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Containerization Method for Logistic Cost Reduction Based on Closed-Loop

Supply Chain Model

Conference Paper · August 2015

DOI: 10.1115/DETC2015-46371

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 Proceedings of the ASME 2015 International Design Engineering Technical Conferences &
Computers and Information in Engineering Conference
August 2-5, 2015, Boston, Massachusetts, USA
CONTAINERIZATION METHOD FOR LOGISTIC COST REDUCTION BASED ON
CLOSED-LOOP SUPPLY CHAIN MODEL
XinyanOu
Stony Brook University
Stony Brook, NY, USA
Guoxian Xiao
General Motors Corp
Warren, MI, USA
ABSTRACT
Logistics cost is an important contributor to the overall cost
in a supply chain system. By using collapsible containers, the
frequency of return freight can be reduced and the return of
containers can be optimized, leading to potential logistic cost
savings. However, the dynamic behavior of container flows due
to demand, inventory, storage, and repair requirements make it
difficult to accurately analyze container system performance. An
accurate estimation of this collapsible container usage impact is
of great importance for decision-making.
This paper describes the development of a mathematical
model of the container dynamic flow system by using the
collapsible containers. A continuous time, discrete space Markov
process is used for stochastic scenario. The model determines the
total cost savings, based on the collapsible rate, the number of
collapsible containers, the performance of the factory and the
supplier and the transportation environment. The presented
mathematical formulation enables the evaluation of the system
performance. A case study of collapsible container supply chain
system demonstrates the advantages of this methodology. In
addition, a simulation model of this stochastic system is
presented to verify the mathematical model. Simulation tests are
conducted to demonstrate the potential logistics cost savings in
the closed-loop supply chain system.
1. INTRODUCTION
A supply chain is an integrated manufacturing process
wherein raw materials are converted into final products [1]. Two
basic characteristics in a supply chain management system are
inventory control and logistics management. During the last two
1 Copyright © 2015 by ASME and General Motors
IDETC/CIE 2015
DETC2015-46371
Qing Chang
Stony Brook University
Stony Brook, NY, USA
Jorge Arinez
General Motors Corp
Warren, MI, USA
decades, efforts to minimize system-wide costs via reduction on
inventory has been increasingly addressed and attempted in
industry. Literatures dealing with this aspect of inventory
management can be categorized into two major types, the first
being deterministic analytical models [2-4] and the second being
stochastic models [5-7].
In this paper, we introduce an innovative containerization
method (CM), which represents an opportunity to reduce
shipping schedules in return freights and thus the amount of
trucks operated and fuel consumed annually, to mitigate the
trade-off between holding a low safety inventory level and the
requirement for flexible lead time. By using collapsible
containers, the return of containers can be optimized, leading to
potential logistic cost savings while keeping a low quantity of
safety inventory, a quantity that can be calculated by container
number in the system. The dynamic behaviors of container level
are investigated based on a closed-lined supply chain model
consisting of one supplier and one factory. In order to quantify
