TEMA 4

Transport Management
The flow of products and related services between supply chain participants is directly
dependent upon effective transportation, which is the focus of these courses.

OUTLINE
Chapter 1.
A Prior Decision to Transport Management - Supply Chain Network
Configuration (GLOBAL SUPPLY CHAIN DESIGN)

1. Factors Influencing Supply Chain Network Configuration

2. The trade ‐offs between customer service and cost to serve
3. Methodology of designing a SC network configuration
 Evaluate “as-is” SC model
 Data Collection
 Reduce the complexity of the real SC model by Data Aggregation
 Network Design Tools and Techniques for optimizing configuration
of SC network
 Evaluation of data and results
See https://slideplayer.com/slide/1423674/
 1. CONFIGURAREA RETELEI DE TRANSPORT
FACILITY DECISIONS
in Supply Chain Network Design
A Prior Decision to Transport Management
Optimizarea fluxurilor de materii prime, materiale si produse finite

Network design involves decisions relating to plant and warehouse location as well as
distribution and sourcing.

• Facility allocation – alocare facilitate

– location&role (unde-locatia, ce rol (furnizor, productie, stocare, magazine de vanzare, etc)).
The two major types of facilities are production sites and storage sites.
• Where should facilities be located? What processes are performed ?
• Capacity allocation - capacitate
• How much capacity should be allocated to each facility?
• Supply allocation - sourcing decisions
– what suppliers and supply base to use for each facility?
• Market allocation – alocarea pietei de desfacere
– Which markets should be served by which Distribution Centers?
• Transportation between all facilities.

Because all these problems are of great strategic value to an organization, both
quantitative and qualitative aspects must be considered.
 Factors Influencing Supply Chain Network Design
Supply Chain network performance evaluated along two dimensions at the highest level:
– Customer needs that are met (customer service – nivelul de servire)
– Cost of meeting customer needs (cost to serve – costul servirii)

Factors Influencing Supply Chain Network Design:

• Elements of customer service influenced by network structure

(asigurarea nivelului de servire planificat)
– Response time - is the amount of time it takes for a customer to receive an order.
– Product variety - is the number of different products or configurations that are offered by the
distribution network
– Product availability - is the probability of having a product in stock when a customer order arrives
– Customer experience includes the ease with which customers can place and receive orders and the
extent to which this experience is customized
– Time to market - is the time it takes to bring a new product to the market
– Order visibility - is the ability of customers to track their orders from placement to delivery
– Returnability - is the ease with which a customer can return unsatisfactory merchandise
• Supply chain costs affected by network structure(reducerea costurilor de servire a clientilor)
– Inventories
– Transportation
– Facilities and handling
– Information
• Qualitative Factors (Macroeconomic, Political, Infrastructure, Logistics and facility costs,
etc)- mediul socio-politic si economic de functionare.
 SC Network Design Decisions
the trade ‐offs between customer service and cost to serve
Network Design: design the best network of facilities by balancing the
trade ‐offs between, demand, revenue, costs, and customer service

Trade ‐offs between

Number of Customer Service and Number of Facilities
Facilities

Response Time

Notes: Increasing the number of facilities moves them closer to the end
consumer. This reduces the response time.
 Total Costs Distribution
Related to Number of Facilities

Total Costs of
Network
Distribution

Notes: Inventory costs increase, facility costs increase, and transportation costs decrease
as we increase the number of facilities (reduce his transportation costs from the
warehouses to the stores, sometimes called “outbound” transportation).
Variation in Logistics Costs and Response
Time with Number of Facilities
Response Time

Total Logistics Costs

Number of Facilities
Notes: Total costs decrease and then increase as we increase the number of facilities.
Response time decrease as we increase the number of facilities.
 The trade off Cost-Response Time

• Customer response time

– Maintain a balance between an inexpensive location and proximity to
customers. Don't get too close, or go too far away
FG-Finished Goods (produse finite)
WIP – Work in Progres (semifabricate)
High Raw Material – Materii prime, materiale
Local FG Inventory

Regional FG Inventory
Regional WIP Inventory
Total
Central FG Inventory
Distribution
Cost Central WIP Inventory
Where you should locate your
Distribution Centre?
Proximity to your customers and access
points are the most important thing.
The biggest cost is actually the delivery
transport to your customer.

Custom production and Central Raw Material

Low Custom production and raw material at suppliers

Low Response time High
 Supply Chain Network Design
• Supply chain network design is the process of establishing the network nodes
and flow-paths in a supply chain. These nodes can represent facilities whose
functions are to supply (the supplier base/vendor shipping locations), to
produce (the manufacturing plants), distribute (the warehouses, cross-docks),
and to sell (the retail stores, outlets, and points of sale).
• Network design determines the physical configuration and infrastructure of
the supply chain to satisfy customer demand at specified service levels and at
the lowest cost.
As explained in the previous course network design is a strategic decision. As we
said, the supply chain infrastructure typically needs to be reevaluated/realigned
due to changes in sales channels, market share, the regulatory environment ,
higher cost and time to serve, mergers and acquisitions, etc.

