Fresh fruit juice (FFJ) supply chain network design
Background
The FFJ was founded in 1948 and has a production plant in Kayseri. Over the last few years, however, the
distribution system within Turkey has come under scrutiny. The current distribution centers (DCs) have
been haphazardly selected over time through mergers and acquisitions. There is no apparent logic to the
current network and the current management thinks they have too many DCs. Additionally, a small
bottler in Yalova approached FFJ to provide additional manufacturing (bottling) capabilities. Some of the
management within FFJ is happy to see this, as it is a “getting closer to the demand”. Others view it as
costly and unnecessary duplication of facilities.
You have been hired to provide some analytical support to help the FFJ management re‐design its logistics
network within Turkey. Specifically, you have been asked to answer the following questions:
1) Does FFJ have the right number of DCs in Turkey now? Should they be reduced?
2) Should FFJ source from the Yalova plant?
3) Can the current configuration handle increases in demand?
You have decided to create a network design model to help analyze the situation.
Supply Chain Details
FFJ currently operates one plant in Kayseri that processes and bottles fruit juice. The plant distributes these
juices (in pallets) to five DCs located in 5 different cities (Antalya, Manisa, Gaziantep, Kayseri, Istanbul) using
a national truckload carrier. The juices stored at these five DCs and are then distributed by a local carrier to
12 smaller regional DCs (RDCs) that in turn distribute to cities (hotels, restaurants and retailers). Each city is
dedicated to a single RDC. The RDCs are located in Adana, Antalya, Bursa, Erzurum, Eskişehir, Gaziantep,
Gümüşhane, Istanbul, Kayseri, Manisa, Muğla, Samsun.
Data
The tables below provide the related data that you have currently collected.
Distance DC to RDC
Distances (in km) between the five DCs and the twelve RDCs are in the table below. The
distance includes the expected delivery distances from that RDC to its local customers.
That is why the distance from Antalya to Antalya, for example, is 100 km and not 0.
GÜMÜŞHANE
GAZİANTEP
ERZURUM
ESKİŞEHİR
İSTANBUL
ANTALYA
SAMSUN
MANİSA
KAYSERİ
MUĞLA
ADANA
BURSA
dij
ANTALYA 552 100 541 1248 424 764 1166 718 618 428 311 905
GAZİANTEP 212 764 1040 637 889 100 736 1120 349 1096 1075 714
İSTANBUL 939 718 243 1228 324 1120 1092 100 771 529 783 734
KAYSERİ 333 618 691 632 540 349 550 771 100 832 853 453
MANİSA 884 428 290 1438 395 1096 1315 529 832 100 254 976
1
Outbound (OB) Transportation Costs from DC to RDC
Costs per pallet moving product from a DC to the RDC using the 0.1 TL per pallet/km of
local carrier.
GÜMÜŞHANE
GAZİANTEP
ERZURUM
ESKİŞEHİR
İSTANBUL
ANTALYA
SAMSUN
MANİSA
KAYSERİ
MUĞLA
ADANA
BURSA
ANTALYA 55,2 10 54,1 124,8 42,4 76,4 116,6 71,8 61,8 42,8 31,1 90,5
GAZİANTEP 21,2 76,4 104 63,7 88,9 10 73,6 112 34,9 109,6 107,5 71,4
İSTANBUL 93,9 71,8 24,3 122,8 32,4 112 109,2 10 77,1 52,9 78,3 73,4
KAYSERİ 33,3 61,8 69,1 63,2 54 34,9 55 77,1 10 83,2 85,3 45,3
MANİSA 88,4 42,8 29 143,8 39,5 109,6 131,5 52,9 83,2 10 25,4 97,6
Inbound (IB) Transportation Costs from Plant to DC
Costs of moving a pallet from plant to DC.
TL/pallet Kayseri Yalova
ANTALYA 49,44 48,4
GAZİANTEP 27,92 85,92
İSTANBUL 61,68 14,08
KAYSERİ 8 58
MANİSA 66,56 28,4
Variable costs at Plants
Costs per pallet for loading and procuring from each plant. The Kayseri Plant has unlimited capacity.
Plants Var Cost (TL/pallet)
Kayseri 20,0
Yalova 7,5
Fixed and Variable costs for DCs
Variable cost of handling pallets at DCs and fixed cost of the DC.
Distribution Var CostFixed Cost Capacity
Center (TL/pallet) (TL/week) (pallet/week)
ANTALYA 7,6 4760 150
GAZİANTEP 6,5 3400 200
İSTANBUL 10,2 7480 350
KAYSERİ 7,1 6120 250
MANİSA 7,5 5440 150
2
Current Product Flows
Actual flows from a DC to the RDC. (to use in baseline calculations)
Quantity shipped
GÜMÜŞHANE
GAZİANTEP
ERZURUM
ESKİŞEHİR
İSTANBUL
ANTALYA
SAMSUN
MANİSA
KAYSERİ
MUĞLA
ADANA
BURSA
ANTALYA 0 36 0 0 39 0 0 0 0 0 8 0 83
GAZİANTEP 40 0 0 17 0 74 0 0 0 0 0 0 131
İSTANBUL 0 0 30 0 30 0 0 162 0 0 0 0 222
KAYSERİ 27 0 26 34 0 0 25 0 50 0 0 33 195
MANİSA 0 0 0 0 0 0 0 0 0 59 10 0 69
Quantity delivered 67 36 56 51 69 74 25 162 50 59 18 33 700
To do list:
Build the model (Excel)
Create two baselines: (current system has only Kayseri plant and 5 DCs)
Baseline 1: Use current product flows -not optimized. What are the costs?
Baseline 2: optimal assignment where you keep all 5 DCs open, but use your model to calculate assignments
from DCs to RDCs.
Run the following scenarios and compare them to baselines.
Scenario 1 –Reduce to 4 DCs; only Kayseri plant is open
Scenario 2 –Reduce to 3 DCs; only Kayseri plant is open
Scenario 3 –Reduce to 2 DCs; only Kayseri plant is open
Scenario 4 - DCmin=1;DCmax=5 ; only Kayseri plant is open
Scenario 5 –Open the Yalova plant with 250 pallet/week capacity, DCmin=1; DCmax=5
Scenario 6 –Open Yalova plant with unlimited capacity; DCmin=1;DCmax=5
Scenario 7 –Demand increases by 30% (roundup to integer) and Yalova open with unlimited capacity
