Strategic planning of joint logistics at the level of horizontal cooperation.

Cerny, Zbynek ; Simon, Michal

1. INTRODUCTION

In terms of advanced economies are small and middle-sized companies allowed to be the most flexible, most effective and most progressive and therefore to be the most important part of economy (Jac et al., 2005). Dissemination of European market bears not only the entrepreneurial opportunities for these companies, but threats above all. Competition is increasing and small and middle-sized companies are not able to face it. New cooperation and generation of enterprise nets and clusters (Porter, 1998) are appearing. And they must define important activities, critical activities for a good functioning of a company network.

Currently, a lot of researchers are focused mainly on the logistics optimization at the vertical level of cooperation; optimization of the typical supply chains and there are a lot of mathematical figures and models (Fiala, 2005). In these research papers is mainly placed emphasis on the supplier-customer relations. The same is in area of SW tools. Most of SW tools for strategic logistics planning (ORionPI, 4Flows, One, Snow, OptiNet, etc.) solve a logistics (distribution, warehousing, etc.) well for the supply chains, because there are considered the material flows between different levels only and often in one direction (some of these SW tools were tested at our department). But in the softwares is problem to determine and design relations between the subjects at the same level. Focusing on the vertical type of cooperation (supplier-customer relations) is obvious--in the high quality, quickly and cheaply get the products to the customers. But a little bit in a shadow is other type of cooperation that has also significant impact on a quality of the logistics processes--cooperation at the horizontal level. This paper is focused on this type of cooperation.

2. BENEFITS FROM HORIZONTAL COOPERATION

Advantages of logistics for cluster members are e.g. lower material and product acquisition costs due to corporate central purchase, lower costs of stock functioning and equipment and opportunity to use stock spaces and resources of central stock (Gros et al., 2005). Logistics in cluster has advantages for cluster itself as well e.g. central optimizing of stock capacities and resources of whole cluster or opportunity to select cluster members on the basis of their product price analysis and material transfer.

Network enterprise creates presumptions for costs reducing and sales increasing of partners in the given business chain. The usage of central stocking is the basic point of "supplying logistics" in the existing chain. We talk about location of central stock in the most convenient place not separately for each cluster member but for the whole cluster.

This structure of goods supply organization from suppliers to companies through a central stock brings many advantages. Reducing of transportation costs is one of the advantages that are influenced by reducing of transportation cars importing the goods into one company in cluster. Theoretically speaking always one transportation car which has the goods from a central stock from many suppliers goes to each company.

We give an example: we have 10 suppliers delivering into a cluster which has 5 cluster members. If we transport the goods from suppliers directly to each company we would need 5 transportation cars from each supplier; that is 50 cars. Each company would have to receive 10 cars. When we use a central stock the number of used cars will reduce to 15 ^ 10 cars would go from suppliers to a central cluster stock, material would be moved to the cars for individual customers here and thereby only five cars would go from a central stock to individual companies.

Goods purchase for reducing quantity price is another advantage of stocks centralization in cluster (Schotanus et al., 2009). According to requirements of members cluster will buy goods into a central stock. These goods will be then divided among companies.

In the following chapters are described some of the advantages that are coming from joint logistics control.

2.1 Localization of central stocks

* Easier and more synoptic evidence of stocks stage.

* Enhancement of material flow continuity and whole cluster production process.

* Costs savings connected with rental or building of new instore space.

* Costs savings connected with in-store space running (electricity, human resources, and other costs).

* Reduction of services costs.

* Faster and easier reaction to concrete requirements of individual members.

[FIGURE 1 OMITTED]

2.2 Stocks control

* Mutual purchase (using of trade discount).

* Financial resources savings which would be connected with unnecessary stocks by individual cluster customers.

* Reduction of safety stock by individual cluster members.

* Reduction of stocks level.

* Enhancement of reaction to seasonal demands.

* For reason of using of central stock it is possible to choose a long-term perspective among individual deliveries.

