This document summarizes a case study for optimizing the supply chain of a dairy company, Lácteos SA. It provides context on Lácteos SA's current operations, including its product portfolio, suppliers, distribution center, delivery points, and key performance metrics. It also outlines the objectives of optimizing the network design and lists key data points and questions to consider, such as evaluating alternative distribution center locations and outsourcing/insourcing strategies.

1. Princess Nourah bint Abdulrahman University
Strategy and Operations Consulting Seminar: Open Cases
October 2022
Case 1: Supply Chain Optimization in the Dairy Sector 3
▪ Context
▪ Data to consider
▪ Questions to solve
Case 2: Business Case for an Investment Opportunity in Real
Estate 18
Case 3: Financial Valuation for a Renewable Energy Start-up 22
Annex 31
2PNU – Strategy and Operations Consulting Seminar
INDEX
An important group in the dairy sector of the Basque Country.
“Lácteos SA”. carries
out the distribution of all kinds of food products to the different

2. distribution
channels: Food and HORECA
FOOD DRY SMOOTHIES BEVERAGES
DERIVATIVES SWEET SAUSAGES
MILK MILK POWDER SINGLE DOSE
CHEESES WITHOUT
LACTOSE YOGURT
product familiesmain channels
Total References: 510
29,4%
7,2% 4,8%
22,2%
35,6%
0,8%
0,0%
10,0%
20,0%
30,0%
40,0%

3. 50,0%
Frío Seco Din
41,4%
58,6%
Kaiku
Km0
Food
HORECA
References
(in number of references)
Open case 1. Context
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own
product
external
product
Cold Dry
I
The current flow of the distribution process of Lácteos SA
entails the passage

4. of most of the product through the central platform located in
Jundiz (Basque
Country)
From there it is distributed to Food customers. and the Horeca
channel (food service) both directly and through its
delegations.
Location of delegations
Biscay
Gipuzkoa
Araba-Jundiz
Navarre
Cantabria
Rioja Barcelona
Zaragoza
Valencia
Madrid
Current Flow of the Distribution Process
Other Manufacturers/
external suppliers
Central
platform
Jundiz
Food

5. Horeca Channel
Delegations
Manufacturers/
Suppliers own self
of Lácteos SA
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Open case 1. Context
Central platform
Jundiz
The current network of Lácteos SA has 64 origins and 1.120
destinations of the Jundiz platform
64 Origins 1.120 destinations664.316 lines prepared
48.636 orders prepared
560 Food destinations
550 Horeca destinations
10 Delegations
Own factories of
Lácteos SA
5
15 own suppliers of

6. Lácteos SA
45 external suppliers
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Open case 1. Context
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In this background, the client requests…
Project Objectives
… to carry out a diagnosis of the current logistics model to
carry out the appropriate network design
for current and future market demand, considering the
possibility of separating or outsourcing certain
channels
▪ Dimensioning of the network from the production centres and
external suppliers to the distribution carried out from
the distribution centre of Jundiz
▪ Distribution system sizing. current scenario vs. other possible
scenarios
▪ Cost evaluation of scenarios based on ratios available by
Lácteos SA: cost €/km by type of vehicle. cost €/m2 of
warehouse by location…
Open case 1. Context

7. PNU – Strategy and Operations Consulting Seminar 7
In order to meet the needs raised, IDOM carried out the design
and optimization of the logistics network of Lácteos SA
What is
Strategic
Network
Design?
What is a
model?
What is
optimization?
▪ The process used to evaluate and/or propose changes to the
supply chain to
reduce costs and/or increase profitability without incurring
investments
▪ It is a computer representation of a physical system.
▪ It is a grouping of information of the desired level of detail
(by family. class. code.
by provider. by cluster. etc..)
▪ It allows us to test without affecting the real world by
optimizing
▪ Network optimization is finding the structure that provides the
greatest profitability
among multiple options that can be obtained. based on current
optimized network

8. characteristics.
▪ Mathematical programming is used to find the optimal
solution
▪ Business logic is introduced through constraints; Although
100% of the cases
cannot be modelled. a large part of them can.
Network
Design
Sales & Ops
Planning
Transportation
modelling
Inventory
modelling
Strategic
sourcing
Product Intro/
phase-out
M&A
Rationalization
Green house
Gas Analysis
Risk
Analysis

9. Open case 1. Context
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The characterization and optimization of the logistics network
will be
carried out. based on 7 key concepts of logistics management
Each concept will be defined based on supply. transportation
and inventory policies
Open case 1. Data to consider
Data
Products and packaging
Current distribution centre
Supply centers
Delivery points
1
2
5
6
Supply policies
Transport policies

10. Inventory policies
Service levels
3
Growth forecasts
4
Transport modes and politics
7
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Products
Real case
Open case data
▪ Lácteos SA distributes 2 types of product: Cold and Dry
▪ Products have different dimensions. logistics sizes and
packaging
▪ Products are stored and distributed differently depending on
whether they are cold or not (refrigerated warehouse/room
temperature warehouse. refrigerated truck/room temperature
truck)
▪ From the Jundiz warehouse. 510 different references are
distributed
▪ The following products and the production ratio will be
considered for this case:
―Cold product: 3 references

