Logistics Management Jagathy

Logistics ManagementLogistics Management

Dr. Jagathy Raj V. P.Dr. Jagathy Raj V. P.Associate ProfessorAssociate Professor

School of Management StudiesSchool of Management StudiesCochin University of Science and TechnologyCochin University of Science and Technology

Kochi - 22Kochi - 22

Every company dreams of Every company dreams of achieving the Seven R’sachieving the Seven R’s

DeliveringDelivering The right product, inThe right product, in The right quantity, andThe right quantity, and The right condition, atThe right condition, at The right place, atThe right place, at The right time, forThe right time, for The right customer, atThe right customer, at The right costThe right cost

The turbulent business environmentThe turbulent business environment High UncertaintyHigh Uncertainty

Rapid changesRapid changes

The demand for better quality products at The demand for better quality products at

lower cost at a shorter supply lead timelower cost at a shorter supply lead time

Short product life cycleShort product life cycle

Globalization of marketsGlobalization of markets

Formation of trade blocksFormation of trade blocks

Shifting of Manufacturing bases to lower Shifting of Manufacturing bases to lower

labour cost areaslabour cost areas

Global sourcing suppliesGlobal sourcing supplies


Effective logistics Management Effective logistics Management alone can make this possiblealone can make this possible

LogisticsLogistics

In recent years, Logistics has received In recent years, Logistics has received increased management attention.increased management attention.

Corporations are using logistics as a Corporations are using logistics as a competitive weapon to meet the challenges of competitive weapon to meet the challenges of global competition and turbulent business global competition and turbulent business environment.environment.

The focus of modern businessThe focus of modern business

Maximizing the ROI with service-cost performance Maximizing the ROI with service-cost performance

as good as (or perhaps better than) the as good as (or perhaps better than) the

competitor’s is the primary objective of any competitor’s is the primary objective of any

company manufacturing and selling goods to meet company manufacturing and selling goods to meet

customer needscustomer needs

Satisfying the needs of the customer at least Satisfying the needs of the customer at least

costcost

Maximize the ROIMaximize the ROI

IntroductionIntroduction

Previously we have to wait for long time for getting Previously we have to wait for long time for getting premium goodspremium goods

Twentieth Century – Due to Metamorphic environmental Twentieth Century – Due to Metamorphic environmental transformation in the business world which results transformation in the business world which results – Lot of growth opportunities as well more complicated Lot of growth opportunities as well more complicated

business problems threatening even survival on the business problems threatening even survival on the other.other.

– Ex: Numerous cars, two wheelers etcEx: Numerous cars, two wheelers etc


Reasons- this is the outcome ofReasons- this is the outcome of– Heavy industrializationHeavy industrialization– Liberalization policyLiberalization policy– Rapid innovation in the field of Science and Rapid innovation in the field of Science and

Technology followed by their easy transferTechnology followed by their easy transfer– Globalization of world marketGlobalization of world market


As a result consumers are becoming very As a result consumers are becoming very selective and conscious about their purchase selective and conscious about their purchase decisions, especially value for money and decisions, especially value for money and convenience.convenience.

Distributors/retailers are also very conscious Distributors/retailers are also very conscious about their ROI due to the availability of huge about their ROI due to the availability of huge attractive trade opportunitiesattractive trade opportunities


So in the competitive environment, it is important So in the competitive environment, it is important for every firm to generate the highest level of for every firm to generate the highest level of customer satisfaction while delivering the highest customer satisfaction while delivering the highest value to the shareholders.value to the shareholders.

So in such an erratic market place, firms need to So in such an erratic market place, firms need to put their best effort towards formulating market put their best effort towards formulating market oriented and customer focused strategiesoriented and customer focused strategies


They are increasing their product portfolioThey are increasing their product portfolio Quick information sharingQuick information sharing Prominent display, read and intact deliveryProminent display, read and intact delivery 24 hours on-the-spot after sales service,24 hours on-the-spot after sales service, Eagerness to sort out problems and complaintsEagerness to sort out problems and complaints

– in order to satisfy their consumers with a in order to satisfy their consumers with a difference than competitors.difference than competitors.


Additionally to generate the highest value to Additionally to generate the highest value to shareholders, firms need to have cost-effective shareholders, firms need to have cost-effective best market offeringbest market offering

For this they need to have an improvement of For this they need to have an improvement of productivity and profitability by means of optimum productivity and profitability by means of optimum utilization of resources, avoiding idle time for any utilization of resources, avoiding idle time for any of themof them


To attain all of the above goals, firms have to offer To attain all of the above goals, firms have to offer best quality product at a reasonably least price as best quality product at a reasonably least price as and when required, avoiding a stock-out situation and when required, avoiding a stock-out situation which has given impetus to the concept of which has given impetus to the concept of Logistics ManagementLogistics Management

It has ability to ensure a consistency in the quality, It has ability to ensure a consistency in the quality, tremendous cost saving potential and making tremendous cost saving potential and making goods at the place of requirements in timegoods at the place of requirements in time

LogisticsLogistics US Air force Technical report(1981) defines this term as US Air force Technical report(1981) defines this term as

the science of planning and carrying out the movement and the science of planning and carrying out the movement and maintenance of forces – deals withmaintenance of forces – deals with

Design and development, acquisition, storage, movement, Design and development, acquisition, storage, movement, distribution, maintenance, evacuation and disposition of distribution, maintenance, evacuation and disposition of materialsmaterials

Movement, evacuation and hospitalization of personnel.Movement, evacuation and hospitalization of personnel. Acquisition or contruction, maintenance, operation, disposition Acquisition or contruction, maintenance, operation, disposition

of facilities, of facilities, Acquisition or furnishing of servicesAcquisition or furnishing of services

Act as a supportive system which reflects the practical art Act as a supportive system which reflects the practical art of moving armies and materials engaged in combat to of moving armies and materials engaged in combat to achieve the desires resultsachieve the desires results

LogisticsLogistics

In the Industrial and commercial world. In the Industrial and commercial world. Logistics has a acquired wider meaningLogistics has a acquired wider meaning

It covers activities for the material flow from It covers activities for the material flow from the source to the processing facilities, and the source to the processing facilities, and subsequent distribution of finished goods subsequent distribution of finished goods from there to the ultimate users.from there to the ultimate users.

LogisticsLogistics

A survey conducted by Fawcett and Clinton A survey conducted by Fawcett and Clinton

shows that more than 80.2 percent of the shows that more than 80.2 percent of the

leading edge firms and leading edge firms and

More than 75.8 percent of the other firms More than 75.8 percent of the other firms

include logistics in their strategic planning include logistics in their strategic planning

process.process.

Independent Business FunctionIndependent Business Function

Manufacturing

Sales

Distribution

Procurement

Inventory Control

Out ComeAggressive preaching

Skill

ObjectiveMaximization of Profit by

Sales volume

Limited Integrated BusinessLimited Integrated Business

Manufacturing Management

PhysicalDistribution and

SalesManagemt

Material Management

Output

Price – based competition

Objective

Cost Control

Internal Integrated Business Internal Integrated Business Function (Logistics ManagementFunction (Logistics Management

Manufacturing Management

Marketing and Distribution

Management

Material Management

OUTPUT

Increased Productivity.

Profitability andMarket Shares

Objective

Maximization

of profitable Sales Values and

Cost Reduction

External Integrated Business External Integrated Business Function (SCM)Function (SCM)

CUSTMERS

LOGISTICS

VENDERS

Output

Customer Values and Harmonics

RelationsRelationships

Objective

Core Competency

LogisticsLogistics

Logistics is responsible for managing the Logistics is responsible for managing the

acquisition, movement and storage of acquisition, movement and storage of

materials, parts and finished goods (together materials, parts and finished goods (together

with related information flows) through an with related information flows) through an

organization and its marketing channels to organization and its marketing channels to

meet customer expectations and the meet customer expectations and the

company’s profit objective.company’s profit objective.

LogisticsLogistics Logistics has been recognized not only as a group of important Logistics has been recognized not only as a group of important

functions, but as function that have important strategic impacts functions, but as function that have important strategic impacts

as wellas well

In the United States, annual expenditure on non-military logistics In the United States, annual expenditure on non-military logistics

are estimated as 11 percent of the Gross National Product. are estimated as 11 percent of the Gross National Product.

With logistics cost of 30 percent of goods sold, not uncommon With logistics cost of 30 percent of goods sold, not uncommon

for US manufacturing firms potential saving in logistics for US manufacturing firms potential saving in logistics

coordination cannot be ignored. coordination cannot be ignored.

Logistics strategy must be integrated with corporate strategy Logistics strategy must be integrated with corporate strategy

because corporate strategy because corporate strategy


The Council of Logistics Management defines The Council of Logistics Management defines

Logistics Management as:Logistics Management as:The process of planning, implementing and The process of planning, implementing and

controlling the efficient, cost – effective flow controlling the efficient, cost – effective flow and storage of raw materials, in-process and storage of raw materials, in-process inventory, finished goods and related inventory, finished goods and related information from point of origin to point of information from point of origin to point of consumption for the purpose of conforming to consumption for the purpose of conforming to customer requirementscustomer requirements

Customer

Industrial Enterprise

Suppliers Purchasing Manufacturing Physical

Distribution

Requirements information flow

Value added material flow

A Process view of Logistics Management

Flows in a Logistics SystemFlows in a Logistics System

Flow of MaterialsFlow of Materials

Merchandise flowMerchandise flow

Money flowMoney flow

Information flowInformation flow


Logistics Management is an integrating function Logistics Management is an integrating function which coordinates and optimizes all logistics as which coordinates and optimizes all logistics as well as integrates logistics activities with other well as integrates logistics activities with other functions including marketing, sales, functions including marketing, sales, manufacturing, finance and ITmanufacturing, finance and IT

It Includes the design and administration of system It Includes the design and administration of system to control the flow of materials, work-in-process to control the flow of materials, work-in-process and finished inventory to support business unit and finished inventory to support business unit strategystrategy

Supplier

Supplier

Transport

Delivery

Consolidation Warehouse

Manufacturing Stage I

Manufacturing

Stage N

Manufacturing Stage II

Finished Goods

Local delivery

Finished Goods Storage

Raw Materials Source

Wholesaler

Retailer

Retailer

TransportRaw Materials Source

Local delivery

Material Handling

Raw materials or Parts Storage

N Stages

Customers

Warehouse

Manufcaturing

Material Handling

Delivery

INBOUND LOGISTICS

INTERNAL LOGISTICS

OUTBOUND LOGISTICS

Material Flow Information FlowNote:

