Spreadsheet Models
Designing Spreadsheet LP Models
The Supply Chain
Market research data
scheduling information
Engineering and design data
Order flow and cash flow
Supplier
Inventory
Supplier
Customer
Ideas and design to
satisfy end customer
Material flow
Credit flow
Customer
Manufacturer
Inventory
Supplier
Inventory
Distributor
Customer
Inventory
2
Supply Chain Management

Facilities, functions, activities for
producing & delivering product or service
from supplier to customer
Production planning
 Selecting suppliers
 Purchasing materials
 Identifying facility locations
 Managing inventories
 Distributing product

3
Wall Street Journal, October 27, 2006:

Bill Ford Jr.: For Auto Makers, China
is the New Frontier

On the outskirts of Nanjing, China, “Ford is
finishing work on two sprawling new
factories….Ford also has plants in Chongqing
and Thailand.”

“Ford says it will shutter nine factories in North
America by the end of 2008, and another seven
factories by the end of 2012.”
4
Location Analysis Decision-making
Need to identify factors that are
important for the location decision being
made
 Relevant factors will be influenced by

Type of facility
 Geography involved

5
Factors in Ford’s Decision to Build
Plants in China?





China is the world’s fastest-growing major
vehicle market today
Transportation costs to this new market
China has a large, relatively cheap, skilled
labor pool for manufacturing
Recent increase in number and quality of raw
material and auto parts suppliers in China
Attractive manufacturing climate and
supporting infrastructure
6
Location Analysis Technique
Transportation Method
Identify a location for a new facility so that the location
minimizes the company’s overall cost of production
and transportation for the supply chain.
To perform this analysis, one must be able to
model a given set of facilities and identify the
shipping strategy that will minimize the total
shipping costs.
7
Network Of Routes for KPiller
120
Amsterdam (500)
62
61
Antwerp (700)
130
41
Leipzig (400)
Nancy(900)
40
100
110
102.5
90
Liege (200)
122
Le Havre (800)
42
Tilburg (500)
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The Transportation Tableau
To
From
Leipzig
Nancy
Liege
Tilburg
62
120
130
41
61
40
100
110
102.5
90
122
42
Amsterdam
Antwerp
Supply
500
700
800
Le Havre
Demand
400
900
200
500
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Excel Model






Create a table for the unit shipping costs
Create a table for the shipping quantity from
each source to each destination (sink)
Calculate the total shipped from each source
Calculate the total received at each destination
Calculate the total shipping cost for a shipping
strategy
Create the spreadsheet model for the problem
using the template outlined in Lpmodels.xls
10
Goals For Spreadsheet Design

COMMUNICATION - A spreadsheet's primary business
purpose is that of communicating information to managers.

RELIABILITY - The output a spreadsheet generates
should be correct and consistent.

AUDITABILITY - A manager should be able to retrace
the steps followed to generate the different outputs from
the model in order to understand the model and verify
results.

MODIFIABILITY - A well-designed spreadsheet should
be easy to change or enhance in order to meet dynamic
user requirements.
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Spreadsheet Design Guidelines

Organize the data, then build the model around the data.

Do not embed numeric constants in formulas!

Things which are logically related should be physically related.

Use formulas that can be copied.

Column/rows totals should be close to the columns/rows being
totaled.

The English-reading eye scans left to right, top to bottom.

Use color, shading, borders and protection to distinguish
changeable parameters from other model elements.

Use text boxes and cell notes to document various elements of
the model.
12
Balanced Transportation Models

A transportation problem is balanced if
Total supply at all of the sources =
Total demand at all of the destinations

The KPilller transportation problem is currently
balanced with Total Supply = Total Demand = 2000
engines

In this case, all of the units are shipped from the
sources (harbors) and all of the destinations (plants)
receive their demand
13
Unbalanced Transportation Models

If Total supply at all of the sources >
Total demand at all of the destinations,
the problem is feasible. There will be unshipped units at
some of the source locations though.
 (Resolve model with Nancy’s plant demand set equal to
700 engines)

If Total supply at all of the sources <
Total demand at all of the destinations,
the problem will be infeasible.
 (Resolve model with Nancy’s plant demand set equal to
1000 engines)
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Solving an Infeasible Unbalanced
Transportation Model

The model needs to be balanced in order to identify an optimal
shipping strategy. An extra source must be added into the model
to supply the current shortage.

Extra capacity needed = Total demand at all destinations – Total
supply at all current sources

To create this additional source of supply/capacity, either

Acquire a new facility/harbor and include it in the network design and
spreadsheet model’s table structure
or

add a Dummy source into the model’s table structure
15
Solving the KPiller Transportation Problem when
Nancy wants 1000 engines

In this problem, the total demand exceeds the total
supply by 2100 – 2000 = 100 engines

Insert a dummy harbor with a capacity of 100 engines
and a unit shipping cost of $0 to each plant. Edit the
spreadsheet model and Solver dialog box to include
this new imaginary source.

The identified optimal solution will identify how many
engines to ship from each harbor to each of the plants.
The engines shipped from the dummy harbor are units
that will not actually be distributed; these are the
amounts that the receiving plants will be short in the
eventual distribution.
16
Contracting a new harbor deal when Nancy’s
demand is 1000 engines

In this problem, the total demand still exceeds the total
supply by 2100 – 2000 = 100 engines

Insert a possible location for a harbor with a capacity
of at least 100 engines along with the identified unit
shipping costs from this location to each plant. Edit the
spreadsheet model and Solver dialog box to include
the new harbor warehouse at this location.

The identified optimal solution will identify how many
engines to ship from each harbor, including the
additional harbor at the new location, to each of the
plants so as to minimize total costs
17
Questions to Reflect on….

How would you use the transportation model
to identify whether Hamburg or Gdansk might
be a better location for an additional harbor?

What happens when you do not add a new
“real location” to the network but use a dummy
source which ends up shipping primarily to
one destination? What can you do to resolve
this problem?
18
Ragsdale Case 3.1 Revisited

“Putting the Link in the Supply Chain”

What type of models have we studied in
this class to help you analyze this case?
Sketch out the layout of the different
models that you would need to integrate
on a piece of paper.

How would you link the models together?
19
Scheduling Applications

Arlington Bank problem in packet

Template for scheduling model in
lpmodels.xls

Discussion of Project 1: Chase Bank

Homework Practice: Chpt. 3 #25
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