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Nu-kote International manufactures ink-jet, laser, and toner cartridges; ribbons; and thermal fax supplies. We developed spreadsheet linear-programming models for planning shipments of finished goods between vendors, manufacturing plants, warehouses, and customers to minimize overall cost subject to maximum-shipping-distance policies. Nu-kote used versions of these linear programs (LPs) to model supply chains with different warehouse configurations. The LPs have between 5,000 and 9,700 variables and 2,452 constraints. Nu-kote has used these LPs for an inherently nonlinear problem to identify improved shipments that will reduce annual costs by approximately $1 million and customer transit time by two days. It has already saved $425,000 from insight gained from the model.
Key words: programming: linear, large-scale systems; transportation: freight-materials handling.
History: This paper was refereed.
Nu-kote International is the largest independent manufacturer and distributor of aftermarket imaging supplies for home and office printing devices. Its major products are ink-jet, laser, and toner cartridges; ribbons; and thermal fax supplies. The company manufactures more than 2,000 products for use in over 30,000 types of imaging devices. In addition to remanufacturing for the aftermarket, Nu-kote partners with original equipment manufacturers to develop and manufacture imaging supplies for new equipment. Nu-kote serves over 5,000 customers (commercial dealers, retail stores, and so forth) around the world from a network of five plants, five major vendors, and four warehouses. This privately-held company's headquarters are in Franklin, Tennessee, just south of Nashville (Figure 1).
Distribution Challenges
Nu-kote's strategy is to be the low-cost producer in the imaging supplies industry. In the past, Nu-kote reduced costs by transferring production to China, but distribution and transportation costs remained high. Nu-kote wanted to optimize shipping of finished goods in its transportation network for both inbound transportation (from vendors and plants to warehouses) and outbound transportation (from warehouses to customers).
During 2001 and 2002, an increasing amount of production in China, a drastic change in product mix, and double-digit growth in the retail sector forced the company to analyze the product flows from its vendors and manufacturing plants to its warehouses and customers. Today, Nu-kote fills most customer orders (outbound shipments) from its warehouse in Franklin, Tennessee because 50 percent of the US population is within 500 miles of Franklin and more than 80 percent of its top customers...