Transport

Transport

MaterialHandling

Visual Representation of Integrated Logistics Management

ComponentsComponents

Inbound Logistics Inbound Logistics

Internal LogisticsInternal Logistics

Outbound LogisticsOutbound Logistics

Inbound LogisticsInbound Logistics

Sourcing and vendor selection for supply of raw Sourcing and vendor selection for supply of raw materials and manufacturing partsmaterials and manufacturing parts

Inbound transportation and procurement planningInbound transportation and procurement planning Raw materials warehousing including Raw materials warehousing including

consolidation warehousingconsolidation warehousing Management of InventoryManagement of Inventory Information system for effective support strategic Information system for effective support strategic

alliances with the supplies and transportersalliances with the supplies and transporters

Internal LogisticsInternal Logistics

Capacity Planning Operational planning Capacity Planning Operational planning Production planningProduction planning

Materials Requirement planningMaterials Requirement planning Shop floor controlShop floor control Management of in-process inventoryManagement of in-process inventory Supporting material handling facilities Supporting material handling facilities

planning and their deployment etcplanning and their deployment etc

Out bound LogisticsOut bound Logistics Outbound logistics system is concerned with the flow of Outbound logistics system is concerned with the flow of

finished products from factory warehouse to the customers finished products from factory warehouse to the customers through a distribution network comprising:through a distribution network comprising:

The wholesalersThe wholesalers

DistributorsDistributors

RetailersRetailers

Regional warehousesRegional warehouses

TransportersTransporters

The inventory at all levelsThe inventory at all levels

Sales order processingSales order processing

Sales return processingSales return processing

Accounts receivable realization and Accounts receivable realization and

Counter flow of information from the customers to the factoryCounter flow of information from the customers to the factory


Logistics is the process of strategically Logistics is the process of strategically managing the procurement, Movement and managing the procurement, Movement and storage of materials, parts and finished storage of materials, parts and finished inventory (and the related information) inventory (and the related information) through the organization and its marketing through the organization and its marketing channels in such a way that current ans channels in such a way that current ans future profitability are maximized through the future profitability are maximized through the cost – effective fulfillment of order.cost – effective fulfillment of order.


Logistics Management refers to designing, Logistics Management refers to designing, developing, producing and operating an developing, producing and operating an integrated system which is responds to integrated system which is responds to customer expectations by making available customer expectations by making available the required quantity of required quality the required quantity of required quality products as and when required to offer best products as and when required to offer best customer service at the least costscustomer service at the least costs


For Service IndustryFor Service Industry– Defined as the process of coordinating non martial Defined as the process of coordinating non martial

activities necessary to the fulfillment of the service in a activities necessary to the fulfillment of the service in a cost and customer service effective mannercost and customer service effective manner

It is an internal integration of interrelated managerial It is an internal integration of interrelated managerial function to ensure a smoth flow of raw materials from the function to ensure a smoth flow of raw materials from the point of inception to the first product point, semi-finished point of inception to the first product point, semi-finished goods within production process and finished goods from goods within production process and finished goods from the last point the point of consumptionthe last point the point of consumption

Integrated Logistics ManagementIntegrated Logistics Management

Defined as the process of anticipating Defined as the process of anticipating customer needs and wants acquiring the customer needs and wants acquiring the capital, material, people. Technologies and capital, material, people. Technologies and information necessary to meet those needs information necessary to meet those needs and wants, optimizing the goods-or and wants, optimizing the goods-or services, producing network to fulfill services, producing network to fulfill customer requirements; and utilizing the customer requirements; and utilizing the network request in a timely waynetwork request in a timely way

Goals of Logistics Goals of Logistics systemsystem

• Provide a Targeted Level of Customer Service at the Least Cost.

• Maximize Profits, Not Sales.

The Value Chain (Porter[1985])The Value Chain (Porter[1985])

Primary activities

Inbound logistics

Operations

Outbound logistics

Marketing and sales

Service

Technology development

Human resource management

Firm Infrastructure

Procurement

M a r g i n

M a r g i n

Supp

ort

activ

ities

Major features of For Major features of For Logistics ManagementLogistics Management

Smooth flow of all types of goods such as raw mareials, Smooth flow of all types of goods such as raw mareials, work-in-process and finished goodswork-in-process and finished goods

Meeting customer expectations about product and related Meeting customer expectations about product and related information requirementsinformation requirements

Real time flow of information about products’ demand and Real time flow of information about products’ demand and availabilityavailability

Delivery of quality product in required quantity without Delivery of quality product in required quantity without excessive safety stockexcessive safety stock

Best possible customer service at the least possible costBest possible customer service at the least possible cost Integration of various managerial functions for optimization Integration of various managerial functions for optimization

of resourcesof resources Movement and storage of goods in appropriate quantityMovement and storage of goods in appropriate quantity Enhancement of productivity and profitabilityEnhancement of productivity and profitability


Integrated Logistics is viewed as a method Integrated Logistics is viewed as a method to create a sustainable competitive to create a sustainable competitive advantage over the company's competitionadvantage over the company's competition

Logistics strategy must be integarted with Logistics strategy must be integarted with corporate strategy because corporate corporate strategy because corporate strategy sets the basic requirement to the strategy sets the basic requirement to the Logistics system of a strategyLogistics system of a strategy


The logics process is becoming more demanding and The logics process is becoming more demanding and complex, so is the business environment in which the complex, so is the business environment in which the logistics has to operatelogistics has to operate

Highlights seven critical factors including that are Highlights seven critical factors including that are contributing to the complexity of logistics system contributing to the complexity of logistics system operationsoperations

Escalating customer demandEscalating customer demand Cycle time reductionCycle time reduction GlobalizationGlobalization RestructuringRestructuring Supply Chain PartnershipsSupply Chain Partnerships Productivity pressures andProductivity pressures and Environmental awarenessEnvironmental awareness


Revolution in Communication and Revolution in Communication and Information Technologies have opened new Information Technologies have opened new avenues for integrating raw material supply, avenues for integrating raw material supply, Manufacturing support and Physical Manufacturing support and Physical distribution of logisticsdistribution of logistics

Relative Importance Depends onRelative Importance Depends on

Raw materials Sources and Raw materials Sources and VolumeVolume

Capital InvestmentCapital Investment

Distribution Volume and Distribution Volume and TerritoryTerritory

Competitiveness depends onCompetitiveness depends on

Reducing raw materials input costs through Reducing raw materials input costs through sourcing and inbound logistics optimizationsourcing and inbound logistics optimization

Increasing throughput from the plantIncreasing throughput from the plant

Choice of cost – effective Technology Choice of cost – effective Technology

Reducing outbound Logistics costReducing outbound Logistics cost

The following objectives are realizedThe following objectives are realized

Increased velocity of flowIncreased velocity of flow

Quick responseQuick response

Reduced costReduced cost

JIT SupplyJIT Supply

JIT DistributionJIT Distribution

Need for integrationNeed for integration

Through effective ManagementThrough effective Management InfrastructureInfrastructure MachinesMachines ProcessProcess Technology andTechnology and PeoplePeople

Gaining Competitive Advantage Gaining Competitive Advantage

through Logisticsthrough Logistics

The Goal:

Sustainable competitive advantage

Productivity advantage

Value advantage

Logistics leverage opportunities Tailored service Distribution Channel Strategy Customer relations etc. Reliability Responsiveness Information Flexibility

Logistics leverage opportunities Capacity utilization Asset turn Co-makership/schedule integration etc Low inventory Low waste

Important Logistics Activities and Their Important Logistics Activities and Their

Relations to Key Business GoalsRelations to Key Business Goals

Customer Service

Purchasing Costs

Production Costs

Logistics Costs

Inventory

Structure and Functionsof

Logistics

Facilities

Sales Volume Other

Costs

Working Capital Fixed

Asset

Return on Capital Employed

Growth Market Share High level of service

Key BusinessGoals

Important LogisticsActivities

MajorVariables

Logistics has been recognized not only as a group of important functions, but as functions that have important strategic impacts as well

Strategic Logistics PlanningStrategic Logistics Planning Strategic logistics planning is essentially Strategic logistics planning is essentially

concerned with the deployment and management concerned with the deployment and management of logistics resources to met the desired cost of logistics resources to met the desired cost effective service performance of the systemeffective service performance of the system

This may involve, number and location of This may involve, number and location of warehouses, mode and carrier selection, Inventory warehouses, mode and carrier selection, Inventory positioning, inventory planning, sub contracting of positioning, inventory planning, sub contracting of services, sourcing, equipment and facilities services, sourcing, equipment and facilities planning, order management and Infromation planning, order management and Infromation systems planning etcsystems planning etc

Strategic Logistics PlanningStrategic Logistics Planning

This is also includes such decisions as location and This is also includes such decisions as location and capacities of company owned plants and warehouses, capacities of company owned plants and warehouses, acqusition or long term hiring of carriers like ships barges, acqusition or long term hiring of carriers like ships barges, trucks etc, acquisition of matrial handling system and trucks etc, acquisition of matrial handling system and facilities, balancing facilities to maximize throughput and facilities, balancing facilities to maximize throughput and flexibility and introduction of system to help, reductions in flexibility and introduction of system to help, reductions in response time and in process inventoryresponse time and in process inventory

Choice of supply, transport mode, strategic alliance with Choice of supply, transport mode, strategic alliance with both suppliers and customers also form parts of these both suppliers and customers also form parts of these strategic logistics planning process.strategic logistics planning process.


The process of strategically managing the acquisition, The process of strategically managing the acquisition,

movement and storage of materials, parts, finished goods movement and storage of materials, parts, finished goods

inventory, and related information flows through the inventory, and related information flows through the

organization and its marketing channel in such a way that organization and its marketing channel in such a way that

current and future profitability is maximized through the current and future profitability is maximized through the

cost-effective fulfillment of orders.cost-effective fulfillment of orders.

Main objectives of logistics planning are:Main objectives of logistics planning are: Cost reduction:Cost reduction: - - This strategy is directed towards minimizing the This strategy is directed towards minimizing the

variable costs associated with the movement and storage. The best variable costs associated with the movement and storage. The best strategy is to evaluate the alternative courses of action and select the strategy is to evaluate the alternative courses of action and select the optimum one keeping profit maximization as the prime goal in mind.optimum one keeping profit maximization as the prime goal in mind.

Capital reduction: -Capital reduction: - This strategy is directed towards minimizing the This strategy is directed towards minimizing the level of investment in the logistics system. level of investment in the logistics system.

Service improvements: -Service improvements: - This strategy recognizes that the revenue is This strategy recognizes that the revenue is

a function of the logistics service provided and develops an effective a function of the logistics service provided and develops an effective service strategy that is different from the one provided by competitors.service strategy that is different from the one provided by competitors.

