CHALLENGE QUESTIONS (1)

Suppose you are asked to argue about why Logisticsis not only
Warehousing and Transportation. What would be your line of
reasoning?
Which could be the activities under the responsibility of a Logistics or
Supply Chain Executive?
_

Logistics is more than transportation and warehousing. Its all about both
distribution, planning, flow of information and tracking of goods.
Logistics Management is that part of supply chain management that plans,
implements, and controls the efficient, effective forward and reverse flow and
storage of goods, services and related information between thepoint of origin
and the point of consumption in order to meet customers' requirements.
What is the main idea behind the birth of Logistics as a new
discipline?
_

the integration of transportation, warehousing, and inventory as the future of the discipline. At
that time, physical distribution was just beginning to edge its way into the corporate lexicon and make
its considerable presence felt in the business community

Discipline meets efficient movement of finished products from the end of

production line to consumer, and in some cases includes the movement of
raw materials from the source of supply to the beginning of the production line
What is the difference between Logistics and Supply Chain
Management?
_

Supply Chain focuses on Supply Chain as a whole; competition among

supply chains; logistics as a differentiation lever
ENTIRE SUPPLY CHAIN
VALUE OF THE CUSTOMER SERVICE
OVERALL LOGISTICS COST TO SERVE THE FINAL CUSTOMER
SUPPLY CHAIN BASED COMPETITION
Supply chain management is an integrating function with primary responsibility for
linking major business functions and business processes within and across
companies into a cohesive and highperforming business model. It includes all of the
logistics management activities, as well as manufacturing operations, and it drives
coordination of processes and activities with and across marketing, sales, product
design, finance, and information technology.

3 Stacks of Logistics Management

1. Logistics Execution includes the design and management of the
processes that support the flow of materials (handling, storage, physical
transformation and transport activities) and documents along the supply
chain
2. Supply chain planning is the process that plans for the adjustment of the
operational capacity and for the execution of the operational activities
linking the demand and the supply sides of the supply chain. It aims at
getting the supply chain aligned and tuned

3. Supply chain design and strategy aims at defining:

(1) the logistics network structure (supply network, production network and
distribution network)
(2) the transportation modes (road, rail, ship, inter-modal, etc.)
(3) the make or buy policies
Build a strong case in favour of the following statement: Logistics is
crucial for a Retailer in the Fast Moving Consumer Goods sector
_

L&SCM are non-discretionary activities that must be accomplished to deliver

the right value to the right customer
_ These activities are costly: L&SCM related costs represent on average
between 5 and 15% of revenues and more if a supply chain perspective is
taken
_

They have a substantial impact on the assets of a company (inventories,

manufacturing plants, transport)
_ Last but not least L&SCM affects the top line of the profit&loss, i.e. revenues
(customer service, lost sales
_

keyperformance indicators of the process itself:

_ Order Fill Rate
_ Order Cycle Time
_ Order Completeness
_ Delivery Accuracy
_ Delivery Frequency
_ Punctuality
_ Order Tracking
_ Product range
_ Collection of unsold (or expired) items

CHALLENGE QUESTIONS (3)

Whats the difference between effectiveness- and efficiency-related
performance in Logistics? Give some examples of effectiveness-related
performance?
_

EFFECTIVENESS

EFFIENCY

The right
materials
In the right
quantities
Of the right quality
In the right place
At the right time

The right
PRCE
COST REDUCTION

REVENUE
IMPROVEMENT

(1) Reduce logistic costs

_ By improving the efficiency/productivity of

the
the
_ the
_ the
_ the
_
_

transportation activities
handling activities
storage activities
use of packaging
administrative tasks (for instance document management)

(2) Contribute to increase the Revenues

_ By improving customer service
_ getting a premium price for the better service
_ increasing customer retention
_ increasing the number of customers
_ entering new markets

(3) Reduce the current assets

_ By reducing inventories
_ removing dead inventories
_ right-sizing and deploying the safety stocks (centralization/decentralization)
_ right-sizing the cycle stocks

(4) Reduce the investment in fixed assets

_ By better logistics/supply chain planning (less variability and less
unpredictability)
_ reducing the manufacturing and warehousing capacity
_ reducing the fleets
_ reducing personel

(5) Manage the trade-off between the different

sources of value (with a net positive effect on ROA)
_ By improving productivity though investments in fixed capital (e.g. information
systems)
_ By improving the efficiency of the logistic activities accepting an increase in the
inventory level
_ By improving customer service and revenues accepting a less than proportional
increase in the logistic costs
_ By reducing the fixed capital through outsourcing accepting an increase in the
logistic costs
_

What is the meaning and the use of the ROA model?

