4/13/2016

Whatisasupplychainnetwork?
Supplychainsandsupplynetworksbothdescribetheflowand
movementofmaterials&information,bylinkingorganisationstogether
toservetheendcustomer
A SupplyChainNetwork(SCN) isanevolutionofthebasic supplychain.
Duetorapidtechnologicaladvancement,organisationswithabasic
supplychaincandevelopthischainintoamorecomplexstructure
involvingahigherlevelofinterdependenceandconnectivitybetween
moreorganisations,thisconstitutesasupplychainnetwork

Example:SupplyChain

Example:SupplyChainNetwork

Theabovediagramisanexampleofasimplifiedsupplychain;thesupplychain
showsthemovementofmaterialflowfromtheApplefarmrightthroughthe
productionprocesstotheendusers.

Theaboveexampledemonstratesasimplified
versionofasupplychainnetworkofanAppleJuice
organisation.Theorganisationwillhaveanupstream
networkandadownstreamnetwork.
Organisationsarelinkedviatwotypesofflows:
Togetacompletepictureofanorganisationssupply
chainnetwork;information&materialflowshould
bemapped. Inefficiencycanthenbelocatedand
removed.
Materialflow: Isthemovementofgoodsfromraw
primarygoods(suchasWool,TreesandCoaletc.)to
completegoods(TVs,RadiosandComputers)that
aretobedeliveredtothefinalcustomer.
Informationflow: Isthedemandfromtheend
customertoprecedingorganisationsinthenetwork.

DistributionNetwork
Adistributionnetworkisaninterrelatedarrangementofpeople,storage
facilitiesandtransportationsystemsthatmovesgoodsandservicesfrom
producerstoconsumers.
Adistributionnetworkisthesystemacompanyusestogetproducts
fromthemanufacturertotheretailer.Afastandreliabledistribution
networkisessentialtoasuccessfulbusinessbecausecustomersmustbe
abletogetproductsandserviceswhentheywantthem.

4/13/2016

TheRoleofDistribution
intheSupplyChain

FactorsInfluencing
DistributionNetworkDesign

Distribution:thestepstakentomoveandstorea
productfromthesupplierstagetothecustomer
stageinasupplychain
Distributiondirectlyaffectscostandthecustomer
experienceandthereforedrivesprofitability
Choiceofdistributionnetworkcanachievesupply
chainobjectivesfromlowcosttohigh
responsiveness
Examples:WalMart,Dell,Proctor&Gamble,
Grainger

Distributionnetworkperformanceevaluatedalong
twodimensionsatthehighestlevel:
Customerneedsthataremet
Costofmeetingcustomerneeds

Distributionnetworkdesignoptionsmusttherefore
becomparedaccordingtotheirimpactoncustomer
serviceandthecosttoprovidethislevelofservice

FactorsInfluencing
DistributionNetworkDesign

ServiceandNumberofFacilities

Elementsofcustomerserviceinfluencedbynetwork
structure:
Responsetime
Productvariety
Productavailability
Customerexperience
Ordervisibility
Returnability

Numberof
Facilities

Supplychaincostsaffectedbynetworkstructure:
Inventories
Transportation
Facilitiesandhandling
Information

ResponseTime

TheCostResponseTimeFrontier
High

InventoryCostsandNumber
ofFacilities
Inventory
Costs

LocalFG
Mix
RegionalFG
LocalWIP

Cost

CentralFG
CentralWIP
CentralRawMaterialandCustomproduction
Customproductionwithrawmaterialatsuppliers

Low
Low

ResponseTime

High

Numberoffacilities

4/13/2016

TransportationCostsand
NumberofFacilities

FacilityCostsandNumber
ofFacilities

Transportation
Costs

Facility
Costs

Numberoffacilities

Numberoffacilities

Variation in Logistics Costs and Response

Time with Number of Facilities

Total Costs Related to

Number of Facilities
TotalCosts

TotalCosts

ResponseTime

TotalLogisticsCosts
Facilities
Inventory
Transportation

NumberofFacilities

DesignsforaDistributionNetwork
ManufacturerStoragewithDirectShipping
ManufacturerStoragewithDirectShippingandIn
TransitMerge
DistributorStoragewithCarrierDelivery
DistributorStoragewithLastMileDelivery
ManufacturerorDistributorStoragewithConsumer
Pickup
RetailStoragewithConsumerPickup

NumberofFacilities

ManufacturerStoragewithDirectShipping
(DropShipping)
Mfr

Retailer
Customer
ProductFlow
InformationFlow

4/13/2016

PerformanceCharacteristicsofManufacturerStoragewithDirectShipping
Network
CostFactor

Performance

Inventory

Lowercostsbecauseofaggregation.Benefitsofaggregation arehighestforlow
demand,highvalueitems.Benefitsareverylargeifproductcustomizationcanbe
postponedatemanufacturer.

