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SCM 7040 G01 A01 FALL 2023 SESSION
LOGISTICS MANAGEMENT
BRIEFING ANALYSIS #2: Grid Method to Locate Centralized Prairie Fresh-Produce Warehouse/DC
Background: As part of Lecture 2, we went through the procedures involved with the “Grid Method.”
This is a form of a heuristic model. It is not necessarily intended to be super-accurate nor optimal, but
rather involves techniques that are sufficiently simple that people can quite easily use themselves, e.g.,
without sophisticated computer technologies, etc. Their intended use is for first-cut estimations, that
can allow for a better understanding, and also help hone into be able to undertake more detailed
evaluations.
Rather than just letting the Grid Method sit on a “theoretical” shelf, we are going to put the method to
use in a somewhat more practical way, to undertake a preliminary evaluation regarding what might be
the best centralized starting point to locate a warehouse / distribution centre (DC) handling large
quantities of fresh produce for grocery stores in larger urban centres across the Prairie region that
ultimately are sourced from the U.S. The method attempts to identify a suitable first-cut site, based on
seeking to reduce transportation costs. For anyone who might happen to be an international student and
relatively unfamiliar, Canada is a major food production and exporting country, but what we eat is not
necessarily what we actually make. This is particularly true of fresh produce (fruits and vegetables), that
all overwhelmingly come to Prairie consumers from ultimate sources in the U.S. Some in Canada suggest
reliance on such imports is a serious policy concern, however, they reflect our current taste preferences.1
In order to permit use of a “square grid” we will set an arbitrary “origin” point as Florida City in Florida.
All other sites are located West and North of Florida City, hence how the grid will be set up. In the Prairie
Region, there are five major urban customer destinations, with populations as follows:
• Edmonton, Alberta (1,151,635)
• Calgary, Alberta (1,305,550)
• Saskatoon, Saskatchewan (264,637)
• Regina, Saskatchewan (224,996)
• Winnipeg, Manitoba (758,515)
Agriculture and Agrifood Canada confirms that Canadians indeed import a lot of fresh produce. The total
population of these major urban centres is 3,705,333, which incidentally represents about 10% of the
population of Canada as a whole, so this is not trivial. Based on this, and assuming roughly 40% of imports
originate from the U.S., we will set a reasonable total annual quantity of about 100,000 tonnes. For
Western Canada, including the Prairies, most of this material comes from California. For our purposes we
will assume 92% is from California, with Fresno, California assumed as the main central source point. A
further portion comes from the Florida/Georgia area on the east coast of the U.S., which we will assume
to be approximately 8%. The central source point for the latter is assumed as Lakeland in Polk County.
For a variety of good reasons, costs to move products in Canada are more expensive, in part in this case
because of LTL versus TL. Transportation costs are to be assumed as follows:
1
York University. 2023. Food Policy in Canada: Reliance on Exports
1
•
•
Transportation of produce from source points in U.S. to warehouse/DC of $2.50 per tonne-km; and
Transportation of produce from warehouse/DC to Prairie urban centres of $5.00 per tonne-km.
