milliken asia
DESCRIPTION
Milliken Asia. Presented by Christina Jones & Rajani Shenoy Arvind Ganesan, Siddharth Gudal, Tarun Keswani, Clarence Wardell. Agenda. Overview & Assumptions Case 1: Current Demand Case 2: Current Forecasted Demand Conclusions. Company Overview. - PowerPoint PPT PresentationTRANSCRIPT
Milliken Asia
Presented by Christina Jones & Rajani Shenoy
Arvind Ganesan, Siddharth Gudal, Tarun Keswani, Clarence Wardell
Agenda Overview & Assumptions Case 1: Current Demand Case 2: Current Forecasted Demand Conclusions
Company Overview One of the largest privately held textile
and chemical manufacturers in the world
Located in Spartanburg, SC Milliken Chemical, a division of
Milliken & Company, makes hundreds of products and colorants for paint, petroleum, plastics, textiles, fibers, and other manufacturing processes.
www.milliken.com
Project Overview Milliken’s chemical division is looking
to expand their warehousing in the Asia – Pacific Region
Where should warehouses be located in order to support customers in this region, with respect to: Reduction of Lead Time for product
delivery to the customer Reduction of Overall Costs to Milliken,
and consequently costs incurred by the customer
Project Overview Divide the problem into four independent
sub-problems, two will be discussed: Case 1: 2005 “Current Demand”
Demand currently served out of temporary warehouses in Asia-Pacific Region
Case 2: Forecasted “Current Demand” 2010 Forecast for demand currently served
out of temporary warehouses in Asia-Pacific Region
Process
•Set of Potential WHs•Demand at each Point•Distance btw/ WH & Point•Number of Warehouses to open (1, 2, 3, 4, or 5)•Assume unlimited capacity warehouses
•Given inputs find optimal warehouse locations that minimize total distance traveled by products
•Determine resulting lead times from warehouse to demand point, given optimal locations•Determine Inventory Requirements at each warehouse (Pipeline, Cycle, Safety)
•Where and how many warehouses should Milliken open?
Inputs Optimization Analysis Conclusions
Potential Warehouse Locations
Port Klang, Malaysia
Guangzhou, China Beijing, China Jakarta, Indonesia Melbourne,
Australia Manila, Philippines
Singapore Busan, S. Korea Bangkok, Thailand Kaohsiung,
Taiwan Shanghai, China Hong Kong
Pasir Gudang, Malaysia
Seoul, S. Korea Taipei, Taiwan Johor Darul, Malaysia
Assume port cities are potential warehouse locations
Note: No Potential Warehouses in India (due to restrictions) and Japan (due to high costs)
Map of Potential Warehouse Locs
How Many Warehouses? Assume that Milliken will:
Open no more than 5 Warehouses in Asia Reposition currently operated, but not-
owned, warehouses Assume that new warehouses will not
be constrained by capacity
Demand at Each City Demand in 14 Countries / Regions
Japan, Korea, Taiwan, Thailand, China, Malaysia, Australia, Hong Kong, India, Indonesia, Philippines, New Zealand, Vietnam, & Fiji
Data received for 2005, YTD 2006, and Forecasted 2010
Aggregate demand over city & product Case 1: 2005 Case 2: 2010
Distance Traveled For each Demand
Point and Potential Warehouse: Determine Latitude &
Longitude for each city
Calculate great arc distances between two points
Facility Location Problem Locate warehouses such that Total
Distance weighted by Demand Volume is minimized
Satisfy capacity and demand constraints
Do not exceed max number of warehouses allowed
Problem Formulation
1,0
0
warehousesofnumbertotalexceednotDo
capacitywarehouseexceednotDo
demandallSatisfy
j
ij
jj
jji
ij
ij
ij
x
y
Mx
jxCy
ipy
iji j
ij ydminSubject to:
where:
otherwise0
site warehousea designated is location if1
allowed s warehouseofnumber total theis
warehouseofcapacity theis
point at demandyearly estimated theis
warehousefrom served is that point at demand theis
warehouseand point demandbetween distance theis
jx
M
jC
ip
jiy
jid
j
j
i
ij
ij
Minimize total distance
Safety Stock Sensitivity Analysis: Service Levels
80%, 90% , 99% Average Daily Demand – shifted from
demand points to assigned Warehouses Standard Deviation in Daily Demand Average Lead Time from Spartanburg
to opened Warehouse Locations Standard Deviation in Lead Time (10%
Variance assumed)
Case 4
Cycle Stock and Pipeline Inventory Fixed Shipment Cost of $3,000 Net Weighted Unit Inventory Cost of
$2.194 Holding Cost – 20% of Net Weighted
Unit Inventory Cost Average coverage of 210 miles per day
during transit for calculation of transit times to warehouse locations
