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Pan American Advanced Studies Institute Simulation and Optimization of Globalized Physical Distribution Systems Santiago, Chile August, 2013. PASI Project: Case #2. P an American A lliance for S upply I mprovement: Beverly Kris Jaeger Alejandro MacCawley Marie-Eve Rancourt

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P an american a lliance for s upply i mprovement beverly kris jaeger alejandro maccawley

Pan American Advanced Studies InstituteSimulation and Optimization of Globalized Physical Distribution SystemsSantiago, Chile August, 2013

PASI Project: Case #2

Pan American Alliance for Supply Improvement:

Beverly Kris Jaeger

Alejandro MacCawley

Marie-Eve Rancourt

Carlos Solorio-Magana

ShanthiMuthuswamy


There s a challenge to be met

There’s a challenge to be met …

  • Agenda

    • Introduction

      • Current State

      • The Mission

    • Methods

      • Models & Paths

      • Calculations & Computations

    • Solution Options

      • Implications

      • Further considerations

    • PASI Objectives

Interpretations

& Assumptions


Problem overview case 2

Problem Overview: Case 2 

  • What do we ‘know’?

  • Introduction


Problem overview

Problem Overview

  • 6 Manufacturing Plants

    • Newark NJ, St Louis MO, Springfield MO

      Memphis TN, Fort Worth TX , & Mexicali

  • 5 Current Distribution Centers

    • Canada: Toronto

    • USA: Salt Lake, Tulsa OK

      Allentown PA, Atlantic City, NJ

  • 2 Candidate DCs

    • Oakland CA

    • Los Angeles

DC

?

  • Introduction


Problem overview1

Problem Overview

  • DC Leases Expiring in 18 months:

    • Toronto

    • Salt Lake City

  • Customers

    • Retailers across US and Canada

    • US Customers must be serviced by a US-based Distribution Center

DC

  • Introduction


P an american a lliance for s upply i mprovement beverly kris jaeger alejandro maccawley

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  • Introduction


P an american a lliance for s upply i mprovement beverly kris jaeger alejandro maccawley

Problem Formulation

Decisions

Objective

  • Introduction

  • Active/open DC (yj)

  • Size of new DC (S)

  • Outbound flows (xjk)

    • Inbound flows given (% from each plant)

Minimize:

  • Fixed & variables costs for the active DC(s)

    • The fixed cost of new DC is a function of S

  • Transportation costs

    • Inbound and outbound


What is our mission

What is our mission?

  • Measurable challenges

    • Reduce total supply chain costs

    • Reduce delivery times

  • Solution(s)

  • Solution(s)

  • Introduction


The challenges q1 q2

The Challenges, Q1 & Q2

  • Q1: ID optimal location in Western NA

    • Salt Lake City (SL)

    • Los Angeles (LA)

    • Oakland (O)

  • Q2: ID optimal location serving Western CAN

    • Salt Lake City

    • Toronto (T)

    • LA or O

  • Introduction


Q1 q2 global approach

Q1 & Q2: Global Approach

  • Salt Lake City USA (as is currently)CAN

  • Oakland USA (candidate)CAN

  • Los AngelesUSA (candidate)CAN

SL

O

LA

  • Introduction


P an american a lliance for s upply i mprovement beverly kris jaeger alejandro maccawley

Q1 & Q2: Global Approach

  • Salt Lake City USA TorontoCAN

  • OaklandUSA TorontoCAN

  • Los AngelesUSA TorontoCAN

T

SL

O

T

T

LA

  • Introduction


The challenges specific

The Challenges, Specific

  • For location serving Western North America:

    • Sizing of DC for peak inventory

    • Impact to inventory, freight, transit time, & DC costs

  • For locationserving Western CAN:

    • Sizing of DC to support customer demand

    • Associated costs for DC

  • Introduction


Our approach as a team

Our Approach as a Team

  • Method


Fundamental phases

Fundamental Phases

  • Plant to DC

  • Within DC

  • DC to Customer

DC

DC

DC

  • Method


Fundamental phases1

Fundamental Phases

  • Plant to DC

  • Within DC

  • DC to Customer

DC

  • Method


Plant to dc

Plant to DC

DC

  • Method


Plant to dc1

Plant to DC

DC

  • Shipping distance & rates/mile

  • Method


Plant to dc2

Plant to DC

DC

  • Given factors:

    • Truck can drive 500 miles/day

    • Average of 40K lbs/shipment

    • Ship combination of TL & LTL

    • 100% of freight paid by Plant

  • Assumptions:

    • Only ground freight used

  • Method


Plant to dc inbound trans

Plant to DC: Inbound Trans.

