Automotive Inventory Delivery Location Optimization

Abstract

Automotive supply chains are large, complex networks that are frequently looked at for cost reduction opportunities. While research shows many ways to optimize routing and quantities of inventory to save money, it tends to be for systems where locations are distant. This thesis identifies opportunities for cost reduction in systems where there are multiple nearby delivery locations for any part, such as an automotive vehicle assembly plant with a warehouse within a few miles distance. A mixed integer linear optimization model was used on data from Nissan’s Smyrna, TN assembly plant. This model takes advantage of warehouse management cost variability for each part. By optimizing the delivery location for every part to be the warehouse or the factory, annual warehouse management cost savings of greater than 20% are possible. This result is discussed further as well as ways to successfully implement this type of model at different factories.