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ISyE 6203ConsolidationIntro to GISJohn H. Vande Vate

Fall 2011

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Our Company• Direct TL shipments

– Low transport cost gives high Gross Margin– High Cycle Stock at Stores gives low ROIC

• Balance Transport and Inventory– EOQ/EPQ improved ROIC dramatically with

only small impact on Gross Margin– Adjusting mode to suit smaller shipments

reduced impact on transport costs and Gross Margin

• What next?

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Summary • Direct Full Truckloads

– $158 million in inventory– $435 thousand in transportation– Gross Margin % = 33%– SPEED = 1.08– ROIC = 23%

• Single EOQ to All Stores– $15.8 million in inventory– $2.54 million in transportation– Gross Margin % = 32.5%– SPEED = 1.65– ROIC = 34%

• Different EOQ shipments– $? million in inventory– $? million in transportation– Gross Margin % = ?– SPEED = ?– ROIC = ?

Balance Inv. & Transport

Balance Inv. & Transport w/ more

detail & complexity

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Our Company• Pretty much come to the end of the possibilities for

improving performance under the current rules. So, …• CHANGE THE RULES• Use LTL instead of FTL (Challenge 4)• Change the network• Consolidate flows

– Recognize & exploit economies of scale in transport rates– Aggregate flows to exploit economies of scale while managing

the inventory impacts.– Try to get low inventories at the stores AND larger shipments

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Consolidation: An Example• Truck load shipments from Green Bay and

Denver to Indianapolis• Assemble Products in Indianapolis and

distribute by full truckload from there to stores• What will happen to costs compared to direct

full truck load shipments?– Transportation– Pipeline– At plants– At Indianapolis Warehouse/Cross Dock– At Stores

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Indianapolis

• Assume 2 separate operations– Manufacturing– Assembly & Distribution

• Manufacturing moves finished units to Assembly as they are completed at no cost.

• What happens in Assembly & Distribution?

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Assembly & Distribution• Receiving Dock

– Receives shipments from Green Bay and Denver

• Assembly Operations– Draws goods out of Receiving and

Indianapolis Manufacturing, Assembles and sends to Shipping at rates matched to demand

• Shipping Operations– Accumulates finished goods – Ships when a full truck load accumulates.

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Indianapolis

Green Bay

Denver

Indianapolis Plant

Indianapolis Receiving AssemblyIndianapolis Shipping

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Indianapolis• Indianapolis Assembly draws goods out of

Receiving and moves them into Shipping at a constant rate matched with demand

• Two Related Questions– What is in a Truck Load shipment to a Store?– What is the Cycle Stock in Indianapolis Shipping?

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Challenge 5• Determine how many

– TVs– Computers

are in a full truck load shipment from Indianapolis to a store

• Give a brief explanation of how you calculated this

• Due in 10 minutes

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Challenge 6 • Assume we operate with full truck load

shipments using Indianapolis in this way• Adjust the financial statements to reflect

changes in transportation and inventory• Discuss the impacts, relate them to our

initial assessment. Explain the differences.

• What would you do next?• Due ???

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Review of EOQ

• Ignoring the Supplier’s Cycle Stock

• Considering the Supplier’s Cycle Stock

• If we’re the only customer

2ADhCQ

2AD PhC P DQ

2 2 2 12

AD P AD D AD ADhC P D hC D D hC hCQ

The 2 disappears

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What if?

• What if, say, Denver, is an arm’s length supplier – not part of our company?

• Should we consider his Cycle Stock or not?

• There’s a 40% difference. It matters.

2 Or Q ?AD ADhC hCQ

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Questions?

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Intro To GIS

• Useful Tool: GIS

• Geographic Information System– Links databases and maps– Useful for addressing questions like:

• Where should we …?

• How far away are…?

• How are …. distributed?

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GIS

• Spatial data– Location – Stored in a shape file, geodatabase, …

• Attribute data– Associated characteristics– Stored in DB

• GIS systems typically maintain these separately and “join” them for display or analysis

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Geographic Data

• Raster model– Area covered by a grid of square cells– Image data is a Raster model, cells = pixels

• Vector model – Features represented as

• Points or nodes

• Lines or arcs

• Areas or polygons

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Geographic Data

• Key Properties of Geo Data– Projection: The method of translating locations on

the 3-D earth to (X,Y) coordinates on a map or screen

– Scale: The ratio between distance on a map to the equivalent distance on earth

– Accuracy• Positional: Is it in the right place?

• Consistency: Is it correctly categorized?

• Completeness: Is it all there?

– Resolution: e.g., pixel size

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Layers

• Different geo data maintained in different data layers with common location information,

Raster Layer: Digital Ortho photo: combines the visual properties of a photograph with the positional accuracy of a map, in computer readable form.

Vector Layer:Lines defining the street network

Vector Layer:Polygons describing land parcels

Smart MapDifferent layers linked by common locations

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Software Tools

• ESRI – ArcView, ArcGIS and others

• MapInfo – MapInfo and others

• MS – MapPoint (Tutorial, etc)

• Many others

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Geocoding

• Geocoding: – Placing data with location information on the map

• LatLong

• Street Address

• Examples: – Geocode Stores by ZIP (OurCompany.xls)

– Geocode Census Data by ZIP (US Census and private vendors sell demographic data)

(3XXXXDemographicData.xls)

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Thematic Maps

• Thematic Maps: – Display the attributes of geographic data

• Examples: – Population

• Sized Circles

• Shaded Regions

– Median Household Income• Shaded Regions

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Geographic Queries

• SQL-type query based on geographic information: – Eg. Average household income within 20

miles of Store # 1

• MapPoint is quite poor at this

• Example: – Household income within 20 miles of Store

#1

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Distance Calculations

• As the crow flies– Using the Measure Distance Tool

• Over the road– Using the Route Tool

• Add Store #2 as Start• Add Store #1 as End• Get Directions• Over the road distance• Can adjust route options for speeds, hours of

driving, rest stops, …

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Territories

• Given fixed centers develop territories based on proximity to those centers

• MapPoint is very poor at this– Either you import them or you build them

by hand…– Other (more expensive) packages do this

automatically

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Programming Tools

• MapPoint includes software links (COM or Component Object Model) that allow you to integrate MapPoint into your applications (e.g. with VB, into Excel, Access, …)

• We won’t go that far.

• Interested: See About Programming with MapPoint