We consider a supply chain with
DC in Topeka. It
supplies 100 customers in the USA. The demand for lamps is proportional
to the
population of the cities. The network model may consider 3 DC
facilities with different size: 1200 sq m, 1800 sq m. 2400 sq m (sites
can hold
600000, 900000 or 1200000 pcs of lamps respectively), each with fixed
investment, carrying,
maintenance and throughput costs:

- Fixed
investment costs depend on the DC size:

- IF DC capacity is 600000, then the fixed investment costs constitute 1000000$
- IF DC capacity is 900000 then the fixed investment costs constitute 1500000$
- IF DC
capacity is 1200000 then the fixed investment costs constitute 2000000$

- The
carrying cost function is “stepped” and depends on
inventory:

- IF 0 < DC inventory < 300000 pcs, then the carrying costs constitute 3000$ per month
- IF 300000 < inventory < 600000 pcs, then the carrying costs constitute 6000$ per month
- IF 600000 < inventory < 900000 pcs, then the carrying costs constitute 9000$ per month
- IF
900000 < inventory < 1200000 pcs, then the carrying costs constitute
12000$ per month

- Warehouse
maintenance costs depend on DC size:

- IF DC capacity is 600000, then the maintenance costs constitute 72000$ per year
- IF DC capacity is 900000, then the maintenance costs constitute 108000$ per year
- IF DC
capacity is 1200000, then
the maintenance costs constitute 144000$ per year

Throughput
costs are proportional
to the product flows.

The
goal is to select the most suitable DC size to invest in.

The
result
of the experiment contains warehouse of 1800 sq m that suits us.

Related topics

Running the NO experiment