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# Logistics Management

## Prof. Alessandro Perego

Politecnico di Milano

Exercises on
Distribution Network Design
(collection of exercises from past examinations)

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Exercise 1
A regional warehouse has an average distance of 40 km from the 8 delivery areas to which it delivers. Each
area is about 20 km2 and there is a random uniform distribution of 25 customers. Every stop at the customer
lasts on average 10 minutes and the speed to move towards the delivery area and in the delivery area are
respectively 60 Km/h e 30 Km/h. Assuming as negligible the loading capacity of the lorries, assess the
annual costs to perform the local distribution if each customer is replenished once a week.
Assume two tours per day (morning and afternoon), a 8 hour shift for the lorry drivers (excluding the lunch),
rectilinear paths inside the delivery areas and a daily cost of a lorry driver+lorry equal to 200 € a day.

Exercise 2
SHOEZ manufactures leather shoes in its plant in Vigevano (PV) and replenishes once a week its 100
customers (small shops) in the Milano area, by using lorries.
Assuming the following:
- average demand per shop: 40 boxes/week;
- average dimensions of the boxes: 360 x 200 x h=120 mm ;
- density of the goods: 250 kg/m3;
- average time to reach the delivery area: 40 minutes;
- average time for a stop (unloading, document management…): 18 minutes;
- average time between two consecutive deliveries in the same delivery tour: 12 minutes;
- lorry capacity: 4 m3; 0,8 t;
- overall delivery cost per hour (all inclusive): 25,82 euro/h;
Assess if it is convenient to outsource the local distribution at a price of 0,52 euro per box delivered.

Exercise 3
A two echelon distribution network is made by 1 Central warehouse (CW) and 6 regional warehouses(RW).
The overall demand seen by the CW is equal to 150 pallet loads/week.
Assuming that the replenishment is made by semitrailers with a capacity of 30 pallet loads, you are requested
to calculate the average cycle stock in the RW in the two following cases:
a) replenishment once a week;
b) replenishment period set in order to fulfil the semi trailer capacity.

Exercise 4
DOC PUGLIA s.r.l, a wine manufacturer, replenishes with the wine bottled in the two plants in Lecce and
Battipaglia (dedicated to different items) three regional warehouses that deliver to the points of sales of the
Northern Italy (see Figure 1). The replenishment is made by full pallet loads once every two weeks.
In Table 1 and Table 2 the annual flows (in tons) and the transportation fares (transportation with
tractor+semi trailer) are reported.

A possible alternative is the use of a transit point (TP) of a third party logistics provider, set in Bologna (see
Figure 2).
The transportation fares are reported in Table 2.

## Assuming the following:

- the pallet loads density is equal to 900 kg/m3;
- the TP fare is equal to 10,33 euro/t of goods passing by there;
- cycle stocks in the TP are negligible;
- the introduction of the TP is not going to modify the replenishment period and the overall inventory
in the distribution network;
- a working year is made by 50 weeks/year and 5 days/week;
you are requested to assess if it is worth to change the network configuration (with the use of the TP).

2
Lecce P1 F
Battipaglia (SA)
P2
2

Lecce P1 P2 F
Battipaglia (SA)
2

TP Bologna

## Figure 2 – The possible alternative with the use of a transit point

Plants
S1 S2
DP1 258 223
Regional DP2 235 198
warehouses DP3 237 310
Table 1 – Yearly flows (in tons) form plants to regional warehouses

Quantity / shipment
between 5-10 t between 10-15 t between 15-20 t > 20 t
S1-DP1 134,28 108,46 90,38 61,97
S1-DP2 129,11 103,29 87,80 61,97
S1-DP3 139,44 111,04 98,13 67,14
S2-DP1 123,95 103,29 80,05 56,81
S2-DP2 123,95 100,71 77,47 56,81
S2-DP3 134,28 108,46 87,80 61,97
S1-TP 80,05 67,14 56,81 43,90
S2-TP 72,30 61,97 46,48 36,15
TP-DP1 56,81 41,32 33,57 23,24
TP-DP2 51,65 38,73 30,99 20,66
TP-DP3 61,97 46,48 38,73 25,82
Table 2 – Transportation fares (euro/ton)

