Unit 8: Supply Chain Distribution and Logistics
This unit covers the analysis of facility layouts, given layout objectives and types. Different requirements for manufacturing and service-industry building layouts are considered. Location decisions include analyzing the link between supply-chain networks and facility locations as part of operations optimization.
Completing this unit should take you approximately 10 hours.
Upon successful completion of this unit, you will be able to:
- determine the optimal number and location of distribution centers for a given product type;
- describe what areas of logistics have changed with the rise of e-commerce and why;
- describe how firm size and logistics complexity indicate why some businesses use third-party logistics; and
- determine optimal transportation mode depending on the type of logistics, such as 1PL and 2PL.
8.1: Distribution Network Analysis
Distribution networks are used to get products from the manufacturer to wholesalers and retailers. Since distribution requires large-scale transportation, businesses are constantly striving to optimize delivery. In analyzing their distribution network, a manufacturer will consider customer demand, financial issues such as cash flow, current processes, challenges, geography, and transportation costs among other considerations.
Watch this video. The analysis presented employs distribution network analysis to analyze past transport systems. What were the main uses of transportation roads in Roman times, and how are these applicable today?
8.1.1: Tiered Suppliers
Most manufactured goods rely on many different parts from various suppliers. Suppliers are tiered or vertically stratified based on their specialization and expertise. The automotive industry, for example, has a three-tier supply chain consisting of entire-systems manufacturers on top as first tier, components builders in the second tier, and individual parts suppliers in the third tier.
Read Sections 1 and 2 of this article. The study investigates how automotive original equipment manufacturers (OEMs) design supply networks. In Table 2, notice how personal ties and contractual, transactional, and professional network ties play a role.
8.1.2: Subassembly Suppliers
Manufacturers sometimes outsource sub-assembled parts or pieces to increase the speed of their production capabilities. These suppliers are contracted third parties who are usually specialists in their particular field. Some initial benefits can include reduced delivery times, quality assurance, and a decrease in overall production costs.
Read this article, which highlights a novel strategy for procurement. Focus on sections 1, 2, and 5 and the opening paragraphs for sections 3 and 4. The model in the paper presents a new strategy to reduce procurement costs and enhance overall procurement flexibility.
8.1.3: Supplier Relations
Relationships are the key to success in any business. Managing supplier relations is a long-term commitment to promote collaboration and maintain a stable supply chain in the future. Consequently, the customer ultimately wins when manufacturers and suppliers have great relations.
Read this article. The idea is to determine ways of managing supplier relations in order to improve procurement performance. After reading this article, what is your own definition of supplier relations?
8.1.4: Reverse Supply Chain
The traditional business process moves goods and services to the customer. However, a reverse supply chain is when goods move from the customer back to a vendor. This is so for various reasons, from product reacquisition, reinspection, assessment of product quality, and refurbishing.
Read this article. The authors propose that reverse supply chains can achieve economic as well as environmental and social benefits. Regarding your electronic devices, do you know how you can recycle and reverse supply them back to a vendor?
8.2: Network Design
As part of making a product, manufacturers must establish a network of suppliers, transporters, and contractors. Strategically designing its network will afford a business an opportunity to establish a system that will best meet customer demand. Obviously, minimizing costs is of utmost importance, however, as firms grow the emergence of labor security, maintenance of fixed costs within the network, and managing quality may also become top priorities.
Read this article. The research focuses on network design performance in our current era of product customization and personalization. With online order volume steadily increasing, what network design considerations do you feel are necessary to successfully fulfill custom orders?
8.2.1: Number and Location of Distribution Centers
How many centers a supply chain has will make an impact on the supply chain network. In addition, where the distribution center is placed will also affect the supply chain and logistical transportation systems. A well-designed plan can potentially reduce costs associated with material handling and may increase labor productivity and operational profits.
Read this article. In it, a model is presented to help determine the number of distribution centers, their locations, and capacity among other factors. Among the 15 assumptions presented, which do you feel are most important and least important?
