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JetFuel Inc. supplies jet fuel to the Seattle Tacoma International Airport. The fuel is picked up from a refinery in tanker trucks, and delivered directly to the airport’s fuel reservoir. Demand is known due to the scheduled nature of commercial aviation. Problem parameters are given in the table below:
Distance from refinery to Sea-Tac |
150 miles |
Truck capacity |
5,000 gallons |
Demand per day |
50,000 gallons |
Truck travel speed |
30 miles/hour |
a.
Draw a diagram that shows the cumulative number
of gallons against time (hours), for one 24 hour period. Assume the refinery only produces fuel for
JetFuel and this production occurs at a constant rate. Assume consumption at the airport is
constant, and the reservoir is never allowed to drop below 150,000
gallons. Inventory held at the refinery
can be as little as 0. Trucks are
dispatched full.
b.
Can you identify the time between production and
consumption for each gallon of fuel ?
c.
On the diagram, indicate inventory held at the
refinery, and inventory held at the airport.
d.
How large does our storage capacity need to be
at the refinery?
e.
Name one change that could be made to this
logistics system to reduce transportation cost, and any necessary assumptions.
f.
Name one change that could be made to this
logistics system to reduce inventory cost, and any necessary assumptions.
g.
If the transportation company has ownership of
the fuel only between the refinery and the airport (not at the refinery or the
airport), would the transportation company decrease logistics cost (sum of
transportation and inventory) by shipping more or less frequently?
JetFuel is thinking about serving several other municipal airports in the Puget Sound region, and one of their considerations is whether or not to build their own holding facility. The demand at municipal airports is more variable, because these airports serve private jets and recreational flyers rather than commercial airlines. The average and variance of demand is shown in the table below.
Renton Municipal Airport |
Boeing Field |
Vashon Municipal Airport |
Ephrata Municipal Airport |
Sea-Tac |
|
Average daily demand |
10,000 gallons |
25,000 gallons |
5,000 gallons |
5,000 gallons |
54,286 gallons |
Variance in daily demand |
5,000 gallons |
5,000 gallons |
2,000 gallons |
1,000 gallons |
0 gallons |
a) By how much would the inventory held be reduced if a central holding facility was used rather than holding the fuel at each airport? Assume the airports hold 5 standard deviations, in addition to two days demand, and that you would hold the 5 standard deviations plus two days demand for the group at the holding facility. You can ignore any in-transit inventory between the holding facility and the airports.
b) Assume inventory held at the refinery is owned by the refinery, inventory in transit (between the refinery and the airports) is owned by JetFuel, and inventory at the airports is owned by the airports. Would you advise JetFuel to use a holding facility? Why or why not?
c) To design a network structure for a delivery route, what would be the most important pieces of information to consider (assuming your priority was to minimize cost)?
d) How would your decision process be different if you were delivering milk instead of jet fuel?
e) Which market (SeaTac versus municipal airports) do you think could be served at a lower logistics cost per gallon? Why?
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