Analysis of an international distribution hub for fast moving consumer goods

The focus of this research is creating a framework to accurately assess the benefits of hub capability in an international distribution network for fast moving consumer packaged goods. The traditional inventory centralization dilemma requires an evaluation of whether the reduction in holding costs outweighs the increases in transportation and handling costs. We developed a mixed integer programming model to determine the benefits of adding hub capability to Consumer Co.'s Northwest Latin American import supply chain. Consumer Co.'s NWLA division imports products from Argentina, Brazil and Mexico to eleven countries within Central and South America, each operating a distribution center. By adding hub capability in the Colon Free Trade Zone, our model determined that the lowest cost could be achieved using a "Hybrid" solution, where some channels flowed through the hub and others were shipped direct. This network design would result in a 4.4% reduction in annual relevant costs. A counter-intuitive revelation was the fact that transportation costs could actually decrease. Similar to airlines, carriers can sometimes offer lower rates for indirect shipments passing through a high volume transit point instead of shipping the product directly through a less traveled route. Hub capability in the Colon Free Trade Zone also provides Consumer Co. with the flexibility to tailor their supply chain to potential changes in the fluctuating Latin American environment. Increasing customer expectations can lead to scenarios with higher safety stocks, for which centralization can provide the highest benefits.

Department dc:contributor.department

Massachusetts Institute of Technology. Engineering Systems Division.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2009

Authors dc:creator

• Ortiz Duran, Sebastian
• Hawks, Richard

Advisor dc:contributor.advisor

• Stephen C. Graves.

• Engineering Systems Division.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/53540

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/53540