– Logistics has significant impact on these important Logistics has significant impact on these important corporate performance objectivescorporate performance objectives


Maximizing the ROI with service-cost Maximizing the ROI with service-cost performance as good as(or perhaps better performance as good as(or perhaps better than) the competitor’s is the primary than) the competitor’s is the primary objective of any company manufacturing objective of any company manufacturing and selling goods to meet customer needsand selling goods to meet customer needs

The logistics planning is particularly The logistics planning is particularly crucial to those industriescrucial to those industries

Volume of raw materials and finished goods Volume of raw materials and finished goods handled is very high and freight including handled is very high and freight including handling cost constitutes a significant handling cost constitutes a significant portion of the sales price.portion of the sales price.

Capital intensive manufacturing technology Capital intensive manufacturing technology that requires high capacity utilization to that requires high capacity utilization to spread capital cost over larger volumespread capital cost over larger volume

Asset deployment in raw materials Asset deployment in raw materials procurement and finished goods distribution procurement and finished goods distribution is considerable.is considerable.

Logistics planning includesLogistics planning includes

Supply Chain PlanningSupply Chain Planning Shipment PlanningShipment Planning Transport System PlanningTransport System Planning Vehicle Routing and SchedulingVehicle Routing and Scheduling WarehousingWarehousing

A sound strategic logistics plan for a A sound strategic logistics plan for a manufacturing company must aim at:manufacturing company must aim at:

Minimizing the landed cost of inputs through strategic Minimizing the landed cost of inputs through strategic sourcing, consolidation warehousing and carrier sourcing, consolidation warehousing and carrier selectionselection

Minimizing the procurement lead time and raw Minimizing the procurement lead time and raw materials inventory through better information and materials inventory through better information and procurement systems.procurement systems.

Increasing the productivity of the manufacturing unit Increasing the productivity of the manufacturing unit through appropriate choice of technology, balancing of through appropriate choice of technology, balancing of facilities and optimization of internal logistics support facilities and optimization of internal logistics support including material handling facilitiesincluding material handling facilities

Contd……Contd……

A sound strategic logistics plan for a A sound strategic logistics plan for a manufacturing company must aim at:manufacturing company must aim at:

Decreasing the finished goods inventory Decreasing the finished goods inventory through reduced manufacturing response time.through reduced manufacturing response time.

Minimizing the assets including inventory Minimizing the assets including inventory deployed in the distribution channeldeployed in the distribution channel

Minimizing the delivery lead-time through Minimizing the delivery lead-time through efficient customer response, quick response efficient customer response, quick response logistics and customer specific support logistics and customer specific support services.services.

Logistics Management DecisionsLogistics Management Decisions

The level of investment and the periods over which the The level of investment and the periods over which the benefits from an investment in logistics system is realizedbenefits from an investment in logistics system is realized

Strategic logistics decisionsStrategic logistics decisions

Tactical logistics decisionTactical logistics decision

Operational logistics decisionsOperational logistics decisions

Logistics Management DecisionsLogistics Management Decisions

Strategic

Supply chain designResource acquisitionBroad scope, highly aggregated dataLong-term planning horizons(1year+1)

Tactical

Operational

Production/distribution planningResource allocationMedium-term planning horizons (monthly, quarterly)

Shipment routing and schedulingResource routing and schedulingNarrow scope, detailed dataShort-term planning horizons (daily, real-time)

Logistics Application Areas by Modeling Views

Planning Horizons

Supply chain planning

Transportation planning

Shipment planning

Vehicle routing Warehousing

Strategic Site locationCapacity sizingsourcing

site locationfleet sizing

outsourcingbid analysisfleet sizing

fleet sizingservice day balancingfrequency analysis

warehouse layoutmaterial handling design

Tactical production planningsourcing

routing strategynetwork alignment

consolidation strategymode strategy

routing strategyzone alignment

storage allocationorder picking strategies

Operational

MRP, DRP, ERP

load matching

shipment dispatching

vehicle dispatching

order picking

Logistics ModelingLogistics Modeling

Relevant Features

Real World

ManagementDoubt

ManagementAction

Symbolic Representation

Model

ResultData

Logistics ModelsLogistics Models

Analytical ModelsAnalytical Models Distribution network Optimization Venroy[1989]Distribution network Optimization Venroy[1989]

Berth Planning at Naval station Brown et. al [1994]Berth Planning at Naval station Brown et. al [1994]

Transportation Speranza and Vkovich[1994]Transportation Speranza and Vkovich[1994]

Supply chain of fine chemicals Voudouris[1996]Supply chain of fine chemicals Voudouris[1996]

Facility location formulation Camm et. al [1997]Facility location formulation Camm et. al [1997]

HeuristicsHeuristics

Distribution and Materials Management Mentzer and Schuster Distribution and Materials Management Mentzer and Schuster

[1982][1982]

Material Flow on a site-by-site basis Lee and Billington[1993]Material Flow on a site-by-site basis Lee and Billington[1993]

Modeling buyer-supplier relation Christy and Grout[1994]Modeling buyer-supplier relation Christy and Grout[1994]

Logistics ModelsLogistics Models

SimulationSimulation Production distribution analysis Dorairaj[1989]Production distribution analysis Dorairaj[1989]

Assembly line operations Sayer[1989]Assembly line operations Sayer[1989]

Marketing logistics Horrington et. al [1992]Marketing logistics Horrington et. al [1992]

Complex rail network Dessosky and Leachman[1995]Complex rail network Dessosky and Leachman[1995]

Transportation Chang[1997]Transportation Chang[1997]

CompositeComposite Selection of location Copacino and Rosenfield[1987]Selection of location Copacino and Rosenfield[1987]

Throughput from transportation system Allen et. al[1993]Throughput from transportation system Allen et. al[1993]

Ship Cargo Operation Horne and Irony[1994]Ship Cargo Operation Horne and Irony[1994]

Intermodal container Operation Gambardella[1998]Intermodal container Operation Gambardella[1998]

Limitations of Available ModelsLimitations of Available ModelsAnalytical ModelsAnalytical Models Distribution FocusDistribution Focus Linear or Integer Programming ModelsLinear or Integer Programming Models DeterministicDeterministic StaticStatic Too complex to establish and solveToo complex to establish and solve

Heuristics ModelsHeuristics Models IntuitiveIntuitive DeterministicDeterministic Optimality not ensuredOptimality not ensured Distribution FocusDistribution Focus

Limitations of Available ModelsLimitations of Available Models

SimulationSimulation Do not ensure OptimalityDo not ensure Optimality Scenario EvaluationScenario Evaluation Simple SystemsSimple Systems No focus on Technology Option No focus on Technology Option

SelectionSelection No focus on Parameter No focus on Parameter

OptimizationOptimization

Limitations -Limitations - Optimization ModelsOptimization Models Many optimization models assume that relationships in the system are linear. Many optimization models assume that relationships in the system are linear. Although it is possible to incorporate feedback in optimization models, yet Although it is possible to incorporate feedback in optimization models, yet

optimization model, ignore most of the feedback effects to minimize optimization model, ignore most of the feedback effects to minimize complexity.complexity.

Many optimization models are static. Many optimization models are static.

From the viewpoint of the model user, the optimization models are large, From the viewpoint of the model user, the optimization models are large, cumbersome and complex.cumbersome and complex.

Most of the optimization models have single objective function. In real life, Most of the optimization models have single objective function. In real life, management is faced with a vector of objectives.management is faced with a vector of objectives.

Many optimization problems require use of integer or mixed integer Many optimization problems require use of integer or mixed integer programming models that are difficult to use for large problems.programming models that are difficult to use for large problems.

Limitations -Limitations - Econometric ModelsEconometric Models Econometric models assume availability of perfect information and Econometric models assume availability of perfect information and

equilibrium in the market economy. They ignore such complexities of equilibrium in the market economy. They ignore such complexities of real world as: dynamic processes, disequilibrium and the physical real world as: dynamic processes, disequilibrium and the physical delays between action and results.delays between action and results.

Models use the historical data to find the parameter values. Such Models use the historical data to find the parameter values. Such estimation techniques reveal only the degree of past correlation estimation techniques reveal only the degree of past correlation between the variables. Such correlation cannot accurately represent between the variables. Such correlation cannot accurately represent the dynamic future.the dynamic future.

Econometric models ignore soft variables and immeasurable Econometric models ignore soft variables and immeasurable quantities. At best, these variables are handled with proxy variables.quantities. At best, these variables are handled with proxy variables.

Causal relationships between model variables and feedback are not Causal relationships between model variables and feedback are not considered. The feedback relationships between environmental, considered. The feedback relationships between environmental, social demographic factors are usually as important as economic social demographic factors are usually as important as economic influences.influences.

Limitations -Limitations - Simulation ModelsSimulation Models

The major weakness in the simulation models, as opposed to The major weakness in the simulation models, as opposed to optimization model, is that they do not ensure optimality.optimization model, is that they do not ensure optimality.

It takes considerable time and effort to generate and to evaluate It takes considerable time and effort to generate and to evaluate large number of alternatives.large number of alternatives.

It is generally not easy to modify the model to allow the It is generally not easy to modify the model to allow the inclusion of a new phenomenon without completely inclusion of a new phenomenon without completely restructuring the model.restructuring the model.

In general, rigid structural requirements of the simulation In general, rigid structural requirements of the simulation models prove to be restrictive in the analysis of real-life models prove to be restrictive in the analysis of real-life systems.systems.

Logistics Objects

Generate Alternative

Logistics Strategies

Decision Support Architecture

Evaluate Alternative

Logistics

Composite Model

Inbound/outbound integration Fixed/master/variable/dynamic routing Mode selection Single sourcing

Freight consolidation Just-in-Time movements Continuous move routing Warehouse consolidation

Supply chain infrastructure Movements requirements Transportation

infrastructure Object-oriented data

models

Geographical information systems Modeling languages Spreadsheets Client/server architecture

Interactive optimization Heuristics Network flow/linear

programs Mixed-integer programs

Benchmarking and rationalization Activity-based costing Aggregation/hierarchical models Simulation

The Major Elements of Logistics Composite Modeling Analysis

Characteristics of a Complex systemCharacteristics of a Complex system Presence of several manufacturing stages in series and parallel Presence of several manufacturing stages in series and parallel

Manufacturing stages having variable (probabilistic) operation Manufacturing stages having variable (probabilistic) operation times times

Breakdown and repairs for different stages Breakdown and repairs for different stages

The operating parameter of each stage affecting the output of that The operating parameter of each stage affecting the output of that stage and other stages linked with it stage and other stages linked with it

Linking of different manufacturing stages by material handling Linking of different manufacturing stages by material handling equipment equipment

Absence of buffers in process Absence of buffers in process

Presence of common facilities used by more than one process Presence of common facilities used by more than one process having their own operation cycle failure and maintenance.having their own operation cycle failure and maintenance.

