Logistics Network Designing, Essay Example

Since the decision to build a single warehouse has been made, the new logistics network will be designed in a manner that it focus on the location of the warehouse and its capacity. These two factors have a direct bearing on the performance and profitability of the warehouse to the firm. His will entail the determination of the amount of space to be allocated to each product present in the warehouse. The analysis will involve the steps described below

Data Collection

• Location of current warehouses and retail shops, suppliers and manufacturing facilities. So far 5 warehouses in Boston, Dallas, Chicago, Los Angeles and Atlanta and one manufacturing facility in San Jose. These locations are the most ideal considering proximity to a clientele base and the state of supplementary services..
• Plausible cites for the new warehouse. The plausible warehouse cites are expected to fulfil the following conditions;
• Product descriptions such as the volumes, shapes and sizes. This is essential in designing a network that will fully exploit the space available. This is also important in understanding the capacity of the warehouse.
• Service level necessities of each retail store and their future estimate and past actual annual demand records. These records are important in ensuring the given retailer has the potential or capability to push or sell the desired amount of product.
• Identify all the viable transportation modes and the costs of using each and every one of them. Every mode of transport offers its own benefits and considerable demerits. It is essential that these costs and risks be determined before deciding on the warehouse location.
• The distance between the plausible warehouse cites and the retail stores. Transport costs are a direct implication on the financial position of the warehouse. These costs have to minimize.
• The costs, such as storage fixed and handling costs related to warehousing. The fixed cost should be regarded as a function of the capacity of the warehouse. The finances required to run a given warehouse varies according to the location, the cost of supplementary services such as banking. These costs also have to be minimized.
• Order sizes, frequencies and fixed ordering costs according to product family or specific product. This is important in designating the spaces within the warehouse, creating an organized system that would allow them monitor all the particulars of a given warehouse. organization

Aggregation of data

There is need to obtain the aggregated statistics, such as demand, based on the product types or the distribution patterns. This will involve the replacement of the aggregated demand points of data by one customer. This is essential in determining the financial position and performance of the firm.

• Mathematical Model Building
• Validation of the model considering the existing network structure.
• Assortment of some alternatives that are low cost according to the mathematical model.
• Qualitative factors that are not considered by the mathematical model are factored in. some of these include environmental factors and prevailing market rules and regulations.
• One could opt to construct a comprehensive simulation model that will be employed on plausible low cost solutions. The comprehensive simulation is however time consuming and costly.
• Make the decision on the optimal warehouse cite based on the information gathered and analyses carried out.

Transition into the newly suggested distribution strategy would take a considerable amount of time as resources are redistributed to suit the new system. This may also involve the introduction of a new employee to manage the suggested new system. This will increase the cost of labour. It is therefore important that costs are minimized.

A centralized warehouse is bound experience a reduction in inventory holding costs as a result of risk pooling and an increase in the service level as stock-out incidences will significantly reduce. Inbound transportation costs from the facility to the warehouse will significantly reduce as fixed costs also decrease. The newly suggested distribution system is much more efficient compared to the existing distribution strategy.

However, the central warehouse will generate outbound costs as it transports products to the retailer. It is essential that one determines the trade-off between service level requirements and inventory holding costs on one hand and transportation costs in the other.

In conclusion, since we are constructing a single-warehouse logistics network, operational costs, inventory holding costs are expected to drop. However, the warehouse would realize an increase in cost in the form of outbound transportation costs.

References

Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2007). Supply chain logistics management. Boston: McGraw-Hill/Irwin.

Clausen, U., Ten, H. M., & Klumpp, M. (2013). Efficiency and logistics. Berlin: SPringer.

Groothedde, B. (Heidelberg). Logistics network design and collaboration : design, theory, and practice. 2008: Springer.

Kotzab, H., & Gudehus, T. (2009). Comprehensive logistics. Heidelberg: Springer.

Langevin, A., & Riopel, D. (2005). Logistics systems : design and optimization. New York: Springer.