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Logistics Planning: DR M Mathirajan Department of Management Studies Indian Institute of Science Bangalore
Logistics Planning: DR M Mathirajan Department of Management Studies Indian Institute of Science Bangalore
Dr M MATHIRAJAN
Department of Management Studies
Indian Institute of Science
Bangalore
Components of
logistics management :
Management actions
Planning
Implementation
Outputs of
logistics
Control
Natural resources
(land, facilities,
and equipments)
Human resources
Financial resources
Information
resources
Logistics management
Suppliers
Raw
In-process
materials inventory
Finished
goods
Customers
Logistics Activities
Customer Service
Plant and warehouse
site selection
Demand forecasting
Procurement
Distribution
communications
Packaging
Inventory control
Return goods handling
Material handling
Salvage and scrap
disposal
Order Processing
Traffic and
Parts and service
transportation
support
Warehousing and
storage
Marketing
orientation
(competitive
advantage)
Time and
place utility
Efficient
movement to
customer
Proprietary
asset
Demand uncertainty?
Labor costs?
(d) When should a firm use two or more sources for a part?
Storage
Product
Design
Decisions
Measurement
Decisions
Reward
Decisions
Process
Design
Decisions
Product
Decisions
Price
Decisions
Logistics
Systems
Engineering
Systems
Promotion
Decisions
Place (How,
where, how
much)
Inventory
Decisions
Production
Capacity
Decisions
Transportation
Decisions
Production
Scheduling
Decisions
Sourcing
Decisions
Shop Floor
Decisions
Marketing
Systems
Manufacturing
Systems
Inventories
Warehousing
Facility Location
Customer Service
Materials Handling
equipment selection
equipment replacement
order picking procedures
Packaging design
Order Processing
Production Scheduling
Logistics Planning
Decide what, when, how in three levels:
Strategic long range > 1 year
Tactical - < 1 year horizon
Operational frequently on hourly or daily basis
Examples of Decisions
Type
Strategic
Tactical
Operational
Location
#Facilities, size,
location
Inventory
positioning
Routing
Transportation
Mode
Seasonal Service
Mix
Replenishment Qty
and timing
Order Processing
(CS)
Selecting order
entry system
Expediting orders
Strategy/Control
system?
How much?
Where?
Which mode?
Which carrier?
Which route?
Shipment size and
frequency?
Where?, How
many? What size?
Allocation?
Transport Fundamentals
Most important component of logistics cost.
Usually 1/3 - 2/3 of total cost.
Transport involves
equipment (trucks, planes, trains, boats, pipeline),
people (drivers, loaders & un-loaders), and
decisions (routing, timing, quantities, equipment size,
transport mode).
When deciding the transport mode for a given product
there are several things to consider:
Mode price
Transit time and variability (reliability)
Potential for loss or damage.
NOTE: In developing countries we often find it necessary to
locate production close to both markets and resources,
while in countries with developed distribution systems people
can live in places far from production and resources.
let us guess
Goods
at
shipper
s
Freight
forwarde
r
warehou
se
Routes of Goods
Air
plane
termin
ai
r
al
Contain
se
er
vessel
a
termina
bulk
se
l goods
a
midpier
stream
barg
lan
e
d
lan
d
railway
truck
May
change
transpo
r-tation
modes
Freight
forwarde
r
warehou
se
Goods at
consigne
es
Rail
High fixed costs, low variable costs
High volumes result in lower per unit (variable) costs
Highway
Lower fixed costs (dont need to own or maintain roads)
Higher unit costs than rail due to lower capacity per truck
Terminal expenses and line-haul expenses
Water
High terminal (port) costs and high equipment costs (both fixed)
Very low unit costs
Air
Substantial fixed costs
Variable costs depend highly on distance traveled
Pipeline
Highest proportion of fixed cost of any mode due to pipeline
ownership and maintenance and extremely low variable costs
Vehicle Routing:
- Separate single origin and destination:
Once we have selected a transport mode and have
goods that need to go from point A to point B, we
must decide how to route a vehicle (or vehicles)
from point A to point B.
