricultural inputs is critical. Agriculture constituted 25% of the gross domestic product (GDP) of India in 19971998. Although it has reduced from 28.3% in 19871988, the agriculture GDP went up vefold in real terms from Rs 493 billion to Rs 2541 billion (at 19801981 prices) (Directorate of Economics & Statistics, 1999). While the overall agricultural production went up between 19801981 and 1997 1998 (more than keeping pace with the population growth), the actual production growth was more a function of productivity growth than growth in area. For example, in the case of rice, when overall production went up by 67% between 19801981 and 19971998, the contribution because of growth in area was 9%, while it was 53% because of productivity. Similarly, in the case of wheat, an overall growth of 82% occured because of 15% in area, and 58% in productivity. In 1999, not surprisingly, India was the largest tractor market in the world. However, in terms of total tractors in use in the country, it was eighth in the world. The country had a tractor density of 10.5 tractors per thousand hectares of gross cropped area (GCA) compared with the international average of about 28 tractors per thousand hectares of GCA. The total tractor sales in numbers had increased from 121,106 in the nancial year 19891990 to 254,871 in 19981999, implying a compound annual growth rate of 8.6%. The role of tractors is signicant in improving agricultural productivity in developing countries. Consequently, methods to improve the use of this resource gain signicance. This paper demonstrates how a supply chain perspective can identify areas of improvement in the tractor industry. A zero-one ILP model could be used to optimize stockyard locations and allocation of dealers to locations, with an appropriate recognition of service levels in the developing context. The OR modelling context recognizes the changing expectations of the farmers (for example, requiring the secondary distribution to be by trucks rather than locomotion), the changing power balance in favour of the dealers (for example, their desire to minimize inventory at the dealer level and push it upstream to the stockyard, but with appropriate responsiveness), and the competitive context (for example, requiring better quality during transportation and storage). The quantitative benets demonstrated by the use of OR, with an openness to examining dierent scenarios, aided a much-needed mindset change from a functionally driven focus to a supply chain focus. The willingness of marketing to consider stockyard locations away from their marketing oces (given the better communication facilities as a result of the developing context), and of

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production to consider a two-weekly production planning time bucket rather than the monthly bucket (given the possibility of better decision support for production planning) are examples. With better logistics practices aided by OR, the tractor rms in a large developing country context like India would not only be in a position to contribute to the need for agricultural productivity but also to the export of tractors because of the advantages of scale economies.

Appendix Stockyard location analysis: mathematical programming model. Variables i 5 1, 2, . . . , s potential stockyard locations (s is typically 45 in a state), j 5 1,2, . . . , n dealer locations ( j is typically 1520 in a state). Yi 5 1 if stockyard i is selected 5 0 otherwise Yij 5 1 if dealer j is served via stockyard i 5 0 otherwise Inputs 5 primary transport cost per tractor km from factory to stockyard i pi 5 secondary transport cost per tractor km from stockyard i to dealer j sij 5 distance from factory to stockyard i di dij 5 distance from stockyard i to dealer j Dj 5 demand at dealer j per month Ci 5 cost of operating stockyard i per month M 5 large number mi 5 minimum number of dealers required to be handled by stockyard i Mini 5 minimum volume required to be handled at stockyard i Maxi 5 maximum volume that can be handled at stockyard i Formulation of zero-one IP X XX pi di sij dij Dj Yij Ci Yi : min
i j

X
i

Yij 1 for every j every dealer must be assigned one stockyard: Yij )MYi for every i a stockyard must be opened to be assigned:

X
j

Possible additional constraints If no more than two stockyards should be selected in a state Y1 Y2 Ys )2:

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For minimum number of dealers at stockyard i Yi1 Yi2 Yin *mi : For minimum volume by stockyard i D1 Yi1 D2 Yi2 Dn Yin *mini : For maximum volume by stockyard i D1 Yi1 D2 Yi2 Dn Yin )maxi :

References
Directorate of Economics & Statistics, 1999. Agricultural Statistics at a Glance. Ministry of Agriculture, New Delhi. Gandhi, V.P., Patel, N.T., 1997. Are tractors rising in importance? An examination of the growth of tractor demand and industry in India. In Desai, B.M. (ed.) Agricultural Development Paradigm for the Ninth Plan under New Economic Environment. Oxford and IBH, New Delhi, pp. 570590. Koksalan, M., Sural, H., 1999. Efes beverage group makes location and distribution decisions for its malt plants. Interfaces, 29, 2, 89103. Raghuram, G., 2001. Logistics Management in Agriculture: Case Studies. PSG Monograph 69. Indian Institute of Management, Ahmedabad (April). Raghuram, G., Rangaraj, N., 2000. Logistics and Supply Chain Management: Cases and Concepts. Macmillan India Limited, New Delhi. Sankaran, J., Raghavan, S., 1997. Locating and sizing plants for bottling propane in south India. Interfaces, 27, 6, 115. Sery, S., Presti, V., Shobrys, D., 2001. Optimization models for restructuring BASF North Americas distribution system. Interfaces, 31, 3, 5565. Sharan, G., 1995. Demand for farm tractors: two models. Agriculture Engineering Today, 19, 12, 17.