In this course we will focus on solving a part of the strategic decisions:

• where to locate facilities
• determining the appropriate number of facilities such as plants and
warehouses
• determining distribution strategies (product flow): how and which products
can move from facility to facility.
 Supply Chain Network Design (SCND)
SCND realigns your network locations and/or product flows and minimizes
total cost.
You need comprehensive data (date complete) about all facets of your Supply
Chain -- if the data is not comprehensive and the access to that data is too
difficult, the project will fail (va esua).

Evaluate “as-is” model - we need to analyze the existing network to see what
is working and what is not:
• Where and when an item is manufactured (in existing plants) or should be
manufactured
• How much of an item to produce and at what cost (demands on markets)
• Where an item is stocked and in what quantities
• How an item is transported (mode, carrier, and time), when to ship, and in
what quantities
• Which suppliers to use and in what locations
• Risk management to mitigate the type of supply chain disaster
• What is the ideal customer service level and the policies to support that
strategy
 Complexity of Network Design Problems
• Where to locate facilities is, in general, a very difficult problem.

• The complexity increases with

– the number of customers,
– the number of products,
– the number of potential locations for warehouses, and
– the number of warehouses located.
Some of the factors looked at logistics locations are both qualitative
and quantitative and include:
– Proximity to customers and suppliers
– Availability, cost and flexibility of labor
– Government incentives and regulations (stimulente și reglementări guvernamentale)
– Availability of land/existing warehouses and real estate costs (costuri imobiliare)
– Quality and proximity to transport infrastructure
 Data Collection for Network Design
Network design projects require a significant amount of data:
1. Existing consuming locations (customers, retailers, etc)
2. Existing supplying locations (warehouses and distribution centers,
manufacturing facilities, and suppliers),
3. Annual demand of all products or categories of products carried at
each locations,
4. Flow-Paths data between network nodes (shipping data - volumes and
frequencies along each existing route/lane based on historical data,
and future projections, cost for transportation lanes/routes by mode
(ocean/air/rail/road), equipment types (container, vehicle, refigerated,
etc), carrier capacities, carrier contracts).
5. Fixed and variable operating costs for each storage locations - (handling
cost - labor and utility costs, fixed operating costs, storage costs -
inventory holding costs),
6. Order processing costs,
7. Customer service level requirements,
8. Production and sourcing costs and capacities,
9. Other costs that reflect the cost of opening a new facility or closing an
existing facility.
 Reducerea complexitatii retelei de supply chain
The amount of data required for SC network modeling is huge. Prior to modeling Network Design applies
techniques to reduce the volume of data and to simplify network configuration.
For this reason, the essential first step is data aggregation.
Data Aggregation - is a means to reduce complexity at the top planning models.
Aggregation can be performed on two dimensions – time and entities.
• An aggregation on time - we may look at quantities relating to certain intervals of time –
named periods. By example annual demand.
• An aggregation of entities implies that a set of entities with similar characteristics forms an
aggregate (entity). Example of aggregation of entities in your supply chain:
 Aggregating Customers (gruparea clientilor)
Customers located in close proximity are aggregated using a grid network or clustering techniques. All customers within a
single cell or a single cluster are replaced by a single customer located at the center of the cell or cluster.
This cell or cluster is refered to as a customer zone – see next slide.
 Aggregating Product (gruparea produselor)
Items are aggregated into a number of product groups, based on:
a. Distribution pattern - all products picked up at the same source and destined to the same
customers are aggregated together-agregarea vanzarilor aceluiasi produs catre toti clientii.
Within each of distribution pattern groups, aggregate the SKU’s by similar logistics characteristics ( Weight, Volume,
Holding Cost, etc)
b. Product type. In many cases different products simply might be variations in product
models or style or might differ only in the type of packaging. These products are typically
aggregated together.
 Other data aggregation:
• Supplier (from hundreds of vendors to a small group of important vendors or vendors in the same geographic
area), Fleet (all trucks of one’s own fleet with the same load capacity and the same engine)
• Plants, warehouses (that are a different building but on the same campus), etc
 Aggregating Customers (gruparea clientilor)
Agregarea clientilor dupa distante se poate realiza prin utilizarea primele 3 cifre ale
codului postal:

Primele 2 cifre face agregarea clientilor pe zone geografice si judete, a 3-a cifra – valorile adiacente
inseamna localitati apropiate. De exemplu 087 – reprezinta localitatile din judetul Giurgiu, unele dupa
altele. 0870 – Baneasa, 0871 Prundu (Prundu este localitate limitrofa Baneasa in jud. Giurgiu).

