EXAM – based on exercises.

PLANNING HIERARCHIES
Strategic planning – high impact, decisions taken by the CEO e.g. location problems (of production
sites etc.)

Highly aggragated data – taxes, labour market

Tactical planning – decisions taken by middle management (head of production/operations).

What kind of production? e.g. assembly line or

Data – customer market data, output etc.

Operational planning – Lower management

LOCATION PROBLEMS
What kind of facilities do we consider?

- Production sites
- Dépôts
- Distribution sites (Hubs)

External factors on location planning

 Where are the customers?

 Where are the suppliers?

Location planning can be based on

LOCATION FACTORS
Quantitative

- How much taxes do we have to pay?

- Space available
- Raw materials
- Transportation costs
- Land costs
- Labour market – is there enough labour available in this area or do you have to bring some?
- Waste Disposal

Qualitative

- Market - what is the situation in the market?

- Image – Child-labour, sustainability
- Leisure activities
- Safety
- Politics

Scoring Models – high rate for important factors

DISTRIBUTION NETWORKS
Full truck loads going from production site to central warehouses.

Large warehouse – 1 FTL

Smaller warehouses – Tours

Location decisions:

- Number of warehouses
- Which warehouse locations?
- Assignment of customers to warehouses (which customer is served by which warehouse?)

Not relevant in reality - Weights are cities (heavy weight for more inhabitants), Location site is taken
where it is close to all of it. The more weight the stronger the pull. (Varignon frame)

SINGLE LOCATION – FINDING THE MEDIAN

Assumption: Only one warehouse, different locations (1,2,3) – which one to take?

Weight of each area – demand of customers area (A,B,C,…) (b)

Distance – between customer area and warehouse

Distance must be minimized.

Dij  DA1 = 10 -> Distance between customer area A and WH1

Given demand and distance where should we built it?

Many customers in B, if wh is away from B, high transportation costs.

Sum must be minimized.

 Full enumeration/Complete enumeration

We try all of them to see which one is the best,

WH1: 20*10+30dB1+25*dC1

WH2: 20*dA2+30dB2
MEDIAN PROBLEM
7 Customer areas, 5 Potential Locations, already multiplied.

Which location should be built (just one)?

Location 5 is the median (total delivery cost of 34)

Customer from Area 6 would be happy, Area 5 would not be happy.

Average cost minimized

SINGLE LOCATION – FINDING THE CENTRE

Not average cost minimized, but minimize the dissatisfaction.

CENTRE PROBLEM – FAIRNESS

Cij  Disutility of customer

Minimize the maximum disutility.

10… very dissatisfied.

Find maximum disutility in the row.

MULTIPLE LOCATIONS: WLP
Warehouse Location Problem (WLP)

L… Potential Locations and 4 Customer Areas.

Capacities unlimited – we can also serve all the customers from one warehouse, each location has a
certain fixed.

Open all, open 1, or open something in between.

Not only which one but also how many?

 How many and which locations should be built?

 Minimize total cost : transportation + fixed cost
 Transportation cost: in the uncapacitated problem these can be given for delivering total
demand

Capacities are unlimited. Open all – high fixed costs, low transportation costs. Customer areas are
served by closest Warehouse, if we open all.

WLP: EXEMPLARY SOLUTION 1  ALL WAREHOUSES ARE BUILT

Another solution:

Transportation go up. Look for smaller distance between Warehouse and Customer Area.
Solution 2 was better, BUT WAS IT THE BEST SOLUTION?

COMPLETE ENUMERATION OF ALL POSSIBLE SCENARIOS:

2^m -1 Possible solutions

M=10  1023

In our example  2^5 -1