distribution networks design Presented by: Shaghayegh Parhizi Zeinab Bagherpour
distribution networks design
Presented by:Shaghayegh ParhiziZeinab Bagherpour
Distribution definition : Distribution means , making product available in the markets. In the other words , distribution means to reach the appropriate product to the appropriate place , in the appropriate time.
The two general aspects of product availability : Preparing product for sailing to the end customerMaking product available via taking possession of it by the end customer
Distribution (5)
Distribution channel definition : It is a way that product and its ownership rights flow through it. Distribution channels are mostly chains of different organizations that except the main distributor and the end customer are nominated “wholesalers”.Activities in a distribution channel :
1. Activities are related to changing ownership 2. Activities are related to physical supply of product3. Lateral activities
Distribution (5)
physical distribution : formal management of physical distribution is analyzing , programming and controlling a level of product availability that is proportional with demands of the market area and resources of the firm.
The important points in distribution decisions : 1.Product inventory 2. Facilities 3. Relationships4. Transportation 5. The size of unit load
Distribution (5)
Distribution (5)
The difference between physical distribution & transportation
Factors influencing distribution network design (3)
Response time Product varietyProduct availabilityCustomer experienceOrder visibilityReturn ability
Literature review (4)
Literature review (4)
Tow key dicisions
Will product be delivered to the customer location or picked up from a preordained site ?
Will product flow through an intermediary?
Design options for a distribution network(3)
Manufacturer storage with direct shipping Manufacturer storage with direct shipping and in-transit mergeDistributor storage with package carrier delivery Distributor storage with last mile delivery
Manufacturer/ Distributor storage with customer pick upRetail storage with customer pick up
Manufacturer storage with direct shipping (3)
manufacturer
retailer
customers
Product flow
Information flow
Performance characteristics of Manufacturer storage with direct shipping (3)
higher transportation cost because of increased distance and disaggregate shipping
Transportation
Lower cost because of aggregation . Benefits of aggregation are highest for low-demand , high value items.
Benefits are very large if product customization can be postpone at the manufacturer
Inventory
PerformanceCost factor
Performance characteristics of Manufacturer storage with direct shipping (3)
Significant investment in information infrastructure to integrate manufacturer & retailer
Information
Lower facility cost because of aggregation . Some saving on handlingcosts if manufacturer can manage small shipments or ship from production line
Facilities & handling
PerformanceCost factor
Performance characteristics of Manufacturer storage with direct shipping (3)
Easy to provide a very high level of variety
Product variety
High response time of between 1 to 2 weeks because of increased distanceand two stages for order processing.
Response time may vary by product , thus complicating receiving .
Response timePerformanceService factor
Performance characteristics of Manufacturer storage with direct shipping (3)
Good in terms of home delivery but can suffer if order from several manufacturers is sent as partial shipments
Customer experience
Easy to provide a high level of Product availability because of aggregation at manufacturer .
Product availability
PerformanceService factor
Performance characteristics of Manufacturer storage with direct shipping (3)
Expensive & difficult to implementReturnability
More difficult but also more important from a customer service perspective
Order visibility PerformanceService factor
Manufacturer storage with direct shipping and in-transit merge (3)
Factories
Retailer In – Transit merge by carrier
Customer
Information flow
Product flow
Performance characteristics of in-transit merge (3)
Handling cost higher than drop-shipping at carrier
Receiving cost lower at customer
Facilities & handling
Somewhat lower transportation cost than drop-shipping
Transportation
Investment is somewhat higher than for drop-shipping
Information
Similar to drop-shippingInventoryPerformanceCost factor
Similar to drop-shippingProduct variety
Similar to drop-shippingProduct availability
Similar to drop-shipping may be marginally higher
Response timePerformanceService factor
Performance characteristics of in-transit merge(3)
Performance characteristics of in-transit merge (3)
Similar to drop-shippingOrder visibility
Better than drop-shipping because a single delivery has to be received.
