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Lambert
Author(s): Vijay Gupta, Emmanuel Peters, Tan Miller and Kelvin Blyden
Source: Interfaces , Jul. - Aug., 2002, Vol. 32, No. 4 (Jul. - Aug., 2002), pp. 28-45
Published by: INFORMS
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(The new Pfizer consumer and pharmaceutical distri about logistics planning over varying planning hori
bution network includes all of these locations and zons (Figure 1).
three additional echelon-one distribution centers that
Warner-Lambert's planning-horizon framework
comprised the old Pfizer pharmaceutical and con was a traditional hierarchical framework (Anthony
sumer division network.) Warner-Lambert distributed 1965, Hax and Meal 1975, Miller 2002). In this frame
finished goods to its customers' receiving locations work, logistics planning and scheduling activities fall
(warehouses) either directly from its two major distri into three horizons: (1) operational planning focusing
bution centers (DCs) or in shipments that flowed from on the short-run (one to 18 months), (2) tactical plan
a distribution center to a pool distributor and then to ning generally spanning a 12 to 18 month horizon, and
(3) strategic planning typically covering two to five
Pfizer7 s annual sales exceed $30 years or so into the future. Warner-Lambert wanted a
billion. planning system to address diverse problems and
functions over a broad planning horizon.
the customer. As a general rule, large consumer
product orders flowed as truckloads from Elk Grove Decision-Support Systems Literature
or Lititz direct to the customer, while small orders typ A bountiful and ever-increasing collection of literature
ically flowed from the DC to the pool distributor to the addresses decision-support systems (Table 1). Bowersox
customer. Most pharmaceutical orders were delivered and Closs (1996) and Liberatore and Nydick (1998,2000)
by courier services. review DSSs in depth.
Interfaces
Vol. 32, No. 4, July-August 2002 29
i Aggregate Planning
Allocates capacity and
resources to product lines
Assigns sales regions to
DCs and plants
Constraints
t
Conducts carrier selection process
Constraints
Operations Scheduling
Distribution resource planning (DRP)
Master production scheduling
Short run DC workload scheduling
c
Transport scheduling Operational (1 to 18 months)
Constraints
Short-term scheduling
(shop floor)
Figure 1: Warner-Lambert designed its DNDSS to support short-run and long-run planning and scheduling.
?Tax information, local content rules, and intra regarding the US network for distributing finished
company transfer pricing (profits) for global and in goods, including warehousing, transportation, and
ternational models, delivery.
?Accounts receivable, deduction claims, and short To support long-run planning of warehouse capac
age and damage claims by customer and by location, ities in the network, WL developed three linked simu
and lation models: (1) a DC storage-capacity model, (2) a
?A well-defined hierarchical product-line structure DC picking-and-shipping model, and (3) a DC facility
with data available at any level of product aggregation. sizing model (Figure 2). Collectively these models
WL's information systems group developed and evaluated the capacity requirements and projections
maintained a database, which included many of these for the DCs in WL's network over planning horizons
elements. of two and five years, depending upon the decision in
question. WL did its tactical and strategic planning of
warehouse capacities as part of its overall network
Individual Elements of the Strategic planning. For example, in a typical strategic-planning
and Tactical DSS exercise, WL determined whether its warehouse net
WL's DSS contributed to many decisions concerning work had enough capacity to handle the demands pro
distribution, customer service, and the supply chain. jected for the next three to five years.
However, its main purpose was to support decisions The projected demand was based on a sales forecast.
Interfaces
30 Vol. 32, No. 4, July-August 2002
Distribution Boykin and Levary (1985) Monsanto System determined optimal routes for effective capacity
utilization.
Distribution Van der Heyden and Grann Elevator System allocated berths and equipment to loading and unloading
Ottjes (1985) Meatschappij (GEM) operations.
Financial management ABA Banking Journal Fannie May, Freddi Mac, System provided decision support for mortgage organization,
(2000) Home Side Lending, loan underwriting, and credit authorizations.
and Advantor
Hazardous-waste Sen et al. (2000) DOE and other institutions System integrated hazardous-waste clean-up efforts.
management
Health-care management Wong et al. (2000) Indiana University System provided comprehensive management of patient records,
including monitoring medications and lab results.
