Strategic Design of Multi Echelon Distribution Network

Abstract

In the recent years, companies are facing highly competitive environment and pressure to reduce their sourcing and procurement cost, production cost, inventory management cost and logistics system cost meanwhile achieving the astonishing levels of customer satisfaction. Warehousing and Distribution System is often treated as a stepchild in the Supply Chain of company. Therefore in the process of optimizing supply chains, Distribution echelon is generally ignored in optimization process as compared to other echelons, while it is one of the major money consumer among other echelons of supply chain. A well designed Distribution Network can won a company a competitive advantage over its competitors to win business.

Designing a complete Distribution Network requires critical analysis of both Qualitative and Quantitative factors. Quantitative factors constitute impact on cost of distribution network while qualitative factors have impact on the service level issues.

Since, this thesis deals with a practical industrial problem. Therefore I have taken up a case of Pakistan Tobacco Company, a Subsidiary of British American Tobacco, a Multinational Operating in Pakistan since its birth. It is a FMCG company manufacturing tobacco products in Pakistan.

This Thesis studies the impact of different factors on designing of distribution network and then formulates the mathematical model for determines transportation schedule, number of distribution channels in a Distribution Network. In this study, we focused on the minimizing the total distribution network cost by adopting the techniques of Mathematical programming and challenging distribution cost.