Production and Supply Chain Management Logistics. Paolo Detti Department of Information Engeneering and Mathematics University of Siena

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1 Production and Supply Chain Management Logistics Paolo Detti Department of Information Engeneering and Mathematics University of Siena

2 Production and Supply Chain Management Coordinator: Paolo Detti Part I: Logistics. 6 CFU. Prof. Paolo Detti Part II: Production Planning and Control. 6 CFU. Prof. Marco Pranzo A single score is assigned to the course given by the average of the scores attained in the two parts.

3 Production And Supply Chain Management Part I: Logistics Introduction to the problems and the mathematical models related to internal and external logistics of production and distribution systems. Professor: Paolo Detti Contacts: Receiving hours: by appointment, sending an to

4 Logistics: Contents of the course Structures of the logistic networks. Coordination problems in supply chains. Management problems in material flows: Minimum cost network flows. Structure of the optimal solutions. The network simplex. Internal logistics: Inventory management (EOQ, multi-period planning production and inventory control). External logistics: Plant location, Vehicle routing.

5 Texts and material - Ravindra K. Ahuja, Thomas L. Magnanti, James B. Orlin, Network Flows: Theory, Algorithms, and Applications, Prentice Hall, Slides of Lectures (available during the course). - Scientific papers (available during the course). Suggested text: - Brandimarte, P., Zotteri, G, Introduction to Distribution Logistics, Wiley, 2007.

6 Examination (part I: Logistics) The examination has a written and an oral part. The written part consists of modeling and numerical exercises on logistics problems introduced during the course. The oral part is devoted to verify the knowledge of the theoretical foundations of the models and the solution methods of the addressed logistics problems. At the end of the lessons, before the official date of the first exam, a preliminary written test can be performed with numerical exercises and theoretical questions. A good performance in the test allows to perform an examination without the written part and with a reduced oral exam.

7 Logistics 1991, U.S. Council of Logistics Management (a trade organization based in the United States)

8 CSCMP s Definition of Logistics Management Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements. Supply chain management [ ] In essence, supply chain management integrates supply and demand management within and across companies Council of Supply Chain Management Professionals (CSCMP)

9 Decision problems in logistics and production Decision levels Problem characteristics Strategic Tactic Operational Plant location, logistic network design, resource procurement, Design of new products, Production capacity definition, Aggregate production planning, Inventory management, transport, Seasonal production Capacity planning Production scheduling, Management of phisical and Data flows Deterministic or sthocastic, continuos or discrete, with linear or non-linear constraints, single- or multiobjective, single- or multi- decision makers

10 Logistic Networks Distribution Network (DN) DN is the entire chain of distribution intermediaries from the supplier to the consumer. A DN is characterized by a physical arrangements of facilities, such as warehouses, production plants and transit points, on a possible wide geographical area. Inventory and transportation management strategies contribute to the definition of DN.

11 Stuctures of logistic networks Linear logistic structure Prod.Syst. / Supplier 1 Prod.Syst. / Supplier 2 3 Prod.Syst. / Supplier

12 Stuctures of logistic networks Supply chain structure with assemblies

13 Stuctures of logistic networks Pure distribution network

14 Stuctures of logistic networks A real-world supply chain can be a hybrid of all the presented structures

15 Costs in logistics Costs for building and mantaining facilities Transportation costs for materials and goods Ordering costs for materials and goods Inventory holding costs

16 Costs in logistics Cost Types linear: a linear cost linearly depend on the amount of items (we make or buy), say x, according to a linear function f(x)=cx, where c is the unit cost. nonlinear: a cost is nonlinear when can be expressed by a nonlinear function f(x). E.g., the case of economy of scale: larger is the amount of items (we make or buy) smaller is the per unit cost.

17 Costs in logistics Cost Types fixed: a cost that does not depend on the amount of items (we make or buy). E.g., the fixed ordering costs are costs we pay whenever and whatever amount of goods or materials we order (eventually, within a given range). variable: the cost depend on the amount of items (we make or buy).

18 Design of logistic networks Designing a logistic network requires locating and sizing production plants, warehouses, distribution centers, and retail stores, optimizing transportation flows. In practice, only a subset of the above decision problems must be addressed, since some part of the network could be already given.

19 Design of logistic networks The design of a logistic network is typically considered a strategic problem (long-term horizon). However, recent trends, whereby third parties may offer logistic services (e.g., renting a shelf space instead of building a warehouse), tend to make the problem a bit more tactical and with a shorter-term horizon.