Vestel Case
Supply chain Management




Analyzing Smaller Scale Vestel System
Distribution plan for Vestel
Assumptions for calculations:
1. The truck can be filled to 100% of the capacity. The shape of the items to be shipped is not a constraint. 2. Handling costs such as unloading the shipment is not considered. In order to find the distribution plan for Vestel that yields to the lowest transportation cost we have analyzed different scenarios taking into account the following: * The number of units that have to be shipped to each of the cities * The volume of each type of product: Televisions 1vol./unit, Refrigerator 3vol./unit. * The capacity of the different trucks available large truck: 18 vol. and cost 10$/unit dist., small truck: 10 vol. and cost 6$/unit dist. Knowing the number of units to be shipped to each city and the volume per type of product, the total volume to be shipped to each city can be calculated. Adding 13 to Ankara, 7 to Adana and 8 to Erzurum, gives a total volume of 28. With this information, three different scenarios have been analyzed: * Scenario 1:
* Route: 1 large truck to Ankara – Erzurum / 1 small truck to Adana –Erzurum In this first scenario the approach followed was using one large truck to deliver all the products for Ankara (13 units of volume) and using the remaining space to ship product for Erzurum (5 units of volume: 1 refrigerator and 2 televisions). Then using a small truck to deliver all the products to Adana (8 units of volume) and using the remaining space to ship product for Erzurum. (2 units of volume: 2 televisions) The large truck travels 8 distance units at a cost of 10$/dist_units and the small truck travels 8 distance units and a cost of 6$/dist_units. This yields to a total cost of $128. 8*$10+8*$6=$128
This approach seemed to be good since the load has been optimized using large trucks when possible, taking into account that the cost per unit of volume is lower with the larger trucks. Besides, the capacity utilization of the trucks is 100% when they leave Manisa. However, the main problem of this approach is that the capacity utilization of the trucks drops significantly for the second stage of the shipment once they have delivered the product in the first city. In order to see that quantitatively, lets analyze that for the large truck: This truck has a utilization of 100% from Manisa to Ankara (distance: 3). However, for the second stage from Ankara to Erzurum (distance: 5) the utilization is just 5 units of volume for a total capacity of 18 units of volume, what gives an utilization of 28% (5/18). The average utilization of the truck for the whole shipment can be calculated taking into account the distance and capacity utilization for each of the stages; for a distance of 3 the utilization is 100% and for a distance of 5 the utilization is 28%, this yields to an average utilization of 55% 3*100%+5*28%3+5=55%
Following the same logic, the average utilization for the small truck is 100% in the first stage and 30% in the second stage what yields to an average utilization of 74%. In order to calculate the average truck utilization of each of the scenarios, the distance travelled per truck has been taken into account. In this scenario, the large truck travels a distance of 8 and the small truck also travels a distance of 8. That yields to an average capacity utilization of 64%. (8*55%+8*74%)/(8+8)=64%
* Scenario 2:
* Route: 1 large truck to Ankara – Adana / 1 small truck to Adana –Erzurum This approach uses the same trucks than in the first scenario (1 large truck and 1 small truck) but the distance travelled has been optimized. In this case, the large truck is travelling first to Ankara (13 units of volume) using the remaining space to ship products for Adana (5 units of volume: 1 refrigerator and 2 televisions). Using this route, the large truck is travelling 6 distance units instead of...