Sandvik Mining And Construction Final Presentation

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Senior Design Final Presenation

Senior Design Final Presenation

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  • 1. This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content. Warehouse Network Design Saila Balasubramanian Ryan Bechtel Linh Nguyen Rigan Patel Brad Sims Brian Turner Advisor: Dr. Marc Goetschalckx Sponsor Contact: Mr. Stan Boddy Aftermarket Processes Manager – USA and Canada [email_address] (404) 589-3861 December 5, 2008
  • 2. Overview
    • Inventory cost problem
    • Network redesign
    • Data aggregation/analysis
    • Model formulation
    • Results
    • Value
    • Deliverables
    This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 3. Senior Design This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
    • Semester-long Georgia Tech course
      • Requirement to graduate
    • Find client company
    • Identify problem area(s)
    • Design solution
      • Using ISyE methodology
      • About 1,000 hours of work, equivalent value
    • Provide client with helpful product
  • 4.
    • $60 million of inventory (1.2 million items)
      • Built through acquisitions
      • Obsolete inventory
    • Focus areas include
      • Inventory management
        • Low demand items
        • Stock levels
    Problem Description This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 5.
      • Excess stock = higher holding costs
    • Misallocated inventory
        • Proximity of inventory to customer
      • Strategic stock: 18,500 SKUs
        • 25% of total inventory value
        • Average of 14,000 sales/yr for past 5 years
    Problem Description This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 6. Problem Description This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 7. This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 8. Objectives This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
    • Minimize annual logistics cost
      • Holding costs
      • Transportation costs
    • Improve customer service level
      • Currently 62%
    • Optimal stock quantities
  • 9.
    • Data collection
      • Sandvik database
        • Weight, price, demand, lead times
      • Eliminate incomplete data
    • Transportation costs
      • Calculated shipping distances
      • Estimated rate of $0.28 ton-mile
    • Aggregation
    Data This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 10.
    • Started with 49,000 SKUs ($60 Million)
      • 9,500 SKUs ($15.1 Million)
        • <5 sales/yr
    • Three facets of aggregation
    Item Aggregation This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 11.
    • By price:
      • Created 6 groups by log scale
        • $10-$100, $100-$500, $500-$1,000, $1,000-$5,000, $5,000-$10,000, $10,000+
    • By weight:
      • Created 4 groups by log scale
        • 0-1, 1-10, 10-100, 100+ Kg
    Item Aggregation This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 12.
    • Grouped by number of items sold over past 5 years
      • Increases model accuracy
      • 1 to 2 same difference as 20 to 21, but huge difference in ratio
    • Groups: 1-3, 4-8, 9-15,16-25
    Aggregation by Demand This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 13.
    • Active customers
      • 1,200 in region
      • 2,650 active shipping locations
    • Aggregation
      • By location
      • Zip-3
        • 1,000 in US alone
      • Zip-2
        • 187 aggregated customer groups
    Customer Aggregation This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 14. This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 15. This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 16.
    • 96 aggregated item groups
      • 22 blank
        • 141: $10-$100, 100+ Kg, 1-3 demand
    • 187 aggregated customers
      • 90 in Canada
      • 97 in the US
      • Average 10 active locations per region
    Aggregation Summary This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 17.
    • Items sold up to 25 times in last 5 years
    • Used sales history, customers, items
    • Average order quantity/customer/item
      • Item 111 ordered by customer 01 on average 0.2 times/yr
    Demand Calculation This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content. Row Labels 111 112 113 114 121 122 123 01 0.2 0.222 0.72 0.2 0 0 0 02 0.2 0.267 0.8 0.22 0.2 0 0.2 03 0.257 0.229 0.257 0.291 0 0 0 04 0 0.2 0.2 0.2 0 0 0
  • 18.
    • Linear mathematical programming model
      • Objective function
        • Minimize costs (holding, transportation)
      • Decision variables
        • Stock levels
        • Demand allocation
      • Constraints
        • Demand
        • Customer service level
    Model Design This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 19.
    • One to one replenishment: (S-1,S)
    • Demand follows Poisson distribution
      • Slow occurring demand
    • Demand met by multiple warehouses
    • Predetermined service levels
    • Know warehouse delivery capabilities
    • Any unsatisfied demand is lost sales
    Assumptions This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 20.
    • Minimize
      • Σ [(7%)(# of Items)(Item Value) (Stock Level) ]
        • # of items in each item group
        • Average value of each item group
        • Stock level decision variable
      • Σ [(# of Customers)(# of Items)(Shipping Cost) (% Demand Allocated) ]
        • # of Customers in each customer zone
        • # of items in each item group
        • Cost to ship from warehouse to customer
        • Demand allocation decision variable
    Objective function This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 21.
    • Service level per customer ≥ α
    • All demand must be met
    • Stock level can only take one value
    Constraints This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 22.
    • Total Cost: $2,458,261
      • Holding Cost: $2,109,450
      • Transportation Cost: $348,811
    Results for α =0.70 This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.   111 112 113 114 121 Brier Hill, PA 2         Olyphant, PA   1 1 1   Narvon, PA         1 Chateauguay, QC           Val d'Or, QC 2         Lively (Sudbury), ON           Timmins, ON           Yellowknife, NT           Creighton, SK           Laval, QC   1 1 1 2
  • 23. This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content. This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 24. Results for α =0.95 This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
    • Total Cost: $3,328,713
      • Holding Cost: $2,831,340
      • Transportation Cost: $497,373
      111 112 113 114 121 Brier Hill, PA 3 1 1 1   Olyphant, PA     1     Narvon, PA         2 Chateauguay, QC           Val d'Or, QC 3         Lively (Sudbury), ON           Timmins, ON           Yellowknife, NT           Creighton, SK           Laval, QC   1 2 2 2
  • 25. This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 26. Sensitivity Analysis This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 27.
    • $15.8 million dollars of obsolete items
    • Elimination recommended
      • Reduced holding costs
      • Possible salvage value
    • Incomplete data files
      • Weights/composition
      • Inconsistent policies
    Salvage Value This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 28.
    • Current holding cost
      • 7% of $30.9 million
      • $2.16 million
    • Estimated model holding cost
      • $1.91 million
    • Total savings
      • $250,000 per year
    Value This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 29.
    • Calculated savings
    • Stock levels
    • Ordering policy
    • Cost savings vs. service levels
      • Sensitivity analysis
      • Future objective changes
    Recommendation Report This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 30.
    • Model results.xls
      • Service levels from .4 – 1.0, increments of .05
      • Sample for α =.95
    Delivered Files This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.   111 112 113 114 121 Brier Hill, PA 3 1 1 1   Olyphant, PA     1     Narvon, PA         2 Chateauguay, QC           Val d'Or, QC 3         Lively (Sudbury), ON           Timmins, ON           Yellowknife, NT           Creighton, SK           Laval, QC   1 2 2 2
  • 31.
    • Aggregated Inventory.xls
      • Lists items in aggregated groups
    • Unsold inventory (Access file)
      • Items unsold in 5 years
      • $15.8 million
    Delivered Files This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 32.
    • Found problem area
      • Determined methodology
    • Data collection and analysis
      • Removed unnecessary data
      • Customer and item aggregation
    • Model formulation
    • Results
      • Sensitivity analysis
    • Calculated value
    Summary This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.
  • 33.
    • Questions?
    This document has been created in the framework of a student design project and the Georgia Institute of Technology does not officially sanction its content.