Editing Logistics (section)

=== Configuration and management ===
[[File:Push-Back-Rack.jpg|thumb|A [[FIFO and LIFO accounting|LIFO]] rack system for storage of motorcycles]]
[[File:Airline hub-1995.svg|thumb|In this particular airline logistic network, [[Denver]] serves as a network [[hub and spoke|hub]] for the [[Midwestern United States|Midwestern U.S.]]]]
In the logistics business, a logistical system is designed at a minimum cost based on the expected customer service level. As the service improves, the number of sales also increased. As service is further improved, more sales are captured from competing providers. Further increase in customer service levels after these only increases sales marginally.<ref name="Ghiani 2004"/>

Similarly to production systems, logistic systems need to be properly configured and managed. Actually a number of methodologies have been directly borrowed from [[operations management]] such as using [[Economic Order Quantity]] models for managing inventory in the nodes of the network.<ref>Waters D., Logistics: An Introduction to Supply Chain Management, Palgrave Macmillan 2003</ref> [[Distribution resource planning]] (DRP) is similar to [[Material requirements planning|MRP]], except that it does not concern activities inside the nodes of the network but planning distribution when moving goods through the links of the network.

Traditionally in logistics, configuration may be at the level of the warehouse ([[node (graph theory)|node]]) or at level of the distribution system ([[Flow network|network]]).

Regarding a single warehouse, besides the issue of designing and building the warehouse, configuration means solving a number of interrelated technical-economic problems: dimensioning [[Pallet racking|rack]] cells, choosing a [[Palletizer|palletizing]] method (manual or through [[robots]]), rack dimensioning and design, number of racks, number and typology of retrieval systems (e.g. [[Crane (machine)#Stacker|stacker cranes]]). Some important constraints have to be satisfied: fork and load beams resistance to [[bending]] and proper placement of [[fire sprinkler|sprinklers]]. Although [[Order picking|picking]] is more of a tactical planning decision than a configuration problem, it is important to take it into account when deciding the layout of the racks inside the warehouse and buying tools such as handlers and motorized carts since once those decisions are taken they will work as constraints when managing the warehouse, the same reasoning for [[Sorting#Physical sorting processes|sorting]] when designing the conveyor system or installing automatic [[Order picking#Technologies|dispensers]].

Configuration at the level of the distribution system concerns primarily the problem of [[location (geography)|location]] of the nodes in geographic space and distribution of [[Productive capacity|capacity]] among the nodes. The first may be referred to as [[Optimal facility location|facility location]] (with the special case of [[site selection]]) while the latter to as capacity allocation. The problem of outsourcing typically arises at this level: the nodes of a [[supply chain]] are very rarely owned by a single enterprise. Distribution networks can be characterized by numbers of levels, namely the number of intermediary nodes between [[Vendor (supply chain)|supplier]] and consumer:
* [[Direct store delivery]], i.e. zero levels
* One level network: central warehouse
* Two level network: central and peripheral warehouses

This distinction is more useful for modeling purposes, but it relates also to a tactical decision regarding [[safety stocks]]: considering a two-level network, if safety inventory is kept only in peripheral warehouses then it is called a dependent system (from suppliers), if safety inventory is distributed among central and peripheral warehouses it is called an independent system (from suppliers).<ref name="RuPe" /> Transportation from producer to the second level is called primary transportation, from the second level to a consumer is called secondary transportation.

Although configuring a distribution network from zero is possible, logisticians usually have to deal with restructuring existing networks due to presence of an array of factors: changing demand, product or process innovation, opportunities for outsourcing, change of government policy toward [[trade barriers]], innovation in transportation means (both [[vehicles]] or [[thoroughfares]]), the introduction of [[regulations]] (notably those regarding pollution) and availability of ICT supporting systems, such as [[Enterprise resource planning|ERP]] or [[e-commerce]].

Once a logistic system is configured, management, meaning tactical decisions, takes place, once again, at the level of the warehouse and of the distribution network. Decisions have to be made under a set of [[constraint (mathematics)|constraints]]: internal, such as using the available infrastructure, or external, such as complying with the given product [[shelf life]]s and [[Shelf life|expiration dates]].

At the warehouse level, the logistician must decide how to distribute merchandise over the racks. Three basic situations are traditionally considered: shared storage, dedicated storage (rack space reserved for specific merchandise) and class-based storage (class meaning merchandise organized in different areas according to their access index).

[[Order picking|Picking]] efficiency varies greatly depending on the situation.<ref name="autogenerated1" /> For a man to goods situation, a distinction is carried out between high-level picking (vertical component significant) and low-level picking (vertical component insignificant). A number of tactical decisions regarding picking must be made:
* Routing path: standard alternatives include transversal routing, return routing, midpoint routing, and largest gap return routing
* Replenishment method: standard alternatives include equal space supply for each product class and equal time supply for each product class.
* Picking logic: order picking vs batch picking

At the level of the distribution network, tactical decisions involve mainly [[inventory control]] and [[delivery (commerce)|delivery]] path optimization. Note that the logistician may be required to manage the [[reverse logistics|reverse flow]] along with the forward flow.