Resit Exam Supply Chain Network Design (EBM040A05)

January 17, 2014

Coordinator: Prof. dr. I.F.A. Vis Date: January 17, 2014 Time: 14h Duration: 3 hours Number of questions: 7 Type of questions: open Answer in: English Credit score: 100 credits counts for a 10 Number of pieces: 3 (see box)

           

 

 

Good luck! 

This exam is divided into three separate pieces.

1. This front page, plus sheet with formulas, plus scrap paper; no questions 2. Question 1,2,3,4,5 (Vis; 14 pages) 3. Questions 6,7 (Wortmann; 6 pages)

The pieces will be corrected separately, so do not write answers of one piece on the other piece!

Do not forget to add your name and student number on top of the front page of each piece.

Please write the answers in the boxes provided. If insufficient space is provided and/or you made an error, please use the back side of the sheet containing that question.

A FEW FORMULAS

Forecasting formulas

Naive: Ft = At – 1

Moving Average: nAFt

ntiit /

1

With weights:

11

/t

ntii

t

ntiiit wAwF

Exponential smoothing:

Ft = Ft – 1 + α(At – 1 - Ft – 1)

n

AFAMAPE

nFAMSE

nFAMAD

ii

n

ii

i

n

ii

i

n

ii

/||100

/)(

/||

1

2

1

1

Tracking signal =

)/(

)(

nFA

FA

ii

ii

SCRAP PAPER

SCRAP PAPER

SCRAP PAPER

 

1  

Resit Exam Supply Chain Network Design (EBM040A05) January 17, 2014

Questions 1,2,3,4,5: 75 credits

Your name and student number:

Exercise 1 Supply Chain Network Design for a Dutch flower exporter (25 credits)

Consider a supply chain of flowers. Royal Flower Company (RFC) functions in this supply chain as a major Dutch flower exporter. The core capability of RFC is to distribute flowers from their suppliers to retailers all over Europe. RFC offers every day a complete range of Dutch and overseas cut flowers. Roses are purchased from a supplier in Ecuador. The flower Alstroemeria is purchased in Kenya. RFC also purchases flowers directly from leading growers in Holland. Furthermore, each morning an employee of RFC purchases flowers on the flower auction in Aalsmeer. The warehouse of RFC is located in Aalsmeer next to the auction. On a daily basis, retailers can electronically review the assortment and electronically place their orders. From its warehouse, the management of RFC confirms the order by email. RFC notifies its suppliers by fax about the types of flowers required and the order size. The suppliers confirm the orders also by fax. The next morning, the Dutch growers themselves deliver the flowers to the warehouse. The suppliers abroad are responsible for the transportation process themselves and send their flowers each week to the warehouse of RFC. The flowers from the auction are transported on a conveyor to the warehouse. At the warehouse, all flowers are distributed over trolleys of the various retailers according to their orders. At the end of a day, these trolleys are loaded into trucks and transported to the retailers. The retailers are asked to send the empty trolleys back to the warehouse with the next truck. The transport from the warehouse to the retailers and back is outsourced to an external transport company. All trucks of this company are stationed at the warehouse of RFC. RFC and the transport company electronically discuss the truck schedule each day.     

2  

 

Exercise 1A  

Draw a figure to describe this supply chain of flowers. Indicate clearly all flows of flowers and trolleys and all flows of information. (5 credits) ANSWER TO QUESTION 1A

 

3  

Exercise 1B  

a. What are specific types of logistics costs in the supply chain of RFC. Formulate 5 different ones.  (3 credits) ANSWER TO QUESTION 1B.a

b. What are 3 typical performance measures for RFC? (2 credits)

ANSWER TO QUESTION 1B.b    

4  

Exercise 1C Strong seasonal variations in selling flowers can be noticed. In table 1, the number of orders for flowers per season (in thousands of orders) are depicted for the past four years. The estimate of total demand for year 5 equals 600,000 orders of flowers.

Year Season 1 2 3 4 Winter 100 90 95 110 Spring 120 115 130 140

Summer 150 160 145 170 Fall 140 165 140 145

Give a forecast for each season of year 5 by using the seasonal indices and the estimate of total demand for year 5. (5 credits)  

ANSWER TO QUESTION 1C  

   

5  

 

Exercise 1D RFC is suffering from the economic crisis. Demand for flowers has decreased enormously. Currently, demand equals only 380 orders for flowers per day. Staffing at RFC is such that there are 7 employees working at all times. To achieve this, a total of 34 employees are on the payroll. Each employee handles complete orders, so the 7 employees work in parallel. It takes an employee on average 16 minutes to complete one order. The warehouse is operational 24 hours per day, 365 days per year. a. What is currently the average work-in-progress calculated with Little’s equation? (3

credits)  

