Optimisation of Distributive Logistics Flows in Multidivisional Firms: The Case of the Ceramic Tiles Industry

Abstract

The management of internal distributive logistics can be a major issue for modern firms and can have a significant impact on the profitability of companies. An operational analysis tool is developed for the management of the internal shipment of finished goods in multidivisional companies where there is a high level of inter-plant freight transfer activity. In order to optimise this management, the Total Distributive Cost (TDC) related to finished-good transfer has to be minimised. The fundamental cost factors which make up the TDC and which depend on the shipments policy adopted, are first identified (direct transfer costs, indirect warehousing costs and logistics costs related to the service level provided to final customers). A study is made of when these factors occur and their effects upon total distributive cost. The TDC is then minimised, optimally balancing shipping parameters, in other words the time interval between consecutive shipments and the dimensional threshold for direct forwarding of orders. The methodology is finally applied to a representative case of a multidivisional firm operating in the ceramic tiles sector. The results obtained show that significant improvement to the actual TDC value can be achieved using optimal logistics parameters. Although the case analysed has some peculiarities, the methodology proposed is of a general nature and can be applied successfully to other industrial fields with similar logistics characteristics.