Trend in Supply Chain Optimization and Humanitarian Logistics Tokyo University of Tokyo University...
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Transcript of Trend in Supply Chain Optimization and Humanitarian Logistics Tokyo University of Tokyo University...
Trend in Supply Chain Optimization and Humanitarian Logistics
Tokyo University of Tokyo University of
Marine Science and Technology Marine Science and Technology
KUBO KUBO MikioMikio
Agenda
Definition of the Supply Chain (SC) and Logistics Decision Levels of the SC Classification of Inventory Basic Models in the SC Logistics Network Design Inventory Production Planning Vehicle Routing
SC Risk Management and Humanitarian SC
What’s the Supply Chain?
IT(Information Technology)+ Logistics = Supply Chain
Real System, Transactional IT, Analytic IT
実 シ ス テ ム
IT処 理 的
IT解 析 的
Real System=Truck, Ship, Plant, Product, Machine, …
Transactional ITPOS, ERP, MRP, DRP…Automatic Information Flow
Analytic ITModel + Algorithm=Decision Support System
brain
muscle
nerve
Levels of Decision Making
Strategic LevelStrategic Level
Tactical LevelTactical Level
Operational LevelOperational Level
A year to several years; long-term decision making
A week to several months; mid-term decision making
Real time to several days; short-term decision making
Transactional IT
Analytic IT
Models in Analytic IT
Logistics Network Design
Inventory
Safety stock allocationInventory policy
optimization
Production
Lot-sizingScheduling
TransportationDelivery
Vehicle Routing
Multi-period Logistics Network Design
Strategic
Tactical
Operational
Plant DCSupplier Retailer
Models in Analytic IT
Logistics Network Design
Inventory
Safety stock allocationInventory policy
optimization
Production
Lot-sizingScheduling
TransportationDelivery
Vehicle Routing
Multi-period Logistics Network Design
Strategic
Tactical
Operational
Plant DCSupplier Retailer
Models in Analytic IT
Logistics Network Design
Inventory
Safety stock allocationInventory policy
optimization
Production
Lot-sizingScheduling
TransportationDelivery
Vehicle Routing
Multi-period Logistics Network Design
Strategic
Tactical
Operational
Plant DCSupplier Retailer
Inventory=Blood of Supply Chain
Time
Inventory acts as glue connecting optimization systems
Plant DCSupplier Retailer
Raw material Work-in-process Finished goods
Classification of Inventory
In-transit (pipeline) inventoryTrade-off: transportation cost or production speed
Seasonal inventoryTrade-off: resource acquisition or overtime cost , setup cost
Cycle inventoryTrade-off : transportation (or production or ordering) fixed cost
Lot-size inventoryTrade-off: fixed cost
Safety inventoryTrade-off: customer service level , backorder (stock-out) cost
In-transit (pipeline) Inventory
Inventory that are in-transit of products
Trade-off: transportation cost or transportation/production speed
->optimized in Logistics Network Design (LND)
Seasonal Inventory
Inventory for time-varying (seasonal) demands
Trade-off: resource acquisition or overtime cost -> optimized in multi-period LND
Trade-off: setup cost -> optimized in Lot-sizing
Demand
Period
Resource Upper Bound
Cycle InventoryInventory caused by periodic activities
Trade-off : transportation fixed cost -> LND
Trade-off: ordering fixed cost-> Economic Ordering Quantity (EOQ)Inventory
Level demand
Cycle Time
Lot-size Inventory
Cycle inventory when the speed of demand is not constant
Trade-off: fixed cost ->Lot-sizing, multi-period LND
Time
Inventory Level
Safety Inventory
Inventory for the demand variability
Trade-off: customer service level ->Safety Stock Allocation, LND
Trade-off: backorder (stock-out) cost ->Inventory Policy Optimization
Classification of Inventory
Time
Safety Inventory
Cycle InventoryLot-size Inventory
In-transit (Pipeline) Inventory
It’s hard to separate them but…They should be determined separately to optimize the trade-offs
Seasonal Inventory
Logistics Network DesignDecision support in strategic levelTotal optimization of overall supply chains
Example Where should we replenish pars? In which plant or on which production
line should we produce products? Where and by which transportation-
mode should we transport products? Where should we construct (or close)
plants or new distribution centers?
