Direct and indirect flow of goods

The direct flow of goods between supplier and receiving points ideally corresponds to the logistics model of flow orientation and can be characterized as the “primal strategy” of logistics. Among other things, it enables just-in-time strategies to be developed. Still, it can make sense to disrupt the flow of goods for the purposes of separating or consolidating goods. Above all, the indirect flow of goods resulting from such a decision creates economies of scale.

Economies of scale in the indirect flow of goods

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The objective of indirect flow of goods is to achieve economies of scale leading up to the point of separation or following the point of separation. For instance, the goods that are to be shipped can be consolidated into large transport lots in order to reduce unit transport costs and the unit costs of the shipping department at the supply point and of the receiving department at the receiving point. This process is called consolidation Consolidation . But consideration must also be given to the fact that disrupting the flow of goods can generate higher costs for warehousing, handling and order processing Order processing [1].

 

Types of consolidation in the indirect flow of goods

There are three forms of consolidation Consolidation in the indirect flow of goods [2]:

  • Inventory consolidation
  • Vehicle consolidation
  • Distribution-warehouse consolidation

 

Inventory consolidation is a time-based form of consolidationin which deliveries are delayed until a certain transport lot is reached. Inventory consolidation is also used when deliveries are accumulated at a specific receiving point and are performed at a predetermined point in time.
Vehicle consolidation is a spatial form of consolidation. During a run, a vehicle collects goods at several supply points or delivers them to several receiving points. In addition to the costs generated by the time-based form of consolidation, costs are also generated by the collection or delivery run. But these costs can be minimized with the help of efficient route planning Route planning .
Distribution-warehouse or transit-terminal consolidation is also a form of spatial consolidation. In the distribution warehouse, goods received from the supply points are sorted, loaded onto other vehicles and delivered to receiving points. This enables the number of links between supply and receiving points to be reduced. In addition to the vehicle-consolidation costs, costs are generated by the construction and operation of the transshipment warehouse [1].

The hub-and-spoke network forms the basis of the distribution systems used by courier, express and parcel services Courier, express and parcel services (CEP services). Here, it must be ensured that the savings achieved through consolidation are large enough to cover the operating costs of the hub Hub and the higher transport costs associated with the greater distances.
Hub-and-spoke networks are especially suited for low transport volumes of individual shipments. In addition, the time windows should not be too tight and the costs for building the consolidation station should not be too high [1, 3].

Just-in-time strategies with direct flow of goods

The direct flow of goods is based on the strengths of the just-in-time Just-in-time system. The objective of just in time (JiT) is to supply a product or a service by adequately planning, managing and monitoring all streams of material and the related information flows. In this process, time, material, manpower and energy should not be wasted and customer requirements in terms of price, quality and delivery services Delivery service fulfilled. The just-in-time concept is based on the following, directly related principles [4]:

  • Reduction of cycle times Cycle time
  • Order orientation in production
  • Lowering of set-up times
  • Provision of capacities
  • Simplification of processes

 

A variation of just-in-time Just-in-time is just-in-sequence Just-in-sequence . In this concept, materials needed by a particular area are provided in the precise sequence that is required. This can be achieved through sequence-focused picking conducted near the site that requires the items - that is, near the customer. But, it can also be done far from the customer through production coordinated with the site requiring the item. In the implementation of just-in-sequence deliveries near the customer, industrial-park concepts have been gaining importance [5].
In principle, the just-in-time Just-in-time system can be applied in procurement Procurement logistics , production Production logistics and distribution logistics Distribution logistics . But JiT strategies are used most frequently in procurement logistics, particularly in the automotive industry [1].

Recommended reading

Logistikmanagement | Pfohl 2004

Strategic Logistics Management | Stock / Lambert 2001

References

[1] Logistikmanagement | Pfohl 2004
[2] Consolidation Strategy: Inventory, Vehicels and Terminals | Hall 1987. In: Journal of Business Logistics 8(1987)2
[3] Grundlagen der Netzoptimierung | Heinrichmeyer 1998. In: Handbuch der Verkehrslogistik | Buchholz / Clausen / Vestag (Hrsg.)
[4] Just-in-Time | Zibell 1990
[5] Das Konzept Industriepark | Gareis 2002

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