Marketing Brown (1985) Abbott Labs Hospital System integrated marketing plans for product portfolio.
Products Division
Materials management Benderetal. (1985) IBM (New York Optimization-based vendor selection system identified 5-10
manufacturing facility) percent savings on commodity purchases.
Materials management Ramani (2001) MP Trust Hospital Integrated materials (inventory) management system resulted in
12-15 percent reduction in annual purchase costs.
Natural-resources Giorgio et al. (1985) Italian National Research System provided efficient management of multipurpose Lake
management Council and Como reservoir.
International Institute
Table 1: These selected DSSs have been implemented in private industry and the public sector.
Such sales forecasts often consisted of a series of alter projections for the planning horizon into the DC
native forecast scenarios, each with a projected prob storage-capacity model and the DC picking-and
ability of occurring. These alternative forecasts facili shipping-capacity model. Each model projected
tated sensitivity analyses on the base case (the most capacity-utilization rates (surplus or deficit) over the
likely forecast scenario). Projections of finished-goods planning horizon for its areas of warehouse opera
inventory turns also drove the planning process. Be tions. The outputs of these two models became inputs
cause inventory turns are important in determining to the DC facility-sizing model (Table 2). The DC
storage-space requirements, WL also used projections facility-sizing model evaluated such factors as the total
of turn rates in its sensitivity analyses. networkwide warehouse square footage required to
The outputs of the individual planning models be store, pick, and ship the projected sales and inventory
came inputs to the other models. In practice, the plan over the planning horizon.
ning methodology was usually both sequential and it Projections for sales and finished-goods-inventory
erative. First, planners input the sales and inventory turns were also inputs to the model. Warner-Lambert
Interfaces
Vol. 32, No. 4, July-August 2002 31
Five Year
Projections of Sales
and Inventory Turns
DC Picking-and
DC Storage Shipping Capacity
Capacity Model Model
1 Distribution
Network Inventory
DC Facility-Sizing
Model Optimization Model Investment Model
Models
Plans/Analyses for One to Five Years
Inputs and outputs into the Future
Potential Iterative
process
Figure 2: Pfizer developed these principal DSS components to facilitate both strategic and tactical warehouse
and transportation planning.
developed this optimization model of its US network ning horizon directly into the DC workload models. In
as part of a project to evaluate long-run warehouse either case, an iterative planning process would typi
capacity requirements. This model then became a key cally ensue in which the network optimization model
component of the firm's strategic and tactical DSS. The would evaluate the implications of results from the DC
optimization model was a mixed-integer program workload and facility-sizing models, and vice versa.
ming model that produced plans for distribution of Planners would also run optimization model sce
WL products over the planning horizon. The model's narios that simultaneously considered freight, variable
results included projected product flows through the and fixed warehousing costs, warehouse storage and
network by individual location from plants to custom throughput capacity constraints, and so on (that is,
ers. It forecast the future product volumes that each they would employ a traditional optimization-based
warehouse would have to handle. In some applica cost-minimization approach). Such runs also included
tions, planners would run this model before running constraints on customer-order cycle time (for example,
the DC workload models to identify the projected por constraints specifying that all customer locations must
tion of total demand each DC would handle. In other be served by a DC within three days transit time of the
cases, a supply and distribution plan was in place, and customer's location when served by motor carriers).
planners would input the initial forecast for the plan For evaluative purposes, however, we usually found
Interfaces
32 Vol. 32, No. 4, July-August 2002
Input Factor
Interfaces
Vol. 32, No. 4, July-August 2002 33
Projection
Output $(millions)
1. One-time cost for buying and installing rac
2. One-time cost for facility-expansion constr
3. One-time cost for land for expansion 1.0
4. One-time cost for material handling equipm
5. One-time cost for material handling equipme
6. Annual cost of labor for full 2nd shift 2.0
7. Annual cost of labor to support facility abov
8. One-time cost for operating a 2nd shift and
9. Increase in annual operating cost (excluding
10. Annual depreciation of capital costs required
11. Increase in annual operating cost (including
Interfaces
34 Vol. 32, No. 4, July-August 2002
Line Item Fill Rate Order Fill Rate Freight Cost Per Pound
Figure 3: The customer logistics scorecard monitored key measures of the supply-chain relationship between
Warner-Lambert and its customers.
