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INTERNATIONALJOURNALOFAPPLIEDENGINEERINGRESEARCH,DINDIGUL Volume1,No 3,2010 Copyright2010AllrightsreservedIntegratedPublishingAssociation REVIEWARTICLE ISSN09764259

ApplicationofMultiObjectiveMathematicalLinearProgrammingModel forSupplyChainManagementinaFussyEnvironment
BabatundeB.O DepartmentOfBusinessAdministration,OsunStateUniversity,Osogbo,OsunState,Nigeria bayoogoga@yahoo.com

ABSTRACT Thispaperaimsatapplyingmathematicalprogrammingmodeltosupplychainmanagement inafussyenvironment.Italsocriticallyexaminedtheinventory,productionanddistribution activitiesinmanufacturingorganisationandthepossibilityofcostreductioninallsegmentof supply chain management. A linear programming model LINDO algorithm was used to determinethebasicobjectivecoefficientallowabledecreaseandoptimumcostofinventory, production and transportation cost from plant to depots and from depots to various distributorsofFiveselectedproductsofamultinationalcompany.Thefindingrevealedthat for the company tooptimally manage its resources, there is need for certain cost in Supply Chain to be reduced, the possible cost of reduction in each product was revealed, ranging fromcostofinventory,productionandtransportationfromplanttodepotsandtransportation costfromdepotstodistributors.Also,quantitytotransportfromtheplanttoeachdepotand from depots to various distributors at a particular period of time under the study. The possibilityofpriceincrease inthe futurewasalsodiscoveredandrangesinwhichthebasis objectivecoefficientallowabledecreasewascriticallyanalysed. Key words: Mathematical Linear Programming Model, Supply Chain Management and FuzzyEnvironment. 1.Introduction The most common industrial strategy adopted by most developing countries to achieve moderngrowthinrecenttimeispropersupplychainmanagement.Itisimperativetonote thathighproductivity withtheimproperdistributionandmarketingoftheproductsmaynot leadtotheachievementofthegoalsandobjectivesofanorganization. In the course of its existence, the organizations goals is to maximize profit and minimize costtoattainthisfocalobjective,hencetheorganizationmustbeableandjudiciouslyutilize theirresources.Supplychainmanagement isthe panaceatoenhanceorganizationoperation efficiency.Moreattentionneedstobeplacedonsupplychainmanagementtoenhancegrowth andsustainabilityofmanufacturingorganizationinourcountry. Thecurrenttrendofeconomicsituationisseriouslyalertingforpropermonitoringofsupply chainmanagementespeciallyinafussyenvironment.Itisagreatadvantagetodaywherethe system could really provide further assistance in the aspects of determining the quantity of producttobemanufacturedanddistributedthatwillmeettherequirementofconsumersata reduced price. As it is established in this paper, production and purchase order could be monitored in the system and exceptions highlighted to trigger as replanning necessary. Supplychainisacrossfunctionalapproachtomanagethemovementofrawmaterialsintoan

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organizationandthemovementoffinishedgoodsoutoftheorganizationtowardstheend consumer.Manyorganizationstodaystrivetofocusincorecompetenciesandbecomemore flexible(sincetheyareoperatinginfussyenvironment). Todayscompaniesarelookingforwaystoreducelostandimproveshareholdersvalue.They are hoping to improve their supplier relationships to bring better and cheaper products to market faster. In the present world today, successful chain management requires a change frommanaging individualfunctiontointegrating activities intokeysupplychainprocesses. An example: the purchasing department places orders as requirements become appropriate. Marketing, responding to customer demand, communicates with several distributors and retailers, and attempts to satisfy this demand. Shared information between supply chain partnerscanonlybefullyleveragedthroughprocessintegration. Supply chain business process integration involves collaborative work between buyers and suppliers,jointproductiondevelopment,common systemsandsharedinformation.According to Lambert and cooper (2000) operating an integrated supply chain requires continuous informationflows,whichinturnassisttoachievethebestproductflows.However,inmany companies,managementhasreachedtheconclusionthatoptimizingtheproductflowscannot be accomplished without implementing a process approach to thebusiness. The key supply chainprocessesstatedby Lambert,D.Cooper,M.&Pagh(1998)are:Customerrelationship management, Customer service management, Demand management, Order fulfilment, Manufacturing flow management, Supplier relationship management, Product development andcommercializationandReturnsmanagement 1.1HistoricalBackgroundofGuinnessNig.Plc. GuinnessNigeriaPlcisoneofthebigcompaniesinNigeriafromtheparentcompanywitha longhistorydatingbacktomorethantwohundredyears.(TheoriginalGuinnessbreweriesat St.Jamesgate,Dublinwasfoundedin1759,in1936,thesecondbreweryparkRoyalbrewery was opened in London and then in 1963 the third brewery at Ikeja, Nigeria came into existence). ViscountElvenden,nowearlofIveagh,officiallylaidthefoundationstoneofIkejaBrewery inJanuary1962.HelaterbecamethechairmanoftheGuinnessparentcompanyinLondon. th Onthe6 March,1963,IkejaBrewerywasofficiallyopeningbyHisExcellencyDr.Nnamdi Azikwe,ofblessedmemory,thethenGovernorGeneralofNigeria,.Themanagingdirector of Guinness parent company, Lord Royal of Merton was present at theopening ceremony. Work started on the Benin Brewery in mid 1972. The brewery was designed to brew both Harp lager and Stout beer. In June 1974, full production of Harp lager started. In 1976, a decision was made to build a new stout brewery in Benin on the same site as the Harp Brewery1977.ThebrewerieswithcorporateheadquartersatIkeja,hasthreedivisionsnamely corporate affairs division.The staff strength, which hasrisen over the years, stands at over four thousand two hundred of which a little less than four hundred are management staff cadre. In production distribution, the company uses a multi channel approach. Products are distributedthrougha numberofdistributors,retailoutlets,anddirectlytoconsumers.Ithas alsoestablisheditselfintheareaofsocialimprovement.Guinnesshassponsoredmemberof 616

