Logistics Management

Dr. Jagathy Raj V. P.

Associate Professor
School of Management Studies
Cochin University of Science and Technology
Kochi - 22

Every company dreams of

achieving the Seven Rs

Delivering

The right product, in

The right quantity, and
The right condition, at
The right place, at
The right time, for
The right customer, at
The right cost

The turbulent business environment

High Uncertainty
Rapid changes
The demand for better quality products at
lower cost at a shorter supply lead time
Short product life cycle
Globalization of markets
Formation of trade blocks
Shifting of Manufacturing bases to lower
labour cost areas
Global sourcing supplies

Logistics Management

Effective logistics Management

alone can make this possible

Logistics
In recent years, Logistics has
increased management attention.
Corporations are
competitive weapon
global competition
environment.

received

using logistics as a
to meet the challenges of
and turbulent business

The focus of modern business

Maximizing the ROI with service-cost performance
as

good

as

(or

perhaps

better

than)

the

competitors is the primary objective of any

company manufacturing and selling goods to meet
customer needs
Satisfying the needs of the customer at least
cost
Maximize the ROI

Introduction
Previously we have to wait for long time for getting
premium goods
Twentieth Century Due to Metamorphic environmental
transformation in the business world which results
Lot of growth opportunities as well more complicated
business problems threatening even survival on the
other.
Ex: Numerous cars, two wheelers etc

Introduction
Reasons- this is the outcome of
Heavy industrialization
Liberalization policy
Rapid innovation in the field of Science and
Technology followed by their easy transfer
Globalization of world market

Introduction
As a result consumers are becoming very
selective and conscious about their purchase
decisions, especially value for money and
convenience.
Distributors/retailers are also very conscious
about their ROI due to the availability of huge
attractive trade opportunities

Introduction
So in the competitive environment, it is important
for every firm to generate the highest level of
customer satisfaction while delivering the highest
value to the shareholders.
So in such an erratic market place, firms need to
put their best effort towards formulating market
oriented and customer focused strategies

Introduction

They are increasing their product portfolio

Quick information sharing
Prominent display, read and intact delivery
24 hours on-the-spot after sales service,
Eagerness to sort out problems and complaints
in order to satisfy their consumers with a
difference than competitors.

Introduction
Additionally to generate the highest value to
shareholders, firms need to have cost-effective
best market offering
For this they need to have an improvement of
productivity and profitability by means of optimum
utilization of resources, avoiding idle time for any
of them

Introduction
To attain all of the above goals, firms have to offer
best quality product at a reasonably least price as
and when required, avoiding a stock-out situation
which has given impetus to the concept of
Logistics Management
It has ability to ensure a consistency in the quality,
tremendous cost saving potential and making
goods at the place of requirements in time

Logistics
US Air force Technical report(1981) defines this term as the
science of planning and carrying out the movement and
maintenance of forces deals with
Design and development, acquisition, storage, movement,
distribution, maintenance, evacuation and disposition of
materials
Movement, evacuation and hospitalization of personnel.
Acquisition or contruction, maintenance, operation, disposition
of facilities,
Acquisition or furnishing of services

Act as a supportive system which reflects the practical art

of moving armies and materials engaged in combat to
achieve the desires results

Logistics
In the Industrial and commercial world.
Logistics has a acquired wider meaning
It covers activities for the material flow from
the source to the processing facilities, and
subsequent distribution of finished goods
from there to the ultimate users.

Logistics
A survey conducted by Fawcett and Clinton
shows that more than 80.2 percent of the
leading edge firms and

More than 75.8 percent of the other firms

include logistics in their strategic planning
process.

Independent Business Function

Manufacturing
Inventory
Control
Sales
Procurement

Objective
Maximization
of Profit by
Sales volume

Distribution

Out Come
Aggressive
preaching
Skill

Limited Integrated Business

Manufacturing
Management

Material
Management

Physical
Distribution and
Sales
Managemt

Objective

Output

Cost Control

Price based
competition

Internal Integrated Business

Function (Logistics Management

Manufacturing
Management

Objective
Maximization
of profitable Sales
Values and
Cost Reduction

Material
Management Marketing and
Distribution
Management

OUTPUT

Increased
Productivity.
Profitability and
Market Shares

External Integrated Business

Function (SCM)

Objective
Core
Competency

V
E
N
D
E
R
S

L
O
G
I
S
T
I
C
S

C
U
S
T
M
E
R
S

Output
Customer Values
and Harmonics
Relations
Relationships

Logistics
Logistics is responsible for managing the
acquisition,

movement

and

storage

of

materials, parts and finished goods (together

with related information flows) through an
organization and its marketing channels to
meet

customer

expectations

companys profit objective.

and

the

Logistics

Logistics has been recognized not only as a group of important

functions, but as function that have important strategic impacts

as well
In the United States, annual expenditure on non-military logistics

are estimated as 11 percent of the Gross National Product.

With logistics cost of 30 percent of goods sold, not uncommon

for US manufacturing firms potential saving in logistics

coordination cannot be ignored.
Logistics strategy must be integrated with corporate strategy

because corporate strategy

Logistics Management
The Council of Logistics Management defines

Logistics Management as:

The process of planning, implementing and
controlling the efficient, cost effective flow
and storage of raw materials, in-process
inventory, finished goods and related
information from point of origin to point of
consumption for the purpose of conforming to
customer requirements

A Process view of Logistics Management

Flows in a Logistics System

Flow of Materials
Merchandise flow
Money flow
Information flow

Logistics Management
Logistics Management is an integrating function
which coordinates and optimizes all logistics as
well as integrates logistics activities with other
functions including marketing, sales,
manufacturing, finance and IT
It Includes the design and administration of system
to control the flow of materials, work-in-process
and finished inventory to support business unit
strategy

Visual Representation of Integrated Logistics Management

INBOUND LOGISTICS

Transport

Transport

Supplier

Raw Materials Source

Consolidation
Warehouse

Material
Handling

Transport

Raw materials
or Parts Storage

Supplier

Raw Materials Source

INTERNAL LOGISTICS

Material
Handling
Manufacturing
Stage I

Manufacturing
Stage II

Manufcaturing
Manufacturing
Stage N

N Stages

OUTBOUND LOGISTICS

Retailer

Local delivery

Finished Goods

Material
Handling

Warehouse

Delivery

Transport
Finished Goods
Storage

Customers
Retailer
Note:

Material Flow

Local delivery

Wholesaler

Information Flow

Delivery

Components
Inbound Logistics
Internal Logistics
Outbound Logistics

Inbound Logistics
Sourcing and vendor selection for supply of raw
materials and manufacturing parts
Inbound transportation and procurement planning
Raw materials warehousing including
consolidation warehousing
Management of Inventory
Information system for effective support strategic
alliances with the supplies and transporters

Internal Logistics
Capacity Planning Operational planning
Production planning
Materials Requirement planning
Shop floor control
Management of in-process inventory
Supporting material handling facilities
planning and their deployment etc

Out bound Logistics

Outbound logistics system is concerned with the flow of
finished products from factory warehouse to the customers
through a distribution network comprising:
The wholesalers
Distributors
Retailers
Regional warehouses
Transporters
The inventory at all levels
Sales order processing
Sales return processing
Accounts receivable realization and
Counter flow of information from the customers to the factory

Logistics Management
Logistics is the process of strategically
managing the procurement, Movement and
storage of materials, parts and finished
inventory (and the related information)
through the organization and its marketing
channels in such a way that current ans
future profitability are maximized through
the cost effective fulfillment of order.

