Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 1
Marc Goetschalckx
Marc Goetschalckx
MHRC Portland, 2002
School of Industrial and Systems EngineeringGeorgia Institute of Technology
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Definitions and problem statement✯ Literature review✯ Characteristics of (global) strategic
supply models✯ Computational tools✯ Research opportunities and
conclusions
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 2
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Mexico
Japan
USA
Germany
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Customers
Warehouses
FinishingFacilities Warehouse
sProductionFacilities
Suppliers
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
• “A supply chain is a network of organizations that are involved through upstream and downstream linkages in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer,” Christopher (1998).
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 4
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Cost minimization✯ Return on investment maximization✯ Profit maximization✯ Robustness✯ Responsiveness✯ Flexibility✯ Usually conflicting
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Products
Facilities
Channels
Customers Countries
Time Periods
Inventory
Objectives
Vendors
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Stratetic Enterprise Planning
Master Production and DistributionPlanning
StrategicDemandPlanning
TacticalDemandPlanning
MaterialRequirem.Planning
ProductionPlanning
DistributionPlanning
OperationalDemandPlanning
Scheduling VehicleDispatching
DemandMonitoringPurchasing
Strategic
Tactical
Operational
Execution
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Examples:• Build a manufacturing plant• Select third-party logistics• Select customer-product groups
✯ Long range permanence of decisions✯ Heterogeneous forecasted data, if
available at all✯ Company vision and survival
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Multicommodity, multiperiod, multi-echelon, capacitated network flow design problem (planes, nodes, arcs)
✯ Decision variables• Binary status variables for facility
location status, technology and size, and machines
• Continuous material flow variables (production, transportation, storage, and sales)
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Objectives• Cost minimization, profit maximization,
risk minimization, flexibility✯ Objective function, constraint matrix,
RHS parameters all are stochastic
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Definitions and problem statement✯ Literature review✯ Characteristics of (global) strategic
supply models✯ Computational tools✯ Research opportunities and
conclusions
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 8
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Descriptive Design ModelingSupply Chain 14638 1215 326Global Supply Chain 972 698 188Supply Chain Management 692Logistics 6045Global Logistics 35 12Material Handling 1239 852 208Facilities Planning 162 62 15Warehousing 191 91 15
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
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Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Global SupplyChain Global Logistics
MaterialHandling Facilities
Planning Warehousing
Modeling
Design
Descriptive
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ModelingDesignDescriptive
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Global models• Vidal and Goetschalckx (1997)• Cohen and Huchzermeir (1999)• Ganeshan et al. (1999)• Schmidt and Wilhelm (2000)
✯ Location models• Owen and Daskin (1998)
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Historic Perspective• Geoffrion and Powers (1995)
✯ Software Tools• Ballou and Masters (1993, 1998)
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Ballou (1998) (UG)✯ Wood et al. (1999) (UG)✯ Tayur (1999) (Academic)✯ Simchi-Levi et al. (1999) (MBA)✯ Chopra and Meindl (2001) (UG, IIE*)✯ Stadtler (2000,2002) (Practitioner)✯ Shapiro (2001) (Grad)
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Much more papers as compared to material handling
✯ For all categories, mostly descriptive or analysis, fewer design, very few normative modeling
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Extensive literature on deterministic or scenario-based supply chain design
✯ Few papers on multinational supply chains
✯ Stochastic optimization for small problems
✯ Some stochastic optimization for exchange rates in global systems
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 12
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Definitions and problem statement✯ Literature review✯ Characteristics of (global) strategic
supply models✯ Computational tools✯ Research opportunities and
conclusions
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 13
5-Jun-02 Marc Goetschalckx
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Cohen, JMOM, 1989
Cohen, EJOR, 1991
Arntzen, Interfac., 1995
Canel, IJPR, 1997
Dogan, IIE TR, 1999
Vidal, EJOR, 2000
Philpott. Appita J., 2001
Schmidt, IJPR, 2000
Factors
Single-Country (Domestic) Characteristics
ObjectiveCost minimization x x - x - - -Profit maximization x - x - x x xInventory minimization - x - - - - -Cost Variance Minimization - - - - - -
