Logistics planning is the supply chain equivalent of conducting an orchestra – trying to unify a multitude of moving parts and people to deliver in time. The only difference is, for an orchestra who gets it right, there’ll be a standing ovation; for the logistics planner that gets it right, there’ll just be silence. Get it wrong and there will be anything but silence. In this article, we look at why logistics planning is possibly the most complex task in supply chain management.
What is Logistics Planning?
In supply chain management there is effectively three tiers of activity – strategic, tactical and operational execution. Logistics planning is a tactical supply chain requirement. To put this into context, Logistics Network Design is the strategic – it sets out the network blueprint of where facilities are located, what transport modes are used and where inventory is held. Logistics Planning is then the task of planning how material will flow through that network. Finally, the operational element is performing the plan. You can think of logistics planning in terms of chess – strategy gives you the board, pieces and rules and then planning puts all the pieces in the right place before operations play the game.
The Logistics Planning Tasks
Logistics planning focuses on the physical movement of material through the supply chain and that predominantly translates as transport and warehousing. In transport, the role of logistics planning includes identifying the correct fleet configuration, fleet positioning, driver numbers and approaches to transport routing. For warehousing the role of logistics planning is to plan layout, picking methodologies, material handling equipment, resourcing levels and shift patterns, amongst other requirements.
In logistics, the gap between planning and operational delivery is closing. Technology is driving the ability to make dynamic adjustments to logistics planning whilst the plan is being delivered. This can be best seen in vehicle routing. Not that many years ago, vehicle routes were manually planned and the driver was provided with a daily, or even weekly schedule on paper. That schedule was fixed unless the driver decided to alter the plan whilst on route. In modern transport operations, especially multidrop and home delivery networks, planning is now live and dynamic. The routes are constantly being optimised to avoid traffic congestion, make additional collections or deliveries or to meet altered customer delivery times.
This closing of the gap between tactical planning and operational execution, does, in some cases, help the role of logistic planning. Planning failures can more easily be rectified in the live environment which helps improve service levels and costs. However, that doesn’t mean logistics planning is any less complex.
The Complexities of Logistics Planning
Planning to get the right volume of material through the supply chain, at the right time and cost is complex for many reasons, with the primary one being constraints. Once again, transport route planning provides the example to demonstrate the complexity that constraints create.
Transport route planning comes under the mathematical problem often referred to as the ‘travelling salesman problem’. The problem is how to find the optimal route, minimising distance and time, from the starting point, through multiple intermediate destinations and then back to the starting point. Of course, this is very simplistic and could be done manually if you have less than 10 intermediate points. However, most logistics networks will have hundreds and potentially thousands of intermediate points to consider. That makes for a very complex problem to solve, but the constraints then make it even more complex.
Let’s say that we have a fixed requirement of 1,000 customer delivery points to schedule. That’s difficult enough to route, even with an assumption that every delivery point takes the same volume and has no restriction on the time for delivery. Of course, that’s not going to be the case, so let’s start to consider the constraints.
Time is a good place to start. It is likely that each individual customer will want a specific time delivery window, perhaps morning or afternoon or even a 1-hour delivery slot. Next, it is also possible that certain customers can only take certain types of vehicle – perhaps curtain sided for ease of unloading or small fixed unit vehicles for urban deliveries. After time and vehicle type we can then throw in even more constraints such vehicle accessibility (low bridges, congestion charging etc.), vehicle capacities, collection requirements, temperature control, driver hours legislation…the list goes on. So, we started with what was already a hugely complex problem, to route 1,000 customer delivery points, but then added multiple layers of constraints that need to be considered.
Of course, Operations Research, which is a mathematics discipline focused on supporting management decisions, has been developing advanced analytical solutions for problems such as the one described since the 1940s. Luckily, these solutions have now found their way into systems solutions that can, at the very least, find a heuristic-driven solution to such logistics planning problems. However, these systems are expensive and can still be super-complex to use to their fullest extent.
Is Logistics Planning the Most Complex Task in Supply Chain Management?
It could be argued that strategy, in terms of Logistics Network Design, is equally as complex as logistics planning. Calculating optimal locations for manufacturing, warehousing and distribution centres requires complex and challenging modelling, as does determining where inventory should be positioned in the network. However, the fundamental difference between strategy and the tactical role of logistics planning is that strategy can be roughly right, tactical logistics planning must be exactly right. There is no room for error in logistics planning. Analysis must be made at a granular level and thoroughly tested against every eventuality. This is what makes logistics planning the most complex part of supply chain management.