Logistics Management
Logistics Management refers to designing,
developing, producing and operating an
integrated system which is responds to
customer expectations by making available
the required quantity of required quality
products as and when required to offer best
customer service at the least costs

Logistics Management
For Service Industry
Defined as the process of coordinating non martial
activities necessary to the fulfillment of the service in a
cost and customer service effective manner
It is an internal integration of interrelated managerial
function to ensure a smoth flow of raw materials from the
point of inception to the first product point, semi-finished
goods within production process and finished goods from
the last point the point of consumption

Integrated Logistics Management

Defined as the process of anticipating
customer needs and wants acquiring the
capital, material, people. Technologies and
information necessary to meet those needs
and wants, optimizing the goods-or
services, producing network to fulfill
customer requirements; and utilizing the
network request in a timely way

Goals of Logistics
system
Provide a Targeted Level of Customer
Service at the Least Cost.
Maximize Profits, Not Sales.

The Value Chain (Porter[1985])

Major features of For

Logistics Management
Smooth flow of all types of goods such as raw mareials,
work-in-process and finished goods
Meeting customer expectations about product and related
information requirements
Real time flow of information about products demand and
availability
Delivery of quality product in required quantity without
excessive safety stock
Best possible customer service at the least possible cost
Integration of various managerial functions for optimization
of resources
Movement and storage of goods in appropriate quantity
Enhancement of productivity and profitability

Integrated Logistics Management

Integrated Logistics is viewed as a method
to create a sustainable competitive
advantage over the company's competition
Logistics strategy must be integarted with
corporate strategy because corporate
strategy sets the basic requirement to the
Logistics system of a strategy

Integrated Logistics Management

The logics process is becoming more demanding and
complex, so is the business environment in which the
logistics has to operate
Highlights seven critical factors including that are
contributing to the complexity of logistics system
operations

Escalating customer demand

Cycle time reduction
Globalization
Restructuring
Supply Chain Partnerships
Productivity pressures and
Environmental awareness

Integrated Logistics Management

Revolution in Communication and
Information Technologies have opened new
avenues for integrating raw material supply,
Manufacturing support and Physical
distribution of logistics

Relative Importance Depends on

Raw materials Sources and
Volume
Capital Investment
Distribution Volume and
Territory

Competitiveness depends on
Reducing raw materials input costs through
sourcing and inbound logistics optimization
Increasing throughput from the plant
Choice of cost effective Technology
Reducing outbound Logistics cost

The following objectives are realized

Increased velocity of flow
Quick response
Reduced cost
JIT Supply
JIT Distribution

Need for integration

Through effective Management
Infrastructure
Machines
Process
Technology and
People

Gaining Competitive Advantage

through Logistics

Important Logistics Activities and Their

Relations to Key Business Goals
Key Business
Goals

Major
Variables

Customer
Service

Return on
Capital Employed

Growth
Market Share
High level of service

Sales
Volume

Purchasing
Costs

Important Logistics
Activities

Other
Costs

Production
Costs

Logistics
Costs

Working Capital

Fixed
Asset

Inventory

Facilities

Structure and Functions

of
Logistics

Logistics has been recognized not only as a group of important functions,

but as functions that have important strategic impacts as well

Strategic Logistics Planning

Strategic logistics planning is essentially
concerned with the deployment and management
of logistics resources to met the desired cost
effective service performance of the system
This may involve, number and location of
warehouses, mode and carrier selection, Inventory
positioning, inventory planning, sub contracting of
services, sourcing, equipment and facilities
planning, order management and Infromation
systems planning etc

Strategic Logistics Planning

This is also includes such decisions as location and
capacities of company owned plants and warehouses,
acqusition or long term hiring of carriers like ships barges,
trucks etc, acquisition of matrial handling system and
facilities, balancing facilities to maximize throughput and
flexibility and introduction of system to help, reductions in
response time and in process inventory
Choice of supply, transport mode, strategic alliance with
both suppliers and customers also form parts of these
strategic logistics planning process.

Strategic Logistics Planning

The process of strategically managing the acquisition,
movement and storage of materials, parts, finished goods
inventory, and related information flows through the
organization and its marketing channel in such a way that
current and future profitability is maximized through the
cost-effective fulfillment of orders.

Main objectives of logistics planning are:

Cost reduction: - This strategy is directed towards minimizing the
variable costs associated with the movement and storage. The best
strategy is to evaluate the alternative courses of action and select the
optimum one keeping profit maximization as the prime goal in mind.
Capital reduction: - This strategy is directed towards minimizing the
level of investment in the logistics system.
Service improvements: - This strategy recognizes that the revenue is
a function of the logistics service provided and develops an effective
service strategy that is different from the one provided by competitors.
Logistics has significant impact on these important
corporate performance objectives

Strategic Logistics Planning

Maximizing the ROI with service-cost
performance as good as(or perhaps better
than) the competitors is the primary
objective of any company manufacturing
and selling goods to meet customer needs

The logistics planning is particularly

crucial to those industries

Volume of raw materials and finished goods

handled is very high and freight including
handling cost constitutes a significant
portion of the sales price.

Capital intensive manufacturing technology

that requires high capacity utilization to
spread capital cost over larger volume

Asset
deployment
in
raw
materials
procurement and finished goods distribution
is considerable.

Logistics planning includes

Supply Chain Planning

Shipment Planning
Transport System Planning
Vehicle Routing and Scheduling
Warehousing

A sound strategic logistics plan for a

manufacturing company must aim at:
Minimizing the landed cost of inputs through strategic
sourcing, consolidation warehousing and carrier
selection
Minimizing the procurement lead time and raw
materials inventory through better information and
procurement systems.
Increasing the productivity of the manufacturing unit
through appropriate choice of technology, balancing of
facilities and optimization of internal logistics support
including material handling facilities
Contd

A sound strategic logistics plan for a

manufacturing company must aim at:
Decreasing the finished goods inventory
through reduced manufacturing response time.
Minimizing the assets including inventory
deployed in the distribution channel
Minimizing the delivery lead-time through
efficient customer response, quick response
logistics and customer specific support
services.