Trade-off in LND Model: N umber of Warehouses v.s.
輸 送 中 在 庫 費 用 輸 送 費 用Number of warehouses
• Service lead time ↓• Inventory cost ↑• Overhead cost ↑• Outbound transportation cost ↓• Inbound transportation cost ↑
Trade-off: In-transit inventory cost v.s. Transportation cost
輸 送 中 在 庫 費 用 輸 送 費 用In-transit inventory costTransportation cost
Multi-period Logistics Network Design
Decision support in tactical levelAn extension of MPS (Master Production System) for production to the Supply ChainTreat the seasonal demand explicitly
Demand
Period (Month)
Trade-off:Overtime v.s. Seasonal Inventory Cost
資 源 超 過 ペ ナ ル テ ィ( 残 業 費 )
作 り 置 き 在 庫 費 用Demand
Period
Resource Upper Bound
Constant Production
Inventories
VariableProduction
Overtime
Overtime penaltySeasonal inventory
S uppliersP lants
P roduc t ion L ines
Warehouses C ustomer G ropus
× 3
B O M or R ec ipie
Mixed Integer Programming (MIP) + Concave Cost Minimization
Safety Inv. CostBOM or Recipe
Safety Stock Allocation
Decision support in tactical levelDetermine the allocation of safety stocks in the SC for given service levels安 全 在 庫 費 用 サ ー ビ ス レ ベ ル
+ 統 計 的 規 模 の 経 済( リ ス ク 共 同 管 理 )
Safety Inventory Service Level
+Risk Pooling (Statistical Economy of Scale)
Basic Principle of Inventory
Economy of scale in statistics: gathering inventory together reduces the total inventory volume.
-> Modern supply chain strategies risk pooling delayed differentiation design for logistics
Where should we allocate safety stocks to minimize the total safety stock costs so that the customer service levelis satisfied.
Lead-time and Safety Stock
Normal distribution with average demand μ , standard deviation σService level ( the probability of no stocking out ) 95%->safety stock ratio 1.65
Lead-time (the time between order and arrival ) L
LL RatioStock Safety
Volume Inv.Max
+
=
The Relation between Lead-time and (Average, Safety, Maximum) Inventory
0
500
1000
1500
2000
2500
3000
0 5 10 15 20
Lead- time
AverageMax.Safety
Guaranteed Lead-timeGuaranteed lead-time (LT) : Each facility guarantees to deliver the item to his customer within the guaranteed lead-time
Facility i
1 Production time Ti = 3
2Guaranteed LTof upstream facility=1 day= Entering LT LIi
Guaranteed LT to downstream facility
Li =2 days
2
Safety inv.=2 days
Net Replenishment TimeNet replenishment time (NRT) :
= LTi +Ti -Li
Facility i
1 Production time Ti = 3
2Guaranteed LTof upstream facility=1 day= Entering LT LIi
2
Safety inv.=2 days
Guaranteed LT to downstream facility
Li =2 days
Safety Stock Allocation Formulation
net replenishment time
maximum demand
upper bound of guaranteed LT
Algorithms for Safety Stock Allocation
Concave cost minimization using piece-wise linear approximationDynamic programming (DP) for tree networksMetaheuristicsLocal Search (LS), Iterated LS, Tabu Search
A Real Example: Ref. Managing the Supply Chain –The Definitive Guide for the Business Professional –by Simchi-Levi, Kaminski,Simchi-Levi
458 29
Part7Denver ($2.5)
Part 6Raleigh ($3)
58 837
37
37
3
28
37 171539
15
15 1530
30
Final DemandN(100,10)Guaranteed LT=30 days
5
Part 5Charleston ($12)
Part 4Malaysia ($180)
Part 3Montgomery ($220)
Part 2Dallas ($0.5)
Part 1Dallas ($260)
x2
43,508$ (40%Down)
What if analysis: Guaranteed LT=15 days ->51,136$
Inventory Policy Optimization
Decision support in operational/tactical levelDetermine various parameters for inventory control policies
品 切 れ 費 用 安 全 在 庫 費 用 発 注 ( 生 産 ) 固 定 費 用サ イ ク ル 在 庫 費 用
Classical Newsboy Model Classical Economic Ordering Quantity Model
Safety Inventory Lost Sales Cycle InventoryFixed Ordering
Base stock Policy (Multi Period Model)
Base stock level s* = target of the inventory positionInventory (ordering) position=In-hand inventory+In-transit inventory (inventory on order) -BackorderBase stock policy: Monitoring the inventory position in real time; if it is below the base stock level, order the amount so that it recovers the base stock level
(Q,R) and (s,S) Policies
If the fixed ordering cost is positive, the ordering frequency must be considered explicitly.(Q,R) policy : If the inventory position is below a re-ordering point R, order a fixed quantity Q (s,S) policy : If the inventory position is below a re-ordering point s, order the amount so that it becomes an order-up-to level S
(Q,R) Policy and (s,S) Policy
R(=s)
R+Q(=S)
Lead time
(Q,R)
(s,S)Inventory position
Time
In-hand inventory
Periodic Ordering PolicyCheck the inventory position periodically; if it is below the base stock level, order the amount so that it recovers the base stock level
Mon. Tue. Wed. Thu.