Semnificația codului poștal

românesc format din șase cifre:

Prima cifră cu valori intre (0-9), reprezintă cele

zece regiuni poștale în care a fost împărțită
România.

A doua cifră cu valori intre (0-5) codifică județele

componente ale unei regiuni poștale
Exceptie face zona postala 0, care include București,
Ilfov si Giurgiu unde a 2-a cifra are urmatoarele valori:
Bucuresti: (1-6) si reprezintă cele șase sectoare
Jud Ilfov : valoarea 7, jud Giurgiu valoarea 8.

Ultimele patru cifre precizează, din punct de

vedere poștal localitatea, reședințe de județ,
orașe, sate (cu precizarea comunei), străzi,
porțiuni de străzi și imobile.
A Strategy for Product Aggregation
• Place all SKU’s into a source-group
– A source group is a group of SKU’s all sourced from the
same place(s)
• Within each of the source-groups, aggregate the
SKU’s by similar logistics characteristics
– Weight (kg/buc/cutie/palet, etc)
– Volume (paleti, cutii, etc)
– Holding Cost
Aggregating Customers and Products
 Recommended Approach
In practice, the following approach is typically used when
aggregating the data:

 Aggregating Customers
• Aggregate demand points for 150 to 200 zones. If customers
are classified into classes according to their service levels or
frequency of delivery, each class will have 150 to 200
aggregated points.
• Make sure that each zone has approximately an equal amount
of total demand. This implies that the zones may be of
different geographic sizes.
• Place the aggregated points at the center of the zone.

 Aggregate the products into 20 to 50 product groups.

 Network Design Tools:
Major Components
• Mapping (cartografierea)
– Mapping allows you to visualize your supply chain and solutions
– Mapping the solutions allows you to better understand different scenarios
– Color coding, sizing, and utilization indicators allow for further analysis
• Data
– Data specifies the costs of your supply chain
– The baseline cost data should match your accounting data
– The output data allows you to quantify changes to the supply chain
• Engine
– Optimization Techniques
 Mapping
Visualizing customers on a map is a powerful way to start to analyze any
supply chain network. In fact, companies can get a lot of value just from this
exercise. Let’s start by looking at the customer network for a company.
 Supply Chain Mapping
Resiliency starts with supplier mapping
• Do you know what your supply chain looks like?
The first step one can take when gaining insight into a supply chain is supply
chain mapping.
Some types of maps very useful for supply chain design
Demand Density Mapping - see’ your customer demand graphically. Use this
graphical demand density mapping to support facility location decisions
Centre of Gravity Mapping
(metoda centrului de gravitaţie)- provides the ideal location for a centralized
distribution centre. It can be based on the centre of gravity of demand, the
centre of gravity of supply, or the least cost distribution centre of gravity. It can
also be used to test the location of a DC or a factory for example. This mapping
will help indicate:
 The best location for a facility from a service (nivel si timp de servire) view
 The best location for a facility from a cost view, etc
Customer/DC Allocation Mapping - The customer allocation mapping process
highlights where these allocations can be improved based on the time or
distance from the DC. The result?
• Improved service times
• Reduced network costs
 Facility* Location Models (1)
Selecţia locurilor de amplasare a unei facilitati
Facility location decisions are strategic decisions.
Facility location as a network node is a frequent decision related to the supply chain design (SCD).
The overall goal to be achieved in solving a facility location problem (FLP) is to keep the total costs
of supplying all regions as low as possible (cost total de distributie minim) .
For example, a strategy of being a low-cost producer might result in locating where labor or
material costs are low, or locating near markets or raw materials to reduce transportation costs.
Location decisions can have a significant impact on the success or failure of a business.
However, in choosing the location of a facility, many other criteria than minimizing costs are
taken into account.
A generic list of possible facility location criteria is shown in the table below, where location
criteria were divided into quantitative and qualitative criteria.

*Facility – furnizor, fabrica, depozit, centru de

distributie, hub, magazin de desfacere, etc
 Facility Location Models (2)
ALEGEREA LOCATIEI DE AMPLASARE A UNEI FACILITATI IN RETEAUA UNUI SC
The primary location options available to existing organizations are:

 to expand an existing location,

 move to a new location, relocation
 build a new facility location

There are a number of techniques that are helpful

in evaluating location alternatives and selection:
1. Location Selection Using Quantitative Criteria
a) Locational cost-profit-volume analysis
b) Break-even analysis
c) The center of gravity method
d) The transportation method (for multiple facility location problem)
2. Location Selection Using Qualitative Criteria
a) factor rating
Orice metoda cantitativa de alegere a locatiei trebuie folosita impreuna cu alte metode calitative pentru
a profita de infrastructura existentă, de distanța reala dintre client data de infrastructura de transport
sau de alte costuri ale alegerii locatiei (pretul terenului, fortei de munca, utilitati, etc.)

