Supply chain logistics encompasses all material flows–from the flow of purchased materials into a facility, through the manufacturing process, and out to the final customers.
Improved management of supply chain logistics can lead to improvements in customer service with simultaneous reductions in total inventory, transportation, and warehousing costs.
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Manufacturing Planning and ControlMPC 6th EditionChapter 10aManagement of Supply Chain LogisticsSupply chain logistics encompasses all material flows–from the flow of purchased materials into a facility, through the manufacturing process, and out to the final customers.Improved management of supply chain logistics can lead to improvements in customer service with simultaneous reductions in total inventory, transportation, and warehousing costs.AgendaSupply Chain Logistics (SCL) FrameworkSCL Breadth–all material flow decisions, from raw materials to final customersTotal Cost Concept–the general goal is to minimize the overall cost while meeting customer-service goalsDesign, Operation, and Control Decisions–logistics decisions can be far reaching, SCL management must provide leadership for continued evolutionSupply Chain Logistical ElementsTransportationCommon modes include air, rail, truck, pipeline, and combinationsOwnership/management may be private carriage, courier, common carrier, and contract servicesPrime consideration is cost, main cost factors are quantity discounts and selection of routingWarehousesCustomer benefits from warehouses in terms of time and place utilityCloser warehouses offer reductions in service time and service costsCustomers also derive a level of comfort from having a warehouse nearby (warm puppy effect)Warehouses offer the firm a number of benefitsMixing products from several plantsCompleting or packaging the productBreaking bulk–taking advantage of carload rates for long-distance shipments to warehousesInventoryInventory fulfills several marketing requirementsMaintenance of a full line of productsProvision of adequate display stockMaintaining full inventory pipelines to customersInventory also serves a buffering roleSafety stockCycle stockPooling of safety stock over several locations can lead to significant savingsWarehouse Replenishment SystemsAdvantages-Low complexityDisadvantages-Filtered data, allocation is arbitrary, decentralized dataAdvantages-unfiltered data, better coordination of resourcesDisadvantages-More complex, works best with steady demandAdvantages-reflects projected requirements, local decisions with central visibilityDisadvantages-Highly complexWarehouse Location AnalysisThe number and location of warehouses is a key element of managing the supply chainCommon approaches include simulation, heuristics, and mathematical programmingSimulationEvaluate likely candidate solutions and compare resultsComputer-based approach can evaluate many candidates to identify good (but not always the best) solutionCandidate 1Serve Gary and Michigan City from Hammond, all other locations from IndianapolisCandidate 2Warehouses in Columbus and IndianapolisCandidate 3Warehouses in Hammond and Terre HauteHeuristic ProcessesHeuristics allow rapid identification of a good solution by following a procedure that is known to work wellAdd and Drop Procedure–consider a single warehouse, then add the best of the remaining warehouses, repeat until addition results in a worse solutionBest initial choice is IndianapolisBest second choice is HammondNo other warehouse reduces costs, so stopMathematical ProgrammingExact procedures to solve the location problem exist, but can be time consumingLinear programming with branch-and-bound methodologyMathematical ProgrammingTypical problems (<200 facility options) can be solved exactly to find optimal solutionsBranch-and-bound approachVehicle Scheduling AnalysisWith a given set of customer and warehouse locations, how should vehicles be schedule to meet objectives at the lowest cost?Route problem–order in which customers will be visited by delivery/pickup vehiclesAnalytical framework–travelling salesman problemGiven a set of cities, what is the least-cost method of visiting each of them, starting from and returning to a single point?Travelling Salesman Problem–Solution MethodologiesZero-One Integer ProgrammingComputational requirements increase rapidly with problem sizeHeuristicsTime-saved–consider time savings from visiting two customers on a single trip, this identifies favorable combinations which can be combined into toursCustomer Service MeasurementMake-to-Stock–major issue is delivery timingSpeed of deliveryConsistency of deliveryPercent of items demanded that are supplied from stockPercent of line items in an individual customer order delivered from inventoryPercent of customers with all line items filled from inventoryCustomer Service MeasurementMake-to-Order–primary issue is meeting promised delivery datesTime from order placement to deliveryChanges to customer requested dates complicates the measurement systemThe need for coordination between order entry and master production scheduling is criticalPrinciplesThe role and contributions of each element of a supply chain must be determined and managed.Management must provide the integration for the elements of these systems and evaluate alternatives in terms of total cost.The information from distribution requirements planning systems should be used for planning produce deliveries.PrinciplesThe design of warehouse systems should incorporate the locational effect on sales.Vehicle scheduling activities must be coordinated with customer service requirements.Customer service objectives and standards must be set and monitored. These should reflect the types and classes of customers and products.Quiz – Chapter 10aWhen stages of the supply chain are considered separately, sub-optimization is likely to occur? (True/False)In general, shipping full loads will be less costly (per unit) than using the services of a less than carload (LCL) carrier? (True/False)Warehouses are beneficial to customers in terms of both __________ and _________.When the safety stock requirements of several warehouses are consolidated to a single location the total required stock is likely to increase? (True/False)Base stock systems reduce or eliminate the problem of amplification of orders? (True/False)
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