ROA = NET PROFIT

TOTAL ASSETS

= REVENUE - COST
CURRENT + FIXED ASSETS

Revenue= Better customer service

Cost=Logistics Cost Delivery
Current Assests=Low inventory + Low raw materials + low wok-in-process
material
Fixed Assets= Labor+Machinery+Working Capital+Facility
Its used to assess the return of assests according to the net profit. You can
compare the alternatives to decide efficiently.
Provide some examples of different logistic strategies, their expected impact
on ROA and their alignment with the corporate strategy?
_

Strategy A

Lean, Risk-hedging, Responsive, Agile Supply Chains

 Product typologies (Mass Products, Innovative Products)

Classify products depending ondemand characteristics (Functional vs.
Innovative)
Process typologies (Stable Process vs. Unstable Process)
Supply chains of different Sectors (Process Stability & Demand Variability
Levels)
Supply Chain Strategies
Lean (highest cost efficiency)
Responsive(flexible to the changing and

diverse needs of the customers

Risk Hedging(sharing resources in a supply
chain so that the risk in supply disruption can
also be shared

Agile (Cevik, hareketli) responsive and

flexible

Strategy B
Time-based, (Cycle-time, order cycle-time reduction, pull approach,
Asset-based, (inventory reduction,
Technology-based (equipment utilization)(b2b, RFID, automated
warehouses)
Relationship-based Supply Chain Strategies (third party logistics
services)(integration to SC and collaboration)

CHALLENGE QUESTIONS (4)

What is the role of warehouses in a distribution network?
What are the main processes and activities in a warehouse? And in a transit
point?
_

The logistic channel includes:

_the distribution network, whose nodes are the plants, the warehouses (central
and regional warehouses, transit points) and the points of sale
_the transportation systems (connections) which connect the nodes of the
network
STORAGE:
_ Keep the inventories
_ guarantee a determined safety stock coverage
_ decouple asynchronous processes
_ keep the goods safe
_ .. (the main roles of the inventories)

FLOW MANAGEMENT/MATERIALS HANDLING:

_ Transform the flows
_ From Full pallet loads to customer orders
_ From unpacked products to packed products
_ From untailored products to tailored productsye

TRANSIT POINTS
It aims at optimizing transports to the end customers
(local distribution)

 by accepting a longer cycle time (+ 1 or 2 days on

average) than the 1-echelon distribution network
What are the main performance indicators to control the warehousing
process?
_

Wharehousing Process
RECEIVING=>
Once there they are inspected for damage and any damage is noted on the carrier receipt
The received goods are compared to the purchase order to check that they are those ordered

PUT AWAY =>

The warehouse inventory records are updated to reflect receipt of the item and its location

STORAGE = >
PICKING =>

The items on the picking list are arranged so as to minimize the distance the picker has to walk through
the aisles

SHIPPING

The carrier is scheduled to pick up the goods at aspecific time

What are the main performance differences between a single-deep pallet rack
and a drive-in system?
_ Storage systems similar to block stacking, but provided with racks to carry
the unit loads
_ One item per lane
_ Special trucks are required to enter the lanes (width = 1 meter)
_ In Drive-in systems access to the lanes is only from one side, thus implying a
LIFO stock management for the lane, while in drive-through systems it is from
both sides thus permitting a FIFO stock management for the lane
_ Like block stacking, these systems are useful for articles with high inventory
level
_

What could be the relative weight of the functional areas within the
warehouse of an electrical equipment manufacturer? What in a
pharmaceuticals wholesaler distribution center?
_

?????????????????????????
Assume you are a cement manufacturer. Which storage system would you
take into account for the temporary storage of the cement bags on pallet loads
that come out of the plant?
_

Block Stacking System of the cement bags pallets

CHALLENGE QUESTIONS (5)

What are the main warehouse management policies?
Two main policies:
1) Management of the operative cycles (storing/retrieving)
_ Operative cycles types
_

_ Single command cycles to store or retrieve

_ Dual command cycles to store and retrieve

2) Criteria to allocate the UL to the locations of the storage system:

_ Criteria to decide where to place the UL of an article
_ Space subdivision criteria
_

What is the Access Index (AI)? How can it be calculated? What is its purpose?

