Page 283 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes The chilled DSD system was a relatively small distribution method, created for items
which required continuous refrigeration. This was primarily created for the fruit juices
product line.
Question
Discuss the distribution operations and the distribution channels utilized by a leading
multinational company in the beverage and snack food industry.
Source: http://www.icmrindia.org/casestudies/catalogue/Operations/OPER031.htm

12.5 Summary

 The primary determinants of logistics network design are requirements established by
integrated procurement, manufacturing, and market distribution strategies. Within the
framework of these interlocking strategies, logistics requirements are satisfied by blending
transportation and inventory capabilities. These capabilities play out across a network of
enterprise facilities.
 Important in the performance of logistics requirements are warehouse facilities. Such
facilities are justified by logistical system design in terms of their contribution to cost
reduction, service improvement, or a combination of both.
 Transportation and inventory economics are critical network design considerations. When
seeking least cost logistics, transportation deals with the spatial aspects of logistics. The
ability to consolidate transportation is a primary justification for including warehouses in
a network design. Inventory introduces the temporal dimension of logistics.
 Average inventory increases as the number of warehouses in a system increase given a
constant demand situation. Total cost integration provides a framework for simultaneous
integration of logistics, manufacturing, and procurement costs. Thus, total cost analysis
provides the methodology for integration across the network.
 Accurate total cost analysis is not without practical problems. Foremost is the fact that a
great many important costs are not specifically measured or reported by standard
accounting systems.
 A second problem involved in total cost analysis is the need to consider a wide variety of
network design alternatives. To develop complete analysis of a planning situation,
alternative shipment sizes, modes of shipment, and range of available warehouse locations
must be considered.
 These problems can be overcome if care is taken in network analysis. The cost format
recommended for total cost analysis is to group all functional costs associated with
inventory and transportation.
 The significant contribution of total cost integration is that it provides a simultaneous
analysis of time- and space-related costs in logistical network design.
 The formulation of a logistical strategy requires that total cost analysis be evaluated in
terms of customer service performance. Logistical service is measured in terms of
availability, capability, and quality of performance.
 The ultimate realization of each service attribute is directly related to logistical network
design. To realize the highest level of logistical operational support within overall enterprise
integration, customers should be provided service to the point where marginal cost equates
to marginal revenue. Such marginal equalization is not practical to achieve; however, the
relationship serves as a normative planning goal.

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