The source and final destination locations on the cartesian grid and associated quantities involved for
each are summarized in the following table (latitude/longitude data are also provided for reference):
Location and Quantity Data for Grid Method Analysis of Centralized Produce Distribution Centre
Site
Quantity
X-Grid (E-W)
Y-Grid (N-S)
Longitude
Latitude
Origin site
Florida City, FL
n/a
0.0 km
0.0 km
80.48 deg W
25.45 deg N
Source sites
Transportation costs from these are all set uniformly at $2.50 per tonne-km
Fresno, CA
92,000 tonnes 4,372.8 km W
1,257.7 km N
119.77 deg W
36.75 deg N
Lakeland, FL
8,000 tonnes
163.6 km W
289.9 km N
81.95 deg W
28.06 deg N
Destinations
Transportation costs to these are all set uniformly at $5.00 per tonne-km
Edmonton, AB 31,000 tonnes 3,674.1 km W
3,126.1 km N
113.49 deg W
53.53 deg N
Calgary, AB
35,000 tonnes 3,738.3 km W
2,849.6 km N
114.07 deg W
51.05 deg N
Saskatoon, SK
7,000 tonnes 2,916.7 km W
2,970.9 km N
106.69 deg W
52.14 deg N
Regina, SK
6,000 tonnes 2,685.2 km W
2,783.3 km N
104.61 deg W
50.45 deg N
Winnipeg, MB 21,000 tonnes 1,854,8 km W
2,719.8 km N
97.15 deg W
49.88 deg N
You will note that some of the grid location numbers may not appear to work out quite properly (i.e.,
compared to roadway travel distances), but we will use these for our initial approximation. Part of the
complexity is that the grid employed is flat, whereas the world is actually spherical. (Approximation
employed is based on using circumference of Earth as 40,075 km, representing 360 degrees, or hence
about 111.3 km per change in degree). Remember for Grid Method, you do two sets of calculations: firstly,
for the X-Grid; and secondly, for the Y-Grid.
Assignment: You are to prepare a two-page Briefing Analysis, including summary. You are to:
•
•
•
Utilize the Grid Method to identify the approximate location for a produce warehouse/DC to handle
all fresh produce from the U.S. going to Canadian Prairie cities, based on data as provided.
Recommend, based on the Grid Method results, where more precisely you would locate the facility,
this given identified site may not necessarily be in an entirely suitable location, e.g., in the middle of
water, not near any road links or not in proximity to any urban or practical locations.
Provide reasons for your final recommended location, including Grid Method results.
You will need to justify your answers, and are required to include at least three additional cited
references beyond those listed here in this document.
Due Date: This Briefing Analysis submission is due at the beginning of the Lecture on Monday, October
23rd, 2023. An “Assignment Folder” will be open on UM Learn. This is the preferred method for you to
upload and submit your assignment document. The Assignment Folder will close automatically. You can
also send via email to the instructor with postmark no later than 6:15 PM, October 23rd, 2023:
robertvparsons@gmail.com or Robert.Parsons@umanitoba.ca. Because of time sensitivity of the
information involved, the Assignment Folder will close, and electronic submissions after that time will
not be accepted. The marks involved are small so missing one is not a major concern.
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In-Class Discussion: We will discuss this assignment briefly as part of the lecture, including thoughts on
broader context. The in-class discussions are part of the active participation assessment metric.
Briefing Analysis Format: The Briefing Analysis format is described in the course outline, and involves
two-page maximum length (12-point font minimum), including three reference citations that are not
included in the page count, with the indicated format of three sections:
•
•
•
Summary section including recommendations;
Background section describing any critical background factors that are essential for making your
case; and lastly
Analysis section presenting your analysis that makes the case for what you are recommending.
References can be placed on a third page. As noted, the references do not count as part of the tw0-page
limit. A “template” for Briefing Analysis assignments will be available on UM Learn. Students are strongly
reminded to pay close attention to the above format! It is different from what you may normally
undertake. Not adhering to the required format has been noted as a significant source of deductions for
students taking this course in earlier sessions. Importantly, the synoptic approach employed is much
closer to reporting expectations you will encounter in real business organizations.
Reference Format Style: As described in the course outline, you are permitted to use any reference
format style you wish (e.g., APA, MLA, Chicago, etc.), but with the provision that a consistent format
must be used throughout the entire document, and must involve a proper reference, not just a URL.
Scoring and Grade Contribution: For the purposes of feedback, the assignment is scored out of 30, with
the score posted on UM Learn under the Grades section. The rubric employed for marking is based on:
15 for content; 9 for references; and 6 for technicalities, including grammar, punctuation, formatting, etc.
This assignment is worth up to 3% of your final grade, with thus the grade contribution you receive will
be the score out of 30 divided by 10.