8.2.2: Global Location Center Decisions
Manufacturers with global reach have to make important decisions on where to establish a physical presence. This decision is strategic because of the complexities involved with operations, including logistical, environmental, political, geographical, and even local incentives. Since these long-term decisions affect profitability, the result must maximize overall connectivity with others in a firm's supply chain.
Read this article. One objective of this paper is to determine distribution center locations. Compare and contrast the two cases presented.
8.2.3: Allocating Product to Distribution Centers
A distribution center is the core of a supply chain network infrastructure. Assigning production and inventory storage to a specific plant means it must be in close proximity to distribution centers to minimize transit times. Deciding the best sites for stock and distribution will determine the business' flexibility and can result in significant cost savings.
Read this article. The goal is to understand optimum product allocation and distribution locations so products are delivered at the lowest possible cost. As you read Part 2, what are some other problems associated with supply chain allocation and distribution?
8.2.4: Vehicle Routing Models
Vehicle routing is an important problem in transportation, distribution, and logistics. This component of the supply chain is the critical link between suppliers, manufacturers, wholesalers, retailers, and customers. The travel time, service time, and vehicle availability are of significant concern.
Read this article. The paper presents a mathematical model to solve vehicle routing challenges. In your own words, explain what vehicle routing is and why it's important to a supply chain.
8.3: 1PL, 2PL, 3PL, 4PL, and 5PL Logistics
PL refers to Party Logistics, and the number refers to a business or individual within service integration. 1PL are manufacturers and retailers who handle their cargo without an intermediary, whereas a 2PL is used for international transportation of wholesale goods for trade. The 3PL is a third-party business that mainly does transportation and delivery of products but may also provide warehousing, management, and customs services. A fairly new concept is the 4PL which is the management of an entire company's supply chain, with a 5PL aggregating demands of other 3PL for bulk transport freight.
Read this article. The study covered improvements to customer service logistics through a redesign. Which PL is the most convenient and widely well-known?
Read this case study of a 4PL model.
Despite technological advances and supply chain automation, logistics remains dependent on diverse skills and competencies. They involve office and operations managers, administrative staff, truck drivers, and many physical warehouses. The combination of technology, heavy machinery, and labor makes this part of the supply chain quite complex.
Watch this video. It highlights the many different modes of transportation required to move goods around the world. Why do you think logistics factors a large percentage of the cost of a good?
8.4: Domestic and Global Logistics
Modern worldwide supply chains and manufacturing mean a business must operate domestically and globally. A well-functioning domestic and global logistics operation considers customs, infrastructure, shipping arrangements, quality of services, time efficiency, and tracking ability. The reliability of a supply chain to deliver goods on time to a customer requires sound logistical performance.
Read this article. The document examines issues and costs related to domestic and international logistics. Sections 3 and 4 are most applicable here. What are the unique challenges facing domestic and global logistics?
8.5: Green and Reverse Logistics
Today customers consume products in a linear fashion. Meaning when a product is purchased it is used and then disposed of for a new or different model. Green logistics serves to recirculate goods back to a business so they can be remanufactured or refurbished for a new customer base.
Watch this video. The presentation proposes rethinking how products and components can be repurposed by sending them back to a business for remanufacturing. What consumer items in your possession can be repurposed or remanufactured for another use?
8.6: Service Response Logistics
The overall goal of a supply chain is to create a satisfied customer by ensuring the entire process delivers quality goods on time. However, when inefficiencies become apparent in the logistics system, managers must respond so delays are minimized. Despite all the complexities in logistics and transportation, the responsiveness to changes in the system will ensure services are not disrupted.
Watch this video. It focuses on the critical link of supply chain management and the difficulties in quickly and efficiently delivering donor-supplied goods in emergencies. How can IT and automation help decision-makers in a crisis?
Study Guide: Unit 8
We recommend reviewing this Study Guide before taking the Unit 8 Assessment.
Unit 8 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.