Introduction to LogisticsSystems Management

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Introduction to LogisticsSystems Management

Second Edition

Gianpaolo GhianiDepartment of Innovation Engineering, University of Salento, Italy

Gilbert LaporteHEC Montreal, Canada

Roberto MusmannoDepartment of Electronics, Informatics and Systems

University of Calabria, Italy

A John Wiley & Sons, Ltd., Publication

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Library of Congress Cataloging-in-Publication Data

Ghiani, Gianpaolo.[Introduction to logistics systems planning and control]

Introduction to logistics systems management / Gianpaolo Ghiani, Gilbert Laporte,Roberto Musmanno. – Second edition.pages cmIncludes index.

ISBN 978-1-119-94338-9 (hardback)1. Materials management. 2. Materials handling. 3. Business logistics. I. Laporte, Gilbert. II.

Musmanno, Roberto. III. Title.TS161.G47 2013658.5–dc23

2012033914

A catalogue record for this book is available from the British Library.

ISBN: 978-1-119-94338-9

Set in 10/12pt Times-Roman by Laserwords Private Limited, Chennai, India

To Laura, Allegra and VittoriaTo Ann and Cathy

To Maria Carmela, Francesco and Andrea

Contents

Foreword by Marc Goetschalckx xi

Preface xiii

Acknowledgements xv

About the Authors xvii

List of Abbreviations xix

1 Introducing logistics 11.1 Definition of logistics 11.2 Logistics systems 1

1.2.1 Logistics activities 51.2.2 Information flows and logistics networks 51.2.3 Case of more products 7

1.3 Reverse logistics 91.4 Integrated logistics 101.5 Objectives of logistics 12

1.5.1 Measures of the service level 141.6 Management of the logistics system 18

1.6.1 Planning phase 181.6.2 Organizational phase 191.6.3 Control phase 28

1.7 Case study: The Pfizer logistics system 331.8 Questions and problems 36

2 Forecasting logistics requirements 442.1 Introduction 442.2 Qualitative methods 462.3 Quantitative methods 48

2.3.1 Graphical representation of time series 482.3.2 Classification of time series 48

viii CONTENTS

2.4 Data preprocessing 512.4.1 Insertion of missing data 522.4.2 Detection of outliers 522.4.3 Data aggregation 532.4.4 Removing the calendar variations 552.4.5 Deflating monetary time series 562.4.6 Adjusting for population variations 572.4.7 Normalizing the data 58

2.5 Choice of the forecasting method 592.5.1 Notation 592.5.2 Casual versus extrapolation methods 592.5.3 Decomposition method 602.5.4 Further time series extrapolation methods: The constant

trend case 712.5.5 Further time series extrapolation methods: The linear

trend case 752.5.6 Further time series extrapolation methods: The seasonal

effect case 802.5.7 Further time series extrapolation methods: The irregular

series case 882.5.8 Sporadic time series 91

2.6 Advanced forecasting method 972.7 Accuracy measure and forecasting monitoring 98

2.7.1 Accuracy measures 992.7.2 Tuning of the forecasting methods 1002.7.3 Forecast control 102

2.8 Interval forecasts 1062.9 Case study: Forecasting methods at Adriatica Accumulatori 1092.10 Case study: Sales forecasting at Orlea 1102.11 Questions and problems 112

3 Locating facilities in logistics systems 1223.1 Introduction 1223.2 Qualitative methods 1263.3 Quantitative methods 127

3.3.1 Single-commodity single-echelon continuous locationproblems 128

3.3.2 Single-commodity single-echelon discrete locationproblems 132

3.3.3 Single-commodity two-echelon discrete locationproblems 155

3.3.4 The multicommodity case 1593.3.5 Location-covering problems 1633.3.6 p-centre problems 168

3.4 Hybrid methods 174

CONTENTS ix

3.5 Stochastic location models 1753.6 Case study: Container warehouse location at Hardcastle 1793.7 Case study: The organ transplantation location–allocation policy

of the Italian National Transplant Centre 1833.8 Questions and problems 185

4 Selecting the suppliers 1934.1 Introduction 1934.2 Definition of the set of potential suppliers 1944.3 Definition of the selection criteria 1944.4 Supplier selection 1984.5 Case study: The system for the selection of suppliers at Baxter 2024.6 Questions and problems 205

