Design Option for a Transportation Netwok

8/10/2019 Design Option for a Transportation Netwok

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DESIGN OPTION FOR A

TRANSPORTATIONNETWOK

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The Role of Distribution in the Supply Chain

D istr ibut ion : the steps taken to move and store a

product from the supplier stage to the customer stage in

a supply chain

Distribution directly affects cost and the customer

experience and therefore drives profitability

Choice of distribution network can achieve supply chain

objectives from low cost to high responsiveness

Examples: Wal-Mart, Dell, Proctor & Gamble, Grainger

Wikipedia

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Factors Influencing Distribution Network Design

Distribution network performance evaluated along two

dimensions at the highest level:

Customer needs that are met

Cost of meeting customer needs

Distribution network design options must therefore be

compared according to their impact on customer service

and the cost to provide this level of service

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Elements of customer

service influenced by

network structure:

Response time

Product variety

Product availability

Customer experience

Order visibility

Returnability

Factors Influencing Distribution Network

Design

Supply chain costs affected

by network structure:

Inventories

TransportationFacilities and handling

Information

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Transportation Network

Design of transportation networkimpacts the performance of a supply

chain.

It establishes the infrastructure in whichoperational transportation decisions

regarding scheduling and routing are

made.A well designed network allows a supply

chain to achieve the desired degree of

responsiveness at low [email protected]


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Design Options for a Distribution Network

Direct Shipping Network Direct Shipping with Milk Runs

All Shipments via central DC

Shipping via DC using Milk Runs

Tailored Network

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Direct Shipping Network

Shipments come directly from suppliersto retailers.

SC manager only needs to decide on

the quantity to ship and the mode oftransportation.

Elimination of intermediate warehouses

& simplicity of operation andcoordination.

Decision for one shipment does not

influence others. [email protected]


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Direct Shipment Network

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Direct Shipping with Milk

RunsA milk run is a route in which a truck

either delivers product from a single

supplier to multiple retailers or goes

from multiple suppliers to a singleretailer.

Indirect shipping with milk runs, a

supplier delivers directly to multipleretail stores on a truck or a truck picks

up deliveries from many suppliers

destined for the same retail [email protected]


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Direct Shipping with Milk

Runs

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All Shipments via Central DC

Suppliers send their shipments to the DCand the DC then forwards appropriate

shipments to each retail store.

DC is to store inventory and to serve astransfer location.

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All Shipments via Central DC

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Shipping via DC using Milk

Runs

Suppliers send their shipments to an

intermediate transit point

They are cross-docked and sent tobuyer locations without storing them

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Shipping via DC Using Milk

Runs

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Tailored Network

This is a combination of previousoptions that reduce the cost and

improves responsiveness of the

supply chain. The goal is to use the appropriate

option in each situation.

The complexity of managing thistransportation network is high because

different shipping procedures are used

for each product and retail outlet,[email protected]


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Tailored Network

Network Structure Pros Cons

Direct shipping No intermediate warehouse

Simple to coordinate

High inventories (due to large lot

size)

Significant receiving expense

Direct shipping with milk

runs

Lower transportation costs for small lots

Lower inventories

Increased coordination

complexityAll shipments via central

DC with inventory

storage

Lower inbound transportation cost

through consolidation

Increased inventory cost

Increased handling at DC

All shipments via central

DC with cross-dock

Low inventory requirement

Lower transportation cost through

consolidation

Increased coordination

complexity

Shipping via DC using

milk runs

Lower outbound transportation cost for

small lots

Further increase in coordination

complexity

Tailored network Transportation choice best matches

needs of individual product and store

Highest coordination complexity

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THANK YOU !

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Design Option for a Transportation Netwok

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