The Logistics Models must consider:The Logistics Models must consider:

The temporal dimensions must be included. Information, inventories, and The temporal dimensions must be included. Information, inventories, and customer service are time-dependent, as are the mode performance and customer service are time-dependent, as are the mode performance and demand rates in a logistics system.demand rates in a logistics system.

The model should have capability to explicitly incorporate spatial dimensions of The model should have capability to explicitly incorporate spatial dimensions of logistics.logistics.

The model should have a multiple product capability;The model should have a multiple product capability;

Multiple echelons should be included;Multiple echelons should be included;

The model should have the ability to incorporate linear and nonlinear The model should have the ability to incorporate linear and nonlinear relationship amongst the variables;relationship amongst the variables;

Contd….Contd….

The Logistics Models must consider:The Logistics Models must consider:

The model should explicitly consider production, transport mode, The model should explicitly consider production, transport mode, warehouse, materials handling equipment capacities etc.warehouse, materials handling equipment capacities etc.

The model should have the ability to incorporate the stochastic The model should have the ability to incorporate the stochastic nature of logistics activities.nature of logistics activities.

Linkage between stagesLinkage between stages

Breakdown of stagesBreakdown of stages

Dynamic effects of weather and handling capacitiesDynamic effects of weather and handling capacities

Logistics decisions for complex systemsLogistics decisions for complex systems

Logistics decisions for complex systems, require Logistics decisions for complex systems, require

temporal integration that covers planning horizons of temporal integration that covers planning horizons of

several years to a day and spatial integration that covers several years to a day and spatial integration that covers

the entire supply chain from suppliers to the ultimate the entire supply chain from suppliers to the ultimate

customerscustomers

Characteristics of Complex systemsCharacteristics of Complex systems

Presence of several manufacturing stages in series and parallelPresence of several manufacturing stages in series and parallel Manufacturing stages having variable probabilistic) operation Manufacturing stages having variable probabilistic) operation

timestimes Breakdown and repairs for different stagesBreakdown and repairs for different stages The operating parameter of each stage affecting the output of that The operating parameter of each stage affecting the output of that

stage and other stages linked with itstage and other stages linked with it Linking of different manufacturing stages by matrial handing Linking of different manufacturing stages by matrial handing

equipmentequipment Absence of buffers in processAbsence of buffers in process Presence of common facilities used by more that one process Presence of common facilities used by more that one process

having their own operation more than one process having their having their own operation more than one process having their own operation cycle failure and maintenanaceown operation cycle failure and maintenanace

Steel Plant Logistics PlanningSteel Plant Logistics Planning

First, the inbound and the outbound logistics cost in a First, the inbound and the outbound logistics cost in a steel plant is significant and it accounts for 15 to 25 steel plant is significant and it accounts for 15 to 25 percent of the sales price per ton. percent of the sales price per ton.

Second, steel plants are capital intensive. Fixed capital Second, steel plants are capital intensive. Fixed capital cost accounts for 20 to 25 percent of the cost per ton cost accounts for 20 to 25 percent of the cost per ton of saleable steel.of saleable steel.

Third, it involves global sourcing of about 2.5 tons of Third, it involves global sourcing of about 2.5 tons of raw materials for the production of a ton of finished raw materials for the production of a ton of finished steel. steel.

Fourth, small improvements in logistics result in large Fourth, small improvements in logistics result in large savings due to high volume of materials handled in savings due to high volume of materials handled in steel plants.steel plants.

Contd……Contd……

Steel Plant Logistics PlanningSteel Plant Logistics Planning Fifth, the system involves temporal integration Fifth, the system involves temporal integration

over a time range of one shift to several years.over a time range of one shift to several years.

Sixth, the system involves spatial integration Sixth, the system involves spatial integration that covers the entire supply chain from that covers the entire supply chain from suppliers to the ultimate customers.suppliers to the ultimate customers.

Seven, the performance of logistics (specially Seven, the performance of logistics (specially the internal logistics) system significantly the internal logistics) system significantly influences the energy requirements and influences the energy requirements and utilization of costly and coupled manufacturing utilization of costly and coupled manufacturing stages, therefore, the cost of a ton of steel stages, therefore, the cost of a ton of steel producedproduced

Modeling of Steel Plant LogisticsModeling of Steel Plant Logistics An integrated steel plant is a closely coupled system of many units An integrated steel plant is a closely coupled system of many units

(plants)/stages in series and parallel, each with its own stochastic processing (plants)/stages in series and parallel, each with its own stochastic processing times and breakdown/repair patterns.times and breakdown/repair patterns.

These units (plants) are installed by different agencies and most of them are These units (plants) are installed by different agencies and most of them are available in a few different capacities step only.available in a few different capacities step only.

The operating parameter of each stage affecting the output of that stage and The operating parameter of each stage affecting the output of that stage and other stages linked with it.other stages linked with it.

The stages are linked by specialized material handling system which may have The stages are linked by specialized material handling system which may have its own stochastic loading, unloading, travel, failure and repair times.its own stochastic loading, unloading, travel, failure and repair times.

There may be finite or zero buffers between the stages.There may be finite or zero buffers between the stages.Contd….Contd….

Modeling of Steel Plant LogisticsModeling of Steel Plant Logistics Presence of common facilities used by more than one process having their Presence of common facilities used by more than one process having their

own operation, failure and maintenance cycles.own operation, failure and maintenance cycles.

There are better methods for evaluating individual pieces of equipment. There are better methods for evaluating individual pieces of equipment. These methods use deterministic values of processing time, product quality, These methods use deterministic values of processing time, product quality, associated rejects, failure rates etc. associated rejects, failure rates etc.

Models for analyzing and evaluating the performance of complex system with Models for analyzing and evaluating the performance of complex system with variability are difficult to formulate using exact mathematical procedures.variability are difficult to formulate using exact mathematical procedures.

A plant can be theoretically viewed as a complex queuing network whose A plant can be theoretically viewed as a complex queuing network whose analytical solution is difficult.analytical solution is difficult.

Experimenting with a large real system is a difficult and expensive Experimenting with a large real system is a difficult and expensive proposition.proposition.

Conducting experiments with different combinations of many parameters Conducting experiments with different combinations of many parameters leads to combinatorial explosion.leads to combinatorial explosion.

Modeling ApproachesModeling Approaches

The modeling Focus: CompositeThe modeling Focus: Composite

Simulation Approach for internal Logistics Simulation Approach for internal Logistics and Throughput Optimizationand Throughput Optimization

Design of Experiment for Parameters, Design of Experiment for Parameters, Routings and Product mix OptimizationRoutings and Product mix Optimization

Mathematical Programming for Tactical Mathematical Programming for Tactical Procurement PlanningProcurement Planning

Economic Evaluation for Facilities hiringEconomic Evaluation for Facilities hiring

Area Showing the Plant Site, Waterways and Lightering and HRC loading Points

The ProblemThe Problem

Making the different types of raw materials Making the different types of raw materials available in the right quality and right quantity, available in the right quality and right quantity, and in the right time at the least possible cost to and in the right time at the least possible cost to the Integrated Steel Plant and ensuring the the Integrated Steel Plant and ensuring the back-to-back supply of the finished products back-to-back supply of the finished products through sea route for export is the logistics through sea route for export is the logistics problem of the plant that we have taken for problem of the plant that we have taken for study.study.

ProblemProblem

Optimization of Raw Materials Logistics and “Back- to-Back” Optimization of Raw Materials Logistics and “Back- to-Back” Supply of Finished Goods for a Coastal Integrated Steel Plant.Supply of Finished Goods for a Coastal Integrated Steel Plant.

The important objective of the study is to optimize the raw The important objective of the study is to optimize the raw materials procurements and HR Coil export considering two materials procurements and HR Coil export considering two alternative options: alternative options:

Independent barge-mixes for the raw materials lightering and Independent barge-mixes for the raw materials lightering and export of HR coils and export of HR coils and

Use of same barge-mix for lightering of raw materials and loading Use of same barge-mix for lightering of raw materials and loading of export HR coils through “back-to-back” integrationof export HR coils through “back-to-back” integration..

More specifically, the problem deals with:More specifically, the problem deals with: Deciding capacity mix of ships to use for transportation of raw Deciding capacity mix of ships to use for transportation of raw

materials from different sources, materials from different sources,

Making an optimum procurement plan for raw materials, source-Making an optimum procurement plan for raw materials, source-wise and material-wise.wise and material-wise.

Deciding the barge mix to hire for the lightering and HRC loading Deciding the barge mix to hire for the lightering and HRC loading operations,operations,

Scheduling the ships from each Load Port for a given month, Scheduling the ships from each Load Port for a given month,

Finding the economy and feasibility of back-to-back supply of HRC Finding the economy and feasibility of back-to-back supply of HRC for export, andfor export, and

Preparing a daily schedule for the barges used for lightering and Preparing a daily schedule for the barges used for lightering and export of HRC.export of HRC.

The important constraints are:The important constraints are: Availability of ships of different category at Load Ports.Availability of ships of different category at Load Ports.

Scheduled maintenance of barges and other equipment in use, therefore, their Scheduled maintenance of barges and other equipment in use, therefore, their unavailability at certain periods.unavailability at certain periods.

Restrictions on movement of 1000 ton and 700 ton barges to BFL. Only 2800 ton and Restrictions on movement of 1000 ton and 700 ton barges to BFL. Only 2800 ton and 2000 ton barges are allowed for lightering and HRC loading at BFL. 700 ton barges are 2000 ton barges are allowed for lightering and HRC loading at BFL. 700 ton barges are not operated during monsoon season for lightering.not operated during monsoon season for lightering.

Anchorage location depend on such variables as capacity of ship that can be Anchorage location depend on such variables as capacity of ship that can be handled, availability of anchorage, lighterage and HRC loading dues payable to port handled, availability of anchorage, lighterage and HRC loading dues payable to port etc;etc;

Tide dependent water level in the creek that constraints the smooth movement of Tide dependent water level in the creek that constraints the smooth movement of barges in the creek.barges in the creek.

Contd….Contd….

The important constraints are:The important constraints are: The poor condition of sea during the monsoon season and consequential ship The poor condition of sea during the monsoon season and consequential ship

movement, availability of anchorages, ship unloading, barge movement and movement, availability of anchorages, ship unloading, barge movement and unloading restrictions.unloading restrictions.

Crossing and parallel barge movement restrictions in the creek due to sharp Crossing and parallel barge movement restrictions in the creek due to sharp turnings. turnings.

Movement restrictions of barges through the creek during night. Movement restrictions of barges through the creek during night.

