Abstract

The location of distribution centers is an important strategic decision in supply chain design, particularly as it relates to service quality, productivity, and profitability of the firm. There has been extensive research performed on distribution location models which require the use of complex algorithms and assumptions that make use of these models difficult in practice for small and medium enterprises (SMEs) that have limited capital and resources. Studies have also failed to capture and quantify potential business results of using more sophisticated methods. In this study, a deterministic and static location-allocation model is designed using a prototype software tool. The tool is a collection of Excel/VBA programs formulated as a mixed integer programming (MIP) model. Research was done in conjunction with a personal care products company that provided a unique opportunity to evaluate the manual methods typically used in SMEs with the results of the software tool and the potential business impact. Both quantitative data, including customer locations and order information, as well as qualitative data were collected from the company. A total of five models were simulated using the prototype software tool, including one model of the current supply chain for use as a base comparison, and four future-state models of potential distribution center (DC) location scenarios. The objective in each of these models was to minimize transportation costs while maintaining the desired service fulfillment levels. The use of the prototype software tool resulted in a more optimal supply chain solution. The optimized DC location resulted in a network design with a 6.5% reduction in transportation costs from the base model, and a 0.8% reduction in transportation costs from a location previously chosen by the company. The results also provided insight into considering weighted shipping volume in location analysis as it can serve as a magnifier of business impact and rapid diminishing returns when shipping product below an average of 10 pounds. The use of an optimization tool was shown to mitigate many issues SMEs encounter in attempting to synthesize multiple variables in the DC location problem.

Degree

College and Department

Ira A. Fulton College of Engineering and Technology; Technology

Rights

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