Basic Optimization
Training
LLamasoft, Inc
October 2008
Optimization Course Overview
• Course Goal: Understand the basics of supply
chain optimization through lecture, computer
exercises, and coaching
• Course Objective: Students will be able to use
the software, with minimal assistance, to
correctly build a supply chain model; add the
basic components of optimization to the model;
perform an optimization; interpret the results
through outputs; and perform an infeasibility
analysis.
Agenda
•
•
Overview of Model Components
Optimization Basic Components
– Structure
– Cost
– Constraints
•
•
•
Infeasibility Analysis
Optimization Results
Review
Model and Optimization
Overview
Model Elements
Understanding Optimization
What is the optimal network
structure?
• Evaluate millions of
alternatives, find the
global optimal structure:
lowest cost structure
that meets the
constraints
• Determine the optimal
supply chain network
structure using MIP/LP
programming
Thousands of possibilities…
…One Optimal Answer!
Optimization Basic
Component 1
Structure
Learning Objective- Structure
• Explain the basic components to modeling in the
software
• Use the components to create a supply chain
network
• Perform a network optimization
Goal: Successfully design a new optimal
supply chain network using the software
Example Network Design- Sites
FW1
CZ1
P1
FW2
CZ2
PW1
S1
P2
FW3
PW2
S2
FW4
P3
PW3
FW5
CZ3
CZ4
CZ5
CZ6
Structure
•
6 Essential Elements in Models
–
–
–
–
–
–
Sites
Products
Demand
Sourcing Policies
Transportation Policies
Inventory Policies
Exercise 1: Network Optimization
Model Folder
• Go to Computer and Create Folder:
C://Llamasoft/Training/Optimization
Open Supply Chain Guru
• Start
Add a New Model
• Go to File  Add A New Model
Saving Models and Projects
• Save Model in Training Folder:
C://Llamasoft/Training/Optimization
• Save Model As:
Opt_Training_Basic
• Save Project As:
Guru_Training
Site Types
• Customer Site
– Only customer sites can
have demand
– Customer sites have
sourcing policies but NO
inventory policies
– They do not ship to other
sites or produce any
products
– Flow into customer sites
= $$$ (revenue!)
• Existing Facility
– Indicates this site presently
exists in the supply chain
• Potential Facility
– Indicates this site presently
does not exist in the supply
chain
•
Type, and Choice combine to determine which costs
to apply
– Open Potential Facility = Add Startup Cost
–
–
Closing Existing Facility = Add Closing Cost
Always incur Fixed Operating Costs if flow
exists
Creating the Opt_Training_Basic Model
4 Sites
IP
IP
SP
CZ
DC 1
TP
SP
IP
TP
SP
SP
TP
TP
DC 2
Product
A
2 Products
Product
B
MFG
Opt_Training_Basic Model: Sites
MFG
DC 1
DC 2
CZ
• Name
• Location (Address, City, State, Country, Postal
Code, Latitude, Longitude)
• Capacity Period, Capacity Basis
• Fixed Startup Cost/Cap, Fixed Operating Cost/Cap
• Closing Cost
Opt_Training_Basic Model: Add Customer Site
• Open the Sites Table
• Add Customer Site
– Name: CZ
– City: New York
– State: New York
– Type: Customer
– Graphic: Circle
– Graphic Color: Green
– Leave all other fields default
Opt_Training_Basic Model: Add DCs
•
Add Distribution Center 1:
– Name: DC_1
–
–
–
–
–
City: Omaha
State: Nebraska
Type: Existing Facility
Graphic: Triangle
Graphic Color: Yellow
•
Add Distribution Center 2:
– Name: DC_2
–
–
–
–
–
City: Austin
State: Texas
Type: Existing Facility
Graphic: Triangle
Graphic Color: Yellow
Opt_Training_Basic Model: Add Manufacturer
•
Add Manufacturer:
– Name: MFG
– City: Los Angeles
– State: California
– Type: Existing Facility
– Graphic: Square
– Graphic Color: Red
Opt_Training_Basic Model: Column Update
• Place cursor in the Graphic Size Field
• Right Click or Select the Column Update Button
on the toolbar
• Select 10 from the drop down menu and apply the update
Opt_Training_Basic Model: Layout Map
• Display the Sites on the Layout Map
Opt_Training_Basic Model: Products
Product
A
•
•
•
•
•
Name/ SKU
Inventory Valuation
Price
Weight, Cubic
Status
Product
B
