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Solution for Supply Chain Network Design: Applying Optimization and Analytics to the Global Supply Chain 1st Edition Chapter 6, Problem 2

by Michael Watson Sara Lewis Peter Cacioppi Jay Jayaraman
106 Solutions 14 Chapters 19697 Studied ISBN: 9780133017373 Supply Chain Management 5 (1)

Chapter 6, Problem 2 : 2. TL and LTL Model—Mini Case Study. ...

2. TL and LTL Model—Mini Case Study.

A distributor of all types of residential construction products (wood, nails, fixtures, appliances, windows, and so on) delivers product directly to the job site. For small jobs, like a single house, they ship in LTL quantities. For large jobs, like an apartment complex, they ship in TL quantities. They sell to customers across the U.S. and use an average TL rate of $0.11 per ton-mile (with a minimum charge of $12.50 per ton) and $0.30 per ton-mile for LTL (with a minimum charge of $4.00 per ton). The model, more details on the case, and directions on how to use it can be found in the file TL and LTL Model for Construction Products.zip on the book web site.

a. In the existing supply chain, they are shipping everything from warehouses in Seattle, Dallas, and Pittsburgh. What is the current cost of this supply chain?

b. If they could pick any warehouses from the list of potential warehouses, what are the best three and what is the cost of the best three? What is the average distance to customers, what is the percentage within 300 miles, and how did the average distance to customer change?

c. If they were to add two more warehouses to the existing three, where should they put the warehouses? What is the cost of this solution? What is the average distance to customers, what is the percentage within 300 miles, and how did the average distance to customer change?

d. If they were to pick the best five warehouses, where should they put the warehouses? What is the cost of this solution? What is the average distance to customers, what is the percentage within 300 miles, and how did the average distance to customer change?

Step-By-Step Solution

2. Note: There is a typo in the book. The LTL Minimum charge should be $24 per ton, not $4.

For this problem, I have worked only with the warehouses that were active. You can create new versions of this problem where you activate other warehouses. Also, this model would be a good one to expand to include the inbound transportation costs. In addition, you could use this problem to test different aggregation strategies—like aggregate to a three-digit zip code. Or, you could split the customers into LTL and TL customers. In other words, this could be a good base to build from.

Here is the cost table for the four scenarios:

Here are the best 3, best 2 additional, and best 5:

Best 3

Best 2 Additional

Best 5

Percent of Demand with 300 Miles:

Baseline20.7%

Best 348.8%

Baseline + 258.1%

Best 560.3%

Average Distance:

Baseline619

Best 3358

Baseline + 2294

Best 5264

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