5 Managing a warehouse 2105.1 Introduction 210

5.1.1 Performance parameters 2135.1.2 Decision-making problems 216

5.2 Warehouse design 2165.2.1 Choice of warehouse systems 2175.2.2 Choice of warehouse layout 2305.2.3 Sizing of the storage zone 2345.2.4 Sizing of the receiving zone 2405.2.5 Sizing of the shipping zone 241

5.3 Tactical decisions for warehouse logistics planning 2425.3.1 Product allocation to the storage points 2425.3.2 Inventory management 249

5.4 Operational decisions for warehouse logistics management 2765.4.1 Package picking from the storage zone 2765.4.2 Package consolidation in load units 285

5.5 Case study: Performance evaluation of an AS/RS systemconducted by Wert Consulting 303

5.6 Case study: Inventory management at Wolferine 3055.7 Case study: Airplane loading at FedEx 3065.8 Questions and problems 309

6 Managing freight transport 3186.1 Introduction 318

6.1.1 Modes of transport 3186.1.2 Classification of transport problems 323

6.2 Freight Traffic Assignment Problems (TAPs) 3266.2.1 Minimum-cost flow formulation 3276.2.2 Linear single-commodity minimum-cost flow problems 3286.2.3 Linear multicommodity minimum-cost flow problems 336

6.3 Service network design problems 342

x CONTENTS

6.3.1 The linear fixed-charge network design model 3446.4 Vehicle allocation problems 3506.5 A dynamic driver assignment problem 3526.6 Fleet composition 3546.7 Shipment consolidation 3566.8 Vehicle routing problems 359

6.8.1 The travelling salesman problem 3626.8.2 The Node Routing Problem with Capacity and Length

Constraints 3786.8.3 The Node Routing and Scheduling Problem with Time

Windows 3916.8.4 Arc routing problems 3986.8.5 Route sequencing 409

6.9 Real-time vehicle routing problems 4106.10 Integrated location and routing problems 4126.11 Vendor-managed inventory routing 4146.12 Case study: Air network design at Intexpress 4226.13 Case study: Meter reader routing and scheduling at Socal 4276.14 Case study: Dynamic vehicle-dispatching problem with pickups

and deliveries at eCourier 4306.15 Questions and problems 432

Index 443

Foreword

Logistics is concerned with the organization, movement and storage of materialand people. The term ‘logistics’ was first used by the military to describe theactivities associated with maintaining a fighting force in the field and, in its nar-rowest sense, describes the housing of troops. Over the years the meaning ofthe term has gradually generalized to cover business and service activities. Thedomain of logistics activities is providing a system’s customers with the rightproduct, in the right place, at the right time. This ranges from providing thenecessary subcomponents for manufacturing, to having inventory on the shelf ofa retailer, to having the right amount and type of blood available for hospitalsurgeries. A fundamental characteristic of logistics is its holistic, integrated viewof all the activities that it encompasses. So, while procurement, warehouse man-agement and distribution are all important components, logistics is concernedwith the integration of these and other activities to provide the time and spacevalue to the system or corporation. Excess global capacity in most types ofindustry has generated intense competition. At the same time, the availability ofalternative products has created a very demanding type of customer, who insistson the instantaneous availability of a continuous stream of new models. So theproviders of logistics activities are asked to do more transactions, in smallerquantities, in less time, for less cost and with greater accuracy. New trends suchas mass customization will only intensify these demands. The accelerated paceand greater scope of logistics operations have made planning-as-usual impossi-ble. Even with the increased number and speed of activities, the annual expensesassociated with logistics activities in the United States have held constant forthe past several years, around 10% of the Gross Domestic Product. Given thesignificant amounts of money involved and the increased operational require-ments, the management of logistics systems has gained widespread attentionfrom practitioners and academic researchers alike. To maximize the value in alogistics system, a large variety of planning decisions has to be made, rangingfrom the simple warehouse-floor choice of which item to pick next to fulfil a cus-tomer order to the corporate-level decision to build a new manufacturing plant.Logistics management supports the full range of those decisions related to thedesign and operation of logistics systems.