Opt_Training_Basic Model: Add Products
• Open the Products Table
• Add (2) Product Records
• Product_A
–
–
–
–
–
Value: 5
Price: 10
Weight: 5
Cubic: 5
Status: Include
• Product_B
–
–
–
–
–
Value: 10
Price: 20
Weight: 10
Cubic: 10
Status: Include
Opt_Training_Basic Model: Demand
Demand In
•
•
•
•
Customer Site
Product
Quantity
Occurrences
CZ
• Time Between Orders
• Due Date
• Price
Opt_Training_Basic Model: Add Demand
• Open the Demand Table
• Add (2) Demand Records
• Record 1
– Customer Site: CZ
– Product Name:
Product_A
– Quantity: 100
– Order Time: 0
• Record 2
– Customer Site: CZ
– Product Name:
Product_B
– Quantity: 100
– Order Time: 0
Shipments Vs. Demand
• Shipments are typically modeled through the
Transportation Policies table
• Shipments table allows you to model shipments outside
of the Transportation Policies table
• There are no cost fields in the Shipments data table- the
costs in the Transportation Policies table are used to
calculate the transportation costs
• Allows for accurate modeling of a “Push” system, instead
of a demand driven supply chain
Opt_Training_Basic Model: Sourcing Policy
DC 1
CZ
Product_A,
Product_B
Product_A,
Product_B
MFG
DC 2
• Identifies which sites to send replenishment and
customer orders, and whether product is ordered
from an outside source or made at that site
Types of Sourcing Policies
•
•
•
•
•
•
Single Source
Single Source (Select Closest)
Multiple Sources (Most Inventory)
Multiple Sources (Order of Preference)
Multiple Sources (Probability)
Source by Transfer
•
•
•
•
•
Make
Make by Schedule
Make (Single Process)
Make (Order of Preference)
Make (Probability)
Hint: Use the Quick Reference
Card for descriptions of these
policies!
Opt_Training_Basic Model: Adding Sourcing Policies
• Open the Sourcing Policies Table
• Add a total of (10) Sourcing Policies
– 4 Multiple Sources (Most Inventory)
• CZ can source Product_A from DC_1 and DC_2
• CZ can source Product_B from DC_1 and DC_2
– 4 Single Source
• Each DC can only source from the MFG for Both
Products
– 2 Make
• 1 for each product at the Manufacturer
Opt_Training_Basic Model: Layout Map
• Display the Sourcing Policies on the Map
Opt_Training_Basic Model: Transportation Policy
DC 1
CZ
MFG
DC 2
•
•
There must be at least one Transportation Policy that applies to
source and destination which is not “Make”
Each Transportation Policy defines a “Flow”
–
–
–
–
Source Site
Destination Site
Product (all applicable products if not explicitly entered)
Mode (1 if not explicitly entered)
Types of Transportation Policies
•
•
•
•
•
Parcel
LTL (Less than Truckload)
Full TL (Full Truckload)
Air, Rail and Ship
Daily or Weekly Shipment
•
•
•
•
•
•
•
Periodic Shipment
Pooled Outbound/ Pooled Inbound
Pooled Periodic Outbound/ Pooled Periodic Inbound
Flow (Optimization Only)
Link To Lane
Aggregate Container
Disaggregate Container
Opt_Training_Basic Model: Add Transportation Policies
•
Open the Transportation Policies Table
• Add (4) Transportation Policies
• One for each Source-Destination combination defined in the
Sourcing Policies
- Source Sites: MFG, DC_1, DC_2
- Destination Sites: DC_1, DC_2, CZ
- Leave all other fields at default value
Opt_Training_Basic Model: Inventory Policy
Product_A
Product_B
MFG
Product_A
Product_B
DC 1
Product_A
Product_B
DC 2
• Defines
– Initial Inventory Levels
– Safety/ Cycle Stock Levels
– Associated Costs
• One Inventory Policy is optional for each product at the facility sites
Opt_Training_Basic Model: Add Inventory Policies
•
Open the Inventory Policies Table
• Add (6) Inventory Policies
– One for each Facility (non-Customer Site) and Product
combination
• Sites: MFG, DC_1, DC_2
• Product Name: Product_A, Product_B
• Leave all other fields at default value
Opt_Training_Basic Model: Add Costs
•
•
Open the Sourcing Policies Table
Add a sourcing cost to one lane (2 policies)
–
Use the filter bar
–
Update the Average Unit Cost to 1 and clear the filter
to view only DC_1
How do you think this will affect the optimization results?