Transportation

Facilitiesandhandling

Information

Highertransportationcostsbecauseofincreaseddistance anddisaggregate
shipping.

Lowerfacilitycostsbecauseofaggregation.Somesavingonhandlingcostsif
manufacturercanmanagesmallshipmentsorshipfromproductionline.

ServiceFactor

Performance

ResponseTime

Longresponsetimeofonetotwo weeksbecauseofincreaseddistance
andtwostagesfororderprocessing.Responsetimemayvaryby
product,thuscomplicatingreceiving.

ProductVariety

Easytoprovideaveryhighlevelofvariety.

ProductAvailability

Easytoprovide ahighlevelofproductavailabilitybecauseof
aggregationatmanufacturer.

CustomerExperience

Goodin termsofhomedeliverybutcansufferiforderfromseveral
manufacturersissentaspartialshipments.

Timetomarket

Fast,withtheproduct availableassoonasthefirstunitisproduced.

Ordervisibility

Moredifficultbutalsomoreimportantfromacustomerservice
perspective.

Returnability

Expensiveanddifficulttoimplement.

Significant investmentininformationinfrastructuretointegratemanufacturerand
retailer.

PerformanceCharacteristicsofInTransitMerge

IntransitmergeNetwork

CostFactor

Factories

Intransitmerge
ByCarrier

Retailer

Customers

Performance

Inventory

Similartodropshipping.

Transportation

Somewhatlowertransportationcoststhandropshipping.

Facilitiesandhandling

Handlingcostshigherthandropshippingatcarrier;receivingcosts
loweratcustomer.

Information

Investment issomewhathigherthanfordropshipping.

ServiceFactor

Performance

ResponseTime

Similar todropshipping;maybemarginallyhigher.

Productvariety

Similar todropshipping.

ProductAvailability

Similartodropshipping.

Customerexperience

Betterthandropshippingbecauseasingleorderhastobereceived.

Customers
ProductFlow
InformationFlow

DistributorStoragewithCarrierDelivery

Factories
DistributorStorage

Timetomarket

Similartodropshipping.

Ordervisibility

Similartodropshipping.

Returnability

Similartodropshipping.

PerformanceCharacteristicsofDistributorstoragewithCarrierDelivery
CostFactor

Performance

Inventory

Higher thanmanufacturerstorage.Differenceisnotlargeforfastermoving
items.

Transportation

Lower thanmanufacturerstorage.Reductionishighestforfastermoving
items.

Facilities andhandling

Somewhat higherthanmanufacturerstorage.Thedifferencecanbelargefor
veryslowmovingitems.

Information

Simpler infrastructurecomparedtomanufacturerstorage.

ServiceFactor

Performance

Response Time

Faster thanmanufacturerstorage.

Product variety

Lower thanmanufacturerstorage.

Productavailability

Higher costtoprovidethesamelevelofavailabilityasmanufacturerstorage.

Customer experience

Better thanmanufacturerstoragewithdropshipping.

Time tomarket

Higher thanmanufacturerstorage.

Order visibility

Easier thanmanufacturerstorage.

Returnability

Easier thanmanufacturerstorage

Customers

ProductFlow
InformationFlow

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4/13/2016

PerformanceCharacteristicsofDistributorStoragewithLastMileDelivery

DistributorStoragewithLastMileDelivery

CostFactor

Performance

Inventory

Higherthandistributorstoragewithpackagecarrierdelivery.

Transportation

Veryhighcostgivenminimal scaleeconomies.Higherthanany
otherdistributionoption.

Facilitiesandhandling

Facilitycostshigherthanmanufacturerstorageordistributor
storagewith packagecarrierdelivery,butlowerthanachainof
retailstores.

Information

Similartodistributorstoragewithpackagecarrierdelivery.