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artsandsportseventsitisthemainsponsoroftheNigerianUniversityGamesovertheyears (NUG).ItalsosupportstheGuinnessEyeHospitalsatKadunaandOnitsha.LagosUniversity Teaching Hospital Guinness Eye center was established in 1991.There is no doubt that the company is market leader in the brewery sectorof the economy and hence there would not havebeenabetterchoiceasthecasestudyforthisproject. 2.TheObjectiveoftheStudy Themainobjectivefocusoneffectivecostcontrolofinventory,productionanddistribution ofgoodsintheorganization,thatiswhytheresearchworkisaimingatminimizingthecost ofoperations. Othercanbe ToestablishbetterrelationshipbetweenSupplier,producersandcustomers. Toestablisheffectivedistributionsystemthatcanbeusedtoimproveperformanceof theproductlines Developproductiontechnologyinmanufacturing firmsandintegratethebestsupply chainflowforthe product/marketcombination 2.1LiteratureReview The term supply chain management is relatively new in literature, appearing in 1982 by Oliver and Webber. Many as a highly novel management concept view supply chain management, but comparison with earlier work reveals similarities. The fundamental assumptions,onwhichsupplychainmanagementrests,aresignificantlyolderasrevealedby Lambert, D. Cooper,M.& Pagh,J. (1998).Morerecently, manymanufacturers andretailers have embraced the concept of supply chain management to improve efficiency a cross the valuechain Tan,K.(2001). AccordingtoOliverK.&Webber,(1982)pp54.Theoriginaluseofthetermsupplychain management emphasized a reduction in inventory costboth within and across firms,which the logistics manager confronted with, but that initial perspective has been broadening. Consequently, the competition is no longer between firms butbetween supply chain actors. Lancioni,F.(2000).StatedthatThegoalsoftheentiresupplychainbecomesthecommon objective of each firm, cost and service improvements that are not achieved by individual firms will now be attained by cooperating companies. According to the Simchi Levi.D, PhillipKaminsky.PandEdithSimchiLevi.E.(1999).Theyconcludedthatsupplychainsare flexible,dynamicandcomplexnetworksoforganization. Supply chain management attract contra attention in some major firms in the 1990s as a result of the realization of the potential cost benefits of integration across facilities, across units supply chain management which involve flow from supplier to manufacturer and to consumer. Mostof the cost factors within a supply chain can be classified intofour categories,which includes production, transportation, inventory and material handling costs. While the

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compositionoftheseoperationalcostsrelativestothetotalcostvariesfromonecompanyto others. The main factor for proper management of supply chain however, involve better selection of material procurement from supplier, production process and distribution to various consumer through the intermediary. Stevens (1989) Lee & Billingtor (1995) Swaminathan, Smith & Sadeh (1996) Cooper (1997) explained that Supply chain exist becausethereareveryfewcompaniesthatcanproduceendproductsforendcustomersfrom raw material on their own, without the assistance of other organization, the company that producestherawmaterials isoftennotthesamecompanythatsellstheendproductstothe endcustomer.Inordertoprovideendproductstotheendconsumers,anetworkofactorsare involvesintheactivities(purchasing,transformationanddistribution)toproduceproductsor services. The series of actors that interact to produce and contribute to the value of end productsiswhatwillrefertosupplychain. Theconceptofsupplychainmanagement(SCM)helpsthecompaniesinthisenvironmentto achieve effective enterprise integration. There is need for modelling of supply chain in a fuzzy environment with the objective of measuring the performance of various strategies, methodandtechnologiesthroughwhichtheapplicationofoperationsresearchmodelcanbe used.Theaspectsofsupplychainmanagementthatneedtobeconsideredassaidearlierare worldwide network of suppliers, factories, warehouses, distribution centres and retailers through which raw materials are transformed and delivered to consumers, the essential motivationbehindthemodellingandanalysisistoeffectivelydesignandcontroloperations systemsforimprovingcompetitivenessbyproducingqualitygoodsandservices. 2.2Relatedtheoriesoninventory,productionanddistributionplanning 2.2.1IntegratedAnalysisofProduction,DistributionandInventoryplanning In a fairly recent review paper titled Integrated Analysis of Production, Distribution and Inventory planning by Bhatnagar et al (1993) address the issue of coordination in organization. They identify two levels on it, coordination between functions, which they called the general coordination problem and coordination within the same function at differentechelonsinanorganization,calledtheMultiPlantCoordinationProblem.Inspiteof thefocusoftheirwork,theauthorspresentagoodcategorizationandsomeliteraturereview forthegeneralcoordinationproblem.Withinthisproblemtheydistinguishedthreecategories that present the integration of decision making pertaining to: (1) Supply and production planning. (2) Production and distribution planning, and (3) Inventory and distribution planning. 2.2.2CoordinatingProductionandTransportationSchedulingintheSupplyChain. ThispaperpresentedbyKadirErtogra,DavidWuandLauraI.Burke(1998).Inthispaper they considerthecoordinationofproductionandtransportationscheduling,acruciallinkof this integration in manufacturingcentric industries such as automotive and electronics, transportationcostsconstitutethesecondlargest component followingtheproductioncosts. Whilethepotentialofintegratingproductionandtransportationplanningcouldbesignificant, therehasbeenalackofresearchandpracticeinintegratingthesefunctions.