  • Method & Model


Fundamental phases2

Fundamental Phases

  • Plant to DC

  • Within DC

  • DC to Customer

DC

DC

DC

  • Method


Fundamental phases3

Fundamental Phases

  • Plant to DC

  • Within DC

    DC to Customer

DC

  • Method


Dc to customer

DC to Customer

DC

  • Method


Dc to customer1

DC to Customer

DC

  • Method


Dc to customer2

DC to Customer

DC

  • Given factors:

    • Truck can drive 500 miles/day

    • Average of 25,000 lbs/shipment

    • Ship combination of LTL &TL

    • 100% OB freight paid by Plant

    • US DC serves US customer

  • Assumptions

    • No stop charges

    • Pallet weight includes tare & product

  • Method & Model


Dc to customer3

DC to Customer

  • Model:

  • Method & Model


Fundamental phases4

Fundamental Phases

  • Plant to DC

  • Within DC

  • DC to Customer

DC

DC

DC

  • Method & Model


Fundamental phases5

Fundamental Phases

  • Plant to DC

  • Within DC

  • DC to Customer

DC

  • Method & Model


Existing dc costs

Existing DC Costs

DC

Size and costs for the two new candidates, LA and Oakland???

  • Method


Dc costs

DC “Costs”

DC

  • Given factors:

  • Average 11 sqft/pallet stored

  • Averages 1,500 lbs of product per pallet in DC inventory

  • Average 9 turns/yearfor the network ~40 daysof Supply

  • Peak Inventory levels up to 12% over the average level

  • Toronto is 100% utilized now

  • Candidate DC space costs for LA & Oakland are given

  • { $6.25 per square foot for fixed

  • { $0.095 per lb for variable cost

  • Method & Model


Size for the new dc inventory

Size for the new DC inventory

DC


Modeling warehouse capacity

Modeling warehouse capacity


Warehouse capacity fast movers

Warehouse capacity (fast movers)

Convert in squared feet: Sf = 11/1,500 qf


Warehouse capacity s l o w m o v e r s

Warehouse capacity (s l o w m o v e r s)

Convert in squared feet: Ss = 11/1,500 qs


Dc design justification

DC Design & Justification

  • Unknowns, affecting stacking height:

    • Height of packed goods

    • Fragility of packed goods

       Stack a max of 3 high with block stacking

  • Unknowns, affecting configuration

    • Perishable items

    • ABC Control Breakdown

    • Slow vs. fast mover profile

      Block stacking for fast, Pallet rack for slow

  • Method & Model


Dc facility sizing convention

DC Facility Sizing Convention

  • 40% Bulk/Reserve + Fast Pick

    • Fast movers – block stacking; Slow movers – pallet racks

  • 60% Other storage support

    • Clearance, Aisles, Shipping/Receiving,Pallet & Vehicle Stow

Slow movers

Fast movers

3

3

  • Method & Model

S* = 246,000


Toronto extra capacity calculation

Toronto Extra Capacity Calculation

  • Toronto is currently at full capacity

  • Extra DC size calculated in sqft: 44,554

  • DC fixed and variable costs calculated using only the extra space added to serve West CAN

  • Method  Options


Salt lake city new option

Salt Lake City New Option

  • Current DC size at SLC in sqft: 500,000

  • New DC size calculated in sqft: 246,000

  • Lease expires in 18 months

  • SLC new option: Rent only ½ the current space

  • Advantages

    • No new hiring, training

    • No new scoping required

    • CODB known, unchanged

    • Laws and regulations known

  • Method  Options


Outcomes total landed costs

Outcomes: Total Landed Costs

  • Method & Model

  • Outcomes


Outcomes total landed costs1

Outcomes: Total Landed Costs

  • Outcomes


Outcomes total landed costs by number of dcs

Outcomes: Total Landed Costs by number of DCs

  • Outcomes


Outcomes for service time

Outcomes for Service Time

Computed Demand: 84% from US customers, 16% from Canadian customers

  • Outcomes


Outcomes for roi

Outcomes for ROI

  • Outcomes


Summary

Summary

  • Computed Landed Costs

  • Computed Service Times

  • Two Options:

    • LA  US, Toronto  Canada

    • SLC New  US, Toronto  Canada

  • “Solutions”


P an american a lliance for s upply i mprovement beverly kris jaeger alejandro maccawley

CC

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  • Introduction


P an american a lliance for s upply i mprovement beverly kris jaeger alejandro maccawley

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  • Introduction


Considerations recommendations

Considerations & Recommendations

  • Product life cycles and turnover

  • Safety stock and demand variability

  • Load consolidation opportunities

  • Other transportation alternatives

  • Opportunities for DCs in other locations

  • Investigation into additional landed cost factors

  • External factors: workforce, unions, government, political unrest, regulations, CODB …


Considerations recommendations1

Considerations & Recommendations

  • Size and orientation of racks and shelving

  • Storage configuration profile: Selective racks, push-backs, drive-through, block stacks, combo

  • Number and width and orientation of aisles

  • Clearance height available within the building

  • Fast-pick areas, Storage and retrieval systems

  • Special support areas, regional consideration


Pasi project objectives

PASI & Project Objectives

  • Apply concepts practically

    • Real-world problem

    • With interpretations

      assumptions & considerations

  • Collaborate across:

    • Cultures & Universities

    • Backgrounds & Perspectives

  • Experience & Enjoy!


Pasi project objectives1

PASI & Project Objectives

  • Apply concepts practically

    • Real-world problem

    • With interpretations

      assumptions & considerations

  • Collaborate across:

    • Cultures & Universities

    • Backgrounds & Perspectives

  • + Experience & Enjoy!

Thank You Alice, Jorge & PASI!!


P an american a lliance for s upply i mprovement beverly kris jaeger alejandro maccawley

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