1. Structuring a DC Network Ken Homa

2. Manufacturing Plants Distribution Centers Intermediaries End Users Customers

3. Plant Distribution Networks Centralized, decentralized DC Market Area Trade-off : customer service and operating costs

4. Plant DC CCCCC Distribution Networks Building Blocks C, Q, F, S

5. Plant DC CCCCC Transportation Distribution Networks Cost Components

6. Plant DC CCCCC Handling (out) Transportation Distribution Networks Cost Components Handling (in)

7. Plant DC CCCCC Handling (out) Handling (in) Transportation Storage Distribution Networks Cost Components Optimize “landed cost” systemwide

8. Plant DC Increasing Distance Single plant, co-located DC Transportation Costs In general, transportation costs increase with distance for comparable “types” of shipments

9. Transportation Tactics Load consolidation Backhauling Dynamic routing Distribution networking

10. Transportation Costs By Type $/Unit Truck LTL Parcel Premium Load (UPS) (Overnite)

11. Transportation Costs Backhauls Origin Destin- ation Backhauls Full trucks (to and from) Single destinations

12. Transportation Costs Dynamic Routing Origin Destin- ation Single destinations Max full truck distance Destin- ation Full TruckPartial Truck Drop Off Charges

13. Transportation Costs Distribution Networking Origin Customer Max full truck distance Efficiently route LTL DC Full TruckPartial Truck LTL

14. Plant DC Distribution Networks Single plant, multiple DCs DC

15. Cost adders …. Overhead / fixed costs Handling steps Less than truckload rates Offset by truckload volumes to DCs

16. Investment adders... DC “plant & equipment” Inventory (“local safety stock”) Forecast error (fragmented forecast) Lead times (plant to DC to customer) Service level multiplier...

17. Service Level -> Safety Stock Factor

18. Distribution Networks Principles Local => faster response Scale determines degree of affordable decentralization Ship full trucks : consolidation, backhaul, dynamic routing Answer derived from policy & analysis

19. Structuring a DC Network