Demand
Arrival of the order of Mon. ( Lead time L =1 day )
Order
L=1
Algorithms for Inv. Policy Opt.
base stock , (Q,R) , and (s,S) policies->Dynamic Programming RecursionPeriodic ordering policy-> Infinitesimal Perturbation Analysis During simulation runs, derivatives of the cost function are estimated and are used in non-linear optimization
Lot-size OptimizationDecision support in tactical levelOptimize the trade-off between set-up cost and lot-size inventory
段 取 り 費 用 在 庫 費 用Lot-size Inv. Setup Cost
Algorithms for Lot-sizing
MIP solver with strong forumulation(Meta)heuristics Metaheuristics using MIP solver Relax and Fix Capacity scaling MIP based neighborhood local search
Scheduling Optimization
Decision support in operational levelOptimization of the allocation of activities (jobs, tasks) over time under finite resources (such as machines)
Machine 1
Machine 2
Machine 3
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Time
What is Scheduling?
Allocation of activities (jobs, tasks) over time Resource constraints. For example, machines,
workers, raw material, etc. may be scare resources.
Precedence relation. For example., some activities cannot start unless other activities finish.
Machine 1
Machine 2
Machine 3
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Time
Solution Methods for Scheduling
Myopic heuristics Active schedule generation scheme Non-delay schedule generation scheme Dispatching rules
Constraint programming
Metaheuristics
Vehicle Routing Optimization
DepotDepot
CustomersCustomers
RoutesRoutes
service timewaitingtime
earliest time
Customer
latest time
service time
Algorithms for Vehicle Routing
Saving (Clarke-Wright) method Sweep (Gillet-Miller) method Insertion method Local Search Metaheuristics
History of Algorithms for Vehicle Routing Problem History of Algorithms for Vehicle Routing Problem
Construction MethodConstruction Method(Saving, Insertion)(Saving, Insertion)
Local SearchLocal Search
GeneralizedGeneralizedAssignmentAssignment
Location Based Location Based HeuristicsHeuristics
Tabu SearchTabu Search
GRASPGRASP(Greedy Randomized(Greedy RandomizedAdaptive Search Procedure)Adaptive Search Procedure)
AMPAMP(Adaptive Memory(Adaptive Memory Programming)Programming)
Approximate AlgorithmApproximate Algorithm
Exact AlgorithmExact Algorithm
K-Tree Relax.K-Tree Relax.
State Space Relax.State Space Relax.Set Partitioning ApproachSet Partitioning Approach
HierarchicalHierarchicalBuilding BlockBuilding BlockMethodMethod
Cutting PlaneCutting Plane
19701970 19801980 19901990
Route SelectionRoute SelectionHeuristicsHeuristics
Simulated AnnealingSimulated Annealing
Genetic AlgorithmGenetic Algorithm
20002000
SweepSweepMethodMethod
Disruption
Supply Chain “Risk” Management
Proactive and response approaches to cope with supply chain disruptions.
