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Logistics Systems Analysis Mid-Term Review

This document presents a comprehensive mid-term review of logistics systems with an emphasis on inventory analysis and cost minimization strategies. It covers essential topics such as supply chain costs, inventory modeling, transportation, and economic order quantity (EOQ). The document analyzes the relationships between holding, moving, and waiting costs, as well as the influence of capital utilization on financial performance. It concludes with an exploration of spatial logistics challenges, including facility location optimization.

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Logistics Systems Analysis Mid-Term Review

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  1. Logistics Systems AnalysisMid-Term Review John H. Vande Vate Spring, 2001 1

  2. Supply Chain Costs Holding Waiting Rent Moving Handling Transport EOQ Trade off Holding and Moving Costs cQ + d/Q minimized with Q = d/c Subjects Covered 2

  3. Project Inventory Analysis Modeling Inventory Analysis At the Plant Shipments of size Q to DC Inventory at plant per shipment: (Q/2)*(Q/P) Shipments per year: D/Q Total Inventory: (Q/2)*(D/P) + Q/2 EOQ: minimize fD/Q + h(Q/2)*(1+D/P) Q* = (2fD/h)P/(P+D) Subjects Covered 3

  4. Inventory Analysis Plant to Warehouse Inventory at plant per shipment: (Q/2)(Q/P) Shipments per year: unknown Shipments generated by DC served through warehouse: D/Q Total Plant inventory per DC served through warehouse: (Q/2)(D/P) EOQ to warehouse: Q* = (2fDw/h)P/(P+Dw) but what’s Dw? Project 4

  5. Inbound Q/2 from each plant that serves it Outbound “Option” or mix of items shipped together Total Demand at warehouse for Assembly: DO “Production Rate” of Option at Warehouse: DO Inventory per shipment to DC: (Q/2)(Q/DO) Shipments per year: D/Q EOQ: min fD/Q + h(Q/2)(1 + D/DO) Q* = (2fD/h)DO/(DO +D) but what’s DO? Warehouse Inventory 5

  6. Inventory per shipment to DC: (Q/2)(Q/DO) Shipments per year: D/Q Inventory per year: (Q/2)(D/DO) if served with this option DO= Sum of Demands at DC’s served with this option If Shipment size Q for this option is relatively constant across the DC’s Total Outbound Inventory Cost for the Option is (average Q/2)*[Do we serve any DC with this option?] Outbound Inventory to DC 6

  7. Modeling “Rules” • Use meaningful (helpful) names • Comment extensively • Keep data and model separate • Keep model general where possible 7

  8. Capital Utilization influences financial performance Total Capital influences Capital Utilization Inventory Levels contribute to Capital Cash-to-Cash Cycle influences Capital Value of Inventory Savings “Finance” 8

  9. Extension of EOQ to variable demand Simple formula for headways: H(t) = (2Fixed/cD’(t)) Estimate of Total Cost Reconstructing implementable headways 1-1 Distribution 9

  10. Correct Models Relate decision whether or not to ship with volume shipped Q[t]  Ship[t]*Remaining Demand Better Models Do not aggregate constraints Q[s, t]  Ship[s]*Demand in Period t Models for Variable Demand 10

  11. Different Objectives Item-miles miles max distance … Two varieties of models Do we locate here or not? What is the position of the facility? Location 11

  12. Measures of Distance Rectilinear Euclidean Iterative scheme for locating a single facility using Euclidean Distances Extension to locating several facilities Locate Allocate Location 12

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