1 1 transportation & supply chain systems john h. vande vate spring, 2001
DESCRIPTION
2 2 Who am I? John H. Vande Vate Professor and EMIL Director Office: 433 Phone: (404) Office Hours: –Tuesday, Thursday or –By appointmentTRANSCRIPT
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Transportation & Supply Chain Systems
John H. Vande VateSpring, 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.
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Resolution
Weeks of• January 22• January 29No 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• ….
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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 $232,500Total 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• Inventory value is $50,000• Inventory carrying cost is $7,500
– Indianapolis ships 1.6 times per year• Inventory is 5,000/3.2 or about 1,500 items• Inventory value is $600,000• Inventory carrying cost is $90,000
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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 TransportWeek 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: FinanceWeek 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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Extending the Analysis
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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Simple Location ModelsWeek 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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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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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 $23,250,000
under earlier strategy. Explain!
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The Difference
Product Value Number per year
Number per shipment
Average Inventory
Average Value of Inventory
Inventory Carrying
CostTV 500.00$ 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$
Part Value Number per year
Number per shipment
Average Inventory
Average Value of 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 DistributionWeek 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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Other Issues
• Workload balancing: UPS case• Combinatorial Bidding: Home Depot Case• Yield/Demand Management• ….
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