Management Support Systems

1. Management Support Systems

2. Strategic Logistics Network Design Modeling

3. Strategic Logistics Network Design Modeling What Planning Horizons Target Issues Network Modeling Basics Building Blocks Structures Applications to Logistics Networks Modeling Targets Validity of Integrated Logistics Why Contemporary Requirements Impediments How Ten Steps To Success Example Analysis Choosing the Right Solver

4. What? Planning Horizons

5. Planning Horizons • Operational: immediate to one week • shipment planning/dispatching • production scheduling • Tactical: one week to one year • production planning • MRP/DRP/forecasting • Strategic: one year to multiple years • network design • fleet sizing • From operational to strategic • term of resource commitment increases • speed of effecting change decreases

6. What? Target Issues

7. System Structure Issues • Number and Location of Raw Material Suppliers • Number and Location of Plants • Number and Location of Production Lines • Number and Location of DCs • Assignment of • Plants to Suppliers • DCs to Plants and Other DCs • Customers to Plants or DCs

8. Facility Ownership Issues • Owned • Leased • Public

9. Facility Mission Issues • Raw Material Suppliers • Procurement Levels • Costs • Capacities • Plant Locations • Manufacturing Levels • intermediate products • finished products • Costs • Capacities • DC Locations • Throughput Levels • Costs • Capacities

10. “What If” Issues • Business Environment Issues • Economic Climate • inflation • regulation • Competitive Pressure • demand forecasts • market share changes • Disaster Planning

11. “What-If” Issues • Business Decision and Policy Issues • Product Introductions/Deletions/Changes • Facility Capacity Changes • Transportation Policy Analysis • Multi-division Distribution System Merger • Alternative Echelon Structures • Implementation Priority Analysis

12. “What-If” Issues • Sensitivity Issues • Cost Vs Customer Service • Cost Vs Number of DCs • Parametric Analysis of Any input

13. What? Network Modeling Basics Building Blocks

14. Network Model Building Block: Node • Supply Node (source nodes, origin nodes) • location where commodities originiate • examples • raw material suppliers (raw materials) • plants/vendors/copackers (intermediate products, finished products) • Transshipment Node • location through which commodities flow • examples • DCs • pools/crossdocks • Demand Node (sink nodes, destination nodes) • location where commodities consumed • examples • plants/vendors/copackers (raw materials, intermediate products) • customers (finished products)

15. Network Model Building Block: Arc • Connects two nodes • Represents an activity or process • Optional Attributes • cost per unit of flow • lower flow limit (capacity) • upper flow limit (capacity) • Examples • procurement activity • production process • DC handling/ storage activity • transportation flow

16. What? Network Modeling Basics Structures

17. C A Network Example 1 Two Echelons Arc Source Node Destination Node

18. B C A Network Example 2 Three Echelons Source Node Transshipment Node Destination Node

19. B C A Network Example 3 Three Echelons + Bypass Arc Source Node Transshipment Node Destination Node

20. B B C A Entry Exit Network Example 4 Three Echelons + Activity or Process Source Node Transshipment Node Destination Node

21. What? Network Modeling Basics Applications to Logistics Networks

22. Examples of Network Nodes • Suppliers • Plants • DC locations • Customers • All together now…..

23. Examples of Network Nodes

24. Begin Activity End Activity Examples of Network Arcs Procurement Activity Procurement Process Procurement Costs Procurement Capacities

25. End Process Begin Process Examples of Network Arcs Production Process Production Process (Line) Production Costs Production Capacities

26. Entrance to DC (Unloading Dock) Exit from DC (Loading Dock) Examples of Network Arcs DC Activities DC Handling/ Storage Activities DC Costs DC Handling Capacities DC Storage Capacities

27. Examples of Network Arcs

28. What? Modeling Targets

29. Question: What are we going to model? Top Level Answer: • a finished goods (“physical distribution”) network • an integrated logistics network supply • a demand chain value ?????? It all depends on your “logistics perspective”

30. The 1960’s (and before) Era of Dispersed Logistics Functions

31. 1968 NCPDM Definition of Physical Distribution Physical Distribution is a term employed in manufacturing and commerce to describe the broad range of activities concerned with efficient movement of finished products from the end of the production line to the consumer, and in some cases includes the movement of raw materials from the source of supply to the beginning of the production line. These activities include freight transportation, warehousing, material handling, protective packaging, inventory control, plant and warehouse site selection, order processing, market forecasting, and customer service.