There exists a vast amount of literature, software packages, decision supporttools and design algorithms that focus on isolated components of the logistics

xii FOREWORD

system or isolated planning in the logistics systems. In the last two decades,several companies have developed Enterprise Resource Planning (ERP) sys-tems in response to the need of global corporations to plan their entire supplychain. In their initial implementations, the ERP systems were primarily usedfor the recording of transactions rather than for the planning of resources on anenterprise-wide scale. Their main advantage was to provide consistent, up-to-dateand accessible data to the enterprise. In recent years, the original ERP systemshave been extended with Advanced Planning Systems (APSs). The main func-tion of APSs is, for the first time, the planning of enterprise-wide resources andactions. This implies a coordination of the plans among several organizations andgeographically dispersed locations.

So, while logistics management requires an integrated, holistic approach, itstreatment in courses and textbooks tends to be either integrated and qualitativeor mathematical and very specific. This book bridges the gap between those twoapproaches. It provides a comprehensive and modelling-based treatment of thelogistics processes. The major components of logistics systems (storage and dis-tribution) are each examined in detail. For each topic the problem is defined,models and solution algorithms are presented that support computer-assisteddecision making and numerous application examples are provided. Each chapterconcludes with case studies that illustrate the application of the models and algo-rithms in practice. Because of its rigorous mathematical treatment of real-worldmanagement problems in logistics, this book will provide a valuable resource tograduate and senior undergraduate students and practitioners who are trying toimprove logistics operations and satisfy their customers.

Marc GoetschalckxGeorgia Institute of Technology

Atlanta, United States

Preface

Logistics lies at the heart of modern economies. From the steel factories ofPennsylvania to the port of Singapore, from Nicaraguan banana fields to thepostal delivery and solid waste collection companies in any region around theworld, almost every organization faces the common problem of getting the rightmaterials to the right place at the right time. Indeed, the fierce competition intoday’s markets has made it imperative to manage logistics systems more andmore efficiently. In this context, quantitative methods have proved able to achieveremarkable savings.

This textbook has grown from a number of undergraduate and graduatecourses on logistics that we have taught to engineering, computer science andmanagement science students. The goal of these courses is to give students asolid understanding of the analytical tools necessary to reduce costs and improvethe service level in logistics systems. The lack of a suitable textbook had forcedus in the past to make use of a number of monographs and scientific paperswhich tend to be beyond the level of most students. We therefore committedourselves to developing a quantitative textbook written at a level accessible tomost students.

In 2004 we published with Wiley a book entitled Introduction to LogisticsSystems Planning and Control, which was widely used in several universitiesthroughout the world. The 2004 edition of the book received the Roger-Charbonneau award from HEC Montreal as the best pedagogical textbook of theyear. In view of this success, we proceeded to prepare a substantially revisededition now entitled Introduction to Logistics Systems Management.

This new edition puts more emphasis on the organizational context in whichlogistics systems operate. It also covers several new results and techniques thathave arisen in the field of logistics over the past decade. This book targets anacademic as well a practitioner audience. On the academic side, it should beappropriate for advanced undergraduate and graduate courses in logistics andsupply chain management. It should also serve as a methodological referencefor practitioners in consulting as well as in industry. We make the assumptionthat the reader is familiar with the basics of operations research and statistics,and we provide a balanced treatment of forecasting, logistics system design,warehouse management and freight transport management. In our text, everytopic is illustrated by a numerical example so that the reader can check his or

xiv PREFACE

her understanding of each concept before moving on to the next one. We provideat the end of each chapter case studies taken from the scientific literature, whichillustrate the use of quantitative methods for solving complex logistics decisionproblems. Finally, every chapter ends with an exhaustive set of exercises.