Opt_Training_Basic Model: Model Options
• Go to Tools Model Options (F3)
• Review Optimization Period
– Start Date / Time
– End Date / Time
Opt_Training_Basic Model: Run the Optimization
• Optimize the Supply Chain
• Save the Project and the Model
Opt_Training_Basic Model: Optimization Solver
• View Optimization
Results
– Optimization Output
Tables
– Metrics
– Graphs
– Auto Implement Optimized
Network
Check on Learning- Structure
• You should be able to:
–
–
–
–
–
–
–
–
–
–
–
Open Supply Chain GuruTM
Add a new model
Save a project
Save a model
Open a table
Understand differences
between sites and
customers
Use the filter bar
Move from field to field
Open the layout map
Change settings on the
layout map
View sites and policies on
the layout map
– Understand the types of
Sourcing policies
– Understand the types of
Transportation Policies
– Understand when to use
shipments vs demand
– Understand the types of
Inventory Policies
– Enter data into tables
– Access the help system
– Set Optimization Options
– Run a simple optimization
– Run the error check on a
model
– Access Optimization
Outputs
Optimization Basic
Component 2
Costs
Learning Objective- Cost
• Distinguish between the different costs used in
Supply Chain Optimization with the software
• Apply costs to the network built in Exercise 1
Goal: Successfully optimize the network with the
new costs included
Three Basic Components of Optimization
• Structure
• Costs
• Constraints
Basic Costs for Optimization
• Site Costs
– Fixed operating
– Fixed startup
– Closing
• Transportation Costs
–
–
–
–
–
Average Cost
Duty Rate
Discount Rate
Return Trip Cost
Transportation Asset
Costs
• Unit Fixed Cost
• Inventory Costs
– Site inventory
– In-transit inventory
– Inbound and Outbound
Warehousing
• Production Costs
– Work Center Costs
• Fixed Operating
• Fixed Startup
• Closing
– Work Resource Cost
Basic Costs
Site Costs
Site Costs
•
•
•
Fixed Operating
Fixed Startup
Closing
Site Costs: Fixed Operating
• Costs associated with the day to day operations of
the facility
• Enable use of a step- function to associate the
operating cost based upon operating capacity
Site Costs: Fixed Operating
• Facility is closed/not used if the throughput is zero.
• Facility is open at Level 1 if the throughput is between 0 and 5,000
pounds.
• Facility is open at level 2 if throughput greater than 5,000 pounds
Site Costs: Fixed Start-Up
•
•
•
•
Costs to open and begin operating a new facility
Only applies to Potential Facilities
No thoughput constraints
Ability to use step- function to associate start up
cost with operating capacity
Site Costs: Closing
• Cost to end operations at an Existing Facility
• Does not apply to Potential Facilities or Customers
Exercise 2a: Add Site Costs
Exercise 2a: Create New Cost Model
• From the Project Explorer, right
click on the Opt_Training_Basic
Model
• Select Copy Model
• Right Click on the copied model
• Select Save Model As
• Save model as: Opt_Training_Cost
Exercise 2a: Add Fixed Operating Costs
• Open the Sites Table
• Open the Field Guru
• Enter the following Fixed Costs:
DC_1
Capacity
Cost
0
500
100
500
DC_2
Capacity
0
500
Cost
50
250
Exercise 2a: Complete Fixed Operating Costs
• Now run the optimization and view the results!
Basic Costs
Transportation Costs
Transportation Costs: The Concept of “Flow”
• In Optimization, there are no individual
shipments
• Instead it is the total amount shipped, as
determined by the optimizer
• This total amount is the “Flow”.
10,000 Units
Site A
Site B
Transportation Cost
• “Average Unit Transportation Cost”
–
–
–
–
Average Cost
Cost Basis
Shipment Weight
Distance
Transportation Cost: Average Cost
• Related to Cost Basis
• Transportation Cost per
Cost Basis Unit
• Associated Field Guru
Transportation Cost: Cost Basis
•
•
•
•
•
•
•
•
Weight = Avg Cost * Weight of Flow
Qty = Avg Cost * Number of Units of Flow
Cubic = Avg Cost * Volume of Flow
Distance = Cost per Mile
Fixed = Fixed Cost per Shipment
Weight-Distance = Cost per Pound per Mile
Qty-Distance = Cost per Unit per Mile
Cubic-Distance = Cost per Volume per Mile
Transportation Cost: Distance and Fixed Cost Basis
• In order to cost these correctly the optimizer
needs to approximate the number of shipments
made
10,000 Units
Site A
Site B
Total Flow
Transportation Cost: Shipment Weight
• Since the optimizer only knows the flow (sum of all
shipments), the only way to cost at the “shipment” level is to
approximate the shipment size.
