Logistics is the method through which organizations meet their objectives while still maintaining the customer needs in terms of movement, storage, and supply. However, this is a very complicated issue that basically involves a lot of comparisons and analysis. The company has to ensure that it does not compromise its objectives and has to ensure that it meets the requirements of the customer base (Chopra & Meindl, 2007). A major company like Amazon does not consider competition but considers the customer base that it serves (Amor, 2000). Therefore, it has to ensure that there is a common base where the supply and the economics rest. All these factors ensure that any company has the capability to thrive in an otherwise very competitive industry.
Every once and again, due to an increase in the competition or a change in the customer base, various companies are required to analyze their logistics and supply chain. It has been described that any successful organization may be required to leverage the resources that it may have with the reconstruction of the supply chain (Chopra, n.d.).In this, studies have indicated that the reconstruction may save the company about 25% of the costs that may be used in the distribution of supplies and commodities (Harrison, et al., 2003). Some of the major questions that may be involved in this redesign process include: services to the customers, need for shuffling inventories as well as the distribution locations among others. However, the factor of storage, as well as the costs incurred for the transportation from the production facilities to the consumer bases, has to be considered.
One major factor that has to be considered in logistics and supply is the fact that the network should not be based on the size factor (Kersten, et al., n.d.).Therefore, the design and redesign are aimed at focusing on the customer needs without having to follow the shortest or longest path. However, with the increase in technologies and the availability of e-commerce, some of the paths that companies can take have been reduced in such a way that they are able to meet the individual needs of a consumer within a specified locality. E-commerce is an internet technology that enables consumers to order the commodities from their homes with the logistics and supply methodology of companies ensuring proper delivery (Laudon & Traver, 2014). The second factor in the supply chain is the product type. Some products may be so fast moving that they may not require storage and can, therefore, move directly from the production facilities to the customer consequently saving the storage costs. On the other hand, some products may require storage because of the time is taken for the movement from the production facilities to the customer base. Therefore, the supply chain has to consider establishing storage facilities for these commodities.
Transportation is a pivotal factor in ensuring that the customer base, as well as the storage, is met. Therefore, companies should focus more on being creative in the supply of commodities, both to the storage facilities and to the customers. The retail sector has seen unprecedented creativity whereby suppliers and retailers have come to the agreement that the transportation costs be shifted to the retailer. The move has seen a dramatic reduction in the costs incurred by the supplier but has the effect of increasing the costs incurred by the retailer (Furtwengler, 2015). All these are some of the approaches that can be used by the supplier to reduce the cost incurred.
The supply chain
Basically, the supply chain is the route that commodities and products take from their production to the final consumer. The route is not straightforward and as such, may constitute a variety of organizations and middlemen. The design of an effective and efficient chain, therefore, should be focused on the reduction or elimination of these middlemen because it reduces the time taken as well as the cost of the commodity. However, the supply chain depends on the logistic system for efficient delivery and supply. However, because of the interaction between the various intermediate members of the supply chain, there needs to be a management strategy.
There are 4 determinants for a successful supply chain. However, it is very important to differentiate between a supply chain and logistics. The former refers to the various processes that are involved in commodity transfer from the producer to the eventual consumer through the various middlemen while logistics is the process or method used in ensuring that this supply is smooth and efficient (Monczka, et al., 2014). In this, the logistics work to ensure that the members are well conversant with each other and that the network is stable. The factors that promote or hinder the success of a supply chain include: the collaboration of the various members in the supply chain, the strategy used in the supply chain, information between the various members and the costs incurred in the supply chain (Napolitano, 2010)
To begin with, the members involved in the movement of commodities from the manufacturer to the consumers are the most important determinants of the success of a supply chain. The trust, as well as the understanding between these members, is a requisite for a successful supply chain. In this, it is required that the members should have each other’s backs and should understand each other when it comes to the movement of goods and services. Members who may not be in good terms are not likely to result in a very efficient process while the members who have good mutual understanding, as well as trust, are likely to make the supply process very successful
A strategy may be defined as the process employed throughout the supply chain and as such, strategies which focus on improving the efficiency and the cooperation between members is likely to have a positive output (Haksever & Render, 2013). On the other hand, strategies that do not focus on the various parties involved in the supply chain are likely to have a redundant effect on the efficiency of service delivery. It is this factor that calls for the review and the redesign of the whole process for better service delivery.
The other factor that affects the success of a supply chain is the availability of information. The supply strategy has to focus on availing information to every member of the supply chain by basically ensuring that he is up to date with the latest technology, inventories, strategies etc. By doing so, the cooperation and the trust between these members are enhanced and as such, prevent backlogging of activities. Finally, the supply chain should be cost effective and should consider the routes that focus on efficient service delivery as well as minimization of costs. It has been stated that the cost of supply of commodities from the producer to the consumer has to be put at a minimum while still catering for efficiency.
The supply chain strategy
A business entity is as successful as the strategies it employs in the distribution of commodities from the manufacturer to the consumer (Onder, 2014).Therefore, a supply chain strategy is a review of the components of the transfer of these commodities and include inventories, transportation, middlemen, sourcing, and planning. The review is aimed at ensuring that the customer is satisfied with the service delivery while the company ensures that its goals and objectives are attained. Furthermore, the company has to balance between demand and supply in the various regions that it serves.
Transportation is a critical element in every company operations. Basically, there are two modes of transport that the company can employ when dealing with the distribution of the commodities: the inbound transportation and the outbound transportation (Bowersox, et al., 2007). The former refers to the process whereby goods and services are brought to the facility either for storage or manufacture while the latter refers to the movement of goods from the companies’ premises to the end consumer (Simon, 2009).Basically, the transportation can be through the normal transportation methods such as rail, road, air, sea etc. However, any company which wants to reduce the freight charges in the transportation has to ensure that there is bulk transportation and the method used is very effective. In this, rail transport has been widely emphasized because of the ability to transport commodities in bulk besides the means being very fast. However, the company has to consider several factors such as the distance to be covered, the location etc.