Also, there are commercial software packages available for location analysis, same
use linear programming or mixed integer programming algorithms, others use
heuristic approaches.
Location Selection Using Quantitative Criteria (1)
Locational Cost – Profit Volume Analysis
The analysis of alternative locations can be done numerically or graphically but is better to
use both to make a good choice of location.
The procedure for locational cost-profit-volume analysis involves these steps:
1. Determine the fixed and variable costs associated with each location alternative.
2. Plot the total-cost lines for all location alternatives on the same graph.
3. Determine which location will have the lowest total cost for the expected level of output.
Alternatively, determine which location will have the highest profit.
This method assumes the following:
1. Fixed costs are constant for the range of probable output.
2. Variable costs are linear for the range of probable output.
3. The required level of output can be closely estimated.
4. Only one product is involved.
For a cost analysis, compute the total cost for each location:
Total cost = FC + V x Q , where FC = Fixed cost, V = Variable cost per unit,
Q= Quantity or volume of output
For a profit analysis, compute the total profit for each location:
Total profit = Q(P − V) − FC where P = Selling price per unit (pretul de vanzare)
 Location Selection Using Quantitative Criteria (1)
Locational Cost – Profit Volume Analysis
Case study
Selectia locatiei prin analiza costurilor.
Un distribuitor Farma caută o a patra locație a unui centru de distributie pentru
asi extinde actuala retea de distributie. Există trei locații potențiale: Medias,
Sibiu si Brasov.
Redam mai jos tabela de costuri aferente celor trei locatii. Au fost incluse in
tabela si cresterile de costuri ale transportului total in retea pe care le aduce
fiecare centru de distributie. Ce locație ar aduce cel mai mic cost in costul total
de distributie cunoscand faptul ca, volumul lunar al produselor manipulate este
de 20000 kg pe lună?

Monthly total cost = FC + VC + Transportation cost

Medias: $4,000 + $0.5 per kg x 20000 kg + $19,000 = $33,000
FC = Fixed Cost
Sibiu: 3,500 + $0.75 per kg x 20000 kg + 22,000 = 40,500
VC = Variable Cost
Brasov: 4,500 + $1 per kg x 20000 kg + 18,000 = 42,500

Prin urmare, se va alege locatia Medias deaorece va avea cel mai mic cost total pentru acest volum
lunar de activitate.
Aceasta analiza cantitativa va fi urmata de analiza calitativa pentru luarea deciziei finale.
 Break-even analysis
Location Selection Using Quantitative Criteria (2)
 Location Selection Using Quantitative Criteria (3)
Center of Gravity Methods (Metoda Centrului de Gravitatie)
In the world of logistics, a center of gravity solution suggests that:
• facilities are located at the center (the “center of gravity”) of a collection of demand points
(daca folosim numai distanta dintre clienti) or selecting the location of a facility so that the
weighted-average distance to all the demand points is minimized (de ex. daca folosim
distanta dintre clientii dar si cererea anuala ca factor de ponderare).
Metoda centrului de gravitaţie (metoda grilei) este cea mai folosita metoda pentru stabilirea
amplasamentului unei facilitati din reteaua SC (fabrica, depozit,etc). Cele mai utilizate variante
iau in calcul:
 Volumul livrarilor (volumul cererii);
Facilities are located at the center (the
 Distanţa sau Costurile de Transport “center of gravity”) of a collection of
 cererea şi distanţa şi demand/supply points.
 timp, cerere şi distanţă.
In general, cea mai buna varianta practica de alegere a locatiei de amplasare a unui depozit
este atunci cand ne raportam la valorile medii ponderate ale punctelor de servire (de ex. cerere
si distanta, adica la minimizarea distanței totale medii ponderate), deci locatia aleasa trebuie sa
fie cat mai aproape de cererile clientilor.
Costurile de distributie sunt mai mici in cazul depozitelor amplasate mai aproape de clientii mari (volume
si frecvente mari de livrare vs volume mici), dar aceasta regula nu este universala. De aceea metoda
trebuie folosita impreuna cu alte metode calitative pentru a profita de distanța reala dintre clienti
stabilita pe baza infrastrucurii existente de transport sau de alte costuri pentru alegerea locatiei (accesul
la infrastructura, pretul terenului, fortei de munca, utilitati, costurile de capital, taxe, etc.
 Metoda Centrului de Gravitatie
(formule)
Scenarii posibile:
a) Volumul livrarilor este acelasi catre toate destinatiile
Coordonatele locatiei de amplasare a unei facilitati din SC se determina astfel:

b) Volumul livrarilor este diferit de la o destinatie la alta.

