The Bis Corporation

Logistics Network Configuration

Designing & Managing the Supply Chain Chapter 2 Byung-Hyun Ha [e-mail]

Outline
 Case: Bis Corporation  What is logistics network configuration?  Methodology
 Modeling  Data Aggregation  Validation

 Solution Techniques

Case: the Bis Corporation
 Background
          Produce & distribute soft drinks 2 manufacturing plant 120,000 account (retailers and stores), all over the US 3 existing warehouse (Chicago, Dallas, Sacramento) 20% gross margin $1,000 for each SKU (stock-keeping unit) for all products

 Current distribution strategy (designed 15 years ago)
Produce and store at the manufacturing plant Pick, load, and ship to a warehouse/distribution center Unload and store at the warehouse Pick, load, and deliver to store

Case: the Bis Corporation
 You, consulting company
 Proposal as reengineering the sales and distribution functions  First phase, identifying 10,000 direct delivery account, based on
• • • • • • • • Dock receiving capabilities Storage capability Receiving methodologies Merchandising requirements Order-generation capabilities Delivery time window constraints Current pricing Promotional activity patterns

Case: the Bis Corporation
 Redesign distribution network
 Grouped accounts into 250 zones, products into 5 families  Data collected
• • • • • Demand in 1997 by SKU per product family for each zone Annual production capacity at each manufacturing plant Maximum capacity for each warehouse, new and existing Transportation costs per product family per mile for distributing Setup cost for establishing a warehouse

 Customer service level requirement
 No more than 48 hours in delivery

 Additionally,
 Estimated yearly growth, variable production cost, cost for increasing production capacity, …

Case: the Bis Corporation
 Issues
     How can the Bis Corporation validate the model? Impact of aggregating customers and products Number of