Contents

Intoduction................................................................................................................. 1
Ghani Glass............................................................................................................. 1
Supply Chain Management...................................................................................... 1
Aims........................................................................................................................ 2
Objective................................................................................................................. 3
Problem statement.................................................................................................. 3
Methodolgy.............................................................................................................. 3
VARIABLES............................................................................................................... 3
PARAMETERS........................................................................................................... 3
Constraints:............................................................................................................. 4
DETERMINATION OF EXPECTED PROFIT...................................................................4
Lingo Software............................................................................................................ 6
Constarint................................................................................................................ 6
Data........................................................................................................................ 6
Results..................................................................................................................... 7
Parameters.............................................................................................................. 8
Conclusion............................................................................................................... 8
References.................................................................................................................. 8

Intoduction.
Ghani Group is a reputed business house in Pakistan with interests in float
glass, container glass and value added glass, automobiles, beverage
products and mining for silica sand, coal and rock salt. Over 50 Years of
experience in glass related raw materials and glass manufacturing. The
groups dedication to quality and customer service enabled it to achieve an
exclusive 25 year excellence certificate from Philips. Electric Company The
group operates a diverse range of businesses, including five modern glass
manufacturing plants, an automobiles Industry, beverage company and a
number of mining companies[1].
Its main plant is located in Hattar and also the main warehouse is situated in
hattar. There are two main distributor, one in Lahore, one in Karachi. The
ghani glass supplies its different products like 250 ml , 240 ml, 330 ml and
500 ml bottles in the form of pallets to customers through its distributors. A
shipment can contains pallets of all types as according to demand.
Supply chain is a network of industries, people, activities, information and
resources to move finished product from supplier to customer. It links
supplier and user companies until the raw material is converted into finished
product and reaches to customer hand[2].
Planning, implementing, and controlling the process of supply chain to fulfill
the customer requirement in an efficient way is defined as supply chain
management. Movement and storage of raw material, wip stock and
completed products from origin point to consumption point is involved int
it[3].
SCM is the management of activities consisting of the acquisition and
transformation of raw material to finished products delivered to customer[4].
Supply Chain Management is incorporation of supply and demand. By
sharing this data with supplier and client SCM applications have capability
likely to improve the speed-to-market of products, decrease expenditures,
and permit all members in the supply chain for better management of
present resources and plan for expectation requirements [5].
SCM is both art and science that improves the way company finds raw
materials transforms it to finished product and carry it to clients[6].
Supply chain management(SCM) is the network of interconnected business
involved in the provision of products to end clients[7].
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Supply chain management flows consists of three main flows.

1. Product flow
2. Information flow
3. Finance flow
Product flow involves transportation of goods ,information flow includes
orders transmitting and updating of delivery status, financial flow consists of
credit terms[8].
SCM is based on loyalty and assurance[9].buyersupplier relationship always
based on trust and contributes to the stability of business, on the basis of
trust and commitment relationship partners share future plans for the
achievement of long term goals[10] .
An efficient progress measurement is necessary for Supply chain
management because of following reasons 1. Provides easiness to
understand system (2) influence activities during the coordination and (3)
sharing of information between suppliers and stake holders[11].moreover,
researchers have agreed that SCM performance impacts overall
performance[12].
supply chain management is not limited to the activities of logistics and the
development and control of materials and information flow inside company
or between organisations[13]. it is also used to describe planned,
managerial issue[14]., to recognize and explain the connection a corporation
develop with its supplier[15].Different subject i.e purchase, supply, logistics
and transportation, marketing, organizational behavior, network, strategic
management, management of information systems and operations
management have contributed to the explosion of SCM. it is observed that a
great progress has been made toward understanding the core of Supply
cahin management[16].
traditionally, purchasing is considered to have a passive role in the business
institute[17].In the 80s, purchasing was seen to be involved in the business
strategic planning procedure[18]. in the 90s, more attention was paid to
purchasing in the process of supply chain [19].
supplier selection for goods and services to be provided is critical decision for
different industries ,supplier has high impact on progress of supply chain and
directly influences financial and operational impact of
organization[20].Trusts, honesty, assurance, and characteristics are
important factors for fair dealing between a supplier and stakeholders[21] .
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Supply chain management is primarly concerned with the following process

of supply chain,
Procurement & Production.
Packaging.
Distribution[22].
Aims& Objective.

To find the profit function for the product from the manufacturer
through distributor
To optimize the transportation cost from manufacturer to distributor.
To fulfill demand in the province using regional warehouses.

Problem statement.