Se foloseste volumul livrarilor (Q) ca factor de ponderare.
Coordonatele locatiei de amplasare a unei facilitati din SC se determina astfel:

Obs.: Locatia de amplasare a facilitatii care deserveste destinatiile si-a deplasat centrul de
greutate catre clientii mari D1 si D2.
 Metoda Centrului de Gravitatie
Selection Using Quantitative Criteria (3)
Studiu de caz: alegerea celei mai bune locatii pentru un centru de distributie regional (CDR)
care aprovizioneaza 7 centre locale situate aproape de aglomeratiile urbane.
Aplicarea practica a metodei:
1.Creați o grila (X,Y) pe o scara a hartii care sa permita
definirea corecta a coordonatelor unei locatii*
2.Definiti locatiile centrelor de distributie locale si
determinați pe grila coordonatele fiecărui centru.
3.Alegeti factorul de ponderare pentru calculul mediei
ponderate a coordonatelor
Volum Determinarea coordonatelor locatiei CDR prin
Centre Y*Volu metoda centrului de gravitatie
X Y Livrari X * Volum
Locale m X= Sum( valoare X * Volum Livrari) / Total Livrari,
(tone)
C1 5 16 8000 40000 128000 deci X=435,000 / 66,000=6.6
C2 13 15 9000 117000 135000 Y = Sum(valoare Y * Volum Livrari) / Total Livrari,
C3 5 12 8000 40000 96000 deci Y= 590,000 / 66,000=8.4, rezulta CDR (6.6;8.4)
Interpretare: Volumele mari catre C4, C6 și C7 au
C4 10 9 12000 120000 108000
condus la alegerea locației CDR mai apropiata de
C5 2 7 9000 18000 63000
aceste centre. Daca locatia determinata este într-un
C6 7 5 10000 70000 50000 loc care nu este fezabil (ape sau pe un munte), sunt
C7 3 1 10000 30000 10000 necesare ajustări sau utilizarea unor metode
TOTAL 66000 435000 590000 alternative, suplimentare.
 Single Facility Location Model
Other application of Center of Gravity
• This model assumes a known set I of demand points, each with known
demand volumes, Vi , and transportation rates, Ri.
• The objective is to locate the facility at the point that minimizes total
transportation cost, TC:
– Let di denote the distance from the facility to demand point i.

– Min subject to: TC  Vi Ri d i d  ( X  X )2  (Y  Y )2
iI
i i i

– The decision variables are X and Y , the coordinates of the facility

– Xi, Yi denote the coordinates of demand point i.

For calculating the distances we are used direct line distance (Euclidean distance).
As you see, the distance can be determined according to Pythagoras.
 Single Facility Location Model
• Differentiating TC w.r.t. X and Y and setting the
result equal to zero gives the ‘center of
gravity’:
Vi Ri X i 
i  d i 
X
Vi Ri 
i  di 
Vi RiYi 
i  d i 
Y 
Vi Ri 
i  di 
 Gravity Methods for Location
• Ton Mile-Center Solution
d n  ( x  x n)  ( y  y n)
2 2

– x,y: Warehouse Coordinates

n
– xn, yn : Coordinates of delivery  xi F i
location n i 1 Fi
– dn : Distance to delivery x di
n
location n
 Fi
– Fn : Annual tonnage to delivery* i 1 di
location n n yi F i