the system-wide cost with or without uncertainties, such as
random disruption events in manufacturing, a cost modeling
approach of the whole system is developed [8, 9], which bases
on both deterministic and stochastic model. This paper
contributes to our understanding about the interactions between
inventory level and lead time adjustment through increasing or
decreasing the delivering frequencies, by which increasing the
deliver frequency would lower inventory level and shorten the
lead time of demand and vice versa. In addition, the incentives
to invest on collapsible container is studied based on cost
analyses. Some key results of this paper demonstrate that there
is a great advantage by using CM and an important improvement
of lead time flexibility.
 The rest of the paper is organized as follows: Section 2
describes the system and models the system as a continuous
closed-line supply chain system. The cost saving is formulated
depending on the logistic saving and the extra containers cost.
Section 3 presents the formulation of the extra container cost
based on a CLSC with deterministic analysis and stochastic
analysis. Section 4 gives a complete mathematical formulas of
the cost saving of the system. It also proposes a simulation
method of the system and gives a verification for the cost saving
formulas based on the simulation result. The paper ends with a
discussion and conclusion remarks in section 5.
2. CLOSED-LOOP SUPPLY CHAIN MODEL
2.1 System Description
In this paper, we investigate a closed-lined supply chain
(CLSC) system with the use of collapsible containers as shown
in Fig. 1, which consists of a supplier and a factory. The supplier
produces parts and loads parts into containers. Then, a trip of
trucks deliver these containers to the factory. The factory
consumes parts, empties the containers, and returns them to the
supplier. Due to using collapsible containers, the return trips can
accommodate more containers and the frequency of return
freight is reduced so that the frequency of return freight is lower
than the frequency of the freight from the supplier to the factory.
This lower return freight frequency could potentially reduce the
logistic cost, however, it raises the probability of the supplier
starving the necessary containers, which may lead to the
production rate reduction of the factory. To avoid the supplier
starving and mitigate the impact on the factory production rate
due to using collapsible containers, the supplier uses extra
containers when there is no available collapsible containers in
the supplier’s storage. The extra containers are disposable and
non-collapsible and the empty extra containers will be discarded
after use.
Figure 1. CLOSED-LINED SUPPLY CHAIN (CLSC)
2 Copyright © 2015 by ASME and General Motors
The structure of the CLSC system can be described as
shown in Fig. 2. The supplier is modeled as a virtual machine
(denoted as S) producing parts while the factory is modeled as a
virtual machine (denoted as F) consuming parts. The
transportations are also modeled as virtual machines (denoted as
G and R). In addition, four virtual buffers are used to reflect the
uncertainties of the system. A continuous flow model is used to
analyze this closed-line system with exponential machines. The
definitions of variables and parameters are listed below.
Figure 2. LAYOUT OF CLOSED-LINE SUPPLY CHAIN
𝑐𝑠 , 𝑐𝑓 : The rated speeds of the supplier and the factory,
respectively.
𝑣𝑠 (𝑡), 𝑣𝑓 (𝑡): The processing rates of the supplierand the factory
at time t, respectively.
