Omni-Channel Network Design

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Transportation & Logistics
Example: Araz – Fashion for the Budget Conscious!
• Situation
n Araz is a fast-fashion retailer selling mainly to fashion conscious women on
a budget. They currently distribute their products from their own plants to
their own branded stores or directly from fulfillment centers to home for
online sales.
n They have decided to offer different delivery options for their online (e-
commerce & m-commerce) consumers:
w Home delivery
w Pick up in their stores
w Pick up in a convenience store (e.g. an attended pick up point)
w Pick up in an Automated Package Station (e.g. “un-attended” pick up point)
• How should Araz design this omni-channel network?
n Formulate a MILP to design physical flow through multiple channels
n Determine flow quantity through different channels and intermediate
facilities to open in order to minimize cost

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Material adapted from Ponce, E. (2017) 21
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Araz – Fashion for the Budget Conscious!

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Material adapted from Ponce, E. (2017) 22
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Araz – Model Formulation 3
1 ID 1 Convenience Store

0 CDC Retail Store

2 ID2 APS

6
Home

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Material adapted from Ponce, E. (2017) 23
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Araz – Fashion for the Budget Conscious!

c03=6.00 v3=0.50
D3=4500
c01=2.40 c13=2.20 c06=8.15
c14=2.10
S1=20,000
f1=1,100
v1=1.35 D4=15000
c04=5.85

v5=0.75
c05=6.25

c02=2.45 c25=1.05 D5=1000 D6=3000

c26=3.40

S2=5,000
f2=900
v2=1.60

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Material adapted from Ponce, E. (2017) 24
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Araz - Model in Spreadsheet

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Material adapted from Ponce, E. (2017) 25
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Araz - Solving Model in Spreadsheet

MIT Center for

Material adapted from Ponce, E. (2017) 26
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Araz – Fashion for the Budget Conscious!

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Material adapted from Ponce, E. (2017) 27
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Araz - Solution
Total Cost: $146,100 x03=4500

x04=15000

x02=4000 x25=1000 x26=3000

MIT Center for

Material adapted from Ponce, E. (2017) 28
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