Given a map of all of our route choices between A and
B we can create a network representing these
choices The problem then reduces to the problem of
finding the shortest path in the network from point
A to B.
This is a well solved problem that can use Dijkstras
Algorithm for quick solution of small to medium
(several thousand nodes) sized problems.
Vehicle Routing:
- Multiple Origin and Destination Points
Suppose we have multiple sources and multiple
destinations, that each destination requires some integer
number of truckloads, and that none of the sources have
capacity restrictions [No Capacity Restriction].
In this case we can simply apply the transportation method
of linear programming to determine the assignment of
sources to destinations.
Sources
Destinations
Vehicle Routing:
- Coincident Origin and Destination: The TSP
If a vehicle must deliver to more than two customers, we must
decide the order in which we will visit those customers so as to
minimize the total cost of making the delivery.
We first suppose that any time that we make a delivery to
customers we are able to make use of only a single vehicle, i.e.,
that vehicle capacity of our only truck is never an issue.
In this case, we need to dispatch a single vehicle from our depot
to n - 1 customers, with the vehicle returning to the depot
following its final delivery.
This is the well-known Traveling Salesman Problem (TSP).
The TSP has been well studied and solved for problem instances
involving thousands of nodes. We can formulate the TSP as
follows:
TSP Formulation
Minimize
c x
ij ij
i I j J
ij
i I
1, j J
ij
( i , j ) E (U )
U 1, U N
xij {0,1}, i I , j J
Illustration of VRP
123
44
50
29
112
58
90
77
76
88
Depot
57
59
39
176
89
65
124
115
98
(Outlier)
125
Vehicle Routing
Find best vehicle route(s) to serve a set of orders from
customers.
Best route may be
minimum cost,
minimum distance, or
minimum travel time.
Orders may be
Delivery from depot to customer.
Pickup at customer and return to depot.
Pickup at one place and deliver to another place.
Complications
Many Costs:
Fixed charge.
Variable costs per loaded mile & per empty mile.
Waiting time; Layover time.
Cost per stop (handling).
Loading and unloading cost.
More Complications
Time windows for pickup and delivery.
Hard vs. soft
Compatibility
Vehicles and customers.
Vehicles and orders.
Order types.
Drivers and vehicles.
Driver rules (DOT)
Max drive duration = 10 hrs. before 8 hr. break.
Max work duration = 15 hrs. before 8 hr break.
Max trip duration = 144 hrs.
Simple Models
Homogeneous vehicles.
One capacity (weight or volume).
Minimize distance.
No time windows or one time window per
customer.
No compatibility constraints.
No DOT rules.
VRP Solutions
Heuristics
Construction: build a feasible route.
Improvement: improve a feasible route.
Not necessarily optimal, but fast.
Performance depends on problem.
Worst case performance may be very poor.
Exact algorithms
Integer programming.
Branch and bound.
Optimal, but usually slow and applicable for small size
problem
Difficult to include complications.
APPLICATIONS OF VRP
The VRP is applicable in many practical situations directly related to
the physical delivery of goods such as
distribution of petroleum products,
distribution of industrial gases,
newspaper deliveries,
delivery of goods to retail store,
garbage collection and disposal,
package pick-up and delivery,
milk pick-up and delivery, etc.
the non-movement of goods such as
picking up of students by school buses,
routing of salesmen,
reading of electric meters,
preventive maintenance inspection tours,
employee pick-up and drop-off , etc.
In COVERS
Efficient
Heuristic Procedures
NNH
MNNH
MSCWH
Simulation Features
Manipulate the System Generated Routes
Completely User Generated Routes
COVERS Handles
Multi-Depot VRP
Heterogeneous VRP
Minimizing the total distance traveled by the vehicles and/or the number of vehicles
used.