Factories

Distributor/
Retailer
Warehouse

Customers

ProductFlow
InformationFlow

Servicefactor

Performance

Responsetime

Veryquick.Samedaytonextdaydelivery.

Productvariety

Somewhatlessthandistributorstoragewithpackagecarrierdelivery
butlargerthanretailstores.

Productavailability

Moreexpensive toprovideavailabilitythananyotheroptionexcept
retailstores.

Customerexperience

Verygood,particularlyforbulkyitems.

Timetomarket

Slightlyhigherthandistributorstoragewithpackagecarrierdelivery.

Ordertraceability

Lessofanissueand easiertoimplementthanmanufacturerstorageor
distributorstoragewithpackagecarrierdelivery.

Returnability

Easiertoimplementthanotheroptions.Harderandmoreexpensive
thanaretailnetwork.

ManufacturerorDistributorWarehouseStoragewithConsumer
Pickup
CustomerFlow
ProductFlow
Retailer

Information
Flow

Factories

CrossDockDC

PickupSites

Customers

PerformanceCharacteristicsofNetworkwithConsumerPickupsites
CostFactor

Performance

Inventory

Can matchanyotheroption,dependingonthelocationofinventory.

Transportation

Lower thantheuseofpackagecarriers,especiallyifusinganexisting
deliverynetwork.

Facilities andhandling

Facility costscanbeveryhighifnewfacilitieshavetobebuilt.Costsare
lowerifexistingfacilitiesareused.Theincreaseinhandlingcostatthe
pickupsitecanbesignificant.

Information

Service Factor

Performance

Responsetime

Similartopackagecarrierdelivery withmanufacturerordistributorstorage.
Samedaydeliverypossibleforitemsstoredlocallyatpickupsites.

Productvariety

Similartoother manufacturerordistributorstorageoptions.

Product availability

Similartoother manufacturerordistributorstorageoptions.

Customer experience

Lowerthanother optionsbecauseofthelackofhomedelivery.Inareaswith
highdensityofpopulation,lossofconveniencemaybesmall.

Time tomarket

Similar tomanufacturerstorageoptions.

Order visibility

Difficult butessential.

Returnability

Somewhat easiergiventhatpickuplocationcanhandlereturns.

Significant investmentininfrastructurerequired.

4/13/2016

FrameworkforNetworkdesignDecisions
CompetitiveStrategy
InternalConstraints
Capital,GrowthStrategy
ProductionTechnologies
Cost,scale/scopeimpact
Competitive
Environment
AggregateFactorsand
Logisticscosts

Phase1
SC
Strategy

FrameworkforNetworkDesignDecisions

Phase I: Design a Supply Chain Strategy Starts with a clear definition of

the firms competitive strategy as the set of customer needs that the
supply chain aims to satisfy. Managers must forecast the likely evolution
of global competition and whether competitors in each market will be
local or global players. Constraints on available capital and whether
growth will be accomplished by acquiring existing facilities, building new
facilities or partnering.

GlobalCompetition

Tariffs&TaxIncentives
Phase2
Reg
Facility
Conifig

Phase3
Desirable
sites

RegionalDemand
Size,growth,
homogeneity
Political,ExchangeRate
andDemandRisk
AvailableInfra
structure

ProductionMethods
Factorcosts
Phase4

LogisticsCost

Location
Choices
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Phase II: Define the Regional Facility Configuration Forecast of the

demand by country. Include a measure of the size of the demand as well
as a determination of whether the customer requirements are
homogenous or variable across different countries. Homogenous
requirements favor large consolidated facilities whereas requirements that
vary across countries favor smaller, localized facilities. If economies of
scale are significant in reducing costs, it may be better to have few
facilities serving many markets. If economies of scale are not significant , it
may be better for each market to have its own facility. They must identify
demand risk, exchange rate risk, political risk, tax incentives and regional
tariffs for local production. They must also decide whether a facility needs
to be located close to or far from a competitors facility.

