Introduction:

In recent times, global market competition has increased several folds where the upgrades on

each products or the introduction of new products in market are happening within a short

span of time. The need for the reduction of various costs associated with the production and

operations and delivery of products to the target customers has become critical. Nowadays in

the fast growing global economy the companies are more concentrating on the supply of

goods from factories to customers with minimum cost and within the delivery deadline.

Moreover the effective and efficient use of resources to deliver products at the correct price

and at the right time has become important to the success of the organization. The

organization must take utmost care of each and every network link in supply chain and

overcome the barriers like lack of transportation infrastructure, retrieval of inadequate

information from the global market and not correctly formulated regulations on

transportation and not clearly understanding the impacts of competitive market.

Affecting design of firm’s logistics/ supply chain network:

As firms constantly search for new ways to reduce cost and improve services to the

customers, the point of where to place logistics and manufacturing facilities has also become

critical. All businesses function in a very dynamic environment in which change is constant.

 Change in the requirement of Customer Service.

 Switching Locations of Customer or Supply Markets

  Modification in Corporate Ownership

 Cost Pressures

 Competitive Capabilities

 Alteration in Corporate Organization.

Location Determinants:

The major location determinants vary among the individual organization within specific

industries. For instance, the labor intensive industries such as the household appliances,

furniture, and textiles put forth significant stress on the cost of labor and on the availability in

both the local and the regional market areas. The manufacturers of high technical products

such as the peripherals and computers, scientific instrument, engineering and semiconductors

put forth a great significance on providing the availability of qualified workforce with high

technical and quality skills near to customer markets.

The major determinants of location are Regional/ national and the site-specific.

The major location determinants for regional or site specific are:

Regional/ National Determinants:

 Labor climate

 Transportation availability

o Infrastructure

o Services

o Proximity to customers and markets

 Life Quality
  Incentives for taxes and industrial development

 Cost of land and utilities

 Preference by company

Site- Specific Determinants:

 Access to transportation such as air, trunk, water and rail

 Outside/inside metropolitan area

 Workforce availability

 Taxes and cost of land and utilities

Role of Logistics Variables:

 Facility role

 Facility location

 Capacity allocation

 Market and supply allocation

The trends to selection of plant include:

1. Strategically positioning the inventories, with rapid movement of items placed at

“market-location” logistics ability, and passive movement of items at regional or

national sites.

2. Direct plant-to-customer shipments which can lower or reject the necessity for

distribution facilities and company-owned supply.

3. Usage of “cross-docking” facilities and drastic growing needs.

Principle types of modeling approach:

 Optimization

Selecting the “best” fit solution from different feasible solutions based on precise

mathematical procedures available.

Strengths:

One approach is Linear Programming (LP).

 Very appropriate for linking facilities available in a network.

 Describes various optimum distribution patterns.

Limitations:

 Sensitivity issues mainly in the services provided and the cost associated

 Issues related to Network rationalization such as the assignment of the customers

present to the distribution centers (DCs).

 Heuristics

Heuristics is based upon implementing a model which can produce a good approximation to

the lowest cost location in a very critical decision problem.

Strengths:

 Can considerable decrease a problem to the lowest manageable size.

 The heuristic approach can be as matured as mathematical optimization technique.

 Limitations:

 Never consider the correct direction of movement.

 Simulations

Simulation is based on implementing a model of actual system and manipulating experiments

with the model.

Strengths:

 In theory of location, a firm can validate the result of several locations on profitability

and costs.

 Simulations are eitherdynamic or static based on whether they combine data from

each run into the subsequent run.

Limitations:

 Does not produce an optimum result but judge through the iterative process.

The Grid Technique

The Grid Technique attempts to determine a static facility such that the position represents

the lowest cost center for transferring the inbound materials and outbound product within the

same geographic grid. This grid technique is the simplest form which works when all the

transportation rates are the similar.

Advantages

 The grid technique’s strengths are in its easiness, simplicity and its functionality to

serve as starting point for determination of location.

 The grid technique also facilitates as a starting point for preparing a location decision.

Limitations

 It is a fixed approach, and the recommendation is optimal for only single point in

time.

 The grid technique considers linear transportation rates, whereas real transportation

rates varysubstantially with distance but considerably less than proportionally.

 The grid technique does not take into consideration the topographic conditions.

Conclusion:

Supply chain management is an important pillar for any organization. Effective supply chain

helps in curtailing cost by maintain the service levels of customer satisfaction, quality and

other factors like on-time delivery. A typical supply chain consists of Supplier,

Manufacturer, Distributor, Retailer and customer. A supply chain is concerned with the

managed control of the flow of information, raw materials, and the finances in the chain. The

task is to design, develop, plan and execute a certain chain of activities at different level of

services to the profitability. Integration of services at different stages is the main and core

theme of supply chain. It would bring synergies by integrating different departments and

business functions in order to create a value chain. The key logistical drivers of supply chain
are Inventory, Facility and transportation and the cross functional drivers are Pricing,

communication and information sourcing.

References:

1. John Joseph Coyle, C. John Langley, Brian J. Gibson, Robert A. Novack, Edward J.

Bardi, “Supply Chain Management: A Logistics Perspective, 8th edition”.

2. Arntzen, B. C., G. G. Brown, T. P. Harrison, and L. Trafton. Global Supply Chain

Management at Digital Equipment Corporation. Interfaces, Jan.-Feb., 1995.