i 1 Fi
y di
Min  F i ( xi  x)2  ( yi  y )2 n
 Fi
i 1 di
* Volumul cererii anuale (tone)– factor de pondere
(weighted factor)
 Practical Center of Gravity
• Alegerea celei mai bune locatii de amplasare a unui depozit este realizata atunci cand ne raportam la valori
medii ponderate (de ex. cerere si distanta, adica la minimizarea distanței totale medii ponderate).
• Metoda se poate folosi si la alegerea locatiei unui depozit dintr-o lista de candidaturi de locații. Atunci când
alegeți o locatie, enumerați toate combinațiile și alegeți cea mai buna locatie. În cele din urmă, locatia
aleasa trebuie sa fie cat mai aproape de cererile clientilor. De ex.emplu, City 10 este cea mai buna solutie de
amplasare a unui depozit desi locatia nu are cea mai mica distanta medie fata de clienti. Pozitia ei este
avantajoasa fata de clientii importanti ai companiei, 24% din volumul cererii provenind de la clienti sub 100 km
fata de City 10, s.a.m.d.
• Metoda centrului de gravitatie, atunci cand se foloseste la proiectarea retelei de SC, nu trebuie folosita singular,
deoarece poate conduce la alegerea unei locatii nedorite. Deoarece noi alegem o locatie centrala fata de niste
puncte ale caror valori sunt medii ponderate, aceste valori medii ponderate pot influenta negativ importanta
ponderilor in alegerea locatiei si implicit alegerea celei mai potrivite locatii. De exemplu, inmultind volumul
cererii cu distanta, valoare medie ponderata afecteaza importanta clientilor cu volume mari ale cererii si
implicit alegerea locatiei unui depozit cat mai apropiat de acestia.
• De asemenea, metoda trebuie folosita impreuna cu alte metode calitative pentru a profita de infrastructura
existentă, de distanța reala (pe șosea) dintre clienti sau de alte costuri ale alegerii locatiei (pretul
terenului, fortei de munca, utilitati, etc.)
• Tabelul de mai jos prezinta influenta ponderilor aplicate distantelor. Prima linie distanta medie (km) intre o
localitate si celelalte localitati, celelalte linii procentul factorului de ponderare (de ex. procentul onorarii
volumul cererii (exprimata in tone/paleti/camione, etc) realizat de clientii pana la distante de 100, 200, si 300
km fata de orasul selectat, din coloana tabelului.
Selection of Multiple Facilities Locations Using Quantitative Criteria
The transportation method (4)

Amplasarea mai multor depozite

Formal Problem Definition for Locating “P” Facilities
Given a set of customer locations and their demand, find the best
P number of facilities (plants or warehouses) that minimize the
total weighted distance from the facility to the customer,
assuming that each facility can satisfy the full demand of the
customer and that all demand is always satisfied.

Pentru alegerea numarului optim de depozite (numar,

locatie) care sa deserveasca clientii (cost, timp de servire)
se poate recurge atât la metode algoritmice exacte, aparţinând
matematicii, cercetărilor operaţionale, cât şi la metode de
simulare pentru iden.
 Amplasarea mai multor depozite (slide 1)
General Facility Location Model
Reproiectarea optima a configuratiei unui supply chain prin reamplasarea
centrelor de distributie necesare servirii cererii.
Facility = depozit/centru de distributie
Linear programming techniques - Tehnici de programare liniara
Let’s start with the key data elements:

• J - the set of all customers.

So the set J would be {Bucuresti, Craiova, Timisoara, Cluj, and so on}.

• dj - the demand for customer j - let’s assume that we will measure demand at his stores in terms of total weight (kg)

• I - the set of potential facilities we can select from. For example the facilities are the 9 warehouses.

• dist i, j - the distance from facility i to customer j.

The objective of this problem is as follows:

Minimize the average weighted distance from the warehouses to the stores. This is equivalent to minimizing the total
transportation spends.

We have two decisions we are making using a binary variable {0,1} :

We will denote with Xi the decision to use the warehouse at location i.

If Xi = 1, then we elected to use the facility at location i; if Xi = 0, then we elected to not use this facility.
We will denote with Yi,j the decision to use facility i to service customer j.
If Yi,j = 1, then facility i will service customer j.
If Yi,j = 0, then facility i will not service customer j.
 Amplasarea mai multor depozite
(slide 2)
We also have a few constraints or rules that we must keep in mind:

1. We have to meet all the demand so every customer must be fully served by a facility
(o singura facilitate trebuie sa serveasca un client).

2. We are limiting the number of facilities to P so we want to locate exactly P facilities.

Limitarea la P a numarului de facilitati disponibile pentru alocare.
The constraint is:

If we did not limit the number, the model would likely select all facilities. The more
facilities, the closer to the customers (our overall objective).
3. Capacity constraints (restrictiile referitoare la capacitatea de servire a depozitelor)
This constraint ensures that a warehouse is never assigned more demand than it can
handle. Volumul marfurilor transportate catre toti clientii j de la facilitatea i nu
depaseste capacitatea depozitului i (capi) daca va fi utilizat (Xi=1)

4. Only open DC can supply a customer. Daca depozitul i deserveste clientul j (Yi,j=1)
inseamna ca depozitul din locatia i este deschis (Xi=1).
 Amplasarea mai multor depozite (slide 3)
Other Constraints – physical flow restrictions.
Other restrictions might be:
Total_to_customer >= Demand because otherwise the products would remain in the warehouse
Total_to_warehouse = Total_from_warehouse