Allocation of the UL dependingon the AI

_In order to minimize the operative cycle times it is possible to store the
articles with higher AI in the locations where they are most easily retrievable
_This entails an access concentration (operative cycles) in the locations
closest to the I/O, and brings as a consequence the minimization of the
average operative cycle times
_The locations which are most easily accessible depend on the storage
systems and on the handling system
_To apply the criterion a dedicated storage is required but a class based
storage is in general working
Randomized Storage
Dedicated Storage
Class Based Storage (SHAPE OF THE ZONES & NUMBER OF CLASSES)
ACCESS INDEX = #RETRIEVAL INDEX
#ASSIGN LOCATION
In which situations would you suggest a class based storage policy? Make an
example
_

_ It is a good trade-off as it is possible to allocate the items to the locations following

the allocation criteria, but with a good utilization of the storage capacity

The marginal advantage in reducing the average operative cycle times,

coming from the increasing of the number of classes (and therefore the
number of zones) is decreasing (significantly decreasing with more than 3
zones).
_ In the meanwhile the marginal disadvantage in terms of storage capacity (and
complexity), coming from the increasing of the number of classes (and
therefore the number of zones) is increasing.
_

Detail the main phases of the design of the storage system within a
warehouse
_

1. Design Parameters Identfcation (SC&TC)

2. LAyout Design to hava a given Storage Capacity
3. Determination of the number of trucks to reach a given Throughput
Capacity

The expected lenght of the path (to the average location and
back) from the I/O position is:
P=U+V P=U/2+V P=2/3U + V
Optimum length of two sides of the storage area U=V
U=2V U=1,5 V
The minimum length of the path (to the average location and
back) from the I/O point can be got by deriving: P= 2U/a + V Uopt= a/2. Vopt

NA = Uopt/ AW + 2D
NC = SC / 2NA.NPB.NL V=NC.W
REAL STORAGE CAPACITY = 2.NA.NC.NPB.NL
T= VT + FT VT = P/SH + S/SV

P=2U/a + V

S=2H.(NL-1)/2

TCtruck = UF.3600/T
How the decoupling of the storage and retrieving activities during a day can
influence the needs of trucks capacity?
_

Throughput capacity of the system requires number of trucks to do the

retireving tasks or sth like that

CHALLENGE QUESTIONS (6)

Which are the main differences - in terms of technical features - between the
traditional and the automated warehouses?
_

_Racks are higher and longer

_Aisles are narrower (1 1,4 m)
_Higher requirements in terms of construction accuracy
_An automatic input/output system is required
_No human intervention is required (except for maintenance)
_

Why do we translate the coordinates of the racks from spatial to temporal?

In order to define The shape factor of the racks SF = Tv/Th

Which are the main advantages of the dual command cycles with respect to
the single command cycles?
Two main automated warehouse management policies:
1) Management of the operative cycles (storing/retrieving)
_ Operative cycles types
_

_ Single command cycles to store or retrieve

_ Dual command cycles to store and retrieve
_

Optimization of the dual command cycles:

_ NCZ (No Cost Zone)

_ MTB (Minimum Travel Between)

2) Class based storage

SC-DC
Positioning
24sx2x3
Fork cycles
10 15 s x 2 x 4
Acceleration + deceleration 6 8 s x 2 x 3
Reducing the positioning time and acceleration +deceleration time
How would you improve the dual command cycle performances?
Criteria to optimize the dual command cycles:
_ MTB (Minimum Travel Between)

The idea is to couple a storage/retrieval in a specific pallet location with a retrieval/storage in

the closest pallet location (i.e. minimize the interleave without load)
NCZ (No Cost Zone The idea is to couple a storage/retrieval in a specific pallet location with a
retrieval/storage without increasing the variable time of the cycle (i.e. the dual command cycle
must have the same variable time of the single command cycle, without increasing the costs)
_

Try to explain why the design of the storage area in an automated warehouse
affects both the Storage and the Throughput capacity
_

Max number of storage levels

Max number of column bays
Min number of aisles

CHALLENGE QUESTIONS (7)

_ Why

is the picking process key to distribution systems

performance?
_ Impact on Warehouse Costs

_ Picking/Order Assembly usually accounts for more than 50% of the Warehousing
Costs

