Designing an Integrated Distribution System at DowBrands, Inc.

Abstract

Merging two independent distribution systems into an integrated whole poses significant challenges and opportunities for managers. Not only must they analyze the trade-offs among facility, inventory, and transportation costs, but they must also consider customer-service issues. We developed an optimization-based decision support system (DSS) for designing two-echelon, multi-product distribution systems and applied it to a problem facing DowBrands, Inc. The DSS provided valuable insight into the problem's cost and service trade-offs. Savings in logistics arising from its application are conservatively estimated to be $1.5 million per year.