𝑣𝑔𝑖𝑛 (𝑡), 𝑣𝑔𝑜 (𝑡), 𝑣𝑟𝑖𝑛 (𝑡), 𝑣𝑟𝑜 (𝑡) : The input rates and output
rates of the transportation from S to F and transportation from F
to S at time t, respectively.
𝑣𝑒𝑖𝑛 (𝑡): Input rate of extra containers at time t.
𝑣𝑒𝑜𝑢𝑡 (𝑡): The output rate of extra containers at time t.
𝐵𝑠𝑖 , 𝐵𝑠𝑜 , 𝐵𝑓𝑖 , 𝐵𝑓𝑜 : The buffer capacity of the upstream and
downstream of the supplier and factory respectively.
𝑏𝑠𝑖 (𝑡), 𝑏𝑠𝑜 (𝑡), 𝑏𝑓𝑖 (𝑡), 𝑏𝑓𝑜 (𝑡) : The buffer level of
𝐵𝑠𝑖 , 𝐵𝑠𝑜 , 𝐵𝑓𝑖 , 𝐵𝑓𝑜 at time t, respectively. The buffer level means
the number of containers in the buffer.
𝑇𝑡𝑟𝑎𝑛𝑠 : The transportation time interval between the supplier
and the factory.
s: The number of trucks in one trip.
m: The maximum number of non-collapsed containers per truck
from the supplier to the factory.
M: The maximum number of collapsed containers per truck
from the factory to the supplier.
𝑇𝑠𝑑,𝑖 : The ith trip departure time from the supplier.
𝑇𝑓𝑑,𝑖 : The ith trip departure time from the factory.
𝜆𝑠 , 𝜇𝑠 : The supplier’s breakdown rate and repair rate.
𝜆𝑓 , 𝜇𝑓 : The factory’s breakdown rate and repair rate
We make the following assumptions:
(a) The buffer capacity of 𝐵𝑠𝑖 , 𝐵𝑠𝑜 , 𝐵𝑓𝑖 , 𝐵𝑓𝑜 are big enough such
that the supplier and the factory are never blocked.
(b)When the buffer 𝐵𝑠𝑖 is empty, extra containers are added and
the rated speed of input extra containers is equal to the rated
speed of the supplier 𝑐𝑠 .
(c) At time 𝑡 = 0 , all the collapsible containers are in the
buffer𝐵𝑠𝑖 . The buffer 𝐵𝑠𝑜 , 𝐵𝑓𝑖 and 𝐵𝑓𝑜 are empty.
(d)The supplier is never starved by using the extra containers.
(e)The rated speeds of the supplier and the factory keep the same,
i.e. 𝑐𝑠 = 𝑐𝑓
(f) The supplier freights the containers at predetermined
departure time 𝑇𝑠𝑑,𝑖 with a fixed interval sm/𝑐𝑠 . Namely,
𝑠𝑚
𝑇𝑠𝑑,𝑖 = 𝑖 . As we describe before, the supplier uses the extra container
𝑐𝑠
(g) The factory freights the containers at predetermined
departure time 𝑇𝑓𝑑,𝑖 with a fixed interval sM/𝑐𝑓 . Namely,
𝑠𝑚 𝑠𝑀
𝑇𝑓𝑑,𝑖 = + 𝑇𝑡𝑟𝑎𝑛𝑠 + 𝑖 . second, disruption events prevent the factory returning enough
𝑐𝑠 𝑐𝑓
(h) The parts in collapsible containers have higher priority to be
consumed than those in extra containers in the factory. In other
words, if there are both collapsible and non-collapsible
containers (extra containers) in buffer 𝐵𝑓𝑖 , the factory consumes
the parts in collapsible containers first.
2.2 Cost Classification and Cost Allocation
A general supply chain is a complex network system which
encompasses a set of organizations and activities facilitating
economical and efficient flow of raw material to final products.
Cost is one of the most effective indexes to evaluate the
performance of a supply chain system, for its clarity and ability
to provide guidance for system wide cost saving. However, an
accurate cost estimation of all activities involved in raw material
sourcing, procurement, conversion and logistics within a supply
chain is important but difficult for any single entity get involved
in the system. The primary goal in this paper is to present a
quantitative method for cost saving of using collapsible
containers. The total cost saving problem includes: the cost of
extra containers and logistic saving. Other operational impacts,
including extra labor cost for container handling and
maintenance, inventory control and warehouse management can
all be translated into calculating container cost in the system.
Thus, the total cost saving per unit time is formulated as
𝐶𝑜𝑠𝑡𝑆𝑎𝑣𝑖𝑛𝑔𝑡𝑜𝑡𝑎𝑙
= 𝐿𝑜𝑔𝑖𝑠𝑡𝑖𝑐𝑆𝑎𝑣𝑖𝑛𝑔 − 𝐸𝑥𝑡𝑟𝑎𝐶𝑜𝑛𝑡𝑎𝑖𝑛𝑒𝑟𝐶𝑜𝑠𝑡 (1)
The logistic saving per unit time can be obtained as
m 𝑠𝑚
𝐿𝑜𝑔𝑖𝑠𝑡𝑖𝑐𝑆𝑎𝑣𝑖𝑛𝑔 = (1 − ) C 𝑇 / (2)