• If the flow is 10,000 pounds, and the average shipment weight
is 1000 pounds that corresponds to 10 shipments.
Transportation Cost: Distance
• Calculate using Straight Line
– Based on latitude and longitude of
source and destination sites
– Adds a circuity factor (17%- in
Model Options)
• Calculate Using Mappoint Routing
– Interfaces with Microsoft Mappoint
to determine actual road distance
– Must have Map Point installed on
the same computer
Transportation Cost: Transportation Assets
• Total cost of owning or using each unit of this asset
• This is a fixed cost, not used to calculate profits or
expenses in the network operation
• Included on the summary report, can be used to
compare various scenarios
Transportation Cost: Other Costs
• Duty
• Discount Rate
• Return Trip Cost
Exercise 2b: Add Transportation Costs
to Cost Model
Exercise 2b: Add Transportation Costs
• Copy Opt_Training_Cost Model
• Save as Opt_Training_Cost_Transpo
• Add the following costs:
– MFG facility always costs 2.00 per unit shipped to any
location
– DC_1 costs 10.00 per unit, per mile to ship to the
customer
– DC_2 costs 20.00 per unit, per mile to ship to the
customer
Exercise 2b: Results
• Now run the optimization and view results!
Basic Costs
Inventory Costs
Inventory Costs
•
•
•
•
Facility Inventory Holding
In-transit Inventory Holding
Inbound Warehousing
Outbound Warehousing
Inventory Costs: Facility Inventory Holding
Inv Holding Cost = Avg Inv * Product Value * (i/365) * T
• Avg Inv = Average Inventory
• Product Value = Value in Products Table
• i = Annual inventory carrying cost %
• T = Optimization period in days
Inventory Costs: Average Inventory Calculation
•
Method of Calculation
– Inventory Turns
OR
– Constituent Parts
•
•
•
Safety Stock Inventory
Cycle Stock Inventory
Pre-Build Inventory
Facility Inventory Level Determination
•
Total Facility
Inventory
Factors which affect
inventory levels
– Volume/ Qty of product
throughput (Tput)
– Number of facilities in
the network
Avg
Inv
Tput (Qty)
• As the number of
facilities decreases,
the average inventory
in the remaining
facilities increases due
to increased
throughput, but at a
decreasing rate.
Average Inventory Calculation 1: Inventory Turns
•
•
•
•
Ratio of inventory throughput to average inventory
Increasing Inventory Turns reduces Facility Holding Costs
Must balance turnover with safety stock to avoid stockout
Also called Stock turns, turns, stock turnover
Inventory Turns: Linear Approximation
Avg
Inv
Inv Turns = 8
Slope=1/8
Tput (Qty)
Avg Inv = m * Tput
• m = Inverse of Inventory Turns
• Tput = Volume of Product Throughput
Inventory Turns: Pooling Effect
• Piecewise linear approximation
• Used in locations with
considerable amounts of
product, typically called a
distribution center
• Average Inventory can defined
over multiple ranges of
throughput.
• Format for the relationship is a
series of pairs <lower range
value, turns value>
Inv Turns = <0,5><1000,8><3000,15>
Avg
Inv
1/15
1/8
1/5
1000
3000
Tput (Qty)
Up to 1000, Avg Inv = (1/5) * Tput.
Between 1000 and 3000, Avg Inv = (1/8) * Tput + 75.
After 3000, Avg Inv = (1/15) * Tput + 250.