Agenda Overview Case 1: 2005 Current Demand Case 2: 2010 Forecasted Demand Conclusions
Case 1: Current Demand Profile
Korea comprises the most demand with 260,000 units/year Vietnam is the least with 90 units/year
Demand by Country
0
50000
100000
150000
200000
250000
300000
Korea
Thaila
nd
Taiwan
Mala
ysia
Hong K
ong
ChinaIn
dia
Austra
lia
Indo
nesia
Phillip
ines
New Zea
land
Vietnam
Country
An
nu
al D
eman
d
Case 1
Case 1: Map of Demand Points
Case 1
Case 1: Optimal Warehouse Location
Loc1 Loc2 Loc3 Loc4 Loc5Avg Lead
Time (Days)Max Lead Time (Days)
1 Warehouse Taipei - - - - 6.5 17.4 (to New Zealand)
2 Warehouse Bangkok Seoul - - - 4.7 18.2 (to New Zealand)
3 Warehouse Bangkok Seoul Melbourne - - 3.5 7 (to India)
4 Warehouse Bangkok Seoul Melbourne Taipei - 3.2 7 (to India)
5 Warehouse Bangkok Seoul Melbourne Taipei Johor Darul 2.8 7 (to India)
Case 1
Results for One Warehouse
Case 1
Demand & Lead Time for Top 10 Cities With 1 Warehouse
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Bangkok Taipei Johor Darul Hong Kong Victoria Chungchongnam-Do
Shanghai Kyongi-Do Mumbai
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with One Warehouse3%
42%
26%
29%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Two Warehouses
Case 1
Demand & Lead Time for Top 10 Cities With 2 Warehouse
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Bangkok Taipei Johor Darul Hong Kong Victoria Chungchongnam-Do
Shanghai Kyongi-Do Mumbai
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Two Warehouse
23%
45%
23%
10%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Three Warehouses
Case 1
Demand & Lead Time for Top 10 Cities With 3 Warehouse
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Bangkok Taipei Johor Darul Hong Kong Victoria Chungchongnam-Do
Shanghai Kyongi-Do Mumbai
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Three Warehouse
26%
45%
29%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Four Warehouses
Case 1
Demand & Lead Time for Top 10 Cities With 4 Warehouse
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Bangkok Taipei Johor Darul Hong Kong Victoria Chungchongnam-Do
Shanghai Kyongi-Do Mumbai
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Four Warehouse
29%
42%
29%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Five Warehouses
Case 1
Demand & Lead Time for Top 10 Cities With 5 Warehouse
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Bangkok Taipei Johor Darul Hong Kong Victoria Chungchongnam-Do
Shanghai Kyongi-Do Mumbai
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Five Warehouse
35%
42%
23%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Pipeline Inventory
Case 1
Pipeline Inventory (Current Demand)
# WH Total Pipeline Inventory Carrying Costs
1 84,159 $ 27,704
2 81,115 $ 26,702
3 80,176 $ 26,393
4 79,584 $ 26,198
5 79,936 $ 26,314
Annual Cycle Stock
Case 1
Cycle Stock (Current Demand)
Location Cycle Stock Reorder Period
1 Taipei 50,124 49
2 Bangkok 33,771 73
Seoul 37,039 67
3 Bangkok 31,940 78
Melbourne 10,967 27
Seoul 37,039 67
4 Bangkok 29,036 85
Melbourne 10,967 227
Seoul 30,375 82
Taipei 25,148 99
5 Bangkok 22,700 109
Melbourne 10,967 227
Seoul 30,275 82
Taipei 25,148 99
Johor Darul 18,105 137
Cycle Stock Current Demand
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1 2 3 4 5
Number of Warehouses
Cyc
le S
tock
Dis
trib
uti
on
am
on
g W
areh
ou
ses
Johor Darul
Melbourne
Seoul
Bangkok
Taipei
Safety Stock
Case 1
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Sa
fety
Sto
ck
Le
ve
l (u
nit
s)
1 2 3 4 5
Number of Warehouses opened
Safety Stock Level Current Demand Case - 90% Fill Rate
Johor Darul
Melbourne
Seoul
Bangkok
Taipei
Taipei Bangkok Seoul Melbourne Johor Darul Total
1 Warehouse 33,978 0 0 0 0 33,978
2 Warehouse 0 22,019 25,094 0 0 47,113
3 Warehouse 0 19,435 25,094 8,156 0 52,685
4 Warehouse 3,469 19,395 25,489 8,156 0 56,510
5 Warehouse 3,469 19,341 25,018 8,156 18,139 74,123
Case 1
Maps
3 Warehouses Bangkok Seoul Melbourne
Case 1
Maps
5 Warehouses Bangkok Seoul Melbourne Taipei Johor Darul
Recommendation In order to achieve 1 week lead times, must
open at least 3 warehouses in Bangkok, Seoul, and Melbourne
Need cost data to formulate final recommendation
Case 1
Agenda Overview Case 1: 2005 Current Demand Case 2: 2010 Forecasted Demand Conclusions
Case 2: Forecasted Demand Profile
Korea comprises the most demand with 297,000 units/year Vietnam is the least with 135 units/year
