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Designing efficient logistics system

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Business decisions are based on facts and it is important to ensure that systems in place are capable of collecting essential data.

Logistics or distribution networks are designed to allow for efficient movement of commodities to satisfy customer needs and information necessary for decision-making.

There are organisations that have a mandate to distribute their products countrywide on a daily basis.
Imagine Delta Beverages and Bakers Inns headache to ensure products are available to people at the remote ends of Zimbabwe.

One might argue these products are not necessities, and the business motive, driven by the desire to make profits, is what drives such institutions to reach out. There are necessities that need to be distributed to the remote parts of the country. The citizenry needs food and relies on shops to avail goods to satisfy their needs, and medicines to treat ailments.

All these commodities, foods and medicines need to be accessed by everyone even though most of them originate from Harare.

All distribution networks are interested in collecting essential logistic data. The three data elements are consumption rate, stock-on-hand and losses and adjustments.

Consumption rate relates to how much of a commodity is consumed over a given period and the average monthly consumption is a scientific measure to illustrate this element. Stock-on-hand relates to the physical stock held at a distribution centre. The physical stock must be usable stock only. Stock becomes usable because it might be damaged, expired, obsolete or redundant.

Losses and adjustments relate to the effectiveness of the distribution network, accounting for the value lost due to inefficient practices and account for stocks listed as unusable above.

Distribution networks have two extremes; its either a pull or push system. Pull is a system whereby materials are brought to service centres to replace material already used. With a push system, materials are pushed forward to production areas in anticipation of a need as opposed to pull, where material is called up to replace materials used.

The other difference between the push and pull system is on the decision-making of when and how much to order. In pull systems, the lower level, the user, requests for commodities from the higher level. In push systems, the higher level decides when to send commodities and how much to a lower level.

There are factors that influence which distribution system to adopt. The tiers in the distribution network may favour a pull or push system. If the network is two-tiered, a pull system might be appropriate because of ease of communication. Multi-tier networks may effectively operate with a push system.

Apart from number of tiers, the levels of advancement of the lines in communication networks, the road networks, postal and telephone communication are determinants of push or pull.

Where communication is advanced, pull systems are desirable. Where communication networks are poor, push systems are desirable.

Staff capability to manage inventory is a factor to consider if push or pull is desirable. If staff understands inventory management fundamentals, pull systems are desirable and the opposite is true.

There are compromises to push and pull systems. A blend of push and pull may be ideal.
Delta Beverages, for example, does not wait for orders from the remote areas, but schedules deliveries, operating a moving warehouse, and retail outlets order from the moving warehouse.

The ultimate goal of operating distribution systems is to ensure the right commodities are available to the right distribution centres in the right quantity, at the right time, in the right condition and at the right cost.

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