Post on 06-Jul-2018
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Answers
1.- The annual inventory and distribution cost of the current distributi
2.- e would recommend settin up an *'+ because doin so can bri
-owever, closin all reional '+s and handlin all products at an *
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3.- /f an *'+ is built while eepin all reional '+s open, there are .
Our recommendation would be option 3: To handle High demand produ
ecasue:
Option 2 re3uires the lowest initial investment and its recovery tim
/n both best and worst4case scenarios, annual savins are hiher f
/n the best4case scenario, annual savins are slihtly hiher for op
The re3uired initial investment and its recovery time are much hi
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n system (Option 1) is: $1,0!,"1#1" %&'
sinicant savins to the company in the lon term
'+ (Option .) is not the best option
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ore options:
ts at regional DCs and build an NDC or !iddle and "ow demand products.
e is also the lowest -owever, in the lon term after investment recovery, option ! implie
r option ! than for option 2
ion . than for option ! -owever, in middle and worst4case scenarios, annual savins are
er for option . than for option !
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s hiher annual savins
hiher for option !
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A56O case study
O#T$ON 1: Current distribution s%stem &stoc' each item at e(er%
Dail% Demand or 1 produ
1**#roducts DC 1
#art 1 10 High !ean !72#
+. D. "##art 3 .0 !edium !ean .2#
+. D. !1
#art , 80 "ow !ean 02#
+. D. 1"#
O#T$ON 1: Current distribution s%stem &stoc' each item at e(er%
A**%A5 +O&T (/nventory 9 distribution) of current system with all -;5 p
DC 1 DC2 DC 3
High $ 1.!,1727. $ #2,77028 $ ,!!.2
!edium $ !!,18##0 $ 0,""70 $ 8!,!#2"
"ow $ 71,0#78 $ 22,2.!7" $ ,11"7
TOT" NN
TC &Holding cost o in(entor% in storage)4&Holding co
&(g $n(5Hda%5367)4&&Total units transported in a
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C).
t
DC 2 DC 3 DC 9 DC 7 Total
..1 18 11#1 !!
2# 7. !2# 22"217 17 1 82"
. !" 8 !7
08! 0# 1"2 .72
12. .!" !8 !"#
C).
oducts at '+
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=eriodic review policy > O%5
Transport =u Current NDC
=lant to '+ T5 00" 007
'+ to cust 5T5 01 0.2
"40 0 T " 2 days in production
11 7 days 4444? 1 days in transit
Holding =&u5da%) 017 (transit or storae)
C+" "7@
> 122#7!
rtation cost rom DC to customer)
5D5367)
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14 Total annual cost (inventory 9 distribution) of current system
A**%A5 +O&T (/nventory 9 distribution) of current system with 1 hih product a
TC &Holding cost o in(entor% in storage)4&Holding cost o in(en
&(g $n(5Hda%5367)4&&Total units transported in a %ear)5Hda%
(g $n( >=2 4 ++ Total units transported in a %e
O%5 > 2.#!7#2!
B(l9r) > .!170021
C(l9r) > !"0.#
++ !#08#2." .1.##
in O%5
This estimated D can be used in O
T+ > (-oldin cost of inventory in storae)9(-oldin cost of inventor
T+ > 1.!1727.
A**%A5 +O&T (/nventory 9 distribution) of current syste
E 10 hih products > 1.!1727.
A**%A5 +O&T (/nventory 9 distrib
> @50
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'+1
or% in transit)4&Transportation cost rom plant to DC)4&Transportation
5&8da%s in transit))4&&T" Trans. Cost)5D5367)4&&"T" Trans. Cost)5D5367)
r &lot si?e)5&8 o orders in a %ear) >5&367=0)
%5 when its value is not provided
in transit)9(Transportation cost from plant to '+)9(Transportation cost from '+
with 1 hih product at '+1
ution) of current system with 10 hih products at '+1
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ost rom DC to customer)
to +ustomer)
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A56O case study
O#T$ON 2: Auild a National Distribution Center &NDC) and close 7 regional DCs
1**#roducts Dail% Demand or 1 product
DC 1 DC 2
#art 1 10 High !ean !72# ..1+. D. "# 2#
#art 3 .0 !edium !ean .2# 217
+. D. !1 .
#art , 80 "ow !ean 02# 08!
+. D. 1"# 12.
NDC ggregation Dail% Demand or 1 product
1** #roducts !ean
10 High "0". 1..8!"11!78
.0 !edium .2! 1.170.!!8.
80 "ow 2" 271#"11"7
B* B*.7
High $ !!.,01!28 $ !2,!112.
