In recent years, we have observed a process of consolidation of pharmaceutical wholesalers on the Polish market. Dominant entities, while increasing their market share through the acquisition of smaller players, also take over their logistics structures. Managing the resulting new organizational structure effectively is not simple. Overcoming differences related to the organizational culture of individual entities and the use of different IT systems in them is one side of the coin. An equally important problem is merging the functioning of the logistics area into one efficient system. Within this area, an important element requiring improvement is inventory management in the distribution network. And it is this thread that will be described in more detail in the article.
Reorganization of the distribution network
Improving the inventory replenishment model at individual levels of the distribution network should begin with defining its functionality. In the target distribution network model of the studied Enterprise, the operation of three Central Warehouses was assumed. The fundamental role of inventory in Central Warehouses is to secure sales throughout the distribution network. Therefore, it is important to aggregate orders flowing from individual Companies in order to determine the global needs of the entire network. All final customer (Pharmacy) orders aggregated at the level of Company Warehouses (Regional Warehouses) are directed to the appropriate, assigned Central Warehouse. Based on the total needs of all Central Warehouses, orders to suppliers are generated. The idea of the functioning of the model distribution network in this respect is shown in Figure 1. A fundamental change in the functioning of the model distribution network is the reorganization of deliveries to the final customer – the first delivery will be completed in Central Warehouses, and not, as it has been so far, in Regional Warehouses. As part of this solution, it is assumed that the decoupling point (the place of allocation of the main inventory in the distribution network) is located in Central Warehouses. In Company Warehouses, only cross-docking and transport to Pharmacies will be carried out, in accordance with established routes. Handling of the second and third delivery to Pharmacies will be carried out from stocks maintained in Regional Warehouses.
Inventory replenishment model in the proposed distribution network
The considered Enterprise uses the services of many suppliers, both domestic and foreign. An analysis of the role and operating conditions of Central Warehouses within the distribution network indicates that a rational solution is to consider assortments in an aggregated manner – from each supplier separately. Such an approach is related to the commercial terms offered by the supplier. One-time orders of goods from a supplier of significant value create the possibility of obtaining larger discounts and allow meeting the conditions resulting from logistics minimums.
Classic inventory replenishment models treat individual assortment items separately, and therefore they cannot be applied directly in this situation. The S,c,s model does not have such limitations. In the case of the inventory replenishment system in Regional Warehouses, it is proposed to use a modified tool of the theory of constraints. Inventory replenishment within a solution based on a constraint is based on managing the inventory buffer in the appropriate link of the supply chain. Combining both inventory replenishment methods, i.e., the s, c, S model at the level of Central Warehouses and the model based on the theory of constraints at the level of Regional Warehouses, constitutes a hybrid solution for inventory management in the distribution network in the considered Enterprise.
The article comes from the “Logistyka” magazine 4/2008.