Logistics Management Decisions

The level of investment and the periods over which the
benefits from an investment in logistics system is realized
Strategic logistics decisions
Tactical logistics decision
Operational logistics decisions

Logistics Management Decisions

Strategic

Tactical

Operational

Supply chain design

Resource acquisition
Broad scope, highly aggregated data
Long-term planning horizons(1year+1)
Production/distribution planning
Resource allocation
Medium-term planning horizons
(monthly, quarterly)
Shipment routing and scheduling
Resource routing and scheduling
Narrow scope, detailed data
Short-term planning horizons (daily,
real-time)

Logistics Application Areas

by Modeling Views
Planning
Horizons

Supply chain
planning

Transportation
planning

Shipment
planning

Vehicle routing

Warehousing

Strategic

Site location
Capacity
sizing
sourcing

site location
fleet sizing

outsourcing
bid analysis
fleet sizing

fleet sizing
service day
balancing
frequency
analysis

warehouse
layout
material
handling design

Tactical

production
planning
sourcing

routing
strategy
network
alignment

consolidation
strategy
mode strategy

routing strategy
zone alignment

storage
allocation
order picking
strategies

Operation MRP, DRP,

ERP
al

load
matching

shipment
dispatching

vehicle
dispatching

order picking

Logistics Modeling
Real World

Relevant
Features
Management
Doubt

Management
Action
Symbolic
Representation

Data

Result

Model

Logistics Models
Analytical Models
Distribution network Optimization Venroy[1989]
Berth Planning at Naval station Brown et. al [1994]
Transportation Speranza and Vkovich[1994]
Supply chain of fine chemicals Voudouris[1996]
Facility location formulation Camm et. al [1997]
Heuristics
Distribution and Materials Management Mentzer and Schuster
[1982]
Material Flow on a site-by-site basis Lee and Billington[1993]
Modeling buyer-supplier relation Christy and Grout[1994]

Logistics Models
Simulation
Production distribution analysis
Assembly line operations

Dorairaj[1989]

Sayer[1989]

Marketing logistics

Horrington et. al [1992]

Complex rail network

Dessosky and Leachman[1995]

Transportation

Chang[1997]

Composite
Selection of location

Copacino and Rosenfield[1987]

Throughput from transportation system

Ship Cargo Operation

Allen et. al[1993]

Horne and Irony[1994]

Intermodal container Operation

Gambardella[1998]

Limitations of Available Models

Analytical Models

Distribution Focus
Linear or Integer Programming Models
Deterministic
Static
Too complex to establish and solve

Heuristics Models

Intuitive
Deterministic
Optimality not ensured
Distribution Focus

Limitations of Available Models

Simulation
Do not ensure Optimality
Scenario Evaluation
Simple Systems
No focus on Technology Option
Selection
No focus on Parameter
Optimization

Limitations - Optimization Models

Many optimization models assume that relationships in the system are linear.

Although it is possible to incorporate feedback in optimization models, yet

optimization model, ignore most of the feedback effects to minimize complexity.

Many optimization models are static.

From the viewpoint of the model user, the optimization models are large,
cumbersome and complex.

Most of the optimization models have single objective function. In real life,
management is faced with a vector of objectives.

Many optimization problems require use of integer or mixed integer programming

models that are difficult to use for large problems.

Limitations - Econometric Models

Econometric models assume availability of perfect information and

equilibrium in the market economy. They ignore such complexities of
real world as: dynamic processes, disequilibrium and the physical
delays between action and results.

Models use the historical data to find the parameter values. Such
estimation techniques reveal only the degree of past correlation
between the variables. Such correlation cannot accurately represent
the dynamic future.

Econometric models ignore soft variables and immeasurable quantities.

At best, these variables are handled with proxy variables.

Causal relationships between model variables and feedback are not

considered. The feedback relationships between environmental, social
demographic factors are usually as important as economic influences.

Limitations - Simulation Models

The major weakness in the simulation models, as opposed to

optimization model, is that they do not ensure optimality.

It takes considerable time and effort to generate and to evaluate

large number of alternatives.

It is generally not easy to modify the model to allow the inclusion

of a new phenomenon without completely restructuring the model.

In general, rigid structural requirements of the simulation models

prove to be restrictive in the analysis of real-life systems.

 Freight consolidation
Just-in-Time movements
Continuous move routing
Warehouse consolidation

Logistics
Objects
Supply chain infrastructure
Movements requirements
Transportation
infrastructure
Object-oriented data
models

Generate
Alternative
Interactive optimization
Heuristics
Network flow/linear
programs
Mixed-integer programs

Logistics
Strategies

Logistics
Composite
Model

Inbound/outbound integration
Fixed/master/variable/dynamic routing
Mode selection
Single sourcing

Decision Support
Architecture
Geographical information systems
Modeling languages
Spreadsheets
Client/server architecture

Evaluate
Alternative
Benchmarking and rationalization
Activity-based costing
Aggregation/hierarchical models
Simulation

The Major Elements of Logistics Composite Modeling Analysis

Characteristics of a Complex system

Presence of several manufacturing stages in series and parallel
Manufacturing stages having variable (probabilistic) operation times
Breakdown and repairs for different stages
The operating parameter of each stage affecting the output of that stage
and other stages linked with it
Linking of different manufacturing stages by material handling
equipment
Absence of buffers in process
Presence of common facilities used by more than one process having
their own operation cycle failure and maintenance.

The Logistics Models must consider:

The temporal dimensions must be included. Information, inventories, and customer
service are time-dependent, as are the mode performance and demand rates in a
logistics system.
The model should have capability to explicitly incorporate spatial dimensions of
logistics.
The model should have a multiple product capability;
Multiple echelons should be included;
The model should have the ability to incorporate linear and nonlinear relationship
amongst the variables;
Contd.

