PART I. INTRODUCTION.

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1 I.2 Logistics Strategy and Planning The mission of logistics is to get the right goods or service to the right place, at the right time, and in the desire condition, while making the greatest contribution to the firm KEY ACTIVITIES. 1. Customer services standard. a) Determine customer needs and wants. b) Set customer service levels. 2.Transportation. a) Freight Consolidation. b)vehicle scheduling. 3.Inventory Management. a) Short-term term sales forecasting. b) Number, size, and location of stocking point. c)jus-in in-time, push, and pull strategy. 4.Information flow and order processing. a)ordering Rules. b) Order information transmittal methods. SUPPORT ACTIVITIES. 1. Warehousing. a) Warehouse configuration. b) Stock layout and dock design. 2.Material Handling. a)equipment selection. b)stock storage and retrieval. 3.Purchasing. a)purchase timing. 4.Protective package. a) Design for Handling and Storage. 5. Cooperate with Production/Operations. a)sequence and time production outputs. 6. Information Maintenance. a)information collection, storage, and manipulation.

2 It has been suggested that a logistics strategy has three objectives: (1) Cost reduction is strategy directed toward minimizing the variable costs associated with the movement and storage. The best strategy is usually u formulated by evaluating alternative courses of action, such as choosing among different warehouse location or selecting among alternative e transport modes. (2) Capital reduction is strategy directed toward minimizing the level of investment in the logistic system. Shipping direct to customer to avoid warehousing, choosing, public warehouses over privately owned warehouse, selecting a just- in-time supply approach than stocking inventory, or using third-party party-logistics. (3) Service improvement strategies usually recognize that revenue depend on the level of logistics customer service, the increased revenues may more than offset the higher costs.

3 The figure three illustrates specific logistics questions. At One level companies must choose smart logistics strategies, implying specific logistics questions s to answer. As an Example, a common strategy is to ship all products to a customer from a single distribution center; another common strategy is to ship to a customer from a multiple DC`s

4 Logistics Strategy includes the business goal, requirements, allowable decisions, tactics, and vision for designing and operating a logistics systems. Supply Chain Planning includes the location, sizing and configuration of plants and distribution d centers, the configuration of shipping lanes and sourcing assignment, the aggregate allocation of production resource, and customer profitability and service issues. Shipment Planning is the routing and scheduling of shipment through the supply chain, including freight consolidation and transportation mode selection. Transportation Systems Planning includes the location, sizing, and configuration of the transportation rtation infrastructure, including fleet size and network alignment. Vehicle Routing & Scheduling includes the routing and scheduling of drivers, vehicles, trailers, etc. Other applications include dynamic dispatching, customer zone alignment, and frequency of delivery questions. Warehousing includes the layout design and storage\picking operations of distribution centers

5 Analyzing the various logistics strategies requires modeling views of a logistics supply chain. Strategic, tactical,, and operational model are three fundamentals classes of modeling views, with general properties shown in the next figure: Strategic supply chain design resource acquisition broad scope, highly aggregated data long-term planning horizons (1 year +) Tactical production/distribution planning resource allocation medium-term planning horizons (monthly, quarterly) Operational shipment routing & scheduling resource routing & scheduling narrow scope, detailed data short-term term planning horizon (daily, real-time)

6 The logistics applications areas can be organized into modeling views as shown in the table Supply chain planning Transportation problem Shipment planning Vehicle routing Warehousing Strategy Site location Capacity sizing Sourcing Site location Fleet size Outsourcing Bid analysis Fleet sizing Fleet sizing Warehouse layout Material Handling system Tactical Production planning Sourcing Routing strategy Network alignment Consolidation strategy Mode strategy Routing strategy Zone alignment Storage allocation Order picking strategy Operational MRP, ERP Load matching Shipment dispatching Vehicle dispatching Order picking

7 Contemporary Logistics Strategies. JUST-IN IN-TIME LOGISTICS If we knew precisely where, when, and how much material is needed d at each stage of a logistics supply chain, good could be move through the supply chain just-in in-time (JIT) for use by the next process, without need to build up inventories. FREIGHT CONSOLIDATION Strategies for consolidating freight are fundamental to shipment planning decision. Shipments in the logistics systems can be routed and scheduled independently of each other or can be combined to try and achieve transportation economies-of of-scale. There are many ways to consolidate freight, including:

8 1. Vehicle Routing. This type of combined consolidation is called multi-stop vehicle routing. 2. Pooling. Individual shipments can be brought to a central location or pooled, creating large shipment suitable for economies-of of-scale transportation modes such as truckloads or rail carloads

9 INTEGRATION OF INBOUND AND DISTRIBUTION LOGISTICS This strategy particularly impacts shipment planning and vehicle routing and scheduling. For example, la figure below illustrates separate delivery and pickup routes (left), and integrated delivery(d)\pickup(p) routes (right). FIXED/MASTER ROUTES & VARIABLE/DYNAMIC ROUTES Fixed and master routes are regular vehicles route sequence and schedules developed using average demand forecasts. Fixed routes are regular run each period without considering actual customer demand, while master routes are adjusted slightly on actual demand. In contrast, c variable or irregular routes are tailored to actual customer demand information. The extreme case of variable route is dynamic routes, which are adjusted dynamically as the rout run.

10 DISTRIBUTION CENTER CONSOLIDATION vs. DECENTRALIZATION Fundamental decision in Supply Chain design include the number, location, sizing, an product configuration of distribution center. The next figure illustrates two basic strategies: consolidated distribution (fewer but larger distribution centers) and decentralized distribution (more e but smaller distribution centers). PRIVATE FLEET vs. FOR-HIRE FLEET Private Fleet gives more control over transportation cost and service, but forces the firm into operations secondary to business; They are becoming less attractive as competition from transportation deregulation. Third-Party Logistics.

11 TRANSPORTATION MODE SELECTION. Transportation mode impacts inventory costs in three different ways: w 1. Slower transportation modes create more in-transit inventory. 2. Large shipment sizes may create order quantity inventory, which arises if the batch shipment size is more than the amount of current demand. 3. Slower transportation modes may rise safety stock inventories needed eded to protect uncertainties in supply and demand.

12 CONTINOUS MOVE ROUTING. Some trucking companies offer discount for continuous move routes, where drivers and tractors are kept highly utilized by coordinating the dropoff of and inbound trailer with the pick up of an outbound trailer. This route reduces costs if the continuous move discount is more than the deadhead cost ti travel to the origin of the second shipment. SINGLE SOURCING. Single sourcing simplifies the LSC which can reduce management and a operational cost. Single sourcing also creates larger volume shipment along lanes, which may reduce transportations cost.

13 THE TRIANGLE OF LOGISTICS DECISION MAKING. Inventory Strategy. Forecasting. Storage fundamentals. Inventory decisions. Purchasing and supply scheduling decisions. Storage decision Customer Services Goals. The Product. Logistics service. Information Systems. Location Strategy. Location decisions. The network planning process. Transport Strategy. Transport Fundamentals. Transport decisions. MIXED STRATEGY. A mixed distribution strategy will have lower costs than a pure, single, strategy. A mixed distribution strategy will have lower costs than a pure, or DIFFERETED DISTRIBUTION. Not all products should be provided the same level of costumer service. This is a fundamental principle for logistics planning.

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