intra-and inter-facility logistics · intra-and inter-facility logistics jessica l. heierstamm,...
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Intra- andInter-facilityLogistics
JessicaL.Heier Stamm,Ph.D.AssistantProfessor
CollegeofEngineeringKeystoneResearchFacultyScholarIndustrialandManufacturingSystemsEngineering
LOGISTICSDECISIONS
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WhatisLogistics?• CouncilofSupplyChainManagementProfessionals(CSCMP)definition– “Logisticsmanagementisthatpartofsupplychainmanagementthatplans,implements,andcontrolstheefficient,effectiveforwardandreverseflowandstorageofgoods,servicesandrelatedinformationbetweenthepointoforiginandthepointofconsumptioninordertomeetcustomers'requirements.”
• KeyIdeas– Forwardandreverseflow– Efficientandeffective– Plans,implements,andcontrols– Partofsupplychainmanagement(SCM)
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…forwardandreverseflow…
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Inbound Logistics Materials Management Physical Distribution
goods, services, information
Business Logistics
…efficient,effective…• Effectiveness:deliveringonwhatiscommitted– Price– Quality– Responsetime– Flexibility
• Efficiency:usingresourcesinthe“best”way
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Achieving desired objective while
minimizing costs
…plans,implements,andcontrols…
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-Corporate Objectives-Number of Facilities-Facility Location & Capacity-Resource Requirements
-Material Flow-Resource Allocation-Capacity Allocation-Inventory Policies
-Scheduling-Routing-Warehousing-Tracking/Tracing
Strategic
Tactical
Operational
Long Term
Medium Term
Near Term
SupplyChainNetworkImportance• Cost– 2016logisticscostsintheU.S.:7.5%ofGDP,or$1.39trillion
CSCMP’s28th AnnualStateofLogistics Report,CouncilofSupplyChainManagementProfessionals,preparedbyA.T.Kearney
• EnvironmentalImpact– Packaging– Fuelemissions
• CompetitiveAdvantage– Speed– Flexibility
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KeyDecisions• Intra-facilitylogistics(warehousing)–Warehousedesign–Whichskus where– Equipment,technology
• Inter-facilitylogistics(transportation)–Modechoice– Comprehensivenetworkplanning– Routing– Fleetanddriverassignment
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DECISIONSUPPORTTOOLS:MODECHOICE
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ModeChoiceProblem• Giventhecostprofilesofdifferentmodesforaparticularshipment,whichoptionismosteconomical?– Normalizeallcoststocommonunitandtime– Comparetotalcostofeachmode
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LogisticsSystemCostClassification• Usefultoclassifycostsunderessentialtypes,e.g.,– Transportationcosts:movementviavehicle;loading/unloading
– Handlingcosts:packing/unpackingboxes,bags,pallets;intra-facilitystoringandpickingmovements
– Holdingcosts:opportunitycostofcapitalfortimewaiting
– Facilityrentcosts:economic“rent”forfacilityspace,storageinfrastructure,andmaintenance
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Example• 1plant,1product• Produce10units/day• Keepnosafetystock• Spacecost=$20/unit*year• Itemvalue=$500/unit
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• 1warehouse• Avg demand10units/day• Keep100unitssafetystock• Spacecost=$25/unit*year• Itemvalue=$512/unit
• Railcarcapacity=400units• Cost=$1200/carload• Transittime=20days
• Truckcapacity=100units• Cost=$700/truckload• Transittime=3days
Inventoryholdingcostrate=25%ofvalueperyear
Example• 1plant,1product• Produce10units/day• Keepnosafetystock• Spacecost=$20/unit*year• Itemvalue=$500/unit
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CostsatthePlant• Inventoryspacecost =(#unitspershipment) x(spacecostperunit*year)
=qunitsx$20/unit*year• Inventoryholdingcost =(avg inventoryheld)x(valueperunit) x(inventoryholdingcostrate)
=q/2units x$500/unit x25%peryear
