In this part of the article by Agnieszka Hodczak-Sekulska and Adam Redmer, labels for individual methods were missing in selected fields in Figure 1. We are now publishing the full version of this figure in part 2, while apologizing to the Authors and Readers for the situation.
Editorial Team
The article is a continuation of the Authors’ previous article titled “Distribution network structure using the example of retail chains” (Logistyka 1/2010), dedicated to the essence of distribution networks, their structure, and the identification of the structure of a typical distribution network for retail chains operating in Poland. In this article, the Authors have analyzed and optimized a typical retail distribution network to determine to what extent this network is appropriate and to what extent it should be restructured. And it should be!
A company usually has to work for several years to effectively plan a distribution network. However, this effort will not ensure certain success, as errors made during this time can lead to a significant deterioration of the company’s condition. The entire distribution network planning process should include the following elements:
- description of the current state – its assessment and collection of historical data,
- definition of requirements of stakeholders (owners, distribution centers, stores, customers) regarding service levels – identification of expectations for network restructuring and its limitations,
- development of an order fulfillment strategy ensuring required service levels for individual customer segments while maintaining cost-effectiveness – development of distribution network development variants,
- detailed analysis of collected data – BI (Business Intelligence) tools,
- processing of forecast data regarding the functioning of the distribution network,
- construction of a mathematical model of the distribution system – identification of cost functions,
- optimization – for example, using solvers working with MS Excel software (such as Premium Solver Platform by Frontline Systems Inc.),
- results and recommendations – development/transition path to the target solution.
The optimization stage in the distribution network design process can be based on various types of optimization methods that can be adapted to a specific distribution network design case. Table 1 presents a comparison of selected methods widely described in the literature on so-called operations research, which allow for the design of an optimal distribution network structure. The optimization method requires some clarification here. Although other methods can also be treated as optimization methods, by an optimization method, the authors mean the construction of a mathematical model for a given, specific distribution network development planning problem and its solution using optimization tools, such as the aforementioned solver – such an approach will be presented in the further part of the article.
Based on Table 1, a chart (Figure 1) was prepared, presenting the relationship between the accuracy and labor intensity of applying each method. The colors of the cells on the chart indicate that:
- green color – indicates favorable methods, very well suited for designing distribution networks, which provide relatively accurate results with average labor intensity, such as MWZT,
- blue color – indicates neutral methods, for which the increase in accuracy is proportional to the increase in the labor intensity of applying a given method; as a result, if the method is labor-intensive, it provides the most accurate results, such as MO, whereas if the method is easy to apply, it provides less precise results (this does not mean, however, that they are useless),
- red color – indicates methods that are not recommended, as they provide inaccurate results despite high labor intensity. In this case, none of the discussed methods fell into the red color area.
Furthermore, information about the versatility of each method was added to the chart using an appropriate font color (green – high versatility, blue – medium, red – low).
Each of the presented methods can be used to design a distribution network, but not all of them can be used to determine the location of points in the network (methods for solving so-called network problems, i.e., the shortest path method, maximum flow, and minimum spanning tree, do not allow for this). Conversely, we cannot develop an optimal goods transport plan using the center of gravity method.
The article comes from the “Logistyka” magazine 3/2010.