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Logistics Network Design Strategies

This document discusses approaches to analyzing logistics systems including materials management versus physical distribution and different types of logistic channels. It also summarizes factors that influence logistics network design such as costs, customer response times, and the roles of different facilities. Key decisions in network configuration include the number, location, size, and allocation of retailers, distribution centers, and manufacturing facilities. Optimization models can help determine the optimal number and location of facilities while minimizing costs.

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Niharika Satyadev Jaiswal
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364 views16 pages

Logistics Network Design Strategies

This document discusses approaches to analyzing logistics systems including materials management versus physical distribution and different types of logistic channels. It also summarizes factors that influence logistics network design such as costs, customer response times, and the roles of different facilities. Key decisions in network configuration include the number, location, size, and allocation of retailers, distribution centers, and manufacturing facilities. Optimization models can help determine the optimal number and location of facilities while minimizing costs.

Uploaded by

Niharika Satyadev Jaiswal
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Logistics System Design and Administration

TR PANDEY
Approaches to Analysis of Logistic Systems

 Materials Management Versus Physical Distribution


 Cost Centers
 Nodes Versus Links
1. Balanced System
 Logistic Channels 2. Heavy Inbound System
3. Heavy Outbound System
4. Reverse Logistics
Typical supply chain
upstream

downstream
Logistics Network Configuration
 Configuration of the logistics network (or supply chain) may
involve the following strategic decisions
 Determining the number of retailers, distribution centers and
manufacturing facilities
 Determining the location of each facility
 Determining the size of each facility
 Allocating retailers to different distribution centers
 Determining transportation modes
 Determining the operation of the network (direct shipments, e.g.)
Roles of different type of facilities
 Manufacturing plants
 Responsible for manufacturing the goods for distribution
 Some companies may not own manufacturing plants
 Distribution centers
 Reducing lead times, increasing product availability at the retailer level (depot
effect)
 Enabling economies of scale by consolidating shipments from the
manufacturing plants.
 Delaying the allocation of material to retailers (joint ordering effect)
 Providing a second level of support for emergency orders at retailer level
 Consolidation point for reverse logistics
 Localization of goods to different countries
 Retailers (stores, bases)
 Primary access point for customers
Design options for the network
Direct shipment

Supplier/Plant Retailer/Base
Design options for the network
Direct shipment

DC

Supplier/Plant Retailer/Base
Factors influencing network design
 Strategic factors
 Cost leadership
 Responsiveness/variety
 Technological factors
 Macroeconomic factors
 Tariffs and taxes
 Exchange rate and demand risk
 Political factors
 Infrastructure factors
 Competitive factors
Factors influencing network design
 Customer response time and local presence
 Logistics and facility costs
 Inventory costs
 Transportation costs
 Inbound versus outbound
 External versus internal fleet
 Truckload (TL) versus less than truckload (LTL)
 Facility costs
 Setup
 Operating costs
Number of facilities

Required
Number of
Facilities

Desired
Response
Time
Number of facilities

Inventory
Costs

Number of
Facilities
Number of facilities

Transportation
Costs

Number of
Facilities
Number of facilities

Facility
Costs

Number of
Facilities
Number of facilities

Response time

Total Logistics Costs

Number of
Facilities
OR models for facility decisions
 Facility location model
 minimize transportation and facility costs
 Vehicle routing
 minimize transportation and vehicle costs
 Location-routing:
 combination of facility location and vehicle routing
 Location-inventory
 minimize transportation, facility and inventory holding costs
 Inventory-routing
 minimize transportation, vehicle and inventory costs
Open questions in network design
 Do I need a distribution center at all?
 How many levels do I need in distribution?
 How many distribution centers do I need?
 What is the impact of competition on facility decisions?
 How many retail stores do I need?

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