1. OPSM 305 Supply Chain Management
Koç University
OPSM 305 Supply Chain Management
Class 23:
Strategic Alliances
Zeynep Aksin

2. Next class
Vestel case
Read the case before class
Please presentation slides before class

3. Relating to practice Efes: solved transportation problem using LP
Vestel: Will see application involving other transportation related issues we will talk about today: vehicle selection, routing

4. Data for routing Mileage Estimation Street Network
Straight line distances
This is of course an underestimate of the road distance. To estimate the road distance we multiply the straight line distance by a scale factor, . Typically =1.3.

5. Vehicle Routing The fleet : Customer : types location sizes demand
costs
Customer :
location
demand
accessibility
Delivery zone

6. Vehicle routing problem
Given the demand at i clients
determine the itineraries of K
vehicles with a given capacity Q

7. VRP : heuristic approach
Savings algorithm (Clarke and Wright 1964)
Initial phase :
create n routes (0,i,0), where 0 is the transit point (or DC or depot)
calculate the savings sij = ci0 + c0j - cij and order them in decreasing order
Go over the savings list trying to combine the routes :
Find a route that terminates with i and another that starts with j
Verify capacity constraints
Initial solution :
Combine :

8. VRP : heuristic approach
Savings algorithm: example
1 18
2 7 15
Demand
1 : 6
2 : 4
3 : 4
4 : 6
5 : 5
Capacity 14
Distances :
Savings list :
0-2-0
0-3-0
0-5-0
(1,4) (1,5) (3,5) (4,5) (1,3) (2,5) (3,4) (2,3) (1,2) (2,4)
0-2-0
Solution :
0-1-0
0-2-0
0-3-0
0-4-0
0-5-0

9. Objectives of a strategic alliance
Adding value to products: improving time to market, distribution times, etc.
Improving market access: better advertising, more channels, etc.
Strengthening operations: lowering system costs, cycle times, etc.
Adding technological strength
Enhancing strategic growth: overcoming entry barriers
Enhancing organizational skills: learning, self-learning
Building financial strength: risk sharing, increasing income, etc.

10. Retailer-supplier partnerships
SPs in SCs
3PL
Retailer-supplier partnerships
Quick response
Continuous replenishment
Advanced continous replenishment
VMI
Distributor integration
Transshipment
Technical expertise sharing

11. Main Characteristics of RSP

12. Example: 3PL Focus on core strengths
Provides technological flexibility
Provides other flexibilities: geographic locations, regional warehousing, etc.
Disadvantages: loss of control, 3PL interacting with customers
A form of outsourcing

13. 3PL Success factors Know your own costs
Measurability-data availability
Activity based costing
Customer orientation of the 3PL
Specialization of the 3PL
import-export
Small package
Warehousing
Ship logistics
Etc.
Asset-owning versus non-asset-owning

14. 3PL Implementation Issues
Effective communication
Performance measures
Detailed contracts/agreements
Performance follow-up procedures

15. Distributor integration: transshipment
“shipment of items between different facilities at the same level in the supply chain to meet some immediate need”
Between retailers
Between separately owned distributors: requires distributor integration, typically orchestrated by the manufacturer
Information system to enable inventory visibility
Incentives both ways so that distributors are willing to share their inventory