Application of Third Party Logistics to Implement JIT System With Minimum Cost Under a Global Environment

8/8/2019 Application of Third Party Logistics to Implement JIT System With Minimum Cost Under a Global Environment

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WELCOME

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4 Manufacturer Assembler Distributors Customers


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Manufacturer Assembler


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MANUFACTURER 3RDPARTY LOGISTICS

Manufacturer deliver the products based on theirOptimum Production and Delivery Lot size whichminimizes their Annual Total Cost.(High Delivery Lot size and Less Delivery Frequency)7

3RDPARTY LOGISTICS ASSEMBLER

3RD Party Logistics provider deliver the products toassembler based on assemblers demand .

(Less Delivery Lot size and High Delivery Frequency)


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ATC=

Hr+IjHp+

Fj + (1+i)Cj for j= 1,2,3n

Where,

Ij= 1

2

2 for j= 1,2,3nCj=

2E + DpB + Dpwf forj= 1,2,3n

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ATC=

Hr+IjHp+

Fj + (1+i)Cj13

Ordering Cost Holding Costof Raw materials

Holding Costof Products

TransportationCost

3PLs Cost


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Ordering Cost =

Dr= Annual Demand of Raw Materials (Units peryear)

Nr = Ordering Quantity of Raw Materials (Units

per Order)K= Ordering Cost (Amount per Order)

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Inventory Holding Cost of Raw

Materials =

Hr

Dp = Annual demand of the Product (Units/Year)

P = Production rate of Product (Units/Year)

Nr

= Ordering Quantity of Raw Materials (Unitsper Order)

Hr = Inventory Holding cost of Raw materialsper unit (Amount per year)

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Inventory Holding cost of Products = IjHp

Ij

= Average product inventory of themanufacturer fortransportation container type

j(amount per year).

Hp = Inventory Holding cost of a unit of product

(amount per year).

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Average Product Inventory in the Manufacturer,

Ij= 1 2

2

Nj = Production Lot Size of jth container

type(Units per lot)

mj= Number of shipments ofjth container type.

qj = Actual delivery lot size of transportationcontainer type j (Units/Lot).

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Transportation Cost =

Fj

Dp = Annual demand of the Product (Units/Year)

qj = Actual delivery lot size of transportationcontainer typej(Units/Lot).

Fj = Transportation cost of the transportationcontainer type j from the manufacturer to the3PL (amount/lot).

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Cost of 3rd Party Logistics Provider = (1+i)Cj

Cj = 3PLs cost for the transportationcontainer typej(amount per year).

i= Annual profit margin of3PL (%)

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Actual Cost of 3rd Party Logistics Provider,

Cj=

2E + DpB + Dpwf

E = Annual Inventory Holding Cost of 3rd PartyLogistics

B = 3PLs Pickup cost per unit product (amount per

unit)w= Weight of the Product (Kilogram per unit)

f = Freight rate of the 3PL provider to theassembler

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Actual Cost of 3rd Party Logistics Provider,

Cj= 2E + DpB + Dpwf22

Holding Cost Pick Up Cost Delivery Cost


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Demand of the customer(per month), d= 150 Demand rate per year, Dp = 1800

Delivery Lot Size, Qj= 500

No. of shipments required = 4 No of products delivered = 4 x 500 = 2000

Remaining inventory at the end of each

year(in 3PLs) = 2000-1800 = 200.

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kj= forj= 1, 2, 3..n

rj= forj= 1, 2, 3..n

Actual Delivery Lot size, qj= rjd

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when kjis an integerotherwise

kj=50050 = 3.33, rj= 3.

Actual Delivery Lot size, qj= 3 x 150 = 450.

(450 x 4 = 1800)


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Assume all raw materials are converted intofinal product without any wastage.

= Production Lot size, Nj= No. of shipments(mj)

x Delivery Lot size(qj

)

Nj = mjqj

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TC(mj) =

K +

2mjqjHr+ 1

2

2 Hp

+

Fj+ (1+i)

2E + DpB + Dpwf

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()

= 0

mj* =

2

+

For j = 1,2,3..n

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TCj

* = Minimize TC , TC( ) 28

Nj* = mj

* qj


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Company: MATSHITA Product: Optical Drives Capacity of Transportation container type 1, 20-foot (per Lot), Q1: 4800.

Capacity of Transportation container type 2, 40-foot (per Lot), Q2: 9600.

Demand of Customer (per shipment), d= 465.

Annual Demand of Product(Units), Dp= 112,500.

Annual Production rate of manufacturer(units), P= 150,000.

Holding Cost of raw material (per unit), Hr=`1.2

Holding Cost of Product (per unit), Hp= ` 1.8 Ordering Cost (per order), K= ` 200 Transportation Cost of type 1 container (per Lot), F1= ` 1400. Transportation Cost of type 2 container (per Lot), F2= ` 2600.

Annual Profit Margin of3PL Provider, i= 8% Annual inventory holding cost of3PL, E= ` 1.8 3PLs Pickup cost (per unit),B= ` 0.5 Weight of Product (Kilogram per unit), w= 0.8

Freight rate from 3PL provider to the assembler (per Kilogram),f= ` 0.6.30*Assume the unit of cost is in Indian National Rupees, `.


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k1 = =

4800465 = 10.32

No. of shipments(from 3PL to assembler), r1= 10

Actual Delivery Lot Size, q1 = r1 x d= 10 x 465 = 4650 No. of shipments, m1 = 5.194, this should be an integer.

So m11 = 5, m12 = 6

Total Cost, TC(5) = `189,755, TC(6) = `192,894. Optimum no. of shipments, m1* = 5

Optimum Production Lot size, Nj* = m1

* x qj = 5 x 4650

= 23,250

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mj* =

+

TC(mj) =

K +

m jqjHr+ Hp

+

Fj+ (1+i) E + DpB + Dpwf


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Comparison between 20-foot &

40-foot Containers

Container j Qj mj mj* qj Nj

* TCj*

20-foot 1 4800 5.19 5 4650 23,250 `189,755

40-foot 2 9600 2.59 3 9300 27,900 `200,877

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We can save`11,122 if we choose 20-foot container


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Documents

Application of Third Party Logistics to Implement JIT System With Minimum Cost Under a Global Environment