Pilot requirement for barges and their availability.Pilot requirement for barges and their availability.

Use of only 2800 ton and 2000 ton barges for the HRC export due to safety Use of only 2800 ton and 2000 ton barges for the HRC export due to safety requirements.requirements.

Long term leasing of barges.Long term leasing of barges.

The ObjectivesThe Objectives The methodology for solving hierarchical decision making The methodology for solving hierarchical decision making

problems is applied to solve the following strategic, tactical and problems is applied to solve the following strategic, tactical and operational logistics problems. operational logistics problems.

Strategic ProblemsStrategic Problems To analyze the impact of dredging the river to different depths on the average annual lighterage and HRC To analyze the impact of dredging the river to different depths on the average annual lighterage and HRC

loading cost per ton. [Once in few years].loading cost per ton. [Once in few years].

To analyze the impact of locating the plant jetty at different distance from the sea on average annual To analyze the impact of locating the plant jetty at different distance from the sea on average annual lighterage HRC loading cost per ton[One time decision].lighterage HRC loading cost per ton[One time decision].

To choose the best strategy for lightering and HRC loading, from amongst available options. The options To choose the best strategy for lightering and HRC loading, from amongst available options. The options including use of only 2800 ton barges or both 2800 and 2000 ton barges for export and import. [Once in including use of only 2800 ton barges or both 2800 and 2000 ton barges for export and import. [Once in few years]few years]

To evaluate the economics of the following options [Once in few years]:To evaluate the economics of the following options [Once in few years]:

Having a floating crane at BFL,Having a floating crane at BFL, Having a Floating crane at BFL with a Storage Vessel,Having a Floating crane at BFL with a Storage Vessel, Saving in cost per ton with dredging of the creek, and Saving in cost per ton with dredging of the creek, and Having a dedicated anchorage at JNPT. Having a dedicated anchorage at JNPT.

Tactical ProblemsTactical Problems To decide the optimum (minimum annual total cost) quantity of raw To decide the optimum (minimum annual total cost) quantity of raw

materials to bring to the plant in each month of the year taking into materials to bring to the plant in each month of the year taking into account the production requirement, inventory levels at the site, price of account the production requirement, inventory levels at the site, price of raw materials, handling cost, carrying cost and handling constraints in raw materials, handling cost, carrying cost and handling constraints in monsoon and fair weather.[Decision once a year]monsoon and fair weather.[Decision once a year]

To decide the optimum barge mix to hire for lightering and HRC loading To decide the optimum barge mix to hire for lightering and HRC loading operations with or without back-to-back supply of raw material and operations with or without back-to-back supply of raw material and finished goods. These barges have to be hired for long term (one year for finished goods. These barges have to be hired for long term (one year for larger (2880 ton, and 2000 ton) barges and eight months for smaller larger (2880 ton, and 2000 ton) barges and eight months for smaller barges of 700 ton and 1000 ton). [Decision once a year]barges of 700 ton and 1000 ton). [Decision once a year]

To decide the best ship size to hire from each of the load ports that To decide the best ship size to hire from each of the load ports that minimizes the total relevant cost.[Decision once a month as hire charges minimizes the total relevant cost.[Decision once a month as hire charges of ships change]of ships change]

Contd….Contd….

Tactical ProblemsTactical Problems

To generate a schedule for movement of the material To generate a schedule for movement of the material from a load port to the destination anchorage by ships of from a load port to the destination anchorage by ships of the most economic size, for known monthly supply of raw the most economic size, for known monthly supply of raw materials from the load port. [Monthly decision]materials from the load port. [Monthly decision]

Develop a model to evaluate each set of ship hiring Develop a model to evaluate each set of ship hiring alternatives for the month and their laycan schedules to alternatives for the month and their laycan schedules to help select the best set of ships for the month taking care help select the best set of ships for the month taking care of the possible shortage of ships of most economic size of the possible shortage of ships of most economic size from a load port.[Monthly decisionfrom a load port.[Monthly decision].].

Operational ProblemsOperational Problems

To optimally schedule the barges for To optimally schedule the barges for lightering of ships at sea and loading of lightering of ships at sea and loading of HRC to export ships. [HRC to export ships. [Daily activityDaily activity].].

Important Hierarchical Decisions Problems of Inbound Raw Material Logistics

LevelNature of Decision

Time Horizon

Frequency of Revision

Problems ModelsDecision

Maker

I StrategicSeveral Years

Annual

Source selection for raw materials

Economic evaluation

Top Management

Vessel size selection

Simulation and economic evaluation

Jetty LocationSimulation and economic evaluation

Dredging of creek


Barge mix selection


Middle Management

Important Hierarchical Decisions Problems of Inbound Raw Material Logistics

II TacticalOne year

Monthly

Procurement Planning

Linear programming

Middle Management

Ship scheduling

SchedulingLogistics Manager

III OperationalOne

monthDaily

Barge scheduling

Simulation and Scheduling

Barge Master

Simulation models have been used to evaluate the operational level performance of a strategic/tactical alternative

The composite modeling approach (CMA)The composite modeling approach (CMA)

Study the problem at hand in detail and decompose into different sub-problems.Study the problem at hand in detail and decompose into different sub-problems. Identify the decision variables involved in each sub problems. Specially, Identify the decision variables involved in each sub problems. Specially,

examine the spatial and temporal dimensions of the sub problems.examine the spatial and temporal dimensions of the sub problems. Study each of these decision variables; find out the frequency at which decision Study each of these decision variables; find out the frequency at which decision

regarding them have to be taken, and who is responsible of taking the decision regarding them have to be taken, and who is responsible of taking the decision at which place.at which place.

Group the decisions. Decisions with identical frequency, place and decision Group the decisions. Decisions with identical frequency, place and decision maker are grouped into one.maker are grouped into one.

Take the longest-range (lowest frequency) decision problem first, study the Take the longest-range (lowest frequency) decision problem first, study the decision variables involved. Develop and validate an appropriate model or a set decision variables involved. Develop and validate an appropriate model or a set of models to support decisions on that problem.of models to support decisions on that problem.

Repeat step (e) with the next lowest range decision problem for developing Repeat step (e) with the next lowest range decision problem for developing model(s) or decision support. Additional available information and the model(s) or decision support. Additional available information and the constraints imposed by the long-range decisions are explicitly considered in constraints imposed by the long-range decisions are explicitly considered in model (or DSS) development. model (or DSS) development.

The models may be connected (integrated) by input/output amongst themselves The models may be connected (integrated) by input/output amongst themselves and by input/output from the environment.and by input/output from the environment.

MethodologyMethodology Conduct a detailed study of the present and proposed system to understand all the Conduct a detailed study of the present and proposed system to understand all the

details about different subsystems, operations, movements, and constraints.details about different subsystems, operations, movements, and constraints.

Decompose into appropriate sub-problems. Identify decision variables and its spatial Decompose into appropriate sub-problems. Identify decision variables and its spatial and temporal dimensions peculiar to each of the sub problems.and temporal dimensions peculiar to each of the sub problems.

Collect relevant data from the existing SIP and modify them suitably to suit to the Collect relevant data from the existing SIP and modify them suitably to suit to the Proposed Integrated Steel Plant.Proposed Integrated Steel Plant.

Develop two a simulation models one for the ship lightering and the other for finished Develop two a simulation models one for the ship lightering and the other for finished goods loading operations. The models simulate unloading of raw materials from the goods loading operations. The models simulate unloading of raw materials from the ships and loading of HR Coils into export ships, transport through barges of raw ships and loading of HR Coils into export ships, transport through barges of raw materials from ships to jetty and HR coils from HR jetty to ships, and loading and materials from ships to jetty and HR coils from HR jetty to ships, and loading and unloading of barges. The models specifically takes the random variations in ships unloading of barges. The models specifically takes the random variations in ships lightering and HRC loading, barge movement, barge unloading and loading times and lightering and HRC loading, barge movement, barge unloading and loading times and draft restrictions into consideration. Develop a third model to simulate the unloading of draft restrictions into consideration. Develop a third model to simulate the unloading of raw materials from incoming ships, their transport to plant jetty, unloading of materials raw materials from incoming ships, their transport to plant jetty, unloading of materials from barges to cross country conveyors and back-to-back integrated supply of HRC for from barges to cross country conveyors and back-to-back integrated supply of HRC for export.export.

MethodologyMethodology Develop a LP model to determine the quantity of raw material to bring to the plant in each Develop a LP model to determine the quantity of raw material to bring to the plant in each

of the 12 months to minimize the annual cost of procurement, handling and storage. Such of the 12 months to minimize the annual cost of procurement, handling and storage. Such an approach is essential as the handling capacity is season dependent (less in monsoon) an approach is essential as the handling capacity is season dependent (less in monsoon) where as the plant requirements are independent of the season.where as the plant requirements are independent of the season.

Develop a Spread sheet based economic model to find the best ship sizes to hire from Develop a Spread sheet based economic model to find the best ship sizes to hire from different load ports. different load ports.

Develop simulation based optimization models to evaluate the different operational Develop simulation based optimization models to evaluate the different operational strategies of using barges for both import of raw materials and export of HRC. The model strategies of using barges for both import of raw materials and export of HRC. The model considers the options of with and without back-to-back integration. The model for the best considers the options of with and without back-to-back integration. The model for the best option obtained above is used to find the optimum barge mix to be hired for the year. option obtained above is used to find the optimum barge mix to be hired for the year.

For known ship arrival schedules, develop a barge mix optimization model. For a given For known ship arrival schedules, develop a barge mix optimization model. For a given barge mix ship lightering and HRC loading simulation model is used to estimate the barge mix ship lightering and HRC loading simulation model is used to estimate the expected annual lighterage and HRC export volume and lightering and HRC loading cost expected annual lighterage and HRC export volume and lightering and HRC loading cost per ton. From amongst the feasible barge mixes, the one that gives lowest cost per ton is per ton. From amongst the feasible barge mixes, the one that gives lowest cost per ton is selected. The annual lighterage and HRC export volume includes the total raw materials selected. The annual lighterage and HRC export volume includes the total raw materials and finished goods handled by the barges. and finished goods handled by the barges.

