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Logistics
The process of planning, implementing, and controlling the efficient, cost-effective flow and storage of goods, services, and related information, from point of origin to point of consumption, for the purpose of conforming to customer requirements. Components of an Integrated Logistics System
Physical Supply: links suppliers to operations process Internal Operations: manages in-process material flow Physical Distribution: links operations process to customers
Auto assembly
Finished Goods
Dealers
Customers
SCM: the need to reduce variability or the impact of variability on the supply chain
Supply network variability
late deliveries: weather,equipment breakdown quality problems
Environmental Sensitivity
NOW: Supply chains create tremendous amounts of waste material to protect goods in shipment and storage. FUTURE: Distribution will use reverse logistics, the recycling or proper disposal of cardboard, packing material, strapping, shrink wrap, pallets, etc...
A study by A.T. Kearney & Company provides the average distribution cost (as a percentage of sales) across 270 companies. Functional Activity Administration Transportation : Inbound Outbound Receiving and shipping Packaging Warehousing Inventory carrying cost: Interest Taxes, insurance, obsolescence Or der processing Total % of sales 2.4 2.1 4.3
1.6
Example
Special transportation concerns: Route (or arcs) that have a maximum capacity Routes that cannot be traversed
The Transshipment Problem: a more generalized version of the transportation problem in which intermediate, transship ment, nodes are added to the network. Transshipment nodes are often used to model warehouses, material transfer locations, or junctions for mixed mode delivery of goods and services.
Example
Special transshipment concerns: Backwards or sidewards movement in the network Capacity limitations of the transshipment nodes
Quaker Oats has begun manufacturing, in two of its plants, a new granola product made of three parts oats, two parts raisins and one part almonds. Two oat vendors and two almond vendors have been identified, but only one reliable vendor of raisins could be found. The supply of raw materials and the shipped costs are provided Vendor Oat 1 Oat 2 Raisin Almond 1 Almond 2 Supply in tons 25,000 30,000 50,000 9,000 10,000 Cost to Plant 1 $100 $105 $550 $1,050 $1,200 Cost to Plant 2 $110 $95 $525 $1,150 $1,100
Quaker ships to three distribution facilities. The shipping cost of completed (6-ton) pallets of product and the demand at each distribution facility are provided Hannaford Plant 1 Plant 2 Demand $100 $95 2,500 Quaker $65 $70 5,000 WalMart $90 $90 10,000 Plant Capacity 9,500 8,500
Formulation
Minimize Z= 100O1Q1+110O1Q2+105O2Q1+95O2Q2+550RQ1+525R Q2+1050A1Q1+1150A1Q2+1200A2Q1+1100A2Q2+100Q 1H+65Q1D+90Q1W+95Q2H+70Q2D+90Q2W C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 1O1Q1+1O1Q2<=25000 1O2Q1+1O2Q2<=30000 1RQ1+1RQ2<=50000 1A1Q1+1A1Q2<=9000 1A2Q1+1A2Q2<=10000 1Q1H+1Q2H>=2500 1Q1D+1Q2D>=5000 1Q1W+1Q2W>=10000 1O1Q1+1O2Q1-3Q1H-3Q1D-3Q1W=0 1O1Q2+1O2Q2-3Q2H-3Q2D-3Q2W=0 1RQ1-2Q1H-2Q1D-2Q1W=0 1RQ2-2Q2H-2Q2D-2Q2W=0 1A1Q1+1A2Q1-1Q1H-1Q1D-1Q1W=0 1A1Q2+1A2Q2-1Q2H-1Q2D-1Q2W=0 Q1H+Q1D+Q1W<=9500 Q2H+Q2D+Q2W<=8500
Subject To:
Objective Function Const 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16
Left Hand Right Hand Side Direction Side 25,000.00 <= 27,500.00 <= 35,000.00 <= 9,000.00 <= 8,500.00 <= 2,500.00 >= 5,000.00 >= 10,000.00 >= 0 = 0 = 0 = 0 = 0 = 0 = 9,000.00 <= 8,500.00 <= 25,000.00 30,000.00 50,000.00 9,000.00 10,000.00 2,500.00 5,000.00 10,000.00 0 0 0 0 0 0 9,500.00 8,500.00
Bullwhip Effect
The magnification of variability in orders in the supply-chain.
Retailers Orders
Wholesalers Orders
Manufacturers Orders
Time
Time
Time
The Assignment Problem: deals with a managerial decision to assign A resources (or agents) to specific customers (or tasks). Normally, the assignment problem is structured to assign one and only one agent to one and only one task. Example of an assignment problem
A g e nt 1 50 60 90 40 2 80 100 2 Task 1
Special assignment concerns: Multiple assignments The number of agents not equal to the number of tasks
30 50 60
The Marathon Oil Company operates two refineries, two distribution centers and three tankwaggon shipping points to service its customers in the southeast. Refined crude is shipped from a refinery to a distribution center and finally to a tankwaggon shipping point for final sale to oil distributors. Plant capacities and shipping costs (in $ per gallon) from each refinery to each distribution center (DC) are given below: Refinery Miami Refinery Springfield Refinery Columbia DC .004 .003 Macon DC .006 .008 Capacity 125,000 gals 95,000 gals
Estimated customer demand and per unit shipping costs (in $ per gallon) from each DC to each tankwaggon shipping point ( TWSP) are as follows: Distribution Center Columbia Macon Monthly Demand: Grade I Oil Grade II Oil Charleston TWSP .0016 .0024 20,000 gals 40,000 gals Durham TWSP .0021 .0035 25,000 gals 35,000 gals Carver TWSP .0031 .0022 45,000 gals 20,000 gals
Grade I and II oil consume the same amount of capacity to refine, however; only the Miami refinery is capable of refining Grade I oil.
