1. INTRODUCTION
SunCash is a coffee franchise, with 34 stores spread across Sydney, Australia. While they primarily sell
coffee, they also have a range of cakes and pastries, along with some larger food items like sandwiches,
salads, meat pies, and sausage rolls. Given the impact of COVID-19, the company has incorporated
home delivery, meaning that customers can either travel to a coffeeshop and order there, or place an
online order for delivery.
One problem for SunCash as always been that in trying to provide a full range of food options in each
store, they experience high rates of spoilage for those larger food items. With the adoption of home
delivery, they have also found that the individual stores also have difficulties and inefficiencies when
arranging and making delivery to customers.
To address these challenges, SunCash is planning to revamp and expand their distribution network.
Specifically, they are thinking about creating several “dark kitchens1”, which will ultimately become
the locations at which online orders for food (and any associated coffee) will be prepared and the only
location where such orders are delivered from.
You have been engaged to design their network to support these changes. Management wants you to
present them with a report, which effectively communicates the solutions that you have arrived at. In
addition, they would like to see an Excel file containing your working.
2. THE EXISTING NETWORK STRUCTURE
Currently, all the coffee and food supplies are transported by medium truck from distribution centres
(DCs) to stores. Customers either collect their orders from a store, or if they have placed an order for
home delivery it is delivered to them in a small van from the store who is responsible for the delivery
region where the customer lives. Figure 1 gives a simple visual depiction of the current distribution
network.
1 https://www.deliverect.com/en/blog/dark-kitchens/what-is-a-dark-kitchen
Dis tribution centre(s)
Store Store Store
Products transported by medium truck
Delivery
region
Delivery
region
Delivery
region
Products transported by light truck
https://www.deliverect.com/en/blog/dark-kitchens/what-is-a-dark-kitchen
https://www.deliverect.com/en/blog/dark-kitchens/what-is-a-dark-kitchen
FIGURE 1: Overview of Current SunCash Distribution Network
3. THE PROPOSED NETWORK STRUCTURE
In the proposed distribution network, products may differ in terms of how they are distributed.
Highturnover produce which sells rapidly will be the only type for which inventory is held in every
store. Low turnover products, primarily the larger food items (sandwiches, salads, meat pies, sausage
rolls, etc), have low and/or intermittent demand, which makes them costly to hold in every store and
results in high spoilage rates. These high spoilage rates negatively impact profit, despite the high
margins that are made on these low turnover products. The proposed network is depicted in Figure 2.
FIGURE 2: Overview of Proposed SunCash Distribution Network
High turnover products can be purchased in any store (if they are not in stockout), or they can be
delivered to the customer from inventory held in a Dark Kitchen (DK). The low turnover products are
only held in DKs, thus aggregating the inventory, requiring less safety stock, and reducing the spoilage
rates. These products can be ordered online or in store, and can either be picked up in store, or
delivered. You should also note that the same vehicles that deliver low turnover products to the stores
can also be used to deliver those low turnover products directly to the customer. The DKs are typically
closer to the market than the DCs, which allows for rapid delivery or store pickup.
For efficiency reasons, many of the movements are made by medium truck, including between the DCs
and the stores, and between the DCs and the DKs. The movements between DKs and stores and DKs
and delivery regions are made by small vans. These are more cost effective, allow for delivery to almost
all addresses (where bigger vehicles might not be able to go). All transportation capacity is kept in-
house, to ensure that the food product is handled appropriately.
Distribution centre(s)
Store Store Store
Dark Kitchen
Delivery
region
Delivery
region
High turnover products, medium truck
Low turnover products, medium truck
High turnover products, light truck
Low turnover products, light truck
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4. NETWORK DATA
4.1. Locations of Facilities
SunCash have provided you with the data needed to perform the analysis, plus a map to help visualise
the situation (see Figure 3). All data available in the Excel file named
“ITLS6002_2021_S1_Group_Assignment_Data.xlsx”. The map can be viewed online
(https://tinyurl.com/a3m2m2kw) and is available as a static version in the “Map” worksheet of the
Excel data file.
FIGURE 3: Distribution Centre (DC), Dark Kitchen (DK) and Store/Delivery Region Location
4.2. Product Demand in Store/Delivery Region
The “Markets” worksheet contains all information about the demand for the various types of products
(high and low turnover) and the various types of distribution over the last mile (delivery and store
shopping/pickup). Demand is provided in very aggregate terms, in tonnes per annum. Also note that
demand for delivery services varies considerably across markets. You will notice that the uptake of
delivery and the relative demand for low turnover (generally high value) products varies across the 34
market regions. You should also note that that each store location is used to summarise demand for
both high turnover products which are purchased in-store or picked up from the store after an online
https://tinyurl.com/a3m2m2kw
https://tinyurl.com/a3m2m2kw
https://tinyurl.com/a3m2m2kw
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purchase, as well as to represent the different delivery regions that exist. The assignment will not focus
on specific delivery runs to individual customer addresses – it is enough to move the goods being
delivered from a DK to a delivery area, and make a simplifying assumption that an efficient delivery
run will be devised for any given mix of customer addresses. The stores/delivery areas are marked as
green coloured pins on the map ( ).
4.3. Distribution Centres
The “DCs” worksheet details the relevant fixed costs per annum for three DC locations which will be
evaluated. These could include rent or interest payments, and any costs that may differ across
locations. The Carlingford DC is the one that is currently in operation. The DCs are marked as blue pins
on the map ( ).
4.4. Dark Kitchens
The “DKs” worksheet lists the DK fixed costs. Eight of the DKs will be in completely new locations (and
are marked as “standalone”). Four of the DKs will be positioned alongside existing stores (marked as
“collocated”). In addition to the obvious transportation costs benefits (no truck movement costs for
products moved from the DK to the store), collocated DKs may have fixed cost economies of scale. For
the purposes of this assignment, you can assume that DKs do not have capacity limits (although these
could be readily imposed). The DKs are marked as orange pins on the map ( ).
