Lecture Slides5_half+Logistics+Network

Lecture Slides5_half+Logistics+Network - Logistics Network...

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1 Logistics Network Planning and Flexibility Copyright © 2007 Phil Kaminsky Phil Kaminsky kaminsky@ieor.berkeley.edu The Logistics Network Focuses on the physical supply chain Key tradeoff: responsiveness vs. efficiency Key performance drivers: Inventory Transportation 1-2 © 2005 Phil Kaminsky Facilities Information What is network planning? Vendors, Manufacturing Centers, Warehouse/ Distribution Centers, and Customers Raw materials and finished products that flow between the facilities. Network Planning: The Steps Network Design Inventory Positioning Resource Allocation 1-3 © 2005 Phil Kaminsky
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2 Network Design: Key Issues What are the key questions? What are the tradeoffs? What is the objective? 1-4 © 2005 Phil Kaminsky $60 $70 $80 $90 s $) Minimize the cost of the logistics network without compromising service levels Optimal Number of Warehouses 1-5 © 2005 Phil Kaminsky $- $10 $20 $30 $40 $50 024681 0 Number of Warehouses Cost (million Total Cost Transportation Cost Fixed Cost Inventory Cost Industry Benchmarks: Number of Distribution Centers Pharmaceuticals Food Companies Chemicals 1-6 © 2005 Phil Kaminsky Sources: CLM 1999, Herbert W. Davis & Co; LogicTools Avg. # of WH 3 14 25 - High margin product - Service not important (or easy to ship express) - Inventory expensive relative to transportation - Low margin product - Service very important - Outbound transportation expensive relative to inbound
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3 Decision Support for Network Design We’ll use a DSS for network design What is a DSS? What are the key components of a DSS for network design Mapping Data Col ection and Model Specification The Engine 1-7 © 2005 Phil Kaminsky Mapping Allows You to Visualize Your Supply Chain 1-8 © 2005 Phil Kaminsky Displaying the Solutions Allows you To Compare Scenarios 1-9 © 2005 Phil Kaminsky
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4 Data for Network Design 1. A listing of all products 2. Location of customers, stocking points and sources 3. Potential Sites 4. Demand for each product by customer location 1-10 © 2005 Phil Kaminsky 5. Transportation rates for different modes 6. Warehousing costs 7. Shipment sizes by product 8. Order patterns by frequency, size, season, content 9. Order processing costs 10. Customer service goals Collecting Data Data is typically collected on a customer by customer basis. Data is “geocoded” using a Geographic Information System (GIS) Customer data is aggregated 1-11 © 2005 Phil Kaminsky How? Why? Typically several hundred points, more or less equal demand, the aggregate point is placed at the center of the zone Testing Customer Aggregation 1 Plant; 1 Product Considering transportation costs only Customer data 1-12 © 2005 Phil Kaminsky Original Data had 18,000 5-digit zip code ship-to locations Aggregated Data had 800 3-digit ship-to locations Total demand was the same in both cases
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5 Comparing Output Total Cost:$5,796,000 Total Customers: 18,000 Total Cost:$5,793,000 Total Customers: 800 1-13 © 2005 Phil Kaminsky Cost Difference < 0.05% Product Aggregation Why?
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Lecture Slides5_half+Logistics+Network - Logistics Network...

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