We decided to call this “Quantitative” Supply Chain Decisions, but we could have called it Logistics Decisions. Logistics can be described as the supply chain within a firm, encompassing the more quantitative decisions. We will provide an overview of these decisions. For more details you can click on the link above, which will take you to a detailed white paper we wrote. It is organized so you should be able to easily find the section that you would like more details.
Production Logistics Decisions
- Location and number of facilities
- Cost versus Customer Service
- Economies of scale
- Product design
Logistics issues regarding production will involve where to locate your production facility and your product design (and therefore production and inventory) strategy. Having fewer, larger facilities will often reduce costs, due to economies of scale, but can place your facilities farther away from customers.
Product design can have a profound impact on logistics. In the attached white-paper we describe six product design / production strategies that will affect shipping and warehousing costs, and customer service.
Transportation Logistics Decisions
- Vehicle routing
- Transportation Mode
- Economies of scale versus Speed and Flexibility
Transportation can be 50% of your total supply chain costs. Therefore, managing cost and customer service is critical. Often we find companies that do not re-optimize their routes. Software and methods exist to help you minimize distance traveled, and therefore fuel costs. Routes and stops should be evaluated at least twice a year, and preferably more often.
Transportation mode should also be evaluated. There are a number of different vehicles, from ships and planes to sizes of trucks that you need to consider when shipping product. Again, larger, is usually lower cost, but only if you can fill up the vehicle and deal with the lack of flexibility. For example, you will likely not be able to reroute a railcar if it needs to change the ship-to location.
Storage Logistics Decisions
- Location and Number of facilities
- Type of facility
- Direct-to-consumer warehouse, B2B warehouse, Cross-dock warehouse, Value-added provider, Retail store
- Inventory levels
- Stockout costs versus Obsolescence
- Safety stock and Reorder point
- Order (Production or Purchase) Quantity
- Customer perception versus Costs
Storage logistics decisions are numerous and complicated. We have provided a summary in the bullets points above. This list is too long to write about in this e-newsletter, so if you want the details, they are available in the attached white paper.
If you want more information any of these strategies, give Mitch Millstein a call (314-406-4962) or send him an email (firstname.lastname@example.org