Direct shipment network

Transportation is flow of goods between supply chain stakeholders. The flow can be between and through any echelon of the supply chain from warehouse to factory, from factory to customer etc. The transportation problem can be viewed as a network flow problem where the nodes represent stakeholders, edges represent the cost and amount of transportation between them basically. Consider the network in Fig. 4.1. 5 represents the amount of supply at node n. D is the amount of demand at node m. This network is a direct shipment network. 

With the direct shipment network to a single destination option, the buyer structures the transportation network so that all shipments come directly from each supplier to each buyer location, as shown in Figure 14-2. With a direct shipment network, the routing of each shipment is specified. 

The multiechelon hierarchical network configuration, which considers the options of both direct shipment from manufacturing plants to customers and indirect shipment through either master distribution centers or regional warehouses, may be an intriguing subject for further studies. 

The NP-GP model (with weights from AHP) selects supplier K3, plants Ml and M2, distribution center Nl, and transportation link Ul. Direct shipment from plant to customers is not allowed. Finished products are distributed to customers via DC Nl. For this network design, the unfulfilled demand and delivery time to customers are achieved. However, profit, the facility disruption risk, and the transportation disruption risk goals are not achieved, differing by 2.36%, 30.35%, and 27.4% from the target values, respectively. 

The major advantage of a direct shipment transportation network is the elimination of intermediate warehouses and its simplicity of operation and coordination. The shipment decision is completely local, and the decision made for one shipment does not influence others. The transportation time from supplier to buyer location is short because each shipment goes direct. 

Identify Delivery Requirements One of the key data reqrrirements in analyzing a distribution network is that of the delivery reqrrirements (time order placement to receipt of the shipment). If the reqrrirements are not identifiable, a customer satisfaction gap analysis must be undertaken. The gap analysis is a series of questions directed at internal staff and customers. The purpose is to identify discrepancies between customer perception of satisfaction and satisfaction requirements. At some point, the sales sharply decline because competition exceeds both your delivery and yom cost (assuming equal product quiity). The key is to find the best customer satisfaction that maximizes profits. 

As mentioned before, management wanted to decrease total logistics costs by reducing warehouses. A consolidated network would reduce inventory levels and other associated costs. Transportation costs could increase since it was estimated that there would be a trade-off in this case between less critical next-day tiir shipments and stock transfer shipments but more direct and smaller customer shipments. 

There are many dangers in ignoring SCM as a discipline. The most serious is the loss of prohtable customers. The hypothetical supply chain in Figure 2.1 illustrates the physical movement of products through a traditional network. The flow begins with several suppliers. They send raw material to a factory. Other material that requires no conversion or supports the aftermarket as spare parts goes directly to warehouses that ship to customers. The factory outbound shipments supply a distribution center and regional warehouses. The distribution center and warehouses, in turn, support customer demand. 

Equations 3.9 and 3.10 show the inbound and outbound shipment costs, respectively, that are included in the objective function, based on the transportation costs determined for each arc of the network. The outbound shipments are associated with the transportation of semi-finished and finished products directly to customers, regardless of the origin facility type, and the inbound shipments correspond to the inter-plant transactions among production and distribution facilities. 

A manufacturer storage network is likely to have difficulty handling returns, hurting customer satisfaction. The handling of returns is more expensive under drop-shipping because each order may involve shipments from more than one manufacturer. Returns can be handled in two ways. One is for the customer to return the product directly to the manufacturer. The second approach is for the retailer to set up a separate facility (across aU manufacturers) to handle returns. The first approach incurs high transportation and coordination costs, whereas the second approach requires investment in a facility to handle retems. 

Batch size shipped from each supplier to each store = 40,000 units Number of shipments/year from each supplier to each store = 960,000/40,000 = 24 Annual trucking cost for direct network = 24 X 1,100 X 4 X 8 = 844,800 Average inventory at each store for each product = 40,000/2 = 20,000 units Annual inventory cost for direct network = 20,000 X 0.2 X 4 X 8 = 128,000 Total annual cost of direct network = 844,800 + 128,000 = 972,800... 

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