_ High complexity: handling of fragmented unit loads

_ High labor intensity: picking is difficult to automate
Impact on Customer Service
_ Order Assembly Time is a relevant part of the Order Cycle Time
_ Order Picking Accuracy is substantial to achieve Delivery Accuracy
_ Order Picking Flexibility is paramount to achieve Delivery Flexibility
_ Whats

the difference (system configuration and performance)

between picker-to-part and part-topicker systems?
Picker to part
The picker carries out a picking mission within the picking area, visiting in
sequence all the locations which are detailed in the picking list
Part to picker
The pickers work in one or more picking stations he pallet loads of the items
detailed in the picking list are retrieved from the storage area and carried in
sequence to the pickers who pick only the quantity required in the picking list.
Then the pallet loads, unless finished, are put to store again
_ Which

are the main design parameters of a picking system? What

is the Forward-reserve Problem about? What is the main choice, in
a nutshell?
The Forward-Reserve decision
_ How to split the overall inventory within the warehouse into a reserve stock
and a forward stock (= inventories dedicated to picking)
_ The output of the FRP is first of all the storage capacity of the picking
system
_ A sub-problem, which is embedded in the main problem, is the allocation of
the capacity to the item classes or single items
_ The basic trade-off is between the cost of space and handling costs (i.e. the
replenishment costs on one side and the picking costs - and effectiveness
on the other side)

Determine the value of the picking stock (how much storage capacity is
dedicated to the picking area) in order to reduce the sum of the picking costs
and the picking area replenishment costs
The FRP decision requires to
_ Determine the storage capacity of the picking area:
_ Forward area: yes or no?
_ Identify the items to be located in the picking area: all or only a part?
_ Choose the replenishment frequency if there is a forward area separated from the reserve
area
_

Embedded problem: allocate the picking storage capacity to the items

_ What

are the three basic management policies? What is the main

goal of these policies?

Main design and management decisions

1. Selection of the picking system
_ Segmentation of the picking problem in sub-problems
(clusters of homogeneous items)
_ Identification of the eligible picking solutions

3. Management Policies
_ Space allocation for each item (by-product of the FRP

The basic decision is about the relationship between

warehouse orders (= picking mission) and customer orders (=the final output
of the process)
_ Batching Policies

The basic decision is about the sequencing of picks

in the warehouse order (or picking list)
_ Routing Policies (Sequencing)

The basic decision is about the allocation of single

items or classes of items (class-based storage) to the available picking
locations
_ Location or Storage Policies

CHALLENGE QUESTIONS (8)

_

Which are the main components of the picking time?

_Set-up time
_ Time to get and read the picking list
_ Time to carry the empty picking box and deliver the loaded picking box
_Travel time
_Retrieval time
_ Read and check the picking list
_ Position in front of the picking location
_ Pick the items from the racks and put them into the box
_(Waiting time: congestion, stock-out, )

Which are expected to be the most relevant ones?

The EXPECTED travel time and distance

_

What does the travel time is affected by? How can I reduce it?

The within aisles travel distance depends on the number

of aisles to enter and the routing policy within the aisle
The across aisles travel distance depends on the farthest
(from the I/O point) aisle to enter
_

How does the batching policy impact the picking time? Which are its cons?

Batching policies
Order Picking:

The operator has to fulfill one order per mission only (Picking List = 1 customer
order)

Batch Picking:

The operator has to fulfill more than one order (a batch of orders) per mission
(Picking List = N customer orders =Warehouse Order)
Pros:
_ Increase in the picking density (decrease of the distance between two
consecutive picking locations)
_ Reduction in the average number of lines on the picking list and therefore
reduction in picking stops and picking time if more pieces can be extracted
together
_ (Reduction in the number of missions and hence reduction in the fixed set-up
times)
Cons:
_ Sorting is required
It is a process through which a batch of orders is sorted into single customer
orders
There are two kinds of sorting:
_ sorting concurrent to the picking
_ sorting following the picking:
_ manual sorting
_ automated sorting
_ Information-intensive approach: batching is required (i.e. the formation of
batches)
How does the Access Index based storage impact the picking time? Which
are its cons?
_

Access Index - based Storage

The items with a high ratio between picking frequency/popularity divided by

dedicated space are located closer to the I/O point
Pro:
_ Reduction in the expected picking time (the most of the picks are close to the
I/O point)
Cons:
_ It could cause congestion and interference within the picking system as all
the most requested items are stored in a few aisles
_ Information-intensive approach: AI is a dynamic parameter and allocation
should be changed accordingly

