Background and Setting
- Fiberglass insulation is manufactured in several plants across the United States with each plant having some specialized production capabilities.
- The various fiberglass products can be directly shipped to a customer or distributed through service centers. Interplant shipments are also sometime necessary to respond to excess seasonal demand in some plant areas.
- Glass furnaces are shut down every 5 to 7 years for major “re-builds”.
Client Business Objectives
- In the long term, to evaluate various multi-year demand/capacity scenarios to locate production and distribution facilities.
- In the medium term, 1 to 3 years, to manage furnace rebuilds. For each rebuild, one determines the best time for a rebuild, the inventory build up to make up for lost production during the rebuild, and the re-configuration of the distribution channels during rebuild.
- On a monthly basis, it is critical to plan the seasonal build up of inventory across the plants to better service peak insulation demand, in the fall.
How Did UIA Help?
A distribution model which provides annual and/or monthly levels of detail was developed.
- At the annual level demand is forecasted by state. Product flows from plants to customers and to distribution centers which minimize total system costs (manufacturing plus shipping costs) are generated. This annual model permits the evaluation of multi-product, multi-year planning scenarios.
- The monthly level analyzes the detailed monthly demand/capacity balance on the plants. The demand is provided by the annual model optimal product flows to which seasonal factors are applied. The monthly model also considers starting inventory levels and current and planned production capacities. This level calculates the monthly inventory levels at the plants and the distribution centers, and details product flows at the monthly level. This system is a Linear Program optimization implemented on a RISC 6000 machine networked with PC’s.
How the Client Benefited
The yearly strategic model was used to evaluate the impacts of various location scenarios. Proforma scenarios showed savings of $2 mm annually over current practice. The monthly model is used to schedule re-builds and to plan inventory builds for seasonal demand at all plants and distribution centers.