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Why is it important to develop supporting logic to guide the logistical planning process

Logistics Planning Process Logistics Planning Process To match the changing environment in the logistics due to the changes in the markets, competitors, suppliers and technology, there is a need for a systematic planning and design methodology to formally include the relevant consideration and effectively evaluate the alternatives.

The Concept of Logistics Planning The logistics relational and operating environment is constantly changing. However there is a general process applicable to most logistics design and analysis situations. The following discussion describes each phase and illustrates the types of issues encountered.

A thorough and well-documented problem definition and plan are essential to all that follows. Feasibility Assessment The process of evaluating the need and desirability for change is referred to as feasibility assessment and it includes the activities of situational analysis, supporting logic development, and cost benefit estimation. The objective of doing so is to understand the environment, process, and performance characteristics of the current system and to determine future estimation.

The purpose of the situational analysis is to provide senior management with the best possible understanding of the strengths and weaknesses of the existing logistics capabilities for both current and future environment.

The situational analysis is the performance of measures and characteristics that describe the current logistics environment through: Internal review is necessary to develop a clear understanding of existing logistics by covering the overall logistics process as well as each logistics function with respect to its stated objectives and its capabilities to meet those objectives.

It profiles historical performance, data availability, strategies, operation and tactical policies and practices. All major resources such as workforce, equipment, facilities, relationships and information are examined.

The comprehensive review attempts to identify the opportunities that might motivate or justify logistics system redesign or refinement. Assessment must consider the process physical and information flows through the value — added chaindecisions logic and criteria currently used for value chain managementand key measures for each major logistics activity.

Phase 3 – Recommendations & Implementations

The assessment focuses on the external relationships with the suppliers, customers wholesalers and retailers and consumers final consumer. It focuses on the application and capabilities of the key logistics technologies, including transportation, storage, material handling, packaging, and information processing.

The objective of the assessment is to identify advancements that can provide effective trade — offs with other logistics resources such as transportation and inventory. The second feasibility assessment task is development of a supporting logic to integrate the findings of the internal review, external assessment and technology study. Supporting logic development builds on this comprehensive review in three ways First — supporting logic development forces a critical review of the potential opportunities for logistics improvements and a determination of whether additional investigation is justified, using logistics principles such as tapering principle, principle of inventory aggregation.

The resulting benefits or costs should be clearly identified. The deliverables of this evaluation process include classification of planning and evaluation issues prioritized into primary and secondary categories across short and long range planning horizons. Third — the process of developing supporting logic should include clear statements of potential redesign alternatives such as: Definition of current procedures and systems Identification of the most likely system design alternatives based on leading industry and competitive practices Suggestion of innovative approaches based on new theory and technologies The alternatives along with being practical should also challenge the existing practices.

A recommended procedure requires the manager responsible for evaluating the logistical strategy to develop a logical strategy to develop a logical statement and justification of potential benefits.

Using customer service concept and logistics integration logic and methodology, the manager should commit to paper the most attractive strategy alternatives.

The final feasibility assessment is a preplanning estimate of the potential benefits of performing a logistics analysis and implementing the recommendation. Benefits should be categorized in terms of: Service improvements — It includes results that enhance availability, quality or capability. Improved sciences increase loyalty of existing customers and may also attract business. First, they may occur as a result of a one time reduction in financial or managerial resources required to operate the existing system for e.

Reduction in capital deployed for inventory and other distribution related assets Second, cost reductions may be found in the form of out — of — pocket or variable expenses. Cost prevention — Cost prevention reduces involvement in programs and operations experiencing cost increases.

  • Transportation rates for movement between potential and existing distribution facilities and customers Inventory;
  • Analysis assumption defines the constraints and limitations that must be included to fit the problem to the analysis technique.

Any cost prevention justification is based on an estimate of future conditions and therefore is vulnerable to some error for e. In the final analysis, the decision to undertake in — depth planning will depend on how convincing the supporting logic is, how believable estimated benefits are, and whether estimated benefits offer sufficient return on investment to justify organizational and operational change. These potential benefits must be balances against the out 0- of pocket cost required to complete the process.

Logistics system complexity requires that any effort to identify and evaluate strategic or tactical alternatives must be planned thoroughly to provide a sound basis for change. Project planning involves five specific items: The statement of objectives documents the cost and service expectations for the logistics systems revisions.

The objective fine market or industry segments, the time frame for revisions, and specific service levels. Total system cost can then be determined.

The second project planning consideration concerns design constraints. But constraints can affect the overall planning process for e.

The purpose of developing a statement of constraints is to have a well-defined starting point and overall perspective for the planning effort. Management must stipulate guidelines for each category as a prerequisite to formulation of a plan. It is important that the standards adequately reflect total system performance rather than a limited, sub optimal focus on logistics functions. Once formulated, such standards must be held constant throughout system development. An important measurement requirement is to quantify a list of assumptions that underlie or provide the logic supporting the standards.

Measurement standards should include definitions of how cost components such as transportation are calculated and also relevant customer service measures and method of calculation must also be included. Analysis techniques range from simple manual methods to elaborate computerized decision support tools. Once the project objectives and constraints are defined, planning must identify alternative solution techniques and select the best approach.

Selection an analysis technique must consider the information necessary to evaluate the project issues and options Project work plan: On the basis of feasibility assessment, objectives, constraints and analysis technique, a project work plan must be determined and the resources and time required for completion identified.

