Management

This week we discussed and reviewed network planning. Describe how you would design a logistics network consisting of only one warehouse. In the discussion, include the steps you need to take in order to design the optimal network. What information and data is needed to make this determination? What strategy will be employed in this network?

· 750 – 1,000 words (3 – 4 pages) written essay
· APA format required (including title page, reference page – no abstract required)
· 5 – 7 academic resources for 300/400 level courses
· Content of paper should address the concepts covered this week utilizing personal experience as well as research

ANSWER

Designing a Logistics Network Consisting of only One Warehouse

Designing a logistics network is considered an effective way of material handling. Considerably, designing an effective logistics network entails warehouse and transport capacity (Le et al., 2013). The logistical managers should ensure all the consumers’ requirements and needs that spread through the logistical distribution network. Therefore, they are required to develop a more effective distribution network system that can operate with the lowest possible and deliver the best services and products to consumers. Designing a logistics network with one warehouse may enable a business to meet the above objectives. This paper will discuss how a business can design a logistics network that consists of one warehouse.

Few things need to be considered while planning for a logistics network with one warehouse. These include transport costs, handling costs, fixed costs, and other storage costs that are important elements in the procedure. Handling costs entails the utility and labor costs, while the fixed costs are determined by the volume of material flowing in the warehouse. The storage costs include inventory holding costs. Understanding these three factors is essential while designing a centralized logistics network.

Steps in Designing an Optimal Logistics Network

Data collection

The first step in designing the logistics network is data collection. To design a logistics network, the logistics department must perform a complete analysis of the organization’s operating system. This will be completed by collecting data that involves the flow and layout of the warehousing facility, the location of the current retailers, consumers, distribution centers, and the warehousing facility (Tan and Steve, 2011). The company will need to collect data linked to the transportation rates, the annual demand of the products in various locations, the warehousing, inventory cost, and fixed costs. The consumer information required while establishing the warehouse includes the shipment size and customer service objectives and needs. Therefore, the analysis will enable the selection of a facility and indicate the expenses incurred.

Data Aggregation

Data aggregation entails information considerations to similar group data to speed and simplify analysis. The data collected in the first step may be overwhelming and may lead to higher costs and obtaining information. Data aggregation will streamline data and accuracy of forecast demand. For instance, this may include classifying customers together as per their services or frequency of delivery.

Data Validation and Model

Once the data has been collected and classified, there is a need to ensure that the model and data accurately reflect the network design needs. Therefore, this entails reconstructing the current network configuration and using the collected data and model to compare the new model’s output.

Optimization

Optimization entails determining the location, number, and size of the warehouse, which is optimal for the business to consider the wide range of constraints within the supply chain. This ensures that the centralized logistics network lowers the inventory carrying, transportation, and warehousing cost while fulfilling the customer requirements. There are two mathematical optimization techniques employed the heuristic and exact algorithms techniques. These will allow the organization to achieve a high service level with related inventory volume and service levels.

Information and data required to make this determination

Logistics network design and planning involves building on location strategies, inventory, and transport while focusing on customer service goals and achieving the best at a low cost. While designing an optimal logistics network with one warehouse, the different sets of data are essential for strategic decisions such as determining the suitable distribution channels, optimal location, number or size of the warehouse, and effective reconfiguration of the logistics network (Ribas, Lusa, and Corominas, 2019). Therefore, logistics network design requires data to determine the most design to meet the stated objectives. The specific information includes:

• The of the current location of warehouses, the retail stores, suppliers, and manufacturing facilities.
• The select location for the new warehouse.
• Information about product sizes and volumes.
• Annual demand, the past, and upcoming estimates of ordering frequencies.
• The transportation rates within the current means.
• The transportation distance from the warehouse location to the retail stores.
• The storage, handling, and fixed costs associated with warehousing in terms of function and capacity.

The strategy employed for the Network

Designing a successful logistics network is important for any business. The logistics manager needs to consider designing or redesigning distribution networks to offer the best customer service and operate at a low cost. While designing a logistics network with only one warehouse, a large portion of the Network should be dedicated to consumer services and goals. A well-configured centralized warehouse will effectively serve the market. A centralized warehouse lowers the system-wide costs such as purchasing or production costs, facility costs, inventory carrying, and transportation costs. Since other warehouses’ costs have been broken down to one, there is a need to consider where to place the newer warehouse. While selecting the location, there is a need to consider geographical factors such as natural resources, infrastructure situations, and consumer interests.

The logistics network will employ a centralized strategy. The centralized strategy aims to improve logistics performance and lower the costs based on the facility location and inventory strategy. For instance, the logistics network’s decisions will focus on minimizing transportation costs, facility costs, and inventory carrying costs. Therefore, the cost strategy will maintain a low cost of goods and services, thus developing a competitive advantage and achieving a high sales level. Centralized warehousing will focus on cost reduction to enable the retailers to set up better pricing strategies due to inventory management’s stable nature (Ding and Kaminsky, 2018).

The centralized strategy will focus on evaluating the best solution for the consumers and the retailers. For instance, this will simplify inventory management through coordinated efforts since the inventory system is concentrated in one place. The warehouse’s capacity, the setup cost, and transportation costs will be evaluated during the establishment of the centralized warehouse. Focusing on a centralized strategy in the logistics network means that the operations are limited to a central location.

References

Ding, S., & Kaminsky, P. (2018). Centralized and Decentralized Warehouse Logistics Collaboration, Extended Version. Available at SSRN 3298228.

Lee, H., Zhang, T., Boile, M., Theofanis, S., & Choo, S. (2013). Designing an integrated logistics network in a supply chain system. KSCE Journal of Civil Engineering, 17(4), 806-814.

Ribas, I., Lusa, A., & Corominas, A. (2019). A framework for designing a supply chain distribution network. International Journal of Production Research, 57(7), 2104-2116.

Tan, M. & Steve, S. (2011). Integrate Network Design with Warehouse Design. Available at: https://www.mhlnews.com/archive/article/22045087/integrate-network-design-with-warehouse-design