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Basic Optimization Training

Basic Optimization Training

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Basic Optimization Training

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  1. Basic Optimization Training LLamasoft, Inc October 2008

  2. Optimization Course Overview • Course Goal: Understand the basics of supply chain optimization through lecture, computer exercises, and coaching • Course Objective: Students will be able to use the software, with minimal assistance, to correctly build a supply chain model; add the basic components of optimization to the model; perform an optimization; interpret the results through outputs; and perform an infeasibility analysis.

  3. Agenda • Overview of Model Components • Optimization Basic Components • Structure • Cost • Constraints • Infeasibility Analysis • Optimization Results • Review

  4. Model and Optimization Overview

  5. Model Elements

  6. Understanding Optimization What is the optimal network structure? Thousands of possibilities… • Evaluate millions of alternatives, find the global optimal structure: lowest cost structure that meets the constraints • Determine the optimal supply chain network structure using MIP/LP programming …One Optimal Answer!

  7. Optimization Basic Component 1 Structure

  8. Learning Objective- Structure • Explain the basic components to modeling in the software • Use the components to create a supply chain network • Perform a network optimization Goal: Successfully design a new optimal supply chain network using the software

  9. FW1 CZ1 P1 FW2 CZ2 PW1 P2 FW3 S1 CZ3 PW2 CZ4 FW4 P3 S2 CZ5 FW5 PW3 CZ6 Example Network Design- Sites

  10. Structure • 6 Essential Elements in Models • Sites • Products • Demand • Sourcing Policies • Transportation Policies • Inventory Policies

  11. Exercise 1: Network Optimization

  12. Model Folder • Go to Computer and Create Folder: C://Llamasoft/Training/Optimization

  13. Open Supply Chain Guru Start

  14. Add a New Model • Go to File  Add A New Model

  15. Saving Models and Projects • Save Model in Training Folder: C://Llamasoft/Training/Optimization • Save Model As: Opt_Training_Basic • Save Project As: Guru_Training

  16. Site Types • Existing Facility • Indicates this site presently exists in the supply chain • Potential Facility • Indicates this site presently does not exist in the supply chain • Customer Site • Only customer sites can have demand • Customer sites have sourcing policies but NO inventory policies • They do not ship to other sites or produce any products • Flow into customer sites = $$$ (revenue!) • Type, and Choice combine to determine which costs to apply • Open Potential Facility = Add Startup Cost • Closing Existing Facility = Add Closing Cost • Always incur Fixed Operating Costs if flow exists

  17. Creating the Opt_Training_Basic Model DC 1 IP CZ MFG IP Product B Product A SP SP DC 2 TP TP IP SP SP TP TP 2 Products 4 Sites

  18. Opt_Training_Basic Model: Sites MFG DC 1 DC 2 CZ • Name • Location (Address, City, State, Country, Postal Code, Latitude, Longitude) • Capacity Period, Capacity Basis • Fixed Startup Cost/Cap, Fixed Operating Cost/Cap • Closing Cost

  19. Opt_Training_Basic Model: Add Customer Site • Open the Sites Table • Add Customer Site • Name: CZ • City: New York • State: New York • Type: Customer • Graphic: Circle • Graphic Color: Green • Leave all other fields default

  20. Opt_Training_Basic Model: Add DCs • Add Distribution Center 1: • Name: DC_1 • City: Omaha • State: Nebraska • Type: Existing Facility • Graphic: Triangle • Graphic Color: Yellow • Add Distribution Center 2: • Name: DC_2 • City: Austin • State: Texas • Type: Existing Facility • Graphic: Triangle • Graphic Color: Yellow

  21. Opt_Training_Basic Model: Add Manufacturer • Add Manufacturer: • Name: MFG • City: Los Angeles • State: California • Type: Existing Facility • Graphic: Square • Graphic Color: Red

  22. Opt_Training_Basic Model: Column Update • Place cursor in the Graphic Size Field • Right Click or Select the Column Update Button on the toolbar • Select 10 from the drop down menu and apply the update

  23. Display the Sites on the Layout Map Opt_Training_Basic Model: Layout Map

  24. Opt_Training_Basic Model: Products • Name/ SKU • Inventory Valuation • Price • Weight, Cubic • Status Product B Product A

  25. Opt_Training_Basic Model: Add Products • Open the Products Table • Add (2) Product Records • Product_B • Value: 10 • Price: 20 • Weight: 10 • Cubic: 10 • Status: Include • Product_A • Value: 5 • Price: 10 • Weight: 5 • Cubic: 5 • Status: Include

  26. Opt_Training_Basic Model: Demand • Customer Site • Product • Quantity • Occurrences • Time Between Orders • Due Date • Price

  27. Opt_Training_Basic Model: Add Demand • Record 1 • Customer Site: CZ • Product Name: Product_A • Quantity: 100 • Order Time: 0 • Record 2 • Customer Site: CZ • Product Name: Product_B • Quantity: 100 • Order Time: 0 • Open the Demand Table • Add (2) Demand Records

  28. Shipments Vs. Demand • Shipments are typically modeled through the Transportation Policies table • Shipments table allows you to model shipments outside of the Transportation Policies table • There are no cost fields in the Shipments data table- the costs in the Transportation Policies table are used to calculate the transportation costs • Allows for accurate modeling of a “Push” system, instead of a demand driven supply chain

  29. Opt_Training_Basic Model: Sourcing Policy DC 1 CZ MFG DC 2 Product_A, Product_B Product_A, Product_B • Identifies which sites to send replenishment and customer orders, and whether product is ordered from an outside source or made at that site Product_A, Product_B Product_A, Product_B

  30. Types of Sourcing Policies • Single Source • Single Source (Select Closest) • Multiple Sources (Most Inventory) • Multiple Sources (Order of Preference) • Multiple Sources (Probability) • Source by Transfer • Make • Make by Schedule • Make (Single Process) • Make (Order of Preference) • Make (Probability) Hint: Use the Quick Reference Card for descriptions of these policies!