MethodologyMethodology Develop a model for evaluation of multiple ship schedules obtained by the shipping manager for Develop a model for evaluation of multiple ship schedules obtained by the shipping manager for

hiring of ships from load ports for movement of raw material, to help select the best schedule for hiring of ships from load ports for movement of raw material, to help select the best schedule for every month. This software tries to schedule the minimum cost ship from each port. It takes into every month. This software tries to schedule the minimum cost ship from each port. It takes into consideration the number of ships that have to come from a load port and spreads their arrival at consideration the number of ships that have to come from a load port and spreads their arrival at BFL/BPT/JNPT as evenly as possible during the period to avoid bunching and consequential BFL/BPT/JNPT as evenly as possible during the period to avoid bunching and consequential detention charges. It also takes into account the barge mix available for lightering and HRC loading detention charges. It also takes into account the barge mix available for lightering and HRC loading during the period and the tide restrictions. The result from this software is a schedule showing when during the period and the tide restrictions. The result from this software is a schedule showing when a ship should report at the load port and when it would reach Bombay and when it is expected to a ship should report at the load port and when it would reach Bombay and when it is expected to leave Bombay after lightering with or without HRC for export.leave Bombay after lightering with or without HRC for export.

Develop a scheduling model to generate the daily schedule for movement of barges for lightering of Develop a scheduling model to generate the daily schedule for movement of barges for lightering of raw materials and loading of HRC ships from and into available at different anchorage for raw materials and loading of HRC ships from and into available at different anchorage for unloading/loading. The model explicitly takes into account the draft restrictions in the creek, night unloading/loading. The model explicitly takes into account the draft restrictions in the creek, night navigation restrictions, available loading gears in the ship, unloading facilities available at the ships navigation restrictions, available loading gears in the ship, unloading facilities available at the ships and at the jetty etc. The model generates the schedule for each of the barges. The schedule for and at the jetty etc. The model generates the schedule for each of the barges. The schedule for export loading of HR Coils is also generated.export loading of HR Coils is also generated.

Use the simulation model to evaluate the lighterage and HRC loading cost advantage in going for Use the simulation model to evaluate the lighterage and HRC loading cost advantage in going for dredging the creek up to various depths.dredging the creek up to various depths.

Use the simulation model to find the effect of various jetty locations on the average lightering and Use the simulation model to find the effect of various jetty locations on the average lightering and HRC loading cost per ton.HRC loading cost per ton.

Inputs to LP Model Corporate monthly production plan, Feed mix plan, Raw material costs, Raw

material sources, Mode of transport from each source,Safety stock requirements, Unloading and storage constraints, Maximum availability etc.

Use a Linear Programming Model to arrive at the optimum monthly purchase plan for the

whole financial year

Use the spread sheet model to determine the least cost ship to hire from each load port

Market forces like:Availability of ships, availability of material,

least cost ship from a load port, giving number of ships of each size to hire

from a load port in a monthUse the barge mix optimization model to find the

optimum barge mix to hire for the year for ship lightering and loading export ships

Market forces like availability of Barges resulting in :

Actual barge mix hired

Use the monthly ship scheduling and ship schedule evaluation models to determine the

laycan schedule of the ships to hire from different load ports in a given future month

Details of actual raw material ship arrival, details of actual export ship available, deatils of

anchorage locations, and actual barges available on a day

Use the daily barge scheduling model to make the daily schedule of the Barges operating to lighter the raw material ships and

loading HRC export ships at different anchorage locations

Output from LP modeloptimum monthly

procutement plan from each source

Without back-to-back supply: Number of barges available for

import and export

With back-to-back supply:Total number of barges available

for import and export

Details of Import material and Export

materials

Models used for Raw Material and Finished Goods Logistics System

Least Cost Ship Size from each Load Port Optimum ship sizes for different load ports

Load Port Ship Size and Cost/ton

Goa MBC’s of 2800 T at Rs.135.57/ ton

Mangalore MBC’s of 2800 T at Rs.177.43/ton

Vizag 30,000 to 35,000 T at Rs.269.35/ton

Orissa 30,000 to 35,000 T at Rs.279.39/ton

Bahrain 30,000 to 35,000 T at Rs.281.32/ton

South Africa 30,000 to 35,000 T at Rs.349.60/ton

Brazil 65,000 T at Rs.460.33/ton

The LP Model for Making the The LP Model for Making the Annual Procurement PlanAnnual Procurement Plan

The model gives the following the optimum results The model gives the following the optimum results Optimum monthly procurement/arrival of each raw Optimum monthly procurement/arrival of each raw

material source-wise and quantity,material source-wise and quantity, Total Raw material by each routeTotal Raw material by each route Stock of each materials at the end of each month,Stock of each materials at the end of each month, Total cost of SIP raw materials,Total cost of SIP raw materials, Total cost of BF raw materials,Total cost of BF raw materials, Total cost of SMS raw materials, andTotal cost of SMS raw materials, and Total cost of all raw materials.Total cost of all raw materials.

Interpretations- LP modelInterpretations- LP model lesser amount of material can be brought in during the monsoon, it is lesser amount of material can be brought in during the monsoon, it is

necessary to build up the stock for various raw materials much before necessary to build up the stock for various raw materials much before the monsoon for consumption during the period. the monsoon for consumption during the period.

In order to reduce the carrying cost on such inventory build up, it is best In order to reduce the carrying cost on such inventory build up, it is best to build up the inventories of the less costly raw materials first. to build up the inventories of the less costly raw materials first.

The unloading capacity during monsoon could then be used for bringing The unloading capacity during monsoon could then be used for bringing in more of the expensive raw materials thus decreasing the total in more of the expensive raw materials thus decreasing the total inventory carrying cost. inventory carrying cost.

For example, lumps inventory is to be built up during the period from For example, lumps inventory is to be built up during the period from January to April to cater to the needs during monsoon. January to April to cater to the needs during monsoon.

The unloading capacity during the monsoon could then be utilized for The unloading capacity during the monsoon could then be utilized for unloading more of pellets and coke. unloading more of pellets and coke.

This will decrease the total carrying cost since pellets and coke are more This will decrease the total carrying cost since pellets and coke are more costly compared to lumps and therefore carrying it for a shorter duration costly compared to lumps and therefore carrying it for a shorter duration decreases carrying cost.decreases carrying cost.

The ship Lightering Simulation ModelThe ship Lightering Simulation Model

The optimum barge mix selection model - The optimum barge mix selection model - assumptions: assumptions:

There are two barge unloaders and one barge loader/unloader available. The unloaders can There are two barge unloaders and one barge loader/unloader available. The unloaders can only unload cargo, using grabs from barges bringing in raw materials. The loader/unloader only unload cargo, using grabs from barges bringing in raw materials. The loader/unloader cannot only unload imported raw materials from barges, it can also load HRC for export into cannot only unload imported raw materials from barges, it can also load HRC for export into barges. The grabs have to be changed for this purpose and this takes four hours.barges. The grabs have to be changed for this purpose and this takes four hours.

Three barges can be berthed at the jetty for loading/ unloading at any given time.Three barges can be berthed at the jetty for loading/ unloading at any given time.

Only the MBCs (Mini Bulk Carrier) that is 2800 ton and 2000 ton barges are allowed to be used Only the MBCs (Mini Bulk Carrier) that is 2800 ton and 2000 ton barges are allowed to be used for export of HRC.for export of HRC.

700 ton and 1000 ton barges are not allowed to BFL for lightering.700 ton and 1000 ton barges are not allowed to BFL for lightering.

All barges except the 700 ton barges are hired for whole year. 700 ton barges are hired for All barges except the 700 ton barges are hired for whole year. 700 ton barges are hired for only eight months of fair weather season. only eight months of fair weather season.

Enough HRC for export is available at the jetty whenever it is wanted.Enough HRC for export is available at the jetty whenever it is wanted.

The export requirement of HRC is 75,000 ton per month in both fair weather and in monsoonThe export requirement of HRC is 75,000 ton per month in both fair weather and in monsoon ..

Optimum barge mix selection modelOptimum barge mix selection model

Without back-to-back IntegrationWithout back-to-back Integration (Independent (Independent Barges for Import and Export)Barges for Import and Export)

Option I:Option I: All the 2800 ton barges available in the fleet will be used All the 2800 ton barges available in the fleet will be used exclusively for export of HRC whenever export ships are available. exclusively for export of HRC whenever export ships are available. At times when no ships for export are waiting the 2800 ton MBCs At times when no ships for export are waiting the 2800 ton MBCs are used for lightering ships with raw materials.are used for lightering ships with raw materials.

Option II:Option II: Some of the 2800 ton barges will be exclusively used for Some of the 2800 ton barges will be exclusively used for export of HRC whenever export ships are available. During these export of HRC whenever export ships are available. During these times a loader will be exclusively used for loading HRC for export. times a loader will be exclusively used for loading HRC for export. At times when no ships for export are waiting the 2800 ton MBCs At times when no ships for export are waiting the 2800 ton MBCs are used for lightering ships with raw are used for lightering ships with raw


Option III:Option III: All the 2800 ton and 2000 ton barges available All the 2800 ton and 2000 ton barges available in the fleet will be used exclusively for export of HRC in the fleet will be used exclusively for export of HRC whenever export ships are available. At times when no whenever export ships are available. At times when no ships for export are waiting the 2800 ton MBCs and 2000 ships for export are waiting the 2800 ton MBCs and 2000 ton ISVs are used for lightering ships with raw materials.ton ISVs are used for lightering ships with raw materials.

Option IV:Option IV: Some of the 2800 ton and 2000 ton barges Some of the 2800 ton and 2000 ton barges will be exclusively used for export of HRC whenever export will be exclusively used for export of HRC whenever export ships are available. At times when no ships for export are ships are available. At times when no ships for export are waiting the 2800 ton MBCs and 2000 ton ISVs are used for waiting the 2800 ton MBCs and 2000 ton ISVs are used for lightering ships with raw materials. The rest of the barges lightering ships with raw materials. The rest of the barges will be used only for lightering of raw materials.will be used only for lightering of raw materials.

With Back-to-Back Integration With Back-to-Back Integration

Option V:Option V: All the 2800 ton barges available in the fleet are used for both export All the 2800 ton barges available in the fleet are used for both export and import. The barges will carry HRC for export when sailing out from the jetty, and import. The barges will carry HRC for export when sailing out from the jetty, they will reach the export ship, have the HRC unloaded and proceed to the ships they will reach the export ship, have the HRC unloaded and proceed to the ships with import cargo waiting to be lightered. It will bring back to the jetty raw with import cargo waiting to be lightered. It will bring back to the jetty raw material lightered from the import ship. Thus the forward and return trips made material lightered from the import ship. Thus the forward and return trips made will both be loaded.will both be loaded.

Option VI:Option VI: Some of the 2800 ton barges available in the fleet will be used for Some of the 2800 ton barges available in the fleet will be used for both export and import. These barges will carry HRC for export when sailing out both export and import. These barges will carry HRC for export when sailing out from the jetty. They will reach the export ship, have the HRC unloaded and from the jetty. They will reach the export ship, have the HRC unloaded and proceed to the ships with import cargo waiting to be lightered. They will bring proceed to the ships with import cargo waiting to be lightered. They will bring back to the jetty raw material lightered from the import ship. Thus the forward back to the jetty raw material lightered from the import ship. Thus the forward and return trips of these two barges will be fully loaded. The rest of the barges and return trips of these two barges will be fully loaded. The rest of the barges will be engaged in lightering of raw materials. will be engaged in lightering of raw materials.


