Logistics Networking
Logistics managers should capable and responsive to needs of redesigning network under their direct supervision. This is required to achieve lower costs operations and enhancing customer service under the circumstance of swiftly changing commercial environment (Vonderembse & White, 2013). In this paper, the design of logistics network which consists of only one warehouse will be described, focusing on the steps required to choose an optimal network design, information and data required to determine the correct course of action and strategy required to accomplish it.A single business might have different options to establish single or multiple warehouses attached to its logistics network. Conceptually, this choice is informed by the need to provide high-quality service level to consumers whereas maintain the reasonable cost control. Gzara et al. (2014) admitted that decisions of a kind are made based on two parameters – proximity of the warehouse to customers and responsiveness of the logistics system overall.
For proximity parameter, location and allocation are two measures which should be evaluated by managers prior to rolling out warehouse establishment. Market analysis combined with understanding consumer location is required to be accomplished prior to proximity characterization, specifically when it takes to use the network design with a single warehouse. This analysis will contribute to understanding transportation costs required for delivering goods stored at the warehouse across the whole distribution network (Inbound Logistics, 2004). The second parameter corresponds to the warehouse capacity and inventory management mechanism, meaning that high network responsiveness assumes that goods are available on demand and could be supplied to the destination point at the agreed time. Successful integration of two concepts, as admitted by Gzara et al. (2014), leads to “better network design and potentially better inventory policies, enabling firms to offer similar or improved responsiveness at lower cost” (p. 53).In addition to the responsiveness and proximity, the return on investment (ROI) is another critical parameter which should be considered by logistics managers in warehousing operations. Considering the profit maximization as one of driving forces in logistics network design, ROI represents an important value to analyze whether cost of investment is reasonable in comparison to the profit of investment. An example provided by Menezes et al. (2015 specifies that ROI threshold could be translated into a minimum demand per warehouse, which is then used for an estimate on the number of partnering agreements and contract to a consequent roll-out of the network capacity.
Cost investments by themselves, however, are a subject for financial analysis, sales data, technology investments and labor costs which are differentiated between industries depending on their market strategies, sizes and maturity. Logistics managers, though, are required to build on objective estimation of the aforementioned determinants to come out with a recommendation to management on tangible business benefits which could be achieved in a given network design scenario.To achieve this, several critical data sources should be prior consulted. Labor costs, for instance, accumulate all monetary and non-monetary spending which is paid …
