This option is a suitable combination of the previous options that reducesthe cost and improves responsiveness of the value chain. Heretransportation uses a combination of cross-docking, milk runs, and TLand LTL carriers, along with package carriers in some cases. The goal is ouse the appropiate option in each situation. High demand carriersproducts to high-demand retail outlets may be shipped directly, whereaslow-demand products or shipments to low-demand retail outlets areconsolidated to and from the DC. Operating a tailored network requiressignificant investment in information infrastructure to facilitatecoordination.
Pros and cons of different transportation networks
Direct Shipping- No intermediate warehouse.
- Simple to coordinate.
- High inventories (due to largelot size).
- Significant receivingexpense.
Direct shipping with milk runs- Lower transportation costs forsmall lots.
- Lower inventories.
- Increased coordinationcomplexity.All shipments via central DCwith inventory storage- Lower inbound transportationcost through consolidation.- Increased inventory cost.
- Increased handling at DC.
All shipments via central DCwith cross-dock- Very low inventoryrequirements.
- Lower transportation cost
- Increased coordinationcomplexity.