Customer experience
Similar to drop-shippingReturnability
PerformanceService factor
Distributor storage with package carrier delivery (3)
Factories
Customer
Warehouse storage by distribution / retailer
Product flow
Information flow
Performance characteristics of Distributor storage with package carrier delivery (3)
Somewhat higher than manufacturer storage . The difference can be large for slow- moving items .
Facilities & handling
Lower than manufacturer storage . Reduction is higher for faster moving
Transportation
Simpler infrastructure compare to manufacturer storage .
Information
Higher than manufacturer storage . Difference is not large for faster moving items
Inventory
PerformanceCost factor
Performance characteristics of Distributor storage with package carrier delivery (3)
Lower than manufacturer storage Product variety
Higher cost to provide the seem level of availability as manufacturer storage
Product availability
Faster than manufacturer storage Response timePerformanceService factor
Easier than manufacturer storage .Order visibility
Better than manufacturer storage with drop-shipping.
Customer experience
Easier than manufacturer storage .Returnability
PerformanceService factor
Performance characteristics of Distributor storage with package carrier delivery (3)
Distributor storage with last mile delivery (3)
Factories
Customer
distribution / retailer warehouse
Product flow
Information flow
Distributor storage with last mile delivery (3)
Facility costs higher than manufacturer storage or distribution storage with package carrier delivery , but lower than a chain of retail stores .
Facilities & handling
Very high cost given minimal scale economies . Higher than any other distribution option .
Transportation
Similar to distributor with package carrier delivery
Information
Higher than distributor with package carrier delivery.
Inventory
PerformanceCost factor
Distributor storage with last mile delivery (3)
Somewhat less than distributor storage with package carrier delivery but larger than retail stores
Product variety
More expensive to provide availability than any other option except retail stores
Product availability
Very quick. Same day to next day delivery
Response timePerformanceService factor
Less of and issue and easier to implement than manufacturer storage or distributor storage with package carrier delivery
Order traceability
Very good particularly for bulky items
Customer experience
Easier to implement than other options. Harder and more expensive than a retail network
Returnability
PerformanceService factor
Distributor storage with last mile delivery (3)
Manufacturer/ Distributor storage with customer pick up (3)
Factories
Cross Dock DCRetailer
Customer
Information flowProduct flowCustomer flow
Pick up site
Manufacturer/ Distributor storage with customer pick up (3)
Facility costs can be very high if a new facilities have to built
Costs are lower if existing facilities are used
The increase in handling cost at the pick up site can be significant
Facilities & handling
Lower than the use of package carrier , specially if using delivery network
Transportation
significant investment infrastructure required
Information
Can match any other option depending on the location of inventory
InventoryPerformanceCost factor
Similar to other manufacturer or distributor storage options
Product variety
Similar to other manufacturer or distributor storage options
Product availability
Similar to package carrier delivery with manufacturer or distributor storage. Same day delivery possible for items stored locally at pick up site
Response time
PerformanceService factor
Manufacturer/ Distributor storage with customer pick up (3)
Difficult but essential Order visibility
Lower than other options because of the lack of home delivery
In areas with high density of population loss of convenience may be small
Customer experience
Somewhat easier given that pick up location can handle returns .
Returnability
PerformanceService factor
Manufacturer/ Distributor storage with customer pick up (3)
Retail storage with customer pick up (3)
Higher than all other optionsThe increase in handling cost at the
pick up site can be significant for online and phone orders
Facilities & handling
Lower than all other optionsTransportation
some investment in infrastructure required for online and phone orders
Information
Higher than all other optionsInventoryPerformanceCost factor
Lower than all other optionsProduct variety
More expensive to provide than all other options
Product availability
Very quick. Same day pick up possible for items stored locally at pick up site
Response timePerformanceService factor
Retail storage with customer pick up (3)
Trivial for in-store orders difficult , but essential , for online and phone orders
Order traceability
Related to whether shopping is viewed positive or negative experience by Customer
Customer experience
Easier than other options given that pick up location can handle returns
Returnability
PerformanceService factor
Retail storage with customer pick up (3)
Selecting a distribution network design (3)
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132114Invent
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Man.. Storage (pick up)
Dis.. Storage (last mile delivery)
Dis.. Storage (package carrierDelivery)
Man Storage ( in –transit merge )
Man.. Storage (direct shipping)
Retailer storage (customer pick up)
Traditional combat service support.
