The significant steps of designing a logistics network


Logistics network planning is crucial tools that are necessary to examine the trade-offs amidst inventory quantities, the cost of transportation, and the location and number of the warehouses. The main reason for doing this is to obtain the necessary support that would be most profitable to the organization to achieve the desired customer service. It is important to note that the method is scientifically proven as efficient to analyze the required service levels and also cost of production that is needed in the warehouses with the focus being on meeting the objectives of the customer service. However, as a result of the interrelated functions of logistics, it is challenging to determine its actual costs, effectiveness, and efficiency, which also apply to logistics network planning. At the same time, the demands of logistics function are ever changing as a result of the competition pressures, information technology, and also deregulation of the transportation system. The significant steps of designing a logistics network consisting of only one warehouse include data collection, data aggregation, validation and modeling of data, and optimization.

Ways of Designing Logistics Network

Network design in logistics entails determining/establishing the physical infrastructure/facilities and also the pattern of the supply chain. It is here that significant decisions are made and determined within the manufacturing warehouses. For instance, significant decisions regarding sourcing are made at the physical location of the warehouse. The other vital decisions include picking the right number, location, and the right size of the warehouse. It also entails making decisions regarding the best channel of distribution and also the yearly system-wide costs of production, inventory, and transportation. Trade-off problem must also be resolved during the network design. For instance, issues such as how to increase the warehouse yield have to determined and improved and even an increase in costs of transportation and also inventory has to be made. These decisions must be made because it is the only way in which the management can determine if the location of the warehouse is efficient as a channel of distribution in the supply chain.

The first step in designing a logistics network for only one warehouse entails data collection such as a list of products, the demand level for the products on the warehouse, the customers’ location and sources, rate and mode of transportation, cost of fixing and maintaining the warehouse, and shipment size that will be used. The second step entails the aggregation of data, which involves deviation and measuring of the data available, taking into consideration the variables. For instance, when it comes to customer location data, it will be aggregated through the use of a grid network or clustered. The management can decide to gather all customer location or replacing them using a single customer location. At the same time, the product data will also be gathered. The third step entails modeling and validation of data for the main purpose of ensuring that it perfectly reflects the network that has been designed. The best way to achieve this is through the reconstruction of the existing network and this can be achieved by making a comparison between the data collected and the output of the data that already exists. The last step entails optimization whereby two techniques can be used which include exact algorithms and the heuristics.

The Required Data and Information

When it comes to designing a logistic network of a warehouse, those involved in the process must have sufficient information and data. For instance, data about the various costs that they will have to meet such as costs of transportation and products especially the raw materials. On the other hand, part of the important information required includes the location of the site, the possible routes which the vehicles or the logistics team will be using to on-load and off-loading goods from the warehouse. The other essential data that is needed is the processing costs in the warehouse, the order patterns in terms of content, season, and size. At the same time, there is a need for the management to obtain data about the customer service goals. Mileage estimation, the shipment size, and data on the costs of fixing and handling the warehouse are also required.

The Strategy to be Employed in the Network

Different strategies can be employed in the network, and they include location evaluation strategy of the warehouse. For instance, the strategy entails determining the geographic location of the warehouse, the possible size that would be able to meet the intended functions, and the operating costs. The other strategy entails profiling of the warehouse itself because this will be an important factor when it comes to designing the logistics network. Some of the things that must be profiled are the inventory and operational costs.

In conclusion, designing a logistics network for one warehouse requires that the logistics team following particular steps to become successful in achieving the intended mission and purpose. For instance, the most important steps that must be followed include data collection, data aggregation, validation and modeling of data, and optimization. These steps must be followed in a logical manner. On the other hand, there are important strategies that must be employed in the network such as location evaluation strategy and profiling strategy.


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