Moving the NatioN’s Medicine:

Redesigning the shippiNg Network of UPs sUPPly chain solUtionsgroup 9: Michelle Murphy, Kait Parks & scott WaltonFacility Advisor: dr. Jh Bookbinderindustry Contact: sean cowie & natasza lynch

Supply ChAin SolutionS (SCS) is a 3Rd PaRty logistics provider for healthcaRe

coMPanies arouNd the world.

healthcare compaNies hire SCS to stoRe aNd tRansPoRt products for them to reach the eNd coNsigNee iN a cost effective maNor.

totAl SAvingS fouNd equal 9% in totAl operatioNal costs ($7.9 millioN)

aN exaMPle of a product traNsported is a vACCine that is delivered to a doctor’s office withiN CAnAdA.

curreNtly SCS has 3 WaRehoUse sites; each warehouse is indePendent aNd carries UniqUe PRodUcts for a giveN customer.

the curreNt network is Not Managed as a Whole, aNd No product is stoRed in MoRe then one WaRehoUse.

the riSk of this PRoPosed solUtion adds a layer of complexity to the Managing of these goods aNd the ReqUiRed coMMUnications betweeN all iNvolved parties.

our projeCt is evaluatiNg the

Benefit of the Network beiNg maNaged as a Whole aNd products beiNg stoRed iN MUltiPle locations.

their slogaN is “it’S A pAtient, not A pACkAge” aNd they are owNed by UPs.

if the vacciNes are not trAnSported properly it could JeoPaRdize someoNe’s life.

What is the probleM UPs is facing?

hoW did We Solve the probleM?

iN our propoSed Solution, a ceNtral warehouse would receive all the products

from the maNufacturers theN diStribute thAt product to oNe or more of the 7 warehouses if it resulted iN saviNgs by CheAper trAnSportAtion

determined what percentage of products should be stored in each warehouse in their network (optimal allocation)

determined optimal allocation of products through a linear program minimizing total supply chain cost

analyzed “what-if” scenarios and verified results through a discrete event simulation. results monitored how inventory levels fluctuated based on product allocation recommendations.

determined business rules to determine the product break in the future (“the tipping point”)

warehouses will each service a geographic “zone”

when a product reaches a certain level of demand in that zone, a portion of the product should be allocated to the warehouse that services that area.

additional findings: potential savings by adding warehouses in vancouver and quebec (additional 2 million dollars in savings)

PeRcentage of ShipMentS iN CAnAdA

A

30%

8%

1%

4%1%

1%

1%

12%11%

6%

15%9%

1%

0  

0.5  

1  

1.5  

2  

2.5  

3  

0  5  

10  15  20  25  30  35  40  

M1   M2   M3   M4   M5  

$  (in

 millions)  

Customer  ID    (Name  not  disclosed  for  confiden:ality  reasons)  

PROJECTED TOP 5 CUSTOMER SAVINGS

Current  Opera:onal  Spending  Proposed  Opera:onal  Spending  Savings  

proJected toP 5 customer saviNgs

customer id (Name not disclosed for confidentiality reasons)70%

60%

50%

40%

30%

20%

10%

0%regulatory compliance

top sUPPly chain conceRns iN caN/us 2013

managing supply chain costs

product damage or spoilage

changing distribution

regulatory compliaNce 66%

maNagiNg supply chaiN costs 60%

product damage or spoilage 38%

chaNgiNg distributioN 17%

avg cost per shipmeNt per product class

$0  $200  $400  $600  $800  

$1,000  $1,200  $1,400  $1,600  

P2   P4   P3   P1   P8   P6   P7   P5  Product  Classifica/on  

AVG COST PER SHIPMENT PER PRODUCT CLASS

Current  Opera7on  

Proposed  Opera7on  

Average  Savings/Shipment  

Product classification

p1 2-8c - courrier

p2 2-8c - ltl

p3 ambieNt - courier

p4 ambieNt - ltl

p5 dry - courier

p6 dry - ltl

p7 dry/heat - courier

p8 dry/heat - ltl