How do the routing policies impact the picking time? Which are the main
alternatives we saw?
_

Routing policies the problem

Routing policy: the sequence according to which the items are picked
(=picking mission)

This problem is an instance of the TSP (traveling salesman problem) with the constraint that
the picker has to move within the aisles

1. ORDER BY ORDER

Analyze each order and choose the best picking tour in order to get the minimum travel
(solving the TSP)
PRO:
_ The travel is minimized
CON:
_ A specific picking tour has to be determined per each order

2. PRE - DEFINED POLICIES

A pattern is chosen once for all and is used for all the orders irrespectively of the specific
travel-minimizing path
PROS:
_ The routing policy is more stable and easy to memorize
_ Easier to apply the storage policies
CON:
_ The travel is not minimized

--Traversal policy

The picker enters the aisle, walks through all its length stopping when
requested and gets out of the other side

--Return policy

The picker enters the aisle, picks on one side first, reaches the farthest
requested pick location, then comes back picking on the other side, getting
out of the same side he entered

--Mid-point return policy

The picking area is divided into two parts (through the cut of the working
aisles). In each area the picker adopts a return policy. The picking mission is
completed by two traversal paths (one in the first and one in the last aisle to be
visited)

--Largest- gap return policy

For each aisle to be visited the largest gap is determined.

The largest gap is defined as the maximum distance between the following
distances:
from the beginning of the aisle to the first picking location
between each picking location and the next one
between the last picking location and the end of the aisle

CHALLENGE QUESTIONS (9)

The logistic channel includes:
_the distribution network, whose nodes are the plants, the warehouses (central
and regional warehouses, transit points) and the points of sale
_the transportation systems (arcs) which connect the nodes of the network
_

What should be optimized in the Road FTL transportation? And in road LTL?

Definition: a full truck load (FTL) shipment is a transportation in which a semitrailer (or a trailer) is dedicated to a shipper who fills it with freight for one
destination
Definition: a less than truck load (LTL) transportation is a transportation for
quantities lower (*) than a truck load
MIN of the pick-up and local distribution distances + routing algorithms (the
critical resource is TIME, i.e. how many pick-ups and deliveries can be done in the time
window) should be optimized
_

What are the main issues of rail transportation?

Main characteristics:
_ Low cost (cost per ton*km is pretty low), especially for long distances and
large shipment quantities (high fixed vs low variable cost structure)
_ Low accessibility: the loading/unloading points must be on the railroad
(exceptionally large production or distribution facilities have rail sidings)

_ Slow speed/High transit times and Low reliability: mainly due to the high and
variable handling times at the consolidation stations (unit trains are an
exception)
_ Damage risk: variable depending on the type of service (unit train vs LCL)
What is intermodal transportation? What are its main advantages? When
piggyback intermodal transportation becomes interesting with the respect to
road only?
_

Definition: intermodal transportation services refers to the use of two or more

carriers of different modes in the through movement of a shipment, without
changing the transport unit load, known as Intermodal Transportation Unit
(ITU)
It requires Intermodal Terminals, i.e. dedicated facilities where the ITU are
transferred from one mode to the other
It leverages the best features of each transportation mode (transforming some
labour intensive activities into capital intensive activities)
Two main intermodal transportation modes:
_ Road + rail (also known as piggyback) made by truck, part by rail
_ Road + water (also known as fishyback)
Main characteristics of piggybak
_ Door-to-door service (like the road)
_ Low costs, higher than only-rail but usually lower than only-road especially
for long distances
_ High transit times, mainly dependent on the railroad transit times and the
handling times in the intermodal terminals, and usually low reliability
_ Low damage risk, ITU are never opened during the transportation

Assume you are a Fast Moving Consumer Goods manufacturer. Which types
of transportation modes would you recommend to consider for distribution in
Europe? What would drive your choices?
_

CHALLENGE QUESTIONS (10)

Compare the performance of the main types of distribution networks in terms
of delivery time and distribution costs?
_

When should a direct delivery option be of interest?

Goods are delivered from the suppliers straight to the customers.