M 𝑐𝑠
Where, C 𝑇 is logistic cost per trip.
The extra container cost per unit time is
3 Copyright © 2015 by ASME and General Motors
𝐸𝑥𝑡𝑟𝑎𝐶𝑜𝑛𝑡𝑎𝑖𝑛𝑒𝑟𝐶𝑜𝑠𝑡
= 𝐶𝑒 ∙ 𝐸𝑥𝑡𝑟𝑎𝐶𝑜𝑛𝑡𝑎𝑖𝑛𝑒𝑟𝐶𝑜𝑠𝑡𝑁𝑢𝑚𝑏𝑒𝑟 (3)
Where, 𝐶𝑒 is the cost of a single extra container. The extra
container cost is proportional to the extra container number.
However, the extra container number is relative to not only the
random downtime event of the factory and the supplier but also
the collapsed rate M/m.
3. EXTRA CONTAINER ANALYSIS
when the buffer Bsi is empty. Two factors lead to the result that
the supplier runs out of the containers before the factory return
the containers: first, the collapsible containers are not sufficient;
containers in time. Firstly, we discuss the effect of the initial
number of collapsible container on the production system with
deterministic downtime event. Then, we consider the effect of
random disruption events.
3.1 Deterministic and Transient Analysis
Based on the conservation of flow, the buffer levels during
(0, T] satisfies the following equations:
𝑇
𝑏𝑠𝑜 (𝑇) − 𝑏𝑠𝑜 (0) = ∫0 [𝑣𝑠 (𝑡) − 𝑣𝑔𝑖𝑛 (𝑡)]𝑑𝑡 (4)
𝑇
𝑏𝑓𝑖 (𝑇) − 𝑏𝑓𝑖 (0) = ∫0 [𝑣𝑔𝑜 (𝑡) − 𝑣𝑓 (𝑡)]𝑑𝑡 (5)
𝑇
𝑏𝑓𝑜 (𝑇) − 𝑏𝑓𝑜 (0) = ∫0 [𝑣𝑓 (𝑡) − 𝑣𝑟𝑖𝑛 (𝑡) − 𝑣𝑒𝑜𝑢𝑡 (𝑡)]𝑑𝑡 (6)
𝑇
𝑏𝑠𝑜 (𝑇) − 𝑏𝑠𝑜 (0) = ∫0 [𝑣𝑟𝑜 (𝑡) + 𝑣𝑒𝑖𝑛 (𝑡) − 𝑣𝑠 (𝑡)]𝑑𝑡 (7)
𝑇
∫0 𝑣𝑠 (𝑡)𝑑𝑡 is the container count of S, which is the number
containers used by S during (0, 𝑇].
𝑇
∫0 𝑣𝑓 (𝑡)𝑑𝑡 is the container count of F, which is the number
containers consumed by F during (0, 𝑇].
𝑇
∫0 𝑣𝑒𝑖𝑛 (𝑡)𝑑𝑡 is the container count of total number of extra
containers used by the supplier during (0, 𝑇].
𝑇
∫0 𝑣𝑔𝑖𝑛 (𝑡)𝑑𝑡 is the integration of the input rate of
transportation, showing the container count departing from the
supplier during (0, 𝑇].
𝑇
∫0 𝑣𝑔𝑜 (𝑡)𝑑𝑡 is the container count received by the factory
during (0, 𝑇].
𝑇 𝑇
Similarly, ∫0 𝑣𝑟𝑖𝑛 (𝑡)𝑑𝑡 and ∫0 𝑣𝑟𝑜 (𝑡)𝑑𝑡 indicate the
container counts departing from the factory and arriving at the
suppliers, respectively.
Fig. 3a and 3b illustrate the container count trajectories with
different initial number of collapsible containers without any
random disruption events.
 The container count of S and F is denoted as two slope lines
in Fig. 3a. The container count of S increases as S rated speed
c𝑠 . Due to the transportation delay, the container count of F is
right shifted and parallel to the trajectory of container count of
S.
The step lines between the container count lines of S and F
show the container counts of the transportation from S to F. And
𝑇
the two step lines below the trajectory line ∫0 𝑣𝑓 (𝑡)𝑑𝑡 shows
the container counts of the transportation from the F to S.
𝑇 containers are incurred periodically (shown as the trajectory line
𝑏𝑠𝑖 (0) + ∫0 [𝑣𝑒𝑖𝑛 (𝑡) + 𝑣𝑟𝑜 (𝑡)]𝑑𝑡 is the container count of
total input containers and initial container number of buffer 𝐵𝑠𝑖 .
It is denoted as the dash step line in Fig. 3a and 3b.
When the container count trajectory of S coincides with the
dash line, it means all the input containers and initial containers
has been used up by S, so the buffer 𝐵𝑠𝑖 is empty. Thus, the
coincided part of lines indicates the time period of using extra
container.
The initial number of collapsible containers 𝑏𝑠𝑖 (0) is
crucial to the utilization of extra containers. Fig. 3b indicates that
when the initial collapsible containers are not sufficient, the extra
𝑇
of ∫0 𝑣𝑒𝑖𝑛 (𝑡)𝑑𝑡 ) to keep the factory normal operation. .
The minimum number of initial collapsible containers for
the system without a need of using extra containers periodically
is formulated as following,

