Exam Supply Chain Network Design (EBM040A05)

October 29, 2013

Coordinator: Prof. dr. I.F.A. Vis Date: October 29, 2013 Time: 9h 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; 13 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

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With weights:

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Exponential smoothing:

Ft = Ft – 1 + α(At – 1 - Ft – 1)

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nFAMAD

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SCRAP PAPER

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Exam Supply Chain Network Design (EBM040A05) October 29, 2013

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

Your name and student number:

Exercise 1 Supply Chain Network Design for a beer brewer (25 credits)

A beer brewer within the Netherlands produces bottles of organic beer. A supplier of bottles delivers each week sufficient bottles to the brewer. Hops and grain are supplied from another supplier, who has direct contact with some farmers who deliver high quantity organic raw materials. The bottles filled with organic beer are directly transshipped from the brewer to a distribution centre by a third party logistics provider. From the distribution centre the bottles are delivered by this third party logistics provider to some restaurants and retailers, where customers can buy the beer. Each week the brewer electronically submits to the third party logistics provider a request for trucks required to handle all transportation requests. Customers can return the empty bottles to the retailers. Both the retailers and restaurants make sure that their empty bottles are returned with one of the arriving trucks. At the distribution centre the empty bottles are cleaned and thereafter transshipped by the third party logistics provider to the supplier of bottles to be re-used. An EDI system is used for communication between the brewer and its suppliers, between the brewer and the retailers and restaurants and between the distribution centre and the retailers and restaurants.

The beer brewer is considering expansion to Belgium and Luxemburg in 2014. Total demand and demand patterns in Belgium and Luxemburg will presumably follow those of The Netherlands closely (apart from population size of course). The beer brewer is considering what additional production capacity is required to also handle the demand of Belgium and Luxemburg. The current suppliers will not be able to deliver more raw materials and as a result new suppliers of raw materials need to be selected for these new markets. Also a third party logistics service provider (3PL) needs to be contracted. The current one might be used but the company would like to consider alternative options as well. The company asks for your advice on the best third party logistics provider, the best opening hours for the factory, the best suppliers and an estimate of the delivery speed to be promised to customers.     

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Exercise 1A  

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

 

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Exercise 1B  

It seems that you have insufficient information to start your design project. a. Specify what information you need at least from the management of the beer brewer, potential suppliers and, potential 3PLs? Give a bullet list with questions and clearly indicate whom to ask for more information. (3 credits) ANSWER TO QUESTION 1B.a

b. What are 3 main performance measures you can use in your analyses and why? (2 credits)

ANSWER TO QUESTION 1B.b    

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Exercise 1C The table below gives the Dutch demand for bottles of beer in the past 6 years.

Year Demand 1 34,000 2 31,000 3 27,000 4 24,000 5 36,000 6 ?

a. What is the forecasted demand for year 6 when using exponential smoothing with a

smoothing constant of 0.6? Assume that the original forecast for year 4 was 29,000 bottles of beer. (5 credits)

 

ANSWER TO QUESTION 1C.a  

b. Explain how you could translate this forecast for the Dutch market to a forecast for the demand in Belgium and Luxemburg. (2 credits)

 

ANSWER TO QUESTION 1C.b.  

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Exercise 1D One of your colleagues performed extensive data analyses on the data provided by the beer brewer concerning the production process in the current factory. Part of the production system consists of three stages. A product arrives at the production system every 4.9 minutes to be processed. Each product must visit all three stages. Products first go to process 1 which consists of 3 employees working in parallel. An employee can process a product in 9.3 minutes. Next, the product goes to process 2, where 2 parallel operating machines are available. A machine at process 2 needs 7.8 minutes per product. Finally, the product goes to a checking station. The checking station is manned by one person (a different person than the employees at process 1), who needs 5.6 minutes per product for a quality check. a. What is the departure rate of this system? (3 credits)  

ANSWER TO QUESTION 1D.a b. In another part of the process a labeling machine is used. Why is it better to use a

continuous empirical distribution than a discrete empirical distribution to represent the processing times of this machine? (2 credits)

ANSWER TO QUESTION 1D.b c. Suppose that the processing time is always higher than 5 minutes, and that the average

processing time is 7 minutes. Assume that all possible values are equally likely to be selected. Give the distribution, which is suitable for this model (including parameters). Show your calculations. (3 credits).