Gianpaolo Ghiani (gianpaolo.ghiani@unisalento.it)Gilbert Laporte (gilbert.laporte@cirrelt.ca)Roberto Musmanno (musmanno@unical.it)

Exercises and Website

This textbook contains questions and problems at the end of every chapter.Some are discussion questions, while others focus on modelling or algorithmicissues. The answers to these problems are available at the book’s website(http://www.wiley.com/go/logistics_systems_management),which also contains additional material (FAQs, a list of references, software,further modelling exercises, links to other websites etc.).

Acknowledgements

We wish to acknowledge all the individuals who have helped in one way oranother to produce this text. First, we are grateful to the reviewers whose com-ments were invaluable in improving the organization and presentation of thebook. Similarly, we are indebted to Valentina Caputi, Antonio Igor Cosma,Lucie-Nathalie Cournoyer, Emanuela Guerriero, Rosita Guido, Demetrio Lagana,Emanuele Manni, Francesco Mari, Marco Pina, Ornella Pisacane, Claudia Rotella,Francesco Santoro and Antonio Violi for their scientific and technical support.

About the Authors

Gianpaolo Ghiani is Professor of Operations Research at the University ofSalento, Italy, where he teaches Logistics courses at the Faculty of Engineering.

Gilbert Laporte is Professor of Operations Research at HEC Montreal,Canada Research Chair in Distribution Management, adjunct Professor atMolde University College, Norway; the University of Bilkent, Turkey; andthe University of Alberta, Canada; and visiting professor at the University ofSouthampton, United Kingdom.

Roberto Musmanno is professor of Operations Research at the University ofCalabria, Italy, where he teaches Logistics courses at the Faculty of Engineering.

List of Abbreviations

1-BP One Bin Packing2-BP Two Bin Packing3-BP Three Bin Packing3PL Third Party LogisticsAGVS Automated Guided Vehicle SystemAHP Analytical Hierarchic ProcessAIRT Inter-Regional Association of TransplantationANN Artificial Neural NetworkAPS Advanced Planning SystemAP Assignment ProblemARP Arc Routing ProblemAS Air-StopAS/RS Automated Storage/Retrieval SystemASM Absolute Scoring MethodATSP Asymmetric Travelling Salesman ProblemB2B Business-to-BusinessBF Best FitBFD Best Fit DecreasingBL Bottom LeftBTT Baxter Transfusion TherapyCDC Central Distribution CentreCEO Chief Executive OfficerCIR Inter-Regional CentreCL CarloadCOT Cut-Off TimeCPFR Collaborative Forecasting and Replenishment ProgramCPL Capacitated Plant LocationCPP Chinese Postman ProblemCRP Continuous Replenishment ProgramDC Distribution CentreDDAP Dynamic Driver Assignment ProblemEAN European Article NumberEDI Electronic Data InterchangeELC European Logistics Centre

