1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164 
THE HYDRAE HEADED DISTRIBUTION MONSTER EUROPEAN TRANSPORTATION
Page 39
If you've noticed an error in this article please click here to report it so we can fix it.
AND DISTRIBUTION CONGRESS reported by John Darker, AMBIM
AS PARLIAMENT inched its way to support for the principle of entry to the Common Market, more than 50 delegates representing UK manufacturers, freight forwarders and transport operators joined with transport people from some 15 countries in Berlin last week in an attempt to unravel the formidable problems facing Britain and the other newcomers to the Community.
Far more questions were asked than answered but some useful pointers to the future were revealed in discussions.
Despite rapidly increasing costs and the regrettable sloth of governments in sanctioning larger capacity vehicles. a Dutch RHA spokesman was confident that road haulage would continue to grow in Europe. Some ominous hints were given of the far-reaching plans for a major technical re-vamping of the German rail system, to make it more competitive with road. The need for costly warehouses in too many countries of the Six despite the relatively short distances involved — was brought out; and this suggested that the "mix" of transport/warehouses in a distribution system should be closely examined: there could be great savings from spending more on transport and less on the costly "infrastructure".
Prof J. Ramberg, a distinguished Swedish lawyer specializing in problems of transport law, presided at the congress arranged jointly by Independent Trade Missions and Die Well. A principal speaker, Dr D. R. Borchers, in a graphic phrase, likened the evaluation of a distribution system to a fight with the legendary nine-headed hydra, which for each head conquered reared two in its place!
Dr Borchers, of Arthur D. Little, SA, Brussels, spoke on "Factors to be taken into account by a manufacturer in evaluating an economic distribution system within Europe".
During the last decade, said Dr Borchers. European manufacturers had witnessed progressive increases in their sales and iistribution cost as markets became geographically larger, and competitors more lumerous and powerful. Today and in the years to come, the major opportunities for ncreasecl profit and lower unit costs would indoubtedly be found in the field of distribuion, ie in the efficient and timely movement )f goods from the end of the production line o the final customer.
A prerequisite for success in identifying and exploiting these cost-reduction opportunities was management's recognition of the fundamental principle that "distribution" generally involves a large number of separate but related functions, activities and objectives of the corporation which conflict with one another.
Hence, said Dr Borchers, the essence of good distribution system design lay not in the minimization or maximization of any one of these elements but the optimum balancing of all components. Distribution analysis meant total systems evaluation of at least the following elements: I. The network of the product sources and destinations, ie plant and customer locations; 2. The permissible channels of product flows which link these sources and destinations by means of present and potential dealer and warehouse sites, including their distances; 3. The available modes and frequencies of transportation along these paths; 4. The inventory levels at plants, warehouses and dealers; 5. The natural and institutional barriers, the unhampered flow of goods; 6. The targets and constraints imposed by customers, dealers and management concerning the speed of delivery, the percentage level of immediate service from stock, the level of inventories and frequency of shipments to and from stocks.
Dr Borchers said the proper choice and balancing of these elements would be guided
by a mixture of experience and theory, particularly Operational Research. In general it could be stated: (a) Progressive transportation rate structures favoured bulk and full truck shipments; (b) for a pre-set level of immediate customer service total system stocks of slow-moving items were lower when centralized in as few locations as possible; (c) total stock levels in a multi-stage dealer/warehouse system were dramatically lower (10-60 per cent) when
inventory management and control for all stocking points in the system were centralized at one point in the organization, and all replenishment shipments were initiated centrally on the basis of final customer demand as reported back to centre.
(d) Warehouse capital and the operating costs were sensitive both to the absolute level of item movement and to the relative mix of item sales rates (withdrawals from stock).
These principles, complemented by specific market factors, industry or country in which a company operated, could be brought to bear on a present or proposed distribution system. The form and level of detailed analysis could range from a few checklists and questionaires supplemented by management interviews, to complex simulations of alternative systems on a computer, using O.R. methods. The ultimate technique selected was a management responsibility.
Experience. said Dr Borchers, had shown that the evaluation of a distribution system, unless carefully approached, could be like a fight with the legendary nine-headed hydra. What was needed was both a sound method and an objective yardstick to measure performance.
Logistic performance involved:—
Speed: the time elapsed from receipt to delivery of a customer order.
Service: the percentage of orders satisfied directly from warehouse stock within the permissible customer service time.
Total system cost: the total operating cost of transportation, warehousing, inventory carrying, and control overhead.
Hence, reduced to quantitative terms, the "best" distribution system among alternatives was the one which management considered afforded the optimum compromise of these three performance figures.
Dr J. Miebach, head of planning division, Demag Systemchnik, spoke on "The continued on page 38