Example• 1plant,1product• Produce10units/day• Keepnosafetystock• Spacecost=$20/unit*year• Itemvalue=$500/unit
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CostsatthePlant• Inventoryspacecost =(#unitspershipment) x(spacecostperunit*year)
=qunitsx$20/unit*year• Inventoryholdingcost =(avg inventoryheld)x(valueperunit) x(inventoryholdingcostrate)
=q/2units x$500/unit x25%peryear
• 1warehouse• Avg demand10units/day• Keep100unitssafetystock• Spacecost=$25/unit*year• Itemvalue=$512/unit
CostsattheWarehouse• Inventoryspacecost =(#unitspershipment+safetystock)x(spacecostperunit*year)
=(q+100units) x$25/unit*year• Inventoryholdingcost =(avg inventoryheld)x(valueperunit) x(inventoryholdingcostrate)
=(q/2+100units)x$512/unit x25%peryear
Example• 1plant,1product• Produce10units/day• Keepnosafetystock• Spacecost=$20/unit*year• Itemvalue=$500/unit
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• 1warehouse• Avg demand10units/day• Keep100unitssafetystock• Spacecost=$25/unit*year• Itemvalue=$512/unit
• Railcarcapacity=400units• Cost=$1200/carload• Transittime=20days
• Truckcapacity=100units• Cost=$700/truckload• Transittime=3days
CostsinTransit• Pipelineinventorycost=(#unitsshipped) x(timeintransit) x(valueperunit)x(inventoryholdingcostrate)=3650units x(timeintransit) x$506/unit x25%peryear
• Transportationcost=(costpershipment)x(#shipmentsperyear)
ExampleCOSTSUMMARYUSINGFULLCONTAINERS
Mode AtPlant AtWarehouse PipelineInventory Transport TotalCost
Rail $33,000 $50,900 $25,300 $10,950 $120,150
Truck $8,250 $24,200 $3,795 $25,550 $61,795
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• Whatarethekeyfactors?– Largecontainersize,ifused,increasesinventoryspacecosts– Longtransittimeincreasesinventoryholdingcosts
• What’smissing?– Stochastic,dynamiccomponents– Othercosts,e.g.,emissions
DECISIONSUPPORTTOOLS:NETWORKPLANNING
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ShipperProblem• Givenademandprofile,supplysources,anddistributionnetwork,whatflowthroughthenetworkoptimizestotalcost?– Chooseappropriateplanninghorizon– Capturerelevantcosts
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PhysicalNetworkRepresentation
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Production/Procurement DistributionCenter RetailPOS
Time-expandedNetworkRepresentation
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Time
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Time-expandedNetworkRepresentation
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Time
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NetworkFlowOptimization
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NetworkRepresentation
Arcsinthenetwork
Costsoneacharc
Capacitiesoneacharc
Nodesinthenetwork
OptimizationModelDecisionvariables(howmuchflow?)Objectivefunction
contribution
Flowcapacityconstraints
Flowconservationconstraints(out=in)
NetworkFlowOptimization• Easycase:“imaginary”modewithlinearcosts–Minimumcostnetworkflowmodel– Easy(computationally)tosolve,evenforlarge-scalenetworks
– Foundationofallnetworkoptimizationapproaches
• Generalizations–Multi-commodityflow– Economiesofscale
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Resources• Warehousemanagementprinciplesandtools
– https://www.warehouse-science.com/• MHI(formerlyMaterialHandlingInstitute),materialhandling,logistics,andsupply
chainindustrygroup– http://www.mhi.org/
• CouncilofSupplyChainManagementProfessionals– http://cscmp.org/
• InstituteofIndustrialandSystemsEngineers– Mainsite:http://www.iise.org/Home/– LogisticsandSupplyChainDivision:http://www.iise.org/details.aspx?id=33757
• InstituteforOperationsResearchandtheManagementSciences– Mainsite:https://www.informs.org/– TransportationScienceandLogisticsSociety:http://connect.informs.org/tsl/home– RailwayApplicationsSection:http://connect.informs.org/railway-applications/home– SectiononLocationAnalysis:http://connect.informs.org/sola/home
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