Network Optimization cost overview
You can input costs in a number of tables in your model to represent the costs used in your business. This section provides an overview of the costs and how they are used in calculating outputs in your model. The following illustration provides an overview of how costs can be used in your model. You can see that costs are applied to products, sites, processes, policies, work centers and work resources:
Note that the columns in output tables have limits on the size of the values they can accept. Keep this in mind when applying overly large unit costs. See Data limits in output tables for additional information.
The next table summarizes the various costs and provides a guide to the type of input that can be provided and the output cost affected by each input. A key to the terms used in the table is provided first:
Cost curve:
- Linear: only a value can be specified, such as 5
- Step: only a step function can be specified, with step costs such as:
Name
Minimum Quantity
Cost
StepCost_01
0
100
StepCost_02
10
200
- Linear or step: either cost curve can be used
Cost basis:
- Unit: based on certain criteria involving units, such as quantity or weight
- Event: based on when a certain event occurs, such as a site closing
- Unit-Event: based on events where the number of units matters
Affected output cost:
- The is the field in the Network Summary output where you can find the cost.
Used by:
- Network Optimization only: This cost only applies to Network Optimization, otherwise this cost can be used by multiple optimization tools and/or simulation.
| Table / Field |
Cost curve | Cost basis | Affected output cost |
Description / used by |
| Products | ||||
| Unit Value | Linear | Unit | Inventory Holding Cost |
The unit value of the product is used to determine the inventory holding cost for the product: Inv holding cost = Avg Inv * Product value * Inv Carrying Cost % * Length of Time in Inventory. Use this to specify general inventory costs. |
| Sites | ||||
| Fixed Startup Cost | Step | Unit-Event | Total Fixed Startup |
Fixed startup allows you to specify a step cost for a potential site opening at certain levels. For example, you can set a cost for a DC to open at 1M units and a different cost of opening at 2M, to represent differences in the startup cost of each. Network Optimization only |
| Fixed Operating Cost | Step | Unit | Total Fixed Operating | Fixed operating allows you to specify operating costs for a site. These costs can be at different levels for different levels of throughput. For example, there may be different amounts of overhead incurred for a site at 1M units than at 2M units. |
| Capital Investment Cost | Step | Unit-Event | Total Capital Investment |
Capital investment allows you to add a cost of expansion to both potential and existing facilities. This cost is applied at the throughput level and at all previous levels. You can use this to determine when an existing site should spend an investment cost to expand. Network Optimization only |
| Fixed Closing Cost | Linear | Event | Total Closing Cost |
Facilities may have costs incurred when they are shut down. Closing cost allows you to specify the cost of closing a given site. Network Optimization only |
| Production Policies | ||||
| Unit Production Cost | Linear OR Step | Unit | Total Production Cost |
Unit production cost specifies the average cost of producing a single unit of the product associated with the production policy. You can specify a different cost to produce products at different facilities. Network Optimization only |
| Site Sourcing Policies and Customer Sourcing Policies | ||||
| Unit Sourcing Cost | Linear OR Step | Unit | Total Sourcing Cost |
The unit sourcing cost specifies the average cost of sourcing a single unit of the sourcing policy's product between the source site and destination site. Sourcing costs are generally those costs associated with using the lane such as tariffs, fees, or other overhead costs. The do not include the physical transportation costs. Network Optimization only |
| Inventory Policies | ||||
| Unit Inbound Cost | Linear OR Step | Unit | Inbound Warehousing Cost | Unit inbound cost allows you to specify a cost for inbound warehouse processing tasks, such as the cost of stocking inventory into the right place in the warehouse or RFID technology costs. Inbound and outbound together allow you to bucket your warehousing costs into different categories. |
| Unit Outbound Cost | Linear OR Step | Unit | Outbound Warehousing Cost | Unit outbound cost allows you to specify a cost for outbound warehouse processing tasks, such as the cost of the picking process at a warehouse. Inbound and outbound together allow you to bucket your warehousing costs into different categories. |
| Inv Carrying Cost% | Linear OR Step | Unit | Inventory Holding Cost |