CASE 1: A dynamic distribution model for combat logistics (2)
Combat service support for OMFTS.
CASE 1: A dynamic distribution model for combat logistics (2)
Problem definition (2)Indices & Sets :i; j : nodes or locations (i = 0 is the sea base)k : commoditiest : time periodsI : set of all nodesIs : set of supply nodesIc : set of combat nodesIsl : set of land-based supply nodesIcl :set of land-based combat nodesIl : set of land-based nodesIb : set of beach nodes accessible by watercraftIi : set of inland (not beach) nodesK : set of commoditiesT : set of time periods
Dataws : weight of a support unitwc : weight of a combat unitsij : distance from node i to node j bit maximum total
inventory that can be held at node i in period tDjkt : demand for commodity k at node j in period tN : maximum number of support unitsLa : available air lift in a period (in lb mile)Ls : available ship-shore lift in a period (in lb mile)Tijt : indicates movement of a combat unit from i to j in
period tM : a large number
Problem definition (2)
Decision variables :Xijt : equals 1 if a unit moves from node i to
node j in period t, and 0 otherwiseIikt : inventory of commodity k held at node i
in period tYijkt : quantity of commodity k shipped from
node i to j in period t
Problem definition (2)
Problem formulation (2)
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CASE 2:Designing logistics networks in divergent process industries:methodology and its application to the lumber industry (1)The proposed approach involves five steps:1. The definition of the product-markets, sourcing context and planning horizon.2. The definition of product families and the elaboration of themanufacturing-storage activities process graph.3. The definition of potential network resources (facilities location, layouts, technologies and capacity options) and of technology dependent recipes for production activities.4. The definition of the revenues and costs associated to the network design and activity decisions.5. The optimal mapping of the process graph onto the potential network resources.
CASE 2:Designing logistics networks in divergent process industries:methodology and its application to the lumber industry (1)
markets :the spot marketlarge retailersindustrial customers
Source:Producers have little control over their supply of raw
material.
CASE 2:Designing logistics networks in divergent process industries:methodology and its application to the lumber industry (1)
ModelModeling the supply marketModeling production-distribution facility layouts and capacity optionsModeling flows and inventoriesObjective function
CASE 2:Designing logistics networks in divergent process industries:methodology and its application to the lumber industry (1)
MAXIMIZATION
subject toSupply market constraints (1). Facility layout, space and exclusive options constraints (5), (6) and (7).Seasonal capacity option usage constraints (8).Production activities flow equilibrium constraints (9) and (10).Storage activities inventory accounting constraints (11) and (12).Production and storage capacity constraints (14), (15) and (16).Sales market constraints (17) and (18).Facilities total cost and revenue definitions (19),(20) and (21).
CASE 2:Designing logistics networks in divergent process industries:methodology and its application to the lumber industry (1)
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CASE 2:Designing logistics networks in divergent process industries:methodology and its application to the lumber industry (1)
References1.Designing logistics networks in divergent process industries:A
methodology and its application to the lumber industry; Didier Vila, Alain Martel, Robert Beauregarda;(Int. J. Production Economics 102 (2006) 358–378)
2.A dynamic distribution model for combat logistics,Kevin R. Gue,Computers & Operations Research 30 (2003) 367–381
3.Supply chain management,Stratrgy, Planning,Operation;SUNIL CHOPRA, PETER MEINDL
و رضا زنجيراني فراهاني ،“طبقه بندي مسائل توزيع در مديريت زنجيره تامين ”.4)اولين كنفرانس ملي لجستيك و زنجيره تامين (پناه مهسا الهي
، احمد اخوی ) علمی و عملی ( مديريت توزيع .5