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Supply Chai Management

Supply Chai Management

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Published by Pooja Shah

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Published by: Pooja Shah on Jul 25, 2013
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In this case, the buyer structures his transportation network so that allshipments come directly from each supplier to each buyer location.This policy is justified if demand at buyer locations is large enough thatoptimal replenishment lot sizes are close to a TL (big shipments) fromeach supplier to each location.
Direct shipping with milk runs
 In this case, a supplier delivers directly to multiple buyer locations on atruck or a truck picks up deliveries destined for the same buyer locationfrom many suppliers. This allows reduction in cost by eliminating theneed for direct small shipments using LTL shipments. When deciding thisoption, a supply chain manager has to decide on the routing of each milkrun.
All shipments via central DC
 Under this option, suppliers do not send shipments directly to buyerlocations. The buyer divides locations by geographic region and a DC is
 
built for each region. Suppliers send their shipments to the DC and theDC then forwards appropiate shipments to each buyer location.A cross dock is a transhipment facility at which trucks arrive with goodsthat must be sorted, consolidated with other products, and loaded ontooutbound trucks bound for a retailer.Cross-docking is appropiate for products with large, predictable demandsand requires that DCs be set up such that economies of scale intransportation are achieved on both the inbound and outbound sides.
Shipping via DC using milk runs
 Milk runs can be used from a DC if lot sizes to be delivered to each buyerlocation are small. Milk runs reduce outbound transportation costs byconsolidating small shipments. The use of cross-docking with milk runsrequires a significant degree of coordination and suitable routing andscheduling of milk runs.
 
 
Tailored network
 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
 
Network Structure
 
Pros
 
Cons
 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.

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