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Posts Tagged ‘inventory’

Using Kanban in Spanish Chemistries

The chemistry is fulled of products with a high value to weight (very expensive and low weight). They also have a large variety so the holding cost is terrible high: Low demand and high holding costs means that EOQ is low so you order one by one.

So chemistries needed a system to control their inventory and to accurately get provided. Then they decided to use Kanban. It consists on a set of cards related to each product. There was a card at the end of each stock there was a card at the end of each product. They get the cards and send it to the warehouse and move it back to the pharmacy. The card identifies both the medicament and the chemistry. Each product has its own card on the place where it is. With the card you do 2 things:

  • You communicate: You give it to your supplier
  • You control your inventory: You know when you need to reorder

The chemistry is visited every 4 hours by the supplier, getting the quantity of each product needed (according to the number of cards).

Nowadays the movement of the card is not necessary because of the use of the bar codes and internet. The system automatically knows what the chemistry sells and directly communicates with the warehouse.

Categories: Inventory control Tags:

Routing problems in transportation

April 10, 2010 2 comments

What is a routing problem?

According to Ann Campbell from University of Iowa, the objective of routing problems in transportation is “to minimize the distribution costs during the planning period without causing stockouts at any of the customers”.

The most general case can be modelized by the Vehicle routing problem that broadly speaking consists on:

  • Service a number of customers.
  • Fleet of vehicles
  • Looking for an optimal solution

It can be applied to several fields. In logistics, for instance, we could use it on invenvtory routing. This is an interesting case study of inventory routing:

“The Inventory Routing Problem (IRP) is concerned with the repeated distribution of a set of products from several facilities to a set of customers over a given planning horizon. The facilities produce these products at given rates and have ample storage capabilities for the products. The customers consume products at a given rate and have limited storage capabilities. A fleet of vehicles is available at each of the facilities as well as a set of drivers. The objective is to minimize the overall costs during the planning period.”

You can get the full case study including some data sheets by clicking here.

How can we solve a routing problem?

There are different ways to solve a routing problem, like:

Using graphs:

Using a graph is a very good way to represent this type of problems. Besides representing it graphically, there are other 2 interesting representations (Introduction to Algorithms Thomas H. Cormen, Charles E. Leiserson and Ronald L. Rivest):

  • As a collection of adjacency lists: It provides a compact way to represent sparse graphs (|E| is much less than |V|^2).
  • Adjacency matrix: It’s use when the graph is dense (|E| is close to |V|^2).

There is open source software to represent graphs. I like quite a lot one called Grafos. Regardless the webpage is in Spanish,  it’s quite good and simply to use. You can download it by clicking here.


General cases:

Routing vehicles:

Travel salesman problem:

Travel salesman with m routes:

Specific cases of the routing problem:

There are other interesting specific cases, like when you don’t know with certainty when planning customers loads demands. That one is called vehicle routing problem with stochastic demand. Here you can find some articles about this topic:

Read more…

Categories: Distribution Tags: , ,

Basic inventory principles

March 12, 2010 1 comment

First it’s important to remarck that inventory control is an inexact science. This will give us an introduction to  basic inventory principles:

Importance of inventory costs.

What are the typical costs involved? (inventory cost drivers):

  • Facility costs
  • Human capital: The cost of labor to maintain storage
  • Finance costs.
  • Management costs.
  • Procurement costs: costs of purchasing.
  • Inventory turnover.
  • Sock accuracy
  • Service levels: critical goods, non critical goods, scheduled delivery

Read more…

Categories: Inventory control Tags: , ,