Last Clarification
One last clarification, in that we are talking costs per “tonne-km.” When you see this, it means per
“tonnes times kms.” You do not divide. For example, if it were say 100 tonnes and 2,000 km, it would
represent 100 tonnes × 2,000 km, or 200,000 tonne-km
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SCM 7040 G01 A01 (Logistics Management) – Fall 2023
Briefing Analysis # [Enter Briefing Number and Title Here – delete this]
Student Name:
Student Number:
[Enter Name Here – delete this]
[Enter Student ID Number Here – delete this]
Summary
Background
Analysis
[Maximum length of 2 pages (12 point font, single spaced) – excludes references
– delete this]
References
[References should start on a separate page, and do NOT count in terms of
maximum length of two pages – use consistent citation format – delete this]
SCM 7040 G01/A01:
Logistics Management
Robert V. Parsons, PhD, MBA
Sessional Instructor
Email contacts:
robert.parsons@umanitoba.ca
robertvparsons@gmail.com
October 16th, 2023 – Week #3
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Slide Set 5: Brie ng Assignment #2 Application of Grid Method Analysis
Brie ng Assignment #2
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• Logistics focuses signi cantly on
enhancing operational e ciency and
reducing costs
• A variety of quantitative methods are
employed, including relatively simple
heuristic models, such as Grid Method
• Rather than just letting this sit on a
“theoretical” shelf, we will use the Grid
Method to assess a potentially more
practical application
Brie ng Assignment #2
• Fresh Produce Imports from U.S.
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Graphic from site:
https://ecomercioagrario.com/en/spainimported-2-less-fruits-and-vegetablesuntil-october/
Brie ng Assignment #2
• Canada is a major food production
country, and indeed a major exporter
• But … what we eat is not necessarily
what we produce
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• In particular it turns out Canadians
import most of our fresh produce from
the U.S., this includes on the Prairies
Brie ng Assignment #2
• Based on a quick review
– Upwards about 100,000 tonnes annually of
fresh produce comes to major Prairie cities
– If we were to enhance overall e ciency by
having a single major warehouse to handle
and redistribute these food products,
where likely should be roughly the right
location to put this?
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• Hence why we would want to look at
using the Grid Method model
Brie ng Assignment #2
• There are ve major destinations:
– Edmonton (31,000 tonnes)
– Calgary (35,000 tonnes)
– Saskatoon (7,000 tonnes)
– Regina (6,000 tonnes)
– Winnipeg (21,000 tonnes)
• Two major source locations
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– California (using Fresno) (92,000 tonnes)
– Florida (using Lakeland) (8,000 tonnes)
Brie ng Assignment #2
• We are assuming shipments to central
warehouse from U.S. source locations
are more e cient and less costly:
– $2.50 per tonne-km
• We are assuming that nal-leg
shipments from warehouse within
Canada to destinations are more costly:
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– $5.00 per tonne-km
– For example, these likely will be LTL rather
than LT shipments
• In order to set up a grid-matrix, we also
need to select an “origin” point
– This is Florida City in Florida
– Set as 0 km W, 0 km N on the grid
• In the assignment document you will
nd all the grid location data
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– Note that distances in some cases might
appear a bit out – because the Earth is
spherical and not actually at
– Roughly 1 degree change = 111.3 km
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Brie ng Assignment #2
Brie ng Assignment #2
• You are to set up the Grid Method and
use this to identify approximately point
where warehouse should be located
– Calculations are shown in textbook and
– Are also in Lecture 2 notes
– Remember, you have to do calculations
twice: once for X-axis and once for Y-axis
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• Grid Method will just give you some
arbitrary spot, you need to recommend
what likely would be good real site
Brie ng Assignment #2
• Prepare a two-page brie ng:
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– Outline based solely on the Grid Method,
where would be the likely spot to locate a
major central warehouse/DC
– Then given this spot is likely pretty
arbitrary and unrealistic, recommend
based on analysis where practically you
would recommend siting the warehouse
– And justify your selections based on citing
at least three independent references
Brie ng Assignment #2
• Written brie ng analysis due:
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– Start of Class on Monday, October 23,
2023 at 6:15 PM
– Folder for submissions will be open on UM
Learn and is likely best way to submit
– Given the time sensitivity of information,
late submissions cannot be accepted,
except for a valid problem, in which case
please consult instructor!
