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Distribution Optimization of Automobiles w.r.

t Time and Cost at


Nissan Alissa
Brief Introduction To topic:
Optimization means maximizing the return at a given risk level or risk is minimized for a given
expected return. Now Inventory Optimization means maintaining a certain level of inventory
that would eliminate the out-of-stock situation and at the same time the cost of carrying
inventory is not detrimental to the bottom-line. In simple inventory optimization means
balancing demand and supply. Lean manufacturing is a system whose techniques aim to
significantly eliminate waste in the manufacturing process. In the whole material management
module logistics is the main contributor towards achieving cost effective and optimized
solution. Logistics model differs from company to company, but the logic remains the same.
Different company emphasizes on the different aspects of logistics depending on their nature of
job and organizational requirements. In Mahindra the distribution of revenue budget towards
the above three aspects of logistics are as below

Fig. 1
Project Purpose:
With a large dispersion of dealers, it is critical that automobile manufacturers distribute their
finished products at low cost. Manufacturers can achieve cost effectiveness in their distribution
network through optimization of vehicle routing from the factories to the dealers. Many
manufacturers use specialized supply chain software to continually optimize their distribution
network. The primary purpose of this paper is to identify areas for improvement within the
outbound vehicle distribution routing model in an automotive manufacturer. In particular, the
paper focuses on minimizing the "total landed cost" of distribution, while increasing flexibility in
the logistics network, using Nissan Alissa in Saudi Arabia company. Nissan Alisa Company
currently outsources all of its outbound vehicle Nissan Alissa in Saudi Arabia, Company A.
Company A handles all aspects of distribution of products from each factory or port to each
dealer in the Saudi Arabia. It provides both operational and strategic support: it processes and
accessorizes vehicles, works with carriers to ensure proper shipments, and conducts carrier
contract negotiations on behalf of Nissan Alisa Saudi Arabia, henceforth referred to as NNA. In
addition, Company A owns the routing optimization function and optimizes the distribution
network for NNA. NNA oversees Company A and approves any changes or exceptions to the
current routing.

Fig. 2

In the Saudi market, Nissan sold 61,806 cars, reaching 7.2 percent market share, which
represents 141.7 percent growth year on year. The company plans to introduce new
technologies in the next four years including autonomous driving innovations. However, it is
clear that we will face tougher market conditions this year and Nissan will need to be more
dynamic and make more of an effort to deliver against the needs of our customers. At Nissan,
we have continued to deliver against our Power 88 brand strategy, adding to our growing line-
up of models available in the region. As proof of this we have launched the all new Nissan
Maxima 2016 and also introduced the performance arm of Nissan in the region — known as
NISMO. We also revealed a world premiere — the Nissan Patrol NISMO.
The goal of this project is to understand the inputs and constraints in the model, to find opportunities
for improvement, and to standardize the process for route optimization through the use of the i2 tool.
In particular, this paper will focus on understanding the current model and its formulation and
identifying three particular areas of improvement:

1. Increasing flexibility in the model


2. Including transit inventory costs in the model
3. Using the model proactively rather than reactively

Thesis Overview:
The research uses integrated linear program model developed by Geoffrion and Graves. This
model uses an algorithm known as & quote; Bender& #39; decomposition” for formulation and
solution of problem (Geoffrion and Graves, 1974). The problem will be formulated by inputting
data on series of cost & time variables, an objective function and model constraints in
Mat-lab. Mat-lab provides optimization tools for solving linear, quadratic and non-linear
optimization problems. It provides tools for finding factors that maximize or minimize an
objective by satisfying the model constraints. The objective function of this model is to
maximize profit by minimizing cost. Basically, it is an engine plant. It manufactures different
type of engines for their different products which are getting assembled in different locations
(Nashik, Zaheerabad & Hardwar). Igatpuri plant dispatches engines to the above locations as
per their production plans whose cost is born by Igatpiuri plant. Maximum cost is involved in
dispatching engines from Igatpuri to Haridwar. This is because of the distance between the
location and production fluctuation is very high. In order to meet the demand of Haridwar plant
and to avoid production stoppage high inventory level is maintained at Haridwar plant.
Constrain for Research Model under Geoffrion and Graves Optimization Methodology

1. Supply Constraint: The total flow of automobiles from a distribution centre must be
less than or equal to the supply at that distribution centre.
2. Demand Constraint: The total outflow from all distribution centres must fulfil
demand for that commodity at a particular customer.
3. Single Path Constraint: Each customer must be served by only one distribution
centre at a time for all of its products.
4. Volume and Capacity Constraint: The total flow through distribution centre must fit
within the minimum and maximum for that facility.