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The Bis Corporation

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Logistics Network Configuration

Designing & Managing the Supply Chain Chapter 2 Byung-Hyun Ha bhha@pusan.ac.kr

Outline
 Case: Bis Corporation  What is logistics network configuration?  Methodology
 Modeling  Data Aggregation  Validation

 Solution Techniques

Case: the Bis Corporation
 Background
          Produce & distribute soft drinks 2 manufacturing plant 120,000 account (retailers and stores), all over the US 3 existing warehouse (Chicago, Dallas, Sacramento) 20% gross margin $1,000 for each SKU (stock-keeping unit) for all products

 Current distribution strategy (designed 15 years ago)
Produce and store at the manufacturing plant Pick, load, and ship to a warehouse/distribution center Unload …show more content…

Place the aggregated point at the center of the zone  In this case, the error is typically no more than 1%

Testing Customer Aggregation
 Experimental results: cost difference < 0.05%
 Considering transportation costs only  Customer data
• Original Data had 18,000 5-digit zip code ship-to locations • Aggregated Data had 800 3-digit ship-to locations • Total demand was the same in both cases

Total Cost:$5,796,000 Total Customers: 18,000

Total Cost:$5,793,000 Total Customers: 800

Data Aggregation: Product
 Product aggregation
 Hundreds to thousands of individual items in production line
• Variations in product models and style • Same products are packaged in many sizes

 Collecting all data and analyzing it is impractical

 Aggregation by distribution pattern
 Place all SKU’s into a source-group
• A source group is a group of SKU’s all sourced from the same place

 Aggregate the SKU’s by similar logistics characteristics
• Weight • Volume • Holding Cost

 Aggregation by product type

Data Aggregation: Product
 Aggregation by distribution pattern
70.0

60.0

50.0

Weight (lbs per case)

40.0

30.0

20.0

10.0

0.0 0.000

0.010

0.020

0.030

0.040

0.050

0.060

0.070

0.080

0.090

0.100

Volume (pallets per case)

Test Case for Product Aggregation
 Setting
      5 Plants 25 Potential Warehouse Locations Distance-based Service Constraints Inventory Holding Costs Fixed Warehouse

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