Brie ng Assignment #2
• You are to use an inverted pyramid
format for this 2-page brie ng
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– Summary to identify selected SCM issue;
then Background and Analysis to explain
why these issue important, and example,
with template provided on UM Learn
– Need to cite three (3) references using a
consistent reference format – your choice
– References don’t count for the 2-page limit
Brie ng Assignment #2
• You can certainly work together … but
• Assignment MUST be your own work
– Just “copy and paste” is plagiarism
– University treats this VERY seriously
• Very easy in this case for me to see
• Some real and unexpected paradoxes
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– Too much information for just 2-pages and
too many references
– Very easy for everyone to nd di erent
references with slightly di erent slants
Brie ng Assignment #2
• But how will this be assessed?
– Useful to ask and for me to answer
• You are asked to:
– Identify the approximate spot suggested
through the Grid Method model
– Identify what actual location you would
select based on this, but being realistic
– Justify your selection with three
independent reference sources
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• Meet requests and will get good score!
Brie ng Assignment #2
• For feedback will provide a score out of
30 marks on UM Learn
– 15 marks based on content
– 9 marks based on references
– 6 marks based on technicalities, like
grammar, punctuation, format, etc.
• Score translates to out of 3% for grade
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– i.e, Score out of 30 as presented on UM
Learn divided by 10 to get percent
contribution to nal grade
Brie ng Assignment #2
• In-class discussion
– We will try to talk about ndings on the
due date or shortly after
– Try to compile an overall list of ndings
– We will quickly try to assemble everyone’s
results
• Active participation
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– Further, voluntarily discussing ndings and
what they may mean more broadly does
help toward active participation score!
SCM 7040 G01/A01:
Logistics Management
Robert V. Parsons, PhD, MBA
Sessional Instructor
Email contacts:
robert.parsons@umanitoba.ca
robertvparsons@gmail.com
September 25th, 2023 – Week #2
Slide Set 3: Chapter 3/4 Analysis
Bases, Perspectives and Grid Method
Analyzing logistics systems
• Quickly go back to Appendices 3A and
3B to look at details of analyses:
– Short-run versus long-run
– Four analysis perspectives
• Will then go on to Appendix 4A to look
at Grid Method:
– Warehouse location selection; and
– Sensitivity analysis
Bases for cost logistics analyses
• Short-run versus long-run translates to
• Static versus dynamic analysis
– Fixed-point situation (or given-year) versus
– Considering variability over time or
considering changes in quantity or others
• Text goes through useful example (p83)
– Powdered bulk-solid bagged for market
– System 1 bag and palletize at plant
– System 2 sends bulk via rail to warehouse
near market, then bags and palletizes
Bases for cost logistics analyses
• Powdered product bagged and palletized
Static analysis for powder product
• Based on current costs and ~23,000 kg output
Cost Item
Plant: Packaging
Plant: Storage/handling
Plant: Inventory carrying
Plant: Administration
Plant: Fixed cost
Warehouse: Packaging
Warehouse: Storage/handling
Warehouse: Inventory carrying
Warehouse: Administration
Warehouse: Fixed cost
Transport to warehouse
Transport to customer
Overall Total Cost
System 1
500
150
50
75
4,200
0
0
0
0
0
0
800
$5,775
System 2
0
50
25
25
2,400
500
150
75
75
2,400
150
100
$5,950
Static analysis for powder product
• This analysis is obviously static
– Based on current year cost estimates
– Based on xed output of ~23,000 kg
– (Note they use 50,000 lb for U.S. case,
but I am converting roughly to SI units)
• Based on this static analysis, including
all costs for both options, which one
would you chose? System 1 or System 2
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– But, what might be missed in doing such a
simplistic analysis?
Dynamic analysis for same product
• Critical obvious factor to consider in
this case is “how much product?”