Adams confectionery colleagues. They decided to em To construct this model, the team identified the capac
ploy optimization in support of their global-supply ities and costs associated with the three major produc
chain-planning efforts. The Adams division wanted to tion stages (bulk processing, finishing, and packaging)
enhance its strategic and tactical manufacturing and then modeled these stages explicitly. Further, it
planning capabilities. Thus, Adams supply-chain per identified distribution costs, locations, echelons, and
sonnel worked in conjunction with several people who major transport lanes. It incorporated this data into the
had worked on the original DSS to develop a global model, a traditional mixed-integer formulation (Ap
manufacturing-and-distribution-planning model. pendix). For tactical planning, the model could gen
The Adams global-manufacturing-optimization erate integrated production and sourcing plans for
model included all its major plants and products. This global manufacturing and distribution. For strategic
represented over 12 plants scattered across the Amer planning, the model, somewhat enhanced, would sup
icas, Europe, and Asia and over 70 product families. port decisions concerning plant location, closing,
Interfaces
Vol. 32, No. 4, July-August 2002 35
(3)
(2) Average Shipments
Number of Shipments from per Week from (4) (5)
(1) Regional Warehouse to Pool Regional Warehouse Average Lbs. Average Freight
Pool Point Point During Last 10 Weeks to Pool Point per Shipment Cost per Lb.
Total/Average
Table 4: Monitoring reports, such as this table that tracks planned and actual freight costs and flows by transport
lane, are a key component of the logistics planning toolkit.
expansion, and contraction. The Adams division next ucts increased. As the firm introduced new products
requested a more sophisticated model for evaluating in the different markets, it used its existing plants in
strategic-technology decisions. those markets to produce them. For example, when it
introduced sugarless pellets in the United States, it be
gan production in a midwest plant. Similarly, when it
introduced this product in Canada, it added its pro
A Strategic Model for Planning duction in a Canadian plant. This practice led to low
Manufacturing Technology volume products being produced by multiple plants.
We developed a multiplant model to help the Adams Thus, a future objective of the modeling project was to
division make optimal decisions about locating manu look for opportunities to consolidate the production of
facturing technology. Management wanted to see similar products.
whether moving its manufacturing technology among With these objectives and the traditional supply
plants would reduce overall costs. The decision con and-demand requirements in mind, we developed a
cerned relocation and optimizing the costs of moving mathematical model (Appendix). We solved the model
equipment, closing and opening plants, manufactur using a GAMS interface with a MIP solver. The results
ing, transporting freight, and labor. provided the manufacturing strategy group with new
The logistics-planning group and the manufacturing insights and allowed it to carry out sensitivity analy
strategy group of the Adams division collaborated on ses. The firm implemented results from this study and
the model. It focused on the North Atlantic region, obtained some key benefits:
including Western Europe, Canada, and the United (1) The model identified a new manufacturing and
States, and considered demand for candy and sugar distribution plan projected to reduce annual operating
and sugarless pellet and stick gum and their costs by $5.9 million.
manufacture. (2) The revised operating plan required a one-time
In the late 1990s, in the mature markets, the demand investment of about $11 million, with a payback period
for gum products declined, and demand for new prod therefore of less than two years.
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36 Vol. 32, No. 4, July-August 2002
(3) The model identified new manufacturing tech such as customers' shortage claims on deliveries and
nologies (and their associated product families) that the impact of order-cycle time and on-time delivery
should be transferred into a plant facing imminent lay performance on the firm's relationship with its custom
offs, thus avoiding human hardships and the costs of ers. The DNDSS raised the firm's awareness of such
layoffs. issues and enhanced its ability to remediate supply
(4) In all, the model identified three manufacturing chain problems and to make proactive improvements.
technologies (and their associated product families) to Finally, other key enablers facilitated the success of
be relocated. the DNDSS:
(5) The model also identified a plan for transferring ?The logistics planners who developed this system
similar manufacturing technologies to one location, worked on a variety of operational, tactical, and stra
thus reducing the technology spread. tegic decision-support problems. This mix helped
(6) One of the production-technology moves identi them to understand, for example, the operational im
fied would also reduce the transit time by about four plications of potential strategic or tactical decisions
weeks for a high-demand product in a key sales region about the long term. This knowledge helped them to
and would also reduce in-transit and safety-stock develop better decision-support tools than they would
inventories. otherwise.
