From the course: Excel Supply Chain Analysis: Solving Transportation Problems

Describe the transshipment problem - Microsoft Excel Tutorial

From the course: Excel Supply Chain Analysis: Solving Transportation Problems

Describe the transshipment problem

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- [Instructor] In the previous chapter we saw how to solve transportation problems. In this chapter, we will look at transshipment problems. A transshipment problem is distinct from a transportation problem in that we move items through multiple stages to an end destination. So there will be a source, at least one intermediate level, and then the final destination. As before, at least for the problems that we're working with, demand is given and it doesn't change, so it's deterministic, and there's a known distance between each source and destination, so our cost will not change. As before, sources have limited capacity. And our goal is to find the lowest cost solution to meet demand, but it's more complex than what we were looking at before. Our problem, once again, deals with wind farms, spare parts. And we have eight wind farms which are spread around the U.S. Midwest. To get the spare parts to our wind farms we need to send them through distribution centers, and you can find those in Amarillo, Tulsa, and Kansas City. However, items are not originating there, instead they're being transported from three factories. And those factories are in Albuquerque, Fort Worth, Texas and Springfield, Missouri. So our goal is to find the lowest cost solution to ship from our factories to the distribution centers and onto the wind farms. So what are some of the things that we need to keep in mind when we're solving this problem? Well, the first is flow. Every unit that arrives in a distribution center must leave it, and that's called a conservation of flow constraint. The good news is that this problem is still linear, so computers can solve them quickly. And finally, you should ask questions of the data. Only shipping to distribution centers and not customers can be inefficient, so a question asked might be is shipping directly from the factory to a particular customer, or one or more customers, cheaper? As a supply chain analyst your job is to figure out which case is the least cost for your employer.

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