Flashcards
14. Logistics and Distribution
Cards in this deck (19)
- 1Trends in distribution costsRecently, distribution costs have been increasing. Any reductions in these direct costs are immediately beneficial for the company’s contribution margin and its profitability.
- 2Explain logistics and what it involves- Logistics: Obtaining, producing and distributing material and product in the proper place and in proper quantities.
→ Logistics involves getting the right goods to the right place at the right time at the right cost and in the right condition, and with due care and attention to the environment. - 3International logistics- International logistics: Managing these functions when the movement is on a global scale
- 4Third-party logistics companyAn outside company used to handle logistics functions (SPECIALIST)
- 5Ways of transporting materials (and their pros and cons)• Truck: Great flexibility
• Ship: High capacity and low cost but slow
• Plane: Fast but expensive
• Pipeline: Highly specialized and limited to liquids, gases, and solids in slurry form
• Hand delivery: Last step in many supply chains
--> Multimodal solutions are the norm - 6How to consider an appropriate location- Locations: Choosing an appropriate location considering the current and future locations of suppliers and customers is a critical decision that affects property costs, logistics and operation costs
- 7What does logistics commonly include?- Logistics commonly includes transport, warehousing and storage, inventory control and communications and information systems. Logistics is closely integrated with manufacturing management.
→ Logistics affects our daily life and welfare. It makes up 5-20% of the total costs of typical retailing and manufacturing companies. It directly or indirectly contributes an estimated 25% of GDP. - 8Logistics and the supply chain- Logistics in the supply chain: Logistics links the various stages
- 9Transport function• The movement of goods and people by road, rail, air and water
• Planning, design, construction and maintenance of infrastructure, systems and vehicles
• Operation of terminals, interchanges and networks
• Development of policy at international, national regional and local levels - 10The importance of customer access- Customer access is usually critical for services. However, for manufacturing too, it is important for logistics as it establishes long term operating systems between suppliers and customers.
- 11Distribution modes: Hub and SpokeHub and Spoke distribution paradigm (or model or network) in which all routes move along spokes, passing through a central hub, arranged similarly to a bicycle wheel. The model is commonly used in industry, in particular in transport, telecommunications and logistics.
- 12Point-to-point distribution paradigmA freight carrier travels directly to a destination rather than going through a spoke-hub distribution paradigm. This may be likened to a web with routes directly linking every point.
- 13Centroid methodUsed for locating single facilities that considers existing facilities, the distances between them, and the volumes of goods to be shipped between them. It assumes that inbound and outbound transportation costs are equal, and does not include special shipping costs for unequal shipment sizes or frequencies. All points are equally as important. This methodology involves formulas used to compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above. In order to simplify it, the formula needs to be transferred to real world locations and transport systems.
- 14The factor-rating system→ The factor-rating system is the most widely used system, where a list of factors is pre-developed and a range of possible points are assigned to each factor. Each site is rated against each factor. The sums of the assigned points for each site are computed, and the site with the most points is selected.
- 15Locating new facilitiesNew service facilities are far more common than new factories and warehouses, since they are much less expensive. Multiple sites should be close to customers. Location decisions are closely tied to the market selection decisions. Decisions are more about maximizing profits than minimizing costs.
- 16Benefits of point-to-pointIt may minimize connections and travel time, but only if the airline serves the destination via the origination point.
It minimizes handling - 17Drawbacks of point-to-pointUsually limited services:
- If the city pair isn’t served, it is then impossible to get a destination using that carrier’s route network
- Secondly, the frequency of flights may be reduced because a point-to-point system requires a large number of links, as the number of city pairs is increased by many magnitudes
Reduced economies of scale – smaller volumes - 18Benefits of Hub and SpokeFor a network of n nodes, only n – 1 routes are necessary to connect all nodes; that is, the upper bound that is n- 1. This compares favorably to the (n(n – 1)/2 routes, or O (n2), that would be required to connect each node to every other node in a point-to-point network.
The reduced number of routes generally leads to more efficient use of scarce transportation resources. For example, aircrafts will be likely to fly at full capacity and can often fly routes multiple times in a single day.
Complicated operations such as package sorting can be consolidated at the hub, rather than maintained separately at each node.
Spokes are simpler, and new spokes can be connected rapidly
Customers may find the network to be simpler and more intuitive. Scheduling is more convenient for customers since there are fewer routes with more frequent service. - 19Drawbacks of Hub and SpokeThe model is centralized and day-to-day operations may be relatively inflexible. Changes at the hub or even in a single route could have unexpected consequences across the network. It may be difficult or impossible to handle occasional periods of high demand between 2 spokes.
Route scheduling is more complicated for the network operator. Scarce resources must be used carefully to avoid starving the hub. Careful traffic analysis and precise timing is required to keep the hub operating efficiently.
The hub constitutes a bottleneck in the network. Total cargo capacity of the network is limited by the hub’s capacity. Delays at the hub (e.g. mechanical problems with an aircraft) can also affect the network, although to a lesser extent.
Cargo must be routed through the hub before reaching its destination, possibly requiring a much longer journey than a direct point-to-point connection. -> desirable trade-off for freight, which can take advantage of the sorting capabilities of the hub, but it may be unacceptable for time-critical cargo such as customers
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- Business and Management 2A (Operations Management) Flashcards on 14. Logistics and Distribution, created by Nina Olsson on 02/08/2018.
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