Global Shipping at Erken Apparel International

GROUP NO: 9, SECTION: B

Submitted by, Abhishek Kumar 9061 Mallikarjun Hosakoti 9084 Sandeep S Prasad 9102 Santhosh K S 9103 Sonali Basu 9110

Agenda
Overview of Global Shipping at Erken Apparel International Statement of the Problem: Decision Criteria and Solutions: Variable definition and Objective function Constraints Problem Formulation and solution

Erken Apparel International

Erken manufactures clothing items around the world Erken has contracted with a US retail clothing wholesale distributor for men s goatskin and lambskin leather jackets for the next Christmas season. The distributor has distribution centers in Indiana, North Carolina and Pennsylvania The jackets arrive at the distribution center unfinished, where the finishing touches are added and then supplied to retail chains, malls, boutiques etc. Erken has a two stage manufacturing process for the jackets
1. 2. the tanned leather is shipped from the tanning factories to the production plants in Europe and South America. The manufactured products then move from the ports in Europe / South America to the US ports and finally to the Distribution centres.

Statement of the Problem

Erken Apparel International wants to determine the least expensive shipments of material and Jackets that will meet the demand at the US distribution centers. In order to do so we have developed a transhipment model for Erken that will result in a minimum cost solution.

Decision Criteria and Solutions

The distributor has contracted with Erken to deliver the following number of leather jackets to its distribution centers:
Distribution Center Indiana Goatskin Jackets 1000 Lambskin Jackets 780 950 1150

North Carolina 1400 Pennsylvania 1600

Erken has tanning factories plants in

Europe Mende Forgia Saragosa

South America Feira El Tigre

They have clothing manufacturing plants in:

South Europe Limoges Naples Madrid America Sao Paulo Caracas

Following are the supplies of available leather from each tanning facility anning Goatskin Lambskin
Factory Mende Foggia Saragosa Feira El Tigre Supply (lb.) 4000 3700 6500 5100 3600 Supply (lb.) 4400 5300 4650 6850 5700

The processing capacity at each plant is

Production Plant Madrid Naples Limoges Sao Paulo Caracas Capacity (lb.) 7800 5700 8200 7600 6800

In the production of jackets, 37.5% of the goatskin leather and 50% of the lambskin leather is waste. After production, lambskin jackets weighs approximately 3 pounds, and a lambskin jacket weighs around 2.5 pounds

The following are the costs per pound, in U.S. dollars, for tanning the uncut leather, shipping it and producing the leather jackets at each plant.
PLANT ($/lb.) TANNING FACTORY Mende Foggia Saragosa Feira El Tigre Madri d 24 31 18 Naples 22 17 25 Limoges 16 22 28 Sao Paulo 21 19 23 16 14 Carcas 23 22 25 18 15

 Once the leather jackets are produced at the plants in Europe and South America, Erken transports them to ports in Lisbon, Marseilles and Caracas. The capacity at each port and transportation costs are as follows:
Port ($/lb.) Lisbo Plant Madrid Naples Limoges Sao Paulo Caracas Capacity (lb.) 8000 5500 n 0.75 3.45 2.25 Marseilles 1.05 1.35 0.6 1.15 0.2 9000 Caracas

The jackets are then moved to the US ports in New Orleans, Jacksonville and Savannah The capacity at each port and transportation costs are as follows:
U.S. Port ($/lb.) New Port Lisbon Marseilles Caracas capacity (lb.) 8000 5200 7500 Orleans 2.35 3.1 1.95 Jacksonvill Savanna e 1.9 2.4 2.15 h 1.8 2 2.4

The transportation costs ($/lb.) from the U.S. ports to the three distribution centers are as follows:

Distribution Center ($/lb.) Indian North US Port New Orleans Jacksonvill e Savannah 0.43 0.38 0.41 0.34 0.65 0.5 0.65 0.52 0.87 a Carolina Pennsylvania

LPP Formulation for the problem: Let, Xmm= Quantity moved from Mende to Madrid Xmn= Quantity moved from Mende to Naples Xml= Quantity moved from Mende to Limoges Xms= Quantity moved from Mende to Sao Paulo Xmc= Quantity moved from Mende to Caracas Xfm= Quantity moved from Foggia to Madrid Xfn= Quantity moved from Foggia to Naples Xfl= Quantity moved from Foggia to Limoges Xfs= Quantity moved from Foggia to Sao Paulo Xfc= Quantity moved from Foggia to Caracas Xsm= Quantity moved from Saragosa to Madrid Xsn= Quantity moved from Saragosa to Naples Xsl= Quantity moved from Saragosa to Limoges Xss= Quantity moved from Saragosa to Sao Paulo Xsc= Quantity moved from Saragosa to Caracas XFeS= Quantity moved from Feira to Sao Paulo XFeC= Quantity moved from Feira to Caracas Xes= Quantity moved from El Tigre to Sao Paulo Xec= Quantity moved from El Tigre to Caracas

Objective function for Goatskin Jackets

Minimize: Z = 24Xmm + 22Xmn + 16Xml + 21Xms + 23Xmc + 31Xfm + 17Xfn + 22Xfl + 19Xfs + 22Xfc + 18Xsm + 25Xsn + 28Xsl + 23Xss + 25Xsc + 16XFeS + 18XFeC + 14Xes + 15Xec