What are the main decisions to be taken when designing a distribution
network?
_

Strategic Level :
Number of echelons
Number of warehouses of each echelon
Warehouse location
Typology dimensions and automotion level
in-house or outsourcing
Operational Level
layout, product allocation
storage / handling systems
order marketing
connections
How can a distribution problem be described? What are the main factors
that drive
the choice of the distribution network structure?
_

Objective : identification of the network structure and the management

policies to achieve the service level objectives with the minimum overall
distribution costs
Distribution Costs
Primary Distribution
Secondary Distribution
Safety Stocks + In-Transit Stocks + Cycle Stocks
Handling
Customer Service
Order cycle time
Delivery frequency
Delivery punctuality
Delivery completeness
Delivery flexibility
COST + SERVICE + PROFIT OPTIMIZATION REQUIRED

Assume you are a consumer electronics manufacturer. Which types of

distribution
Networks would you recommend to consider for distribution in Europe
_

CHALLENGE QUESTIONS (11)

Which are the main macro-phases of the Distribution Network Design
process? How would you cope with them?
_

Design methodology Main phases

Strategic planning
_Objective
Identification of the most promising configuration of the distribution network (just a limited
number e.g. 3-5 alternatives)
_Methodologies
Strategic/qualitative methodologies
_Data required
Limited number of aggregate data
Operative planning
_Objective
Best alternative selection and fine tuning
_Methodologies
Quantitative methodologies
_Data required
Huge amount of detailed data
How would you cope with them?

Network selection Matrixes provide it.

What do the Network selection matrixes aim at? Which are their strengths?
Which their limitations?
_

The Network Selection matrixes aims at finding a rough Distribution Network structure that fits
the specific Distribution Problem
y: PRODUCT SERVICE x: SUPPLY - DEMAND

_ Data collection
A determined set of data has to be collected per each distribution problem (a company deals
with more than one distribution problem)
_ Distribution problem representation
It has to be a compact representation of the distribution problem (i.e. a representation that
includes all the drivers at the same time)
_ Positioning on the matrixes
Each distribution problem will be positioned on a set of matrixes depending on the values of
the different drivers
_ Macro-decision on the network structure
The matrixes give the designer some recommendations about the structure of the distribution
network (number of echelon, rough suggestions about the number of warehouses per each
echelon,)

Assume you are a manufacturer of car parts. How would you structure your
European Distribution Network?
_

Which are the main differences between the qualitative and the quantitative
cost models in terms of objectives/field of applications and information
required?
_

Qualitative cost models

They aim at analysing the relationships between the main costs and a specific parameter of
the Distribution Network (e.g. number of warehouses, umber of echelons, etc.) by identifying
the cost curves
(i.e. curves that show how the costs vary by varying the parameter) See the example in the
forthcoming part of the lesson (number of regional warehouses in a two echelon distribution
network)

Quantitative cost models

They aim at calculating the costs of one (or a limited number of) specific Distribution Network
configuration in order to assess the most convenient alternative. They require a huge amount
of data and can be used only after the most promising alternative selection

CHALLENGE QUESTIONS (12)

_

How would you describe the location problem? And the allocation one?

Where to locate that the number of echelons and the number of warehouses for each echelon
have already been decided, we have to roughly determine the location of each warehouse
(warehouse location) and then to find the its exact position (site selection)

Which are the main models to cope with them? Which are their pros and
cons?
_

The warehouse location process is based on two main steps:

_ the determination of the geographical position of the warehouse
_ the review of the results stemming from the quantitative techniques

CHOICE FACTORS
_ Proximity

to suppliers/plants

_ Proximity to customers
_ Presence of transport infrastructures
_ Cost of the area and of the public utilities
_ Costs of in/outbound transports
_ Cost and reliability of labor
_ Tax relieves/restrictions
_ Proximity to other companies
_ Meteorological conditions / quality of life

Which are the main techniques to deal with the multiwarehouse location?

warehouse => Center of Graivty

Model variables
(X,Y) = coordinates of the center of gravity
Model parameters
_(Xi,Yi) = coordinates of both the points of origin and destination
_Fi = Inbound (for the point of destination) and outbound (for the point of origin) flows
_Ri = transportation rate per unit [/(km*t)] (it depends on the weight and the distance)

First Step

Centroids (X*, Y*)

Second Step

Multi warehouse => Heuristic / LP / Simulation techniques applied

Constraints
_ Constraints related to the production capacity of the plants (Qi)
_ Constraints related to the operative capacity of the warehouses (Qj)
_ Constraints related to the forecast demand of each customer (Qk)