Use of Logistics Channel The procurement cycle occurs at the manufacturer/supplier interface and includes all processes necessary to ensure that materials are available for manufacturing to occur according to schedule. During the procurement cycle, the manufacturer orders the components from suppliers that replenish the component inventories. The relationship is quite similar to that between a distributor and manufacturer, with one significant difference: whereas retailer or distributor orders are triggered by uncertain customer demand, component orders can be determined precisely once the manufacturer has decided what the production schedule will be. Component orders are dependent on the production schedule. Of course, if a supplier’s lead times are long, the supplier has to produce to forecast because the manufacturer’s production schedule may not be fixed that far in advance. In practice, there are several tiers of suppliers, each producing a component for the next tier. A similar cycle would then flow back from one stage to the next. The processes are shown as below; A firm can vary supply of product by controlling a combination of the following two ...

When deciding upon locational decision a manager basically decides upon suppliers, plants, ware houses and markets. There may also be other facilities such as super stockists, consolidation centers or transit points. Besides locating the facilities a manager must also decide how market may be allocated to ware houses and how ware houses will be allocated to plants. The allocation decision can be altered on a regular basis as different costs change and markets evolve. When designing the network, both location and allocation decisions are made jointly. In some cases, companies want to design supply chain networks, in which a market is supplied from only one factory. This is commonly known as the capacitated plant location model with single sources. Companies may impose this constraint because it lower the complexity of coordinating the network and requires less flexibility from each Facility. A much more general form of the plant location model needs t be considered if the entire supply chain network from the supplier to the customer must be designed. Consider a supply chain in which suppliers send materials to factories that supply ware houses that supply markets. Location and ...

Plant and distribution center location is a common problem faced by logistics managers. Increased production economics of scale and reduced transportation cost have focused attention on distribution centers. In recent years, location analysis has been further extended to include logistics channel design as a result of global sourcing and marketing decisions. Global operations increase logistics channel decision complexity, design alternatives and related logistics cost. Location Decisions Location decision focus on selecting the number and location of distribution centers. Typical management questions:- How many distribution centers should the firm use and where should they be located? What customers or market areas should be serviced from each distribution center? Which product lines should be produced or stopped at each plant or distribution center? What logistics channels should be used to source material and serve international markets? What combination of public and private distribution facilities should be used? Location Analysis Techniques Location analysis problems are very complex and data intense. Complexities are created because of the number of ...

Prior to the 1950s,functions now accepted as logistics were generally viewed as facilitating or support work. Organizational responsibility for logistics was dispersed throughout the firm. This fragmentation often meant that aspects of logistical work were performed without cross-functional coordination, often resulting in duplication and waste information was frequently distorted or delayed and lines of authority and responsibility were typically blurred. Managers recognizing the need for total cost control began to reorganize and combine logistics functions into a single managerial group. Structuring logistics as an integrated organization first appeared in the 1950s. The motivation behind functional aggregation was the belief that grouping logistics functions into a single organization would increase the likelihood of integration. The paradigm (model) was that functional proximity would facilitate improved understanding of how decisions and procedures in one area affect performance in other areas. The belief was that eventually all functions would begin to work as a single group focused on total system performance. This integration paradigm, based on organizational proximity, ...

Distribution Resource Planning (DRP) is a more sophisticated approach that considers multiple distribution stages and the characteristics of each stage. It is a logical extension of Material Requirements Planning (MRP), although there is one fundamental difference between the two. MRP is determined by a production schedule that is defined and controlled by the enterprise. On the other hand, DRP is guided by customer demand, which is not controllable by the enterprise. So, while MRP generally operates in a dependent demand situation, DRP operates in an independent environment where uncertain customer demand determines inventory requirements. The manufacturing requirements planning component coordinates the scheduling and integration of materials into finished goods. MRP controls inventory until manufacturing or assembly is complete. DRP then takes coordination responsibility once finished goods are received in the plant warehouse. The fundamental DRP planning is the schedule, which coordinates requirements across the planning horizon. There is a schedule for each SKU and each distribution facility. Schedules for the same SKU are integrated to determine the overall ...

Planning is extremely important when it comes to inventory resources. The lack of planning can be costly to the firm either because of the carrying and financing costs of excess inventory or the lost sales from inadequate inventory. The inventory requirements to support production and marketing should be incorporated into the firm’s planning process in an orderly fashion. The production side: Every product is made up of a specified list of components. The planner must realize the different mix of components in each finished product. Each item maintained in inventory will have a cost. This cost may be based on volume purchases, lead time for an order, historical agreements or other factors. Each component can be assigned a value. Once the mix is known and each component has been assigned a value, the planner can calculate the materials cost. The marketing side: The second step in inventory planning involves a forecast of unit requirements during the future period. The marketing department should also provide pricing information so that higher profit items can receive more attention. Inventory database An important component of inventory planning involves access to an ...