1 chapter 12management.unk.edu/mgt314/chapter_12_operations_management_2… · chapter 12...
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Chapter 12
Logistics, Logistics, and Distribution
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2Below is a Photo of An Accident Near
New Orleans Involving Two Trucks And
A Smart Car at less than 10 MPH.
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Learning Objectives
Know what a third-party logistics provider is
Understand the major issues that need to be considered when locating a plant or warehouse facility
Be able to use the transportation method of linear programming to analyze location problems
Know how a factor rating system can be used to narrow potential location sites
Understand the centroid method to locating entities such as cell phone communication towers
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What is Logistics?
The movement of goods through the supply chain
“the art and science of obtaining, producing, and
distributing material and product in the proper place
and in proper quantities”
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Decisions Related to Logistics
How to best transport goods
Modes of transportation
Truck, rail, ship, pipelines
Warehouses
Consolidation
Cross Docking
Hub-and-Spoke systems
Facility Location
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Issues in Facility Location
Proximity to Customers
Business Climate
Total Costs
Infrastructure
Quality of Labor
Suppliers
Other Facilities
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Issues in Facility Location
Free Trade Zones
Political Risk
Government Barriers
Trading Blocs
Environmental Regulation
Host Community
Competitive Advantage
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Plant Location Methodology: Factor Rating Method Example
Two refineries sites (A and B) are assigned the following range of point
values and respective points, where the more points the better for the
site location.
Total pts. 418 544
Best Site is B
Major factors for site location Pt. Range Site A Site BFuels in region 0 to 330 123 156
Power availability and reliability 0 to 200 150 100
Labor climate 0 to 100 54 63
Living conditions 0 to 100 24 96
Transportation 0 to 50 45 50
Water supply Climate 0 to 10 4 5
Climate 0 to 50 8 4
Supplies 0 to 60 5 50
Tax policies and laws 0 to 20 5 20
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Plant Location Methodology:
Transportation Method of Linear Programming
Transportation method of linear programming seeks to minimize
costs of shipping n units to m destinations or its seeks to maximize
profit of shipping n units to m destinations
See the Data Disk in the back of the book. Under Excel templates,
look in chapter 12 for the U.S. Pharmaceutical Company example.
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Plant Location Methodology: Centroid Method
The centroid method is used for locating single facilities
that considers existing facilities, the distances between
them, and the volumes of goods to be shipped between
them
This methodology involves formulas used to compute the
coordinates of the two-dimensional point that meets the
distance and volume criteria stated above
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Plant Location Methodology: Centroid Method Formulas
Where:
Cx = X coordinate of centroid
Cy = X coordinate of centroid
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith location
i
iix
xV
V d = C
i
iiy
yV
V d = C
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Centroid Method
500
200
1373
777
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Centroid Location
Latitude Longitude Sales
Denver 39.739 104.985 500
Kearney 40.701 99.081 200
Minneapolis 44.983 93.267 1373
Dallas 32.776 96.797 777
Warehouse 40.434 96.693 2850
40.43N 96.69W
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