The Logistics Models must consider:

The model should explicitly consider production, transport mode,
warehouse, materials handling equipment capacities etc.
The model should have the ability to incorporate the stochastic
nature of logistics activities.
Linkage between stages
Breakdown of stages
Dynamic effects of weather and handling capacities

Logistics decisions for complex systems

Logistics decisions for complex systems, require
temporal integration that covers planning horizons of
several years to a day and spatial integration that covers
the entire supply chain from suppliers to the ultimate
customers

Characteristics of Complex systems

Presence of several manufacturing stages in series and parallel
Manufacturing stages having variable probabilistic) operation
times
Breakdown and repairs for different stages
The operating parameter of each stage affecting the output of that
stage and other stages linked with it
Linking of different manufacturing stages by matrial handing
equipment
Absence of buffers in process
Presence of common facilities used by more that one process
having their own operation more than one process having their
own operation cycle failure and maintenanace

Steel Plant Logistics Planning

First, the inbound and the outbound logistics cost in a
steel plant is significant and it accounts for 15 to 25
percent of the sales price per ton.
Second, steel plants are capital intensive. Fixed capital
cost accounts for 20 to 25 percent of the cost per ton of
saleable steel.
Third, it involves global sourcing of about 2.5 tons of raw
materials for the production of a ton of finished steel.
Fourth, small improvements in logistics result in large
savings due to high volume of materials handled in steel
plants.
Contd

Steel Plant Logistics Planning

Fifth, the system involves temporal integration
over a time range of one shift to several years.
Sixth, the system involves spatial integration that
covers the entire supply chain from suppliers to
the ultimate customers.
Seven, the performance of logistics (specially the
internal logistics) system significantly influences
the energy requirements and utilization of costly
and coupled manufacturing stages, therefore, the
cost of a ton of steel produced

Modeling of Steel Plant Logistics

An integrated steel plant is a closely coupled system of many units (plants)/stages in

series and parallel, each with its own stochastic processing times and breakdown/repair
patterns.

These units (plants) are installed by different agencies and most of them are available in
a few different capacities step only.

The operating parameter of each stage affecting the output of that stage and other stages
linked with it.

The stages are linked by specialized material handling system which may have its own
stochastic loading, unloading, travel, failure and repair times.

There may be finite or zero buffers between the stages.

Contd.

Modeling of Steel Plant Logistics

Presence of common facilities used by more than one process having their own
operation, failure and maintenance cycles.
There are better methods for evaluating individual pieces of equipment. These
methods use deterministic values of processing time, product quality, associated
rejects, failure rates etc.
Models for analyzing and evaluating the performance of complex system with
variability are difficult to formulate using exact mathematical procedures.
A plant can be theoretically viewed as a complex queuing network whose analytical
solution is difficult.
Experimenting with a large real system is a difficult and expensive proposition.
Conducting experiments with different combinations of many parameters leads to
combinatorial explosion.

Modeling Approaches
The modeling Focus: Composite
Simulation Approach for internal Logistics and
Throughput Optimization
Design of Experiment for Parameters, Routings
and Product mix Optimization
Mathematical Programming for Tactical
Procurement Planning
Economic Evaluation for Facilities hiring

Area Showing the Plant Site, Waterways and Lightering and HRC loading Points

The Problem

Making the different types of raw materials

available in the right quality and right quantity,
and in the right time at the least possible cost to
the Integrated Steel Plant and ensuring the
back-to-back supply of the finished products
through sea route for export is the logistics
problem of the plant that we have taken for
study.

Problem
Optimization of Raw Materials Logistics and Back- to-Back
Supply of Finished Goods for a Coastal Integrated Steel Plant.
The important objective of the study is to optimize the raw
materials procurements and HR Coil export considering two
alternative options:
Independent barge-mixes for the raw materials lightering and
export of HR coils and
Use of same barge-mix for lightering of raw materials and loading
of export HR coils through back-to-back integration.

More specifically, the problem deals with:

Deciding capacity mix of ships to use for transportation of raw materials
from different sources,
Making an optimum procurement plan for raw materials, source-wise and
material-wise.
Deciding the barge mix to hire for the lightering and HRC loading
operations,
Scheduling the ships from each Load Port for a given month,
Finding the economy and feasibility of back-to-back supply of HRC for
export, and
Preparing a daily schedule for the barges used for lightering and export of
HRC.

The important constraints are:

Availability of ships of different category at Load Ports.
Scheduled maintenance of barges and other equipment in use, therefore, their unavailability
at certain periods.
Restrictions on movement of 1000 ton and 700 ton barges to BFL. Only 2800 ton and 2000 ton
barges are allowed for lightering and HRC loading at BFL. 700 ton barges are not operated
during monsoon season for lightering.
Anchorage location depend on such variables as capacity of ship that can be handled,
availability of anchorage, lighterage and HRC loading dues payable to port etc;
Tide dependent water level in the creek that constraints the smooth movement of barges in
the creek.
Contd.

The important constraints are:

The poor condition of sea during the monsoon season and consequential ship
movement, availability of anchorages, ship unloading, barge movement and
unloading restrictions.
Crossing and parallel barge movement restrictions in the creek due to sharp turnings.
Movement restrictions of barges through the creek during night.
Pilot requirement for barges and their availability.
Use of only 2800 ton and 2000 ton barges for the HRC export due to safety
requirements.
Long term leasing of barges.

The Objectives

The methodology for solving hierarchical decision making

problems is applied to solve the following strategic, tactical and
operational logistics problems.

Strategic Problems
To analyze the impact of dredging the river to different depths on the average annual lighterage and HRC
loading cost per ton. [Once in few years].
To analyze the impact of locating the plant jetty at different distance from the sea on average annual lighterage
HRC loading cost per ton[One time decision].
To choose the best strategy for lightering and HRC loading, from amongst available options. The options
including use of only 2800 ton barges or both 2800 and 2000 ton barges for export and import. [Once in few
years]
To evaluate the economics of the following options [Once in few years]:

Having a floating crane at BFL,

Having a Floating crane at BFL with a Storage Vessel,
Saving in cost per ton with dredging of the creek, and
Having a dedicated anchorage at JNPT.

Tactical Problems
To decide the optimum (minimum annual total cost) quantity of raw materials to
bring to the plant in each month of the year taking into account the production
requirement, inventory levels at the site, price of raw materials, handling cost,
carrying cost and handling constraints in monsoon and fair weather.[Decision
once a year]
To decide the optimum barge mix to hire for lightering and HRC loading
operations with or without back-to-back supply of raw material and finished
goods. These barges have to be hired for long term (one year for larger (2880
ton, and 2000 ton) barges and eight months for smaller barges of 700 ton and
1000 ton). [Decision once a year]
To decide the best ship size to hire from each of the load ports that minimizes
the total relevant cost.[Decision once a month as hire charges of ships change]
Contd.

Tactical Problems
To generate a schedule for movement of the material
from a load port to the destination anchorage by ships of
the most economic size, for known monthly supply of raw
materials from the load port. [Monthly decision]
Develop a model to evaluate each set of ship hiring
alternatives for the month and their laycan schedules to
help select the best set of ships for the month taking care
of the possible shortage of ships of most economic size
from a load port.[Monthly decision].