One of the motivations for using the DKs is to be more responsive to the customer. If the DKs are too
far away from the customers, then the trucks will take a long time to reach the customers, and the
reliability of scheduled delivery times is likely to be reduced. Consequently, you are to impose some
criteria which ensure a minimum level of responsiveness. It is suggested that you use a maximum
distance of 25km between DKs and the stores/delivery areas which are allocated to them.
4.5. Distance Information
You will need to calculate an approximation of the cost of moving the flowers through your distribution
network. To assist you, in the “Distances” worksheet you have been provided with estimates of the
distance between the DCs and the store/delivery areas, between the DCs and the DKs, and between
the DKs and the store/delivery areas. These distances have been generated using Google Maps and
are based on a judgement of the most appropriate route for the class of vehicle making the delivery.
Given the proximity of many of the facilities to the major Sydney motorways (M7, M4, M5, M2, etc.),
and the favourable travel conditions on these roads, these routes make extensive use of the
motorways. Toll costs are not considered, nor are any costs linked to travel times.
4.6. Transportation Costs
There are a variety of available ways to convert the distances to costs. It is suggested that you base
these on the capacity of the available truck fleet, and their associated costs, where these data are
available on the “Trucks” worksheet. Medium trucks, which are used for DC to store/delivery area
shipments, and DC to DK shipments, have a capacity of 5 tons, and a cost per truck kilometre of $5.00.
Small vans, which are used for the delivery runs from the DKs to the stores and the delivery areas,
have a capacity of 1 tons, and a cost per truck kilometre of $2.50. This approach requires you to work
out the number of shipments per annum based on the annual flows and the truck capacities. The out
and back trip costs could be handled. There is no requirement to consider the cost of the delivery runs
within each delivery area.
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5. PROJECT REQUIREMENTS
5.1. Main Component
Your group is to write a report that analyses a number of scenarios, answering some specific questions
for each.
Scenario 1: Optimise the new distribution network, where only new, “standalone” DKs are to be
considered. Only one DC needs to be open: all three DCs are to be evaluated in turn, with detailed
results reported for each solution (note that you could estimate a single model with decision variables
for DC opening, but you will likely exceed the limits of 200 decision variables in Solver).
Scenario 2: Optimise the new distribution network, where both “standalone” DKs and collocated DKs
are to be considered. Only one DC needs to be open: all three DCs are to be evaluated in turn, with
detailed results reported for each solution.
Scenario 3: The management of SunCash is very curious about the performance of the collocated DKs.
Optimise the new distribution network, where only collocated DKs are to be considered. Only one DC
needs to be open: all three DCs are to be evaluated in turn, with detailed results reported for each
solution.
All scenarios should be compared carefully. You should give a final recommendation about how
SunCash should proceed, and what network configuration they should use.
6. MARKING CRITERIA
# Criteria Worth (%)
1 Synopsis 5
2 Introduction 5
3 Description of techniques used 15
4 Technical implementation 30
5 Recommendations regarding scenarios 20
6 Report conclusion 5
7 Presentation (report and Excel) 10
8 Communication and report structure 10
100
Synopsis (5%)
• The synopsis should provide a brief description of your recommendations. In effect, I/senior
management would like to be able to just read your synopsis and have an understanding of
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what your key recommendations are. The synopsis must not be more than half a page in
length.
Introduction (5%)
• You are to write a brief but professional introduction to the problem you are facing. Your
report is to be written to the managing directors of exlRZN and nuResin.
Description of techniques used (15%)
• Here you are to briefly describe the methods that you used. It is essential that the reader can
gain a clear understanding of what you have done, where you can assume that the reader is
educated and interested, but not familiar with the methods that you have used. The client is
interested not just in what you recommend, but the methods you have employed.
Technical implementation (30%)
• All of the calculations should be made available in the Excel file that you submit. You will be
marked based on how well the models you construct reflect the network you are trying to
optimise, the correctness of your calculations, and the performance of the solutions that you
recommend.
Recommendations regarding scenarios (20%)
• These marks will be awarded based on how well you critically evaluate the performance of the
three scenarios, and the soundness of your final recommendation.
Report conclusion (5%)
• You are to write a brief but professional conclusion based on your findings. This section
should summarize what has come before. No new material should be placed in this section.
A brief summary of the recommendations should also be included.
Presentation (10%)
• 10% of grades will be devoted to the quality of the presentation of this component of the
assignment, including both the report and the Excel file.
Communication and report structure (10%)
• Not only are your findings important, but the way you communicate them to management is
as well. Marks are awarded for clarity, and for a logical, structured presentation of your
findings.
You are also required to provide a Table of contents for the report. You are to provide a reference list
(NOT a bibliography) if required. Note that the group component is worth 25% of your final marks.
1. INTRODUCTION
2. THE EXISTING NETWORK STRUCTURE
FIGURE 1: Overview of Current SunCash Distribution Network
3. THE PROPOSED NETWORK STRUCTURE
FIGURE 2: Overview of Proposed SunCash Distribution Network
4. NETWORK DATA
4.1. Locations of Facilities
4.2. Product Demand in Store/Delivery Region
4.3. Distribution Centres
4.4. Dark Kitchens
4.5. Distance Information
4.6. Transportation Costs
5. PROJECT REQUIREMENTS
5.1. Main Component
6. MARKING CRITERIA
Synopsis (5%)
Introduction (5%)
Description of techniques used (15%)
Technical implementation (30%)
Recommendations regarding scenarios (20%)
Report conclusion (5%)
Presentation (10%)
Communication and report structure (10%)