logistics and supply chain management[1]

8/7/2019 Logistics and Supply Chain Management[1]

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Logistics andSupply Chain

Management


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Transportation and storage of inventory

Finished

Goods

Finished

Goods

Finished

Goods

Finished

Goods

Raw

Material

Raw

Material

Raw

Material

Steel making

Limestone

mining

Coal mining

Iron ore mining

Raw

Material

Raw

Material

Chassis building

Auto body

stamping

Finished

Goods

Finished

Goods

Raw

Material

Auto assembly

Finished

Goods

Raw

Material

Dealers

Customers


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Supply Chain Management

A philosophy that describes how organizations

should manage their supply chains to achieve

strategic advantage The objective is to synchronize requirements of

the final customer with the flow of materials

and information along the supply chain. The

goal is to eliminate variability and reach a

balance between high customer service and low

cost


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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

Manufacturing process variability machine reliability and equipment failure

changeovers / setups / part expediting

design and quality problems

Customer network variability

cancellations and irregular orders

equipment failure

scheduling

Carrying safetyinventories are the

most common

approach to dealing

with variability


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Information Technology in SCM

Seen as the key to variability reduction

Links the success of independent suppliers,

manufacturers, and customers

Risks and rewards are shared among supply chainpartners

Many technologies are accepted among supply

chain managers

Electronic data interchange (EDI) Artificial intelligence / Expert systems

Bar code and radio frequency systems

Internet applications


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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...


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Two major problems in supply chain management

1. How to synchronize to eliminate expensive decoupling inventory

2. How to reduce transportation costs.

A study by A.T. Kearney & Company provides the average distribution

cost (as a percentage of sales) across 270 companies.

Functional Activity % of sales

Administration 2.4

Transportation :

Inbound 2.1

Outbound 4.3 6.4

Receiving and shipping 1.7

Packaging 2.6

Warehousing 3.7

Inventory carrying cost:Interest 2.2

Taxes, insurance, obsolescence 1.6 3.8

Order processing 1.2

Total 21.8%


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Supply ai Sy c ro izatio a i ear rogrammi g

T e Tra sportatio ro lem: a general ormulation o a class o problemsrelated to the supp ly and distribution o goods and services across a net ork.

Generally, the transportation problem is concerned ith the most cost e ective

(or cost minimizing ) ay to supply several demand locations (nodes) rom more

than one supply location (nodes)

Example

Special tra sportatio co cer s:

Route (or arcs) that have a maximum capacity

Routes that cannot be traversed


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The Transshipment Problem: a more generalized version of the

transportat ion problem in which intermediate, t ransship ment , nodes are added

to the network. Transshipment nodes are often used to mod el 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

Special transshipment concerns:


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Quaker Oats has begun manufacturing, in two of its plants, a new granola productmade of three parts oats, two parts raisins and one part almonds. Two oat vendorsand two almond vendors have been identified, but only one reliable vendor of raisinscould be found. The supply of raw materials and the shipped costs are provided

Vendor Supply intons

Cost to Plant 1 Cost to Plant 2

Oat 1 25,000 $100 $110

Oat 2 30,000 $105 $95

Raisin 50,000 $550 $525

Almond 1 9,000 $1,050 $1,150

Almond 2 10,000 $1,200 $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 Quaker WalMart Plant Capacity

Plant 1 $100 $65 $90 9,500

Plant 2 $95 $70 $90 8,500

Demand 2,500 5,000 10,000

Quaker Oats has begun manufacturing, in two of its plants, a new granola productmade of three parts oats, two parts raisins and one part almonds. Two oat vendors


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Bullwhip Effect

Time

Retailers Orders

Time

Wholesalers Orders

Time

Manufacturers Orders

The magnification of variability in orders in the supply-chain.

A lot of retailers

each with little

variability in their

orders.

can lead to

greater variability for

a fewer number of

wholesalers, and

can lead to even

greater variability

for a single

manufacturer.


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M1

M2

S2

C1

C2

M1

M2

Ch1

Ch2

D1

D2

Ca1

Ca2

Network


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Formulation

M inimize . M C1+ . M C2+ . MM 1+ . M M 2+ . C

2+ . M 2+ . 16C1CH1+ . 21C1D1+ . 1C1CA

1+ . 16C2CH2+ . 21C2D2+ . 1C2CA2+ . 24M

1CH1+ . M1D1+ . 22M1CA1+ . 24M2CH2+ .

M2D2+ . 22M2CA2

Subject To: C1 MC1+M C2+M M 1+MM 2


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Example Use the following symmetric distance matrix to design a

tour that minimizes total distance traveled.

From To Node (in miles)

Node 1 2 3 4 5 6

1 - 5.4 2.8 10.5 8.2 4.1

2 5.4 - 5.0 9.5 5.0 8.53 2.8 5.0 - 7.8 6.0 3.6

4 10.5 9.5 7.8 - 5.0 9.5

5 8.2 5.0 6.0 5.0 - 9.2

6 4.1 8.5 3.6 9.5 9.2 -

Example Use the following symmetric distance matrix to design a

tour that minimizes total distance traveled.


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T eClarkand rig t avingsHe ristic

1. Selectany n easthe e tn e n e 1

2. Com tethesavin s, Sij, forlin in nodesiandj:S ij = c1i + c1j-cij foriandjnodes 2,3,...,n

herecij = thecostoftravelin fromnodeitonodej

3. an thesavin s fromlargesttosmallest

4. Startatthetopofthelist, formlargersubtoursby

lin ingappropriatenodesiandj. Stop hencomplete

touris formed.

ample

1

4

2

3

10 miles

logistics and supply chain management[1]

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