?The DSS contained tools developed for and used
Benefits and Enablers of the by field operations (for example, distribution-center
colleagues). The process for developing them in
Decision-Support System creased logistics planners' knowledge about field
Warner-Lambert's DNDSS has generated many bene
fits, some quantified, some never completely quanti The DNDSS continues to evolve and
fied, and some qualitative. The important quantified
benefits include expand.
?Annual savings exceeding $0.5 million in freight
operations and increased people's confidence in the
costs from improved transportation-scheduling
planners and the DSS.
support,
?The elimination of customer deductions amount ?The DSS monitoring functions were based on ex
ceptions reporting.
ing to several hundred thousand dollars annually, and
?Warner-Lambert's activity-based-costing (ABC)
?A strategic manufacturing technology plan that
system for evaluating distribution and customer
could save $5.9 million annually.
service operations provided inputs to the DSS
The DSS also helped distribution managers to un (Liberatore and Miller 1998).
derstand the cost and service implications of proposed
Interfaces
Vol. 32, No. 4, July-August 2002 37
the individual DSS components to support real near facilitated its eventual migration and expansion to
term projects as well as to contribute to the long-term other areas of the firm.
DSS. By developing DSS components as part of indi
vidual projects with specific completion dates and ob
jectives, it created a sense of urgency and immediate
Resources and Costs Required to
need for the DNDSS components. Develop DNDSS
For example, Warner-Lambert developed the stra Warner-Lambert developed its DNDSS with minimal
tegic and tactical components of its DSS (Figure 2) to resources. During the initial development between
evaluate what capacity it needed in its distribution net 1998 and 2000, three or four members of distribution
work over the long term. The firm initially developed with graduate degrees in operations research and
the optimization, inventory, and DC-capacity models operations management spent 50 to 70 percent of their
of the current Pfizer DNDSS to study the Warner time developing the core of the DNDSS. Most of their
Lambert US network in the late 1990s. The firm used
this approach of developing DSS components to sup Warner-Lambert's DSS quickly
port specific projects and then incorporating the com
became an integral planning-support
ponents into the formal DNDSS repeatedly. Typically
it incorporated project components into the DNDSS by component.
appending front-end input interfaces and back-end in
time was devoted to DSS components to support spe
terfaces and reporting technology. The resulting
cific projects. Only 15 to 20 percent of their time was
DNDSS tool readily supported a variety of projects
devoted to pure DNDSS development (to append ge
and applications.
neric front ends and back ends to the DNDSS compo
Because the firm and the US distribution organiza
nents developed for various projects).
tion needed these tools for a project objective, the or
The information systems group also expended effort
ganization did not view them as threatening. Rather,
and resources to develop, maintain, and enhance large
it saw them as aides to making better, quicker deci
scale Oracle databases that indirectly supported the
sions. In addition, people from the distribution orga
DNDSS. However, it started developing this database
nization who had some OR background worked with
system well before the inception of the DNDSS, and
logistics and distribution colleagues to construct this
these databases supported many activities. These da
system. In particular, they provided advice on what tabases were a foundation block of the DNDSS; a firm
decision-support tools would enhance operations. The
without such large-scale databases would incur much
collective, inclusive effort of constructing the DNDSS
greater costs in developing a DSS than Warner
contributed to its positive reception. Lambert did.
Interfaces
38 Vol. 32, No. 4, July-August 2002
Basic, Microsoft Access, and links to data in the order major plants and products, to facilitate tactical and stra
management system. The one-time costs to purchase tegic planning. Given the multiple purposes and plan
the optimization, simulation, and GIS software were ning horizons we expected this model to support, we
less than $100,000, and ongoing annual software ex formulated several variations of this basic model. These
penditures did not exceed $30,000. included mixed-integer and linear-programming for
Warner-Lambert primarily used Microsoft Access, mulations. The mixed-integer variations could address
Visual Basic, and Excel to develop the interfaces, links, fixed costs at the tactical level (for example, annual fixed
input screens, and reporting systems. We designed the costs for plant or production line) and at the strategic
system to be used by nontechnical logistics, order level (for example, plant openings or closings). The fol
management, and other employees. They typically lowing is a simple formulation designed to provide in
could use input screens to select the customers, prod tegrated production and distribution plans for a sce
ucts, analyses, reports, and so forth that they wanted nario in which the division planned to operate all plants
to use. Standard networking topologies facilated user over a tactical planning horizon. This is the model vari
access from laptops or from several desktop PCs. ation used most frequently.
