Logistics CHAPTER 8

After completing the chapter you will:  Know what a third-party logistics provider is  Understand the major issues that need to be considered when locating a plant or warehouse facility  Be able to use the transportation method of linear programming to analyze location problems  Know how a factor rating system can be used to narrow potential location sites  Understand the centroid method to locating entities such as cell phone communication towers

 Some services for business customers ◦ FedEx Distribution Centers ◦ FedEx Returns Management ◦ Merge-in-transit service

 Logistics is… ◦ About the movement of goods through the supply chain ◦ Determining the way the items are moved from the manufacturing plant to the customer. ◦ The art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities.

 Companies that specialize in logistics ◦ UPS, FedEx, DHL ◦ A mfg. company most often will contract with one of those companies  To handle many of its logistics functions ◦ They provide services like  Moving goods  Warehouse management  Inventory control  Customer service functions

 Decision problem ◦ How best to transport goods from plants to customers ◦ Major trade-offs  Cost of transporting the product  Speed of delivery  Flexibility, etc ◦ Information systems play a major role in coordination activities  Allocating resources  Managing inventory levels  Scheduling  Order tracking, etc.

 Highway (trucks)  Water (ships)  Air (aircraft)  Rail (trains)  Pipelines

 Cross-docking ◦ An approach used in consolidation warehouses  Where large shipments are broken down into small shipments for local delivery in an area

 Criteria that influence location planning ◦ Proximity to customers ◦ Business climates ◦ Total costs ◦ Infrastructures ◦ Quality of labor ◦ Suppliers ◦ Other facilities

 Criteria that influence location planning ◦ Free trade zones ◦ Political risk ◦ Government barriers ◦ Trading Blocs ◦ Environmental regulation ◦ Host community ◦ Competitive advantage

 Factor-Rating Systems  Transportation Method  Centroid Method

 Plant Location Decision: Refinery example  Each site was rated against each factor  The site with the most points was selected

 Transportation method of linear programming seeks to minimize costs of shipping n units to m destinations or its seeks to maximize profit of shipping n units to m destinations

 Locating single facility technique ◦ Considers the existing facilities, the distances between them, and the volumes of goods to be shipped  Applications ◦ Intermediate or distribution warehouses ◦ Communication towers

Where: C x = X coordinate of centroid C y = X coordinate of centroid d ix = X coordinate of the ith location d iy = Y coordinate of the ith location V i = volume of goods moved to or from ith location

 Centroid method example ◦ Several automobile showrooms are located according to the following grid which represents coordinate locations for each showroom Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month? X Y A (100,200) D (250,580) Q (790,900) (0,0)

To begin, you must identify the existing facilities on a two- dimensional plane or grid and determine their coordinates. X Y A (100,200) D (250,580) Q (790,900) (0,0) You must also have the volume information on the business activity at the existing facilities.

X Y A (100,200) D (250,580) Q (790,900) (0,0) You then compute the new coordinates using the formulas: Z Z New location of facility Z about (443,627) You then take the coordinates and place them on the map:

 Compare to mfg. facilities ◦ Low cost of establishment ◦ New service facilities are far more common  Service location decision is closely tied to the market selection decision. ◦ Services have multiple sites to maintain close contact with customers.

 A multiple regression model

 Profitability = –5.41×(State population per inn) ×(Price of the inn) – 3.91×(Square root of the median income of the area) ×(College students within four miles)

 Logistics  Facility Location ◦ Plant Location Methods ◦ Service Facility Location

Criteria that influences manufacturing plant and warehouse location planning can include which of the following? a. Proximity to customers b. Business climate c. Infrastructure d. Quality of labor e. All of the above

Criteria that influences manufacturing plant and warehouse location planning can include which of the following? a. Political risk b. Government barriers c. Environmental regulation d. All of the above e. None of the above

Which of the following are plant location methods? a. Transportation method of linear programming b. Factor-rating systems c. Centroid method d. All of the above e. None of the above

Which of the following methods of plant location analysis considers the existing facilities, the distances between them, and the volumes of goods to be shipped? a. Transportation method of linear programming b. Factor-rating systems c. Centroid method d. All of the above e. None of the above

Which of the following methods of plant location analysis is the most widely used general location technique because it combines diverse factors in an easy-to-understand format? a. Transportation method of linear programming b. Factor-rating systems c. Centroid method d. All of the above e. None of the above

The location decision for service facilities is closely tied to which of the following? a. Market selection decision b. Material costs c. Nearness to distributors d. Nearness to high-skilled labor e. None of the above

End of Chapter 8