milk runs and variability
DESCRIPTION
Milk Runs and Variability. John H. Vande Vate Fall, 2002. What are Milkruns?. Daily routes Visit several suppliers Allow frequent visits by sharing vehicle capacity Reduce inventory without increasing transport Same route every day. Milkruns & Consolidation. Building Milkruns. - PowerPoint PPT PresentationTRANSCRIPT
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Milk Runsand
Variability
John H. Vande VateFall, 2002
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What are Milkruns?
• Daily routes • Visit several suppliers• Allow frequent visits by sharing vehicle
capacity• Reduce inventory without increasing
transport• Same route every day
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Milkruns & Consolidation
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Building Milkruns
• Filter out any full truckload• Decide the number of routes (may take
several passes)• Using our Location/Allocation heuristic
– Treat the facilities as route “anchors”– The customers assigned to the “anchor” are
on the same milk run– Treat the sum of distances to the anchors as
a surrogate for the route length
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Example
Assembly Plant
Route Anchor
Route Anchor
Route AnchorRoute Anchor
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The Impact of Variability
Plan for variability by allowing routes to use only, say, 80% of vehicle capacity on average
When daily volume exceeds vehicle capacity, pay premium freight to expedite excess
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Total Cost
Build routes that minimize Total Cost• Cost of planned transportation• Cost of unplanned (expedited)
transportation
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Approximation• Daily Volume from supplier is normally
distributed• Mean • Variance 2 • Covariances ij
• Mean on the route r = sum of Means
• Variance on the route r
2 = sum of variances + 2*sum of covariances
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Probability of Expediting
• Depends on – how full we plan to load the vehicle– What the variance of demand on the route is
• Probability we have to expedite– 1 - N((c-r)/r) (Cumulative Std Normal)
• Doesn’t address the possibility of requiring more than one truck!
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Distribution
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0 2 4 6 8 10 12
Expediting
• If we plan to fill the truck, 50% chance we expedite, regardless of the variance
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Distribution
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0 2 4 6 8 10 12
Expediting
• The less we plan to fill the truck the less likely we are to expedite
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Nomal Distributions with Different Variances
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
-10 -8 -6 -4 -2 0 2 4 6 8 10
Expediting
• The greater the variance the less we should plan to fill the truck
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Tuesday• Aaron Marshall• Distribution Engineer• Peach State Integrated Technologies• Translating these kind of location models into
practice – case studies, challenges.