𝑏𝑛𝑒𝑒𝑑 = 𝑠𝑚 + 𝑠𝑀 + 2𝑇𝑡𝑟𝑎𝑛𝑠 ∙ 𝑐𝑠 (8)

𝑏𝑛𝑒𝑒𝑑 is a threshold to indicate whether the collapsible

containers are sufficient.
Thus, the extra container number per unit time without
downtime event is

ExtraContainerNumber

0 𝑏𝑠𝑖 (0) ≥ 𝑏𝑛𝑒𝑒𝑑

={ 𝑏𝑛𝑒𝑒𝑑 −𝑏𝑠𝑖 (0)
(9)
⌈𝑏𝑛𝑒𝑒𝑑 /𝑠𝑀⌉∙(𝑠𝑀 ⁄𝑐𝑓 )
𝑏𝑠𝑖 (0) < 𝑏𝑛𝑒𝑒𝑑

Then, we denote a disruption event 𝑒⃗ as a 3-tuple (s, 𝑇𝑑 , 𝑑)

or (F, 𝑇𝑑 , 𝑑) to indicate that the supplier or the factory is
(a) COLLAPSIBLE CONTAINERS ARE SUFFICIENT disrupted at time 𝑇𝑑 for a duration of d. We use 𝑣𝑠 (𝑡; 𝑒⃗) and
𝑣𝑓 (𝑡; 𝑒⃗) to denote the processing rate of the supplier and the
factory at time t when the system is disturbed by event 𝑒⃗ ,
respectively.
Fig.4 illustrates the container count trajectories when the
supplier is subject to a disruption event (s, 𝑇𝑑 , 𝑑). As shown in
Fig. 4, when the system has sufficient collapsible containers, a
single disruption event on the supplier will not lead to using extra
T containers, and it has effect on the container count of the factory
0
vgo (t )dt
and the supplier.
T Fig.5 illustrates the container count trajectories when the
 0
vgin (t )dt
T factory is subject to a disruption event (F, 𝑇𝑑 , 𝑑). Only when the
T  vro (t )dt
downtime lasts long enough for the buffer 𝐵𝑠𝑖 to become empty,

0
vs (t )dt
0
T the extra containers will have to be introduced into the system.
T  vein (t )dt 𝑇
The trajectory of ∫0 𝑣𝑒𝑖𝑛 (𝑡; 𝑒⃗)𝑑𝑡 in Fig. 5 indicates that extra

0
vrin (t )dt
T 0

0
v f (t )dt containers are not needed after the factory back up. On one hand,
more initial collapsible containers brings longer maximum
downtime duration for the factory without introducing extra
containers. On the other hand, more initial collapsible containers
(b) COLLAPSIBLE CONTAINERS ARE INSUFFICIENT can reduce the extra containers usage when the downtime last
long enough to require extra containers.
Figure 3. CONTAINER COUNTS WHEN COLLAPSIBLE
CONTAINERS ARE SUFFICIENT AND INSUFFICIENT

4 Copyright © 2015 by ASME and General Motors

 𝑏𝑠𝑖 (0) and collapsed rate M/m . We use the exponential
reliability model to represent the supplier and the factory. The
uptime and downtime probability density function of the supplier
and the factory are given by the exponential distributions given
by parameters λ𝑠 , 𝜇𝑠 , λ𝑓 , 𝜇𝑓 , respectively. The states of the
T factory and the supplier are independent. Hence, the dynamic
0
vgo (t )dt system can be described by a continuous time, discrete space
T Markov process.
 0
vgin (t )dt
According to the assumptions, the supplier is never starved
T (by using extra container) and the factory is never blocked. Thus
0
vro (t )dt the entire closed line system can be formulated in two cases:
T
 vs (t )dt
(a) 𝑏𝑠𝑖 (0) ≥ 𝑏𝑛𝑒𝑒𝑑
T

0
vrin (t )dt
T 0


0
v f (t )dt
𝑒𝑠 ∙ 𝑄(λ𝑓 , 𝜇𝑓 , λ𝑠 , 𝜇𝑠 , 𝑁𝑒𝑞 ) 𝑒𝑠 ≤ 𝑒𝑓
𝑃𝑅𝑒 = { (10)
𝑒𝑓 ∙ 𝑄(λ𝑠 , 𝜇𝑠 , λ𝑓 , 𝜇𝑓 , 𝑁𝑒𝑞 ) 𝑒𝑠 > 𝑒𝑓
Figure 4. CONTAINER COUNT WITH A SUPPLIER
DOWNTIME EVENT
Where,
𝑣 ∙ 𝑇𝑡𝑟𝑎𝑛𝑠
𝑁𝑒𝑞 = [𝑏𝑠𝑖 (0) − 𝑏𝑛𝑒𝑒𝑑 ]
𝑠𝑀
1
𝜆𝑓 𝑠𝑀−𝑠𝑚−𝑣∙𝑇𝑡𝑟𝑎𝑛𝑠
+ (𝜇𝑠 − + 21 ) 𝑐𝑠 (11)
𝜆𝑓 +𝜇𝑓 𝑠𝑀+𝑠𝑚+𝑣∙𝑇𝑡𝑟𝑎𝑛𝑠
2

