Date post: | 19-Oct-2014 |
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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....