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JOURNAL OF APPLIED SCIENCES RESEARCH

ISSN: 1819-544X
1819 EISSN: 1816-157X

JOURNAL home page: http://www.aensiweb.com/JASR


http://www.aensiweb.com/ 2015 November;
November 11(22): pages 19-23.
Published Online 25 November 2015.. Research Article

LINGO Based Supply Chain Network Design


1A. Anand Jayakumar, 2C. Krishnaraj and 1A.Aravinth Kumar
1Department of Mechanical Engineering, United Institute
nstitute of Technology Coimbatore, Tamil Nadu, India
2Department of Mechanical Engineering, Karpagam College of Engineering Coimbatore, Tamil Nadu, India

Received: 23 October 2015; Accepted: 23 November 2015

© 2015
201 AENSI PUBLISHER All rights reserved
ABSTRACT

A typical SCN design problem sets the configuration of the network and the missions of its locations. Some facilities may be
opened, others closed, while others can be transformed using different capacity options. Several modeling approaches can be used u to
formulate the supply chain network design problem. The simplest models available are appropriate
appropriate to solve facility location problems
(FLP), which can be either capacitated (CFLP) or uncapacitated (UFLP). In this paper a LINGO program is used to solve a supply
suppl chain
network design problem. The comparison of the proposed program is made with the excel solver program. It is found that the LINGO
program produces quicker results when compared to the excel solver program.
.
Keywords: Facility location problems, LINGO, SCN. SCN

INTRODUCTION given planning horizon. Typical


ypical costs include fixed
location/configuration costs, fixed vendor and
Successful supply chain management requires market policy selection costs, as well as some
many decisions relating to the flow of information, variable production, handling, storage, inventory and
product, and funds. These decisions fall into three transportation costs
phases, depending on the frequency of each decision
and the period over which a decision phase has an 2. Literature Survey:
impact.. The design, planning, and operation of a Several modeling approaches can be used u to
supply chain have a strong impact on overall formulate the supply chain network design problem.
profitability and success. The simplest models available are appropriate to
A typical SCN design problem sets the solve facility location problems (FLP), which can be
configuration of the network and the missions of its either capacitated (CFLP) or uncapacitated (UFLP).
locations. Some facilities may be opened, others In facility location models, the capacity of potential
closed, while others can be transformed using facilities is assumed to be predetermined. As
different capacity options. Each selected facility is capacity acquisition is a rather fundamental aspect of
assigned one or several production, assembly and/or supply chain design problems, several authors
distribution activities depending on the capacity investigated capacity expansion and relocation
options available at each location. The mission of alternatives.
each facility must also be specified in terms of Hasan Selim and Irem Ozkarahan [1], have
product mix and facilities/customers to supply. Key developed a model to select the optimum numbers,
raw-material suppliers
iers must be selected. For each locations and capacity levels of plants and
product-market,
market, a marketing policy setting service warehouses to deliver products to retailers at the
and inventory levels, as well as maximum and least cost while satisfying desired service level to
minimum sales levels, must also be selected. The retailers. A maximal covering approach is used in
objective is typically to maximize net profits over a statement of the service level.
Corresponding Author: A. Anand Jayakumar, Department of Mechanical Engineering, United Institute of Technology
Coimbatore, Tamil Nadu, India
E-mail: jay4upeople@gmail.com
20 A. Anand Jayakumar et al, 2015 /Journal Of Applied Sciences Research 11(22), November, Pages: 19-23

