Transportation Network Design Options

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Classical economists neglected the importance of facility, location and overall network design Economists, when originally discussed supply – demand relationships, facility, location and transportation cost differentials were assumed to be non existent or equal among competitors.

 

  • The number, size, geographical relationship of the facilities are used to perform logistics operation directly affect customer service capabilities and cost.
  • Network design – primary responsibility of logistics.
  • Typical logistics facilities are manufacturing plants, warehouses, gross dock operations and retail stores.

 

  • Determining

(i) How many of each facility are required

(ii) Their geographic location

(iii) The work to be performed at each is a significant part of network design.

 

  • In specific situations facility operations may be outsourced to service specialists.
  • No matter who does the actual work, all facilities must be managed as an integral part of a firm’s logistical network.
  • You have a network for internal customers, external customers as well as suppliers. Suppliers should be made to understand what their commitment is and follow it. You have to co-exist with your suppliers and share information with them.
  • Network design must take into account geographical location because a great deal of variation exists between different geographical markets. If you set up your base in a place where your demand is high then after a while the demand shifts and come from another location, then again you are in a dilemma.

 

In a dynamic, competitive environment

  • Product assortment
  • Customer supplies
  • Manufacturing requirements

 

All of the above are constantly changing. However re-location of all logistics facilities at one time is inconceivable. Relocation or redesign of specific facilities is possible.

 

Over a period of time, all facilities should be evaluated, to determine if their location is desirable.

 

Selection of a superior location network can provide the first step.

Your network of facilities forms a structure from which logistical operations are performed. Your network should incorporate transportation and information. Specific work tasks related to network design are processing customer orders, management of inventory, material handling.

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