Supply Chain Management in a Dairy Industry A Case Study

Transcription

1 Proeedings o the World Congress on Engineering 2009 Vol I Suly Chain Management in a Dairy Industry A Case Study K. Venkata Subbaiah, Member, IAENG, K. Narayana Rao K. Nookesh babu ABSTRACT - Suly hain management is the lan and ontrol o material and inormation lo among suliers, ailities, arehouses and ustomers ith the objetives o minimization o ost, maximization o ustomer servies and lexibility. The suly hain o a business roess omrises mainly ive ativities viz., Purhase o materials rom suliers, transortation o materials rom suliers to ailities, rodution o goods at ailities, transortation o goods rom ailitates to are houses and transortation o goods rom are houses to ustomers. In this aer, a suly hain model is develoed or a dairy industry, loated in Andhra Pradesh, India. The suly hain inludes our ehelons namely ra milk suliers, lant, arehouse and ustomers. In this model, emhasis is mainly on rodution and distribution ativities, ith a vie to ind out urhase lan o ra milk, rodution lan o rodut mix and transortation lan o the roduts. Index Terms- Suly hain management, Transortation, Prodution lan, Customer zones. I. INTRODUCTION Suly hain management (SCM) is a raidly evolving area o interest to aademiians and business management ratitioners alike. Coordinating the external and internal ativities o a irm is the basi hilosohy o suly hain management. It is about managing the entire roess in a olletive and uniied ashion. Most o the manuaturing irms are organized as netorks o manuaturing and distribution ailities that roure ra materials transorm them into intermediate and inished K. Venkata Subbaiah is ith Deartment o Mehanial Engineering, Andhra University, Visakhaatnam, India. Phone: (R), (M) [email protected] K. Narayana Rao is ith Deartment o Mehanial Engineering, Government Polytehni, Visakhaatnam. K.Nookesh babu is ith Deartment o Mehanial Engineering, Andhra University, Visakhaatnam. roduts and distribute the inished roduts to ustomers. The simlest netork onsists o ailities hih erorm rourement, manuaturing and distribution. These netorks are alled value added hains or suly hains. A suly hain onsists o all stages involved diretly or indiretly in ulilling a ustomer request. The suly hain not only inludes the manuatures and suliers but also retailers and ustomers themselves ith in eah organization. A suly hain is an integrated system herein a number o various business entities (i.e. suliers, manuaturers, industrial ustomers, distributors, retailers) ork together to address issues o both materials lo and inormation lo. A reerene model - the Suly Chain Oerations Reerene model (SCOR), has been develoed by the Suly-Chain Counil (SCC) [1]. This roess reerene model ontains standard desrition o management roess and a rameork o relationshis among the standard roesses. Ganeshan et.al. [5] exlored the basis o suly hain management rom a onetual ersetive by traing the roots o the deinition and the origins o the onet rom a broad stream o literature. Pyke and Cohen [6] analyzed the management o materials in an integrated suly hain and develo a markov hain model or a three level rodution distribution system. Cohen and Huhzermeier [3] resented a survey o the literature ertaining to analyti aroahes or global suly hain strategy analysis and lanning. The integrated suly hain netork model is develoed to ature the omlexities o a multi-rodut, multi-ehelon, multi-ountry, multieriod lanning roblem or the otimal hoie o aility loations, aaity and tehnology used. Sabri and Beamon [4] develoed an integrated suly hain model or use in simultaneous strategi and oeration suly hain lanning..lee and Kim [7] roosed a hybrid aroah to solve rodution and distribution roblems in suly hains. Thomas and Griin [8] deine the ategories o oerational o ordination, buyer and vendor, rodution and distribution, inventory and distribution. Arntzen et.al [9] rovide the most omrehensive

