Chapter 3: Logistics NetworkPlanning3-1
3-1 Chapter 3: Logistics Network Planning
3.1 Why Network Planning?Find the rightbalancebetween inventorytransportationand manufacturingcostsMatch supply and demand underuncertainty by positioning and managinginventoryeffectivelyUtilizeresourceseffectivelybysourcingproductsfromthe mostappropriatemanufacturingfacility3-2
3-2 3.1 Why Network Planning? ⚫ Find the right balance between inventory, transportation and manufacturing costs, ⚫ Match supply and demand under uncertainty by positioning and managing inventory effectively, ⚫ Utilize resources effectively by sourcing products from the most appropriate manufacturing facility
Three Hierarchical StepsNetworkdesignNumber,locationsandsizeofmanufacturingplantsandwarehousesAssignmentof retailoutletstowarehousesMajorsourcingdecisionsTypical planninghorizonisafewyearsInventory positioning:IdentifyingstockingpointsSelectingfacilitiesthat will produceto stockandthuskeepinventoryFacilities that will produce to orderand hencekeep no inventoryRelatedtotheinventorymanagementstrategiesResource allocation:Determinewhetherproductionand packaging of differentproducts is done at the right facilityWhatshould be the plants sourcing strategies?Howmuch capacity each plant should havetomeet seasonaldemand?3-3
3-3 Three Hierarchical Steps ⚫ Network design ⚫ Number, locations and size of manufacturing plants and warehouses ⚫ Assignment of retail outlets to warehouses ⚫ Major sourcing decisions ⚫ Typical planning horizon is a few years. ⚫ Inventory positioning: ⚫ Identifying stocking points ⚫ Selecting facilities that will produce to stock and thus keep inventory ⚫ Facilities that will produce to order and hence keep no inventory ⚫ Related to the inventory management strategies ⚫ Resource allocation: ⚫ Determine whether production and packaging of different products is done at the right facility ⚫ What should be the plants sourcing strategies? ⚫ How much capacity each plant should have to meet seasonal demand?
3.2Network DesignPhysical configurationand infrastructureofthe supply chain.A strategic decisionwith long-lastingeffectsonthefirmDecisions relatingto plant andwarehouselocationaswell asdistributionandsourcing3-4
3-4 3.2 Network Design ⚫ Physical configuration and infrastructure of the supply chain. ⚫ A strategic decision with long-lasting effects on the firm. ⚫ Decisions relating to plant and warehouse location as well as distribution and sourcing
Reevaluation of InfrastructureChanges in:demand patternsproductmixproductionprocessessourcingstrategiescostofrunningfacilitiesMergers and acquisitions may mandatethe integrationof different logisticsnetworks3-5
3-5 Reevaluation of Infrastructure ⚫ Changes in: ⚫ demand patterns ⚫ product mix ⚫ production processes ⚫ sourcing strategies ⚫ cost of running facilities. ⚫ Mergers and acquisitions may mandate the integration of different logistics networks