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1 1 Milk Runs and Variability John H. Vande Vate Fall, 2002
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2 2 What are Milkruns? Daily routes Visit several suppliers Allow frequent visits by sharing vehicle capacity Reduce inventory without increasing transport Same route every day
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3 3 Milkruns & Consolidation
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4 4 Building Milkruns Filter out any full truckload Decide the number of routes (may take several passes) Using our Location/Allocation heuristic –Treat the facilities as route “anchors” –The customers assigned to the “anchor” are on the same milk run –Treat the sum of distances to the anchors as a surrogate for the route length
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5 5 Example Assembly Plant Route Anchor
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6 6 The Impact of Variability Plan for variability by allowing routes to use only, say, 80% of vehicle capacity on average When daily volume exceeds vehicle capacity, pay premium freight to expedite excess
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7 7 Total Cost Build routes that minimize Total Cost Cost of planned transportation Cost of unplanned (expedited) transportation
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8 8 Approximation Daily Volume from supplier is normally distributed Mean Variance 2 Covariances ij Mean on the route r = sum of Means Variance on the route r 2 = sum of variances + 2*sum of covariances
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9 9 Probability of Expediting Depends on –how full we plan to load the vehicle –What the variance of demand on the route is Probability we have to expedite –1 - N((c- r )/ r ) (Cumulative Std Normal) Doesn’t address the possibility of requiring more than one truck!
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10 Expediting If we plan to fill the truck, 50% chance we expedite, regardless of the variance C
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11 Expediting The less we plan to fill the truck the less likely we are to expedite C
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12 Expediting The greater the variance the less we should plan to fill the truck C
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13 Tuesday Aaron Marshall Distribution Engineer Peach State Integrated Technologies Translating these kind of location models into practice – case studies, challenges.
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