Operational Problems
To optimally schedule the barges for
lightering of ships at sea and loading of
HRC to export ships. [Daily activity].

Important Hierarchical Decisions

Problems of Inbound Raw Material
Logistics
Nature of
Time
Frequency
Decision
Level

Decision

Strategic

Horizon of Revision

Several
Years

Annual

Problems

Models

Source
selection for
raw materials

Economic
evaluation

Vessel size
selection

Simulation and
economic
evaluation

Simulation and
Jetty Location economic
evaluation
Dredging of
creek

Simulation and
economic
evaluation

Barge mix
selection

Simulation and
economic
evaluation

Maker

Top
Management

Middle
Management

Important Hierarchical Decisions Problems of

Inbound Raw Material Logistics

II

III

Tactical

Operational

One
year
One
month

Monthly

Daily

Procurement
Planning

Linear
programming

Middle
Manageme
nt

Ship
scheduling

Scheduling

Logistics
Manager

Barge
scheduling

Simulation and
Scheduling

Barge
Master

Simulation models have been used to evaluate the operational level performance of
a strategic/tactical alternative

The composite modeling approach (CMA)

Study the problem at hand in detail and decompose into different sub-problems.
Identify the decision variables involved in each sub problems. Specially,
examine the spatial and temporal dimensions of the sub problems.
Study each of these decision variables; find out the frequency at which decision
regarding them have to be taken, and who is responsible of taking the decision
at which place.
Group the decisions. Decisions with identical frequency, place and decision
maker are grouped into one.
Take the longest-range (lowest frequency) decision problem first, study the
decision variables involved. Develop and validate an appropriate model or a set
of models to support decisions on that problem.
Repeat step (e) with the next lowest range decision problem for developing
model(s) or decision support. Additional available information and the
constraints imposed by the long-range decisions are explicitly considered in
model (or DSS) development.
The models may be connected (integrated) by input/output amongst themselves
and by input/output from the environment.

Methodology

Conduct a detailed study of the present and proposed system to understand all the details
about different subsystems, operations, movements, and constraints.

Decompose into appropriate sub-problems. Identify decision variables and its spatial and
temporal dimensions peculiar to each of the sub problems.

Collect relevant data from the existing SIP and modify them suitably to suit to the Proposed
Integrated Steel Plant.

Develop two a simulation models one for the ship lightering and the other for finished
goods loading operations. The models simulate unloading of raw materials from the ships
and loading of HR Coils into export ships, transport through barges of raw materials from
ships to jetty and HR coils from HR jetty to ships, and loading and unloading of barges.
The models specifically takes the random variations in ships lightering and HRC loading,
barge movement, barge unloading and loading times and draft restrictions into
consideration. Develop a third model to simulate the unloading of raw materials from
incoming ships, their transport to plant jetty, unloading of materials from barges to cross
country conveyors and back-to-back integrated supply of HRC for export.

Methodology
Develop a LP model to determine the quantity of raw material to bring to the plant in each of the 12
months to minimize the annual cost of procurement, handling and storage. Such an approach is
essential as the handling capacity is season dependent (less in monsoon) where as the plant
requirements are independent of the season.
Develop a Spread sheet based economic model to find the best ship sizes to hire from different
load ports.
Develop simulation based optimization models to evaluate the different operational strategies of
using barges for both import of raw materials and export of HRC. The model considers the options
of with and without back-to-back integration. The model for the best option obtained above is used
to find the optimum barge mix to be hired for the year.
For known ship arrival schedules, develop a barge mix optimization model. For a given barge mix
ship lightering and HRC loading simulation model is used to estimate the expected annual
lighterage and HRC export volume and lightering and HRC loading cost per ton. From amongst the
feasible barge mixes, the one that gives lowest cost per ton is selected. The annual lighterage and
HRC export volume includes the total raw materials and finished goods handled by the barges.

Methodology

Develop a model for evaluation of multiple ship schedules obtained by the shipping manager for
hiring of ships from load ports for movement of raw material, to help select the best schedule for
every month. This software tries to schedule the minimum cost ship from each port. It takes into
consideration the number of ships that have to come from a load port and spreads their arrival at
BFL/BPT/JNPT as evenly as possible during the period to avoid bunching and consequential
detention charges. It also takes into account the barge mix available for lightering and HRC loading
during the period and the tide restrictions. The result from this software is a schedule showing when
a ship should report at the load port and when it would reach Bombay and when it is expected to
leave Bombay after lightering with or without HRC for export.

Develop a scheduling model to generate the daily schedule for movement of barges for lightering of
raw materials and loading of HRC ships from and into available at different anchorage for
unloading/loading. The model explicitly takes into account the draft restrictions in the creek, night
navigation restrictions, available loading gears in the ship, unloading facilities available at the ships
and at the jetty etc. The model generates the schedule for each of the barges. The schedule for
export loading of HR Coils is also generated.

Use the simulation model to evaluate the lighterage and HRC loading cost advantage in going for
dredging the creek up to various depths.

Use the simulation model to find the effect of various jetty locations on the average lightering and
HRC loading cost per ton.

Models used for Raw Material and Finished Goods Logistics System
Inputs to LP Model
Corporate monthly production plan, Feed mix plan, Raw material costs, Raw
material sources, Mode of transport from each source,Safety stock requirements,
Unloading and storage constraints, Maximum availability etc.

Use a Linear Programming Model to arrive at

the optimum monthly purchase plan for the
whole financial year

Details of Import
material and Export
materials

With back-to-back supply:

Total number of barges available
for import and export

Output from LP model

optimum monthly
procutement plan from
each source

Without back-to-back supply:

Number of barges available for
import and export

Use the spread sheet

model to determine the
least cost ship to hire
from each load port

Market forces like:

Availability of ships, availability of material,
least cost ship from a load port,
giving number of ships of each size to hire
from a load port in a month

Use the barge mix optimization model to find the

optimum barge mix to hire for the year for ship lightering
and loading export ships

Market forces like availability of

Barges resulting in :
Actual barge mix hired

Use the monthly ship scheduling and ship

schedule evaluation models to determine the
laycan schedule of the ships to hire from different
load ports in a given future month

Details of actual raw material ship arrival, details

of actual export ship available, deatils of
anchorage locations, and actual barges available
on a day

Use the daily barge scheduling model to make the daily schedule
of the Barges operating to lighter the raw material ships and
loading HRC export ships at different anchorage locations

Least Cost Ship Size from each Load Port

Optimum ship sizes for different load ports
Load Port

Ship Size and Cost/ton

Goa

MBCs of 2800 T at Rs.135.57/ ton

Mangalore

MBCs of 2800 T at Rs.177.43/ton

Vizag

30,000 to 35,000 T at Rs.269.35/ton

Orissa

30,000 to 35,000 T at Rs.279.39/ton

Bahrain

30,000 to 35,000 T at Rs.281.32/ton

South Africa

30,000 to 35,000 T at Rs.349.60/ton

Brazil

65,000 T at Rs.460.33/ton

The LP Model for Making the

Annual Procurement Plan
The model gives the following the optimum results
Optimum monthly procurement/arrival of each raw
material source-wise and quantity,
Total Raw material by each route
Stock of each materials at the end of each month,
Total cost of SIP raw materials,
Total cost of BF raw materials,
Total cost of SMS raw materials, and
Total cost of all raw materials.