T
𝑄(λ1 , 𝜇1 , λ2 , 𝜇2 , 𝑁)
 0
vgo (t )dt
T (1−𝑒1 )(1−Φ) λ1 λ2
 0
vgin (t )dt
1−Φ𝑒 −𝛽𝑁 𝜇1
𝑖𝑓 ≠
𝜇2
T 𝜆1 (𝜆1 +𝜆2 )(𝜇1 +𝜇2 )

T
vs (t )dt  0
vro (t )dt = (𝜆1 +𝜇1 )[(𝜆1 +𝜆2 )(𝜇1 +𝜇2 )+λ2 𝜇1 (𝜆1 +𝜆2 +𝜇1 +𝜇2 )𝑁]
(12)
0
T λ1 λ2
0
vrin (t )dt
T { 𝑖𝑓
𝜇1
=
𝜇2
T  vein (t )dt
 0
v f (t )dt 0
𝜇𝑖
𝑒𝑖 = 𝑖 = 1,2 (13)
λ𝑖 +𝜇𝑖

Figure 5.CONTAINER COUNT WITH A FACTORY Φ=

𝑒1 (1−𝑒2 )
(14)
𝑒2 (1−𝑒1 )
DOWNTIME EVENT
(𝜆1 +𝜆2 +𝜇1 +𝜇2 )(𝜆1 𝜇2 −𝜆2 𝜇1 )
β= (𝜆1 +𝜆2 )(𝜇1 +𝜇2 )
(15)
From the deterministic analysis, we can conclude that more
initial collapsible containers can reduce the utilization of extra (b) 𝑏𝑠𝑖 (0) < 𝑏𝑛𝑒𝑒𝑑
containers. When the collapsible containers are less than a
threshold value 𝑏𝑛𝑒𝑒𝑑 , using more collapsible containers can When 𝑏𝑠𝑖 (0) < 𝑏𝑛𝑒𝑒𝑑 , extra containers are added
reduce the periodic utilization of extra containers. When the periodically into the system according to deterministic analysis.
initial number of collapsible containers is beyond 𝑏𝑛𝑒𝑒𝑑 , more The production rate of extra containers can be obtained as
initial collapsible containers can better protect the factory following:
disruption events.
[𝑏𝑛𝑒𝑒𝑑 −𝑏𝑠𝑖 (0)]/𝑐𝑠
𝑃𝑅𝑒 ≈ 𝑒𝑠 ∙ ⌈𝑏 (16)
𝑛𝑒𝑒𝑑 /𝑠𝑀⌉∙(𝑠𝑀 ⁄𝑐𝑓 )

3.2 Stochastic Analysis

According to the previous assumptions, the rated speed of
In this section, we consider the system encountering input extra containers is equal to the supplier rated speed. Thus,
multiple random disruption events on both the factory and the extra container number and cost per unit time are obtained,
supplier. Then average extra container per unit time depends on

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 𝐸𝑥𝑡𝑟𝑎𝐶𝑜𝑛𝑡𝑎𝑖𝑛𝑒𝑟𝑁𝑢𝑚𝑏𝑒𝑟 = 𝑃𝑅𝑒 ∙ 𝑐𝑠 (17)
Table 1. PARAMETERS FOR SIMULATION
𝐸𝑥𝑡𝑟𝑎𝐶𝑜𝑛𝑡𝑎𝑖𝑛𝑒𝑟𝐶𝑜𝑠𝑡 = 𝑃𝑅𝑒 ∙ 𝑐𝑠 ∙ 𝐶𝑒 (18)

𝐶𝑇 281 dollars per trip

4. COST SAVING AND SIMULATION VERIFACATION
From the stochastic analysis and the total cost saving 𝐶𝑒 100 dollars per extra container
formulas, we obtain the total cost saving. And the results are
shown in Fig. 6. 𝑇𝑡𝑟𝑎𝑛𝑠 1 day per trip