2 Proeedings o the World Congress on Engineering 2009 Vol I deterministi model or suly hain management ith an objetive untion ontaining the ost and time elements. Even though suly hain management is relatively ne, the idea o o-ordinate lanning is not ne. The study o multi-ehelon inventory/distribution systems began as early as 1960 by Clark and Sar [2]. Sine then many researhers have investigated multi ehelon inventory and distribution systems. Less researh has been aimed at o-ordination o rourements, rodution and distribution systems. In this aer an attemt has been made to develo a oordinated suly hainlanning model ith rourement, rodution and distribution systems. II. MODEL FORMULATION The roosal o the model is to ind an otimal strategi lan or an integrated suly hain model. Notations MC tv Cost o material urhased by vendor v at time t PC tg Prodution ost o goods g rodued by aility at time t VFTC tv Transortation ost o material Transorted rom vendor v to aility at time t FWTC tg Transortation ost o goods g transorted rom aility to are house at time t WZTC tg Transortation ost o goods g transorted rom are house to ustomer loation at time t FMIC t Inventory ost o mterial o aility at time t FGIC tg Inventory ost o goods g o aility at time t WIC tg Inventory ost o goods g o arehouse at time t BOM g Amount o material needed or roduing goods g AV tv The amount o material urhased by vendor v at time t R The amount o material hih vendor v Transorted o aility at time t. AF t The inventory o material in the aility at time t R tg Amount o good g hih aility rodued at time t AF tg The inventory o goods g at aility at time t. R tg The amount o goods g hih aility transorted to are house at time t. AW tg R tg AC tg Assumtions The inventory o good g in the are house at time t. The amount o good g hih are house transorted to ustomer at time t. The demand o goods g by ustomer at time t. 1. Caaities o vendors are ixed. 2. Demand is deterministi. 3. Variable ost er unit rodution is onstant Mathematial model This model onsists o our ehelons namely Suliers, Plants, Distribution Centers (DCs), and Customer zones (CZs). A multi-objetive untion is ormulated to minimize ost subjet to sulies, lant and distribution aaities, rodution and distribution through ut limits and ustoms demand requirements. Total ost inludes ixed osts o rodution and distribution, variable osts o rodution, distribution and transortation. Various osts involved in the suly hain are 1. Material Cost = tv AVtv v MC * 2. Prodution ost = tg R tg g PC * 3. Transortation ost = VFTC FWTC tg tg WCTC tg tg v + g + g 4. Inventory ost = FMIC t * AF t + FGIC tg * AF tg WIC tg * AW tg t + g g The objetive untion o the model is to minimize the total ost assoiated ith the suly hain hih inludes material, rodution, transortation and inventory osts. Minimize Z= MC tv * AVtv + PC tg tg + VFTC vs g v + FWTC tg tg + WCTC tg tg + FMIC t * AF g g t t + FGIC tg * AF tg + WIC tg * AW tg g g

3 Proeedings o the World Congress on Engineering 2009 Vol I The above stated roblem is solved subjeted to the olloing onstraint set. 1. Uer Loer bound restritions 0 R R _ UPbound 0 R tg R tg _ UPbound 0 R tg R tg _ UPbound R tg _ LPbound R tg R tg _ UPbound et v =1; et t =1; et v =1; 2. Flo Conservative restritions t R = LV t, v, tv AF R BOM R t + ( t et ) * v v g tg v g = AF( t+ 1) t,, AW + R R = AW tg ( t et ) g tg ( t+ 1) g tg,, R( t et ) g= ACtg t,, g Vendor to aility transortation ost Faility to are house transortation ost For aility For aility Ware House to ustomer transortation ost III. CASE STUDY The above develoed model is alied to Visakha Dairy situated in Andhra Pradesh, India. The above dairy has six vendors loated at Vsiahaatnam, Vizianagaram, Tuni, Ramabadrauram, Narsiatnam and Srikakulam. It has to ailities loated at Visakhaatnam and kakinada to meet the ustomer demands. Five arehouses are situated at Visakaatnam, Vizianagaram, Srikakulam Kakinada and Rajahmundry. Its ustomer loations are situated at Visakhaatnam, Vizianagaram, Srikakulam, Kakinada and Rajamundry. The inut data required or the design o suly hain or the above stated industry is given belo. Inut Data Material Cost In the above table the transortation ost or good 1 is shon and the same table reeats or the remaining goods. Inventory arrying ost at the aility or the ra material and goods are onsidered as Zeros. Inventory onst at arehouse