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They propose an analytic study that investigates the effects of integrating production and transportation planning. The paper also integrates optimization models that reconcile the viewpoints from transportation planning and analyze the costs introduced by coordination. Lagrangeandecompositionschemewasusedtodemonstratethenatureoftheproductionand transportationdecision,andthevalueofintegration. 2.3FundamentalsofSupplyChainManagementandModels. A companys supply chain is comprised of geographically dispersed facilities where raw materials, intermediate products, or finished products are acquired, transformed, stored or sold, and transportation links connecting facilities along which products flow from the companys warehouse to the final consumers. The companys goal is to add value to its products as it pass through supply chain stages and transport them to geographically dispersedmarketsintherightquantities,withtherightspecifications,attherighttime,andat arightcompetitivecost.Wedistinguishbetweenplants,whicharemanufacturingfacilitiesof Guinness Nigeria Plc where physical product transformations take place, and distribution centres,whicharefacilities/depotwhereproductsarereceived,storedanddispatched. 2.3.1 SupplyChainComponents A supply chain consists of the following components: Customers, distributors retailers/wholesalers,manufacturersandSuppliers 2.4Transhipment/TransportationProgrammingModel The transhipment model recognizes that it is cost cheaper to ship though intermediate or transientnodesbeforereachingthefinaldestination.Itismoregeneralthanthatof theregular transportationmodelwhereonlydirect shipmentsareallowed.Transportationprogramming models are generally concerned with the programming design for distribution of certain products from several sources or single source to different locations at minimum transportationcost. 2.4.1 DeterministicDynamicProgrammingModel This model determines the optimum solution to an nvariable problem by recomposingit n stage with each stage constituting a singlevariable subproblem. The computation to determinetheoptimumsolutionisdonethroughrecursivesystembywhichonesubproblem isusedasaninputtonextsubproblem.Thisprogrammingtechniqueisusedtosolvemany optimization problems, it can be used to determine the shortest route or distance between stationsordepotsandevenshortestlinkfromplants,ordepottovariousdistributors.Hence, wedeterminethenumbersofstatesfromeachplantsordepotanddistancesbetweenstateson successivestages(Depot/plant)HamdyTaha(2006). 2.4.2 SimulationModel Thecomplexityofinteractionsalongthesupply chainissuchthatonecannoteasilypredict how the system will operate under various conditions, but a computer model of these processescansimulatetheoutcome LantandMezial(1990).

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Mostof the recent supply chain simulation models attemptto findoptimal cost minimizing solutions using linear or nonlinear programming, e.g., Breitman and Lucas (1987) Cohen andLee(1989)HodderandJucker(1985)HodderandDincer(1986),howeverthismodel does not deal adequately with uncertainty setting and fussy environment. Simulation thorough evaluates each alternative by generating a series of values for each random variablesatthesametimefrequenciesprobabilitydistributionindicatetoprovidesolutionto theproblem. 3.Methodology 3.1ModelFormulation Basically, this research is to minimize the cost of supply chain management in a fuzzy environment.(theproductioncost,inventorycost,transportationcost)aredirectlyincludedin the model. A case company under this paper is Guinness Nigeria PLC, with five selected products. 3.2DefinitionofSetsofNotation. I=setofproductiontype(i=1,2,3n) p=setofdistributor(p=1,2,3n) w=setofdepot(w=1,2,3n) t=periodof time(t=1,2,3n) 3.3DefinitionofParameters Hcw=Maximumstocklevelofdepotw. VCPit=variablecostofproductionperunitofproduct iinPeriodt. VCIit=variablecostofinventoryperunitofproduct ifromthesuppliertotheplantin Period t. CTwt=transportationcostpershipmentfromtheplattodepotw inPeriodt. CTwpt=transportationcostpershipmentfromdepot w todistributor pinperiodt. Pci=productioncapacityofproduct iinperiod t. Dipt=demandforproducti bydepot w/distributorpinperiodt. Scp=maximumsupplycapacity. 3.4DefinitionofDecisionVariables Mit=Quantityofmaterialstoproduceaunitofproduction iinperiodt. Kit=Quantityofmaterialsproductisupplyinperiodt. Nijt=Unitsofproducti tobeproducedintheplantinperiodt. Wherejindicateproductbrands/sizes.