xx LIST OF ABBREVIATIONS

EOQ Economic Order QuantityERP Enterprise Resource PlanningEU European UnionEUPP European Union Pfizer PlantFBF Finite Best FitFCNDP Fixed Charge Network Design ProblemFDA Food and Drugs AdministrationFF First FitFFD First Fit DecreasingFFF Finite First FitFIFO First-In, First-OutGIS Geographic Information SystemGOD Great Organised DistributionGPS Global Positioning SystemICT Information and Communication TechnologyIP Intger ProgrammingIRP Inventory-Routing ProblemISO International Organization for StandardisationKPI Key Performance IndicatorLB Lower BoundLFCNDP Linear Fixed Charge Network Design ProblemLIFO Last-In, First-OutLMCFP Linear Minimum Cost Flow ProblemLMMCFP Linear Multicommodity Minimum Cost Flow ProblemLP Linear ProgrammingLTL Less-Than-TruckloadMAD Mean Absolute DeviationMAPD Mean Absolute Percentage DeviationMCTE Multiple-Commodity Two-EchelonMIP Mixed Integer ProgrammingMMCFP Multicommodity Minimum Cost Flow ProblemMRP Material Requirement PlanningMS Multiple SourceMSE Mean Squared ErrorMSrTP Minimum spanning r-tree problemMTO Make to OrderMTS Make to StockNAPM National Association of Purchasing ManagersNCC National Classification CommitteeNF Network FlowNITp Nort-Italy TransplantationNMFC National Motor Freight ClassificationNP Non-PolynomialNRP Node Routing Problem

LIST OF ABBREVIATIONS xxi

NRPCL Node Routing Problem with Capacity and LengthConstraints

NRPSC Node Routing Problem – Set CoveringNRPSP Node Routing Problem – Set PartitioningNRSPTW Node Routing and Scheduling Problem with Time

WindowsNTC National Transplant CentreOCST Centre-South Organization of TransplantationPCB Printed Circuit BoardPZ Pick ZoneRDC Regional Distribution CentreRFId Radio Frequency IdentificationR-LMMCFP Relaxed Linear Multicommodity Minimum Cost Flow

ProblemRPP Rural Postman ProblemRSM Relative Scoring MethodRTSP Road Travelling Salesman ProblemRZ Reserve ZoneSC Shipment Centre (Section 6.12)SC Set CoveringSCSE Single-Commodity Single-EchelonSCTE Single-Commodity Two-EchelonSNDP Service Network Design ProblemSPL Simple Plant LocationSQI Supplier Quality IndexSS Single SourceSSCC Serial Shipping Container CodeSTSP Symmetric Travelling Salesman ProblemTAP Traffic Assignment ProblemTL TruckloadTS Tabu SearchTSP Travelling Salesman ProblemUB Upper BoundVAP Vehicle Allocation ProblemVRDP Vehicle Routing and Dispatching ProblemVRP Vehicle Routing ProblemVRPMT Vehicle Routing Problem with Multiple TripsVRSP Vehicle Routing and Scheduling ProblemsZIO Zero Inventory Ordering

1

Introducing logistics

1.1 Definition of logistics

According to a widespread definition, logistics (from the Greek term logos, whichmeans ‘order’, or from the French loger, which means ‘allocate’) is the disciplinethat studies the functional activities determining the flow of materials (and ofthe relative information) in a company, from their origin at the suppliers up todelivery of the finished products to the customers and to the post-sales service.The origins of logistics are of a strictly military nature. In fact, this disciplinearose as the study of the methodologies employed to guarantee the correct supplyof troops with victuals, ammunitions and fuel and, in general, to ensure armiesthe possibility of moving and fighting in the most efficient conditions. Indeed itwas the Babylonians, in the distant 20th century BC, who first created a militarycorps specialized in the supply, storage, transport and distribution of soldiers’equipment. Logistics was applied exclusively in a military context until the endof Second World War. Subsequently, it was extended to manufacturing companiesin order to determine all the activities aimed at ensuring the correct purchasing,moving and managing of materials. Logistics problems are also increasinglypresent in the service sector, for example in the distribution of some servicessuch as water and gas, in postal services, in urban solid waste collection, in themaintenance of road and electricity networks and in the post-sales activities ofmanufacturing companies (service logistics).

1.2 Logistics systems

From the point of view of companies, logistics is seen as a system (the logisticssystem), which includes not only all the functional activities determining the flow

Introduction to Logistics Systems Management, Second Edition. Gianpaolo Ghiani, Gilbert Laporteand Roberto Musmanno.© 2013 John Wiley & Sons, Ltd. Published 2013 by John Wiley & Sons, Ltd.