Hadi Mohammadi Bidhandi et al [2] have be no greater than a positive number (p > 0).
proposed a mixed integer linear programming model C.Krishnaraj et al [12] have solved a supply
and solution algorithm for solving supply chain chain network numerical problem using LINGO
network design problems in deterministic, multi- Software.
commodity, single-period contexts. The strategic
level of supply chain planning and tactical level 3. What is lingo?
planning of supply chain are aggregated to propose LINGO is a simple tool for utilizing the power
an integrated model. The model integrates location of linear and nonlinear optimization to formulate
and capacity choices for suppliers, plants and large problems concisely, solve them, and analyze
warehouses selection, product range assignment and the solution. Optimization helps you find the answer
production flows. that yields the best result; attains the highest profit,
Marc-Andre´ Carle et al [3], have proposed output, or happiness; or achieves the lowest cost,
paper proposes an agent-based metaheuristic to solve waste, or discomfort. Often these problems involve
large-scale multi-period supply chain network design making the most efficient use of your resources—
problems. The generic design model formulated including money, time, machinery, staff, inventory,
covers the entire supply chain, from vendor and more. Optimization problems are often classified
selection, to production–distribution sites as linear or nonlinear, depending on whether the
configuration, transportation options and marketing relationships in the problem are linear with respect to
policy choices. The model is based on the mapping the variables.
of a conceptual supply chain activity graph on LINGO includes a set of built-in solvers to
potential network locations. tackle a wide variety of problems. Unlike many
Sanjay Melkote, Mark S. Daskin [4], have modeling packages, all of the LINGO solvers are
presented a mixed integer programming formulation directly linked to the modeling environment. This
of the facility location/ network design problem. seamless integration allows LINGO to pass the
Computational experience with problems with upto problem to the appropriate solver directly in memory
40 nodes and 160 candidate links have been rather than through more sluggish intermediate files.
reported. This direct link also minimizes compatibility
Phuong Nga Thanha et al [5], have proposed a problems between the modeling language component
mixed integer linear program (MILP) for the design and the solver components.
and planning of a production–distribution system. Local search solvers are generally designed to
The study aims to help strategic and tactical search only until they have identified a local
decisions: opening, closing or enlargement of optimum. If the model is non-convex, other local
facilities, supplier selection, flows along the supply optima may exist that yield significantly better
chain. solutions. Rather than stopping after the first local
Jukka Korpela et al [6], have proposed a optimum is found, the Global solver will search until
framework by which the risks related to a customer the global optimum is confirmed. The Global solver
supplier relationship, the service requirements by the converts the original non-convex, nonlinear problem
customers and the strategies of the supplier company into several convex, linear subproblems. Then, it
can be included in production capacity allocation and uses the branch-and-bound technique to exhaustively
supply chain design. The framework is demonstrated search over these subproblems for the global
with a numerical example and it is based on solution. The Nonlinear and Global license options
integrating the analytic hierarchy process (AHP) and are required to utilize the global optimization
mixed integer programming (MIP). capabilities.
Atefeh Baghalian et al [7], have developed a
stochastic mathematical formulation for designing a 4. The Modeling Framework:
network of multi-product supply chains comprising In this section, the provided mathematical
several capacitated production facilities, distribution formulation by Sunil Chopra et al (9) for logistics
centres and retailers in markets under uncertainty. network design problems is considered.
Ragheb Rahmaniani et al [8], have proposed an
extension of the capacitated facility location problem
under uncertainty, where uncertainty may appear in
the model’s key parameters such as demands and
costs. They have developed the mathematical
formulation in order to allow partial satisfaction by
introducing penalty costs for unsatisfied demands. In
general, this model optimizes location for predefined
number of capacitated facilities in such a way that
minimizes total expected costs of transportation,
construction, and penalty costs of uncovered
demands, while relative regret in each scenario must
21 A. Anand Jayakumar et al, 2015 /Journal Of Applied Sciences Research 11(22), November, Pages: 19-23

Where: plants that are to be kept open, their capacity, and the
n = number of potential plant locations/capacity allocation of regional demand to these plants.
(each level of capacity will count as a separate The model is solved using LINGO.
location)
m = number of markets or demand points 5. Numerical Example:
Dj = annual demand from market j The following example was taken from the book
Ki = potential capacity of plant i by Sunil Chopra et al (9).
fi = annualized fixed cost of keeping factory i open The Vice President of Supply Chain can
cij = cost of producing and shipping one unit from consider several different options to meet demand.
factory i to market j (cost includes production, One possibility is to set up a facility in each region.
inventory, transportation and tariffs) The advantage of such an approach is that it lowers
yi = 1 if plant i is open, 0 otherwise transportation cost and also helps avoid duties that
xij = quantity shipped from plant i to market j may be imposed if product is imported from other
Equation (1) is the objective function and it regions. The disadvantage of this approach is that
minimizes the total cost (fixed + variable) of setting plants are sized to meet local demand and may not
up and operating the network. The constraint in fully exploit economies of scale. An alternative
Equation (2) requires that the demand at each approach is to consolidate plants in just a few
regional market be satisfied. The constraint in regions. This improves economies of sale but
Equation (3) states that no plant can supply more increases transportation cost and duties. For SunOil,
than its capacity. (Clearly the capacity is 0 if the the vice president of supply chain decides to view
plant is closed and Ki if it is open. The product of the the worldwide demand in terms of five regions –
terms Kiyi captures this effect. The constraint in North America, South America, Europe, Africa and
Equation (4) enforces that each plant is either open Asia. The Data collected are shown below.
(yi = 1) or closed (yi = 0). The solution identifies the

Table 1: Input Data – Demand and Transportation costs [ This data is reproduced from (9)].
Demand Regions
Production and Transportation Cost per 1,000 units
Supply Region N America S America Europe Asia Africa
N America 4860 5520 6060 7800 6900
S America 7020 4620 6480 5880 6000
Europe 6120 6300 5700 7140 6660
Asia 6900 7500 5400 3540 4440
Africa 8520 6000 6180 6300 4260
Demand 12 8 14 16 7

