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MITESD_273JF09_project

# MITESD_273JF09_project - (iii Show that your solution is...

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Professor Simchi-Levi 1.270J Distribution and Logistics PROJECT The following case study concerns a retail company that has a central warehouse in the Boston area. This warehouse serves 24 retailers all located in that region. Our objective is to establish effective reorder intervals for a single product that accounts for more than 80 percent of total sales. The company uses direct shipping strategy to distribute the product, i.e., each truck delivers items to one retailer per trip. Table 1 provides information on the warehouse and the 24 retailers served by it: the X and Y coordinates for each retailer and the warehouse, D , the demand rate per year for the main product faced by each retailer, H , cost of holding an item per unit of time (year) at each retailer and at the warehouse. Each time the warehouse delivers items to a retailer there is an additional set-up cost proportional to the distance between the warehouse and that retailer. This cost is approximated by αd i + C where d i is the distance between the warehouse and the retailer, α = 0 . 32 dollar per mile and C = 150\$. Finally, every time the warehouse places an order, it pays a set up cost of 400\$. (i) Find an effective reorder interval for each retailer and the warehouse. (ii) Find the total cost associated with your distribution strategy.

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Unformatted text preview: (iii) Show that your solution is within 6% from the optimal solution. (iv) Can you improve the solution? Table 1 Retail X Y Holding Cost Demand No. \$/item/year in a Year 4.7 3.9 1 1 0.2 5.6 10 200 2 2.7 0.9 10 700 3 6.1 4.3 5 50 4 7.1 7.9 2 20 5 8.4 2.4 10 300 6 5.7 6.1 2 20 7 8.7 6.2 2 40 8 1.5 4.6 10 500 9 9.9 4.3 3 60 10 7.9 2.9 10 70 11 9.7 2.5 3 80 12 6.5 1.5 2 700 13 3.3 5.8 2 900 14 3.6 9.1 10 600 15 6.9 0.6 14 500 16 5.0 0.5 5 1200 17 5.7 6.8 10 600 18 3.7 8.0 3 300 19 3.7 5.6 5 400 20 5.7 4.7 4 500 21 6.3 3.2 3 50 22 3.4 4.4 5 100 23 5.1 3.8 3 70 24 4.0 6.0 5 150 Retailer # is the warehouse. The coordinates are given in hundreds of miles. MIT OpenCourseWare http://ocw.mit.edu ESD.273J / 1.270J Logistics and Supply Chain Management Fall 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms ....
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MITESD_273JF09_project - (iii Show that your solution is...

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