Shipping plugins for SBC company Evaluation of Status Quo

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Shipping plug-ins for SBC company Evaluation of
Status Quo

• University of California, Berkeley
• Logistics Course Project
• CE 258 October 2003
• Gautam Gupta
  Nikolaos GeroliminisAnkit JainJake

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Problem Description

• Product Plug-in
• an electronic board used in switch centers for
  phone line connection
• 20,000 different types of plug-ins
• variety in price and demand
• Service area
• Southwest region TX, OK, MO, KN, AR
• Time Requirement maintain a high
• customer service level
• 24hrs for new connections
• 2hrs for maintenance

• not possible to keep all the inventories
• at warehouse and hubs

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Model Structure

• 3 echelons
• a Main Distribution Center in Dallas (Warehouse)
• 7 Intermediate Distribution centers (Hubs)
• over thousands of Central Offices (Switch
  Centers) in the field.
• primary source of transportation Trucks
• Big Trucks from W?H
• Smaller Trucks from H?CO

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Operating Policy

• Initial Policy
• keep 7 local inventory at each of the centers
  and to transport goods as and when required.

• New policy multi-echelon system
• Warehouse ? Hubs ? Clusters ? Switch centers

Flow Diagram
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Schematic Description of Operating Policy

• WAREHOUSE
• products are transported from the warehouse to
  each of the hubs every night by trucks in.
• (1 tour per day per Hub)
• HUBS
• each hub must transport the products to the
  switch centers that fall in its region of service
  in maximum time of 10hrs.
• (Time restriction in routing)
• CLUSTERS
• maintenance demand is served max 2hrs
• ?3-5 clusters/Hub
• Car rented when is needed or UPS

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Cost estimation
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Transportation Cost (Hubs?SC)

• Assumptions
• density of switch centers uniform.
• Size of the product is small, vehicle capacity
  infinite.
• The area of each state has been equated to that
  of a circle
• A vehicle makes a round trip, beginning and
  ending at the hub. The time for each trip is 10
  hours, and each stop takes 15 minutes
• Average speed of vehicle is 65 km/hour

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Transportation Cost

• Hubs to Clusters
• Since the cluster is also a switch center, and
  the inventory compensation in done every day, the
  same as the switch centers, these costs have been
  incorporated while estimating the transportation
  cost for hubs to switch centers.
• Clusters to Switch Centers (for maintenance)
• This operation is handled by another
  organization, with SBC paying a lump some amount
  of 25 for each delivery made within the given
  time frame. Based on the total annual demand for
  the spare parts (28673), the total annual cost is
  716,825.

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Operation and Handling cost

• Warehouse
• Rental cost of warehouse (size 50,000ft2-
  0.6/ft2/month) 360,000
• Utilities and insurance 1.0 of total value of
  inventory per year. 289,880
• Rental cost of equipment
  
  1,000
• Maintenance and repair (forklift trucks)
  6,000
• 15 employees, 45,000 per year each
  675,000
• 
  
  1,330,880
• Hubs
• Rental cost (size 800 ft2 at 1.5/ft2/month)
  6 14,400
• 1 employee, 40,000 per year 6
  40,000
• Utilities and equipment 6
  1,000
• 
  332,400
• Clusters
• Rental cost (size 200 ft2 at 1.5/ft2/month)
  33 6,000
• Utilities and equipment 33
  400
• 211,200

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Operation Handling Costs
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Inventory Cost

• Warehouse
• Hubs (inventory for provisional demand )
• Clusters (inventory for maintenance demand )

• a product cannot be substituted with another
  product
• Maintenance is around 5 of total demand
• 99.99 customer satisfaction

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Inventory Cost
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Results
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Conclusions-Next steps

• Variety in products
• variability in demand
• High desirable LOS

Very high costs

• Need for Optimization
• Reallocation of hubs
• Different level of service based on price and
  demand
• Revision of frequencies, tours and strategies

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QUESTIONS ?