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International Series in Operations Research

& Management Science

Volume 161

Series Editor
Frederick S. Hillier
Stanford University, CA, USA
Special Editorial Consultant
Camille C. Price
Stephen F. Austin State University, TX, USA

For further volumes:


http://www.springer.com/series/6161

Marc Goetschalckx

Supply Chain Engineering

13

Marc Goetschalckx
Georgia Institute of Technology
H. Milton Stewart School of Industrial & Systems Engineering
Ferst Drive NW., 765
30332-0205 Atlanta Georgia
USA
marc.goetschalckx@isye.gatech.edu

ISSN 0884-8289
ISBN 978-1-4419-6511-0 e-ISBN 978-1-4419-6512-7
DOI 10.1007/978-1-4419-6512-7
Springer New York Dordrecht Heidelberg London
Library of Congress Control Number: 2011930401
Springer Science+Business Media, LLC 2011
All rights reserved. This work may not be translated or copied in whole or in part without the written
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The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are
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to proprietary rights.
Printed on acid-free paper
Springer is part of Springer Science+Business Media (www.springer.com)

Preface

The focus of this book is the engineering design and planning of supply chain systems. A supply chain system can be loosely described as a system thatthrough
procurement, production, and distributiondelivers goods to satisfy the demands
of customers. Most organizations have a supply chain supporting their missing,
ranging from traditional business supply chains, to military logistics, to disaster
relief or medical delivery systems. As a consequence, there exists a very large variety of supply chain system types with different goals, constraints, and decisions.
But a systematic approach to the design and planning of any supply chain can be
based on the principles and methods of system engineering. Systems engineering methodology uses three fundamental components: data, models, and solution
algorithms.
This book is targeted at several audiences.The first target is a course for upperlevel undergraduate students on supply chains.The second target is use in a capstone
senior design project in the supply chain area.The third target is an introductory
course on supply chains either in a master of engineering or a master of business
administration programs. The last audience consists of students enrolled in logistics
or supply chain postgraduate or continuing education courses.
The book can be roughly divided into four sections.The first section focuses
on data management.Since most of planning and design requires making decisions
today so that supply chain functions can be executed efficiently in the future, this
section introduces forecasting principles and techniques.The next two sections treat
decision making in the two primary areas of transportation and inventory.The second section of the book focuses on transportation systems.First, the characteristics
of transportation assets and infrastructure are shown.Then four chapters focus on
the planning of transportation activities depending on who controls the transportation assets.The third section of the book is focused on storing goods.The last section of the book is focused on supply chain systems that consider simultaneously
procurement, production, transportation, and inventory, as well as the design of the
supply chain infrastructure or network design.
In each chapter, first a model of the process being studied is developed followed
by a description of practical solution algorithms.More advanced material is typical-

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Preface

ly described in appendices.This makes it possible to use an integrated, breadth-first


treatment of supply chain systems by using the initial material in each chapter.A
more in-depth treatment of a specific topic or process can be found towards the end
of each chapter.

Table of Contents

1 Introduction 1
1.1 The Supply Chain and Logistics Domains 1
1.2 Logistics Planning and Decisions Support 9
1.3 Summary and Conclusions 13
1.4 Exercises 13
References 14
2 Engineering Planning and Design 15
2.1 Engineering Design and Design Process 15
2.2 Modeling 20
2.3 Algorithms 49
2.4 Summary and Conclusions 57
2.5 Exercises 57
References 58
3 Forecasting 61
3.1 Introduction 61
3.2 Classification of Forecasting Methods 64
3.3 Forecast Quality and Performance Measures 67
3.4 Forecasting Software 72
3.5 Summary 72
3.6 Exercises 73
References 73
4 Time Series Analysis 75
4.1 Time Series Characteristics 75
4.2 Constant Data Pattern 77
4.3 Trend Data Pattern 87
4.4 Seasonal Data Pattern 97
4.5 Summary 120
4.6 Exercises 120
References 126
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Table of Contents

5 Transportation Systems 127


5.1 Introduction 127
5.2 Transportation Modes and Infrastructure 133
5.3 Transportation Documents and Contract Terms 150
5.4 Exercises 152
References 153
6 Single Flow Routing Through a Network 155
6.1 Vehicle Routing Systems Classification 155
6.2 Single Vehicle OriginDestination Routing 156
6.3 Exercises 178
References 180
7 Routing Multiple Flows Through a Network 181
7.1 Introduction 181
7.2 Network Variants and Applications 184
7.3 Network Solution Algorithms 188
7.4 Minimum Cost Network Flow Formulation 207
7.5 Exercises 211
References 212
8 Single-Vehicle Roundtrip Routing 213
8.1 Introduction 213
8.2 Simple TSP Heuristics 224
8.3 Optimization Based Heuristics 251
8.4 Tours Software Illustration 260
8.5 Exercises 260
References 268
9 Vehicle Routing and Scheduling 271
9.1 Introduction 271
9.2 Classic Vehicle Routing (VRP) 274
9.3 Vehicle Routing with Backhauling (VRPB) 332
9.4 Vehicle Routing Problem with Time Windows (VRPTW) 365
9.5 Fleet Sizing and Fleet Mix 368
9.6 Exercises 373
Appendix A Extended VRP Example (VRP16) 382
References 429
10 Inventory Systems 431
10.1 Introduction 431
10.2 Independent Demand Systems 442
10.3 Dependent Demand Systems 480
10.4 Exercises 483
Appendix A Expected Lost Sales for Discrete Distribution Function 488

Table of Contents

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Appendix B Optimal (s,Q) Policy for Service Level 2 490


References 493
11 Supply Chain Systems 495
11.1 Introduction 495
11.2 Supply Chain Design Objectives 497
11.3 Supply Chain Objects and their Characteristics 503
11.4 Information Technology 516
11.5 Exercises 519
References 520
12 Supply Chain Models 521
12.1 Introduction 521
12.2 Distribution Channel Selection 529
12.3 Tactical Supply Chain Planning 540
12.4 Continuous Location Model 547
12.5 Discrete Supply Chain Models 556
12.6 Geoffrion and Graves Distribution Model 569
12.7 Multi-Echelon Supply Chain Model 571
12.8 Conclusions 576
12.9 Exercises 577
Appendix 12.AContinuous Point Location Based on the
Euclidean Distance Norm 587
Appendix 12.B AMPL Model for the WLP 603
Appendix 12.C AMPL Implementation of the G&G Model 605
Appendix 12.D AMPL Implementation of the Multi-Echelon Model  607
References 611
13 Advanced Supply Chain Models 615
13.1 Introduction 615
13.2 Strategic Single-Country Supply Chain Design 617
13.3 Strategic Global Supply Chain Design 634
13.4Strategic Robust Supply Chain Design Incorporating
Uncertainty 642
13.5 Conclusions 663
13.6 Exercises 664
References  668
Appendix A Standard Distributions 671
A.1 Cumulative Normal Distribution 671
A.2 Unit Loss Function 673
Index  675

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