!edium $ .22,."8" $ .81,8#2!
"ow $ .#.,28!21 $ !!1,0.08
TOT" NN" CO+T O/ O#T$ON 2 B* B*.7
0 middle4case scenario: I>07 worst4case sce
+. D. B*
A**%A5 +O&T (/nventory 9 distribution) of areated system with all -;5 products a
or possible B (alues.
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handled per year
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. High DC 1
DC 1
DC 2
DC 3
DC 3 DC 9 DC 7 DC 9
18 11#1 !! DC 77. !2# 22"
17 1 82" !edium DC 1
!" 8 !7 DC 1
0# 1"2 .72 DC 2
.!" !8 !"# DC 3
DC 9
DC 7
1800"20881. .088.!# "ow DC 1
187.101!08 .0!!#07 DC 1
#8821!.2!78 107"".21 DC 2
DC 3
DC 9
B1 DC 7
$ !78,!"87
$ ."!,.08. =eriodic revie
$ !",1#2#2 Transport
=lant to '+
B1 '+ to cust
1;*1;,*.*2
"40
11
.
>
e scenario
ase scenario TC
se scenario
se scenario
case scenario
ase scenario
ario: I>1
+. D. B*.7 +. D. B1
t *'+ for possible I values
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DC 2 DC 3 DC 9 DC 7 High
27.!02 !812# .2."02 !1!20.
!20#2# ..7702 ."0"7. B 0
1#!02# .!182 B 07
17.7. B 1
DC 2 DC 3 DC 9 DC 7 !edium
1"7". .01".2 .1!1 11.2"
!"1# 21"1. ..08. B 0
2!1"2 ..82#2 B 07
.207 B 1
DC 2 DC 3 DC 9 DC 7 "ow
.#11 28!.. 8222# 8##02
!!"!# 7!!". 771 B 0
#"#2 "71.. B 07
12"2# B 1
policy > O%5
=u Current NDC
T5 00" 007
5T5 01 0.2
0 T " 2 days in production
7 days 4444? 1 days in transit
Holding =&u5da%) 017 (transit or storae)
122#7! C+" "7@
&Holding cost o in(entor% in storage)4&Holding cost o in(entor% in tran
&(g $n(5Hda%5367)4&&Total units transported in a %ear)5Hda%5&8da%s in
(g $n( >=2 4 ++ Total units transported in a %ear &lot si
in O%5
> @50
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EFG2 JBi K. 9 J (IiLEBiEBL) if i ML
EFG2 JBi K. 9 IiLEJ(BiEBL) if i ML because B
EFG2 17*.695&367=0)
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is the same or all combinations o regions in this case.
is the same or all combinations o regions in this case.
is the same or all combinations o regions in this case.
C to customer)
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A56O case study
O#T$ON 3: se current distribution s%stem or High products and build NDC or
1**#roducts Dail% Demand or 1 product
DC 1 DC 2
#art 1 10 High !ean !72# ..1+. D. "# 2#
#art 3 .0 !edium !ean .2# 217
+. D. !1 .
#art , 80 "ow !ean 02# 08!
+. D. 1"# 12.
NDC ggregation Dail% Demand or 1 product
1** #roducts !ean
10 High "0". 1..8!"11!78
.0 !edium .2! 1.170.!!81
80 "ow 2" 271#"11"7
High $ !21,##7#0
B* B*.7
!edium $ .22,."8" $ .81,8#2!
"ow $ .#.,28!21 $ !!1,0.08
TOT" NN" CO+T O/ O#T$ON 3 B* B*.7
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handled per year
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!iddle and "ow products. High DC 1
DC 1
DC 2
DC 3
DC 3 DC 9 DC 7 DC 9
18 11#1 !! DC 77. !2# 22"
17 1 82" !edium DC 1
!" 8 !7 DC 1
0# 1"2 .72 DC 2
.!" !8 !"# DC 3
DC 9
DC 7
1800"20881. .088.!# "ow DC 1
187.101!08 .0!!#07 DC 1
#8821!.2!78 107"".21 DC 2
DC 3
DC 9
DC 7
B1
$ ."!,.08. =eriodic revie
$ !",1#2#2 Transport
=lant to '+
B1 '+ to cust
1;**9;2,
scenario
se scenario TC
e scenario
e scenario
ase scenario
se scenario
rio: I>1
+. D. B*.7 +. D. B1
5 products at *'+ for possible I values
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DC 2 DC 3 DC 9 DC 7 High
27.!02 !812# .2."02 !1!20.