Interpretations- LP model
lesser amount of material can be brought in during the monsoon, it is
necessary to build up the stock for various raw materials much before the
monsoon for consumption during the period.
In order to reduce the carrying cost on such inventory build up, it is best to
build up the inventories of the less costly raw materials first.
The unloading capacity during monsoon could then be used for bringing in
more of the expensive raw materials thus decreasing the total inventory
carrying cost.
For example, lumps inventory is to be built up during the period from
January to April to cater to the needs during monsoon.
The unloading capacity during the monsoon could then be utilized for
unloading more of pellets and coke.
This will decrease the total carrying cost since pellets and coke are more
costly compared to lumps and therefore carrying it for a shorter duration
decreases carrying cost.

The ship Lightering Simulation Model

The optimum barge mix selection model assumptions:

There are two barge unloaders and one barge loader/unloader available. The unloaders can only unload
cargo, using grabs from barges bringing in raw materials. The loader/unloader cannot only unload
imported raw materials from barges, it can also load HRC for export into barges. The grabs have to be
changed for this purpose and this takes four hours.
Three barges can be berthed at the jetty for loading/ unloading at any given time.
Only the MBCs (Mini Bulk Carrier) that is 2800 ton and 2000 ton barges are allowed to be used for export of
HRC.
700 ton and 1000 ton barges are not allowed to BFL for lightering.
All barges except the 700 ton barges are hired for whole year. 700 ton barges are hired for only eight
months of fair weather season.
Enough HRC for export is available at the jetty whenever it is wanted.
The export requirement of HRC is 75,000 ton per month in both fair weather and in monsoon .

Optimum barge mix selection model

Without back-to-back Integration (Independent
Barges for Import and Export)
Option I: All the 2800 ton barges available in the fleet will be used
exclusively for export of HRC whenever export ships are available. At
times when no ships for export are waiting the 2800 ton MBCs are
used for lightering ships with raw materials.
Option II: Some of the 2800 ton barges will be exclusively used for
export of HRC whenever export ships are available. During these
times a loader will be exclusively used for loading HRC for export. At
times when no ships for export are waiting the 2800 ton MBCs are
used for lightering ships with raw

Optimum barge mix selection model

Option III: All the 2800 ton and 2000 ton barges available
in the fleet will be used exclusively for export of HRC
whenever export ships are available. At times when no
ships for export are waiting the 2800 ton MBCs and 2000
ton ISVs are used for lightering ships with raw materials.
Option IV: Some of the 2800 ton and 2000 ton barges will
be exclusively used for export of HRC whenever export
ships are available. At times when no ships for export are
waiting the 2800 ton MBCs and 2000 ton ISVs are used for
lightering ships with raw materials. The rest of the barges
will be used only for lightering of raw materials.

 With Back-to-Back Integration

Option V: All the 2800 ton barges available in the fleet are used for both export
and import. The barges will carry HRC for export when sailing out from the jetty,
they will reach the export ship, have the HRC unloaded and proceed to the ships
with import cargo waiting to be lightered. It will bring back to the jetty raw
material lightered from the import ship. Thus the forward and return trips made
will both be loaded.
Option VI: Some of the 2800 ton barges available in the fleet will be used for
both export and import. These barges will carry HRC for export when sailing out
from the jetty. They will reach the export ship, have the HRC unloaded and
proceed to the ships with import cargo waiting to be lightered. They will bring
back to the jetty raw material lightered from the import ship. Thus the forward
and return trips of these two barges will be fully loaded. The rest of the barges
will be engaged in lightering of raw materials.

Optimum barge mix selection model

Option VII: All the 2800 ton and 2000 ton barges available in the fleet will
be used for both export and import at all times. The barges will carry HRC
for export when sailing out from the jetty. They will reach the export ship,
have the HRC unloaded and proceed to the ships with import cargo
waiting to be lightered. They will bring back to the jetty raw material
lightered from the import ship. Thus the forward and return trips made
will both be loaded for these barges.
Option VIII: Some of the 2800 ton and 2000 ton barges available in the
fleet will be used for both export and import at all times. The barges will
carry HRC for export when sailing out from the jetty, they will reach the
export ship, have the HRC unloaded and proceed to the ships with import
cargo waiting to be lightered. It will bring back to the jetty raw material
lightered from the import ship. Thus the forward and return trips made
will both be loaded.

The total cost for lightering and

HRC loading
Ship hire cost for unloading days for the raw material
ships.
Ship hire cost for the HRC export ship for loading days.
Port charges payable to the Port for the volume of cargo
loaded or unloaded.
The daily hire charges to be paid to all the barges.
The charges for fuel etc payable per trip to barges.
Warfage and Stevedoring charges payable for the day.

The Results of Experiments on Barge Mix Optimization

Model for Lightering and HRC loading Operations with
Various Options
B1 2800, B2 2000, B3 1000, and B4 700 ton Barges
Barges
engaged
for export
Option

Without backto-back supply

With back-toback supply

* Infeasible

Barges with
back-to-back
integration

Optimum Barge
mix of
B1,B2,B3,B4

Model

Average
Maximum
cost per
Tons per
ton
Annum
(Rs/ton)

Feasibility
(Yes/No)

B1

B2

B1

B2

B1

B2

B3

B4

II

4496012

217.32

Yes

IV

3684012

245.53

No

All

All

4692012

192.11

Yes

VI

4692012

192.11

Yes

*VII

All

All

All

All

213012

605.47

No

VIII

5542412

161.18

Yes

Sensitivity Analysis
Lighterage and HRC Loading Cost/ton when using
Various Combination of 2800 and 2000 ton Barges
(B1 2800, B2 2000, B3 1000, and B4 700 ton Barges)
Barges with back-toback integrated

Optimum Barge mix

Tons per
Annum

Average cost
Rs/ton

B1

B2

B1

B2

B3

B4

5542412

161.18

5651212

161.52

5719212

163.32

5726012

167.60

5427212

177.91

5623212

166.99

5328812

174.81

5747612

173.35

Assumptions

Two of the 2800ton barges available in the fleet will be used only for export of HRC whenever export ships
are available.
All the 2800 ton barges available in the fleet will be used for both export and import at all times.
Two of the 2800 ton barges available in the fleet will be used for both export and import at all times.
Two of the 2800-ton and two of the 2000-ton barges available in the fleet will be used only for export of
HRC whenever export ships are available.
All the 2800 ton and 2000 ton barges available in the fleet will be used for both export and import at all
times.
Two of the 2800-ton and two of the 2000 ton barges available in the fleet will be used for both export and
import at all times
All the2800 ton barges available in the fleet will be used exclusively for export of HRC whenever export
ships are available.
All the2800 ton and 2000 ton barges available in the fleet will be used exclusively for export of HRC
whenever export ships are available.