11. ―Dry product: 3 references
Cold product Dry product
Cold coffee Whole milk
Vanilla milkshake Lactose Free Milk
Yogurt Olive oil
Open case 1. Data to consider
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Suppliers- supply centers
Real case
Open case data
supply policies
▪ Jundiz receives the product from 62 origins; divided into:
▪ own factories Lácteos SA: 4
▪ own suppliers Lácteos SA: 15
▪ External providers: 45
transport policies
▪ Road transport
▪ Transportation costs are borne by Lácteos SA for products
produced in its factories or that come from its suppliers. Third-
party
vendors deliver the product directly to Jundiz bearing the cost
of transportation

12. inventory policies
▪ The capacity of the supplier to supply the product is
considered.
Supply policies
▪ A) Factory. B) Own supplier and C) External
supplier
Transport policies
▪ Transport costs per kilometre/tonne
― See distance matrix annex and annex
transportation cost
*Lácteos SA will only be responsible for the transport to the
central warehouse of the product that comes from our own
factories and suppliers
Inventory policies
▪ Does not apply
A) Factory B) Own supplier C) External supplier
Product Tons Product Tons Product Tons
Whole milk 12000 Cold coffee 6700
Vanilla
Smoothie 2300
Lactose
Free Milk 10000 Yogurt 3600 Olive oil 5400
Open case 1. Data to consider

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Delivery points
Real case
Open case data
supply policies
▪ Customers of Lácteos SA demanded 42.000 tons in 2019 to be
distributed from the main warehouse of Jundiz.
▪ The distribution of the products was analysed until their
delivery to the final food customer. to the final customer of the
channel Horeca or up to 10 delegations
▪ We did not work with the price of the final product sent. but
with its weight
transport policies
▪ Road transport
▪ Transportation costs were borne by Lácteos SA for all
products that are distributed from the warehouse of Jundiz
inventory policies
▪ not considered
Supply policies
Delivery points
Tons DP1 DP2 DP3 DP4 DP5 DP6 DP7 DP8
Whole milk 1.613 1.290 1.452 1.387 1.258 2.419 1935 645
Lactose Free Milk 1.157 370 556 648 324 1.620 3.704 1.620

14. Cold coffee 587 391 489 734 342 978 1.467 1.712
Yogurt 220 263 351 439 132 659 1.098 439
Vanilla Smoothie - 174 279 209 70 1.045 348 174
Olive oil 524 210 367 262 105 1.049 2.097 786
Open case 1. Data to consider
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Distribution centres
Real case
Open Case Data
supply policies
▪ Lácteos SA currently has 1 supply centre located in the Jundiz
industrial estate in Vitoria (Alava)
transport policies
▪ Road transport
inventory policies
▪ The maximum capacity per period is considered
▪ Inventory costs:
▪ Fixed cost and variable cost of the operation
Supply policies
▪ A single plant
▪ Storage capacity: No capacity limit

15. Transport policies
▪ Transport costs per kilometre
― See transport costs annex
Inventory policies
▪ Operating costs
― See annex operating costs
Open case 1. Data to consider
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Annex. Matrix of distances (km) between nodes
Destination
Kilometres
Current
distribution
centre
DP1 DP2 DP3 DP4 DP5 DP6 DP7 DP8
Source
A) Factory 100
B) Own supplier 166
C) External Provider 327

16. Current distribution
centre 70 15 100 170 93 570 354 560
Open case 1. Data to consider
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Annex. Costs
Sections (km) Cost (€/km)
Between 0 and <= 10 220 SAR (fixed cost)
More than 10 and <= 25 250 SAR (fixed cost)
More than 25 and <= 40 295 SAR (fixed cost)
More than 40 and <= 50 330 SAR (fixed cost)
More than 50 and <= 150 7.8 SAR/km
More than 150 and <= 350 5.5 SAR/km
More than 350 and <= 900 4.8 SAR/km
More than 900 3.5 SAR/km
Transportation costs
Operating costs
cost type Cost

17. Fixed 300,000 SAR
Variable 150 SAR/ton
* It is considered that they are complete trucks loaded with 18
tons each
Open case 1. Data to consider
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The following questions about the case must be answered
Open case 1. Questions to solve
1. Considering the costs of transportation and operation of the
current distribution centre:
a) What would be the current total logistics cost for Lácteos
SA?
2. In the following slides, two possible new locations for the
distribution centre are incorporated by
adding the distance matrices:
a) Compare the base scenario with the two new proposed
distribution centres. What would
be the most optimal distribution centre?
b) Using the plugin Solver of Excel, find the most optimal
combination of flows with the current
distribution centre and the centre with the lowest cost of the
two new distribution centres
analysed in exercise 2A.

18. 3. What is better for the warehouse, insourcing/outsourcing?
4. Identify other qualitative variables that help us select
between one distribution centre or
another.
Suggested questions
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Possible new location – A
Open case 1. Data to consider
Destination
Kilometres Distribution
centre A DP1 DP2 DP3 DP4 DP5 DP6 DP7 DP8
Source
A) Factory 7
B) Own supplier 260
C) External
Provider 380
Distribution
centre A 165 140 95 260 74 480 390 480
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19. Possible new location – B
Open case 1. Data to consider
Destiny
Kilometres Distribution
centre B DP1 DP2 DP3 DP4 DP5 DP6 DP7 DP8
Source
A) Factory 370
B) Own supplier 393
C) External
Provider 25
Distribution
centre B 395 410 450 395 435 635 30 350