While Microsoft Access is not a large-scale database We use the following notation:
language, it can support applications of about one mil p = index on the plant.
lion records effectively. Most of the applications in the i = index on the bulk-product family.
DNDSS used fewer than one million records for any k = index on the finished (but not packaged) prod
particular activity. Thus, we developed many DNDSS uct family.
decision tools with Visual Basic programming support. m = index on the packaged finished-goods product
We supported the occasional applications that used family. (Note: i, k, and m have a one-to-one correspon
millions of records with Oracle. The DNDSS produced dence. That is, i = 1, k = 1, m = 1 represents the same
reports as Access, Excel, or even Word documents. An product family in bulk, finished, and packaged forms.
alytic reports in Excel could be used as inputs to users' We use three indices to distinguish where a product
own analyses or monthly reports.
family is in the production process. However, one
could more concisely formulate this problem with just
Conclusion one index representing product families at each of the
Once developed, Warner-Lambert's DSS quickly be three production stages.)
came an integral planning-support component for op ; = index on the bulk production line.
erational, tactical, and strategic activities and deci / = index on the finishing production line.
sions. The system relied on such standard operations n = index on the packaging production line.
research methodologies as optimization and simula Jip = the subset of all lines ; = 1, ... , / that can
tion. Just as important to the success of this system was produce product / at plant p.
the support of people at headquarters and in the field. Lkp = the subset of all lines / = 1, ... , L that can
Colleagues ranging from senior distribution managers produce product k at plant p.
to entry-level employees used the information and in Nmp = the subset of all lines n = 1,..., N that can
sights the DNDSS provided. produce product m at plant p.
r = index on the sales region (country).
APPENDIX t = index on the time periods of the defined plan
ning horizon.
epijt = the variable cost per unit of producing bulk
Integrated Manufacturing and product family i at plant p on bulk line ; during pe
Distribution Planning Optimizationriod t.
Model fpkU = the variable cost per unit of producing
We developed the Adams global manufacturing and finished-product family k at plant p on finishing line I
distribution model, which included all of the division's during period t.
Interfaces
Vol. 32, No. 4, July-August 2002 39
gpmnt = the variable cost per unit of packaging Xpijt = the units of bulk-product family / produced
packaged-product family m at plant p on packaging at plant p on production line ; during period t.
line n during period t. YpkU = the units of finished-product family k pro
apmwt = the cost per unit of shipping packaged duced at plant p on production line Z during period t.
product family m from plant p to warehouse w during Zpmnt = the units of packaged-product family m pro
period t. duced at plant p on packaging line n during period t.
bwmrt = the cost per unit of shipping packaged Spmwt = the units of packaged-product family m
product family m from warehouse w to sales region r shipped from plant p to warehouse w during period t.
during period t. Twmrt = the units of packaged-product family m
cpmrt = the cost per unit of shipping packaged shipped from warehouse w to sales region r during
product family m from plant p to sales region r during period t.
period t. Upmrt = the units of packaged-product family m
hwmt = the cost per unit of carrying packaged shipped from plant p to sales region r during period t.
product family m in inventory at warehouse w during Iwmt = the units of packaged-product family m in
period t. inventory at warehouse w at the end of period t.
hrmt = the cost per unit of carrying packaged Irmt = the units of packaged-product family m in
product family m in inventory at sales region r during inventory at sales region r at the end of period t. (Each
period t. sales region or country has a local warehouse that in
dmrt = the demand for packaged-product family m ventories and ships its products to the customer loca
in sales region r during period t. tions within the sales region.)