ANSWER TO QUESTION 1D.a b. The Dutch government offers the possibility of a part-time unemployment option. In this arrangement, the actual working hours of the employees can be temporarily reduced and wages can be cut to the same extent. The employees receive monthly payments of the Dutch government to (partly) compensate for the loss in working time. By which percentage should the working hours of the employees be decreased to bring the utilisation of the employees to 80%? Explain your answer. (7 credits) ANSWER TO QUESTION 1D.b

6  

Exercise 2 Supply Chain Modelling

Exercise 2A (10 credits) Onlinesales sells many products through an online catalog. The company needs substantial warehouse space for storing its goods. Plans are now being made for leasing warehousing space over the next 5 months. Just how much space will be required in each of these months is known. However, since these space requirements are quite different, it may be most economical to lease only the amount needed each month on a month-by-month basis. On the other hand, the additional cost for leasing space for additional months is much less than for the first month, so it may be less expensive to lease the maximum amount needed for the entire 5 months. Another option is the intermediate approach of changing the total amount of space leased (by adding a new lease and/or having an old lease expire) at least once but not every month. The space requirement and the leasing costs for the various leasing periods are as follows:

Month Required space in m2

1 30,000 2 20,000 3 40,000 4 10,000 5 50,000

Leasing period (months)

Total costs in euro per m2 leased

1 650 2 1000 3 1350 4 1600 5 1900

Define all variables, formulate a complete Linear Programming Model, and then, separately, explain the model briefly. ANSWER TO QUESTION 2A

7  

ANSWER TO QUESTION 2A (continued)

8  

Exercise 2B (5 credits) Consider the following linear programming model:

Max X1 + X2 s.t. 4X1+X2 ≤ 8 X1+4X2 ≥ 8 X1 ≤ 3 X2 ≥ 5 X1, X2 ≥ 0

Is it true that the number of corner points in the feasible region of this problem equals 4? Indicate your answer Yes or No and provide a short (graphical) explanation on your answer form.

ANSWER TO QUESTION 2B

9  

Exercise 3 Facility location (15 credits) A consultancy company has identified 20 possible offices around the country from which their employees easily can make monthly visits to each of the 130 important customers. The travel cost cij from location i to every customer j are known. An important constraint is that each customer should be handled by a single office. a. Formulate a facilities location model to choose a minimum total cost collection of

offices and visits to customers assuming that there is an monthly fixed cost of f for operating an office (10 credits).

ANSWER TO QUESTION 3.a.

10  

A logistics manager has selected some possible locations in the neighbourhood of one of the locations resulting from solving the model of question a. The next step is to perform a factor rating analysis. Weights for each of the important factors have been discussed and are known. Most of the relevant scores expressed as integer numbers on a scale of 1-10 have been obtained. Assume that a higher score is more desirable than a lower one. However, not all scores are yet known. Information on the various aspects is included in the table below.

Factor Weight Utrecht Zeist Maarssen Woerden Office utilization 0.20 6 4 5 7 Land costs 0.35 Not yet known 6 6 4 Employee preferences 0.15 8 4 3 5

Accessibility to major highways 0.30 5 6 4 7

b. What should at least be the score of the factor “land costs” to make sure that Utrecht is a better choice than all of the other locations for the office? Support your answer with calculations (5 credits).

ANSWER TO QUESTION 3.b.

11  

Exercise 4 Distribution strategies (10 credits)

The figure above shows three different supply chain distribution strategies, namely shipping from a vendor to a store via a warehouse, or via a crossdock facility or direct shipment.

Discuss by using bullet points the following: What is a cross-dock facility? What are potential benefits to have cross-docks over direct shipment or

warehousing from a supply chain perspective? What are typical products you would cross-dock (name 3)? What are typical objectives of cross-docking operations (name 3)?

ANSWER TO QUESTION 4

12  

ANSWER TO QUESTION 4 (continued)

13  

Exercise 5 Transportation networks and Vehicle Routing (10 credits) Consider the following distribution network. A single vehicle is stationed at a single depot to start a single tour visiting customers scattered around the depot. Each customer needs to be visited exactly once. The goal is to minimize total route distances. The following matrix with distances is available.

From/To Depot 1 2 3 4 5 Depot - 12 13 17 10 1 1 12 - 4 7 8 16 2 15 4 - 5 7 2 3 13 6 5 - 9 8 4 11 8 9 9 - 3 5 7 16 2 6 4 -

a. Explain how you would classify this problem in the context of Vehicle Routing problems. (3 credits) ANSWER TO QUESTION 5a 

b. Draw a network by depicting each city as a node, and each link between two cities as an arc. Include the right transit distance next to each of the arcs. (3 credits) ANSWER TO QUESTION 5b

 

 

 

 

14  

c. Apply the nearest-neighbour heuristic and indicate the resulting sequence and indicate the related length of the tour. (4 credits) ANSWER TO QUESTION 5c 

1

Resit Exam Supply Chain Network Design (EBM040A05) January 17, 2014

Questions 6,7: 25 credits

Your name and student number:

