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Assignment I

In this section, I provide a COG procedure for designing 1 DC for the company, and an NLP method for the 2-DC assignments.

1.1

Single-DC Location Design

Apart from what the problem has given, we only need to determine the exact geometric locations of the 6 cities. And I use longitudes for x-coordinate value and latitudes for y-coordinate value. The fundamental information is presented as follows: For an approximate COG, we just compute City Nan Chang Xi’an Beijing Shanghai Guangzhou Chengdu Longitude 115.9 109 116.4 121.4 113.2 104.1 Latitude 28.7 34.3 39.9 34.5 23.2 30.7 Volume(Vi ) 1000 800 600 400 500 300 Rate(Ri ) 0.5 0.7 0.8 1.8 1 0.6

Table 1: Fundemantal information of the 6 cities Vi Ri Xi ¯ X0 = i i

Vi Ri Yi ¯ , Y0 = i i

Vi Ri

Vi Ri

(1)

And use it to be the initial value of an exact COG, which iterates as follows: Vi Ri Xi /di i Vi Ri /di (n)

¯ Xn =

i

(n)

¯ , Yn =

i

Vi Ri Yi /di i (n)

Vi Ri /di

(n)

(2)

Results of the two COG are presented next.(see .xls file for details)

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Iteration 0 1 2 3

DC Longitude 114.8 115.1 115.3 115.3

DC Latitude 32.2 32.0 31.8 31.8

Cost(RMB) 20607 20565 20555 20552

error(0.1%) 2.7 0.1 0.0 0.0

Table 2: Iteration results for COG After 3 iterations, the algorithm terminates because the results turn stable. And from the table we see that every step the iteration improves the results, but do not differ from the approximation result too much. And it suggests the DC to be located in Hubei Province, as a graph will show.

1.2

Double-DC Location Design

In this section, I use mathematical programming method instead of COG to obtain a better performance. And this method provides not only the location of the DCs, but also a way to distribute the products. Denote x1 , y1 , x2 , y2 the x,y coordinates of the 2 DCs, and dij the Euclidean distance between DC i and city j(The 2 plants: Nan Chang, Xi’an with number 1,2, and the 4 market city, 3,4,5,6). Then Aij , the amount of product A plant i = 1, 2 sends to DC j = 1, 2, and DC i = 1, 2 sends to market city j = 3, 4, 5, 6, similar definition for Bij .ri the transport rate for city i. Therefore, we formulate the NLP:
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min z = i=1 j=1

ri dij (Aij + Bij )

s.t. A11 + A12 ≤ 1000 B11 + B12 ≤ 800 A13 + A14 + A15 + A16 ≤ A11 A23 + A24 + A25 + A26 ≤ A12 B13 + B14 + B15 + B16 ≤ B11 B23 + B24 + B25 + B26 ≤ B12 A13 + A23 + B13 + B23 ≥ 600 A14 + A24 + B14 + B24 ≥ 400 A15 + A25 + B15 + B25 ≥ 500 A16 + A26 + B16 + B26 ≥ 300 x1 , x2 , y1 , y2 within the convex hull of the 6 cities ∀Aij , Bij ≥ 0 Note dij = (xi − xj )2 + (yi − yj )2

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Thus, by solving the NLP, we get the location of the 2 DCs at x1 = 117.9, y1 = 33.5, x2 = 109.0, y2 = 34.3, suggesting 1 DC at Shanghai exactly and the other at Guangzhou exactly. Also a delivering strategy is obtained. (see .xls file for details)

Figure 1: DC solutions for comparison (with a 2-DC strategy)

From Nanchang (P1) Nanchang (P1) Xi’an(P2) Xi’an(P2)

To Shanghai (DC1) Guangzhou(DC2) Shanghai (DC1) Guangzhou(DC2)

Product A 495.5 504.5 0 0

Product B 0 0 404.9 395.1

Table 3: Plant Allocation Strategy

From Shanghai Shanghai Shanghai Shanghai

(DC1) (DC1) (DC1) (DC1)

To Beijing (M1) Shanghai (M2) Guangzhou (M3) Chengdu (M4)

Product A 95.5 400 0 0

Product B 404.9 0 0 0

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From Guangzhou Guangzhou Guangzhou Guangzhou

(DC2) (DC2) (DC2) (DC2)

To Beijing (M1) Shanghai (M2) Guangzhou (M3) Chengdu (M4)

Product A 58.3 0 248.6 504.5

Product B 41.2 0 251.4 395.1

Table 4: DC Allocation Strategy And by setting DC at two market cities, this plan has achieved an enormous cost reduce to only RMB 6423.3! (Of course, this model does not include DC setup costs) Far more better than the single-DC plan.

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Assignment II

In this section, we just intend to give an intuitive answer suggesting for Taylor’s EDN plan. I think the crux here is how to EVALUATE the value and PREDICT its future performance of this plan.

2.1

Question 1: Remain or Change?

Obviously, this is the first question we must answer. After all, Amazon is growing rapidly and earning big money. The situation is still satisfying: the revenue gained in Europe is increasing, and new technology is being introduced as well. However, as I mentioned, a not-bad current situation may be a hazard and obstacle to survive. There are many examples like Kodak, Nokia to lie on their heritage but turn out to ”die” slowly. Change, innovation are really crucial to a enterprise’s sustainable development. Therefore, a scientific method must be raised, on evaluating the potential costs and revenues for the European Distribution Network, analyzing the trade-offs and decide carefully whether, when, where, and how to launch it.

2.2

Question 2: The Role of EDN

The role also means the strategy Amazon should take for the EDN, if they adopt this plan. In my point of view, EDN may act at first only an assisting DC in case of any unpredicted circumstances. But sooner or later must it take a bigger role and finally act as Amazon’s logistics ”life line” in Europe: it should integrate the distinctive parts, now existing, and unify the transportation, distribution, repairing systems on a higher level, while must retain the subtle functions existing to accommodate the inevitable cultural differences and policy variations as well. Specifically, a larger network not only means a greater size, speed and range, but also the flexibility, service and safety of this logistic network should be enhanced.

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2.3

Question 3: How to Implement

The final question is about the implementation of EDN. To tell the truth, I fell a little bit incompetent to go through many details, but I would divide the implementation process into: redesign the whole Europe logistic network, finding location, make detailed construction plan, maneuver respective facilities, personnels, capital flow to adapt to the new EDN. The redesign of the logistic network mainly should include reconsideration the roles of respective DCs after the new EDN is constructed: for example, DC in Britain may share some service in Germany, and the new center may assume some inventory that was previously scattered. The location is extremely important, especially in logistic design. Therefore, to find a best location involves all economic, social, cultural considerations. And it must be careful, because however Amazon can change its strategies, the locations cannot be changed once set. Eventually the construction and adaptations. Constructing a EDN is rather a system engineering. Apart from the location, how to make sure the change can proceed smoothly, and any incompatibility and human errors are reduced so that the new network can be implemented as soon as possible, with the expected desired outcomes, is not an easy task. Maybe thousands of managers, senior engineers and workers will directly be entailed.

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