Option VII:Option VII: All the 2800 ton and 2000 ton barges available in the fleet All the 2800 ton and 2000 ton barges available in the fleet will be used for both export and import at all times. The barges will will be used for both export and import at all times. The barges will carry HRC for export when sailing out from the jetty. They will reach carry HRC for export when sailing out from the jetty. They will reach the export ship, have the HRC unloaded and proceed to the ships with the export ship, have the HRC unloaded and proceed to the ships with import cargo waiting to be lightered. They will bring back to the jetty import cargo waiting to be lightered. They will bring back to the jetty raw material lightered from the import ship. Thus the forward and raw material lightered from the import ship. Thus the forward and return trips made will both be loaded for these barges.return trips made will both be loaded for these barges.

Option VIII:Option VIII: Some of the 2800 ton and 2000 ton barges available in the Some of the 2800 ton and 2000 ton barges available in the fleet will be used for both export and import at all times. The barges fleet will be used for both export and import at all times. The barges will carry HRC for export when sailing out from the jetty, they will will carry HRC for export when sailing out from the jetty, they will reach the export ship, have the HRC unloaded and proceed to the reach the export ship, have the HRC unloaded and proceed to the ships with import cargo waiting to be lightered. It will bring back to ships with import cargo waiting to be lightered. It will bring back to the jetty raw material lightered from the import ship. Thus the forward the jetty raw material lightered from the import ship. Thus the forward and return trips made will both be loaded.and return trips made will both be loaded.

The total cost for lightering and The total cost for lightering and HRC loadingHRC loading

Ship hire cost for unloading days for the raw material Ship hire cost for unloading days for the raw material ships.ships.

Ship hire cost for the HRC export ship for loading days.Ship hire cost for the HRC export ship for loading days. Port charges payable to the Port for the volume of cargo Port charges payable to the Port for the volume of cargo

loaded or unloaded. loaded or unloaded. The daily hire charges to be paid to all the barges.The daily hire charges to be paid to all the barges. The charges for fuel etc payable per trip to barges. The charges for fuel etc payable per trip to barges. Warfage and Stevedoring charges payable for the day.Warfage and Stevedoring charges payable for the day.

The Results of Experiments on Barge Mix Optimization Model for Lightering and HRC loading Operations with

Various OptionsB1 –2800, B2 – 2000, B3 – 1000, and B4 – 700 ton Barges

OptionModel

Barges engaged for export

Barges with back-to-back integration

Optimum Barge mix of

B1,B2,B3,B4 Maximum Tons per Annum

Average cost per

ton (Rs/ton)

Feasibility (Yes/No)

B1 B2 B1 B2 B1 B2 B3 B4

Without back-to-back supply

II 2 0 0 0 3 4 2 2 4496012 217.32 Yes

IV 2 2 0 0 4 4 3 4 3684012 245.53 No

With back-to-back supply

V All 0 All 0 2 4 2 2 4692012 192.11 Yes

VI 2 0 2 0 2 4 2 2 4692012 192.11 Yes

*VII All All All All 2 2 5 5 213012 605.47 No

VIII 2 2 2 2 2 6 3 4 5542412 161.18 Yes

* Infeasible

Sensitivity AnalysisSensitivity AnalysisLighterage and HRC Loading Cost/ton when using Various Combination of 2800 and 2000 ton Barges

(B1 –2800, B2 – 2000, B3 – 1000, and B4 – 700 ton Barges)Barges with back-to-

back integratedOptimum Barge mix

Tons per Annum

Average cost Rs/ton

B1 B2 B1 B2 B3 B4

2 2 2 5 4 2 5542412 161.18

2 3 2 6 3 4 5651212 161.52

3 2 3 6 2 4 5719212 163.32

3 3 3 6 6 4 5726012 167.60

3 4 3 5 2 4 5427212 177.91

2 4 3 5 4 4 5623212 166.99

2 5 2 6 3 3 5328812 174.81

4 4 5 5 5 2 5747612 173.35

AssumptionsAssumptions Two of the 2800ton barges available in the fleet will be used only for export of HRC whenever Two of the 2800ton barges available in the fleet will be used only for export of HRC whenever

export ships are available. export ships are available.

All the 2800 ton barges available in the fleet will be used for both export and import at all times. All the 2800 ton barges available in the fleet will be used for both export and import at all times.

Two of the 2800 ton barges available in the fleet will be used for both export and import at all times. Two of the 2800 ton barges available in the fleet will be used for both export and import at all times.

Two of the 2800-ton and two of the 2000-ton barges available in the fleet will be used only for Two of the 2800-ton and two of the 2000-ton barges available in the fleet will be used only for export of HRC whenever export ships are available. export of HRC whenever export ships are available.

All the 2800 ton and 2000 ton barges available in the fleet will be used for both export and import at All the 2800 ton and 2000 ton barges available in the fleet will be used for both export and import at all times. all times.

Two of the 2800-ton and two of the 2000 ton barges available in the fleet will be used for both Two of the 2800-ton and two of the 2000 ton barges available in the fleet will be used for both export and import at all times export and import at all times

All the2800 ton barges available in the fleet will be used exclusively for export of HRC whenever All the2800 ton barges available in the fleet will be used exclusively for export of HRC whenever export ships are available. export ships are available.

All the2800 ton and 2000 ton barges available in the fleet will be used exclusively for export of HRC All the2800 ton and 2000 ton barges available in the fleet will be used exclusively for export of HRC whenever export ships are available.whenever export ships are available.

Results from Model with two barges each of 2800 ton and 2000 ton in export and import circuit.

B1-2800 ton Barge,B2-2000 ton Barge,B3-1000 ton Barge,B4-700 ton Barge. Cost/per ton means average raw material Lightering and HRC loading cost per ton)

Barges Fair Weather Monsoon Weather Annual

B1 B2 B3 B4 Ton/Mth Cost/ton Ton/Mth Cost/ton Ton/year Cost/ton

2 5 4 2 505901 167.03 373801 149.49 5542412 161.18

2 5 5 4 506101 168.08 373801 150.94 5544012 162.37

3 6 2 4 530101 165.29 372901 158.81 5732412 163.13

2 5 6 4 509451 168.55 372801 152.60 5566812 163.23

3 6 2 3 528801 165.53 372901 158.81 5722012 163.29

2 5 6 3 506801 169.02 372801 152.60 5545612 163.55

3 4 4 2 506001 170.45 373901 154.13 5543612 165.01

The results from experiments of barge-lightering model with various options

(B1 –2800t, B2 – 2000t, B3 – 1000t, and B4 – 700t Barges , Values in ‘( )’ gives the Monsoon weather value)

OPTION

Opt. Barge mix B1,B2,B3,B4 Fair-weather

ton (Monsoon tons)

Tons per Annum

Average cost per ton Rs/ton

B1B2

B3 B4

All 2800 t Export and Import

2 4 2 2398251

(376501)4692012 192.11

2 nos. 2800 t Export 3 4 2 2396751

(330501)4496012 217.32

TWO 2800 t Export and Import

2 4 2 2398251

(376501)4692012 192.11

All 2800 t and 2000 t Export and Import

2 2 5 5112501

(210001)1740012

Cost very high at Rs 605.47 Ton

2 nos. 2800 t and 2 nos. 2000 t Export

4 4 3 4329201

(262601)3684012 245.53

2 nos. 2800 t and 2 nos. 2000 t Export and

Import2 6 3 4

505901 (373801))

5542412 161.18

Effect of Locating the Plant Jetty at Effect of Locating the Plant Jetty at Different Distances from the SeaDifferent Distances from the Sea

B1-2800T Barge,B2-2000T Barge,B3-1000T Barge,B4-700T Barge

Sl. No.Distance of Jetty from

the Sea (in KM)

Best Barge MixLighterage Cost in

Rupees/TonB1 B2 B3 B4

1 5 KM 5 4 0 0 102.23

2 10 KM 4 5 1 0 124.51

3 15 KM 4 5 1 0 126.87

4 20 KM 3 6 2 1 162.59

5 25 KM 3 4 4 2 185.64

6 30 KM 3 3 5 6 225.32

Effect of Locating the Plant Jetty at Effect of Locating the Plant Jetty at Different Distances from the SeaDifferent Distances from the Sea

If the savings due to reduced annual lighterage cost is more than If the savings due to reduced annual lighterage cost is more than

the annual cost of transportation of materials from the new the annual cost of transportation of materials from the new

location to the plant, the new location of the jetty may be seriously location to the plant, the new location of the jetty may be seriously

considered. An alternative to the location may be imperative, considered. An alternative to the location may be imperative,

particularly when the congestion in the river increases due to particularly when the congestion in the river increases due to

higher movement of bulk materials for the proposed integrated higher movement of bulk materials for the proposed integrated

steel plant of the company and other industrial units that are steel plant of the company and other industrial units that are

coming up in the area.coming up in the area.

Effect of Dredging the Creek on Lighterage Effect of Dredging the Creek on Lighterage CostCost

The movement of the barges in the river is tide constrained. The movement of the barges in the river is tide constrained.

The tide height in the creek varies from a high of 5 meters to a low of 0.6 meters above the Chart Datum at the The tide height in the creek varies from a high of 5 meters to a low of 0.6 meters above the Chart Datum at the highest of the high tides and at the lowest of low tides respectively. highest of the high tides and at the lowest of low tides respectively.

The actual ground level in the creek varies from 0.8 to 9 Meters below the Chart Datum. The actual ground level in the creek varies from 0.8 to 9 Meters below the Chart Datum.

The draft requirement for the loaded barges varies from 3.8 meters to 2.0 meters. The draft requirement for the loaded barges varies from 3.8 meters to 2.0 meters.

The draft required for empty barges varies from 2.2 meters to 0.8 meters.The draft required for empty barges varies from 2.2 meters to 0.8 meters. A safety clearance of 0.5 meters from the ground is also required in addition to the minimum draft essential for A safety clearance of 0.5 meters from the ground is also required in addition to the minimum draft essential for

sailing. sailing.

One way of making barge movement less restrictive is to dredge the creek. One way of making barge movement less restrictive is to dredge the creek.

Dredging increases the depth of the channel below the chart datum and makes additional draft available for Dredging increases the depth of the channel below the chart datum and makes additional draft available for sailing of the barges at any given time sailing of the barges at any given time

This is expected to bring down the lightering time of ships as the navigation will be less dependent on tides.This is expected to bring down the lightering time of ships as the navigation will be less dependent on tides.

