Page 298 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 13: Logistics Design and Operational Planning

Collecting Validation Data Notes
In addition to collecting data to support alternative analyses, base case or validation data must
also be collected to verify that the results accurately reflect reality. The specific question concerns
whether the chosen analytical approach accurately replicates historical results when distribution
practices and operating environments are evaluated.

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Caution Comparison should focus on historical activity (e.g., sales and volume) and expense
levels both in total and by facility, if possible.
The objective of validation is to increase management credibility regarding the analysis process.
If the process does not yield credible results, management will have little confidence in the
alternative analyses. It is critical that data collection efforts include investigations into why
analytical results may not accurately reflect the past.

Example: Changes in distribution centre operating practices or a one-time event such as
a strike may make it impossible to exactly replicate the past. When such situations occur, the
validation data collection process should include an assessment of the likely impact of such
changes so that appropriate considerations can be made.

Analysis

The analysis activity uses the technique and data from the previous activity to evaluate strategic
and tactical logistics alternatives. This four-stepped activity includes the following specific
tasks: (1) defining analysis questions, (2) completing and validating a baseline analysis,
(3) completing analyses of alternatives, and (4) completing sensitivity analysis.

Defining Analysis Questions

The first task defines specific analysis questions concerning alternatives and the range of
acceptable uncertainty. The specific questions build on research objectives and constraints by
identifying specific operating policies and parameters.

Example: The questions for a distribution centre site analysis must identify the specific
location combinations to be evaluated.
In the case of an inventory analysis, questions might focus on alternative service and uncertainty
levels.
Suppose that a strategic planning effort is focusing on the identification of an optimal network
of distribution facilities to serve the U.S. domestic market. Assume that the current network uses
four distribution centres located in Newark, New Jersey; Atlanta, Georgia; Chicago, Illinois;
and Los Angeles, California. Shipment volume is defined in terms of weight shipped; cost, in
terms of transportation and inventory carrying expenses; and service level, in terms of the
percentage of sales volume within 2 days’ transit of the distribution centre. Likely questions for
the sample analysis include: (1) What is the performance impact of removing the Chicago
distribution centre? (2) What is the performance impact of removing the Los Angeles distribution
centre? and (3) What is the performance impact of removing the Atlanta distribution centre?
These questions represent a small subset of the potential alternatives for evaluation. Other
alternatives could include fewer or more distribution centres or evaluation of different locations.

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