2 INTRODUCTION TO LOGISTICS SYSTEMS MANAGEMENT

of materials and information, but also the infrastructures, means, equipment andresources that are indispensable to the execution of these activities.

A logistics system is made up of facilities, where one or more functional activ-ities are carried out (e.g. storage and distribution). Figure 1.1 shows a schematicrepresentation of a logistics system in which the manufacturing process of thefinished goods is divided into a transformation phase and an assembly phase,performed in different centres. At the start are the suppliers of materials andcomponents which feed the final manufacturing process. The end part representsa typical two-level distribution system with a tree structure. The Central Distri-bution Centres (CDCs) are directly supplied by the production plants, while eachRegional Distribution Centre (RDC) is connected to a single CDC which has thetask of serving the customer, who can also be dealers or retailers.

Customer

Customer

Customer

Customer

CDC

CDC

Assemblyplant

Productionplant

Supplier

Supplier

RDC

RDC

RDC

RDC

Productionplant

Figure 1.1 Example of a logistics system.

At each facility the flow of materials is temporarily interrupted, generally inorder to change their physical-chemical composition, ownership or appearance.In all cases, each logistic activity carried out involves costs which affect the valueof the product, constantly adding to it as it draws nearer the facilities closest tothe final customer. This added value can be spatial (following e.g. distributionactivities) or temporal (owing to storage activities).

Galbani is the Italian leader in the milk and dairy products sector and oneof the main actors in the pressed pork market. The Galbani group is cur-rently made up of three independent operational societies, one of them calledbiG Logistics. This company has the task of managing the logistics activ-ities of the whole group. The logistics system is organized in such a way

INTRODUCING LOGISTICS 3

as to guarantee an efficient synchronization of the internal production anddistribution processes of the products, both for the Great Organized Distri-bution (GOD) and for the channel represented by the traditional retail shops.The distribution network of the company is organized on two levels: there are,between the production plants and the destination markets, a central ware-house and 11 distribution platforms. This solution allows the minimization ofthe transport times and of the storage times of the goods in the warehouses.As a result, it favours a rapid delivery of the products, strictly respectingthe refrigeration chain (deliveries within 12 hours for national distributionand 24 to 36 hours for abroad). The daily products are dispatched directlyby the production plants to the central warehouse, located in the area ofOspedaletto Lodigiano, considered a barycentral position with respect to thenational markets of the Galbani group. The central warehouse serves, in turn,the second-level platforms with the orders mixed according to their desti-nation (see Figure 1.2). The platforms receive the entering flow of goodsfrom the central warehouse and supply both the Distribution Centres of theGOD and the so-called satellites. The satellites are small-sized stores withoutstockpiles, with vans used for distribution to retailers. The van operates asa truly travelling store. There are 111 satellites distributed throughout thenational territory, with a coverage radius on the provincial scale.

OspedalettoLodigiano

Figure 1.2 Geographical position of the central warehouse (in grey) and the11 distribution platforms of the logistics system of Galbani.

4 INTRODUCTION TO LOGISTICS SYSTEMS MANAGEMENT

A logistics system can be represented by means of a directed (multi)graphG = (V , A), where V is the set of facilities, and A is the set of links existingamong the facilities used for the flow of materials (see Figure 1.3). There canbe several arcs between a pair of facilities, representative of alternative forms oftransport services, different routes, or different products.

Supplier

Supplier

Supplier

Supplier

Productionplant

Assemblyplant

Distributioncentre

Distributioncentre Customer

Customer

Customer

Customer

Productionplant

Figure 1.3 Representation of a logistics system system by a directed graph.

The logistics system of Galbani can be represented by the directed graph ofFigure 1.4.