!20#2# ..7702 ."0"7. B 0
1#!02# .!182 B 07
17.7. B 1
DC 2 DC 3 DC 9 DC 7 !edium
1"7". .01".2 .1!1 11.2"
!"1# 21"1. ..08. B 0
2!1"2 ..82#2 B 07
.207 B 1
DC 2 DC 3 DC 9 DC 7 "ow
.#11 28!.. 8222# 8##02
!!"!# 7!!". 771 B 0
#"#2 "71.. B 07
12"2# B 1
policy > O%5
=u Current NDC
T5 00" 007
5T5 01 0.2
0 T " 2 days in production
7 days 4444? 1 days in transit
Holding =&u5da%) 017 (transit or storae)
122#7! C+" "7@
&Holding cost o in(entor% in storage)4&Holding cost o in(entor% in tran
&(g $n(5Hda%5367)4&&Total units transported in a %ear)5Hda%5&8da%s in
(g $n( >=2 4 ++ Total units transported in a %ear &lot si
in O%5
> @50
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EFG2 JBi K. 9 J (IiLEBiEBL) if i ML
EFG2 JBi K. 9 IiLEJ(BiEBL) if i ML because B
EFG2 17*.695&367=0)
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is the same or all combinations o regions in this case.
is the same or all combinations o regions in this case.
is the same or all combinations o regions in this case.
C to customer)
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A56O case study
O#T$ON 9: se current distribution s%stem or High and !iddle products and b
1**#roducts Dail% Demand or 1 product
DC 1 DC 2
#art 1 10 High !ean !72# ..1+. D. "# 2#
#art 3 .0 !edium !ean .2# 217
+. D. !1 .
#art , 80 "ow !ean 02# 08!
+. D. 1"# 12.
NDC ggregation Dail% Demand or 1 product
1** #roducts !ean
10 High "0". 1..8!"11!78
.0 !edium .2! 1.170.!!81
80 "ow 2" 271#"11"7
High $ !21,##7#0
!edium $ !0#,1721!
B* B*.7
"ow $ .#.,28!21 $ !!1,0.08
TOT" NN" CO+T O/ O#T$ON 9 B* B*.7
32;713.39
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handled per year
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ild NDC or "ow products. High DC 1
DC 1
DC 2
DC 3
DC 3 DC 9 DC 7 DC 9
18 11#1 !! DC 77. !2# 22"
17 1 82" !edium DC 1
!" 8 !7 DC 1
0# 1"2 .72 DC 2
.!" !8 !"# DC 3
DC 9
DC 7
1800"20881. .088.!# "ow DC 1
187.101!08 .0!!#07 DC 1
#8821!.2!78 107"".21 DC 2
DC 3
DC 9
DC 7
B1 =eriodic revie
$ !",1#2#2 Transport
=lant to '+
B1 '+ to cust
1;*1;229.,,
"40
11
"ow products.
>
scenario
se scenario TC
e scenario
e scenario
ase scenario
se scenario
rio: I>1
+. D. B*.7 +. D. B1
ducts at *'+ for possible I values
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DC 2 DC 3 DC 9 DC 7 High
27.!02 !812# .2."02 !1!20.
!20#2# ..7702 ."0"7. B 0
1#!02# .!182 B 07
17.7. B 1
DC 2 DC 3 DC 9 DC 7 !edium
1"7". .01".2 .1!1 11.2"
!"1# 21"1. ..08. B 0
2!1"2 ..82#2 B 07
.207 B 1
DC 2 DC 3 DC 9 DC 7 "ow
.#11 28!.. 8222# 8##02
!!"!# 7!!". 771 B 0
#"#2 "71.. B 07
12"2# B 1
policy > O%5
=u Current NDC
T5 00" 007
5T5 01 0.2
0 T " 2 days in production
7 days 4444? 1 days in transit
Holding =&u5da%) 017 (transit or storae)
122#7! C+" "7@
&Holding cost o in(entor% in storage)4&Holding cost o in(entor% in tran
&(g $n(5Hda%5367)4&&Total units transported in a %ear)5Hda%5&8da%s in
(g $n( >=2 4 ++ Total units transported in a %ear &lot si
in O%5
> @50
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EFG2 JBi K. 9 J (IiLEBiEBL) if i ML
EFG2 JBi K. 9 IiLEJ(BiEBL) if i ML because B
EFG2 17*.695&367=0)
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is the same or all combinations o regions in this case.
is the same or all combinations o regions in this case.
is the same or all combinations o regions in this case.
C to customer)
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