Average Inventory Calculation 2: Constituent Parts
• Pre-build
• Safety Stock
• Cycle Stock
Constituent Parts: Pre-Build Inventory
•
Results from demand exceeding production capability in one period, but
excess production completed in the previous period
•
Example
–
–
–
–
•
In a 2 period model MFG has a production capacity of 50 units
The demand is 20 and 80 units in Periods 1 and 2 respectively
The MFG site produces 50 units each period
In the first period the 30 excess units produced are stored as Pre-Build Inventory
Viewed in the Optimization Output- Inventory Table
Constituent Parts: Safety Stock
• Held excess product
• Also called a buffer
• The model may tap into the
safety stock when necessary
Constituent Parts: Cycle Stock
2.5
2
Cycle Inventory
• Portion of inventory
allocated to meet
anticipated demand
• In a simple model where
demand is constant, cycle
stock equals half the order
size
1.5
1
0.5
0
0
0.5
•
•
•
1
1.5
2
2.5
3
3.5
4
Time
The blue line refers to actual cycle
inventory
The red line refers to the average
cycle stock
The order size is 2 units and occurs
once per unit time
4.5
Average Inventory Calculation: Constituent Parts
• Sum of pre-build inventory, safety stock and the cycle stock
Inventory Costs: Facility Inventory Holding
Why determine Average Inventory?
Avg Inv is used to calculate Facility Inventory Holding Costs in the Optimization
Inv Holding Cost = Avg Inv * Product Value * (i/365) * T
Avg Inv = Average Inventory
Product Value = The Product’s Value in the Products Table
i = Annual inventory holding cost %
T = Optimization period in days
Inventory Costs: In-transit Inventory
Total Cost due to value of products being transported and transport time
T days
Site A
Site C
Quantity Q
In-transit Inventory Cost = Q * Product Value * (i/365) * T
•
•
•
•
Q = Quantity of Products in-transit
Product Value = Value in Products Table
i = Capacity Cost % in Model Options
T = Transport Time in Days
In-transit Inventory Costs: Example
Product Value = $500
DC_A_Local
10 days
DC_B_Overseas
Customer
Demand = 1000 units
In-transit Inventory Cost = Q * Product Value * (i/365) * T
A to C  1000 * $500 * (15%/365) * 10 = $2,055
B to C  1000 * $500 * (15%/365) * 90 = $18,493
Inventory Costs: Inbound and Outbound Warehousing
• Inbound Warehousing Cost: activity cost of handling and
moving one unit of product from receiving dock to inventory
• Outbound Warehousing Cost: activity cost of removing one
unit of this product from inventory to the shipping dock
• Includes such costs as paper tracking procedures, handling
equipment, and personnel
• Does not include Transportation Costs
Exercise 2c: Add Inventory Costs
Exercise 2c: Add Inventory Costs
• Copy Opt_Training_Costs_Transpo
• Save as Opt_Training_Costs_Inventory
• DC_1
– 5 Inventory Turns
– 15% Annual Inventory Holding
Cost
– Inbound Warehousing= .5
– Outbound Warehousing = .6
• DC_2
– 7 Inventory Turns
– 15% Annual Inventory Holding
Cost
– Inbound Warehousing = .7
– Outbound Warehousing = .8
Exercise 2c: Results
• Run the Optimization
and View the Results!
Basic Costs
Production Costs
Production Costs
• Simple Costing
• Work Center Costs (Sub Models)
– Fixed Operating
– Fixed Startup
– Closing
• Work Resource Costs
Production Costs: Simple Unit Production
• Avg Unit Cost field for a
“Make” sourcing policy
• Source Name field is left
blank.
• Field Guru enables
costing from a Step
Graph for Economies of
Scale
Optimization Basic
Component 3
Constraints
Learning Objective- Constraints
• The learner will be able to explain the different
constraints involved in the software, identify
potential constraints to a supply chain model,
apply constraints to a practice model, and
successfully perform an optimization on the
model
Constraints in Optimization
• Basics of Constraints
• Aggregate Constraints
–
–
–
–
Flow
Inventory
Production
Site
• Service Constraints
–
–
–
–
Max Sourcing Distance
Due Date
End to End
Bundled Demand
The Basics of Constraints: Definition
• Restrictions placed upon the model
• Aggregate Constraints: restriction defined for a
sum over multiple objects, with at least one
object having two or more values
–
–
–
–
Flow
Inventory
Production
