1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 31.
1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 15.
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Transcript of 1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 15.
1-1
Logistics ManagementLSM 730
Dr. Khurrum S. Mughal
Lecture 15
Cost-Profit-Volume Analysis
Cost-Profit-Volume Analysis
Cost-Profit-Volume Analysis
Since Bowling Green has the lowest Total Cost at the volume being produced, it will be chosen as the site of new facility
13-5CR (2004) Prentice Hall, Inc.
· A more complex problem that most firms have. · It involves trading off the following costs:
- Transportation inbound to and outbound from the facilities - Storage and handling costs- Inventory carrying costs- Production/purchase costs- Facility fixed costs
· Subject to:- Customer service constraints- Facility capacity restrictions
· Mathematical methods are popular for this type of problemthat:
- Search for the best combination of facilities to minimizecosts
- Do so within a reasonable computational time- Do not require enormous amounts of data for the analysis
Multiple Location Methods
13-6
Location Cost Trade-Offs(Heuristic)
Number of warehouses
Cos
t
Production/purchaseand order processing
Inventory carryingand warehousing
Warehousefixed
Inbound andoutboundtransportation
Total cost
00
CR (2004) Prentice Hall, Inc.
13-7CR (2004) Prentice Hall, Inc.
· Location of truck maintenance terminals
· Location of public facilities such as offices, and police and fire stations
· Location of medical facilities
· Location of most any facility where transportation cost (rather than inventory carrying cost and
facility fixed cost) is the driving factor in location
· As a suggestor of sites for further evaluation
Examples of Practical COG Model Use
13-8CR (2004) Prentice Hall, Inc.
· A method used commercially- Has good problem scope- Can be implemented on a PC- Running times may be long and memory requirements substantial- Handles fixed costs well- Nonlinear inventory costs are not well
handled
Mixed Integer Programming
6-9
Transport Fundamentals
CR (2004) Prentice Hall, Inc.
When the Chinese write the word “crisis,” they do so in two characters—one meaning danger, the other opportunity.
6-10
Transport Fundamentals in Planning Triangle
PL
AN
NIN
G
OR
GA
NIZ
ING
CO
NT
RO
LL
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Transport Strategy• Transport fundamentals• Transport decisions
Customer service goals
• The product• Logistics service• Ord. proc. & info. sys.
Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply
scheduling decisions• Storage fundamentals• Storage decisions
Location Strategy• Location decisions• The network planning process
PL
AN
NIN
G
OR
GA
NIZ
ING
CO
NT
RO
LL
ING
Transport Strategy• Transport fundamentals• Transport decisions
Customer service goals
• The product• Logistics service• Ord. proc. & info. sys.
Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply
scheduling decisions• Storage fundamentals• Storage decisions
Location Strategy• Location decisions• The network planning process
CR (2004) Prentice Hall, Inc.
Importance of Effective Transportation System
• Comparison of developing Vs developed countries
• Increased Competition and access– Perishable Items
• Economies of Scale– Auto Parts
• Reduced Prices– Oil and Middle East
13-11CR (2004) Prentice Hall, Inc.
6-12
Transport System Defined
CR (2004) Prentice Hall, Inc.
· Performance - Average transit time - Transit time variability - Loss and damage - Other factors including availability, capability,
frequency of movement, and various less tangible services
· Cost - Line haul - Terminal/local - Accessorial or special charges