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Viwt=Unitsofproduct itobetransportedfromplanttodepotw inperiodt. Fiwpt=Unitsofproductitobetransportedfromdepotw todistributor pinperiodt. 3.5Theassumptionsofthemodel Theassumptionuponwhichthisresearchisbasedonthestatedassumptionsbelow Numberofproductconsiders: 5 Only 5 major products of difference types and brands of Guinness Nig Plc are considered.Thesecontributemostly95%ofthetotalprofitfortheorganization. Onemajorplantisputunderconsideration. Number of distributor: 3 three different distributors are considered in the major regionswithhighestdemandcapacity. Maximumloadingcapacityofthetrailerdependsonthetypeofthetrailer,typeofthe product pallet load and distance to be covered. (Maximum loading capacity will be considered). Productioncapacity:ThereisProductioncapacityperperiodbutitcanbeincreasedor changedbasedonmarketdemandandfuturetrend. Thereisnoopeningstock. NumberofDepot:4fourmajordepotsareconsidered.Depot4islocatedwithinthe plant. Number of planning/study period: 4, only one period time with largest units of parameterunderthestudywillbemodelled. Transportationcostpershipmentfromplanttodepot,depottodistributorinperiodt. This project will only consider the highest cost of distributing products across the interlinksoftheplant,depotsanddistributors. Maximum number of Guinnesss products to be carried at time from plant to depot anddepottodistributoramountto40,000kgvolumeweightoftheproducts,whichis equivalentto62palletsoftheproduct. Transportationcostpershipmentfromplanttodepotinperiodt.Highestcostincuron depotoutsidetheplantwillbemodelled,whiledepotwithinthemainplantwillattract nocost. NumberofSupplier:onemajorsupplierisconsidered. 3.6TheModels Objectivefunction Minimize the total cost of operation (inventoryproductiondistribution cost), which is expressedasMinimize:Z=Inventorycost+Productioncost+Transportationcost(Plant toDepot)+Transportationcost(DepottoDistributor)

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Where Inventorycost=

n i=1 n s=1 t=1 CPitNijt.......................(3.2) VCIitMit................................(3.1)

Productioncost=

i=1

Transportationcostfrom n (PlanttoDepot) = i=1 n (DepottoDistributor)= 3.6.1 TheConstraints Theattainmentoftheobjectivefunctionstatedaboveissubjectto: i. ii. iii. Supply/warehouseconstraints Demandconstraints Production/distributionconstraints KitScp FiwptDipt Viwtpci foralli,t..(3.5) forall,i, p,w,t...................................................................................................(3.6) forall,i,w,t(3.7) Nonnegativityconstraintsfunction. Nijt Mit Pci Scp 0 0 0 0 0 0 forall i,t. forall i,w,t. forall i,t. forall i,w,pt. forall i. forall s. Viwt Fiwpt n n w=1 n CTwptFiwptt=1(3.4) CTwtViwt t=1.(3.3)

i=1w=1p= 1

InformationwasgatheredfromcustomersandGuinnessNigPlconlyonthefollowingbasis: a. Productpallet b. Production/inventorycost

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c. Transportationcostincurpershipment. 3.7 DataAnalysisandInterpretation TheLinearprogrammingmodelisusedthroughLINDOsoftwaretogivethedetailanalysis oftheresult,fromthemethodologyofthisstudy Nijtrepresentunitsofproductiofsizejtobeproducedintheplantinperiodtwith1being thesetofproduct1and2,consistofbrandsizeofGuinnessforeignstout(GFS1andGFS2), product 3 Malta Guinness (MG), product 4 Gordon spark (GS) and product 5 Smirnoff (SMF).Wherejdenotethenumberofdifferentsizesoftheproduct.Only Guinnessforeign stout product consisting of two different sizes denoted by GFS11 for big size, GFS12 for smallersize. Table1.1: Producttypesandbrands.
Producttype Guinnessforeignstout(GFS) MaltaGuinness(MG) GordonSpark(GS) Smirnoff(SMF) Brand/size 1 2 1 1 1 DecisionVariable N11t N12t N1t N1t N1t

Primarysource2010.
INVENTORYCOSTITERATION:SOLUTION LPOPTIMUMFOUNDATSTEP3 OBJECTIVEFUNCTIONVALUE 1. 189.3220 VARIABLE GFS1 GFS2 MG GS SMF ROW JAN FEB MAR APR VALUE 2.500000 5.500000 0.000000 3.400000 0.000000 SLACKORSURPLUS 0.000000 0.000000 0.000000 38.000000 NO.ITERATIONS=3 REDUCEDCOST 0.000000 0.000000 2.216000 0.000000 0.000000 DUALPRICES 0.112800 0.037000 0.011000 0.000000