  31. Opt_Training_Basic Model: Adding Sourcing Policies • Open the Sourcing Policies Table • Add a total of (10) Sourcing Policies • 4 Multiple Sources (Most Inventory) • CZ can source Product_A from DC_1 and DC_2 • CZ can source Product_B from DC_1 and DC_2 • 4 Single Source • Each DC can only source from the MFG for Both Products • 2 Make • 1 for each product at the Manufacturer

  32. Display the Sourcing Policies on the Map Opt_Training_Basic Model: Layout Map

  33. There must be at least one Transportation Policy that applies to source and destination which is not “Make” Each Transportation Policy defines a “Flow” Source Site Destination Site Product (all applicable products if not explicitly entered) Mode (1 if not explicitly entered) Opt_Training_Basic Model: Transportation Policy DC 1 CZ MFG DC 2

  34. Types of Transportation Policies • Parcel • LTL (Less than Truckload) • Full TL (Full Truckload) • Air, Rail and Ship • Daily or Weekly Shipment • Periodic Shipment • Pooled Outbound/ Pooled Inbound • Pooled Periodic Outbound/ Pooled Periodic Inbound • Flow (Optimization Only) • Link To Lane • Aggregate Container • Disaggregate Container

  35. Opt_Training_Basic Model: Add Transportation Policies • Add (4) Transportation Policies • One for each Source-Destination combination defined in the Sourcing Policies • Source Sites: MFG, DC_1, DC_2 • Destination Sites: DC_1, DC_2, CZ • Leave all other fields at default value • Open the Transportation Policies Table

  36. Defines Initial Inventory Levels Safety/ Cycle Stock Levels Associated Costs One Inventory Policy is optional for each product at the facility sites Product_A Product_B Product_A Product_B DC 1 DC 2 Opt_Training_Basic Model: Inventory Policy Product_A Product_B MFG

  37. Opt_Training_Basic Model: Add Inventory Policies • Add (6) Inventory Policies • One for each Facility (non-Customer Site) and Product combination • Sites: MFG, DC_1, DC_2 • Product Name: Product_A, Product_B • Leave all other fields at default value • Open the Inventory Policies Table

  38. Update the Average Unit Cost to 1 and clear the filter Opt_Training_Basic Model: Add Costs • Open the Sourcing Policies Table • Add a sourcing cost to one lane (2 policies) • Use the filter bar to view only DC_1 How do you think this will affect the optimization results?

  39. Opt_Training_Basic Model: Model Options • Go to Tools Model Options (F3) • Review Optimization Period • Start Date / Time • End Date / Time

  40. Opt_Training_Basic Model: Run the Optimization • Optimize the Supply Chain • Save the Project and the Model

  41. Opt_Training_Basic Model: Optimization Solver • View Optimization Results • Optimization Output Tables • Metrics • Graphs • Auto Implement Optimized Network

  42. Check on Learning- Structure • You should be able to: • Open Supply Chain GuruTM • Add a new model • Save a project • Save a model • Open a table • Understand differences between sites and customers • Use the filter bar • Move from field to field • Open the layout map • Change settings on the layout map • View sites and policies on the layout map • Understand the types of Sourcing policies • Understand the types of Transportation Policies • Understand when to use shipments vs demand • Understand the types of Inventory Policies • Enter data into tables • Access the help system • Set Optimization Options • Run a simple optimization • Run the error check on a model • Access Optimization Outputs

  43. Optimization Basic Component 2 Costs

  44. Learning Objective- Cost • Distinguish between the different costs used in Supply Chain Optimization with the software • Apply costs to the network built in Exercise 1 Goal: Successfully optimize the network with the new costs included

  45. Three Basic Components of Optimization • Structure • Costs • Constraints

  46. Basic Costs for Optimization • Site Costs • Fixed operating • Fixed startup • Closing • Transportation Costs • Average Cost • Duty Rate • Discount Rate • Return Trip Cost • Transportation Asset Costs • Unit Fixed Cost • Inventory Costs • Site inventory • In-transit inventory • Inbound and Outbound Warehousing • Production Costs • Work Center Costs • Fixed Operating • Fixed Startup • Closing • Work Resource Cost

  47. Basic Costs Site Costs

  48. Site Costs • Fixed Operating • Fixed Startup • Closing

  49. Site Costs: Fixed Operating • Costs associated with the day to day operations of the facility • Enable use of a step- function to associate the operating cost based upon operating capacity

  50. Site Costs: Fixed Operating • Facility is closed/not used if the throughput is zero. • Facility is open at Level 1 if the throughput is between 0 and 5,000 pounds. • Facility is open at level 2 if throughput greater than 5,000 pounds