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Exercise 5
A two echelon distribution network for finished products is made by 1 central warehouse and 6 regional
warehouses. The average weekly consumption of each of the regional warehouses is equal to 20 pallet loads.
The inventory management is made by a periodic review policy, with a replenishment lead time equal to 2
days and the replenishment period is equal to 8 days. The replenishment is made trough semitrailers
(capacity = 33 pallet loads).
You are requested to determine the cycle stock in the regional warehouses in the following alternatives:
1. actual situation (6 regional warehouses);
2. distribution network with only 4 regional warehouses all facing the same demand, assuming to have a
periodic review policy with a replenishment period set in order to fulfil the semi trailer capacity.

Exercise 1
In order to assess the annual costs to perform the local distribution, we have to compute the number of tours
a truck can perform in one shift.
The expected time for a tour is:

TT = 2 x t W - A + t A

40km
tW − A = = 0,67 h / tour
60km / h

dA 10 min
tA = + × 25 = 5,02h / tour
30km / h 60 min/ h
with:
1,15 × N
dA = 2× = 25,71km
N/A

## As a consequence the expected time for a tour is 6,36 h/tour.

A truck can then perform only one tour per shift. The overall costs for a tour are the daily costs of the truck.
As a consequence the total distribution costs per year (assuming 52 weeks/year) are:

## TDC = 200 × 8 × 52 = 83.200 €/year

Exercise 2

In order to assess the convenience to outsource the delivery to a service provider, we have to compute the
costs to deliver one box.
In order to do this, we have to start computing the maximum number of point of sales that can be served in
one tour, considering both the volume and the weight constraints:

## Vol 1 order = (0,36 × 0,2 × 0,12) × 40 = 0,3456 m3 /order

Weight 1 order = 0,3456 × 250 = 86,4 kg /order

The maximum number of shops served in one tour is 9 (the strictest of the two constraints: 11 taking into
account the volume, 9 the weight).

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The expected time for a tour is:

40 12 18
TT = 2 × + (9 − 1) + 9× = 5,63h / tour
60 60 60

The costs to deliver one box are the annual delivery costs divided by the # box delivered.

## # box deliverd per year = 52 × 100 × 40 = 208.000 boxes/year

208.000
# tours/year = = 577,78deliveries / year
9 × 40

## The annual distribution cost is then:

TDC = 577,78 × 5, 63× 25,82 = 83.990€ / year

## The cost per box is:

83.990
DC box = = 0, 4€ / box
208.000

## Outsourcing the local distribution at 0,52 €/box is not convenient.

Exercise 3
The cycle stock in the regional warehouses is 75 PL and will become 90 PL.

Exercise 4
The new configuration with the transit point is more convenient. There are savings in the transportation costs for more
than 75,000 €/year and additional handling costs for 15,092 €/year. Details on the transportation costs calculation are
reported in the tables:

## Quantity per shipment [t] Fare [€/t] Transportation costs [€/year]

P1-RW1 10.32 108.46 27,983
P1-RW2 9.40 129.11 30,341
P1-RW3 9.48 139.44 33,047
P2-RW1 8.92 123.95 27,641
P2-RW2 7.92 123.95 24,542
P2-RW3 12.40 108.46 33,623
Total transportation costs 177,177

Transportation costs for the distribution network with the transit point

## Quantity per shipment [t] Fare [€/t] Transportation costs [€/year]

P1-TP 29.20 43.9 32,047
P2-TP 29.24 36.15 26,426
TP-RW1 19.24 33.57 16,147
TP-RW2 17.32 30.99 13,419
TP-RW3 21.88 25.82 14,124
Total transportation costs 102,163

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Exercise 5
Assuming 5 working days per week, in the “AS-IS” situation:
8
T= = 1,6weeks
5
20 × 1,6
CS1 w = = 16 PL
2
CSSystem = 16 × 6 = 96 PL

## In the new configuration (4 regional warehouses):

20 × 6
D1 w = = 30 PL / week
4
33
T= = 1,1weeks
30
30 ×1,1
CS1 w = = 16, 5PL
2
CSSystem = 16,5 × 4 = 66PL