lect25 - Transportation Management Network & Hubs Chris...

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Chris Caplice ESD.260/15.770/1.260 Logistics Systems Dec 2006 Transportation Management Network & Hubs
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© Chris Caplice, MIT 2 MIT Center for Transportation & Logistics – ESD.260 Distribution System Approach Distribution System ± Number and location of transshipment points ± Routes and schedules of vehicles ± Routes and schedules of items flowing Operational Tactical Strategic Decisions made at different times ± Strategic – longer scope and less data available (yr+) ± Tactical – shorter scope w/ planning data (week to yr) ± Operational – very short scope real data (daily)
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© Chris Caplice, MIT 3 MIT Center for Transportation & Logistics – ESD.260 The Network Design Problem V V V V V V V V P P P P P W W W W W W W C C C C C C C C C C C C C C C Treat each potential facility location as a node
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© Chris Caplice, MIT 4 MIT Center for Transportation & Logistics – ESD.260 V V V V V V V V P PP P P WW W W W CC C CCC C C C C C C C C C The Network Design Problem Treat shipment flows as links or arcs
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© Chris Caplice, MIT 5 MIT Center for Transportation & Logistics – ESD.260 The Network Design Problem Network design is the selection of nodes and links that minimize total cost V V V V P P P W W W W C C C C C C C C C C C C C C C
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© Chris Caplice, MIT 6 MIT Center for Transportation & Logistics – ESD.260 Distribution Network Design Three key questions for Distribution ND ± How many DCs should there be? ± Where should the DCs be located? ± For each SKU and each customer: ² which DC should serve the customer, and ² which plant should serve the DC? Cost & Performance Trade-Offs ± Transportation Costs (Inbound versus Outbound) ± Facility Costs (Fixed versus Throughput) ± Inventory Costs (Cycle versus Safety Stock) ± Customer Service (Availability versus Order Cycle Time)
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© Chris Caplice, MIT 7 MIT Center for Transportation & Logistics – ESD.260 Facility Location Cost Trade-Offs 0 2 4 6 8 10 12 14 16 18 20 Number of Warehouses Freight Cost Facility Costs Inventory Cost Total Costs
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© Chris Caplice, MIT 8 MIT Center for Transportation & Logistics – ESD.260 A “Simple” MILP Formulation ijkl k il Where: X Total annual volume of product i produced at plant j and shipped through DC k on to customer zone l Z {0,1};1 if the DC at k is selected, else 0 D = annual demand for product i at custom = = ij k k ijkl er zone l P = maximum annual capacity for product i at plant j V = maximum annual throughput volume at DC at k F = The fixed annual operating cost of a DC at k C The variable cost to produce one = ijkl ij ijk ik ikl unit of product i at plant j and ship it through DC k to cu C= C [ m n f g ]+ stomer TL +DCTHPT zone l so +LT t L tha IJK L K ijkl ijkl k k i=1 j=1 k=1 l=1 k=1 JK ijkl il j=1 k=1 KL ijkl ij k=1 l=1 IJL ijkl k k i=1 j=1 l=1 ijk Minimize: C X F Z Subject to: X D ; for all I and L X P ; for all I and J X V Z ; for all K X 0 , for all I, J, K Z + ∑∑∑∑ ∑∑ ∑∑∑ k = {0,1} , for all K How big is this formulation?
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This note was uploaded on 12/06/2011 for the course ESD 1.260j taught by Professor Chriscapliceesd during the Fall '06 term at MIT.

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lect25 - Transportation Management Network & Hubs Chris...

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