iminwmt = the minimum inventory level allowed (or
lowest inventory target) for packaged-product family
m at warehouse w at the end of period t. The Global Manufacturing and
iminrmt = the minimum inventory level allowed for Distribution Model
packaged-product family m at sales region r at the end Minimize:
of period t.
ypik = the conversion factor that translates what 1 jL ?j 2j ?j Xpijtepijt + 2j 2j 2j 2j Ypkitfpkit
p i j t p k I t
unit of bulk-product family / contributes to the output
of finished-product family k at plant p. For example, a "t~ jZj 2-? 2J ?j ? pmntgpmn
p m n t p m w t
value of 1.0 indicates that 1 unit of bulk production
yields 1 unit of finished production. (This factor does
" 2~t 2Li 2-t jLj * wmrPwmr
not change from period to period, and therefore, we w m r t p m r t
omit the subscript t.)
+ 2j 2j 2j ^wmV^wmt
zpkm ? the conversion factor that translates what 1 w m t r m t
unit of finished-product family k contributes to the out
put of packaged-product family m at plant p. subject to
Opijt = the total potential production capacity (in
Iwmt ^ imin^nt for all w, m, t, (A2)
units) to produce bulk-product family i at plant p on
production line / during period t. Irmt > iminrmt for all r, m, t, (A3)
cjpkit = the total potential capacity (in units) to pro
duce finished-product family k at plant p on produc *~wmt ~ *wmt ? l ' jZj ^pmwt ~~ j-j * wmrt
p r
tion line / during period t.
for all w, m
vpmnt ? the total potential production capacity (in
units) to produce packaged-product family m at plant *rmt ~~ -*rraf-
w p
p on packaging line n during period t.
We define the decision variables as follows: for all r, m,
Inte
40 Vol. 32,
Interfaces
Vol. 32, No. 4, July-August 2002 41
would typically include such factors as customs, du Hp > O = head-count increase due to increase in
ties, and other local taxes. One could also easily insert production at location p.
variable warehouse-handling costs by product family Qp > 0 = variable to capture the need for existing
and by location as well as warehouse throughput ca manufacturing location p to continue to operate.
pacity constraints. Further, one can easily convert this = 0, if plant p is open.
cost-minimization model into a profit-maximization = 1, if plant p is closed.
model to evaluate tax strategies and intercompany Yp > 0 = variable to capture the need to open a new
transfer pricing. One could also incorporate con manufacturing plant at location p (or need to sign a
straints on maximum allowable transit times between new lease to keep an existing location open).
a warehouse-stocking location and a sales region into = 0, if the company needs to open a new plant at lo
this basic model. cation p.
= 1, if it does not need to open a new plant at location
A Strategic Manufacturing Upm > 0 = variable to capture the need for the labor
Technology Planning Model that exists at location p to produce product m (assum
The Adams division wanted to see if moving existing ing that unneeded labor will be laid off).
manufacturing technology among plants would re = 0, if labor at plant p is needed for producing product
m.
duce overall network costs. Thus, the decision con
cerned relocation and optimizing costs and labor ca = 1, if labor at plant p is not needed for produ
pacities. The costs considered included those of product m.
relocating existing equipment, hiring and firing, clos We use the following parameters:
ing and opening plants, manufacturing, freight, and bpmp> = cost of moving technology to produce prod
duties. uct family m from ptop' (assuming that a partial move
of technology is not allowed).
To capture the decision to move production tech
nology, we defined various decision variables. For lpm ? number of laborers required for producing
product m at location p.
plants, finished goods, and demand regions, we use
sp = cost of reducing head count by one at manu
the following notation:
facturing location p.
p = index on the initial manufacturing plant.
np = cost of increasing head count by one at manu
m = index on the finished-goods product families.
facturing location p.
p' = index on the new manufacturing plant.
ip = original number of technologies present at lo
r = index on the sales region (country).
cation p.
We use the following decision variables:
cp ? cost of closing the plant at location p.
Xpmp> = binary variable representing the move of kp = new investment required to keep plant p open
technology to produce product family m from manu or to sign a new lease for p.
facturing location p to location p'. ap = number of definite layoffs required at plant p
= 1, if the production technology for product m is due to reduced demands.
moved from p to p'. dmr = demand for product family m at sales re
= 0, if it is not moved. gion r.
