IntegratedSupplyChainManagement(2,5)

# IntegratedSupplyChainManagement(2,5) - Example Problem 49...

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Example Problem: 49 Node Problem Find minimum cost way to serve 49 locations Fixed costs Transport Mileage and volume related costs Problem description Demands ~ state population Fixed costs given (avg. \$77.9K) Demands/period = 0.00001 demand/person per period

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Two Fundamental Approaches Analytic location models Give insight Demands distributed like smooth peanut butter on bread Locate anywhere on the bread Discrete location models Demands only at specified sites Locate at specified candidate sites More like the chunky peanut butter analogy…. More realistic – able to capture more of real problem
First Fundamental Approach Approximating the difficult problem Develop an Analytic Model N is the number of facilities (DCs) Fixed cost as a function of N fN where f is the fixed cost per DC per period Transportation cost as a function of N HOW?

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Determining Service Areas Area of demand region is A Divide region into N equal sized diamonds N service areas Each diamond (service area) has an area of A/N Example with N=9 A/9
Determining Service Areas Assume we locate a facility at the center of each diamond So locating N facilities is equivalent to N service areas

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Average Distance from a Facility Let a=A/N, area of a single diamond Travel at 45 degrees to sides of diamond (euclidean distances) Average distance from a facility to a randomly selected demand point (Given uniformly distributed demands) 3 2 a Area = a
Average Distance with N Service Areas Divide region into N equal sized diamonds Each diamond has an area of A/N N A N A a a 2 3 1 dist. Avg.

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