A key step in many decision-making and design processes is the optimization

phase, which itself contains several stages. The purpose of the optimization
process in our approach is to help determine realistic and practical outcomes
of management decision-making and design processes in the supply chain.
There are two basic ways to optimize the problem, either the qualitative
approach or the quantitative approach. Using only a qualitative approach,
the problem optimization, when making a decision, relies on personal
judgment or experience acquired in dealings with similar problems in the
past. In a few cases this approach may be adequate; however, there are
many situations where a quantitative approach to the problem provides a
betterstructured and logical path through the decision-making process.
Problem formulation.

The mathematical optimization model was formulated as an integer linear

programming problem with the minimization of costs under constraints
Indices, parameters and decision variables in the model together with their
descriptions are provided .The proposed optimization model is a cost model
that takes into account two types of parameters, i.e., the spatial parameters
(distributor capacity and capacity of transport unit), time and transport
mode..

MANUFACTURE

DISTRIBUTOR

VARIABLES
X1 = Units moved from manufacturer to distributor
D = Stochastic demand of distributor

PARAMETERS
Hw

= Inventory holding cost

Ti

= No. of trucks

NT

= No. of travels

CT

= Capacity of truck

CM

= Capacity of manufacturer

CD

= Capacity of Distributor

DMD = distance b/w manufacturer and distributor

CMD = Per Km cost b/w manufacturer and Distributor
= mean of the population based on the capacity of manufacturer
= standard deviation of produced items
c= item cost
p= sales price
s = salvage value
Now
Transportation cost = CMD . DMD . X1
Holding cost

= X1 . H M

Constraints:

X1
>= Dd
Dd = distributors demand
(capacity constraint)

DDwd >= [(2NTs 1). (Dmd/VTs) + (LT+ UT)(X1)

date constraint)

(due

X1

Cd >= X1
constraint

Distributor capacity

Cm >= X1
constraint

Manufacturer capacity

Xi >= 0

<= (Ti. CT) NT

(Non negativity constraint)

DETERMINATION OF EXPECTED PROFIT

Assume that demand is from a normal distribution with mean and standard deviation given by , . Let
the sales price be p, the salvage price be s and the item cost be c.
(Q) is the expected profit from ordering Q units.
(x,)denotes the probability density function for a normal distribution with parameters ,

( pD+ s (QD))(D , ) d( D)+ ( pQ ) ( D , ) d (D)cQ

(Q)=

The first integral is over the demand realizations that are less than the order quantity Q;
If demand equals D and if D<Q then manufacturer will sell X units at price p and salvage (Q-D) units at s
The second integral is over the demand realizations that are more than the order quantity Q in these cases
the manufacturer can only sell Q units at price p.
The last term is what the manufacturer pays for ordering Q units.
To evaluate this expression we re-write as follows

( pD+ s (QD))(D , ) d( D)+ ( pQ ) ( D , ) d (D)cX

(Q)=

( pD+ s (QD))( D , ) d( D) ( ps ) ( DQ ) (D , )d ( D)cQ

X

We can simplify this as follows

= p+s (X )( ps ) ( DQ ) ( D , ) d ( D)cQ
X

( DQ ) ( D , )d( D)= (Dz)( D 0,1)d ( D)

X

Where z=Q-/
Note that

( D 0,1) is the probability density function for the standard normal distributed random

variable with mean of 0and standard deviation of 1.

The above expression is known as the partial loss function and can be calculated as follows

Partial loss function=

( Dz)(D 0,1) d( D)

=NORMDIST (Z,

0, 1, FALSE) - Z*(1-normdist (z, 0, 1, true))

= (z 0,1)zX (1 ( z))

Where (z) is the cumulative distribution function for the standard normal

Thus profit calculation is

(X) =

p+s (X )( ps )

partial-loss-function (z=X-/) - CX

Hence our objective function is: Maximize

Maximize M = Transportation cost + Holding cost + Expected Profit

Maximize M = (CMD . DMD . Xi) + (Xi . Hm) +

(X)

= (CMD

. DMD . Xi) + (Xi . Hm) +

p+s (X )( ps )

partial-

loss-function (z=X-/) CX
Lingo Software.
Constarint.

Data.

Assume d to be 50

Results.

Parameters.
(Number Of Trucks)
6
8
10

Result
2570
2576
2595.005

Demand %
20%
40%
50%

Result
2657.01
2765.02
2834.032

Conclusion.
By increasing number of trucks transportation cost increases and objective value
also increases. when we see objective value according to deamad then by
increasing demand % objective value also increases .objective value has direct
relationship to number of trucks and demand.

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