Logistical Network Analysis Chapter 12 A Logistics Approach

Logistical Network Analysis Chapter 12 A Logistics Approach to Supply Chain Management Coyle, Langley, Gibson, Novak, Bardi

Contents Concepts / Definition / Scope / Objectives / Importance Number of facilities Network options Milk Runs RORO LASH Collated from presentation by LSRC TYBMS [2011] Div A Purvi, Viancia, Ruchi & Afreen LSRC TYBMS [2011] Div α Gaurav, Komal, Hardik & Nitesh LSRC TYBMS [2011] Div α Rochelle 2

Introduction As firms continue to search for new ways to lower costs and improve service to their customers, the issue of where to locate logistics and manufacturing facilities has become more complex & critical In addition to enhancing the efficiency & effectiveness of a logistics / supply chain operation, the redesign of a firm’s overall network can help to differentiate a firm in the marketplace In the short run, a firm’s logistics/supply chain network and the locations of its key facilities are fixed and logistics managers must work within this network Site availability, leases, contracts, and investments make changing facility locations impractical in the short run However, in the long run, the firm’s facility locations are considered variable, and are subject to change Facilities design and location have become strategically important in today’s highly competitive business environment 3

Logistics Network The Logistics Network consists of the supply chain partners Facilities Vendors, Manufacturing Centres, Warehouse / Distribution Centres and Customers Raw materials and finished products that flow between the facilities 4

Logistics Network Analysis consists of modeling the supply chain relationships between trading partners - the links in the supply chain Logistics Network Analysis is used to answer the following questions What are the drivers of costs? Can costs be reduced by making changes? Move distribution centers to other locations? Move production lines to other plants? Changing carrier modes? Changing the product mix? What is the Impact of an acquisition, spin-off or new product? 5

Logistics Network Design A logistics network design initiative typically covers three elements - the inbound logistics, outbound logistics, and return logistics Relates to decisions regarding where to located the source of supply, warehousing & distribution infrastructure Logistics network design seeks to minimize logistics cost while offering the right level of flexibility to meet customer service levels 6

. . . Logistics Network Design Involves the following considerations What is the optimal number and location of suppliers? What is the optimal number and location of production sites? What is the optimal number and location of distribution centres, and what level of activity should be carried out in each? What should be the allocation of warehouses / distribution centres to product plants and allocation of customer demand points to warehouses / distribution centres? What are the optimal transportation modes and routings to meet delivery requirements? What return network should be in place, and what repair activity should be carried out in each site? 7

Logistical Networks / Distribution Strategies Distribution strategies can be of he following types Direct Shipping Milk Runs Cross Docking Hub & Spoke Model [covered in transportation] 8

. . . Logistical Networks / Distribution Strategies Direct Shipping Refers to the method of distribution in which goods come directly from the suppliers to the retail stores In this case, routing of each shipment is specified and the supply chain manager needs to decide on the quantity to ship and the mode of transportation to use This system eliminates the need for intermediates facilities such as warehouses and distribution centres Goods that are generally distributed through the method of direct shipping are certain perishable items, high volume goods, high bulk items and specialty products 9

. . . Logistical Networks / Distribution Strategies Direct Shipping Benefits Elimination of intermediaries Since there are no intermediaries, simple to operate & coordinate Saves time Since the shipment goes directly from supplier to retailer, lot of time is saved Less damage Since the shipment goes directly from supplier to retailer, there is less handling of the products, as a result there is less product damage Improved accuracy Since the shipment goes directly from supplier to retailer, the invoices match the receiving records and correct products enter 10 store

. . . Logistical Networks / Distribution Strategies Milk Runs A Milk run is a route in which a truck either Delivers product from a single supplier to multiple retailers [Fig. a] Or goes from multiple suppliers to single retailer [Fig. b] Fig. delivers b Thus, Fig. in aa milk run, a supplier directly to multiple retail stores on a truck or a truck picks up deliveries from many suppliers to the same retail store Main task of the logistics manager is to decide on the routing of each milk run Milk runs require a high degree of coordination among the supply chain members 11