SiteSelection:WheretoLocate

Modelsforfacilitylocationandcapacity
allocation

Infrequentbutimportant

Goalistomaximizetheoverallprofitabilitywhileprovidingcustomerswith
appropriateresponsiveness.

beingintherightplaceatthe
righttime

Revenuescomefromsaleofproducts,whereascostarisesfromfacilities,labor,
transportation,materialandinventories.
Amanagermustconsidermanytradeoffsduringnetworkdesign.Ex:building
manyfacilitiesreducestransportationcostandprovidesfastresponsetime,butit
increasesthefacilityandinventorycost.
Managersusenetworkdesignmodelsin2situations:
1. Todecideonlocationswherefacilitieswillbeestablishedandthecapacity
tobeassignedtoeachfacility.(longterm)
2. Modelsareusedtoassigncurrentdemandtotheavailablefacilitiesand
identifylanesalongwhichproductwillbetransported.(annualbasis)

13April2016

Phase III: Select a Set of Desirable Potential Sites Hard infrastructure

requirements include the availability of suppliers, transportation services,
communication, utilities and warehousing infrastructure. Soft infrastructure
facilities include the availability of skilled workforce, workforce turnover
and the community receptivity to business and industry.
Phase IV: Location Choices Maximize total profits taking into account the
expected margin and demand in each market, various logistics and facility
costs, and the taxes and tariffs at each location.

35

Mustconsiderotherfactors,
especiallyfinancialconsiderations
Locationdecisionsmademore
oftenforserviceoperationsthan
manufacturingfacilities
Locationcriteriaforservice
accesstocustomers

Copyright 2011 John Wiley & Sons, Inc.

Locationcriteriafor
manufacturingfacility

natureoflaborforce
laborcosts
proximitytosuppliersandmarkets
distributionandtransportationcosts
energyavailabilityandcost
communityinfrastructure
qualityoflifeincommunity
governmentregulationsandtaxes

Supplement 7-36

4/13/2016

NetworkOptimizationModels

DemandAllocationModel

Allocatingdemandtoproductionfacilities
Locatingfacilitiesandallocatingcapacity

Whichmarketisservedby
whichplant?
Whichsupplysourcesareused
byaplant?
xij =Quantityshippedfromplant
siteitocustomerj

KeyCosts:
Fixedfacilitycost
Transportationcost
Productioncost
Inventorycost
Coordinationcost

n m

Min cij xij

i 1 j 1

s.t.
n

xij D j

i 1
m

xij K i
j 1

xij 0
Whichplantstoestablish?Howtoconfigurethenetwork?

GlobalSupplyChainFactors

PlantLocationwithMultipleSourcing
yi =1ifplantislocated
atsitei,0otherwise
xij =Quantityshipped
fromplantsiteito
customerj

n m

i 1

i 1 j 1

Min f i y i cij xij

s.t.
n

xij D j

i 1
n

xij K i y i
j 1

Governmentstability
Governmentregulations
Political&economicsystems
Economicstability&growth
Exchangerates
Culture
Export/importregulations,duties
&tariffs
Rawmaterialavailability

y i k ; y i {0,1}

Climate
Number&proximityof
suppliers
Transportation&distribution
system
Laborcost&education
Availabletechnology
Commercialtravel
Technicalexpertise
Crossbordertraderegulations
Grouptradeagreements

i 1

Supplement 7-40

LocationIncentives

LocationAnalysisTechniques

Tax credits
Relaxed government regulation
Job training
Infrastructure improvement
Money

Location factor rating

Center-of-gravity
Load-distance

Supplement 7-41

Supplement 7-42

4/13/2016

LocationFactorRating
LocationFactorRating
Inthe locationfactorrating system,factorsthatareimportantinthe
locationdecisionareidentified.Eachfactorisweightedfrom0to
1.00toprioritizethefactorandreflectitsimportance.Asubjective
scoreisassigned(usuallybetween0and100)toeachfactorbasedon
itsattractivenesscomparedwithotherlocations,andtheweighted
scoresaresummed.Decisionstypicallywillnotbemadebasedsolely
ontheseratings,buttheyprovideagoodwaytoorganizeandrank
factors.

