colgen2_digest

colgen2_digest - Column Generation II : Application in...

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Column Generation II : Application in Distribution Network Design Teo Chung-Piaw (NUS) 27 Feb 2003, Singapore
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1 Supply Chain Challenges 1.1 Introduction Slide 1 Network of facilities: procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. 1.1.1 Distribution Network Slide 2 Distribution Network Design looks at strategies to distribute finished prod- ucts to customers efficiently at lowest cost - a difficult but important problem N1 Factory storage with drop shipping Warehouse storage with package carrier delivery Local storage with last mile delivery Factory or Warehouse storage with consumer pickup Local storage with consumer pickup Note 1 Delivery Options Drop shipping refers to the practice of shipping directly from the manufac- turer to the end consumer, bypassing the warehouse who takes the order and initiates the delivery request. Delivery costs tend to be high with this option, but it eliminates the need to setup and manage warehouse delivery operations. In warehouse storage with package carrier delivery, the customers request are met from a few centralized warehouse strategically located in the re- gion. Transportation cost tends to be lower than the previous option, but inventory holding and warehouse management costs increase. 1
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In the local storage with last mile delivery option, more warehouses need to be setup and spread across the region (leading to higher warehouse and inventory cost), but transportation cost will be lower. In the factory/Warehouse storage with consumer pickup approach, inven- tory is stored at the factory or warehouse but customers place their orders online and then go to designate pickup points to collect their orders. In- ventory and warehousing cost will be low due to demand aggregation at the factory. however, new pickup sites have to built, leading to higher facility costs. A significant information infrastructure is also needed to provide visibility of the order until the customer picks it up. In the last option, inventory is stored locally at a warehouse (or retail outlet) nearby. Customers either walk into the warehouse/retail outlet or place an order online or on the phone and pickup at the warehouse/retail store. Local storage increases inventory costs but transprotation cost re- duces. This option is more suitable for fast moving goods so that there is only marginal increase in inventory even with local storage. Slide 3 How to set up the distribution network to move products from the factory to the customers? 2N e t w o r k D e s i g n 2.1 Issues 2.1.1 Location Slide 4 Distribution Centers (DC): An intermediate storage location for stocking of finished products for subsequent shipment to customers.
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This note was uploaded on 12/04/2011 for the course ESD 15.094 taught by Professor Jiesun during the Spring '04 term at MIT.

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colgen2_digest - Column Generation II : Application in...

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