Site
• Service Constraints: restriction placed on the
service to a customer
The Basics of Constraints: Use in the Software
• Types of Constraints
–
–
–
–
Minimum
Maximum
Fixed
Conditional Minimum
• Constraint Variable
Inputs
– Specific: Refers to one
site/ product/ time period/
mode
– Set: Refers to a group of
sites/ products/time
periods/ modes
– All: Refers to all sites/
products/ time periods/
modes
Aggregate Constraints
•
•
•
•
•
Throughput
Flow
Inventory
Production
Site
Aggregate Constraints: Throughput
• Site is restricted by the
amount of flow (basis)in the
model during the specified
period
• Step function depicts
capacity limit with INF
Aggregate Constraints: Flow
Flow requirement, flow requirement type, flow
requirement basis, and time period that the
restriction occurs
DC 1
CZ 1
Restricted by 5 elements:
Site, Destination, Mode, Product , or Time Period
Aggregate Constraints: Flow
• Places a restriction on the product flow over a
set of time periods, between source and
destination sites, for products or when using a
specified mode
Aggregate Constraints: Flow Count
• Sets up intricate constraints in the model linking the
following 5 variables; Source, Destination, Product,
Mode and Period
• By aggregating the Destination Sites, Products and
Modes it disregards the various possible flows that are
due to these variables
Aggregate Constraints: Inventory
• Restricted by 3 Elements
– Site
– Product
– Time Period
Aggregate Constraints: Inventory
• Allows the specification of additional rules
regarding inventory
• Defines aggregated quantities over sites,
products, and time periods
Aggregate Constraints: Inventory Count
• Similar to aggregate flow count
• Can utilize the “Set” feature of the Groups Table
Aggregate Constraints: Production
• Restricted by 4 elements
–
–
–
–
Site
Process
Product
Time Period
Aggregate Constraints: Production
• Defines aggregated productions that need to be
restricted by a plant, or set of plants and by
products, or set of products
Aggregate Constraints: Production Count
• Similar to Aggregate Flow Count, but pertains to
Productions
Aggregate Constraints: Site
• Defines the minimum and maximum number of
open sites allowed in a set of periods
Aggregate Constraints at Sites
• Allows the user to customize the number of sites
that can be used in a specific time period
Service Constraints
•
•
•
•
Maximum Sourcing Distance
Due Date
End to End
Bundled Demand
Service Constraints: Maximum Sourcing Distance
Consider a network with manufacturing, warehousing, and
customer echelons. All flows between two successive
echelons are permitted.
DISTANCES
M1
WH1
CZ_1
CZ_2
M2
WH1
WH2
WH3
M1
500
800
120
M2
600
1000
200
M3
300
500
750
CZ_1
CZ_2
CZ_3
CZ_4
WH1
180
720
340
600
WH2
700
150
280
100
WH3
150
200
70
640
WH2
CZ_3
M3
WH3
CZ_4
Maximum Sourcing Distance
If the maximum sourcing distance is 200 miles for customers
and 500 for the warehouses, the network is reduced to the
following flow alternatives.
DISTANCES
M1
WH1
CZ_2
M2
WH1
WH2
WH3
M1
500
800
120
M2
600
1000
200
M3
300
500
750
CZ_1
CZ_2
CZ_3
CZ_4
WH1
180
720
340
600
WH2
700
150
280
100
WH3
150
200
70
640
CZ_1
WH2
CZ_3
M3
WH3
CZ_4
Maximum Sourcing Distance
• Between the end site and the source node
• Distance Based
• Can be set in either the Sourcing Policy Table or the
Service Requirements Table
Service Constraints: Customer Due Date
Customer due date-driven service
constraints force the demand to be
classified by customer lead times.
Suppose P1 demand at each customer is
100 units.
Classified demand
CZ_1
2
P1 in 7 days=75
P1 in 3 days=25
1
WH1
3
1
4
3
Air
Truck
Rail
CZ_2
7
3
6
5
2
4
WH2
1
P1 in 5 days=50
P1 in 1 days=50
5
CZ_3 P1 in 6 days=40
P1 in 5 days=60
Customer Due Date
All supply alternatives are feasible for the first demand
classification, but only the following alternatives are feasible for
the second classification
CZ_1
P1 in 3 days
2
1
WH1
4
Air
Truck
Rail
1
3
CZ_2
3
P1 in 1 days
5
5
4
WH2
1
CZ_3
P1 in 5 days
Customer Due Date
• Only from the last echelon site to the customer
• Time- based
• Set in the Demand Table
Service Constraints: End-to-End
End-to-end service requirements are given from a
make-node to a customer node.