Identify important factors

Weight factors (0.00 - 1.00)
Subjectively score each factor (0 - 100)
Sum weighted scores

Supplement 7-44

LocationFactorRating

LocationFactorRating
SCORES (0 TO 100)
LOCATION FACTOR
Labor pool and climate
Proximity to suppliers
Wage rates
Community environment
Proximity to customers
Shipping modes
Air service

WEIGHTED SCORES

WEIGHT

Site 1

Site 2

Site 3

Site 1

Site 2

Site 3

.30
.20
.15
.15
.10
.05
.05

80
100
60
75
65
85
50

65
91
95
80
90
92
65

90
75
72
80
95
65
90

24.00
20.00
9.00
11.25
6.50
4.25
2.50
77.50

19.50
18.20
14.25
12.00
9.00
4.60
3.25
80.80

27.00
15.00
10.80
12.00
9.50
3.25
4.50
82.05

Site 3 has the

highest factor rating

Weighted Score for Labor pool and climate for

Site 1 = (0.30)(80) = 24

Supplement 7-45

CenterofGravityTechnique

Supplement 7-46

CenterofGravityTechnique

Locate facility at center of movement in

geographic area
Based on weight and distance traveled;
establishes grid-map of area
Identify coordinates and weights shipped for
each location

Supplement 7-47

Ingeneral,transportationcostsareafunctionofdistance,
weight,andtime.
The centerofgravity, or weightcenter, techniqueisa
quantitativemethodforlocatingafacilitysuchasawarehouse
atthecenter ofmovementinageographicareabasedon
weightanddistance.
Thismethodidentifiesasetofcoordinatesdesignatinga
centrallocationonamaprelativetoallotherlocations.

Supplement 7-48

4/13/2016

CenterofGravityTechnique

GridMapCoordinates
y

2 (x2, y2), W2

y2

x=

3 (x3, y3), W3

y3

x1

y=

x2

x3

Wi

i=1

1 (x1, y1), W1

yiWi

i=1

y1

xiWi

i=1

Wi

i=1

where,
x, y = coordinates of new facility at
center of gravity
xi, yi = coordinates of existing facility i
Wi = annual weight shipped from
facility i

TheBurgerDoodlerestaurantchainpurchases
ingredientsfromfourdifferentfoodsuppliers.The
companywantstoconstructanewcentral
distributioncenter toprocessandpackagethe
ingredientsbeforeshippingthemtotheirvarious
restaurants.Thesupplierstransportingredient
itemsin40foottrucktrailers,eachwithacapacity
of38,000pounds.Thelocationsofthefour
suppliers,A,B,C,andD,andtheannualnumberof
trailerloadsthatwillbetransportedtothe
distributioncenter areshowninthefollowing
figure:

Supplement 7-49

CenterofGravityTechnique

Supplement 7-50

CenterofGravityTechnique

y
700
600

(135)

500
Miles

x
y
W

C
(105)

A
200
200
75

B
100
500
105

C
250
600
135

D
500
300
60

xW
i i

x=

i=1
n

(200)(75) + (100)(105) + (250)(135) + (500)(60)

= 238
75 + 105 + 135 + 60

(200)(75) + (500)(105) + (600)(135) + (300)(60)

= 444
75 + 105 + 135 + 60

W
i

i=1

400

300
200

(60)

yW
i i

(75)

y=

i=1
n

W
i

100

i=1

100 200 300 400 500 600 700 x

Miles

Supplement 7-51

LoadDistanceTechnique

CenterofGravityTechnique
y
700
600

Miles

500

C
(135)

B
(105)

400
300
200

x
y
W

A
200
200
75

B
100
500
105

C
250
600
135

D
500
300
60

Center of gravity (238, 444)

D
(60)

(75)

100
0

Supplement 7-52

100 200 300 400 500 600 700 x

Miles

Supplement 7-53

Avariationofthecenterofgravitymethodfordetermining
thecoordinatesofafacilitylocationisthe loaddistance
technique. Inthismethod,asinglesetoflocation
coordinatesisnotidentified.Instead,variouslocationsare
evaluatedusingaloaddistancevaluethatisameasureof
weightanddistance.
Theloaddistancetechniqueisappliedbycomputingaload
distancevalueforeachpotentialfacilitylocation.The
implicationisthatthelocationwiththelowestvaluewould
resultintheminimumtransportationcostandthuswouldbe
preferable.

Copyright 2011 John Wiley & Sons, Inc.

Supplement 7-54

4/13/2016

LoadDistanceTechnique

LoadDistanceCalculations
n

Compute(LoadxDistance)foreachsite
Choosesitewithlowest(LoadxDistance)
Distancecanbeactualorstraightline

ld

LD =

i=1
where,
LD =

load-distance value

li =

load expressed as a weight, number of trips or units

being shipped from proposed site and location i
distance between proposed site and location i

di

di

(xi - x)2 + (yi - y)2

where,
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility

Copyright 2011 John Wiley & Sons, Inc.

