Study unit 2

Models for Decision Making in

Logistics
K. C. Muchenje
Study unit 2
1. Planning a model for management
decision-making.
2. Implementing a variety of systems
3. Collection and evaluation of information
4. Understanding output reports generated
by MIS’s.
5. Categorize and describe MIS and
organizational Levels
6. The levels of management and types of
decisions made
7. 7. Decision-Making Models for Logistics
Management
1. Planning a Model for Management Decision Making

Discuss the process of planning a

model for management decision
making in logistics.
Explain the need for a structured
approach to decision making,
especially in complex logistics
scenarios.
Planning a Model for Management Decision Making: Discuss the process of
planning a model for management decision making in logistics.

The process of planning a model for

management decision making in logistics
involves several key steps.
This model serves as a framework for
making informed decisions that optimize
logistics operations, improve efficiency,
and support overall business objectives.
The process of planning a model for
management decision making in logistics.

Here are the steps involved in

planning such a model
Define the Problem or Objective:
Clearly identify the specific problem
or objective that needs to be
addressed.
Gather Data: Collect relevant data
and information related to the
identified problem or objective.
The process of planning a model for
management decision making in logistics.

Identify Variables and Constraints:

Determine the key variables that directly
impact the logistics problem at hand.
Select Modeling Techniques: Choose
appropriate modeling techniques to
analyze the data and variables.
Develop the Model: Build the logistics
decision-making model based on the
selected technique.
The process of planning a model for
management decision making in logistics.

Implement the Model: Integrate

the decision-making model into
the logistics management system.
This may involve developing
software applications, creating
user interfaces, or integrating the
model with existing enterprise
software solutions.
The process of planning a model for
management decision making in logistics.

Monitor and Evaluate:

Continuously monitor and evaluate
the performance of the model and
its impact on logistics operations.
Update and Refine: As business
requirements, market conditions,
and logistics dynamics change,
update and refine the model
accordingly.
Planning a Model for Management Decision Making: Explain the need for a
structured approach to decision making, especially in complex logistics scenarios.

In complex logistics scenarios, a

structured approach to decision
making is essential due to the
numerous variables,
interdependencies, and potential
consequences involved.
Structured approach to decision making and
complex logistics scenarios.

Here are some reasons why a structured approach

is necessary:
 Complexity Management: Logistics operations
often involve a multitude of interconnected
processes, including procurement, inventory
management, transportation, warehousing, and
order fulfillment.
 Each of these processes has its own set of
variables and constraints. A structured approach
helps manage complexity by breaking down the
problem into manageable components and
considering the relationships and interactions
between them.
Structured approach to decision making and
complex logistics scenarios.
Data-Driven Decision Making: In
logistics, decisions need to be made
based on accurate and up-to-date
information.
A structured approach ensures that
decisions are based on data and
analysis rather than intuition or
guesswork. By gathering and analyzing
relevant data, a structured approach
enables informed decision making,
leading to more effective outcomes.
Structured approach to decision making and
complex logistics scenarios.

Consistency and Standardization:

In complex logistics scenarios,
consistency and standardization are
crucial for ensuring efficiency and
reducing errors.
A structured approach provides a
consistent framework for decision
making across different scenarios
and helps establish standard
procedures and protocols.
Structured approach to decision making and
complex logistics scenarios.

Risk Management: Logistics

operations involve inherent risks,
such as supply disruptions,
capacity constraints, market
volatility, and regulatory
compliance.
A structured approach to decision
making allows for systematic risk
assessment and mitigation
strategies.
Structured approach to decision making and
complex logistics scenarios.
Optimization and Efficiency:
Complex logistics scenarios often
involve trade-offs between conflicting
objectives, such as cost minimization,
service level maximization, and
resource utilization.
A structured approach enables
optimization by using mathematical
models, algorithms, and analytical
techniques to find the best solutions
that balance these objectives.
2. Implementing a Variety of
Systems
Discuss the importance of
implementing various systems to
support decision making in logistics
management.
Examples of systems include
enterprise resource planning (ERP),
transportation management
systems (TMS), warehouse
management systems (WMS), and
demand planning systems.
2. Implementing a Variety of Systems: The importance of
implementing various systems to support decision making in
logistics management.

 Data Integration and Visibility: Logistics

operations generate vast amounts of data
from different sources such as suppliers,
transportation providers, warehouses, and
customers.
 Automation and Efficiency: Logistics
processes can be complex and time-
consuming, involving tasks like order
processing, inventory management, route
optimization, and tracking.
The importance of implementing various systems to
support decision making in logistics management.

Supply Chain Optimization:

Effective decision making in
logistics management requires
optimizing the entire supply chain
ecosystem. Implementing
systems that support supply
chain optimization, such as TMS,
WMS, IMS, PMS etc
The importance of implementing various systems to
support decision making in logistics management.