Objective function
Trans i,j – transportation costs from the location i to j

, trans i, j – transportation costs from the

location i to j

Where to locate a distribution facility must account for uncertainties in transportation costs from the location
to the satellite stores, operating costs, and the required capital investment. In your projects you can
consider the choice of potential distribution locations and enables you to select an optimal location with
minimal investment and ongoing costs.
Studiul de caz se refera la amplasarea depozitelor in functie de volumul comenzilor, distanta si costurile
minime de LIVRARE ale cererilor clientilor.
 Techniques for optimizing
configuration of SC network
– Mathematical optimization techniques
• Heuristics: find good solutions, not necessarily optimal
• Exact algorithms like linear programming (LP): find optimal
solutions
– Simulation models
• provide a mechanism to evaluate specified design
alternatives created by the designer
 2. OPTIMIZAREA FLUXURILOR
Heuristics and Exact Algorithms Evaluation. Two different approaches
Case Study : a distribution system problem
– Single product shipped for better understanding
– Two plants p1 and p2
– Plant p1 has an annual capacity of 200,000 units
– Plant p2 has an annual capacity of 60,000 units
- Production costs (p1 and p2) are the same, warehousing costs (W1 and W2) are the
same
- Warehouses W1 and W2 have no capacity constraint
– There are three markets areas c1, c2 and c3 with demands of 50,000, 100,000 and
Demand locations
50,000, respectively Destinations
Supply locations
Origins

Distribution cost per unit:

Facility
warehouse p1 p2 c1 c2 c3

w1 0 4 3 4 5

w2 5 2 2 1 2
 Heuristics Solutions
First solution : Nearest neighbor sau metoda celui mai apropiat vecin
Se alege cea mai apropiata sursa de aprovizionare pornind de la fiecare
zona de desfacere (C1, C2, C3)
In this case, heuristic based on the closest Warehouse to each market
– For each market, choose the cheapest warehouse to source demand. Then, for every warehouse,
choose the cheapest plant.
(consider only outbound transportation costs - alegerea ordinii de servire a
clientilor este in functie de costul de distributie dintre sursele W1, W2 si
destinatiile C1,C2,C3
C1
D = 50,000
Cap = 200,000 P1 $0 W1 $2 x 50,000

C2
$5 x 140,000
$1 x 100,000 D = 100,000
P2 W2
Cap = 60,000 $2 x 60,000
C3
Inbound Cost: $820,000;
Outbound Cost: $300,000 $2 x 50,000 D = 50,000
Total Transportation Cost to C1,C2,C3* = $1,120,000
Product Flow to Customers (market):
Primul flux dat de euristica este catre C2 (cel mai apropiat client): P2W2C2 (60,000) +
P1W2C2 (40,000) = 100.000pcs; To C1 : P1W2C1=50,000; To C3: P1W2C3=50,000 pcs
 Heuristics Solution (cont.)
• Second approach : Assign each market based on total delivery
cost (total delivery cost per unit along the chain, from the plant
to the warehouse to the customer zone - door to door).
Obs. Capacitatea de productie in retea nu este alocata optim in raport cu
piata de servire. P2 este mai apropiata de piata dar are o capacitate
mica de servire. C1
P1 $0 x 50,000
Cap = 200,000 $3 x 50,000 D = 50,000
P1 to W1 to C1 $3
P1 to W2 to C1 $7
W1 P2 to W1 to C1 $7
C2 P2 to W2 to C1 $4

$5 x 90,000 D = 100,000
P1 to W1 to C2 $4
P2 W2 P1 to W2 to C2 $6
P2 to W1 to C2 $8
$2 x 60,000 P2 to W2 to C2 $3
Cap = 60,000
C3
D = 50,000
P1 to W1 to C3 $5
P1 to W2 to C3 $7
$2 x 50,000 P2 to W1 to C3 $9
P2 to W2 to C3 $4

Total Cost = 50*$3+60*$3+40*$4+50*$4=$740,000 (unitatile exprimate in mii buc)

VAT calculation CHINA=(10,000+4,000+1,000)x0.076 = 1,140 CHF
 What is an Optimization Problem
• Generally, an optimization problem seeks a
solution where decisions need to be made in a
constrained or limited resource environment
– Most supply chain optimization problems require
matching demand and supply when one, the other, or
both may be limited
• An optimization problem comprises of three
major components
– Decision variables
– Constraints (restrictiile)
– Objective (functia obiectiv)
 Exact Algorithms – find optimal
solution
Case Study : the same distribution system problem solved previously using
heuristic solution
– Single product shipped for better understanding
– Two plants p1 and p2
– Plant p1 has an annual capacity of 200,000 units
– Plant p2 has an annual capacity of 60,000 units
– The two plants have the same production costs
– There are two warehouses w1 and w2 with identical warehouse handling costs.
– There are three markets areas c1, c2 and c3 with demands of 50,000, 100,000
and 50,000, respectively
– Distribution cost per unit – see table below

Facility
warehouse p1 p2 c1 c2 c3

w1 0 4 3 4 5

w2 5 2 2 1 2
 Exact Algorithms Solution
The Optimization Model

The problem described earlier can be framed as the following

linear programming problem.