RANGESINWHICHTHEBASISISUNCHANGED: VARIABLE GFS1 GFS2 MG CURRENT COEFFICIENT 18.000000 16.299999 15.080000 ALLOWABLE INCREASE 4.512000 0.740000 INFINITY ALLOWABLE DECREASE 1.480000 0.220000 2.216000

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GS SMF ROW JAN FEB MAR APR

16.080000 0.000000 16.080000 INFINITY RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE 1140.000000 100.000000 1240.000000 110.000000 1350.000000 68.000000 1430.000000 38.000000

1.480000 0.000000 ALLOWABLE DECREASE 97.142860 38.000000 110.000000 INFINITY

PRODUCTIONCOSTMINIMISATION LPOPTIMUMFOUNDATSTEP1 OBJECTIVEFUNCTIONVALUE 1. 1783.750 VARIABLE GFS1 GFS2 MG GS SMF ROW JAN FEB MAR APR VALUE 0.000000 0.000000 31.250000 0.000000 0.000000 REDUCEDCOST 77.919998 17.680000 0.000000 17.680002 24.815002

VARIABLE GFS1 GFS2 MG GS SMF

SLACKORSURPLUS DUALPRICES 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.713500 NO.ITERATIONS=1 RANGESINWHICHTHEBASISISUNCHANGED: OBJCOEFFICIENTRANGES CURRENT ALLOWABLE ALLOWABLE COEFFICIENT INCREASE DECREASE 192.080002 INFINITY 77.919998 103.300003 INFINITY 17.680000 57.080002 11.786667 57.080002 103.300003 INFINITY 17.680000 103.300003 INFINITY 24.815001 RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE 2500.000000 0.000000 2500.000000 0.000000 2500.000000 0.000000 2500.000000 INFINITY

ROW JAN FEB MAR APR

ALLOWABLE DECREASE INFINITY INFINITY INFINITY 0.000000

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TRANSPORTATIONMINIMISATIONCOSTFROMPLANTTODEPOT1 LPOPTIMUMFOUNDATSTEP3 OBJECTIVEFUNCTIONVALUE 1. 97.15000 VARIABLE VALUE REDUCEDCOST GFS1 2.500000 0.000000 GFS2 7.000000 0.000000 MG 2.375000 0.000000 GS 0.000000 0.000000 SMF 0.000000 0.355000 ROW JAN FEB MAR APR SLACKORSURPLUS 0.000000 0.000000 0.000000 0.000000 NO.ITERATIONS=3 DUALPRICES 0.025000 0.015000 0.000000 0.035000

RANGESINWHICHTHEBASISISUNCHANGED:OBJCOEFFICIENTRANGES VARIABLE GFS1 GFS2 MG GS SMF CURRENT COEFFICIENT 10.200000 8.200000 6.000000 8.200000 8.200000 ALLOWABLE INCREASE 1.000000 0.000000 0.560000 INFINITY INFINITY ALLOWABLE DECREASE 0.600000 0.700000 0.240000 0.000000 0.350000

ROW JAN FEB MAR APR

RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE 1140.000000 100.000000 1240.000000 60.000000 1350.000000 30.000000 1430.000000 38.000000

ALLOWABLE DECREASE 60.000000 38.000000 INFINITY 30.000000

TRANSPORTATIONMINIMISATIONCOSTFROMPLANTTODEPOT2 LPOPTIMUMFOUNDATSTEP3 OBJECTIVEFUNCTIONVALUE 1. 101.5375 VARIABLE VALUE REDUCEDCOST GFS1 2.500000 0.000000 GFS2 7.000000 0.000000 MG 2.375000 0.000000 GS 0.000000 0.000000 SMF 0.000000 0.387500 ROW JAN SLACKORSURPLUS 0.000000 DUALPRICES 0.003750

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FEB MAR APR

0.000000 30.000000 0.000000 NO.ITERATIONS=3

0.033750 0.000000 0.038750

RANGESINWHICHTHEBASISISUNCHANGED:OBJCOEFFICIENTRANGES VARIABLE CURRENT ALLOWABLE ALLOWABLE COEFFICIENT INCREASE DECREASE GFS1 11.300000 0.150000 1.350000 GFS2 8.400000 0.000000 0.150000 MG 6.100000 0.620000 0.300000 GS 8.400000 INFINITY 0.000000 SMF 8.400000 INFINITY 0.387499 RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE JAN 1140.000000 100.000000 FEB 1240.000000 60.000000 MAR 1350.000000 30.000000 APR 1430.000000 38.000000 GSENTERSATVALUE1.5000INROW4OBJ.VALUE=101.54 ROW

ALLOWABLE DECREASE 60.000000 38.000000 INFINITY 30.000000

TRANSPORTATIONMINIMISATIONCOSTFROMPLANTTODEPOT3 LPOPTIMUMFOUNDATSTEP1 OBJECTIVEFUNCTIONVALUE 1. 99.20000 VARIABLE VALUE REDUCEDCOST GFS1 0.000000 1.000000 GFS2 12.400000 0.000000 MG 0.000000 0.000000 GS 0.000000 0.600000 SMF 0.000000 0.400000 SLACKORSURPLUS DUALPRICES 100.000000 0.000000 0.000000 0.080000 138.000000 0.000000 58.000000 0.000000 NO.ITERATIONS=1 RANGESINWHICHTHEBASISISUNCHANGED:OBJCOEFFICIENTRANGES VARIABLE CURRENT ALLOWABLE ALLOWABLE COEFFICIENT INCREASE DECREASE GFS1 12.200000 INFINITY 1.000000 GFS2 8.000000 0.000001 8.000000 MG 6.400000 INFINITY 0.000000 GS 8.600000 INFINITY 0.600001 SMF 8.400000 INFINITY 0.400000 ROW JAN FEB MAR APR