Effect of Dredging the Creek on Effect of Dredging the Creek on Lighterage CostLighterage Cost

(B1 –2800t, B2 – 2000t, B3 – 1000t, and B4 – 700t Barges)

Depth of Dredging in M.

Opt. Barge mix B1,B2,B3,B4

Fair-weather ton (Monsoon tons)

Tons per Annum

Average cost per ton Rs/ton

0 2,5,4,2 505901 (373801) 5542412 161.18

0.5 3,6,3,2 512810 (376901) 5610012 157.94

1.0 3,3,4,2 527201 (377901) 5718012 157.52

1.5 2,3,4,6 529651 (378901) 5764122 157.33

2.0 3,3,2,6 530451 (379301) 5781212 157.24

ObservationsObservations The maximum reduction in lighterage cost/ton for two meters of dredging is about rupees four per ton. The maximum reduction in lighterage cost/ton for two meters of dredging is about rupees four per ton.

This could result in savings averaging around rupees twenty millions per annum. This could result in savings averaging around rupees twenty millions per annum.

This information will have to be used by the management to find the payback period of any investment This information will have to be used by the management to find the payback period of any investment

in dredging and take an appropriate decision in the matter. in dredging and take an appropriate decision in the matter.

Another factor to be noted is that with about 0.5 meter of dredging more than three rupees of savings Another factor to be noted is that with about 0.5 meter of dredging more than three rupees of savings

in lighterage cost is achieved. in lighterage cost is achieved.

Therefore deciding the most economical depth of dredging is also of great importance, for which the Therefore deciding the most economical depth of dredging is also of great importance, for which the

information in Table 6.7 can be used. information in Table 6.7 can be used.

Since, cost of dredging is very high compared to the saving in lightering cost, the company alone can’t Since, cost of dredging is very high compared to the saving in lightering cost, the company alone can’t

do the dredging at present. do the dredging at present.

It may be, however, considered later when the traffic volume in the creek increases due to the It may be, however, considered later when the traffic volume in the creek increases due to the

integrated steel plant and other units that are coming up along the banks of the Dharmatar river. integrated steel plant and other units that are coming up along the banks of the Dharmatar river.

At that time by forming a confederation of creek user industries, one can seriously consider dredging At that time by forming a confederation of creek user industries, one can seriously consider dredging

option.option.

The Monthly Ship Scheduling ModelThe Monthly Ship Scheduling ModelThis is the plan for hiring ships for a month

Load port Laycan ReportReport at Load port

At BombayLeave

Bombay

Bahrain 20.4.07 - 30.4.07 25.4.07 02.5.07 04.5.07

Vizag 24.4.07 - 04.5.07 29.4.07 07.5.07 10.5.07

Mangalore 02.5.07 - 12.5.07 07.5.07 11.5.07 14.5.07

Vizag 02.5.07 - 12.5.07 07.5.07 15.5.07 17.5.07

Paradeep 06.5.07 - 16.5 07 11.5.07 20.5.07 23.5.07

S. Africa 03.5.07 - 13.5.07 08.5.07 24.5.07 28.5.07

Vizag 16.5.07 - 26.5.07 21.5.07 29.5.07 01.6.07

Daily Barge Scheduling ModelDaily Barge Scheduling ModelThe schedule for a Barge by the name : Mastya RaniThe schedule for a Barge by the name : Mastya Rani

Date Time Activity Ship Name

11.5.07 10.57 Start loading barge Sagar Kanya

11.5.07 14.27

End of loading Sagar Kanya

11.5.07 16.57

Full barge reaches gull Sagar Kanya

11.5.07 19.44

Start through creek loaded Sagar Kanya

11.5.07 21.49

Reach the jetty loaded Sagar Kanya

11.5.07 21.49

Start unloading at brth1 Sagar Kanya

12.5.07 01.09

End unloading at brth1 Sagar Kanya

12.5.07 01.29

Start loading HRC at brth3 Krishna Sagar

12.5.07 03.29 End of loading at brth3 Krishna Sagar

12.5.07 07.29 Start through creek to gull Krishna Sagar

12.5.07 09.34 Reach gull Krishna Sagar

12.5.07 11.59 Reach export ship Krishna Sagar

Results from Model where only 2800 ton and 2000 ton Barges are allowed to BFL

(B1 –2800, B2 – 2000, B3 – 1000, and B4 – 700 ton Barges)

Percentage

Lightering at BFL

Creek was not Dredged No Tide restriction 1 meter dredged

creek 0.5 m dredged creek

Cost per ton

Opt. Barge Mix

(B1,B2.B3,B4)

Cost per ton

Opt. Barge Mix

(B1,B2.B3,B4)

Cost per ton

Opt. Barge Mix

(B1,B2.B3,B4)

Cost per ton

Opt .Barge Mix

(B1,B2.B3,B4)

100 186 2,6,0,0 171 2,5,0,0 173 2,5,0,0 176 2,5,0,0

75 169 2,5,2,0 156 1,5,4,0 157 1,6,4,0 158 1,6,3,0

50 156 2,5,2,0 143 0,6,4,1 144 1,5,4,0 145 1,6,3,0

25 163 2,5,3,0 150 0,5,5,0 152 1,6,4,0 154 1,6,3,1

0 170 1,5,3,2 159 0,5,6,0 160 0,5,5,1 162 0,5,6,0

Results from Model where only 2800 ton Barges are allowed to BFL

(B1- 2800 , B2 – 2000, B3 – 1000, B4 – 700 ton Barges)

Percentage

lightering at BFL

Creek was not dredged

No Tide restriction 1 meter dredged creek

0.5 dredged creek

Cost per ton

Opt. Barge Mix (B1, B2,

B3, B4)

Cost per ton


B3, B4)

Cost per ton


B3, B4)

Cost per ton

Opt. Barge Mix (B1, B2, B3,

B4)

100 225 7,0,0,0 200 6,0,0,0 205 7,0,0,0 208 7,0,0,0

76 207 6,0,2,0 186 5,2,0,0 189 6,1,1,0 195 6,1,1,0

50 198 4,2,1,0 183 4,3,0,0 185 4,3,0,0 186 4,2,1,0

25 181 3,3,2,0 168 3,5,0,0 170 3,5,0,0 172 3,4,1,0

0 170 1,5,3,2 159 0,5,6,0 160 0,5,5,1 162 0,5,6,0

Results from Model with Floating Crane and 100 percent Lightering in fair weather at BFL

(B1 –2800 , B2 – 2000, B3 – 1000, and B4 – 700 ton Barges)

No. of barges at Ship


No tide restriction1 meter dredged

creek0.5 meter dredged

creek

Cost per ton

Opt. Brage mix

(B1,B2,B3,B4)

Cost per ton

Opt. Brage mix

(B1,B2,B3,B4)

Cost per ton

Opt. Brage mix

(B1,B2,B3,B4)

Cost per ton

Opt. Brage mix

(B1,B2,B3,B4)

Option I Only 2800 ton and 2000t ton Barges are allowed to BFL for Lightering and HRC loading

1 barge 198 2,5,0,0 179 3,5,0,0 180 3,5,0,0 182 2,5,0,0

2 barges 184 2,6,0,0 172 3,5,0,0 173 3,5,0,0 175 2,6,0,0

Option II Only 2800 ton Barges are allowed to BFL for Lightering and HRC loading

1 barge 240 7,0,0,0 221 7,0,0,0 223 7,0,0,0 226 7,0,0,0

2 barges 228 7,0,0,0 210 7,0,0,0 212 7,0,0,0 215 7,0,0,0

Results from Model with Floating Crane and Storage Vessel of 1,50,000 ton

Capacity and 100 percent Lightering in fair weather at BFL(B1 – 2800 , B2 – 2000, B3 – 1000 and B4 – 700 ton barges, FC =Fixed

charge)

Fixed Charge in Rs


No tide restriction1 meter dredged

creek0.5 meter dredged creek

Cost per ton

Opt. Brage mix (B1,B2,B3,B4)

Cost per ton

Opt. Brage mix

(B1,B2,B3,B4)

Cost per ton

Opt. Brage mix

(B1,B2,B3,B4)

Cost per ton

Opt. Brage mix

(B1,B2,B3,B4)

Option I Only 2800 ton and 2000 ton Barges are allowed to BFL for Lightering and HRC loading

FC at Rs 200 213 2,5,0,0 199 3,5,0,0 202 3,5,0,0 209 3,5,0,0

FC at Rs 100 190 2,5,0,0 175 3,5,0,0 177 3,5,0,0 182 2,6,0,0

Option I Only 2800 ton Barges are allowed to BFL for Lightering and HRC loading

FC at Rs 200 260 7,0,0,0 240 7,0,0,0 245 7,0,0,0 249 7,0,0,0

FC at Rs 100 237 7,0,0,0 220 7,0,0,0 224 7,0,0,0 229 7,0,0,0

ConclusionsConclusions

We have used a combination of mathematical, cost, and simulation We have used a combination of mathematical, cost, and simulation models to optimize the raw material logistics system of the models to optimize the raw material logistics system of the integrated steel plant. integrated steel plant.

Models for Models for solving such strategic problems as choice of source for each solving such strategic problems as choice of source for each

material, ideal ship size from each load port and the desirability of material, ideal ship size from each load port and the desirability of dredging the waterwaysdredging the waterways

solving such tactical problems as annual procurement and inventory solving such tactical problems as annual procurement and inventory planning, and barge mix optimization and optimal ship size planning, and barge mix optimization and optimal ship size determination, and determination, and

solving such operational problems as ship scheduling, alternate ship solving such operational problems as ship scheduling, alternate ship schedule evaluation and daily barge scheduling. schedule evaluation and daily barge scheduling.

ConclusionsConclusions

The models described in this paper offer a complete package for The models described in this paper offer a complete package for the solution of the inbound raw material and ‘back –to back’ the solution of the inbound raw material and ‘back –to back’ finished goods logistics problem of the integrated steel plant. finished goods logistics problem of the integrated steel plant.

The approach of breaking complex logistics problems into sub-The approach of breaking complex logistics problems into sub-problems and using separate models to solve each sub-problem problems and using separate models to solve each sub-problem proved to be an effective problem solving strategy in this case. proved to be an effective problem solving strategy in this case.

Involvement of the operating personnel and managers in Involvement of the operating personnel and managers in development of models, in collection of relevant data, explicit development of models, in collection of relevant data, explicit enumeration of operating logic and in validation of models proved enumeration of operating logic and in validation of models proved very useful for the acceptance and implementation of the system.very useful for the acceptance and implementation of the system.

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Logistics Management Jagathy