UNDER THE CONSTRAINTS THAT
ASSUMPTIONS
Vehicle capacity is known and constant (homogenous)
Tot
Quantities
(Units)
# Variables
Including (0, 1)
Variables
# (0, 1)
Variables
#
Constraints
Optimal
Distance
(Km.)
# Routes
# Iterations
(LINDO)
CPU Time
(AT 486)
61
48
16
60
13.2
45
71
75
25
85
26.4
330
79
108
36
114
28.6
353
106
147
49
147
31.0
2780
23
117
192
64
187
31.0
70724
80
132
243
81
225
37.4
43021
667
(11 Mts)
10
137
300
100
270
47.8
4963340
100800
(28 Hrs.)
Sutcliffe and Board (1990) estimated that a simple extrapolation of Waters (1988) ILP approach using
the SCICONIC software might take nearly 1,20,000 years of CPU time on a VAX 8600 machine to solve a
VRP with 38 pick-up points!
Optimal Solution of VRP: Transporting Mentally Handicapped Adults to an Adult Training Center. JORS, 41(1), 61-67.
HEURISTIC ALGORITHMS
(NIH)
(CIH)
(PCWH)
(SCWH)
(CHH)
(NHH)
Modified NNH
(MNNH)
Modified SCWH 1
(MSCWH-1)
Modified SCWH 2
(MSCWH-2)
Timings
#
Commuters
# Pickup
Points
#
Routes
Total Distance
per Trip
(Km.)
Seat
Utilization (%)
06.15 02.15 PM
3659
303
64
1977.0
89.0
FG
07.30 04.15 PM
3999
313
66
2163.0
94.3
AG
08.45 05.30 PM
3042
286
53
1808.3
90.0
02.15 10.15 PM
975
242
30
1056.7
54.0
10.15 06.15 AM
40
----
----
----
----
11715
410
213+
(426)
7005.0
(14010)
----
Total
Each Bus Route (Trip) Repeated; Two Trips a day, Once for Pick-up and once for Drop-off.
Shift 1
A
Shift 2
FG
Shift 3
AG
Shift 4
B
Total Distance
(Km.)
Savings
(in %)
CPU Time
PC/AT 486
@ 33 MHz
(Minutes)
Existing
Practice
(Manual)
1977.0
2163.0
1808.3
1056.7
7005.0
-----
NIH
1875.8
2047.7
1734.1
890.3
6547.9
6.5
12
CIH
2155.2
2322.3
1914.2
1020.7
7412.4
- 5.8
52
PCWH
1803.5
2026.1
1761.1
1080.9
6671.6
4.76
19
SCWH
2139.2
2306.6
1889.2
1014.5
7349.5
- 4.9
18
CHH
1903.8
2047.7
1749.2
964.7
6665.4
4.85
55
NNH
1822.9
2063.2
1708.0
900.0
6494.1
7.29
MNNH
1817.7
2040.8
1740.7
858.9
6458.1
7.81
MSCWH-1
1796.2
2066.4
1687.5
910.2
6460.3
7.78
MSCWH-2
1799.4
2047.0
1688.5
908.5
6443.4
8.02
----
Shift 1
A
Shift 2
FG
Shift 3
AG
Shift 4
B
Total Routes
Reduction in
Trips (%)
Existing
Practice
(Manual)
64
66
53
30
213
NIH
60
63
51
23
197
7.51
CIH
65
69
52
27
213
PCWH
63
68
56
36
223
- 4.7
SCWH
65
70
55
28
218
- 2.3
CHH
60
62
51
25
198
7.04
NNH
57
64
50
24
195
8.45
MNNH
57
63
51
23
194
8.92
MSCWH-1
58
63
49
24
195
8.45
MSCWH-2
58
63
49
24
194
8.92
-----
(NHH)
Modified NNH
(MNNH)
Modified SCWH-2
(MSCWH-2)
USER