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ROW JAN FEB MAR APR

RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE 1140.000000 100.000000 1240.000000 INFINITY 1350.000000 138.000000 1430.000000 58.000000

ALLOWABLE DECREASE INFINITY 48.333332 INFINITY INFINITY

TRANSPORTATIONCOSTMINIMISATIONFROMDEPOT1TODISTRIBUTOR1 LPOPTIMUMFOUNDATSTEP3 OBJECTIVEFUNCTIONVALUE 1. 120.4360 VARIABLE VALUE REDUCEDCOST GFS1 2.500000 0.000000 GFS2 5.500000 0.000000 MG 0.000000 0.768000 GS 3.400000 0.000000 SMF 0.000000 0.000000 SLACKORSURPLUS DUALPRICES 0.000000 0.071400 0.000000 0.001000 0.000000 0.028000 38.000000 0.000000 NO.ITERATIONS=3 RANGESINWHICHTHEBASISISUNCHANGED: OBJCOEFFICIENTRANGES VARIABLE CURRENT ALLOWABLE ALLOWABLE COEFFICIENT INCREASE DECREASE GFS1 11.200000 2.856000 0.040000 GFS2 10.600000 0.020000 0.560000 MG 8.800000 INFINITY 0.768000 GS 10.040000 0.000000 0.040000 SMF 10.040000 INFINITY 0.000000 RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE 1140.000000 100.000000 1240.000000 110.000000 1350.000000 68.000000 1430.000000 38.000000 ROW JAN FEB MAR APR

ROW JAN FEB MAR APR

ALLOWABLE DECREASE 97.142860 38.000000 110.000000 INFINITY

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TRANSPORTATIONMINIMISATIONCOSTFROMDEPOT2TODISTRIBUTOR2 LPOPTIMUMFOUNDATSTEP4 OBJECTIVEFUNCTIONVALUE 1. 139.3375 VARIABLE VALUE REDUCEDCOST GFS1 2.500000 0.000000 GFS2 5.500000 0.000000 MG 2.375000 0.000000 GS 1.500000 0.000000 SMF 0.000000 0.187500 SLACKORSURPLUS DUALPRICES 0.000000 0.043750 0.000000 0.028750 0.000000 0.020000 0.000000 0.018750 NO.ITERATIONS=4 RANGESINWHICHTHEBASISISUNCHANGED:OBJCOEFFICIENTRANGES VARIABLE CURRENT ALLOWABLE ALLOWABLE COEFFICIENT INCREASE DECREASE GFS1 14.200000 1.750000 1.150000 GFS2 11.900000 0.575000 0.400000 MG 8.900000 0.30000 0.460000 GS 11.500000 0.375000 0.375000 SMF 11.500000 INFINITY 0.187500 RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE 1140.000000 100.000000 1240.000000 60.000000 1350.000000 30.000000 1430.000000 38.000000 ROW JAN FEB MAR APR

ROW JAN FEB MAR APR

ALLOWABLE DECREASE 60.000000 38.000000 110.000000 30.000000

TRANSPORTATIONMINIMISATIONCOSTFROMDEPOT3TODISTRIBUTOR3 LPOPTIMUMFOUNDATSTEP4 OBJECTIVEFUNCTIONVALUE 1. 158.6000 VARIABLE VALUE REDUCEDCOST GFS1 2.500000 0.000000 GFS2 5.500000 0.000000 MG 2.375000 0.000000 GS 1.500000 0.000000 SMF 0.000000 0.350000 ROW JAN FEB MAR SLACKORSURPLUS 0.000000 0.000000 0.000000 DUALPRICES 0.052500 0.017500 0.020000

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APR

0.000000 NO.ITERATIONS=4

0.035000

RANGESINWHICHTHEBASISISUNCHANGED:OBJCOEFFICIENTRANGES VARIABLE CURRENT ALLOWABLE ALLOWABLE COEFFICIENT INCREASE DECREASE GFS1 16.100000 2.100000 0.700000 GFS2 13.600000 0.350000 0.400000 MG 10.000000 0.559999 0.280000 GS 13.200000 0.400000 0.700000 SMF 13.200000 INFINITY 0.350000 RIGHTHANDSIDERANGES CURRENTRHS ALLOWABLE INCREASE 1140.000000 100.000000 1240.000000 60.000000 1350.000000 30.000000 1430.000000 38.000000