The alternatives and opportunities specified during the feasibility assessment provide the basis for determining the scope of the study. In turn the scope determines the completion time. One of the most common errors in strategic planning is to under estimate the time required to complete a specific assignment.

Overruns require financial expenditures and reduce project credibility.

Logistics Planning Process

There are a number of PC — based software packages available to structure projects, guide resource allocation, and measure progress.

This includes activities to 1 define assumptions and collect data, and 2 analyze alternatives 1 Assumptions And Data Collection: This activity builds on the feasibility assessment and project plan to develop detailed planning assumptions and identify data collection requirements. Specific tasks are as follows a Define analysis approach and techniques: The most common techniques are analytical, simulation and optimization The analytical approach uses standard numerical methods, such as those available through spreadsheets, to evaluate each logistics alternative.

Simulation is widely used, particularly when significant uncertainty is involved. The testing environment can be physical a model material handling system that physically illustrates product flow in a scaled down environment or numerical such as a computer model of a material handling environment that illustrates product flow on a computer screen current software makes simulation one of the most cost effective approaches foe dynamically evaluating logistics alternatives Optimization uses linear or mathematical programming to evaluate alternatives and select the best one.

Assumptions definition and review build on the situation analysis, project objectives, constraints and measurements standards. For planning purposes, the assumption defines the key operating characteristics, variables and economies of current and alternative systems.

  1. This broadly includes four phases.
  2. But it must ultimately be refined to provide individual assignment responsibility and accountability. Implementation must include adequate controls to ensure that performance occurs on schedule and that acceptance criteria are carefully monitored.
  3. The situational analysis is the performance of measures and characteristics that describe the current logistics environment through. They are generally outside the ability of the firm to change.
  4. They are generally outside the ability of the firm to change.
  5. The implementation plan has to be defined in terms of the individual events, their sequence and their dependencies.

Assumptions generally fall into three classes: Business assumptions — They define the characteristics of the general environment including relevant market, consumer, and product trends and competitive actions, within which an alternative logistics plan must operate.

They are generally outside the ability of the firm to change. Typical assumptions include a definition of alternative distribution facilities, transport modes, logistics processes and fixed and variable costs. Analysis assumption defines the constraints and limitations that must be included to fit the problem to the analysis technique. These assumptions frequently concern problem size, degree of analysis detail and solution methodology.

Definition of business units and product lines to be included Alternatives: Range of options that can be considered Market Trends: Nature and magnitude of change in market preferences and buying patterns Product Trends: Nature and magnitude of change in market preferences and buying patterns particularly with respect to package size and packaging.

Competitive logistics strengths, weaknesses and strategies. Demand patterns by market area, product and shipment size Distribution Facilities: Locations, operating policies, economic characteristics and performance history of current and potential distribution facilities. Transportation rates for movement between potential and existing distribution facilities and customers Inventory: Detailed product information aggregated to fit within the scope of analysis 1.

  • The questions build on research objectives and constraints by identifying specific operating policies and parameters;
  • Using customer service concept and logistics integration logic and methodology, the manager should commit to paper the most attractive strategy alternatives;
  • The objective of doing so is to understand the environment, process, and performance characteristics of the current system and to determine future estimation.

Customer demand grouped to aggregate market areas to fit the scope of analysis techniques c Identify data resources: The process of data collection begins with a feasibility assessment. A fairly detailed specification of data is required to formulate or fit the analytical technique.

For situations when data are extremely difficult to collect or when the necessary level of accuracy is unknown, sensitivity analysis can be used to identify data collection requirements. The types of data required in a logistical design n study can be divided into three classes: The majority of data required in a logistical study can be obtained from internal records.

Although considerable searching may be needed, most information is generally available. The first major data category is sales and customer orders. The annual sales forecast and percentage of sales by month, as well as seasonality patterns are necessary for determining logistics volume and activity levels.

  1. Business assumptions — They define the characteristics of the general environment including relevant market, consumer, and product trends and competitive actions, within which an alternative logistics plan must operate.
  2. In turn the scope determines the completion time. But constraints can affect the overall planning process for e.
  3. Competitive logistics strengths, weaknesses and strategies. The process of data collection begins with a feasibility assessment.
  4. Once formulated, such standards must be held constant throughout system development.
  5. Assessment must consider the process physical and information flows through the value — added chain , decisions logic and criteria currently used for value chain management , and key measures for each major logistics activity. There are four steps in this part of the phase namely.

Historical samples of customer order invoices are also needed to determine shipping patterns by market and shipment size. The combination of aggregate measures of demand and detailed order profiles of projects the requirements that the logistics system must be capable of satisfying. Specific customer data are also required to consider the cost and time associated with moving the products across distance.

Customers and markets ate often aggregated by location, type, size, order frequency, growth rate, and special logistical services to reduce analysis complexity. For integrated channel analysis, its necessary to identify and track the costs associated with manufacturing and purchasing. Identification of policies and costs associated with inventory transfer, reordering, and warehouse processing, inventory control rules and product allocation procedures.

For each of the current and the potential warehouse, the operating costs, capacities, product mix, storage levels and service capabilities should be established.

Transportatio n data requirements. Transportation data requirements include the number and type of modes utilized, modal selection criteria, rates and transit times, and shipping rules and policies. For most logistics analysis applications, a select amount of future market data is useful for evaluating future scenarios.