| dc.description.abstract | Sporting Good Manufacturing Company (SGMC) needs assistance in defining a linear programming model to find out the minimal cost to manufacture and ship their products to their nationwide distributors. These specialty products are cricket bats, cricket stumps and cricket bails, all products manufactured with the finest quality of wood. SGMC currently has distributors located in Punjab, Sindh, Baluchistan, Northern and Azad Kashmir. The company currently has two factories located in Karachi and Lahore in Pakistan. Warehouses located in Quetta, Lahore, Peshawar and Karachi are utilized to store manufactured products. From initial engagement with the company, multiple meetings with company officers were conducted for information gathering. The information provided by these officers mainly focused on the price of manufacturing and shipping of the company’s products. The end goal for the company was to meet their distributor’s demands at a minimal cost. A key understanding was that products could be shipped either from factories to warehouses to distributors or directly from factories to distributors. Currently the company does not have any defined way to find the optimal cost of manufacturing and shipping products. However, the ability to meet distributor’s demands is critical. Other relevant information SGMC provided was the company warehouse storage capacity, product manufacturing cost, shipping cost (factories to warehouses, warehouses to distributors & factories to distributors), and factories total manufacturing capacity. Data regarding the factory workers, machines, warehouse staff, and scheduling were not relevant and, therefore, were not considered in the creation of the linear programming model. All of the basic steps of generating a linear programming model were followed and information was well documented during each step to ensure that the model functioned properly and that enhancements could be easily made for all future requirements. As this project is international, it was difficult and expensive to communicate back and forth. Hurdles due to lack of manufacturing expertise, limited knowledge of supply chain networking, time zone differences from subject matter experts, and geographically dispersed information were all overcome to successfully develop and execute the models.The products analyzed in developing the linear programming model represent 65 percent of SGMC’s annual production volume. The model that was developed indicated that the company did not need to use any of its warehouses and instead needed a simple transportation model from the factories to the distributors. With the initial manufacturing and shipping cost, the total optimal cost indicated by our model for the company was PKR 29,607,400. As the company changed their requirements by adding an additional constraint of manufacturing limit per factory with no change to the shipping cost, the total cost went up to PKR 31,222,500. This change still mimicked our first model outcome indicating the company did not need its warehouses for storage and it is optimal to ship products directly from the factories to distributors. After SGMC negotiated a new fixed-price shipping cost schedule with the new shipping vendor, the new cost structure was used to successfully execute a new model. This model considered the revised shipping cost and included the factories manufacturing capacity constraint. The total optimal cost with this new model came out to be PKR 30,525,600. This model showed that the company needed to use both transportation and transshipment models to meet their distributors demand at the optimal cost. During the process of developing these models, important information was revealed, namely that the company ships products 15 days in advance to their warehouses. This piece of information significantly changed the model. This model appeared to be a simple transshipment model due to the fact that all products were shipped to the warehouses before they were shipped to the distributors, but when the model was executed, a feasible solution could not be found and the investigation through manual verification indicated that the company’s warehouses capacities are less than their distributor’s demands.
One option that the company researched was to expand their Karachi and Lahore warehouses to double their capacity. If the company expands these warehouses and includes the revised shipping price in the model, the optimal cost was found to be PKR 30,606,250 and it will be still a transshipment model.From the report it’s clear this project took some time to lock the requirements for the model, but the end result in the form of the model developed will be a very useful and powerful tool for the company. Even with weekly information changes and situation, this project was an excellent opportunity to exercise and polish linear programming modeling skills. It provided the author with the opportunity to apply skills developed in coursework to practical, real world scenarios. | |