Network
C1 M1 C2 D1 M2 M1 D2 Ca1 S2 M2 Ca2 Ch1 Ch2
Formulation
Minimize 0.004MC1+0.006MC2+0.004MM1+0.006MM2+0.003SC 2+0.008SM2+0.0016C1CH1+0.0021C1D1+0.0031C1CA 1+0.0016C2CH2+0.0021C2D2+0.0031C2CA2+0.0024M 1CH1+0.0035M1D1+0.0022M1CA1+0.0024M2CH2+0.0 035M2D2+0.0022M2CA2 C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 MC1+MC2+MM1+MM2<125,000 SC2+SM2<95,000 -MC1+C1CH1+C1D1+C1CA1=0 -MC2-SC2+C2CH2+C2D2+C2CA2=0 -MM1+M1CH1+M1D1+M1CA1=0 -MM2-SM2+M2CH2+M2D2+M2CA2=0 C1CH1+M1CH1=20000 C2CH2+M2CH2=40000 C1D1+M1D1=25000 C2D2+M2D2=35000 C1CA1+M1CA1=45000 C2CA2+M2CA2=20000
Subject To:
Solution.
Decision Variable 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 MC1 MC2 MM1 MM2 SC2 SM2 C1CH1 C1D1 C1CA1 C2CH2 C2D2 C2CA2 M1CH1 M1D1 M1CA1 M2CH2 M2D2 M2CA2 Solution Value 45,000.00 0 45,000.00 0 95,000.00 0 20,000.00 25,000.00 0 40,000.00 35,000.00 20,000.00 0 0 45,000.00 0 0 0 Unit Cost Total Profit c(j) Contri 0.0040 0.0060 0.0040 0.0060 0.0030 0.0080 0.0016 0.0021 0.0031 0.0016 0.0021 0.0031 0.0024 0.0035 0.0022 0.0024 0.0035 0.0022 (Min.) = 180.0000 0 180.0000 0 285.0000 0 32.0000 52.5000 0 64.0000 73.5000 62.0000 0 0 99.0000 0 0 0 1,028.0000 Slack Shadow or Surplus Price 35,000.00 0 0 0 0 0 0 0 0 0 0 0 0 0 -0.0040 -0.0030 -0.0040 -0.0039 0.0056 0.0046 0.0061 0.0051 0.0062 0.0061 Allowable Allowable Min. RHS Max. RHS 90,000.00 95,000.00 -35,000.0 0 -35,000.0 0 0 0 0 0 0 0 M M 45,000.0000 95,000.0000 45,000.0000 20,000.0000 55,000.0000 40,000.0000 60,000.0000 35,000.0000 80,000.0000 20,000.0000 Reduced Cost 0 0.0030 0 0.0021 0 0.0041 0 0 0.0009 0 0 0 0.0008 0.0014 0 0.0017 0.0023 0 Basis Status basic at bound basic at bound basic at bound basic basic at bound basic basic basic at bound at bound basic at bound at bound basic Allowable Allowable Min. c(j) Max. c(j) 0.0031 0.0030 0.0032 0.0039 -M 0.0039 -M -M 0.0022 -M -M 0.0014 0.0016 0.0021 -M 0.0007 0.0012 0.0001 0.0048 M 0.0049 M 0.0051 M 0.0024 0.0035 M 0.0033 0.0044 0.0052 M M 0.0031 M M 0.0039
Left Hand Right Hand Side Direction Side 90,000.00 95,000.00 0 0 0 0 20,000.00 40,000.00 25,000.00 35,000.00 45,000.00 20,000.00 <= <= = = = = = = = = = = 125,000.0000 95,000.0000 0 0 0 0 20,000.0000 40,000.0000 25,000.0000 35,000.0000 45,000.0000 20,000.0000
1 2 3 4 5 1 2 3 4 5 7 9 6 8 7 9
1. 2. 3. 4. 5. 6. Inventories and multi-period planning Limitations on shipping quantities Changes in demand Multimode shipping Returns Reverse logistics
Transportation and the Traveling Salesman Problem The traveling salesman problem is a special network formulations that requires a heuristic solution for all but the smallest problems. The object of the TSP is to find a network cycle that minimizes the total distance required to visit all nodes once. The nearest neighbor procedure (heuristic) 1. 2. 3. 4. Start with a node (location to be visited) at the beginning of the tour (the depot node). Find the closest to the last node added to the tour. Go back to step 2 until all nodes have been added. Connect the first and last nodes to complete the tour.
Example Use the following symmetric distance matrix to design a tour that minimizes total distance traveled. From Node 1 2 3 4 5 6 To Node (in miles) 2 3 4 5.4 2.8 10.5 5.0 9.5 5.0 7.8 9.5 7.8 5.0 6.0 5.0 8.5 3.6 9.5
3. 4.
Example
1 10 miles 3