1. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Manufacturing Planning and Control MPC 6 th Edition Chapter 10a

2. 10a-2 Management of Supply Chain Logistics 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.

3. 10a-3 Agenda Supply Chain Logistics ScopeSupply Chain Logistics FrameworkSupply Chain Logistics ElementsWarehouse Replenishment SystemsWarehouse Location AnalysisVehicle Scheduling AnalysisCustomer Service ManagementPrinciples

4. 10a-4 Supply Chain Logistics (SCL) Framework SCL Breadth–all material flow decisions, from raw materials to final customers Total Cost Concept–the general goal is to minimize the overall cost while meeting customer-service goals Design, Operation, and Control Decisions–logistics decisions can be far reaching, SCL management must provide leadership for continued evolution

5. 10a-5 Supply Chain Logistical Elements Transportation Warehouses Inventory

6. 10a-6 Transportation Common modes include air, rail, truck, pipeline, and combinations Ownership/management may be private carriage, courier, common carrier, and contract services Prime consideration is cost, main cost factors are quantity discounts and selection of routing

7. 10a-7 Warehouses Customer benefits from warehouses in terms of time and place utility Closer warehouses offer reductions in service time and service costs Customers also derive a level of comfort from having a warehouse nearby (warm puppy effect) Warehouses offer the firm a number of benefits Mixing products from several plants Completing or packaging the product Breaking bulk–taking advantage of carload rates for long-distance shipments to warehouses

8. 10a-8 Inventory Inventory fulfills several marketing requirements Maintenance of a full line of products Provision of adequate display stock Maintaining full inventory pipelines to customers Inventory also serves a buffering role Safety stock Cycle stock Pooling of safety stock over several locations can lead to significant savings

9. 10a-9 Warehouse Replenishment Systems Advantages-Low complexity Disadvantages- Filtered data, allocation is arbitrary, decentralized data Advantages- unfiltered data, better coordination of resources Disadvantages-More complex, works best with steady demand Advantages-reflects projected requirements, local decisions with central visibility Disadvantages- Highly complex

10. 10a-10 Warehouse Location Analysis The number and location of warehouses is a key element of managing the supply chain Common approaches include simulation, heuristics, and mathematical programming

11. 10a-11 Simulation Evaluate likely candidate solutions and compare results Computer-based approach can evaluate many candidates to identify good (but not always the best) solution Candidate 1 Serve Gary and Michigan City from Hammond, all other locations from Indianapolis Candidate 2 Warehouses in Columbus and Indianapolis Candidate 3 Warehouses in Hammond and Terre Haute

12. 10a-12 Heuristic Processes Heuristics allow rapid identification of a good solution by following a procedure that is known to work well Add and Drop Procedure–consider a single warehouse, then add the best of the remaining warehouses, repeat until addition results in a worse solution Best initial choice is Indianapolis Best second choice is Hammond No other warehouse reduces costs, so stop

13. 10a-13 Mathematical Programming Exact procedures to solve the location problem exist, but can be time consuming Linear programming with branch-and-bound methodology

14. 10a-14 Mathematical Programming Typical problems (<200 facility options) can be solved exactly to find optimal solutions Branch-and-bound approach

15. 10a-15 Vehicle Scheduling Analysis With 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 vehicles Analytical framework–travelling salesman problem Given a set of cities, what is the least-cost method of visiting each of them, starting from and returning to a single point?

16. 10a-16 Travelling Salesman Problem– Solution Methodologies Zero-One Integer Programming Computational requirements increase rapidly with problem size Heuristics Time-saved–consider time savings from visiting two customers on a single trip, this identifies favorable combinations which can be combined into tours

17. 10a-17 Customer Service Measurement Make-to-Stock–major issue is delivery timing Speed of delivery Consistency of delivery Percent of items demanded that are supplied from stock Percent of line items in an individual customer order delivered from inventory Percent of customers with all line items filled from inventory

18. 10a-18 Customer Service Measurement Make-to-Order–primary issue is meeting promised delivery dates Time from order placement to delivery Changes to customer requested dates complicates the measurement system The need for coordination between order entry and master production scheduling is critical

19. 10a-19 Principles The 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.

20. 10a-20 Principles The 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.

21. 10a-21 Quiz – Chapter 10a When 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)