Mayuresh Unde

22nd Sept, 2011

Transportation, Warehousing

Design Options for Transportation Network

1.Direct Shipment Network2.Direct Shipping with Milk Runs3.All Shipments via Central Distribution

Center4.Shipping via Distribution Center using

Milk Runs

Direct Shipping Network

A

B

C

D

E

Buyer 1

Buyer 2

Buyer 3

Buyer 4

Buyer5

Suppliers

Direct Shipment Network

Advantages:1. Elimination of

intermediate warehouses

2. Simplicity of operation & coordination

3. The shipment decision for one does not affect the other

4. Method justified if demand at buyer locations is large enough that optimal replenishment lot sizes are close to TL for each supplier to each buyer

Direct Shipping with Milk Runs

A

B

C

D

E

Buyer 1

Buyer 2

Buyer 3

Buyer 4

Buyer5

Suppliers

A

B

C

D

E

Buyer 1

Buyer 2

Buyer 3

Buyer 4

Buyer5

Suppliers

Milk Runs from multiple suppliers or to multiple buyer locations

Milk Run is a route on which a truck either delivers product from a single supplier to multiple retailers or goes from multiple suppliers to single buyer location

Direct Shipping with Milk Runs

Advantages:1. Direct shipping provides the benefit of eliminating intermediate warehouses, whereas

milk runs lower transportation cost by consolidating shipments to multiple locations on a single truck

2. Proves extremely useful in cases where replenishment lot size for each buyer location is small and make require the costly LTL shipping.

Ex: Toyota uses milk runs from many suppliers to each assembly plant

All Shipments via DC

A

B

C

D

E

Buyer 1

Buyer 2

Buyer 3

Buyer 4

Buyer5

SuppliersAdvantages:1. DC plays an important

role in inventory storage and also acts as a transfer location

2. DCs located close to market for better reach; comparative lower transportation costs

3. EOS can be at least achieved on inbound transportation

4. Can also be operated as a Cross-docking DC

DC

Wal-Mart has used cross docking successfully to decrease inventories without incurring excessive transportation costs. In Wal-Mart DC, the total lot size to all stores from each supplier fills trucks on the inbound side to achieve EOS. On outbound side, the sum of the lot sizes from all suppliers to each retail store fills up the truck to achieve EOS

Milk Runs from DC

A

B

C

D

E

Buyer 1

Buyer 2

Buyer 3

Buyer 4

Buyer5

Suppliers

Advantages:1. All advantages same as the

ones mentioned earlier2. Out-bound transportation

costs are also reduced due to milk runs

DC

Basic Warehousing decisions

Ownership

Private Public

How Many?

Centralized Decentralized

What size?Where?

(Location)

Interior Layout

Which Products

Cost Comparison: Public Vs Private

Throughput Volume

Tota

l Co

st

Public Warehousing

Private Warehousing

Basic Warehousing OperationsRECEIVING1. Schedule Carrier2. Upload Vehicle3. Inspect for damage4. Compare to PO

PUT AWAY1. Identify Product2. Identify storage

location3. Move product4. Update records

STORAGE1. Equipment2. Stock Location:

Popularity, Unit size, cube

SHIPPING PREP1. Packaging2. Labeling3. Staging

ORDER PICKING1. Information2. Walk/drive & Pick3. Batch Picking

SHIPPING1. Schedule carrier2. Load vehicle3. Bill of Lading 4. Record update

Warehouse Process

Thank You!