Results from Model with two barges each of

2800 ton and 2000 ton in export and import circuit.
B1-2800 ton Barge,B2-2000 ton Barge,B3-1000 ton Barge,B4-700 ton Barge.
Cost/per ton means average raw material Lightering and HRC loading cost per ton)
Barges

Fair Weather

Monsoon Weather

Annual

B1

B2

B3

B4

Ton/Mth

Cost/ton

Ton/Mth

Cost/ton

Ton/year

Cost/ton

505901

167.03

373801

149.49

5542412

161.18

506101

168.08

373801

150.94

5544012

162.37

530101

165.29

372901

158.81

5732412

163.13

509451

168.55

372801

152.60

5566812

163.23

528801

165.53

372901

158.81

5722012

163.29

506801

169.02

372801

152.60

5545612

163.55

506001

170.45

373901

154.13

5543612

165.01

The results from experiments of barge-lightering model with various

options
(B1 2800t, B2 2000t, B3 1000t, and B4 700t Barges ,
Values in ( ) gives the Monsoon weather value)
Opt. Barge mix
B1,B2,B3,B4
B1

B
2

B3

Fair-weather
ton (Monsoon
tons)
B4

All 2800 t Export and

Import

398251
(376501)

4692012

192.11

2 nos. 2800 t Export

396751
(330501)

4496012

217.32

TWO 2800 t Export and

Import

398251
(376501)

4692012

192.11

All 2800 t and 2000 t

Export and Import

112501
(210001)

1740012

Cost very high at Rs

605.47 Ton

2 nos. 2800 t and 2

nos. 2000 t Export

329201
(262601)

3684012

245.53

5542412

161.18

OPTION

2 nos. 2800 t and 2

nos. 2000 t Export and

505901

Tons per
Annum

Average cost per ton

Rs/ton

Effect of Locating the Plant Jetty at

Different Distances from the Sea
B1-2800T Barge,B2-2000T Barge,B3-1000T Barge,B4-700T Barge
Best Barge Mix
Sl. No.

Distance of Jetty from

the Sea (in KM)

Lighterage Cost in
Rupees/Ton

B1

B2

B3

B4

5 KM

102.23

10 KM

124.51

15 KM

126.87

20 KM

162.59

25 KM

185.64

30 KM

225.32

Effect of Locating the Plant Jetty at

Different Distances from the Sea
If the savings due to reduced annual lighterage cost is more than
the annual cost of transportation of materials from the new
location to the plant, the new location of the jetty may be seriously
considered. An alternative to the location may be imperative,
particularly when the congestion in the river increases due to
higher movement of bulk materials for the proposed integrated
steel plant of the company and other industrial units that are
coming up in the area.

Effect of Dredging the Creek on Lighterage

Cost

The movement of the barges in the river is tide constrained.

The tide height in the creek varies from a high of 5 meters to a low of 0.6 meters above the Chart Datum at the highest of the
high tides and at the lowest of low tides respectively.

The actual ground level in the creek varies from 0.8 to 9 Meters below the Chart Datum.

The draft requirement for the loaded barges varies from 3.8 meters to 2.0 meters.

The draft required for empty barges varies from 2.2 meters to 0.8 meters.

One way of making barge movement less restrictive is to dredge the creek.

Dredging increases the depth of the channel below the chart datum and makes additional draft available for sailing of the
barges at any given time

This is expected to bring down the lightering time of ships as the navigation will be less dependent on tides.

A safety clearance of 0.5 meters from the ground is also required in addition to the minimum draft essential for sailing.

Effect of Dredging the Creek on

Lighterage Cost
(B1 2800t, B2 2000t, B3 1000t, and B4 700t Barges)

Opt. Barge mix Fair-weather ton

Depth of Dredging
B1,B2,B3,B4 (Monsoon tons)
in M.

Tons per
Annum

Average cost
per ton
Rs/ton

2,5,4,2

505901 (373801)

5542412

161.18

0.5

3,6,3,2

512810 (376901)

5610012

157.94

1.0

3,3,4,2

527201 (377901)

5718012

157.52

1.5

2,3,4,6

529651 (378901)

5764122

157.33

2.0

3,3,2,6

530451 (379301)

5781212

157.24

Observations

The maximum reduction in lighterage cost/ton for two meters of dredging is about rupees four per ton.

This could result in savings averaging around rupees twenty millions per annum.

This information will have to be used by the management to find the payback period of any investment
in dredging and take an appropriate decision in the matter.

Another factor to be noted is that with about 0.5 meter of dredging more than three rupees of savings
in lighterage cost is achieved.

Therefore deciding the most economical depth of dredging is also of great importance, for which the
information in Table 6.7 can be used.

Since, cost of dredging is very high compared to the saving in lightering cost, the company alone cant
do the dredging at present.

It may be, however, considered later when the traffic volume in the creek increases due to the
integrated steel plant and other units that are coming up along the banks of the Dharmatar river.

At that time by forming a confederation of creek user industries, one can seriously consider dredging
option.

