Supply Chain Modelling and Analytics

Dr. Gopal Kumar

gopalkumar@iimraipur.ac.in

IIM Raipur
06 October 2017

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 1/20

DHL Supply Chain
The Case
Objective(s)
.
To minimize carbon emission
To minimize total cost
Budget: CN 3 billion
Transportation mode Requirement:
LCD32/42 LCD42: 920K
LCD32: 530K
LCD32/42
ODM (Suppliers)

Minimum:
LCD42 200K

LCD42
Maximum
LCD42 600K Shanghai
LCD42 (DC)
LCD42

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 2/20

DHL Supply Chain
The Case
Objective(s)
.
To minimize carbon emission

Budget: CN 3 billion
Transportation mode Requirement:
LCD32/42 ODM1 LCD42: 920K
LCD32: 530K
LCD32/42 ODM2
ODM (Suppliers)

LCD42 ODM3

LCD42 ODM4

LCD42 ODM5 Shanghai

LCD42 ODM6 (DC)
LCD42 ODM7

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 3/20

DHL Supply Chain
The Case
Objective(s)
.
To minimize carbon emission

Budget: CN 3.3 billion

Transportation mode Requirement:
LCD32/42 ODM1 LCD42: 920K
LCD32: 530K
LCD32/42 ODM2
ODM (Suppliers)

LCD42 ODM3

LCD42 ODM4

LCD42 ODM5 Shanghai

LCD42 ODM6 (DC)
LCD42 ODM7

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 4/20

DHL Supply Chain
The Case
Objective(s)
.
To minimize carbon emission
1200000

1000000

800000

600000 300K
330K

400000

200000

0
Air Express Road Road LTL Road-Network Rail Water

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 5/20

DHL Supply Chain
The Case
Objective(s)
.
To minimize carbon emission

Sensitivity

Increase budget by 2% in steps, and observe how carbon

emission decreases.

Suggest how DHL can achieve the target of 30% reduction in

CO2 emission.

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 6/20

DHL Supply Chain
The Case

.
.
Sensitivity of $F$50 to Total budget
8000000
7000000
CO2 emission

6000000 Dominated solution

5000000
4000000
3000000
2000000
1000000
0

Total budget ($G$48)

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 7/20

Pareto Optimality
Trade-Off Curves
Maximize obj 1 Pareto optimal (curve)
Maximize obj 2

Maximize obj 1
Minimize obj 2

x
Trade-off curve
b
Efficient frontier
x
Gopal Kumar (IIM Raipur) SCMA 06 October 2017 8/20
Pareto Optimality
Trade-Off Curves

1300 labor hours and

1000 units of raw material are available

Objectives:
Maximize profit
Minimize pollution

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 9/20

Pareto Optimality
Trade-Off Curves

Sensitivity of $B$24 to PolluB

25000

20000
Profit

15000

10000

5000

PolluB ($D$21)

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 10/20

Network Optimization of Mahindra & Mahindra
The
. challenge was to build an improved PLANT-
RSO-Dealer network through linear optimization
approach

M&M identified the minimum number

of RSOs required on the basis of
demand-supply constraints and business
feasibility the bottom-line being
dealer serviceability constraints.

The team built a cost curve from

the freight costs, handling costs and
total costs to identify the optimal
number of locations.

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 11/20

Network Optimization of Mahindra & Mahindra
The
. challenge was to build an improved PLANT-
RSO-Dealer network through linear optimization
approach

Freight Costs will go down with

an increase in number of RSOs,
while Handling costs will go up.
By building the cost curve,
the optimal number of locations
with the best mix of Freight &
Handling costs is obtained.

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 12/20

Network Optimization Models
Phase IV

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 13/20

Network Optimization Models
Phase IV

.
Model 3: Allocating demand to production facilities

TelecomOne HighOptic

Baltimore Atlanta Denver

Cheyenne
Memphis Boston Omaha
Salt Lake
Wichita Chicago Portland

Demand allocation to plant(s) is not one time decision.

Supply chain manager may change it monthly/yearly or as per
significant development (changes in demand or cost)
Gopal Kumar (IIM Raipur) SCMA 06 October 2017 14/20
Network Optimization Models
Phase IV

.
Model 3: Allocating demand to production facilities

Demand City
Production and Transportation Cost per 1000 Units Fixed Capa-
Supply City Atlanta Boston Chicago Denver Omaha Portland Cost ($) city
Baltimore 1,675 400 685 1,630 1,160 2,800 7,650 18
Cheyenne 1,460 1,940 970 100 495 1,200 3,500 24
Salt Lake 1,925 2,400 1,425 500 950 800 5,000 27
Memphis 380 1,355 543 1,045 665 2,321 4,100 22
Wichita 922 1,646 700 508 311 1,797 2,200 31
Demand 10 8 14 6 7 11

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 15/20

Network Optimization Models
Phase IV

.
Model 3: Allocating demand to production facilities

Which market is served

n m
Min cij xij
by which plant? i 1 j 1

s.t.
Which supply sources are n
used by a plant? x
i 1
ij
D j , j 1,..., m
xij = Quantity shipped from m

plant site i to customer j x K

j 1
ij i
, i 1,..., n

x ij
0

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 16/20

Network Optimization Models
Phase IV
Model 3: Allocating demand to production facilities
.
HighOptic
Inputs - Costs, Capacities, Demands (for TelecomOptic)
Demand City
Production and Transportation Cost per 1000 Units Fixed Capa-
Supply City Atlanta Boston Chicago Denver Omaha Portland Cost ($) city
Baltimore 1,675 400 685 1,630 1,160 2,800 7,650 18
Cheyenne 1,460 1,940 970 100 495 1,200 3,500 24
Salt Lake 1,925 2,400 1,425 500 950 800 5,000 27
Memphis 380 1,355 543 1,045 665 2,321 4,100 22
Wichita 922 1,646 700 508 311 1,797 2,200 31
Demand 10 8 14 6 7 11

Decision Variables
Demand City - Production Allocation (1000 Units) Plants
Supply City Atlanta Boston Chicago Denver Omaha Portland (1=open)
Baltimore 0 0 0 0 0 0
Cheyenne 0 0 0 6 7 0 1
Salt Lake 0 0 0 0 0 11 1
Memphis 0 0 0 0 0 0
Wichita 0 0 0 0 0 0
Gopal Kumar (IIM Raipur) SCMA 06 October 2017 17/20
Capacitated Plant Location Model
Phase IV

.
TelecomOne

Decision Variables
Demand City - Production Allocation (1000 Units) Plants
Supply City Atlanta Boston Chicago Denver Omaha Portland (1=open)
Baltimore 0 8 2 0 0 0 1
Cheyenne 0 0 0 0 0 0 0
Salt Lake 0 0 0 0 0 0 0
Memphis 10 0 12 0 0 0 1
Wichita 0 0 0 0 0 0 1

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 18/20

Capacitated Plant Location Model

Merger!!
First decide which factories

Then decide demand allocations

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 19/20

 .

Thanks!

Gopal Kumar (IIM Raipur) SCMA 06 October 2017 20/20