* Reduction of stock claims on human resources.

2.3 Determination of distribution variants

* More effective using of capacity of means of transportation.

* Influence of mutual transportation on stocks and end cluster products.

* Freight rates are constant for all cluster members.

* Reduction of transport costs on "extraordinary" delivery.

3. DESIGNED REFERENTIAL MODEL FOR HORIZONTAL COOPERATION

On the basis of above mentioned advantages which come from cooperation and mutual logistics of companies in cluster the mathematical model was proposed (Fig. 2). This model was designed in Microsoft Office Excel.

The model contents the algorithms of some above mentioned areas. We take into account these main areas:

Supplier selection

* Calculation of total material costs by individual purchase.

* Calculation of total material costs by cluster purchase.

* Calculation of total cost saving by the collective cluster purchase.

Localization of central stock

* Localization of a new central stock.

* Company determination in a cluster for central storage.

Stocks control

* Stocks control of cluster member.

* Stocks control in central stock.

* Safety stock determination for individual cluster member.

* Influence of order change on costs.

Determination of distribution variants

* Evaluation of effectiveness of distribution variants.

* Transportation costs and safety stock according to a distribution variant.

[FIGURE 2 OMITTED]

4. PRACTICAL UTILIZATION OF THE MODEL

This model, with some modifications (according to the specific requirements of customer), was used within project in company CEZ Mereni s.r.o.

There are logistics solutions of gauges for five regions in the Czech Republic, exactly for 57 customer places (customer centres). According to a regional map of given areas this problem was solved individually for regions--West, Centre, North, East, Moravia.

Every region has few centres which must be supplied. Model described in this article can be (with some modifications) used because solutions of individual regions can represent a structure of cooperative companies in network which use the mutual supplier (in this case Skutec).

The basic problem of this project is a way of gauges distribution from a central stock in Skutec (a possible supplier in network) to the individual customer places. Customer places are in this model solution certain regional central stocks (a possible central stock in a company network) and all centres (possible cooperative companies in network) which are able to quantify a plan of their consumption. This project determines the ways of instruments distribution and defines necessary minimal stocks in order to ensure needed quantity of required goods and instruments quantity in the time. Stocks minimization in combination with amount of transportation costs was used there as evaluative criterion.

5. CONCLUSION

The aim of this research was to design mathematical model which is used to strategic logistics planning of cooperative companies at the horizontal level. This model can help to small and middle-sized enterprises to well plan their joint purchasing, warehousing and distribution, thereby strengthen their competitiveness. The outputs from this model can show the advantages of their cooperation.

In the next steps we are going to extend this mathematical about new algorithms and design in a database tool.

6. ACKNOWLEDGEMENT

This paper was created with the subsidy of the project 402/08/H051 under the Grant Academy of the Czech Republic. The name of this project is "Optimization of multidisciplinary design and modelling of virtual firm's production systems".

7. REFERENCES

Fiala, P. (2005). Modelling of Supply Chains (Modelovani dodavatelskych retezcu), Professional Publishing, ISBN: 80-86419-62-2, Prague, Czech Republic

Gros, I.; Hanta, V. & Grosova, S. (2005). Optimization of the number and location of the distribution center (Optimalizace poctu a umisteni distribucnich center), Reliant News, Vol. 2, (02/2005), Pages 9-10, ISSN: 18010962

Jac, I.; Rydvalova, P. & Zizka, M. (2005). Inovation of Small and Medium-Sized Companies (Inovace v malem a strednim podnikani), Computer Press, Inc., ISBN 80-251-0853-8, Brno, Czech Republic

Porter, M. E. (1998). The Competitive Advantage of Nations. With a new Introduction. 11th ed., Free Press, ISBN 0-68484147-9, New York

Schotanus; F., Telgen, J. & Boer, L. (2009). Unraveling quantity discounts, The International Journal of Management Science, Omega, Vol. 37, No. 3, Pages 510521, ISSN: 0305-0483