Tpmr = binary variable representing manufacturing vmr = coverage matrix (0 and 1) indicating other de
plant p serving demand for product family m of sales mand exists for product family m at sales region r.
region r. gpm = capital investment required at new location
= 1, if plant p supplies product m to sales region r. when the move of technology for producing product
= 0, if it does not. family m from p is moved.
Fp > 0 = head-count reduction due to reduction in ?pm = production capacity available at plant p for
production at location p. product family m.
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42 Vol. 32, No. 4, July-August 2002
epmr = total cost of producing a unit of product fam S vTpmr = vmr V m, r (B8)
ily m at plant p and shipping m to sales region r.
w = budget available for capital investments. ?jr *- pmr ' -mr ? Opm
z = budget available for expenses.
Using these parameters and decision variables, we + S p'
Xp.mpp'
ov.m - 2 Xpmp. om V p, m
developed the objective function and constraints for
the following linear mixed-integer programming QP s 1, Vp, (BIO)
(LMIP) model: lp I> ^^ m
^i p'^p'mp ^J ^pmp' ? V* * p'
Minimize cost p'
for location that needs new lease, (BU)
2a 2a 2a ?pmr ' u-mr ' * pmr " "
p m r
Yv - Qp (B12)
goods supply cost, (Bl.l)
for location that needs new l
2a $p ' *~p ' 2a 2a Sp ' Ipm ' U-pm
V V m
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Vol. 32, No. 4, July-August 2002 43
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dam, The Netherlands.
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Interfaces
44 Vol. 32, No. 4, July-August 2002
there yet?/Practitioner application. /. Healthcare Management prove on-time delivery performance using the data
45(4) 240-253.
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Zinn, W., M. Levy, D. J. Bowersox. 1989. Measuring the effect of
inventory centralization/decentralization on aggregate safety "For Warner-Lambert, output from the DSS dem
stock: The square root law revisited. /. Bus. Logist. 10(1) 1-14. onstrated how we could reduce our transportation
time to a maximum of three days for the Parke-Davis
Paul Darlington, V.P. Logistics and Customer Ser Division without having to utilize a premium package
vice Operations, Warner-Lambert /Pfizer Inc., 201 carrier for all traffic lanes. The system implemented
Tabor Road, Morris Plains, NJ 07950, writes: "The Dis was unique to Warner-Lambert. Where feasible, we
tribution Network Decision Support System imple used the tonnage from the consumer businesses to
mented by the four authors of this paper has proven avoid premium cost while still insuring delivery
to be an extremely valuable asset to Warner-Lambert within three days.
and the new Pfizer organization. The DSS is unique in "Over the years, we used the DSS to continually
that it uses the same data to perform many important evaluate our Distribution Network. For example, sev
functions, whether daily operations, annual planning, eral years ago, prior to the merger of Pfizer and
or long-range planning. Warner-Lambert, we were able to illustrate to Warner
"To support daily operations, the system generates Lambert management that customer service would not
exception reports that allow Warner-Lambert/Pfizer be improved by adding a third distribution center at
to improve service to its customers and lower opera that time. The majority had the perception that an ad
tional cost. As an example, Warner-Lambert/Pfizer ditional DC was needed to meet customer require
can proactively inform a customer of a back-ordered ments. This resulted in a large cost avoidance for
item or late delivery during the daily planning phase. Warner-Lambert.
"The DSS group has made significant improvements "In summary, the DSS improved customer service,
to a Transportation Planning System that has resulted reduced operations cost, assisted in the annual plan
in several hundred thousand dollar savings annually ning, and designed the optimal Distribution Network
while at the same time reducing costs. The system has for the U.S. and some foreign countries. The DSS group
been used to analyze order-cycle times by functional also supported the different divisions of Warner
area, including our customers' processes. The data al Lambert in analyzing many supply-chain activities.
lows Warner-Lambert/Pfizer to deal with facts and not We consider it a definite competitive advantage. What
perceptions to determine how best to improve the cy is truly exciting is that the system continues to make
cle time. There are many examples where we part improvements as knowledge is gained. The value to
nered with customers to reduce cycle time and im the company will only continue to increase."
Interfaces
Vol. 32, No. 4, July-August 2002 45