Constraints:
Xmm + Xmn + Xml + Xms + Xmc <= 4000 Xfm + Xfn + Xfl + Xfs + Xfc <= 3700 Xsm + Xsn + Xsl + Xss + Xsc <= 6500 XFeS + XFeC <= 5100 Xes + Xec <= 3600 Xmm + Xfm + Xsm <= 7800 Xmn + Xfn + Xsn <= 5700 Xml + Xfl + Xsl <= 8200 Xms + Xfs + Xss + XFeS + Xes <= 7600 Xmc + Xfc + Xsc + XFeC + Xec <= 6800 Xmm + Xmn + Xml + Xms + Xmc + Xfm + Xfn + Xfl + Xfs + Xfc + Xsm + Xsn + Xsl + Xss + Xsc + XFeS + XFeC + Xes + Xec = 19200

Solution (from QM tool):

Constraints Minimize Xmm Xmn Xml Xm Xm Xfm Xfn Xfl Xf Xf Xm Xn Xl X X X S X X X R S 1 2 3 4 5 6 7 8 9 10 11 Solution->

5 5 5 5 <= <= 7 <= 5 <= 5 <= <= 7 <= 57 <= <= 7 <= = tim l Z->

Objective function for Lambskin jackets

Minimize: 23Xmc + 18Xsm + 18XFeC + Z = 24Xmm + 22Xmn + 16Xml + 21Xms + 31Xfm + 17Xfn + 22Xfl + 19Xfs + 22Xfc + 25Xsn + 28Xsl + 23Xss + 25Xsc + 16XFeS + 14Xes + 15Xec

Constraints:
Max 24Xmm + 22Xmn + 16Xml + 21Xms + 23Xmc + 31Xfm + 17Xfn + 22Xfl + 19Xfs + 22Xfc + 18Xsm + 25Xsn + 28Xsl + 23Xss + 25Xsc + 16XFeS + 18XFeC + 14Xes + 15Xec Xmm + Xmn + Xml + Xms + Xmc <= 4400 Xfm + Xfn + Xfl + Xfs + Xfc <= 5300 Xsm + Xsn + Xsl + Xss + Xsc <= 4650 XFeS + XFeC <= 6850 Xes + Xec <= 5700 Xmm + Xfm + Xsm <= 5000 Xmn + Xfn + Xsn <= 2000 Xml + Xfl + Xsl <= 4200 Xms + Xfs + Xss + XFeS + Xes <= 0 Xmc + Xfc + Xsc + XFeC + Xec <= 5700 Xmm + Xmn + Xml + Xms + Xmc + Xfm + Xfn + Xfl + Xfs + Xfc + Xsm + Xsn + Xsl + Xss + Xsc + XFeS + XFeC + Xes + Xec = 10800

Solution (from QM tool):

Minimize mm mn ml m m fm fn fl f f m n l 1 2 3 4 Constraints 5 6 7 8 9 10 11 Solution->

tim l S

The total quantity produced from each of the production locations is (taken from both tables above)
Production Location Madrid Naples Limoges Sao Paulo Caracas Quantity Produced 7800 4150 8200 7600 2250

The total cost of transportation of tanned leather = 310400 (Goat skin) + 310300 (Lamb skin) = $ 620,700

With the QM tool, the following solution has been obtained for the optimal quantity of shipment and minimisation of cost.
From To Shipmen t (in lb.) Madrid Naples Lisbon Marseille s Limoges Marseille s Sao Paulo Caracas Dummy Dummy Caracas Caracas Lisbon Marseille s Dummy Caracas 300 0 0 7600 1100 3000 850 1.15 0.2 0 0 8740 220 0 0 4200 0.6 2520 5000 450 Cost per unit (in $/lb) 0.75 1.35 Shipment cost (in $) 3750 607.5

The total cost of shipment = 3750 + 607.5 + 2520 + 8740 + 220 = $ 15837.5

Using the transportation cost matrix from the case, the minimum cost of transhipment is calculated from QM as follows using the transportation model:
Shipme nt (in From To Jacksonvi Lisbon Lisbon Marseill es Savannah 4650 New Caracas Orleans Jacksonvi Caracas le Jacksonvi Dummy le 2350 0 0 700 2.13 1491 8000 1.95 15600 2 9300 le 2150 1.9 1.8 4085 5130 lb.) Cost per Shipment

unit (in $/lb) cost (in $)

Savannah 2850

The total cost of shipment = 4085 + 5130 + 9300 + 15600 + 1491 = $ 35606

using the transportation model, we calculate the cost of transportation using QM as given below:
Shipmen Shipmen Cost per unit From New Orleans Jacksonvile Savannah Dummy Dummy Indiana North Savannah Savannah Savannah Carolina Pennsylvania Dummy 2350 2750 620 0.34 0.5 0 799 1375 0 8000 2850 1780 0 0 0.38 0 0 676.4 To t (in lb.) (in $/lb) t cost (in $)

The total cost of transportation in this case = 676.4 + 799 + 1375 = $ 2850.4 The total cost of shipment right from the tanning factory to the Distribution Centers = $674,993.9