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Discussion on current situation on Herman Miller¶s transportation and Transshipment models

In this part, we would like to have an overall of Herman Miller¶s transportation system between warehouses and dealers. The company¶s products and services are offered to most of customers under standard trade credit terms and are sold through distribution channels. In our case, we are focus on the distribution channels in Michigan. Herman Miller distributes its stocks through three warehouses which located at Holland, Springlake and Zeeland within Michigan. All of these warehouses are responsible to fulfil any product orders. For the next few months, seven dealers which are located around the three warehouses with large demand of Herman Miller¶s star product Aeron chair. The three major warehouses need to fill the market demand with their safety stocks, but the quantity available at each warehouse is limited which is just enough to cover total demand. And the backup safety stock for each warehouses are 2000units (Holland), 1500 units (Springlake), 1500 units (Zeeland). The following table shows demand requirement of each dealer. Dealers Total order quantity (unit) Pontiac 650 Ann Arbor 575 Frankenmuth 550 Grand rapids 417 Pottage 310 Lansing 205 Traverse 190

Contributing to the additional freight expenses is a significant increase in diesel prices in the United States.According to Herman Miller¶s Annual report (2010). Reflect to our case. were modestly higher in fiscal 2010 compared to fiscal 2009 levels. In order to maximum profit. Dealers Warehouses Pontiac Ann Arbor Frankenmuth Grand rapids Pottage Lansing Traverse Holland $7 $7 $6 $2 $4 $5 $9 Springlake . which causes the difference in transportation costs. freight expenses as a percentage of sales. the distance between dealers and each warehouse vary. Herman Miller dedicated to consolidate shipment. increase trailer utilization. and engage lower cost carriers. The transportation costs of per Aeron chair delivery from each warehouse to each dealer are shown as follow.

Warehouse dealers Pontiac Holland Ann Arbor Frankenmuth Springlake Grand Rapids Pottage Lansing Zeeland Traverse .$2 $7 $7 $3 $5 $5 $6 Zeeland $7 $6 $6 $2 $4 $5 $7 Now distribution management¶s objective is to determine the routes to be used and the quantity to be shipped via each route that will provide the minimum total transportation costs.

Data Analysis: Let X11=the amount of Aeron chair Holland supply to Pontiac X12=the amount of Aeron chair Holland supply to Ann Arbor X13= the amount of Aeron chair Holland supply to Frankenmuth X14= the amount of Aeron chair Holland supply to Grand Rapids X15= the amount of Aeron chair Holland supply to Pottage X16= the amount of Aeron chair Holland supply to Lansing X17= the amount of Aeron chair Holland supply to Traverse X21= the amount of Aeron chair Springlake supply to Pontiac X22= the amount of Aeron chair Springlake supply to Ann Arbor X23= the amount of Aeron chair Springlake supply to Frankenmuth X24= the amount of Aeron chair Springlake supply to Grand Rapids X25= the amount of Aeron chair Springlake supply to Pottage X26= the amount of Aeron chair Springlake supply to Lansing X27= the amount of Aeron chair Springlake supply to Traverse ..

X31= the amount of Aeron chair Zeeland supply to Pontiac X32= the amount of Aeron chair Zeeland supply to Ann Arbor X33= the amount of Aeron chair Zeeland supply to Frankenmuth X34= the amount of Aeron chair Zeeland supply to Grand Rapids X35= the amount of Aeron chair Zeeland supply to Pottage X36= the amount of Aeron chair Zeeland supply to Lansing X37= the amount of Aeron chair Zeeland supply to Traverse Objective Function: ZMin: 7X11+7X12+6X13+2X14+4X15+5X16+9X17+2X21 +7X22+7X23+3X24+5X25+5X26+6X 27+7X31+6X32+6X33+2X34+4X35+5X36+7X37 Constraints: X11+X12+X13+X14+X15+X16+X17<=2000 X21+X22+X23+X24+X25+X26+X27<=1500 X31+X32+X33+X34+X35+X36+X37<=1500 X11+X21+X31=650 X12+X22+X32=575 X13+X23+X33=550 X14+X24+X34=417 X15+X25+X35=310 X16+X26+X36=205 X17+X27+X37=190 No negative variables The following chart shows the transportation schedule Dealers .

