Distribution Planning and Optimization


Distribution planning and optimization takes care of optimal sourcing, optimal distribution center location, optimal warehouse storage, optimal routing, and optimal truck load balancing. An ERP normally does not include applications for these planning and optimization tasks.

An ERP records all your business entities and transactions such customer purchases(sales orders), supplier purchases, product receipts. product shipments, invoices, payments, production orders, etc. However an ERP does very little regarding planning and optimization except for Material Requirements Planning and Inventory optimization (Reorder Point and Economic Order Quantity.

However these planning and optimization tasks need to be done once or more times to keep your fixed costs low. In the next session some of these planning and optimization tasks will be described in detail. Internet Customer Solutions can help you with the implementation of these planning and optimization tasks.

Grouping of Distribution Planning and Optimization Tasks

Distribution planning and optimization aka Supply Chain Planning can be grouped as follows:

  1. Supply planning and optimization

    1. Optimal sourcing: Tactical planning

      1. Finding the best supplier for each purchased item based on price, location, supplier score card (timeliness, quality, support score, availability, etc),  and shipping/trucking cost.

      2. Solution: SourceDay  offers automated bid processing but not the full optimal sourcing

  2. Physical distribution optimization from manufacturer to distribution center

    1. Optimal location of distribution center: Strategic planning

      1. This optimization will minimize the cost of shipping the products from the manufacturers to the distribution centers. Alternative distribution center locations will be considered

      2. This optimization is also discussed in the next paragraph.

  3. Distribution center optimization

    1. Optimal location of distribution center: Strategic planning

      1. This optimization will minimize the cost of shipping the products from the distribution centers to the customers. Alternative distribution center locations will be considered.

      2. Solution: Operations Research models including Branch and Bound algorithms exist for this.

        1. Location Analysis: buy at: https://www.nowpublishers.com/article/Details/TOM-037

        2. https://scholarsarchive.byu.edu/cgi/viewcontent.cgi?article=4777&context=etd

        3. https://blog.hwr-berlin.de/ivanov/wp-content/uploads/2018/09/AnyLogistix-Final-Text.pdf

    2. Optimal warehouse layout: Tactical planning

      1. Determining the optimal layout for the products. Which products to be stored where.

      2. Solution:

        1. Possible solution by https://www.chainalytics.com/distribution-center-dc-optimization2/

        2. Simulation models are also used: www.unex.com

  4. Physical distribution optimization from distribution center to customers

    1. Optimal truck load balancing: Operational planning

      1. Determining where to place products in the trailer so that the products for the first customer are in the back of the trailer

      2. Solution: still to be searched for

    2. Optimal truck routing: Operational planning

      1. Assign customers to a truck such that the trucking costs are minimized.

      2. Solution

        1. An Excel solution is given below

        2. A software solution: https://getcircuit.com/blog/delivery-route-planning-for-teams/

Optimal Location of a Distribution Center

Optimal Truck Routing

To understand optimal truck routing, you can do the following:

1. Solve the business case below manually

  1. Assign the customers to the best distribution centers based on distance. Don't worry about cost since it is assumed that the cost per mile is always the same

  2. Compare your solution with the Excell Solver solution.

Distribution Routing business case.jpg

  1. Solve the business case below using the Excel Solver as explained in the Linkedin course

    1. https://www.linkedin.com/learning/excel-supply-chain-analysis-solving-transportation-problems/solve-supply-chain-transportation-problems-with-excel

  2. Software Publishers for optimal routing

    1. NextMV.io : https://nextmv.io/routing/

      1. This software is not integrated yet with the Acumatica ERP but could be integrated.