Lecture 7: Distribution and Logistics

Question 1

What are the functions of warehouse?

Answer 1

› Storage: to facilitate the coordination between
production and customer demand by buffering
(storing) products for a certain period of time
› Sorting & Picking: to accumulate and consolidate
products from various producers for combined
shipment to common customers
› Transport: to transship products from one mode of
transportation to another
› Operations: to support product customization
activities (value added logistics), such as packaging
labeling, marketing, pricing or even final assembly

Question 2

What cross-docking is and what is the advantage of it?

Answer 2

› Approach to split large shipments into small
shipments for local delivery
› Advantage: low inventory cost (because little or no
storage occurs in cross-docking facilities)

Question 3

What are the methods for selection location? Briefly explain each method.

Answer 3

› Factor-rating method
- Possible locations are known
- Use weights to assign importance of a factor
- Weakness due to subjectivity of weights
- If results are close, perform sensitivity analysis on weights
› Cost volume analysis (economic comparison)
- To make an economic comparison of known locations
- Determine fixed and variable costs for each location
 Fixed costs (e.g. costs for a truck)
 Variable costs (e.g. costs per product or costs per kilometer)
- Graphically:
 Plot costs for each location (costs on vertical axis and annual volume on horizontal axis)
 Select location with lowest costs for expected production volume
› Center-of-gravity Method (Cx & Cy)
- Mathematical technique for finding the best location
for a single warehouse (locations of other facilities
are given)
- Requirements
 Location of other facilities (e.g., suppliers or retailers)
 Volume of goods to be shipped to those facilities