4 Proeedings o the World Congress on Engineering 2009 Vol I Caaities o Vendors (in thousands) Caaities o ailities or roduing dierent goods Caaities o are house to hold dierent roduts Demands or dierent goods at dierent ustomer loations The Problem is solved using LINGO student version akage. Table II: Quantities o goods transorted rom vendors to ailities Table III: Amounts o goods rodued at both the ailities Table IV: Amounts o goods transorted rom ailities to arehouse From Faility F From Faility F IV. RESULTS AND DISCUSSIONS The otimal solution or the model is Table I: Quantities o material to be roured version dierent vendors Table V: Amounts o goods to be transorted rom are houses to ustomer Zones. From are house

5 Proeedings o the World Congress on Engineering 2009 Vol I From Ware House From are house From are house Table I reresents the rourement lan hih indiates quantities o ra materials to be roured rom dierent vendors. As both the material ost and transortation osts to both the ailities is high rom vendor 4 (i.e., Ramabadrauram) and the demand or the ra material an be ulilled by the remaining vendors, ra material should not be roured rom the vendor 4. Table III reresents the rodution lan or the otimal rodut mix. It gives us the quantities o material to be rodued by both the ailities onsidering the demands o the ustomers and their transortation ost. Table II, IV and V reresent the transortation lans or the lant. Table II shos the quantities o material to be transorted rom dierent vendors to both the ailities. Table IV shos the quantities o dierent goods to the shied to the arehouses rom both the ailities. Table V shos the quantities o dierent goods to be transorted rom dierent arehouse to all the ustomer loations. The Transortation ost to are house 4 is very high rom both the ailities and it is also very ar aay rom all the ustomer zones, so the arehouse 4 is disarded rom the lan. From the above obtained lans the total ost o the suly hain is alulated as Rs.27, 41,039/- er one time eriod (i.e.12 hours). The obtained value is Rs.2,02,539/- less than the existing ost. V. CONCLUSIONS In this aer suly hain netork is designed or a dairy industry. This netork inludes material urhase lan, rodution lan, inventory lan and transortation lan. From the results it is observed that the total ost o the suly hain is 9.8 erent lesser than the existing ost. This model an be extended to varying demand and osts. This an also be alied to ast moving onsumer goods. REFERENCES [1.] Suly-Chain Counil, In., 1998, Overvie o the SCOR Model V2.0,.sulyhain.org. [2.] Clark, A. J., and Sar, H., 1960, Otimal Poliies or a MultiiEhelon Inventory Problem, Management Siene, Vol. 6, [3.] Cohen, M. A., and Huhzermeier, A., 1998, Global Suly Chain Management: A survey o Researh and Aliations, Quantitative Models or Suly Chain Management, Kuler aademi ublishers. [4.] Eha H. Sabri and Benita M. Beamon 2000, A Multi-Objetive Aroah to Simultaneous Strategi and Oerational Planning in Suly Chain Design, Omega Vol. 28, NO.5, [5.] Ganeshan, R, Stehens, P., Jak, E., and Magazine, M., 1999, A taxonomi revie o suly hain management researh, Quantitative models or suly hain management. The Netherlands: Kluer aademi ublishers, [6.] Pyke, D.F., and Cohen, M. A., 1994, Multi rodut integrated rodution distribution system, Euroean journal o oerations researh. Vol 74, No I, [7.] T. H. Lee and S.H. Kim., 2000,otimal rodution distribution lanning in suly hain management using a hybrid simulation Analyti aroah. [8.] Thomas D. 1. and P. M. Griin., 1996, Co oordinated suly hain management. Euroean journal o oeration researh, 94: [9.] Arntzen, B. C., G. C. Bron, T. P. Harrison and L. Trolan, 1995, Global suly hain management at digital equiment ororation. Interaes: 25,