ROW JAN FEB MAR APR

ALLOWABLE DECREASE 60.000000 38.000000 110.000000 30.000000

4.Empirical AnalysisandInterpretationoftheModelResults 4.1InventoryCostMinimisation ItwasobservedthatforaunitofMaltaGuinness(MG)toenterintothebasis,thatisform partofinventoryactivityforoptimumachievement,itsinventorycostshouldbereducedby N2.22fromtheoriginalcostofN15.08.WhileotherproductsGuinnessforeignstout(GFS1, GFS2), Gordon Spark (GS) and Smirnoff (SMF) cannot be reduced by any cost. The implication of this is that the organisation should strive to reduce inventory cost of Malta Guinness (MG) toN12.88. This would ensure an optimum total inventory cost of N189.32 andalsoguaranteeeffectiveproductionofallthe5products. Inventorycapacitycanthereforebeimprovedtothedesiredcapacityonlyinthefourthperiod. However, this is not withoutopportunity cost.Theopportunitycost of increasing inventory capacityinperiod4attheexpenseofperiod3is1koboperunitincrease,3koboforperiod2 and 11kobo for period 1, this is the result of slack/surplus dual prices for the period under consideration. On the other hand,only 100units increase can be accommodated in period1,110units in period2, and68units increase inperiod3 and38units in period4. To this end, inventory capacitywouldbeimprovedto1140unitsinperiod1,1240unitsinperiod2and1350units inperiod3.Inthefourthperiodhowever,theanticipatedproductioncapacityof2500units can be achieved, but with opportunity costs arising from other periods.This of course had earlierbeendiscussed.

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4.2ProductionCostMinimisation Fromtheresultofdataanalysis,itwasrevealedthatforaunitofGFS1toenterthebasis,the unit cost of production must be reduced by N77.92, GFS2 by N17.68, GS by N17.68 and SMF by N24.82. The implication of this is that the organisation would have been able to reduce total production cost to N1783.75. Meanwhile the optimum production capacity wouldbemaintainedifthiscostreductionplansareadhereto,evenwhentheproductioncost ofMGisconstant,itsproductioncapacitycanstillbeimprovedby31.25%.Theimplication of this is that, a further unit reduction in the production cost of MG would lead to more productionoutputs.However,productioncapacity cannotbeincreasedinanyoftheperiods. 4.3TransportationCostMinimisation(FromPlanttoDepots) The achievable optimum average periodic cost of transportation from plant to depot 1 is N97.15. This indicates 2.5% value increase on GFS1, 5.5% for GFS2, 2.38% for MG and 1.5% for GS. Meanwhile, the value of SMF remains constant. If this is to be improved however,thetransportationcostperunitofSMFmustbereducedby35kobo.Thisreduction wouldenableitenterthebasis,forfurtheranalysis.Whilereductioninthetotaltransportation costof SMF would give room for further iteration the achievedincrease in the quantity of otherproductswereachievedviaadecreaseof60koboinGFS1,24koboinMGand70kobo inGS. TheachievableoptimumtransportationisN101.54totransportgoodsfromplanttodepot2. The allowable increase in the quantity to be transported is 0.15% in GFS1, 0.16% in MG. These2aretheonlyonesthatcanallowforincreaseinthefaceontheanticipatedoptimum performance.TheonlyproductwithasignificantreducedcostisSMF,whichwouldamount toatotalsunofN2100onallthequantitiestransportfromplanttodepot2.Toachievethis optimumreductionincost,unitcostofGFS1mustbereducedbyN1.35.GFS2by15kobo, MGby30koboandSMFby39kobo. Theoptimumtransportationcostfortransportinggoodsfromplanttodepot3isN99.20.This ofcourse wouldbe achievablebyreducing the transportationcostperunitof GFS1by N1, 60koboforGSand40koboforSMF.Theseunitreductionsinthequantitytobetransported wouldguarantee12.4%increaseinthevolumeofGFS2tobetransported.Fromallindication, themostviabledepotisdepot1,whichbringsabouttheleasttransportationcostofN97.15as againstN101.54fordepot2andN99.20fordepot3.Theimplicationofthisisthatittakesa lowercostcomparedtootherstotransportgoodsfromplanttodepot1.Ifthereducedcostis anything to go by, then the organisation might as well increase the inventory capacity of depot 1 for a better performance, provided there would be market to absorb the pushed products. 4.4FromDepotstoDistributors The analysis of possible optimum cost of transportations suggest that depot 1 will operate optimally at N120.44 cost of transportation for the covered periods, depot 2 is expected to expend N139.34 as optimum cost of transportation for the same periodic coverage while depot3optimum transportation cost was valuedat N158.60. The implication of this is that