Companies and organizations deal with the movement of goods from one region to another and as such, there need to be means through which these commodities are monitored. Furthermore, the inventory indicates the physical nature of commodities held and as such, provide valuable information in the supply chain strategy and management.
Customer satisfaction is ensured by proper inventory management. The inventories define the stocks available and the stocks necessary to satisfy the consumer demands (Mangan, et al., 2008). There are basically three types of inventories: Cycle inventory, safety inventory and seasonal inventory. The first type of inventory refers to the management of commodities that are currently available for consumers and includes the goods that can be found in stock. On the other hand, safety inventory refers to the stock which the company holds onto without necessarily introducing to the supply chain so as to better prepare themselves because of unforeseen circumstances such as an increase in demand. Finally, the seasonal inventory refers to the bulk production of commodities in order to meet demands that may be brought about by seasonal variation, such as raincoats during the rainy season or various commodities required during festive seasons. It is thus a very important thing for companies to consider evaluating the strategies that are employed in inventory management.
Sourcing can be described as a management strategy that basically focuses on the individual members of the supply chain. In this, the strategy focuses on assigning various members the roles needed in the supply chain process. However, outsourcing may shift the roles served by different groups in the supply chain (Priester & Wang, 2010).
The design of a logistics network
It is a fact that managers need to redesign the logistics network in such a way that it caters for efficiency as well as the consumer base. However, this should as per the; lowest costs possible. Costs are an impediment to every successful operation and as such, the task that befalls the manager is very complicated. The history for this review in logistics arises from previous organizational structures which reviewed their logistics operations within 5 years (Porter, 1985). As of late, the competition and the need to take control of the market has led to constant and intense logistic network reviews and redesigns.
Some of the factors that have led to this change in the frequency with which the logistic network is redesigned include: change in customer bases, change in the labor trades, the costs that are associated with space, trade agreements, and supplier changes among others. Therefore, these determinants are essentially the features that need to be put into consideration when the manager is in the process of redesigning and restructuring the network. The main aim of the redesign is to change some of the basic factors associated with chain supply and which may include: inventory carrying, transportation costs, warehousing charges etc.
Furthermore, the review basically focuses on specifics such as the location of facilities, the distribution capability of each facility, the relationship between the suppliers and the relative locations from each other among others. The proposed redesign strategy of the logistic network has been simplified into six steps.
The first step in the redesign is to analyze the current network. In this, the route used is analyzed in terms of the facilities, transportation mechanisms and all other factors necessary for the movement of the commodity from the production stage to the final consumer. The stage is followed by the designing and the optimization of the network database.The third stage is to choose an alternative route that basically meets all the requirements of an effective logistic network. Later on, the proposed network is optimized through a network optimization tool. The later stages of the redesign include putting the model into practice and establishing the costs required. The final decision will determine if the network model can be used.
Redesign of the logistics network
In redesigning the logistics network, we basically have to focus on the demand/customer base and the costs required to meet this demand. Therefore, we arrange the demand in descending order with the aggregate that has the highest demand being the topmost consideration. According to the data, Germany has the highest demand (the data has been arranged for clarity).
From the above data, the countries that need an efficient delivery system are: Germany, Italy, France, Spain, Netherlands, Switzerland, Portugal, Belgium, and Austria. All these countries have a huge consumer base. Basing the argument on the service levels, the 6 warehouses would be located in regions which require premium service L Kassel in Germany=7, bologna In Italy =4, Otzberg in Denmark=4, st.Witz in France=4, Mszczonow in Poland=3, Brussels in Denmark=3.By ensuring that the warehouse is located in the area that has the biggest consumer base, the money saved on transportation is tremendous. However, this has to be checked against the inbound as well as the outbound transportation costs
|Country||Average Primary Transportation Cost from FW’s to RDW
From the above table, the places with the least inbound costs are bologna=974, Lyon=929, Novara=864, otzberg=1021, Brussel=1039,kassel=2014 and Mszczonow=1429
The cost of warehousing can be described below
Therefore, the warehouses would be as follows:st.wit in France which would be used to serve Belgium, France and the Netherlands consumer bases.The second warehouse would be located in Kassel and would be used to serve Belgium, Germany and the Netherlands. The third warehouse would be in Bologna which would basically be used to serve the customer base in Italy.sesena in Spain would be used to serve the customer base of Spain. Mszczonow in Poland would be used to serve the customer base of Poland and Lithuania. Basically, all the other countries will be served from these warehouses because the transportation costs would be far less than those incurred in constructing a warehouse as well as the inbound and outbound transportation.
Basically, the logistic costs are those incurred during the inbound transportation as well as the outbound transportation. Furthermore, these costs include the costs of storage and can be determined from the tables below.
|Housing Cost||Handling Cost|
|1||within 24 h||1||3||4||5||6||8||9||10||11||12||13||14||15||16||17||18||19||21||22||24||25||26||27||28||29||31||32||34||35|
|2||within 36 h||Country||AT||AT||BE||CH||CZ||DE||DE||DE||DE||DK||ES||ES||ES||ES||PT||FR||FR||FR||FR||FR||HU||IT||IT||IT||IT||IT||LT||LV||NL|
The service levels obtained by restructuring the logistic network
The focus of this redesign was basically in the most appropriate locations. The location might be defined in terms of the customer base and the locality. Most of the selected locations serve a considerable number of customers and hence are strategically located.
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