The Monthly Ship Scheduling Model

This is the plan for hiring ships for a month
Load port

Laycan Report

Report at
Load port

At Bombay

Leave
Bombay

Bahrain

20.4.07 - 30.4.07

25.4.07

02.5.07

04.5.07

Vizag

24.4.07 - 04.5.07

29.4.07

07.5.07

10.5.07

Mangalore

02.5.07 - 12.5.07

07.5.07

11.5.07

14.5.07

Vizag

02.5.07 - 12.5.07

07.5.07

15.5.07

17.5.07

Paradeep

06.5.07 - 16.5 07

11.5.07

20.5.07

23.5.07

S. Africa

03.5.07 - 13.5.07

08.5.07

24.5.07

28.5.07

Vizag

16.5.07 - 26.5.07

21.5.07

29.5.07

01.6.07

Daily Barge Scheduling Model

The schedule for a Barge by the name : Mastya Rani
Date

Time

Activity

Ship Name

11.5.07

10.57

Start loading barge

Sagar Kanya

End of loading

Sagar Kanya

Full barge reaches gull

Sagar Kanya

Start through creek loaded

Sagar Kanya

Reach the jetty loaded

Sagar Kanya

Start unloading at brth1

Sagar Kanya

End unloading at brth1

Sagar Kanya

14.27
11.5.07
11.5.07
11.5.07
11.5.07
11.5.07
12.5.07

16.57
19.44
21.49
21.49
01.09
01.29

Results from Model where only 2800 ton and 2000 ton
Barges are allowed to BFL
(B1 2800, B2 2000, B3 1000, and B4 700 ton Barges )
Creek was not
Dredged
Percent
age
Lighteri Cost
per
ng at
ton
BFL

No Tide restriction

Opt. Barge
Cost
Mix
per
(B1,B2.B3,
ton
B4)

1 meter dredged
creek

Opt. Barge
Mix
(B1,B2.B3,B
4)

Cost
per
ton

0.5 m dredged creek

Opt. Barge
Cost
Mix
per
(B1,B2.B3,
ton
B4)

Opt .Barge
Mix
(B1,B2.B3,B
4)

100

186

2,6,0,0

171

2,5,0,0

173

2,5,0,0

176

2,5,0,0

75

169

2,5,2,0

156

1,5,4,0

157

1,6,4,0

158

1,6,3,0

50

156

2,5,2,0

143

0,6,4,1

144

1,5,4,0

145

1,6,3,0

25

163

2,5,3,0

150

0,5,5,0

152

1,6,4,0

154

1,6,3,1

170

1,5,3,2

159

0,5,6,0

160

0,5,5,1

162

0,5,6,0

Results from Model where only 2800 ton Barges are

allowed to BFL
(B1- 2800 , B2 2000, B3 1000, B4 700 ton Barges)
Percentag
e
lightering
at BFL

Creek was not

dredged
Cost
Opt. Barge
per ton Mix (B1, B2,
B3, B4)

No Tide restriction

1 meter dredged
creek

0.5 dredged creek

Cost
per
ton

Opt. Barge
Mix (B1, B2,
B3, B4)

Cost
per
ton

Opt. Barge
Mix (B1, B2,
B3, B4)

Cost
per
ton

Opt. Barge Mix

(B1, B2, B3,
B4)

100

225

7,0,0,0

200

6,0,0,0

205

7,0,0,0

208

7,0,0,0

76

207

6,0,2,0

186

5,2,0,0

189

6,1,1,0

195

6,1,1,0

50

198

4,2,1,0

183

4,3,0,0

185

4,3,0,0

186

4,2,1,0

25

181

3,3,2,0

168

3,5,0,0

170

3,5,0,0

172

3,4,1,0

170

1,5,3,2

159

0,5,6,0

160

0,5,5,1

162

0,5,6,0

Results from Model with Floating Crane and 100 percent

Lightering in fair weather at BFL
(B1 2800 , B2 2000, B3 1000, and B4 700 ton Barges)
No. of
barges
at Ship

Creek was not

dredged
Cost
per
ton

Opt. Brage
mix
(B1,B2,B3,B4)

No tide restriction
Cost
per
ton

Opt. Brage
mix
(B1,B2,B3,B4)

1 meter dredged
creek
Cost
per
ton

Opt. Brage
mix
(B1,B2,B3,
B4)

0.5 meter dredged

creek
Cost per
ton

Opt. Brage
mix
(B1,B2,B3,
B4)

Option I Only 2800 ton and 2000t ton Barges are allowed to BFL for Lightering and HRC loading
1 barge

198

2,5,0,0

179

3,5,0,0

180

3,5,0,0

182

2,5,0,0

2 barges

184

2,6,0,0

172

3,5,0,0

173

3,5,0,0

175

2,6,0,0

Option II Only 2800 ton Barges are allowed to BFL for Lightering and HRC loading
1 barge

240

7,0,0,0

221

7,0,0,0

223

7,0,0,0

226

7,0,0,0

2 barges

228

7,0,0,0

210

7,0,0,0

212

7,0,0,0

215

7,0,0,0

Results from Model with Floating Crane and Storage Vessel of 1,50,000 ton
Capacity and 100 percent Lightering in fair weather at BFL
(B1 2800 , B2 2000, B3 1000 and B4 700 ton barges, FC =Fixed
charge)
Creek was not
dredged
Fixed
Charge in Rs

Cost
per
ton

Opt. Brage mix

(B1,B2,B3,B4)

No tide restriction
Cost
per
ton

Opt. Brage
mix
(B1,B2,B3,
B4)

1 meter dredged
creek
Cost
per
ton

Opt. Brage
mix
(B1,B2,B3,
B4)

0.5 meter dredged creek

Cost
per ton

Opt. Brage
mix
(B1,B2,B3,B4)

Option I Only 2800 ton and 2000 ton Barges are allowed to BFL for Lightering and HRC loading
FC at Rs 200

213

2,5,0,0

199

3,5,0,0

202

3,5,0,0

209

3,5,0,0

FC at Rs 100

190

2,5,0,0

175

3,5,0,0

177

3,5,0,0

182

2,6,0,0

Option I Only 2800 ton Barges are allowed to BFL for Lightering and HRC loading
FC at Rs 200

260

7,0,0,0

240

7,0,0,0

245

7,0,0,0

249

7,0,0,0

FC at Rs 100

237

7,0,0,0

220

7,0,0,0

224

7,0,0,0

229

7,0,0,0

Conclusions
We have used a combination of mathematical, cost, and simulation
models to optimize the raw material logistics system of the integrated
steel plant.
Models for
solving such strategic problems as choice of source for each material,
ideal ship size from each load port and the desirability of dredging the
waterways
solving such tactical problems as annual procurement and inventory
planning, and barge mix optimization and optimal ship size determination,
and
solving such operational problems as ship scheduling, alternate ship
schedule evaluation and daily barge scheduling.

Conclusions
The models described in this paper offer a complete package for
the solution of the inbound raw material and back to back
finished goods logistics problem of the integrated steel plant.
The approach of breaking complex logistics problems into subproblems and using separate models to solve each sub-problem
proved to be an effective problem solving strategy in this case.
Involvement of the operating personnel and managers in
development of models, in collection of relevant data, explicit
enumeration of operating logic and in validation of models proved
very useful for the acceptance and implementation of the system.