Introduction to Supply Chain management(Lesson 3)

Edited By JQuek

Define and describe what is LOGISTICS in SCM

Objectives for today’s lesson

Defining the Logistics Network

The Logistics Network consists of:

Facilities:Vendors, Manufacturing Centers, Warehouse/ Distribution Centers, and Customers

Raw materials and finished products that flow between the facilities.

A simplified logistics cycle

Supply

Sources:plantsvendorsports

RegionalWarehouses:stocking points

Field Warehouses:stockingpoints

Customers,demandcenterssinks

Production/purchase costs

Inventory &warehousing costs

Transportation costs

Inventory &warehousing costs

Transportation costs

Logistics Design Decisions

What must be determined:• the appropriate number of warehouses• the location of each warehouse• the size of each warehouse• Allocate space for products in each warehouse• which products customers will receive from

each warehouse

Decision Classifications

Strategic Planning: Decisions that typically involve major capital investments and have a long term effect1. Determination of the number, location and size of

new plants, distribution centers and warehouses

2. Acquisition of new production equipment and the design of working centers within each plant

3. Design of transportation facilities, communications equipment, data processing means, etc.

Tactical Planning: Effective allocation of manufacturing and distribution resources over a period of several months

1. Work-force size

2. Inventory policies

3. Definition of the distribution channels

4. Selection of transportation and trans-shipment

alternatives

Operational Control: Includes day-to-day operational decisions

1. The assignment of customer orders to individual machines

2. Dispatching, expediting and processing orders

3. Vehicle scheduling.

Network Design: Key Issues

Pick the optimal number, location, and size of warehouses and/or plants

Determine optimal sourcing strategy◦Which plant/vendor should produce which

product Determine best distribution channels◦Which warehouses should service which

customers

The Objective of Logistics Management

Design or configure the logistics network so as to minimize annual system-wide cost subject to a variety of service level requirements

Network Design: Key Issues

The objective is to balance service level against

• Production/ purchasing costs

• Inventory carrying costs

• Facility costs (handling and fixed costs)

• Transportation costs

That is, we would like to find a minimal-annual-cost configuration of the distribution network that satisfies product demands at specified customer service levels.

Major components in Network Design Tools

Mapping◦Mapping allows you to visualize your supply

chain and solutions◦Mapping the solutions allows you to better

understand different scenarios◦Color coding, sizing, and utilization indicators

allow for further analysis

Major components in Network Design Tools

Data◦Data specifies the costs of your supply chain◦The baseline cost data should match your

accounting data◦The output data allows you to quantify

changes to the supply chain Engine◦Optimization Techniques

Mapping Allows You to Visualize Your Supply Chain

Displaying the Solutions Allows you To Compare Scenarios

Data for Network Design

1. A listing of all products2. Location of customers, stocking points and

sources3. Demand for each product by customer location4. Transportation rates5. Warehousing costs6. Shipment sizes by product7. Order patterns by frequency, size, season,

content8. Order processing costs9. Customer service goals

Problems : Too Much Information

Customers and Geocoding Sales data is typically collected on a by-

customer basis Network planning is facilitated if sales data is in

a geographic database rather than accounting database1. Distances2. Transportation costs

New technology exists for Geocoding the data based on Geographic Information System (GIS)

Geocoding is the process of finding associated geographic coordinates (often expressed as latitude and longitude) from other geographic data, such as street addresses, or zip codes (postal codes).

A geographic information system (GIS) lets us visualize, question, analyze, interpret, and understand data to reveal relationships, patterns, and trends

What is geo-coding?

Continue next week....