Warehouses Pontiac Ann Arbor Frankenmuth Grand Rapids Pottage Lansing Traverse Holland 0 0 550 7 0 0 0 Springlake 650 0 0 0 0 0 190 Zeeland 0 575 .

the minimum total transportation cost is $ 12289. Sensitivity Analysis on Constraints Constraints Final .0 410 310 205 0 Therefore.

Shadow Constraint Allowable Allowable Cell Name Value Price R. Side Increase Decrease $W$6 Constrait1 lhs 557 0 2000 1E+30 1443 $W$7 Constrait2 lhs 840 0 1500 1E+30 .H.

660 $W$8 Constrait3 lhs 1500 0 1500 7 410 $W$9 Constrait4 lhs 650 2 650 660 650 $W$10 Constrait5 lhs 575 6 575 410 7 $W$11 .

Constrait6 lhs 550 6 550 1443 550 $W$12 Constrait7 lhs 417 2 417 1443 7 $W$13 Constrait8 lhs 310 4 310 410 7 $W$14 Constrait9 lhs 205 5 .

Same with Holland. As long as Holland warehouse has enough stock or more to satisfy the demand. This is because the other two warehouses have enough stocks to satisfy market demand.205 410 7 $W$15 Constrait10 lhs 190 6 190 660 190 Constraint1: The safety stock in Holland warehouse can have an infinite increase and a decline of 1443 without altering the objective function. For every one unit of demand which changes within the range. the objective function will be changed. This occurs due to Pontiac receiving all its Aeron chair from the Springlake which has . if the safety stock of Holland decreased by more than 1443 units. Constraint2 The safety stock in Springlake can have an infinite increase and a decrease of 660 without changing objective function. as long as Springlake warehouse has enough stock or more to satisfy the damned. the transport cost would not be changed. the transport cost would not be changed. Constraint4 The Aeron chair market demand for Pontiac can fluctuate within the range of 0 units to 1310 units with changing the objective function according to the shadow price. and the change would be unkown. will result in the transportation cost changing by 2. Again. Constraint3 The safety stock in Zeeland can be changed within the range of 1190 units to 1507 units with changing the objective function according to the shadow price. However. the transportation cost will not be changed.

The transportation cost of each unit of Aeron chair between Pontiac and Springlake is $2. Thus. Constraint6 Market demand for Aeron chair in Frankenmuth can be changed within the range of 0 unit to 1993 units with changing the objective function according to the shadow price. And Pottage is getting all its Aeron chair from the Zeeland warehouse. For each unit of demand which changes within the range. Constraint7 Market demand in Grand Rapids for Aeron chair can be changed within the range of 410 units to 1860 units with changing the objective function according to the shadow price. The transportation cost between Lansing and Zeeland is $5. and Lansing gets all of Aeron chair from Zeeland. For each unit of change in demand. Constraint5 Market demand for Aeron chair in Ann Arbor can be changed within the range of 568 units to 985 units. because Ann Arbor is getting all its Aeron chair from Zeeland. For each unit of demand which changes with the range. Thus. the transportation cost will be changed by $6. for each unit of change in demand. Constraint 10 Market demand in Traverse for Aeron chair can be changed within the range of 0 unit and 850 units through changing the objective function according to the shadow price. will result in the transportation cost changing by 6. the transportation cost of each unit of Aeron chair between Ann Arbor and Zeeland is $6. because Frankenmuth is getting all its Aeron chair from Holland (spare stock available).spare stock. For each unit of demand which changes within the range. will result in the transportation cost changing by 6. the transportation cost of each unit of Aeron chair between Frankenmuth and Holland is $6. . This can be obtained through altering the objective function according to the shadow price. Constraint8 Pottage's market demand for Aeron chair can be changed within the range of 303 units to 720 units with changing the objective function according to the shadow price. the transportation cost will be changed by $2. the transportation cost will be changed by $4. Constraint 9 Lansing's market demand for Aeron chair can be changed within the range of 198 units to 615 units by changing the objective function according to the shadow price. will result in the transportation cost changing by $5. For each unit of demand which changes within the range.

it gets stock from Springlake which has spare stock. The transportation cost between Traverse and Springlake is $6. .