. . . Logistical Networks / Distribution Strategies. . . Milk Runs Benefits Reduces Cost Since shipments are done to multiple stores, trucks are better utilized and transportation costs are reduced to some extent Proximity to Suppliers Milk runs are helpful if very frequent small deliveries are needed on a regular basis and either a set of suppliers or a set of retailers is in the same geographical proximity Inventory reduction Milk runs help to reduce the amount of safety stock needed 12

. . . Logistical Networks / Distribution Strategies Cross Docking Traditional warehouses move materials into storage, keep them till they are needed & then move them out to meet the customer demand Cross docking co-ordinates the supply & delivery so that the goods arrive at the receiving area and are transferred straight away to the loading area, where they are put into delivery vehicles Thus Cross docking is the movement of materials from the receiving docks directly to the shipping docks It is said, “Cross docking is a flow through concept and we don’t want product to stop anywhere, because space, brick and mortar is getting very expensive these days’ Thus, the step of filling a warehouse with inventory before shipping it out is virtually eliminated Cross docking shifts the focus from “supply chain” to “demand chain” 13

. . . Logistical Networks / Distribution Strategies. . . Cross Docking Benefits Basic Cross Dock Packages are moved directly form the arriving vehicles to the departing vehicles This form of cross docking does not need a warehouse, just a simple transfer point is enough Flow Through Cross Dock Materials arrive in large packages which are opened, broken into small quantities, sorted, consolidated for delivery to different customers Thereafter packages are loaded and transported to customers 14

. . . Logistical Networks / Distribution Strategies. . . Cross Docking Benefits Cross docking helps to improve the speed of flow of the products from the supplier to the store Helps to reduce the costs as: The material handling & labor is removed from the job of storage (warehouses) Two of the most expensive activities warehousing and storage are eliminated Cross docking helps to reduce the amount of finished goods inventory that is required to be maintained as safety stock 15

Roll-on-roll-off [RO-RO] RO-RO is a type of shipping vessel They are large ships with built-in ramps Cargo such as cars, tractors, trucks are driven over the ramp into the RO -RO vessel The vessel then transports this cargo to its destination port At the destination port, the cargo is driven off the ship RO-RO ship can also transport earth -moving equipment and cranes A typical RO-RO ship can transport about 2000 cars at a time 16

. . . Roll-on-roll-off [RO-RO] Toyota currently uses RO-RO ships to transport cars from Japan to USA On the return trip, the ship carries grain & coal for use in Japan RO-RO have the advantage that no special loading / unloading equipment is required 17

Lighter Aboard Ship [LASH] Barges carrying containers being lifted aboard by the mother vessel's crane Barges carrying containers being towed over inland water ways 18

Lighter Aboard Ship [LASH] AKA LASH carriers, barge carriers, kangaroo ships or lighter transport ships LASH is an ocean ship which carries barges These barges are first loaded with cargo and towed to the ocean ship which is sometimes referred to as the mother ship After reaching the mother ship, the barge is lifted aboard the ship by means of the mother ship's crane After the ocean crossing, the barges are off-loaded and towed to their various destinations The ocean ship then receives a further set of barges, which have been kept ready and the process repeats The advantage is that the barges can move into inland water ways and shallow ports where the ocean vessel cannot ply as the water levels are shallow 19

References Presentation Image http: //graphicleftovers. com/graphic/clobrda-diagram-07 -3 d/ Direct Shipping Supply chain Management: Concepts & Cases – Altekar Pg 232 Milk Runs Supply chain Management: Concepts & Cases – Altekar Pg 231 Cross Docking Supply chain Management: Concepts & Cases – Altekar Pg 229 RORO A Logistics Approach to SCM – Coyle Pg 226 & 235 http: //blueseaslogistics. net/3. html Lash http: //www. harveystudio. com/lash-ship-stern. html http: //commons. wikimedia. org/wiki/File: Barges_loaded_with_shipping_containers_2. jpg http: //www. flickr. com/photos/32865578@N 02/4993612407/sizes/l/in/photostream/ http: //en. wikipedia. org/wiki/Lighter_aboard_ship http: //www. thefreightforwardingcompany. com/glossary/lighter-aboard-ship. html 20