International Logistics Management

1. International Logistics Management • dr Marian Krupa

2. AGENDA: Introduction to the International Logistics Management International Supply Chain Management (SCM) IT and International Logistics Management – ERP software overview International transportation systems International logistics structures and networks management Strategic and operational information management in Logistics - towards Global Business Intelligence. International Logistics Management – case study dr Marian Krupa

3. 5. International logistics structures and networks management Simulation / Simulationprocess logistics network optimization / Geographicallocalization Locationevaluation - „k center” problem

4. Simulation Simulationprocess

5. Logistics networkoptimization SIMULATION – introduction: • Since, thereis no opportunity to perform live experiments in business activity, simulationis the onlyoption to 1) betterunderstand the business model and/or 2) to find the bestsolution (KLPI and business objectives) – optimizationapproach. • Simulationrepresents one of the tools most frequentlyimplemented as a decisionsupport system in SCM (management, economics). Mangan, Lalwani, Butcher, Javadpour, Global Logistics and Supply Chain Management, Wiley & Sons, 2012.

6. Logistics networkoptimization SIMULATION – definition: • Theimitationof theoperation of real-worldprocessor system over time. • SIMULATION is a process of: • building a model with data and • experimenting with it (what-if) • in order to developinsightinto a system’sbehavior – cause-and-effect (understanding business model) • based on a specific set of inputs (data) and assist in decision-makingprocesses (priorities/KPI). Mangan, Lalwani, Butcher, Javadpour, Global Logistics and Supply Chain Management, Wiley & Sons, 2012.

7. Logistics networkoptimization SIMULATION – benefits: • Betterunderstanding of business model; • Showsthesystem behaviorover time; • Allows to evaluateproposedstrategies (different business options) withouttheir live implementations; • Allows „What-if” analysis (optimistic / pessimistic) • Showskey performance indicatorsKPIs (defines business priorities) Mangan, Lalwani, Butcher, Javadpour, Global Logistics and Supply Chain Management, Wiley & Sons, 2012.

8. Logistics networkoptimization SIMULATION – limits: • Data is not verywellstructured; • Thereis no historical data; • Thereare not goodpractices (benchmarks) • Thecost of doingsimulationisgreaterthanthecostimpact of thedecision; • Thecost of simulationisgreaterthanthecost of experiment. Mangan, Lalwani, Butcher, Javadpour, Global Logistics and Supply Chain Management, Wiley & Sons, 2012.

9. Logistics networkoptimization SIMULATION – proces: Formulate / define a problem. Identify business goals and objectives. Definesupplychainkey performance indicators (priorities). Desing (conceptualise) model (varables). Collect data (inputs). Develop the model. Test / verifytheeffectivnes of the model. Valid the final model. Plan and run experiments. Analyseresults and determinedecisions. Develop „What-if” typeanalyses. Mangan, Lalwani, Butcher, Javadpour, Global Logistics and Supply Chain Management, Wiley & Sons, 2012.

10. International Logistics Network optimization - Dilemma of geographicallocalization

11. Facilitylocation OPTIMIZATION – definition: • Optimization (optimality) – makingthebest of or most of something[Oxford Dictionary]. • For example: in logistics, optimisationtechniquescan be used to determine, definethesupplychainnetworkthat will • produceminimum total transport cost • and • deliverthehighestlevel of service. Mangan, Lalwani, Butcher, Javadpour, Global Logistics and Supply Chain Management, Wiley & Sons, 2012.

12. Facilitylocation Facility location is related to: Logisticspoints: plants, warehouses, distributioncenters,resourcessites, etc. • with reference to markets (Demand), • and manufacturers / procurement (Supply).

13. Facilitylocation Simple supply and distributionnetwork:

14. Facilitylocation Complexsupply and distributionnetwork:

15. Facilitylocation geographicallocalization

16. Facilitylocation Key Business Objectives: • Readiness to deliverallgoodsneeded by ourcustomersinchangingdemand environment. • To deliverallgoodsinappropriatequantityto allplaces(markets, points of delivery) rapidly. • To avoid high level of inventory(JiT). • To ensure the highestlogisticsefficiency and qualityperformance standards of management. • To produce the lowestpossibletotalcosts.

17. Facilitylocation Decisiondilemmas: • The final model can be toocomplex. • To perform a perfecttotalcostevaluationistoodifficult and risky. • To implement IT istooexpensiveand too much timeconsuming. • Itisimpossible to definebusiness priorities(all isimportant) • Thereisno skill, experienceand/orknowledge to takefulladvantages of all scientific optimizationmodels (linearprogramming).

18. Facilitylocation DecisionDilemmas: DECISION? Transport costs Maintenancecosts • Break even-pointanalysis • Total costsanalysis • What-ifanalysis model • Comparisonanalysis • MakeorBuyanalysis Flat Rate Flexiblerates • Dominant point analysis • linearprogramming • K CENTER problem • Linearprogramming / Solver

19. Locationevaluation - „k center” problem

20. Logistics networkoptimization K CENTER problem – definition: • Facility location / location analysis / k center problem– mathematical modeling and solution of problems concerning optimal placement of facilities (Distributioncenters, plants, Mainwarehouses) in order to minimize transportation costs. • Whatistheoptimalplacement / location of a new plant ordistribution center?

21. Facilitylocation - Case study ?

22. Project Facilitylocation ?

23. Project: Facilitylocation TASK: • Indicate (point out) the most optimalfacilitylocation. • Youhave to takeintoconsideration (conditions): • All points of supply resources • All point of delivery (markets) • Thecost of transportation (flexiblerate!) • The differentvolume of goods / transportationunits on differentroutes.

24. Project: Facilitylocation METHODOLOGY • Create a graph (net) over the geographical map (i.e, map of Europe) and put an appropriatescale on x/y coordinates. • Define x/y coordinates for allpoints of supply (S) and demand (M) • Enter allinput data to theappropriatedefined, structuredtable. • Based on thepresentedformulaperformallcalculations. Evaluatecoordinates for thenewlocalization of plant. • Point out the optimizedlocalization of the logistics point on the map. • Performsome „whatif” analysis for different business scenarios.

25. Project: Facilitylocation Formula: C – coordinates of theoptimal point X/Y Mi – coordinates for deliverypoints (markets) Si – coordinates for supplypoints (natural resources) Di – number of transportationunits (goods to be sold) di – number of transportationunits (material and resources) Ri – transportationrate for goodsdelivery (markets) ri – transportationrate for materials and resources

26. Project: Facilitylocation MAP - net coordinates ?

27. Project: Facilitylocation EvaluationTable (1):

28. Project: Facilitylocation EvaluationTable (2):

29. Project: Facilitylocation DATA:

30. Questions ? • dr Marian Krupa

31. ExamQuestions (5): • Highlightthepotential role of simulationin SCM decisions. • Explainthestepsinvolvedinsimulationprocess. • Whataretheadvantages and disadvantages of usingsimulationin SCM? • Explainthelocationanalysisor „k center” problem. • What king of SCM decisionscan a simulation model be beneficial for?