ANSWER TO QUESTION 1D.c

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Exercise 2 Supply Chain Modelling

Exercise 2A (10 credits)

A firm has two factories, # 1 and # 2, which ship their output to four warehouses, A, B, C, D. The capacities of the factories for one month, and the requirements of the warehouses for one month, and the costs of shipping one unit from each factory to each warehouse (in euros) are given below. The objective is to minimize costs.

Factory Capacity 1 500 2 900 Total 1,400

 

Warehouse Requirements A 300 B 200 C 400 D 200 Total 1,100

 

Shipping

Shipping

From to Cost From to Cost 1 A 15 2 A 9 1 B 13 2 B 11 1 C 13 2 C 12 1 D 10 2 D 16

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

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ANSWER TO QUESTION 2A (continued)

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Exercise 2B (5 credits) Solving the problem as specified in Exercise 2A in Excel show the following result:

From To Quantity

1 D 200

2 A 300

2 B 200

2 C 400

Explain the outcomes and provide an explanation for the board of directors what the managerial implications are of this solution.

ANSWER TO QUESTION 2B

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Exercise 3 Facility location (10 credits) Calvin Large has several specialty stores in The Netherlands. To ensure an efficient distribution of their jeans to those stores they want to have a distribution centre in The Netherlands. A study will be performed on the selection of an optimal warehouse location. From the warehouse, jeans have to be transported to specialty stores in Amsterdam, Rotterdam, Delft, Groningen and Zwolle. The following data are known:

City Coordinates (x,y) Forecast monthly demand jeans

Amsterdam (-10,15) 5250

Delft (-18,-18) 2600

Rotterdam (-20,-20) 4200

Groningen (30, 45) 2400

Zwolle (25,40) 900

Once a month, the number of jeans forecasted are transported to each specialty store with truck(s). A truck has a capacity of 2000 jeans. A trip of a truck consists of the route from the warehouse to the store and back. Costs for the transport consist of fixed and variable costs per truck. a. Determine optimal (x , y) -coordinates for the location of the Distribution Centre of

Calvin Large. Support your answer with calculations. (5 credits)

ANSWER TO QUESTION 3.a.

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b. With the given way of routing trucks a lot of half empty trucks visit the stores. Due to environmental reasons and costs reductions it is decided to combine several transport tasks. Explain what combinations can be made, what reduction in trucks can be obtained and what impact you expect on the center-of-gravity (no need to perform new calculations). (5 credits) ANSWER TO QUESTION 3.b.

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Exercise 4 Distribution strategies (10 credits) Fencepost Computers, Inc. has an order for 50 laptop computers. The Company sells the computers for €500 each. It estimates that it can earn 8% per 365 days on its money. The laptops can be shipped today for delivery tomorrow at a cost of €100; payment would be received in 5 calendar days after shipment, which basically are 5 days of foregone earnings. The laptops can be shipped for delivery the day after tomorrow at a cost of €85; payment would be received in 7 calendar days. The laptops can be shipped for delivery in 3 calendar days at a cost of €80; payment would be received in 10 calendar days. Finally, the laptops can be shipped for delivery in 5 calendar days at a cost of €75; payment would be received in 14 calendar days. Which shipping schedule should Fencepost use to minimize costs consisting of foregone earnings and fixed shipping costs? Explain your answer.

ANSWER TO QUESTION 4

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Exercise 5 Transportation networks and Vehicle Routing (15 credits) Consider the following distance matrix (in kilometers) for a traveling salesman problem.

