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Network design - Enterprise facility network

Q: What's the essence of logistical strategy?

The essence of logistical strategy is achieving least total-cost operations while maintaining flexibility . Flexibility is the key to provide high-level basic customer service and also maintaining operating capacity to meet key users expectations. For flexibility, an Enterprise needs to achieve a high level of logistical process integration, across a network of warehouse facilities (within firm) and across the supply chain (beyond firm).

4 important questions on Network design - Enterprise facility network

What's the essence of logistical strategy?

The essence of logistical strategy is achieving least total-cost operations while maintaining flexibility. Flexibility is the key to provide high-level basic customer service and also maintaining operating capacity to meet key users expectations. For flexibility, an Enterprise needs to achieve a high level of logistical process integration, across a network of warehouse facilities (within firm) and across the supply chain (beyond firm).

Why is the availability of economical transportation (rail, water, air, highway and pipeline) important for a company?

The availability of economical transportation creates the opportunity to establish a competitively superior warehouse network to serve customers. The importance of facility location analysis has been recognized since Von Thunen wrote 'the isolated state'.

Alfred Weber generalized his theory to an Industrial society. Describe his theory.

He developed a scheme to classify major materials as either:
- ubiquitous: available at all locations
- localized: available only at selected areas

He developed a material index: a ratio of the localized raw material to the total weight of the finished product. When the manufacturing process is weight-gaining, facilities would be located at point of consumption (e.g. beverages). When the manufacturing proces is weight-losing, facilities would be located near the raw material deposit (electronic components). The nature of the product influences the network design.

Explain the local presence paradigm

Local presence paradigm: A long-standing belief is that a firm must have facilities in local markets to deliver as intended. Customers felt that unless a supplier held inventory within the local market area, it would be difficult to provide consistent delivery.

Maintaining inventories in local markets (during 1960's) turned out to be costly and risky. Information Technology Developments have reduced time required to identify and communicate customer requirements so next-day delivery from a central warehouse is made possible.