Network planning for my Logistics class - Essay Example

The decisions made on the logistics network are usually framed to act as a trade-off between the fixed costs of a warehouse and the costs of transporting the goods. This means that, if the network has a few warehouses, then there is a reduction of fixed costs although it raises the transportation costs. Adding more warehouses on the network reduces the transportation costs and increasing the fixed costs. There are two different factors which one must consider when designing a network design. The first factor which a logistician must consider most is the distance.

Adding more warehouses in a network decreases the number of kilometers travelled because the distance from the supplier to the warehouse and then to the customer is minimized. Moreover, the most expensive part in the logistics is the movement of goods from the warehouse to the end user since the load shipped is always divided into different quantities. The more the warehouses on the design network the fewer the kilometers between the customer and the stores. This paper includes the second factor which is to optimally solve the network design problems whereby there is the inclusion of inventory cost.

Ballou (2001) acknowledges the importance of the inventory costs inclusion over the fixed costs of warehousing and also the costs of the transportation. Ballou (2001) also explains that the absence of the inventory costs in network design is caused by the mixed integer in the linear programming, of which is a requirement to have the cost relationships to be linear. Unfortunately, in the real world, the relationships between the inventory and the number of warehouses are not linear. Using the approach of including the inventory costs motivates one to treat the relationship between the inventory and the number of warehouses as a function which is discrete.

This is the reason of proposing the model that may be used by different firms through the inclusion of inventory in the