Exercise 6 and 7 Description This part of the exam is related to the (simplified) supply chain of a supermarket chain in The Netherlands called AMarkt. The supply chain considered consists of a number of retail shops, a set of regional distribution centres (DCs), and a large number of suppliers. The retail shops and the DCs are owned by the company AMarkt, the suppliers are independent. Each retail shop is supplied with products from exactly one DC, according to the regional function of the DC. The company AMarkt has a portfolio of products (the catalogue). Each product is supplied by only one supplier. Larger retail shops sell all products from the catalogue, smaller shops sell only a subset of the catalogue’s products. The retail shops re-order their products at the DC of their region, via so-called retail orders. A retail order is released by one retail shop and refers simply to one product to be delivered from the DC. Therefore, retail shops do not have any relationship with suppliers. There are about 1 million retail orders per day. The DCs translate the (predicted) demand from the shops in their region into purchasing order lines for suppliers. When bundling order lines into a purchasing order for a supplier, each DC ensures that the purchasing order covers nearly a truckload and does not exceed a truckload. Therefore, shipments from suppliers are unique truckloads for a particular DC. The DCs have regular contacts with all suppliers. The purchasing orders are sent to the suppliers by EDI. . The company AMarkt has installed a multi-site ERP system to run their business. This system contains both the retail orders and the purchasing orders. There are about ten thousand purchasing orders per day. For each purchasing order, the supplier sends a message by EDI on shipment which corresponds to the purchasing order. Based on this message, a shipment object is created in the ERP system of AMarkt. Such a shipment consists of a set of shipment lines corresponding to the order lines of the purchasing order of AMarkt. Obviously, the shipment lines are also included in the message sent by the supplier. NB: In ideal circumstances, the shipment lines are identical to the purchasing order lines. However, suppliers are allowed to some extent to deviate in the number of products delivered as compared to the number of products ordered. For example, in case of fast moving goods with high volumes and longer expiration dates (beverages, books, bulbs, cleaning materials, etc.), suppliers may ship more than ordered to the DC for the purpose to optimize their own logistics.

2

Exercise 6A (8 credits) Below, you will find a (simplified) part of a UML class diagram for AMarkt. In this diagram, there are no cardinalities shown. Please add the cardinalities. Also, if you believe that it is useful to add somewhere a composition or aggregation relationship, or a generalization relationship, please draw the symbol in the diagram.

ANSWER TO QUESTION 6A

Shipment

Product

DC Retail Shop

Supplier

Retail order

Purchasing Order Line

Purchasing Order

Shipment Line

3

Exercise 6B (3 credits) In the above diagram, it is not yet possible to represent the amount of stock for each product held in DCs or in retail shops. For the purpose of supply chain management, such information is crucial. Therefore, the above diagram is to be extended with so-called stock-keeping units (SKUs). A stock keeping unit is an information object which corresponds to the fact that stock of a catalogue product is kept at a site, which may be a DC or a retail shop. Moreover, in an SKU the current amount of inventory can be found. Below, we show a (part of) the above class diagram (viz. the classes DC, Retail Shop, and Product), extended with the notion of site and the notion of SKU. Please draw any new relationships needed to include SKU in the above diagram. Again, add the cardinalities. Also, if you believe that it is useful to add somewhere a composition or aggregation relationship, or a generalization relationship, please draw the symbol in the diagram. ANSWER TO QUESTION 6B

Product

DC Retail Shop

Site

SKU

4

Exercise 6C (4 credits) Please list attributes necessary for the class SKU and for the class Shipment Line. ANSWER TO QUESTION 6C Attributes of SKU Necessary: Other possibilities: Attributes of Batch Necessary: Other possibilities:

5

Exercise 7

The following messages are exchanged by EDI between the DC of AMarkt and the suppliers:

1. From DC to supplier: purchasing order 2. From supplier to DC: shipment mes

Extension The situation is going to be extended, and the question below refers to the extended situation. The extension is concerned with the following: AMarkt wants their suppliers to proceed with vendor-managed inventory in the DCs of AMarkt. In other words, each vendor will be informed on all inventory transactions related to the vendor’s product in each DC of AMarkt. This will be realized via an EDI message sent from AMarkt to the suppliers within 15 minutes after the physical movement of goods in the DC.

Exercise 7A (2 credits) How many messages do you (numbered 1-2) will be exchanged per day? Which of the above messages will continue to be used in case of vendor-managed inventory? Which of the above messages (1-2) will no longer be used? ANSWER TO QUESTION 7A

Exercise 7B (3 credits) What new messages will be needed ? How many messages of the new type be exchanged per day? ANSWER TO QUESTION 7B

6

Exercise 7C (5 credits) Is there in the new situation a need for a change in business processes? Please describe such a change if you deem this necessary ANSWER TO QUESTION 7C