CostsMaterials x x x x x x x -Production x x x x x x x xDistribution x x - x x x xInternal Transportation x x x x x - xExternal Transportation (Suppliers and Customers) x x x x x x xInventory - x - x - - -Sales Revenue (Negative Cost) x - x - x x xFixed Transformation Facility x - x x x x - xFixed Distribution Facility x - x x -Fixed Machine - x x - x xFixed Product-Mix x - - - x -Fixed Vendor-Use x - - - - - -
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Cohen, JMOM, 1989
Cohen, EJOR, 1991
Arntzen, Interfac., 1995
Canel, IJPR, 1997
Dogan, IIE TR, 1999
Vidal, EJOR, 2000
Philpott. Appita J., 2001
Schmidt, IJPR, 2000
DecisionsSupplier-Facility (Purchasing) x x x x x x x -Product-Transformer (Production) x x x x x x - -Product-Machine (Production) - x - x - x xProduct-Mix-Machine (Production) - - - - x -Transformer-Customers (Distribution) x x x x x x x xMachine-Customers (Distribution) - - x x x -Tactical Inventory Levels - x - x - - -Dynamic Facility Status (more than one change) - - - - - -
ComponentsCountries M 1 M M 1 M 1 MProducts M M M 1 M M M M
Bill of Material Levels 3 2 1 1 2 2 MSuppliers M M M M M M M MMachines & Technologies - - M - M MTransformation Facilities M M M M M M M MDistribution Facilities M M M M M -Customers M - M M M M M MTransportation Modes 1 1 M M 2 1Echelons 1 1 M M 1 M
ConstraintsProduction Capacities x x x - x x x xSupply Capacities x x - x x x -Sales Upper Bound by Demand x - - - x x -Demand Satisfaction x x x x - - xTransportation Capacities - - - - - -
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Cohen, JMOM, 1989
Cohen, EJOR, 1991
Arntzen, Interfac., 1995
Canel, IJPR, 1997
Dogan, IIE TR, 1999
Vidal, EJOR, 2000
Philpott. Appita J., 2001
Schmidt, IJPR, 2000
Multiple-Country (Global) Characteristics
ObjectivesGlobal After-Tax Profit Maximization x x x x
International CostsCountry-Specific Tax Rates x x x x -Tariffs x x x xDuties x - x -Export Incentives (Negative Cost) x x - -Transfer Prices or Markups x x -
DecisionsTransfer Prices or Markups x - x -Transportation Cost Allocation x - x -
International ConstraintsLocal Content / Manufacturing Offset x x - - -Minimum Taxes per Country x - x -
International FactorsExchange Rates x x x -
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Unified comprehensive model does not exist• Dynamic, stochastic, MIP• Economies of scale and scope explode
number of binary variables• Non-linear effects (transfer prices,
overhead, markups)• Path-based formulations (duty relief)
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Large majority use commercial MIP solvers (B&B + LP)
✯ Stochastic (operational) simulation✯ Decomposition (Benders),
factorization, bilinear programming are very rarely used
✯ Stochastic solutions obtained using limited number of scenarios
✯ Heuristics
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
Copyright © 2000-2002 Marc Goetschalckx, All rights reserved 16
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Definitions and problem statement✯ Literature review✯ Characteristics of (global) strategic
supply models✯ Computational tools✯ Research opportunities and
conclusions
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Logistics systems status✯ “Bookkeeping”
• Transactional• Data warehouse
✯ Advantages• Enterprise standardization• Data integration• Up-to-date data• Multinational
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Growing importance✯ Major vendors
• SAP (financial),– New enterprise module: Network Design
• Baan (manufacturing, transportation),– CAPS Logistics Toolkit
• PeopleSoft (human resources)• ...
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Logistics systems configuration and planning
✯ “Optimizing”• Operations research• Constraint based logic
✯ Interface with ERP✯ Also called advanced planning
systems (APS)
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Strong consolidation✯ Major vendors
• I2 – InterTrans– I2 Rhythm Supply Chain Strategist
• Manugistics• J.D. Edwards – Numetrix
– Enterprise Planning
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Andersen Consulting, “Logistics Software,” jointly with Council of Logistics Management, Oak Brook, IL, 1992 and yearly updates.
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Multiple periods, combined with tactical• Periodic and seasonal demand• Dynamic strategic systems
✯ Global• Taxes and profit realization• Local contents, duty drawback
✯ Stochastic and multi-objective• Flexibility, responsiveness, robustness,
risk, scenarios
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Integrated models are large and complex and expensive
✯ Multi-objective performance measures are complex
✯ Strategic design as a continuous effort✯ Technology transfer to logistics
professionals and students
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Data aggregation and synthesis tools• Middleware between ERP and models
✯ Rapid-prototyping design tools• Procurement-manufacturing-distribution-
markets mission configuration✯ Multi-objective design models
• Explicit tradeoffs between economics, risk, flexibility, and responsiveness
5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx
✯ Robust optimization algorithms (w.r.t. data perturbations)
✯ Large-scale multi-objective stochastic optimization algorithms
Global Supply Chain Design Review, MHRC Portland 2002 5-Jun-02
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5-Jun-02 Global Supply Chain Design Review, MHRC Portland 2002 Marc Goetschalckx