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Transportation Optimization Techniques for Factory-Warehouse Shipping Decisions

Learn how linear programming minimizes transportation costs in supply chain management using the Northwest Corner method and Production Smoothing for factory-to-warehouse allocation. See examples and applications for decision-making.

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Transportation Optimization Techniques for Factory-Warehouse Shipping Decisions

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  1. Ch 6: Transportation • I. Formulation • II. Northwest Corner • III. Production Smoothing

  2. Formulation • Application: Decision about how many units to ship from factory to warehouse, given several factories and several warehouses • If planning new factory or new warehouse, can be used to decide location (ex: Pennsylvania Rite Aid built warehouse at Palmdale)

  3. Linear Programming • Objective: MINIMIZE transportation cost • Constraints: Supply, demand • Supply: Factory capacity • Demand: Warehouse requirement

  4. Example • Three warehouses: Albuq, Boston, Cleve • Three factories: Des Moines,Evansville, Ft Lauderdale Next slide: Data given

  5. Transportation matrix

  6. Northwest Corner • Start at northwest corner • Number of units = MIN (supply,demand) • Ex: Row D,Col A: MIN(100,300)=100 • After allocation, subtract units

  7. Transportation matrix

  8. Transportation matrix

  9. Transportation matrix

  10. Transportation matrix

  11. Transportation matrix

  12. Transportation matrix

  13. Transportation matrix

  14. Transportation matrix

  15. Transportation matrix

  16. MIN Cost • Would need unit cost between factory and warehouse • Use Excel to minimize cost • Northwest Corner is initial allocation

  17. Production Smoothing • Factory replaced by production period • Warehouse repl by demand period

  18. Two month example

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