𝐶𝑜𝑠𝑡𝑆𝑎𝑣𝑖𝑛𝑔𝑡𝑜𝑡𝑎𝑙 𝑣𝑠 10 containers per day

20 containers per trip
= 𝐿𝑜𝑔𝑖𝑠𝑡𝑖𝑐𝑆𝑎𝑐𝑖𝑛𝑔 − 𝐸𝑥𝑡𝑟𝑎𝐶𝑜𝑛𝑡𝑎𝑖𝑛𝑒𝑟𝐶𝑜𝑠𝑡 𝑠𝑚
from the supplier to the factory
= (1 − 𝑚/𝑀)𝐶𝑇 /(𝑠𝑚/𝑐𝑠 )−𝑃𝑅𝑒 ∙ 𝑐𝑠 ∙ 𝐶𝑒 20 ∙ 𝑀/𝑚 containers per trip
(19) 𝑠𝑀
from the factory to the supplier
Unit time 1 day

λ𝑠 , λ𝑓 0.1

𝜇𝑠 , 𝜇𝑓 0.5

Figure 6. COST SAVING VS. bsi(0) WITH DIFFERENT

COLLAPSED RATES

From Fig. 6, higher collapsed rate leads to more cost saving

only when the initial number of collapsible containers is large
enough. The lower collapsed rate is more economic when the
number of collapsible containers limited to a small value.
A simulation model is built by using MATLAB code. In the
simulation, the exponential random function is used to generate
the downtime events to satisfy the stochastic property of the
system. The simulation can calculate the average cost saving per
unit time during the simulation time.
In the simulation study, the simulation time is set as 10000
unit time with step interval 0.01 repeated for 25 iterations. The
parameters are listed in Tab. 1, which is based on a real factory
scenario and the data is mockup for confidential reason.
Fig. 7 shows the comparison between the simulation result
and the mathematical result from the previous formulas.
Figure 7. COMPARISON BETWEEN SIMULATION
RESULT AND MATHEMATICAL RESULT
It can be observed that the analytic derivation of cost savings
matches the simulation results very well. The cost saving will
saturate when 𝑏𝑠𝑖 (0) → ∞ and the maximum cost saving is
equal to the logistic saving due to extra container cost is equal to
zero. Since the cost saving increases slightly when 𝑏𝑠𝑖 (0) is
large enough, there is no reason to have an extremely large
𝑏𝑠𝑖 (0).
In addition, the simulation takes a long time to calculate the
average cost saving. Normally, each scenario takes 20 minutes
and it needs hours to finish a rough curve showing different
scenarios of 𝑏𝑠𝑖 (0). However, the analytic method can estimate

6 Copyright © 2015 by ASME and General Motors

the curve in seconds with an acceptable precision. It substantially
reduces the calculating cycle of researching the tradeoff under
different parameters or variables.
5. CONCLUSION
This paper investigates the potential cost saving of using
collapsible containers in a supply chain system. Through the
analysis of cost classification and allocation, the calculation of
the cost in the system can be divided into two parts, the first
being the extra containers cost and the second being the logistic
saving. The deterministic analysis and stochastic analysis are
used to formulate the cost saving function depending on the
initial number of collapsible container and the collapsed rate.
From our simulation tests and the formulas, this paper
demonstrates the cost savings by using the Containerization
Method and illustrates the tradeoff between the collapsible
containers and the cost saving. The formulas can rapidly estimate
the system cost saving with a high precision.
of the 2008 Industrial Engineering Research Conference,
J.Fowler and S.Mason, Eds.
[9] Chang, Q., Liu, J., Biller, S., and Xiao, G.,“The Costs of
Downtime Incidents in Serial Multistage Manufacturing
Systems”, ASME Transaction, Journal of Manufacturing
Science and Engineering, Vol. 134, 2012.
[10] Chang, Q., Ni, J., Bandyopadhyay, P., Biller, S., and Xiao,
G., “Supervisory Factory Control Based on Real-Time
Production Feedback”, ASME Transaction, Journal of
Manufacturing Science and Engineering, Vol. 129, pp653-
660, 2007.
[11] Li, Jingshan, and Semyon M. Meerkov. “Production
systems engineering”. Springer, 2008.

ACKNOWLEDGMENTS
This work is supported in part by the General Motors R&D
Center.
The authors would like to thank Ms. Jingfang Tang for her
help in this work.

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