Chapter 9: Introduction to JADE Case Study www.networkdesignbook.com

Creating the model Locate the excel workbook JADE Data Model_OCP.xls Log Into the OCP (Opalytics Cloud Platform) Create a new Project by Dragging and Dropping the excel workbook

JADE Paint and Coverings Background: Corporate Background JADE Started Business in 1906 from the Nassau-Suffolk, NY area. They still have their main distribution center there (red triangle on the map) They originally started just making paint, but now sell specialty paints, wood treatments, ready-mixed concrete for patching, and other such products In their markets, they have a strong brands that command a premium and loyalty from the professional contractors Within the last ten years, through acquisitions and strong execution, they have broken in the West Coast and greater Texas markets Although these new markets helped grow revenue, they were not good from a transportation point of view. A new DC was put up in Phoenix to help handle these markets The last VP of the Supply Chain just left the firm and the new one is under intense pressures to take costs out of the supply chain. It is not clear the company can stay in business with its current supply chain

JADE’s Supply Chain JADE has kept its east coast DC in the Nassau-Suffolk, NY area– although the east coast market extends into Florida and the Midwest JADE sells four basic product families. Currently, each of the plants is set up to make just one of the product families. JADE has three plants in the US and one plant in China. All China product comes into the port at Long Beach. JADE’s manufacturing plants are known in the industry for their low cost and high quality The plant in China was a bit of an experiment and the result of an acquisition. It is unusual for such a heavy product to be made so far away from its market. Competitors raised an eyebrow at this decision Their plants and DC’s are set up to handle rail shipments, so the shipments from the plants to the warehouses are a mix of truck and rail

JADE Case Study Objectives Help JADE reduce costs in their supply chain Learn the basics of a commercial optimization tool (OCP)

Mapping JADE’s Supply Chain to OCP End Customers Retailers Demand Points Product -Destinations Distribution Centers Plant Direct Shipment Cross Dock Facility Temporarily Leased Space Manufacturers Assembly Plants Vendors Port of Entry OCP will minimize the cost to get product from the plants to the customers, considering all business rules and choices you give it.

When you are mapping a supply chain to a optimization tool, you want to think about the following questions. Your answers to these will dictate how you set up the model, what data you will need to collect, and the type of results you’ll see What Costs do you want the model to consider when it runs?: Most times it is to minimize cost and occasionally to maximize profits You need to decide what costs to include What are your Business Rules, Constraints, or other Limits? When you minimize cost, a constraint is that you need to meet all demand You also define limits or constraints in terms of what can be made where, how much can be made at each location, warehouse capacity, rules on which customers can serve other What Choices or Decisions do you want the model consider? When the model runs, what choices do you want to give it. Can you make

Typical Methodology Kickoff & Data Collection Data Analysis & Validation Baseline Modeling Analyze Alternative Scenarios Final Summary and Recommendations In the kickoff, you will spend time mapping your supply chain to a tool and determining data that is required In a typical project, your first model will be a baseline model. The baseline model is a model of your supply chain with last year’s data that has all the decisions fixed. This model is then used to compare against your financial records to make sure the model is running correctly. In addition to the baseline model, you will also want to run an optimized baseline model. This is how your supply chain should have performed given your current structure and rules. The difference in cost between the baseline and optimal baseline is from unavoidable problems or from execution issues. Often, you can find significant savings jus with this exercise It is always best to compare your scenarios to the optimal baseline to get a good sense of savings potential

What Costs do you want the model to consider when it runs?: JADE’s Kick-Off Results: JADE’s team is going to start the optimal baseline What Costs do you want the model to consider when it runs?: We will consider the transportation costs from the plant to the warehouse and from the warehouse to the customer. For the imported product from China, we will only consider the cost from Long Beach to the warehouses For this initial model, we will not consider production costs, warehousing costs, inventory costs, etc. What are your Business Rules, Constraints, or other Limits? For the optimal baseline, we will not allow the plants to change, the plant’s mix of product to change, or the warehouse locations to change All product has to move from a plant to a warehouse and then to the customer. The customers require a mix of product and JADE is not set up for plant direct shipments All customers should get all products from a single warehouse What Choices or Decisions do you want the model consider? For the optimal baseline, we are allowing the model to determine which customer should be served from the two warehouses. As a side benefit, this will determine the total tons moving on each of the lanes

JADE Case Study in OCP After you load the file (drag the XLS file to create a new scenario. These four files define the physical infrastructure

JADE Case Study in OCP The sites table will have your plants, warehouses, and customers The key thing you’ll do with this table is to activate and deactivate sites for different scenarios (click and unclick the Active button. Or, in the Excel file this is TRUE and FALSE)

JADE Case Study in OCP The demand table will just have the estimated demand you need to satisfy

JADE Case Study in OCP The production table shows what can be made where This table will be important as you analyze having products made at different plants

JADE Case Study in OCP The products table just shows the product attributes

JADE Case Study in OCP The four other tables you will see…

JADE Case Study in OCP The Lanes table at the top just defines what “Truck Carriers” are used to move product from Plants to Warehouses and then Warehouses to Customers The Truck Carrier table (at the bottom) show the costs in cost per ton mile. $0.07 and $0.12. The unit of measure of demand is in tons This table is defining the trucks in terms of 1 ton of product (Avg Shipment and Truck Capacity)

JADE Case Study in OCP The Zone Open Restrictions show the Min/Max sites. You will definitely want to change this You don’t want to change the parameters table. This just helps convert straight line distance to road distance

JADE Case Study in OCP To run, click either of the run buttons. The large will go away once you run your first scenario. Then, click Launch Solve

JADE Case Study in OCP Network Summary is a good place to start

JADE Case Study in OCP Network gives you a map and the total cost

JADE Case Study in OCP Feel free to explore the other reports as well…

Let’s Do An Exercise to Run Another Scenario We can either copy the existing scenario (and keep our input intact) or change the input and run Now, go to the Sites Form Filter on Warehouses Change them all to Active Change the two fixed to potential Re-run