Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

3.1.6 Interrelation Between and Integration of the Portfolios of the Partial Networks

Intended learning outcomes: Describe the interrelation between and integration of the production, transport, distribution and retail network.

An adequate design of the value-added network is decisive for customer satis­faction, given a sufficient quality of the product or service. Figure, referring to the structure in Fig., shows how the production, distribution, retail (if needed), and various transport networks have to fit together in order to achieve the goal of a satisfied customer.

Figure    Interrelation between and integration of the production, transport, distribution and retail network

There are dependencies between the design options of the different portfolios that should be considered for their integration. Here are some examples:

As the customer tolerance time is a characteristic for the design of both transport networks (see Figure and production, distribution, and service networks (see Figure, Figure, and Figure, there are naturally close combinations when it comes to integrating the networks. This is the case when the customer tolerance time is low in both portfolios, or high in both portfolios. In the case of the distribution network (Figure, this means:

  • Decentralized distribution is the preferred combination for direct transport, with the aim of reducing delivery lead time to a minimum; and
  • Centralized distribution is the preferred combination with indirect transport — i.e., via transshipment centers — since a short delivery lead time is not the priority and it is prefe­rable to ensure that the means of transport is operating at better capacity utilization levels across the route to achieve lower transportation costs.

However, the other combinations are nevertheless possible:

  • If the combination of centralized distribution and direct transport is advantage­ous, demand is highly varied and/or volatile. The reduced storage costs obtained from centralized warehousing thereby outweigh the disadvantage of a lengthier delivery lead time. If value density of the product is high, it is possible at any rate to select a means of transport that is fast enough.
  • If the combination of decentralized distribution with indirect transport is ad­vantageous, the ability to reduce transportation costs or increase simplicity of a merged transport (the aforementioned “in-transit merge” where the customer receives just one complete delivery) outweigh the disadvantages of a longer delivery lead time from the customer’s perspective.

Course section 3.1: Subsections and their intended learning outcomes

  • 3.1.2b Design Options for Global Distribution Networks

    Intended learning outcomes: Explain design options for global distribution networks. Describe some company cases.

  • 3.1.3 Network Structure for Decentralized Distribution

    Intended learning outcomes: Disclose the distribution network structure and describe decision variables in its design. Present features such as available time for shopping, and simultaneously, capacity of an available means of transport of the customer, as well as the required geographical catchment area.

  • 3.1.3b Design Options for Retail Networks

    Intended learning outcomes: For decentralized distribution, explain the portfolio for designing retail networks retail networks.

  • 3.1.4 Centralized Service Versus Decentralized Service

    Intended learning outcomes: Differentiate between centralized service and decentralized service. Present features such as the mobility cost ratio of the service, the degree of customer involvement in bringing and picking up the service object, as well as the need for repeated transfer of the service object.