Supplement 7-55

LoadDistance

LoadDistance
Potential Sites
Site
X
1
360
2
420
3
250

Y
180
450
400

A
200
200
75

X
Y
Wt

Suppliers
B
C
100
250
500
600
105
135

Site 2 dA = 333
D
500
300
60

dB =

(xA - x1)2 + (yA - y1)2

)2

(xB - x1 + (yB - y1

dC = 434.2

)2

dD = 269.3

ld
i

i=1

(200-360)2 + (200-180)2 = 161.2

(100-360)2

Compute load-distance

LD =

Compute distance from each site to each supplier

Site 1 dA =

dB = 323.9 dC = 226.7 dD = 170

Site 3 dA = 206.2 dB = 180.3 dC = 200

(500-180)2

= 412.3

dD = 184.4

Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063

Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789
Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*

* Choose site 3

ImpactofUncertaintyinNetworkDesign
Supplychainnetworkdesigndecisionsinclude
Facilitylocation(numberoffacilities)
Capacityallocation(sizeofeachfacility)
Marketandsupplyallocation(distribution)

ImpactofUncertaintyinNetworkDesign
Hence,itissuggestedthatwhenwemakenetworkdesigndecisions,
we mustconsiderbothsupplyanddemanduncertaintyandthe
financialuncertainty
Ifenoughcareisnottaken,theimpactof uncertaintywillmakeit
operationaltobevarycostlyandcomplex.

These decisions, once made, cannot be changed easily

in the short-term, they remain in place for several years
Demand, prices, exchange rates, and the competitive
market change constantly
A decision that looks very good under the current
environment may be quite poor if the situation changes

10

4/13/2016

EvaluatingNetworkDesignDecisionsUsing
DecisionTrees

ImpactofUncertaintyinNetworkDesign
Supplier

Manufacturer

Distributor

Retailer

Customer

Building flexibility into supply chain operations allows

the supply chain to deal with uncertainty more
effectively

Amanagermustmakemanydifferentdecisionswhen
designingasupplychainnetwork
Manyoftheminvolveachoicebetweenalongterm(orless
flexible)optionandashortterm(ormoreflexible)option
Ifuncertaintyisignored,thelongtermoptionwillalmost
alwaysbeselectedbecauseitistypicallycheaper
Suchadecisioncaneventuallyhurtthefirm,however,
becauseactualfuturepricesordemandmaybedifferent
fromwhatwasforecastedatthetimeofthedecision
Adecisiontree isagraphicdevicethatcanbeusedto
evaluatedecisionsunderuncertainty
662

DecisionTrees

DecisionTrees

Adecisiontreeisagraphicdeviceusedtoevaluate
decisionsunderuncertainty
1.
2.
3.
4.
5.
6.

Identifythedurationofeachperiodandthenumberoftime
periodsT tobeevaluated
Identifythefactorsassociatedwiththeuncertainty
Identifytherepresentationofuncertainty
Identifytheperiodicdiscountratek
Representthetree,identifyingallstatesandtransition
probabilities
StartingatperiodT,workbacktoperiod0identifytheexpected
cashflowsateachstep

DecisionTreeMethodology
1. Identifythedurationofeachperiod(month,quarter,etc.)and
thenumberofperiodsToverwhichthedecisionistobe
evaluated.
2. Identifyfactorssuchasdemand,price,andexchangerate,whose
fluctuationwillbeconsideredoverthenextTperiods.
3. Identifyrepresentationsofuncertaintyforeachfactor;thatis,
determinewhatdistributiontousetomodeltheuncertainty.
4. Identifytheperiodicdiscountratekforeachperiod.
5. Representthedecisiontreewithdefinedstatesineachperiod,as
wellasthetransitionprobabilitiesbetweenstatesinsuccessive
periods.
6. StartingatperiodT,workbacktoperiod0,identifyingthe
optimaldecisionandtheexpectedcashflowsateachstep.
Expectedcashflowsateachstateinagivenperiodshouldbe
discountedbackwhenincludedinthepreviousperiod.

By
Pon Vivek Narayan
Venkatesh
Regan

11