Scribd
Upload
2 views2 pages

Project Option 2 Report

This report details a supply chain optimization model aimed at minimizing costs by selecting two distribution centers (DCs) from six options to meet varying customer demands. A mixed-integer linear programming (MILP) model was developed to allocate products while satisfying capacity and demand constraints. The results confirmed the model's effectiveness in identifying cost-efficient DCs and optimizing shipment allocations, aligning with insights from a Procter & Gamble case study.

Uploaded by

M.S
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
2 views2 pages

Project Option 2 Report

This report details a supply chain optimization model aimed at minimizing costs by selecting two distribution centers (DCs) from six options to meet varying customer demands. A mixed-integer linear programming (MILP) model was developed to allocate products while satisfying capacity and demand constraints. The results confirmed the model's effectiveness in identifying cost-efficient DCs and optimizing shipment allocations, aligning with insights from a Procter & Gamble case study.

Uploaded by

M.S
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Supply Chain Optimization Project – Option 2

Introduction
This report presents a supply chain optimization model inspired by the Procter & Gamble
case study, which focused on restructuring distribution networks and reducing operational
costs. In this project, an analytical model is developed to determine the optimal selection of
distribution centers (DCs) and the optimal allocation of products to customers, with the
goal of minimizing overall supply costs.

Problem Statement
The company must supply 12 customers whose demands vary between 500 and 1000 units.
There are 6 potential DC locations, and exactly 2 must be selected. Each DC has a maximum
capacity of 10,000 units. Opening a DC incurs a cost between 10,000 and 20,000 units.
Shipping costs from each DC to each customer range from 1 to 10 per unit. The objective is
to minimize total costs while satisfying all customer demands and capacity constraints.

Methodology
The approach involves building a mixed-integer linear programming (MILP) model. Binary
variables determine whether a DC is opened, while continuous variables represent
shipment quantities. The model includes demand satisfaction, capacity limits, and a
constraint ensuring exactly two DCs are selected. Randomized data were generated within
specified ranges. The model was implemented and solved using LINGO.

Data Collection
Data were generated as follows:
- Customer demand: uniform between 500 and 1000.
- DC opening costs: uniform between 10,000 and 20,000.
- DC shipping costs to customers: uniform between 1 and 10.
Tables containing the generated data and shipping matrices were included in the LINGO
input.

Mathematical Model
Decision Variables:
x_ij = number of units shipped from DC i to customer j
y_i = 1 if DC i is opened, 0 otherwise

Objective Function:
Minimize Z = Σ_i Σ_j (c_ij * x_ij) + Σ_i (f_i * y_i)

Subject to:
1. Demand satisfaction: Σ_i x_ij = demand_j for all customers j
2. DC capacity: Σ_j x_ij ≤ 10000 * y_i for all DCs i
3. Exactly two DCs: Σ_i y_i = 2
4. Non-negativity and binary constraints.

Results and Discussion


After running the model in LINGO, the solver selected 2 DCs from the 6 available candidates.
Shipment quantities were allocated to minimize transportation and opening costs while
meeting customer demands. The selected DCs demonstrated lower combined opening and
transport costs. The solution satisfied all constraints, confirming feasibility.

Conclusions
The optimization model effectively identified the most cost-efficient distribution centers
and optimal shipment allocations. The results align with the insights from the P&G case
study, demonstrating how OR models can significantly improve supply chain efficiency. This
approach can be extended to more complex real-world scenarios with additional
constraints or facilities.

You might also like