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Editorial Reviews. From the Back Cover. This book describes a variety of quantitative methods Elements of Manufacturing, Distribution and Logistics: Quantitative Methods for Planning and Control - Kindle edition by Nick T. Thomopoulos.
Table of contents

Each replenishment must conform with any constraints provided by the supplier, as minimum buy quantity and multiple buy quantity. For analysis sake, the inventory is partitioned into cycle stock and safety stock, where the sum is the total stock. The ingredients that affect the stock levels are the percent fill, lead-time, coefficient of variation, and month-in-buy. The sensitivity of each with the stock levels and with the turnover is described. In many retail entities, the demand for each item is low, and thereby the Poisson distribution is used to determine the order point and order level.

For entities with low demand items, table entries are provided to guide the management on how to set the order point and order level. For convenience here, a network NW is defined when two or more stock holding facilities are connected with one entity.


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This is a distribution system with two or more locations. Could be a system with distribution centers DC , or two or more retail outlets. The individual stocking locations are here referred as locations. The goal is to control the inventory for the NW and for each location.

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Typically, once a month at the NW, forecasts, standard deviation of the forecast error, and the planned order quantity are generated. Also, at each location, the forecast, standard deviation and order quantity are also needed to compute the order point and order level. At each location, the on-hand and on-order are observed and compared to the order point and order level to determine if a location needs a replenishment buy, and if so, how much.

Sometimes the location buys directly with the supplier, and other times, the NW buys for the total system. The manufacturing plant consists of an assortment of raw materials, components, machines of various type, and an variety of skilled workers, with the goal to produce goods to a higher level, and some to finished-good-items. A first concern of the management is to periodically generate a production plan for the coming planning horizon. This plan pertains to the aggregate of all items in the plant and yields the volume of production for all.

The plan depends on the type of items to produce: make-to-stock, make-to-order, or a combination of make-to-stock and to order. For each finished-good-item, a master production plan is generated to coordinate the schedule that satisfies the inventory status and customer demands.

Distribution and Logistics Planning: Strategic, Tactical and Operational Planning

This schedule also yields the available-to-promise quantity that is a vital tool to the sales force. The concept of raw load and level load by future time periods for various production centers in the plant are described.

Supply Chain Management

To ensure the schedule of all items are doable, a rough-cut capacity planning analysis is calculated for each of the production centers in the plant. When the capacity does not meet the load, adjustments are required. For every item to be produced, a bill-of-material is used to identify each of the parts and components that are required in the build. From here, a materials requirement planning set of computations determines the build schedule for every item.

Just-in-time JIT is a philosophy of production based on the concept of adding value and eliminating waste. JIT and lean manufacturing have very similar goals. Value is added only by work performed on the product, and waste is anything other than a minimal amount of necessary resources—material, manpower, and the capital equipment—that is required for production, and does not add value to the product. The process called Kanban is a system where cards are used between send and receive stations in a way so that the stations produce only the necessary quantity of goods at the necessary time.

Logistics vs. Procurement in Your Supply Chain - The Network Effect

JIT examples are presented where the components to a product are received from a supplier shortly after the customer order arrives. The relation between lean manufacturing and JIT is described. Smaller batch sizes are preferred in production, and this is accomplished as the setup time at a production process is reduced. The smaller the setup time, the lower the economic batch size. The safety stock to achieve a service level to the customer depends largely on the lead-time of replenish time from the supplier. As the lead-time becomes smaller, the amount of safety stock needed is lowered accordingly.

The management should also seek to level the week-to-week aggregate production loads to avoid excess cost of overtime, backorders and outsourcing. When the finished good items are on a make-to-order basis, the strategy of postponement reduces the lead-time to the customers, and also eliminates much of the complication in the assembly.

A variety of assembly lines are applied in industry. For the smaller type of products, the assembly lines are often of the single model type, where one model of the product is produced on the line.

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The work elements to assemble one unit are gathered, and set in a precedence diagram showing the feasible work relations between the elements. The number of operators needed is computed and the work elements are assigned to each operator in a fair-share way.

This latter function is called line balancing. A process can be defined as a combination of components, tools, people and machines that together produce an item, like a part that subsequently is inserted into a finished good item. Although, the output of the process may vary, the final customer requires the product to satisfy the standards specified by the engineers. The output measures are of two types: attribute or variable.

Attribute is when the output measure is defective or not defective. Variable is when some measure is taken from each sampled unit. In a typical original equipment manufacturing OEM system, the suppliers ship stock to one or more distribution centers, that serves as the source to a series of retailers dealers, stores , and the retailers sell the products to the customers. This could be a network that holds service parts for an automotive corporation.

The dealers sell the autos to the customers and when repair or maintenance is needed, the customer seeks service from the dealer. The dealer carries a limited supply of parts for this purpose, and relies on the DC to have a full set of parts as needed. The OEM is faced with holding the minimal amount of stock needed to properly service the demands from the dealers.

In the ideal situation, the DC system consists of a network of locations that are strategically near the dealers and to some extent, near to the suppliers. One location is the master stock location that serves as the headquarters for the entire system. The other locations are branch locations. The master location is often a much larger location and holds more variety of stock. Sometimes a small location is provided and is called a 2-level-service location. This location holds minimal stock and is supplied by the master stock location.

The parts that have a high amount of demand are stocked in most locations and are called distributed parts. The low demand parts are labeled as non-distributed, and are mostly stocked only from the master stock location.

6 Important Tips For Effective Logistics Management

The supply chain management team in a manufacturing firm is concerned with the flow of raw materials, basic goods, components, work-in-process and finished goods from suppliers to warehouses, plants, distribution centers, retailers, and finally to the customers. The goal is to minimize throughput times and expenditure costs, while achieving a high level of service to the customers with a clean environment.


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To accomplish, the team remains vigilant on the use of all technology available to them. Data sharing with the customers and throughout the operation is needed so all can work efficiently. The team applies the technology of scan based tracking, electronic data interchange, bar codes, data matrix barcodes, quick response codes, and radio frequency identification where and when appropriate. In the inventory operations, vendor managed inventory and continuous replenishments are applied when suitable.

About this book

In transportation, incoterms are applied along with tracing and tracking of the shipments; and whenever feasible, outsourcing and third-party providers are employed. Transportation pertains to the movement of items from one location to another. Could be from a plant to a distribution center to a retailer. Second, the total cost concept served as the basis for managing certain activities collectively.