– It is highly unlikely product throughput or
customer demand remains absolutely xed
• Case identi es “ xed” costs but there
are other costs obviously “variable”
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– Packaging, storage and handling, inventory
carrying and administration plus transport!
– Note in the example presented, all are
assumed to vary linearly with throughput
Dynamic analysis for same product
• We end up with total logistics costs
being a linear function of throughput for
both cases
– Becomes doable mathematical problem
Total Cost = Fixed Cost + Variable Cost/Unit × Throughput Units
Or Y = b + m X as mathematical equation form
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– Fixed costs are given directly but variable?
– Leave you to work out but they are correct
– Easiest to take total costs less xed costs
(given) and then divide by 50,000 units
Dynamic analysis for same product
• We now end up with two equations for
total logistics costs and can compare
results as a function of throughput
System 1: Y = $4,200 + $0.0315 X
System 2: Y = $4,800 + $0.0230 X
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– What you see is trade-o where System 2
has 14% higher xed costs but has 27%
lower variable costs
– Result depends on throughput
– See same application in “make or buy” or
production location selection cost analysis
Dynamic analysis for same product
• We can now plot this up to see results
• Have to “gee-whiz” a bit to properly see
Dynamic analysis for same product
• We can now plot this up to see results
Can easily see breakeven here at just over 70,000 units value
Dynamic analysis for same product
• We can now plot this up to see results
Can even show a “low-cost” envelop with optimal solutions
Perspectives for logistics analyses
• Four major perspectives to consider
assessing logistics systems
– Materials management versus physical
distribution
– Cost centres
– Nodes versus links
– Logistics channels
– We will go through each individually
Perspectives for logistics analyses
• Materials management versus physical
distribution
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– Materials management = in-bound
– Physical distribution = out-bound
– Useful to consider that how raw materials are
handled is often very di erent from products
– Give example of drywall manufacturing
– Gypsum input/handling involves basic bulk
solids, whereas product drywall loaded
inside, special railcars or atbed, with critical
need to protect from getting wet
Perspectives for logistics analyses
• Materials management versus physical
distribution – example output drywall product
Perspectives for logistics analyses
• Cost centres
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– Logistics involves transportation, packaging,
warehousing, materials handling, etc.
– By examining these as “cost centres” we can
assess trade-o s and assess to determine
lowest overall costs or highest service, etc.
– On the next pages examine two examples
– Firstly looking di ering transportation modes
– Secondly looking at increasing the number of
warehouses involved
Cost centres example analyses
• First involves change of transport mode
Cost Centres
Via Rail
Motor Carrier
Transportation
300
430
Inventory
500
375
Packaging
350
320
Warehousing
150
75
Cost of Lost Sales
200
100
Total Cost
$1,500
$1,300
Cost centres example analyses
• First involves change of transport mode
Cost Centres
Via Rail
Motor Carrier
Transportation
300
430
Inventory
500
375
Packaging
350
320
Warehousing
150
75
Cost of Lost Sales
200
100
Total Cost
$1,500
$1,300
Analysis shows that seeming more expensive transport mode
produces lower overall logistics costs and is advantageous!