Demand by Country
0
50,000
100,000
150,000
200,000
250,000
300,000
Country
An
nu
al
Dem
an
d
Case 2
Case 2: Map of Demand Points
Case 2
Case 2: Optimal Warehouse Location
Loc1 Loc2 Loc3 Loc4 Loc5Avg Lead Time
(days)Max Lead Time
(days)
1 Warehouse Ningbo - - - - 6.7 18.2 (to New Zealand)
2 Warehouse Bangkok Shanghai - - - 4.7 18.2 (to New Zealand)
3 Warehouse Bangkok Shanghai Melbourne - - 3.5 7 (to India)
4 Warehouse Bangkok Seoul Taipei Melbourne - 3.3 7 (to India)
5 Warehouse Bangkok Seoul Taipei Melbourne Johor Darul 2.9 7 (to India)
Case 2
Results for One Warehouse
Case 2
Demand & Lead Time for Top 10 Cities With 1 Warehouse
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Taipei Shanghai Bangkok Mumbai Johor Darul Hong Kong Victoria Chungchongnam-Do
Beijing
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with One Warehouse9%
30%
24%
36%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Two Warehouses
Case 2
Demand & Lead Time for Top 10 Cities With 2 Warehouses
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Taipei Shanghai Bangkok Mumbai Johor Darul Hong Kong Victoria Chungchongnam-Do
Beijing
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Two Warehouses12%
55%
24%
9%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Three Warehouses
Case 2
Demand & Lead Time for Top 10 Cities With 3 Warehouses
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Taipei Shanghai Bangkok Mumbai Johor Darul Hong Kong Victoria Chungchongnam-Do
Beijing
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Three Warehouses
15%
55%
30%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Four Warehouses
Case 2
Demand & Lead Time for Top 10 Cities With 4 Warehouses
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Taipei Shanghai Bangkok Mumbai Johor Darul Hong Kong Victoria Chungchongnam-Do
Beijing
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Four Warehouses
27%
42%
30%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Results for Five Warehouses
Case 2
Demand & Lead Time for Top 10 Cities With 5 Warehouses
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Seoul Taipei Shanghai Bangkok Mumbai Johor Darul Hong Kong Victoria Chungchongnam-Do
Beijing
Top 10 Demand Cities
Dem
and
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Lea
d T
ime
(day
s)
Demand
Distance Lead Time with Five Warehouses
33%
45%
21%
0 - 2 Days
2 - 5 Days
5 - 8 Days
8+Days
Pipeline Inventory
Case 2
Pipeline Inventory (Forecasted Current Demand)
# WH Total Pipeline Inventory Carrying Costs
1 158,342 $ 52,125
2 161,776 $ 53,255
3 160,474 $ 52,826
4 158,812 $ 52,279
5 159,345 $ 52,455
Annual Cycle Stock
Case 2
Cycle Stock (Current All Demand)
Location Cycle Stock Reorder Period
1 Ningbo,China 70,016 35
2 Bangkok 43,799 56
Shanghai 54,624 45
3 Bangkok 42,044 59
Shanghai 54,536 45
Melbourne 12,660 197
4 Bangkok 42,044 59
Seoul 34,776 71
Taipei 42,010 59
Melbourne 12,660 197
5 Bangkok 35,600 70
Seoul 34,776 71
Taipei 42,010 59
Melbourne 12,660 197
Johor Darul 22,369 111
Cycle Stock Forecasted Current Demand
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1 2 3 4 5
Number of Warehouses
Cy
cle
Sto
ck
Dis
trib
uti
on
am
on
g W
are
ho
us
es
Johor Darul
Seoul
Taipei
Melbourne
Bangkok
Shanghai
Ningbo
Safety Stock
Case 2
Ningbo Bangkok Shanghai Melbourne Taipei Johor Darul Seoul Total
1 Warehouse 34,024 0 0 0 0 0 0 34,024
2 Warehouse 0 22,272 20,265 0 0 0 0 42,537
3 Warehouse 0 19,686 19,506 8,160 0 0 0 47,351
4 Warehouse 0 19,864 0 8,251 8,678 0 25,800 62,593
5 Warehouse 0 19,565 0 8,244 5,629 18,187 26,149 77,775
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Sa
fety
Sto
ck
Le
ve
l (u
nit
s)
1 2 3 4 5
Number of Warehouses opened
Safety Stock Level Current Forecasted Demand Case - 90% Fill Rate
Seoul
Johor Darul
Taipei
Melbourne
Shanghai
Bangkok
Ningbo
Maps
3 Warehouses Bangkok Shanghai Melbourne
Maps
5 Warehouses Bangkok Seoul Taipei Melbourne Johor Darul
Recommendation In order to achieve 1 week lead times,
must open at least 3 warehouses in Bangkok, Shanghai, and Melbourne
Need cost data to formulate final recommendation
Case 2
Agenda Overview & Assumptions Case 1: Current Demand Case 2: Current Forecasted Demand Conclusions
Conclusions Must explore option to open warehouse
in India in order to minimize lead times Consistent warehouse locations in
Bangkok, Seoul, Taipei, Melbourne & Johor Darul from 2005 & 2010
Cost data pending from client to make final recommendations
Questions?