32. Model for the 1960’s That’s right…nothing! (Almost nobody modeled physical distribution networks in the 1960s) Yet…other ideas were beginning to emerge

33. Company • Raw materials • Sub-assemblies • Manufactured parts • Packing materials Goods in process inventory Finished goods inventory Customer or User Field inventory Customer Business Logistics Management (OSU) (1968) MaterialsManagement Physical Distribution Management Business Logistics Source: Professor Bernard J. LaLonde, The Ohio State University, 1968

34. The 1970’s Era of Functional Integration

35. 1976 NCPDM Definition of Physical Distribution Management Physical Distribution Management is the term describing the integration of two or more activities for the purpose of planning, implementing and controlling the efficient flow of raw materials, inprocess inventory and finished goods from point of origin to point of consumption. These activities may include, but are not limited to, customer service, demand forecasting, distribution communications, inventory control, material handling, order processing, parts and service support, plant and warehouse site selection, procurement, packaging, return goods handling, salvage and scrap disposal, traffic and transportation, and warehousing and storage.

36. DC1 CZ1 P1 CZ2 DC2 CZ3 P2 DC3 CZ4 DC4 P3 CZ5 DC5 CZ6 Model for the 1970’s Finished Products Replenishment Outbound

37. Let’s Stop Right Here • This is what most people still model • This is how “logistics” is still practiced in the majority of firms • This is NOT • Integrated logistics • Supply chain management • Demand chain management • Value chain management

38. The 1980’s Era of Integrated Logistics (at least for “Leading Edge” firms)

39. 1985 CLM Definition of Logistics Logistics is the process of planning, implementing,and controlling the efficient, cost effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

40. Intermediate Products Finished Products Raw Materials FW1 CZ1 P1 FW2 CZ2 PW1 P2 CZ3 S1 FW3 PW2 CZ4 FW4 P3 S2 CZ5 PW3 FW5 CZ6 Interplant DC Transfer Inbound Replenishment Outbound Model for the 1980’s

41. Raw Materials In Finished Products Out Process 1 Process 2 Production Line 1 Production Line 1 Production Line 2 Production Line 2 Intermediate Product Production Lines Finished Product Production Lines Multiple Stages of Production

42. The 1990’s supply demand value ?????? Era of the chain

43. 1995 CLM Definition of Logistics Logistics is the process of planning, implementing,and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

44. Intermediate Products Finished Products Raw Materials FW1 CZ1 P1 FW2 CZ2 PW1 P2 CZ3 S1 FW3 PW2 CZ4 FW4 P3 S2 CZ5 PW3 FW5 CZ6 Interplant DC Transfer Inbound Replenishment Outbound Model for the 1990’s

45. Raw Materials In Finished Products Out Process 1 Process 2 Production Line 1 Production Line 1 Production Line 2 Production Line 2 Intermediate Product Production Lines Finished Product Production Lines Multiple Stages of Production

46. What? Validity of Integrated Logistics

47. Questions: • Is “Integrated Logistics” a Valid Idea? • Is “Supply Chain” a Valid Idea? • Are the “Leading Edge Firms” and CLM and the Consultants and the Academic Community Right? Let’s See How a Strategic Logistics Network Model Responds……..

48. Network Model Response 1

49. Manufacturing: Typical Network Design Considerations • Plant Locations • Plant Missions • Production Costs • Production Capacities • Replenishment (plant DC) freight • Outbound (plant customer) freight

50. Manufacturing: When It Makes No Difference You may safely ignore IF for any given product: • Landed cost at any given DC is identical regardless of source • Landed cost at any given direct ship customer is identical regardless of source • No capacity limits • by facility • by line • by product