Cost centres example analyses
• Second involves more warehouses
Cost Centres
3 Warehouses
5 Warehouses
Transportation
850,000
500,000
Inventory
1,500,000
2,000,000
Warehousing
600,000
1,000,000
Cost of Lost Sales
350,000
100,000
Total Cost
$3,300,000
$3,600,000
Cost centres example analyses
• Second involves more warehouses
Cost Centres
3 Warehouses
5 Warehouses
Transportation
850,000
500,000
Inventory
1,500,000
2,000,000
Warehousing
600,000
1,000,000
Cost of Lost Sales
350,000
100,000
Total Cost
$3,300,000
$3,600,000
Analysis shows that while can reduce transportation and cost
of lost sales, the overall costs are higher suggesting not viable
Perspectives for logistics analyses
• Nodes and links
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– Nodes are xed spacial points where good
stop, whether for storage or for processing
(.e.g., manufacturing/assembly)
– Links represent the transportation network
and connect nodes in the overall system
– Di erent modes of transportation may be
used, including combinations and variations
– Node-link analysis is particularly useful for
identifying improvements
– Example diagrams – one shown last week
Nodes and links analysis
• Logistics node/link general layout
Nodes and links analysis
• Diagram showed input points and plants
Nodes and links analysis
• Can also add in warehouses (◉ = W) too
◉
◉
Perspectives for logistics analyses
• Logistics channels
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– Channels are the network of organizations
involved in transfer, storage, handling,
communications and other functions that
contribute to e cient ow of goods
– Channels can range from being relatively
simple, increasingly complex involving multiechelon to being highly complex
– Example diagrams illustrate complexity
– Management and control become
increasingly harder with increased complexity
Logistics channels analysis
• Simple logistics channel
Logistics channels analysis
• Multi-echelon logistics channel
Logistics channels analysis
• Complex logistics channel
Grid analysis methods
• Grid analysis is one of what are termed
heuristic models
– These involve practical methods allowing
individuals to gure out solutions for
themselves, although not necessarily
guaranteed to be optimal
– Represent useful rst-cut evaluations
• Grid analysis is used as a means to
geographically locate sites
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– Warehouse or plant, ensuring it remains
proximal to multiple sources and markets
Grid analysis methods
• Very similar to “centre of gravity”
calculations in technical disciplines
– But our interests are in the distances and
transportation costs to sources and
markets, weighted based based on the
proportion of supply or market involved
with those individual sites
• It is possible to use a simple cartesian
grid coordinate system
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– We can apply X-axis and Y-axis map
coordinates to simply de ne centre point
Grid analysis methods
• Can start simple
– Sum of just volumes × distances for
sources and markets divided by volumes
– Note distance is to arbitrary origin, but
results are still valid – a “centre of cost”
Grid analysis methods
• Can further add costs
– Sum of volumes × distances × rates for sources
and markets divided by volumes × rates
Grid analysis methods
• Example using X-axis and Y-axis useful
– Langley provides example involving three
main sources and ve main markets
• The technique requires you to run through
calculations twice, once for X-axis and
once for Y-axis but once you know the
formula approach, this is relatively simple
to accomplish using a spreadsheet
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– Grid layout and source/market coordinates
on next pages for proposed plant location
Grid analysis methods – example
• Grid layout for example
Grid analysis methods – example
• Coordinate locations
Grid analysis methods – example
• Calculation for plant X- and Y-coordinates
Grid analysis methods – example
• Resulting suggested plant site location
“Centre of cost”
located at
X = 655 and
Y = 826
◉
Grid analysis methods – sensitivity
• Technique further can be used to assess
sensitivity
• First case
– Rail to truck mode Jacksonville (cost +50%)
– Impact on calculations and location in next
slides
• Second case
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– Elimination of supply source at Bu alo
– Impact on calculations and location in next
subsequent slides
Grid analysis methods – sensitivity
• Sensitivity of changing rail to truck mode
Grid analysis methods – example
• Resulting suggested plant site location
“Centre of cost”
located at
X = 664 and
Y = 795
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Relatively insigni cant
change in location
◉
Grid analysis methods – sensitivity
• Sensitivity of changing rail to truck mode
Grid analysis methods – example
• Resulting suggested plant site location
“Centre of cost”
located at
X = 597 and
Y = 719
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Somewhat more
signi cant
change in location
◉
Grid analysis methods – pros/cons
• Advantages of method:
– Key strength is in its simplicity
– Also provides a useful starting point for
location decision(s)
• Disadvantages of method:
– Inherently assumes static conditions
– Assumes straight-line distances, and does
not consider topology
– Assumes linear transport rates, whereas
actual rates can increase with distance
Move on to Chapter 4 materials
• With this bit of background on analysis
techniques we will now proceed to look
at supply chain and “omni-channel”
network design
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– We have touched already on interactions
between logistics and supply chains
– Omni-channel is an interesting and
relatively new term we will better de ne
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