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Decision Modelling

Transshipment problem for Hindustan Unilever
Limited factories to warehouses

Submitted by: Group 10
Dheeraj Panare


Alok Singh


Kalkundri Kunal Avinash


Shefali Kushwaha


Sukhmeet Singh Sikka


Sumit Chaurasia


As it is well known that there are no free dinners. The mode of transport can be either Road. This makes delivery easy and task of sales outlet simpler. The economies of scale can be realized by consolidating the shipments at various warehouses and then sending them through a required mode of transport. the time taken to deliver the shipment may vary depending again on the mode of the transportation  For this type of problem. where all the focus is on selecting that location which will have maximum coverage for the wide range of its products  It may be possible for the firm to achieve cost savings. these hubs come at a great cost and these also pose a problem of routing the transport Modelling Methodology  The type of model to be discussed is the Transshipment Model. The freight charges for the different modes of transportation can be different and may depend on the contingency provisions of time. The transshipment nodes are the nodes where the shipments both arrive as well as leave the respective node  A prime example would be a warehouse example where the shipments arrive from factories and then leave for retail outlets. So FMCG companies to boost their sales and distribution need a transportation hub where crates are opened and are rearranged with cases from other crates. Also. An Indian version of the example is the selection of a location for a warehouse of Hindustan Unilever Limited. When we have excess capacity to carry along a route or to store. The transshipment problem is a logical extension of the Transportation problem. Cost savings may be ensured by economies of scale. the market demand can Decision Modelling Group 10 . the constraints could be either capacity related or demand related.Shipment hubs  The products from the company are delivered in crates which contain a significant number of product cases.Title: Transshipment problem for Hindustan Unilever Limited factories to warehouses Introduction  Transportation problem deals with distribution of goods from several points of supply to a number of points of demand they arise when a cost-effective pattern is needed to ship items from origins that have limited supply to destinations that have demand for the goods  Resources to be optimally allocated usually involve given capacity of goods at each source and a given requirement for the goods at each destination  Most common objective of transportation problem is to schedule shipments from sources to destinations so that total production and transportation costs are minimized Why do we need Trans. Railways or Air. it might not be possible even for the best of the retailers to sell all that product within a feasible time frame.

be a major factor. investment decisions would need to be taken to increase the capacity of the routes or warehouses storage  If the capacity is kept low at a stage when the demand is bound to rise. the imperative will be laid to send the maximum transshipment with the minimum cost. This type of decision making will lead to a lower cost on a whole taking into factor the market and demand functions. if the demand is low. If the demand is higher than the capacity. But.  Hence. the major decision to be taken here is the selection of the mode of the travel depending on cost terms or the route taken depending on the time taken. then it will hamper the sales of the company as a whole and will lead it to underutilization of the warehouse. If the demand is low. Also. Decision Modelling Group 10 . If the country puts up a restriction on import. the firm is bound to lose through opportunity cost. a factor that could help us analyze the demand is the regulatory conditions in the country where the warehouse is located. the excess capacity can lead to fixed costs of inventory.

(Total flow out) = (0) . F (for Firozabad) j = A (for Ahmedabad).XFB .XFC = -300 (Dehradun capacity) and (Ellore capacity) (Firozabad capacity) Multiplying each constraint by -1 and rewrite as: XDA + XDB + XDC = 100 (Dehradun capacity) XEA + XEB + XEC = 300 (Ellore capacity) XFA + XFB + XFC = 300 (Firozabad capacity) Net flow at Ahmedabad = (Total flow in) .(Total flow out) Decision Modelling Group 10 .Analysis Factories (sources) Warehouses Capacities Dehradun 100 Ellore 300 Firozabad 300 Warehouses Ahmedabad Bangalore Cochin From Dehradun Ellore Firozabad Ahmedabad 5 3 9 Bangalore 4 2 7 Requirement 300 200 200 Cochin 3 1 5 Minimizing Total Shipping costs = 5 XDA + 4 XDB + 3 XDC + 3 XEA + 2 XEB + 1 XEC + 9 XFA + 7 XFB + 5 XFC Where: Xij = Number of desks shipped from factory i to warehouse j i = D (for Dehradun).XDC = -100 -XEA .XDB . B (for Bangalore) C (for Cochin) Net flow at Dehradun = (Total flow in) .XEC = -300 -XFA .XEB . E (for Ellore).(XDA + XDB + XDC) Net flow at Dehradun = -XDA .

= (XDA + XEA + XFA) .(0) Net flow at Ahmedabad = XDA + XEA + XFA = 300 (Ahmedabad demand) and XDB + XEB + XFB = 200 (Bangalore demand) XDC + XEC + XFC = 200 (Cochin demand) Layout From: To: Ahmedabad Bangalore Cochin Total Flow Out Dehradun 100 0 0 100 Ellore 0 200 100 300 Firozabad 200 0 100 300 Total Flow In 300 200 200 Unit Costs: Dehradun Ellore Firozabad Total Cost = Ahmedabad Bangalore Cochin 5 4 3 8 4 3 9 7 5 Flow Balance Equations Location Net Flow Sign Dehradun -100 = Ellore -300 = Firozabad -300 = Ahmedabad 300 = Bangalore 200 = Cochin 200 = RHS -100 -300 -300 300 200 200 3900 Decision Modelling Group 10 .

Findings: On solving the problem using Excel solver we get the Optimum Solution as following: 100 desks from Dehradun to Ahmedabad. we can’t comment on the aspect whether this is implementable or not. Though due to unavailability of original data to compare our results with the actual data. 200 desks from Ellore to Bangalore. In effect we will be optimizing the inventory cost. The solution that we have got here is a result of a lot many assumptions and removal of extra decision factors. 100 desks from Ellore to Cochin. 200 desks from Firozabad to Ahmedabad. 100 desks from Firozabad to Cochin. Decision Modelling Group 10 . Total shipping cost = $3.900 Conclusion As per the optimum solution the company should follow the above transshipment findings to minimize the transportation cost which is a very vital need in today’s cut throat competition in price leadership. This will also help to match the local market demand with the available capacity of the company with respect to the inventory to be kept.

baskent.knust.pdf 2.html Decision Modelling Group 10 http://ir. www.czu. 3.