From node i /To node j

1 2 3 4 5 6 7 8

1 - 2.2 5.8 4.0 5.0 8.5 3.6 3.6 2 2.2 - 4.1 3.6 5.8 9.4 5.0 5.8 3 5.8 4.1 - 3.2 6.1 9.0 6.7 9.2 4 4.0 3.6 3.2 - 3.0 6.3 3.6 6.7 5 5.0 5.8 6.1 3.0 - 3.6 2.0 6.0 6 8.5 9.4 9.0 6.3 3.6 - 3.6 8.5 7 3.6 5.0 6.7 3.6 2.0 3.6 - 4.0 8 3.6 5.8 9.2 6.7 6.0 8.5 4.0 -

a. The depot can either be located at node 1 or node 4. What location would you recommend to use given that tours in this network are constructed using the nearest neighborhood procedure? Show your calculations. (8 credits) ANSWER TO QUESTION 5a

 

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b. Convert the distance matrix given to a cost matrix using the following information. The cost of routing a vehicle from any node i to any node j is €100. This is a fixed cost of including a link in a tour. The variable cost of using a link (or arc) is €3.30 per kilometer for the first 5 kilometers and €2.00 for the remainder of the arc distance. Explain if your decision as specified in question a will remain the same or change and show how you have obtained your conclusions. (7 credits)

ANSWER TO QUESTION 5b

 

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Exam Supply Chain Network Design (EBM040A05) October 29, 2013

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 flowers in The Netherlands, as far as this supply chain uses auctions. These auctions belong to one company, Flora Holland, which actually has 5 locations:

Aalsmeer (3 auction rooms, 14 clocks) Naaldwijk (4 auction rooms, 11 clocks) Rijnsburg ( 1 auction room, 7 clocks) Bleiswijk (1 auction rooms, 3 clocks) Eelde (1 auction rooms, 3 clocks).

Farmers who produce flowers (“growers”) are members of exactly one auction. They send their flowers in roller containers to the auction to which they belong. Each roller container, which can be moved manually, contains a batch of identical flowers. A shipment consists of a number of batches. At the auction, each batch is sold via a clock to a customer (trader). Traders buy flowers at several auctions: they are registered as allowed traders if they rent space at the auction, where they receive and temporarily store their purchases. The auction keeps track of agreed prices and settles the payments. Therefore, traders do not have direct contact with customers.

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Exercise 6A (8 credits) 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, please draw the symbol in the diagram.

ANSWER TO QUESTION 6A

Exercise 6B (3 credits) Please draw below the table which corresponds to the class Auctions. You should include at least three attributes. ANSWER TO QUESTION 6B

Grower Auction Trader

Shipment Batch

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Exercise 6C (4 credits) Please list attributes necessary for the class Shipments and for the class Batch. ANSWER TO QUESTION 6C Attributes of Shipments Attributes of Batch

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Exercise 7

The following messages are exchanged by EDI between the auctions and their business partners:

1. From grower to auction: shipment advice, including the batches in the shipment 2. From auction to grower: notification of shipment arrival, with all batches present 3. From auction to grower: batch sold at which price 4. From auction to grower: notification of payment by auction to grower 5. From auction to trader: batch sold at which price, 6. From auction to trader: batch delivered, together with invoice 7. From trader to auction: notification of acceptance of delivery by auction 8. From trader to auction: notification of payment form trader to auction

Extension The situation is going to be extended, and the question below refers to the extended situation. The extension is concerned with the following: Flora Holland agrees that growers connected to an auction open a trading website for e-business. This allows traders to buy batches of flowers from growers directly, before the growers have shipped their flowers to the auction. If a deal has been obtained, the website of the grower sends an EDI message to the trader, about the transaction which was closed. This message is not visible for the auction. However, the auction still has to be informed, as we will see. In case of e-business, the physical flow of flowers still goes via the auction, but not via the clock in the auction. The reason is, that there is anyway a cross-docking function necessary, where growers can ship their flowers to and where traders can efficiently collect their purchased goods. Accordingly, the physical goods flow hardly changes (except for the goods flow within the auction building). Also in this situation, the auction will keep its services related to payment.

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Exercise 7A (2 credits) Which of the above messages (numbered 1-8) will continue to be used in case of e-business? ANSWER TO QUESTION 7A

Exercise 7B (3 credits) Which of the above messages (1-8) will no longer be used? What new messages will be needed in which the auction is involved? ANSWER TO QUESTION 7B

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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