1. 1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 15

2. Cost-Profit-Volume Analysis

4. Since Bowling Green has the lowest Total Cost at the volume being produced, it will be chosen as the site of new facility

5. 13-5 CR (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 problem that:  Search for the best combination of facilities to minimize costs  Do so within a reasonable computational time  Do not require enormous amounts of data for the analysis Multiple Location Methods

6. 13-6 Location Cost Trade-Offs (Heuristic) Number of warehouses Cost Production/purchase and order processing Inventory carrying and warehousing Warehouse fixed Inbound and outbound transportation Total cost 0 0 CR (2004) Prentice Hall, Inc.

7. 13-7 CR (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

8. 13-8 CR (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

9. 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.

10. 6-10 Transport Fundamentals in Planning Triangle PLANNING ORGANIZING CONTROLLING 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 PLANNING ORGANIZING CONTROLLING 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.

11. 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 13-11 CR (2004) Prentice Hall, Inc.

12. 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 orspecial charges