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

8.4.2 Pipeline Planning across Several Independent Locations

Intended learning outcomes: Describe a typical production pipeline showing its production locations.

Globalization of the markets has meant that firms produce at different locations around the world. There are different reasons for this: For example, trade barriers may force companies to establish facilities in countries with important markets (see Section 2.1.1). The buying up of foreign companies is an increasingly frequent phenomenon. Validation require­ments of the FDA encourage the centralization of certain production processes at a single location.

All these conditions result, however, in major disadvantages for efficient logistics: Intermediate products and active substances have to be moved from one location to another and from one country to another. Figure shows a practical example of a production structure called, in technical jargon, a production pipeline. See also [HüTr98].

Fig.        A typical production pipeline.

The different process stages in this pipeline involve different volumes and process units. Some stages produce large volumes in dedicated single-purpose facilities. Others result in small volumes and take place in multipurpose facilities. Figure shows the same pipeline with the various production locations highlighted in different shades of gray.

Fig.        A typical production pipeline showing its production locations.

This distributed production system can be regarded as a customer-supplier relationship among the individual production locations. In the example, the pipeline even links production sites in different countries. Each of these locations has its own planning process for its logistics systems, which makes it more difficult to schedule the entire pipeline efficiently, since each location aims to optimize different aspects when creating its long-term plan. Products that simply pass through the location (in the pipeline) are not taken into account in this optimization, with the result that, for pipeline products, large stocks build up in the intermediate stores, and long lead times are required.

Continuation in next subsection (8.4.2b).

Course section 8.4: Subsections and their intended learning outcomes