WH1
CZ_1
M1
WH2
CZ_2
M2
WH3
Time from M1 to CZ_1 for Product1 <= 5 days
Time from M2 to CZ_1 for all products <= 7 days
Distance from M1 to CZ_2 for Product2 <= 250 miles
End to End Constraints
• Source Site does not have to directly
deliver to the customer; there may be
other facilities in the network where the
order will pass through
• Specified by maximum time for an
order to leave the facility and reach the
customer OR by maximum allowable
distance between the facility and the
customer
• Set in Service Requirements Table
Service Constraints: Bundle Demand
When choosing to bundle demand, demand for all
products at one customer site will be sourced from one
or multiple facilities at the same ratio
WH1
450
75
CZ_1
150
WH2
25
Demand CZ_1(P1) = 600
Demand CZ_1(P2) = 100
Bundled Demand
• Check this box to
aggregate all the
demand by customers
• When a customer
demands multiple
products, these are
sourced in equal ratios
from one or multiple
sites (proportional to
the demand quantities
for these products)
Exercise 3a: Constraining the
Optimization Model
Unconstrained Model
• Al Five DCs in Use
• Houston Processing Plant supplies only DC_KC
With Aggregate Flow Constraints
• Max Flow Reqt Type means at most 500 units of flow can
go through DC_Albany.
• Cond Min Flow Reqt Type means we either have at least
1000 units flow through DC_Portland or none at all.
• How does this change our optimized results?
With Aggregate Flow Constraints
• DC_Portland not used, customers now served by DC_Phoenix
• Fewer CZs in Northeast are served by DC_Albany, more by
DC_Atlanta
With Aggregate Production Constraints
• Max Flow Requirement Type means that at most 1000
units can be produced at Norfolk.
• Min Flow Requirement Type means at least 850 units
must be produced at Reno.
• How does this change our optimized results?
With Aggregate Production Constraints
• Fewer CZs in Midwest served by DC_Atlanta, more by DC_KC.
With Aggregate Site Constraints
• Create Group that contains all five DCs.
• Constrain Optimizer to select between one and three sites
from within that group.
• How does this change our optimized results?
With Aggregate Site Constraints
• Portland and Phoenix DCs are unused, KC picks up the slack.
With Aggregate Inventory Constraints
• Open the Optimization Output Inventory table and note the inventory
costs at DC_KC.
• Set Minimum Inventory at DC_KC to 100 units.
• Optimize the model.
• How does this change inventory costs at DC_KC?
Exercise 3b: Add Constraints
Exercise 3b: Add Constraints
• Copy the Final Cost Model
• Save as Opt_Training_Constraints
• Add the following Constraint:
– DC_1 can only ship a maximum of 50 units of
Product_A to CZ_1 for the entire model period
(Horizon)
• Now run the model and view the results!
How this affect the network design?
Check on Learning- Constraints
• You should be able to:
– Define aggregate
constraints
– Define service constraints
– Open the service
requirements table
– Open the aggregate
constraint tables
– Create service constraints
– Create aggregate
constraints
– Define and distinguish
between serve and
aggregate constraints
– Explain the constraint
requirement types
– Apply aggregate
constraints to a model
– Apply service constraints to
a model
– Understand aggregate
constraints sum and
objects
Infeasibility Analysis
Guru Infeasibility Analysis
•
•
•
Sometimes the optimization solver returns with a
“Problem Infeasible” error message
Infeasibility refers to a problem with input datathere is no solution that fulfills all the constraints
Guru provides the following tools to help the user
identify the source of infeasibility
–
–
–
Check for supply-demand imbalance
Check for logic errors in defining the network structure
Remove all or some hard constraints and solve again
Infeasibility Analysis
Select the hard
constraints to impose
Optimization Results
Optimization Results
•
•
•
•
•
Output Tables
Graphs
Metrics
Layout Map
Comparing Models
Optimization Results: Output Tables
• Summary
–
–
–
–
–
–
Network
Customer
Facility
Work Center
Transportation Asset
Work Resource
• Flows
– Customer
– InterFacility
– Production Process
• Details
– Productions
– Inventory
– Aggregated Demand
Optimization Results: Graphs
• Click of button to
display results
• Numerous choices for
data display
Optimization Results: Metrics
• Quick access to
outputs
• Tables can be
exported to Excel
Exercise 4: View Optimization Outputs
Viewing Optimization Outputs
• Compare optimization outputs from the Basic
Model and the final Model
– Graphically depict
– Compare Tables
Review
Review
•
•
•
•
•
•
Model Components
Structure
Cost
Constraints
Infeasibility Analysis
Optimization Results
LLamasoft Support
• Email: Support@llamasoft.com
• Phone: (734)-418-3133
• Website: www.llamasoft.com