Supplier Supplier

111 satellites GOD sales points

Centralwarehouse

Manufacturingplant

Manufacturingplant

Manufacturingplant

Manufacturingplant

Second levelplatform 1

Second levelplatform 11

GODdistribution

centre

GODdistribution

centre

Figure 1.4 Representation by a directed graph of the logistics system ofGalbani.

INTRODUCING LOGISTICS 5

1.2.1 Logistics activities

Logistics activities are traditionally classified depending on their location withrespect to the production and distribution process. In particular, supply logisticsis carried out before the production plants and consists in the management of rawmaterials, materials and component parts supply as a function of the company’sproduction plan. Internal logistics is carried out in the production plants andconsists in receiving and storing materials, in picking them up from the ware-house to feed the production lines and in successively moving the semi-finishedgoods up to packaging and storing the finished product. Finally, the distributionlogistics activities are carried out after the production plants and before themarket. They supply the sales points or the customers. In this schematization,the supply logistics and the distribution logistics are collectively called externallogistics.

Storage and distribution of the finished products are the primary logisticsactivities, and particular attention will be paid to them in this text. Logisticsactivities can be conducted by the company itself or can be entrusted to a thirdparty (3PL, or Third Party Logistics). These choices are made by the companyaccording to the same logic on which ‘make or buy’-type decisions are based.They assume an in-depth knowledge of the nature of the costs that the companybears (fixed costs, variable costs, direct costs, and indirect costs).

When the multinational company Gillette decided to reorganize its logisticssystem in Turkey in 1999, it entrusted the Exel company with the executionof a series of logistics activities on its behalf, including distribution (both atnational and international levels), customs issues, storage of finished products,and repackaging and labelling of the products.

1.2.2 Information flows and logistics networks

Within a logistics system, with the exception of the cases where recycling of prod-uct wrapping is provided or where defective components or products are returned,the flow of materials typically moves from the suppliers to the processing andassembly plants, thence to the sales points and finally to the customers. The flowof materials is integrated with an information flow which follows the oppositedirection: in the logistics systems of the MTO-type (Make to Order), for example,customers’ orders influence the production plan and the latter determines thedemand for materials and components of the processing and assembly plants.Analogously, in MTS-type (Make to Stock ) logistics systems, market informa-tion (demand recorded in the past, results of possible market surveys etc.) is usedto forecast the sales and therefore affects the mode of distribution, as well as theproduction and supply plans.

6 INTRODUCTION TO LOGISTICS SYSTEMS MANAGEMENT

The production centres of the Galbani group determine the daily productionplan on the basis of recorded predictive data, among others, from the volumesdistributed the previous working day. In this case, the 11 logistics platformsgather the sales data recorded both at the GOD and at the satellites, and thisinformation is transmitted to the central warehouse and from there to theproduction plants.

Hellena is a Dutch company that produces biscuits. The ordering of rawwheat flour is done by fax. Once an order is received and the goods pre-pared, the supplier provides for the dispatch of the product which must beaccompanied by the delivery note. This document must therefore be issuedbefore delivery or dispatch of the goods with specifications of the main ele-ments of the operation (serial number, date, quantity and description of thegoods transported etc.) and issued with a minimum of two copies (one mustbe retained and filed by the supplier and the other must be consigned to thecustomer together with the transported goods). In this context, two informa-tion flows are activated. The first, relative to the sending of the fax, travelsin the opposite direction from the transport of the order (from the customerto the supplier) and also uses a different channel. The second, the deliverynote, accompanies the consignment, using the same channel as the goods andtravelling in the same direction.

An existing information flow (created through fax, email etc.) between apair of facilities can be represented by an arc. This means that the informationnetwork, that is, the set of information flows, can also be represented by a directed(multi)graph, analogously to the network of materials flow.

Networks of materials flow and information networks give rise to logisticsnetworks (see Figure 1.5).

Supplier

Supplier

Productionplant

Distributioncentre

Customer

Customer

Material flow

Information flow

Figure 1.5 Representation of a logistics network.