Table 2: Input Data – Capacity and Fixed costs [ This data is reproduced from (9)].
Plants Fixed Cost Low Capacity Fixed Cost High Capacity
N America 360000 10 540000 20
S America 270000 10 405000 20
Europe 390000 10 585000 20
Asia 246000 10 369000 20
Africa 240000 10 360000 20

Annual demand for each of the five regions is plants exhibit some economies of scale and have
shown in the demand row. The variable production, fixed costs that are less than twice the fixed cost of a
inventory and transportation cost (including tariffs low capacity plant. All fixed costs are annualized.
and duties) of producing in one region to meet The vice president wants to know what the lowest
demand in each individual region. cost network should look like.
There are fixed and variable costs associated
with facilities, transportation, and inventories at each 6. Lingo Program:
facility. Fixed costs are those that are incurred no MODEL:
matter how much is produced or shipped from a SETS:
facility. Variable costs are those that are incurred in PLANTS: LFIXEDCOST, LCAPACITY,
HFIXEDCOST,HCAPACITY,Y,Z;
proportion to the quantity produced or shipped from
MARKETS: DEMAND;
a given facility. Facility, transportation and
LINKS(PLANTS,MARKETS): TCOST, VOLUME;
inventory costs generally display economies of scale ENDSETS
and the marginal sider, however, all variable costs DATA:
grow linearly with the quantity produced or shipped. PLANTS = NAMERICA, SAMERICA, EUROPE,
Sun Oil is considering two different plant sizes ASIA, AFRICA;
in each location. Low capacity plants can produce 10 LFIXEDCOST = 360000, 270000, 390000, 246000,
million units a year, whereas high – capacity plants 240000;
can produce 20 million units a year. High capacity LCAPACITY = 10, 10, 10, 10, 10;
22 A. Anand Jayakumar et al, 2015 /Journal Of Applied Sciences Research 11(22), November, Pages: 19-23

HFIXEDCOST = 540000, 405000, 585000, 369000, MIN = @SUM(LINKS(I,J): TCOST(I,J) *


360000; VOLUME(I,J))+ @SUM(PLANTS:LFIXEDCOST
HCAPACITY = 20, 20, 20, 20, 20; *Y) + @SUM(PLANTS:HFIXEDCOST*Z);
MARKETS = NAMERICAM, SAMERICAM, @FOR(MARKETS(J): @SUM(PLANTS(I) :
EUROPEM, ASIAM, AFRICAM; VOLUME (I,J)) = DEMAND (J););
DEMAND = 12, 8, 14, 16, 7; @FOR (PLANTS(I): @SUM(MARKETS(J) :
TCOST = 4860 5520 6060 7800 6900 VOLUME (I,J))<=
7020 4620 6480 5880 6000 LCAPACITY(I)*Y(I)+HCAPACITY(I)*Z(I););
6120 6300 5700 7140 6660 @FOR( PLANTS: @BIN( Y));
6900 7500 5400 3540 4440 @FOR( PLANTS: @BIN( Z));
8520 6000 6180 6300 4260; END
ENDDATA

Fig 1: Location of Plants and Markets.

7. Computational Efficiency: Nonlinear variables: 0


An intel CORE i5 processor with 4GB RAM Integer variables: 10
was used to process the model. Windows Operating Total constraints: 11
System 8.1 was used. Branch and Bound solver was Nonlinear constraints: 0
used. Total nonzeros: 95

A. Numerical Problem size: B. Run Time:


Total variables: 35 The problem was solved in less than 1 second.

Fig 2: Result.

8. Result:

Table 3: Output Data – Units to be transported.


Demand Regions
Production and Transportation Cost per 1,000 units
Supply Region N America S America Europe Asia Africa
N America 0 0 0 0 0
S America 12 8 0 0 0
Europe 0 0 0 0 0
Asia 0 0 4 16 0
Africa 0 0 10 0 7
23 A. Anand Jayakumar et al, 2015 /Journal Of Applied Sciences Research 11(22), November, Pages: 19-23

Table 4: Output Data – Type and Location of Plants to be Opened.


Plants Low Capacity High Capacity
N America 0 0
S America 0 1
Europe 0 0
Asia 0 1
Africa 0 1

9. Conclusion: disruptions and demand uncertainties: A real-


A global optimum of 1425060 was found. High life case”, European Journal of Operational
capacity plants in Asia, Africa and South America Research, 227: 199–215.
were opened. From South America 12 units were 8. Ragheb Rahmaniani, Mohammad Saidi-
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program to solve the SCND problem and it is faster and Operation”, 5th Edition, Pearson.
when compared to the excel program. The program 10. LINDO Systems Inc, “LINGO The Modeling
can also be expanded to include more data and the Language and Optimizer”.
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