Time
Per
form
ance
Proactive Response
Recovery
Importance of Supply Chain “Risk”
Increase of disasters Natural disasters: earthquake, tsunami, SARS (Severe Ac
ute Respiratory Syndrome), BSE (Bovine Spongiform Encephalopathy), hurricanes, cyclones and typhoons, floods, droughts, volcanic eruption, famine and food insecurity, etc.
Man-made disasters: terrorist attack, CBRNE (Chemical Biological, Radiological, Nuclear, Explosive) disaster, war, strike, riot, etc.
Lean supply chain: increases vulnerability. Globalization: induces long lead time, outsourcing.
Related Area
Risk ManagementBusiness Continuity Planning (BCP)/ Business Continuity Management (BCM)
But, both did not work well …
Humanitarian Logistics / Humanitarian Supply Chain
Humanitarian Logistics / Humanitarian Supply Chain… is a branch of logistics which specializes in organiz
ing the delivery and warehousing of supplies during natural disasters to the affected area and people.DecentralizedNo SCM unit nor trained staffsEverything is ad hocNo performance measure (fairness, speed, …)No information & communication technologyMany players (government, NGOs)
Risk MappingRegular risk : demand/supply uncertainty Irregular risk : disruption / disaster
Impact
Frequency
Typhoon
Earthquake
Strike
Exchange Rate
Line Stop
Supply Delay
Defective Product
Risk Classification (1)
Supply Risk
Plant
ProductionLine
TransportationResource
Warehouse
Demand Risk
Internal Risk
Environmental Risk
Risk Classification (2)
Disaster risk: natural and man-made disasters such as landslides, volcanic eruption, drought, asteroid impactsPolitical risk: contracts, laws, regulations Social risk: child labor / abuse Intellectual property risk: patents, trademarks, copyrights Financial risk, employment risk, reputation risk, ...
Strategies to Cope with Risk
Accept: just do nothing!Avoid: remove the risk factor, if possibleTransfer: insurance, option Alignment: share risk and profit by contractStrengthen: make the SC robust, resilient, redundant, flexible, …
Strengthen StrategiesProactive Robustness Resiliency Redundancy Flexibility Compatibility
Disruption
Time
Per
form
ance
Proactive Response
• Response
– Agility
– Visibility
Robustness
Time Resiliency
PerformanceResiliency
Redundancy -Strategic Inventory-
Inventory for supply (or production) disruptions.That is shared by many supply chain partners.We have to distinguish it with the safety stock to copy with demand uncertainty.
Flexibility of Sourcing-Multiple Sourcing Strategy-
PlantSupplierSingle sourcing
Dual sourcing
Make-and-buy
Plant
Supplier A
Supplier B(Contract)
SupplierPlant
or
Flexible Production Strategy
Graves-Tomlin: 2-flex. is enough for demand uncertainty, i.e., 2-flex. has the similar performance with full-flex.Simulation : 2-flex. is NOT enough for supply uncertainty.
1-flexibility 2-flexibility Full-flexibility
Flexible Transportation Strategy
Multi-mode
Multi-carrier
Multi-route
Compatibility
Risk PoolingDelayed Differentiation / Postponement
Coping Strategies / Risk Mapping
Impact
Frequency
Typhoon
Earthquake
Strike
Exchange Rate
Line Stop
Supply Delay
Defective Product
Avoid
Transfer
Redundancy
FlexibilityRobustness by KAIZEN/TQC
VisibilityAlignment
Robustness by PM
Reduce Impact
Reduce P
robability
Supply Chain “Risk” Optimization
What If AnalysisStochastic Programming (Scenario Approach)
Disruption
Time
Per
form
ance
Proactive Response
Logistics Network DesignSafety Stock Allocation(Strategic, Tactical)
Scheduling Vehicle Routing Transportation(Operational)
Here & NowVariables Recourse Variables
Optimization Models for SCRM
Logistics Network Design
Inventory
Safety stock allocationInventory policy
optimization
Production
Lot-sizingScheduling
TransportationDelivery
Vehicle Routing
Multi-period Logistics Network Design
Strategic
Tactical
Operational
Stochastic /RobustExtensionsDynamic Pricing
Sourcing Decision
Quick Solution without IT