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themostviabledepotisdepot1.Thisofcoursecorroboratethefactthatdepot1alsohasthe leasttransportationcostfromplant. However, the cost element would not have been a singular and appropriate measure of optimality, but equally, the transported quantity could form another rational basis for decisionmaking.Thisofcoursewouldxraythebenefitoftheeconomicscaleinproduction activitieswhereproductionathugevolumesisexpectedtoguaranteeareducedunitpriceof production.Atotalof5,476,000palletsareexpectedtobetransferredwithinthefourperiods withanaveragemonthlytransportationvolumeof1,369,000palletsfordepot1todistributor 1. On the other hand, a total of 5,388,000 pallets are expected to be transferred within the fourperiodsatanaverageperiodicunitof1,347,000palletsforbothdepots2todistributor2 anddepot3todistributor3. Comparingquality andcost,depot1enjoysthe leastcostoftransportationevenata higher volumeofmaterialstransferredfromdepottodistributor.Sincethecentralobjectiveofthis studyistominimizeassociatedcostsofproduction(production,inventoryandtransportation) without necessarily reducing production capacity, it could be inferred that the organisation woulddowellifeffortsareconcentratedondepot1sinceitshowsareasonablecostandalso anappreciablevolumeofitems. 5.Conclusion Every organization in Nigeria today are operating in dynamic and fussy environment, they can not totally predict of what will happen in the future,but with the help of this research analysismorelighthasbeenthrowntoprovidesolutionthroughmathematicalprogramming modelonhowcostcanbereducedinvariousaspectofmanufacturingorganisation.Therefore, there is need for optimal planning for every segment of supply chain management in an organizationthatiscurrentlyfacingsuchproblems. 5.1Recommendation Theorganisationshouldfollowthepatternanalysedabovetoreducethevariouscost as it is revealed in the finding as it applicable to them, to enable them operate at optimuminventory,productionanddistributionplanning. Thereshouldbefuturisticplanningonexpansionofthestoragecapacitysincethereis tendencytousethevalueofcostreductiontobufferproductioncapacity. The management should not just increase the production quantity as revealed by finding, but it should be produced subject to the readiness of distributors to place demandforthem. Since chances of increment in production capacity has revealed, the organization increase the scope of personnel, machines, capital resources to meet up with future changes. Transportation/Shipment should base on proximity to the nearest distributor by ensuringthatthedepotareveryclosetoeachregionofthedistributors.

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6.References 1. Arreola Rita, A. (1989): Integrated Production Distribution Systems with Capacitate manufacturing facilities unpublished PhD dissertation, Department of Industrial Engineering and Engineering Management, California Stanford University,StanfordAxsater,S. 1993. 2. Axsater, S., K. Rosling. 1990. Installation Versus Echelon Inventory Stocking Policies forMultiLevel Inventory Control.WorkingPaper,LuleaUniversityof Technology,Luea,Sweden. 3. Bhatnagar,M&etal(1993)IntegratedAnalysisofProduction,Distributionand InventoryplanningUniversityofBathUK 4. Breitman,RobertL.&JohnM.Lucas(1987)PLANETS:Amodellingsystemfor businessplanning.Interfaces,17(1): pp94106. 5. Cohen, M.A and H.L Lee. (1988). Strategic Analysis of Integrated Production DistributionSystems:ModelsandMethods.OperationsResearch.36,pp 216228. 6. Cohen, M.A and H.L Lee (1989). Resource deployment analysis of global manufacturing and distribution networks. Journal of manufacturing and OperationsManagement,2: pp81104 7. Hamdy A.Taha (2003). Operation Research, Seven Edition. Indian Pearson Education IncHodder, James E, & James V. Jucker. (1985). International plant location under price and exchange rate uncertainty. Engineering costs and productionEconomics,9:pp 2229. 8. Hodder, James E. & M. Cemal Dincer. (1996). A Multifactor model for international facility location and financing under uncertainty. Computers and OperationsResearch,13(5): pp 601609 9. Kadir Ertogra, David Wu and Laura I. Burke (1998). Coordination Productions andTransportationSchedulingintheSupplyChain,UniversityofRuth. 10.Lambert, D. Cooper, M. & Pagh, J, (1998). Supply Chain Management Implementation issues and research opportunities, The International Journal of LogisticsManagement,Vol.9,no.2. 11.Lancioni, F. (2000) New Development in Supply Chain Management for the millenniumIndustrialMarketingManagement,Vol.29,no.1 12.Lant,TheresaK.&StephenJ.Mezias(1990).Managingdiscontinuouschange:A simulation study of organization learning & entrepreneurship Strategy ManagementJournal.11: pp147179. 13.Lee, H & Billington, C. (1995). The evolution of Supply Chain Management ModelsandPracticeatHewlettPackard,InterfacesVol.25,No.5. 632

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14.Oliver,R&Webber,M,(1982)SupplyChainManagement:Logisticscatchesup withStrategyinBooz,Allen&Hamilton:Outlook. 15.Stevens G.(1989) Integrating the supply chain, International Journal ofphysical distributionandlogisticmanagement,vol19,no8. 16.Stock, J.R and D.M Lambert (1987). Strategic Logistics Management, second edition,RichardD.IrwinandCompany,Homewood,Illiois. 17.SimchiLevi.D,PhillipKaminsky.PandEdithSimchiLevi.E.(1999).Designing and managing supply chainconcept,strategies and case studies.Irwin/McGraw Hill. 18.Swaminathan, J Smith, S & Sadeh N. (1996). A multi agent framework for modelling supply chain dynamics. Technical Report, the Robotics Institute, CarnegieMellon. 19.Tan K, (2001). A framewook of supply chain management literature, European JournalofPurchasingandSupplyManagement,Vol.9,no.1

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