Let us xij: the flow of products from i to j as follows:

• x(p1,w1), x(p1,w2), x(p2,w1) and x(p2,w2) be the flows from the
plants to the warehouses.
• x(w1,c1), x(w1,c2), x(w1,c3) be the flows from the warehouse w1
to customer zones c1, c2 and c3.
• x(w2,c1), x(w2,c2), x(w2,c3) be the flows from warehouse w2 to
customer zones c1, c2 and c3
 The Optimization Model
The problem we want to solve is:
OF= min 0x(p1,w1) + 5x(p1,w2) + 4x(p2,w1)
+ 2x(p2,w2) + 3x(w1,c1) + 4x(w1,c2)
+ 5x(w1,c3) + 2x(w2,c1) + 1x(w2,c2) + 2x(w2,c3) – costul total al transportului in retea
subject to the following constraints:
Restrictiile ofertei (capacitatilor de productie; oferta>=cererea)
x(p2,w1) + x(p2,w2)  60000
x(p1,w1) + x(p2,w1) = x(w1,c1) + x(w1,c2) + x(w1,c3)
x(p1,w2) + x(p2,w2) = x(w2,c1) + x(w2,c2) + x(w2,c3)

Restrictiile de cerere prin care ne asiguram ca intreaga oferta satisface cererea

x(w1,c1) + x(w2,c1) = 50000
x(w1,c2) + x(w2,c2) = 100000
x(w1,c3) + x(w2,c3) = 50000
all flows greater than or equal to zero.

See Excel Solver Solution

Total Cost = $740,000 equal with total delivery cost heuristic but less than
Nearest neighbor heuristic solution$1,120,000.
Optimization Problem using Excel Solver

Objective function

Decision variables

Constraints
 Optimization problem
using Excel Solver
Open source: https://opensolver.org/installing-opensolver/

Optimization problem
using Excel Solver
Altă sursă pentru software dedicat rezolvării modelelor de optimizare din
Cercetările Operaționale aveți AICI: http://asecib.ase.ro/soft.htm
 Concluzia Finala
• Cost Total de Livrare
– Metode euristice
• Cel mai apropiat vecin – 1,120,000 USD
• Total Delivery Cost – 740,000 USD

– Modelare Matematica
• Programarea liniara – 740,000 USD

Modelele care tin cont de costul total de distributie (euristica total delivery cost si
modelul matematic) propun distributia produselor de la depozitul W1, cel mai
indepartat de consumatori.
Problema generata: timpul mare de raspuns la cererile clientilor.
For the final decision, incorporate qualitative factors that were disregarded in the
mathematical model, e.g., specific regulations, environmental factors, supply chain
strategies, etc.

Clientii accepta un timp mai mare de livrare?

Daca nu, ce facem?

Răspunsul este: depinde de strategia de supply chain aleasa.

• Daca avem o strategie de Supply chains bazata pe RECEPTIVITATE / FLEXIBILITATE
(capacitate rapida de reactie si raspuns la cererea dinamica a pietei) raspunsul este NU.
• Daca avem o strategie de Supply chains orientata pe EFICIENTA (minimizarea costului
total de livrare) raspunsul este DA.
Evaluating the Effect of Fixed Costs in the Supply Chain
Suppose the following capacities and fixed costs are associated with each of the plants and
warehouses.
There are three possible decisions regarding plant capacity:
a) keep both plants open;
b) keep plant 1 only open, or c) keep plant 2 only open.
Similarly we have three possibilities for the two warehouses:
a ) keep both warehouses open, b) keep warehouse 1 only open or c) keep warehouse 2
only open.
Capacities and fixed costs for the example network
Facility Capacity (Units) Fixed Cost
P1 250,000 300,000
P2 220,000 280,000
W1 250,000 100,000
W2 200,000 90,000
Results of plant and warehouse closings
Facilities Open Cost ($)
Facilities Open Cost ($) (P1, P2, W2) 1,320,000
(P1,P2, W1,W2) 1,370,000 (P1,W1) 1,050,000
(P1,W1,W2) 1,140,000 (P1,W2) 1,640,000
(P2,W1,W2) 1,120,000 (P2,W1) 1,830,000
(P1, P2, W1) 1,330,000 (P2,W2) 1,020,000
Distribution costs tradeoffs
Location Selection Using Qualitative Criteria
Factor Rating
Matricea multicriteriala

Quantitative methods must be followed by

qualitative methods