Global Supply Chain Design Review - ISyE Homemgoetsch/cali/mhrc... · Descriptive Design Modeling Supply Chain 14638 1215 326 Global Supply Chain 972 698 188 Supply Chain Management

Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02

Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 1

Marc Goetschalckx

Marc Goetschalckx

MHRC Portland, 2002

School of Industrial and Systems EngineeringGeorgia Institute of Technology

5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx

✯ Definitions and problem statement✯ Literature review✯ Characteristics of (global) strategic

supply models✯ Computational tools✯ Research opportunities and

conclusions




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USA

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FinishingFacilities Warehouse

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• “A supply chain is a network of organizations that are involved through upstream and downstream linkages in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer,” Christopher (1998).





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Best Std.Dev. (59989)Avg. Param. Value (80989)

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✯ Cost minimization✯ Return on investment maximization✯ Profit maximization✯ Robustness✯ Responsiveness✯ Flexibility✯ Usually conflicting




Products

Facilities

Channels

Customers Countries

Time Periods

Inventory

Objectives

Vendors


Stratetic Enterprise Planning

Master Production and DistributionPlanning

StrategicDemandPlanning

TacticalDemandPlanning

MaterialRequirem.Planning

ProductionPlanning

DistributionPlanning

OperationalDemandPlanning

Scheduling VehicleDispatching

DemandMonitoringPurchasing

Strategic

Tactical

Operational

Execution




✯ Examples:• Build a manufacturing plant• Select third-party logistics• Select customer-product groups

✯ Long range permanence of decisions✯ Heterogeneous forecasted data, if

available at all✯ Company vision and survival


✯ Multicommodity, multiperiod, multi-echelon, capacitated network flow design problem (planes, nodes, arcs)

✯ Decision variables• Binary status variables for facility

location status, technology and size, and machines

• Continuous material flow variables (production, transportation, storage, and sales)




✯ Objectives• Cost minimization, profit maximization,

risk minimization, flexibility✯ Objective function, constraint matrix,

RHS parameters all are stochastic




conclusions




Descriptive Design ModelingSupply Chain 14638 1215 326Global Supply Chain 972 698 188Supply Chain Management 692Logistics 6045Global Logistics 35 12Material Handling 1239 852 208Facilities Planning 162 62 15Warehousing 191 91 15


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Global SupplyChain Global Logistics

MaterialHandling Facilities

Planning Warehousing

Modeling

Design

Descriptive

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✯ Global models• Vidal and Goetschalckx (1997)• Cohen and Huchzermeir (1999)• Ganeshan et al. (1999)• Schmidt and Wilhelm (2000)

✯ Location models• Owen and Daskin (1998)




✯ Historic Perspective• Geoffrion and Powers (1995)

✯ Software Tools• Ballou and Masters (1993, 1998)


✯ Ballou (1998) (UG)✯ Wood et al. (1999) (UG)✯ Tayur (1999) (Academic)✯ Simchi-Levi et al. (1999) (MBA)✯ Chopra and Meindl (2001) (UG, IIE*)✯ Stadtler (2000,2002) (Practitioner)✯ Shapiro (2001) (Grad)




✯ Much more papers as compared to material handling

✯ For all categories, mostly descriptive or analysis, fewer design, very few normative modeling


✯ Extensive literature on deterministic or scenario-based supply chain design

✯ Few papers on multinational supply chains

✯ Stochastic optimization for small problems

✯ Some stochastic optimization for exchange rates in global systems






conclusions




5-Jun-02 Marc Goetschalckx

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Cohen, JMOM, 1989

Cohen, EJOR, 1991

Arntzen, Interfac., 1995

Canel, IJPR, 1997

Dogan, IIE TR, 1999

Vidal, EJOR, 2000

Philpott. Appita J., 2001

Schmidt, IJPR, 2000

Factors

Single-Country (Domestic) Characteristics

ObjectiveCost minimization x x - x - - -Profit maximization x - x - x x xInventory minimization - x - - - - -Cost Variance Minimization - - - - - -

CostsMaterials x x x x x x x -Production x x x x x x x xDistribution x x - x x x xInternal Transportation x x x x x - xExternal Transportation (Suppliers and Customers) x x x x x x xInventory - x - x - - -Sales Revenue (Negative Cost) x - x - x x xFixed Transformation Facility x - x x x x - xFixed Distribution Facility x - x x -Fixed Machine - x x - x xFixed Product-Mix x - - - x -Fixed Vendor-Use x - - - - - -



Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx

Cohen, JMOM, 1989

Cohen, EJOR, 1991


Canel, IJPR, 1997

Dogan, IIE TR, 1999

Vidal, EJOR, 2000


Schmidt, IJPR, 2000

DecisionsSupplier-Facility (Purchasing) x x x x x x x -Product-Transformer (Production) x x x x x x - -Product-Machine (Production) - x - x - x xProduct-Mix-Machine (Production) - - - - x -Transformer-Customers (Distribution) x x x x x x x xMachine-Customers (Distribution) - - x x x -Tactical Inventory Levels - x - x - - -Dynamic Facility Status (more than one change) - - - - - -

ComponentsCountries M 1 M M 1 M 1 MProducts M M M 1 M M M M

Bill of Material Levels 3 2 1 1 2 2 MSuppliers M M M M M M M MMachines & Technologies - - M - M MTransformation Facilities M M M M M M M MDistribution Facilities M M M M M -Customers M - M M M M M MTransportation Modes 1 1 M M 2 1Echelons 1 1 M M 1 M

ConstraintsProduction Capacities x x x - x x x xSupply Capacities x x - x x x -Sales Upper Bound by Demand x - - - x x -Demand Satisfaction x x x x - - xTransportation Capacities - - - - - -


Cohen, JMOM, 1989

Cohen, EJOR, 1991


Canel, IJPR, 1997

Dogan, IIE TR, 1999

Vidal, EJOR, 2000


Schmidt, IJPR, 2000

Multiple-Country (Global) Characteristics

ObjectivesGlobal After-Tax Profit Maximization x x x x

International CostsCountry-Specific Tax Rates x x x x -Tariffs x x x xDuties x - x -Export Incentives (Negative Cost) x x - -Transfer Prices or Markups x x -

DecisionsTransfer Prices or Markups x - x -Transportation Cost Allocation x - x -

International ConstraintsLocal Content / Manufacturing Offset x x - - -Minimum Taxes per Country x - x -

International FactorsExchange Rates x x x -




✯ Unified comprehensive model does not exist• Dynamic, stochastic, MIP• Economies of scale and scope explode

number of binary variables• Non-linear effects (transfer prices,

overhead, markups)• Path-based formulations (duty relief)


✯ Large majority use commercial MIP solvers (B&B + LP)

✯ Stochastic (operational) simulation✯ Decomposition (Benders),

factorization, bilinear programming are very rarely used

✯ Stochastic solutions obtained using limited number of scenarios

✯ Heuristics






conclusions


✯ Logistics systems status✯ “Bookkeeping”

• Transactional• Data warehouse

✯ Advantages• Enterprise standardization• Data integration• Up-to-date data• Multinational




✯ Growing importance✯ Major vendors

• SAP (financial),– New enterprise module: Network Design

• Baan (manufacturing, transportation),– CAPS Logistics Toolkit

• PeopleSoft (human resources)• ...


✯ Logistics systems configuration and planning

✯ “Optimizing”• Operations research• Constraint based logic

✯ Interface with ERP✯ Also called advanced planning

systems (APS)




✯ Strong consolidation✯ Major vendors

• I2 – InterTrans– I2 Rhythm Supply Chain Strategist

• Manugistics• J.D. Edwards – Numetrix

– Enterprise Planning





✯ Andersen Consulting, “Logistics Software,” jointly with Council of Logistics Management, Oak Brook, IL, 1992 and yearly updates.





✯ Multiple periods, combined with tactical• Periodic and seasonal demand• Dynamic strategic systems

✯ Global• Taxes and profit realization• Local contents, duty drawback

✯ Stochastic and multi-objective• Flexibility, responsiveness, robustness,

risk, scenarios


✯ Integrated models are large and complex and expensive

✯ Multi-objective performance measures are complex

✯ Strategic design as a continuous effort✯ Technology transfer to logistics

professionals and students




✯ Data aggregation and synthesis tools• Middleware between ERP and models

✯ Rapid-prototyping design tools• Procurement-manufacturing-distribution-

markets mission configuration✯ Multi-objective design models

• Explicit tradeoffs between economics, risk, flexibility, and responsiveness


✯ Robust optimization algorithms (w.r.t. data perturbations)

✯ Large-scale multi-objective stochastic optimization algorithms




Global Supply Chain Design Review - ISyE Homemgoetsch/cali/mhrc... · Descriptive Design Modeling Supply Chain 14638 1215 326 Global Supply Chain 972 698 188 Supply Chain Management

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