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Use of Strategic Distribution Policy in Operational Replenishment Review

IP.com Disclosure Number: IPCOM000049839D
Original Publication Date: 1982-Jul-01
Included in the Prior Art Database: 2005-Feb-09
Document File: 2 page(s) / 13K

Publishing Venue

IBM

Related People

Dawkins, J: AUTHOR

Abstract

The control of goods movements in a company performing physical distribution may be considered at two levels: operational and planning. The overall goal of control is to minimize the costs of distribution, while maintaining adequate levels of stock to provide service to customers. To minimize the costs over a distribution network entails balancing transportation costs and goods availability over the network. This is too big a problem to be solved in an operational environment.

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Use of Strategic Distribution Policy in Operational Replenishment Review

The control of goods movements in a company performing physical distribution may be considered at two levels: operational and planning. The overall goal of control is to minimize the costs of distribution, while maintaining adequate levels of stock to provide service to customers. To minimize the costs over a distribution network entails balancing transportation costs and goods availability over the network. This is too big a problem to be solved in an operational environment.

The purpose of the technique described here is to allow the results of solving the global problem to influence the operational running, so that the replenishment proposals derived there do not deviate too far from the global optimum.

The distribution policy resulting from a planning program will describe the pattern of replenishment necessary for each group of products at each depot. This policy will contain the following data for each such group: * which source of supply to use for the goods, * which means of transport to use, * how often to make replenishments, and * what other groups of products to replenish at the same time.

The operational use of the supply point and means of transport data is straightforward. But how is one to use the planned replenishment frequency? This is important since it is this that provides the balance between the costs of storage and the reduced cost of shipping larger loads.

Consider how the replenishment review is performed. Although the policy adopted for individual products may vary (for example, min-max review or periods cover), that used for groups of prod...