Inventory carrying cost % allows you to specify a percentage of the product value (in the Products table) that it costs to hold inventory. Network Optimization only |
| Unit Storage Cost | Linear | Unit | Inventory Holding Cost | Unit storage cost lets you specify the inventory cost associated with carrying each unit of inventory. |
| Transportation Policies | ||||
| Variable Transportation Cost | Linear OR Step | Unit | Total Transportation Cost | The variable transportation cost is the cost of transporting a unit of product over the given sourcing lane. This variable cost can be based on different metrics, including distance, quantity, or weight. |
| Fixed Load Cost | Linear OR Step | Event | Total Transportation Cost | The fixed load cost is a cost (based on the number of shipments/shipment size) of loading each shipment onto the carrier’s asset. |
| Fixed Unload Cost | Linear OR Step | Event | Total Transportation Cost | The fixed unload cost is a cost (based on the number of shipments/shipment size) of unloading each shipment from the carrier. |
| Duty Rate | Linear | Unit | Total Duty Cost | Duty cost is calculated by multiplying the Duty Rate by the shipment’s total value (Value from the Product table multiplied by shipment quantity.) |
| Discount Rate | Linear OR Step | Discount | Total Transportation Cost | The discount rate allows you to include a negotiated discount with a transportation company. This is useful when you use multiple carriers to transport products with different pricing structures. |
| Minimum Charge | Linear OR Step | Event | Total Transportation Cost | Minimum charge allows you to specify a minimum rate negotiated with the transportation company. Minimum rates override costs if the cost is less than the minimum charge. |
| Fuel Surcharge | Linear | Distance | Total Transportation Cost | Use this field to represent a fuel surcharge that is incurred in addition to the normal transportation cost in Network Optimization. The fuel surcharge is always calculated as a Distance-based cost, regardless of the variable cost basis value on the Transportation Policy record. |
| Return Trip Cost | Linear | Event | Total Transportation Cost | If an asset is used on the mode in the Transportation Policy, this field specifies the cost for the asset to return to the source site. This cost is reported in the variable cost field of Transportation Assets Summary Network Optimization output. |
| Transportation Assets | ||||
| Fixed Asset Cost | Linear | Unit | Total Transportation Asset Cost | Fixed asset cost is the fixed cost of using this unit. For example, this could be the cost of maintaining a vehicle in the fleet, or yearly administrative costs for operating it. |
| Hourly Cost | Step | Time | Total Transportation Asset Cost |
The hourly cost is the cost of using this asset. This can be used, for example, for driver wages that are based on how many hours a vehicle is in use. Network Optimization only |
| Production Process Steps | ||||
| Unit Process Cost | Linear | Unit | Total Production Cost | This is the cost of processing a unit in a given process. For example, this could be the cost of picking per unit at a warehouse. |
| Fixed Lot Setup Cost | Linear | Event | Total Production Cost | The fixed lot setup cost is the cost of changing processes. For example, a production line might need to switch to a different product, and incur some costs in the process. |
| Work Centers | ||||
| Fixed Startup Cost | Step | Unit-Event | Total Fixed Startup |
This is the initial startup cost of running a work center, similar to the site fixed startup cost. Network Optimization only |
| Fixed Operating Cost | Step | Unit | Total Fixed Operating | This is the fixed operating cost of running a work center, similar to the site fixed operating cost. |
| Capital Investment Cost | Step | Unit-Event | Total Capital Investment |
This is the capital investment cost of running a work center, similar to the site capital investment cost. Network Optimization only |
| Fixed Closing Cost | Linear OR Step | Event | Total Closing Cost |
This is the closing cost of shutting down a work center, similar to the site closing cost. Network Optimization only |
| Work Resources | ||||
| Fixed Resource Cost | Linear OR Step | Unit | Total Work Resource Cost | This is the fixed cost of a work resource. For example, the general/administrative costs per worker for the horizon of the model. |
| Hourly Cost | Step | Time | Total Work Resource Cost |
This is the hourly cost of a work resource. Generally, it is used for the hourly wages of workers. Network Optimization only |
Note that the columns in output tables have limits on the size of the values they can accept. Keep this in mind when applying overly large unit costs. See Data limits in output tables for additional information.
Last modified: Wednesday May 15, 2024