Data Integration and Visibility:

Logistics operations generate vast
amounts of data from different sources
such as suppliers, transportation
providers, warehouses, and customers.
Automation and Efficiency: Logistics
processes can be complex and time-
consuming, involving tasks like order
processing, inventory management,
route optimization, and tracking.
Implementing a Variety of
Systems:
Examples of systems
Enterprise resource planning
(ERP)
Transportation management
systems (TMS)
Warehouse management
systems (WMS)
Demand planning systems.
Implementing a Variety of Systems:
Enterprise Resource Planning (ERP)
ERP systems integrate various aspects of a
company's operations, including finance,
human resources, procurement, inventory
management, and logistics.
In the context of logistics management,
ERP systems provide a centralized platform
for managing and tracking key logistics
processes such as order processing,
inventory control, and purchasing.
They enable organizations to streamline
operations, improve coordination, and gain
visibility into the entire supply chain.
Implementing a Variety of Systems:
Transportation Management Systems (TMS)

 TMS systems are designed to optimize

transportation operations and logistics
processes.
 They provide functionalities such as route
planning, carrier selection, load optimization,
freight audit and payment, and real-time
shipment tracking.
 TMS systems enable organizations to reduce
transportation costs, improve delivery
efficiency, enhance customer service, and
manage logistics operations across multiple
modes of transportation.
Implementing a Variety of Systems:
Warehouse Management Systems (WMS),

 Warehouse Management Systems (WMS): WMS

systems are specifically focused on managing
warehouse operations, including inventory
management, order fulfillment, receiving and
put-away, picking and packing, and shipping.
 These systems provide real-time visibility into
inventory levels, optimize storage space
utilization, improve order accuracy, and enhance
labor productivity through efficient task allocation
and automation. WMS systems integrate with
other logistics systems, such as TMS and ERP, to
ensure seamless coordination across the supply
chain.
Implementing a Variety of Systems:
Demand Planning Systems (DPS)

DPS utilize historical data, statistical

algorithms, and market trends to
forecast customer demand
accurately.
These systems help organizations
estimate future demand for
products or services, enabling better
inventory management, production
planning, and procurement.
 3. Collection and Evaluation of Information:
Highlight the significance of collecting and
evaluating information in logistics decision
making.

Collecting and evaluating information play a

crucial role in logistics decision making.
Here are some key reasons highlighting
their significance:
Accurate and Informed Decision
Making: Logistics decisions impact
various aspects of the supply chain,
including procurement, inventory
management, transportation, and
The significance of collecting and evaluating
information in logistics decision making.

Performance Measurement and

Improvement: Collecting and
evaluating information helps measure
the performance of logistics
operations. Key performance
indicators (KPIs) such as on-time
delivery, order accuracy, inventory
turnover, and transportation costs
provide insights into the effectiveness
and efficiency of logistics processes.
The significance of collecting and evaluating
information in logistics decision making.

 Cost Optimization: Logistics decisions often

involve trade-offs between cost and service
levels.
 Customer Satisfaction and Service Level
Management: Logistics decisions directly
impact customer satisfaction and service levels.
 Continuous Improvement and Innovation:
Collecting and evaluating information on an
ongoing basis enables organizations to foster a
culture of continuous improvement and
innovation in logistics management.
4. Understanding Output Reports Generated
by Management Information Systems (MIS)

Introduce the concept of

Management Information
Systems (MIS) in logistics
decision making.
Explain how MIS generates
output reports that provide
valuable insights and information
for decision making.
 4. Understanding Output Reports
Generated by Management Information
Systems (MIS): The concept of
Management Information Systems (MIS)
in logistics decision making.

MIS is a specialized system that collects,

processes, stores, and disseminates data
and information within an organization. In
the context of logistics management,.
MIS focuses on gathering and analyzing
data related to various aspects of the
supply chain, including procurement,
inventory, transportation, warehousing,
 The concept of Management Information
Systems (MIS) in logistics decision making.

The primary goal of MIS in logistics

decision making is to provide decision
makers with the information they need to
make informed and effective decisions.
MIS gathers data from multiple sources,
such as transactional systems, sensors,
external databases, and manual inputs,
and transforms it into meaningful reports,
dashboards, and analytics.
These outputs help decision makers
monitor the performance of logistics
 4. Understanding Output Reports Generated by Management
Information Systems (MIS): MIS reports that provide valuable
insights and information for decision making

 Management Information Systems (MIS) generate

output reports that provide valuable insights and
information for decision making by leveraging
data collected from various sources.
 These reports are designed to present the data in
a structured and meaningful manner, enabling
decision makers to understand the current state
of logistics operations, identify trends, and make
informed decisions.
 MIS reports and information for
decision making
Here's how MIS generates output reports
that support decision making:
Data Collection and Integration:
MIS collects data from multiple sources,
including transactional systems,
sensors, external databases, and
manual inputs.
Data Processing and
Transformation: Once the data is
collected, MIS processes and
transforms it into useful information.
 MIS reports and information for
decision making
 Key Performance Indicators (KPIs) and
Metrics: MIS reports typically focus on key
performance indicators (KPIs) and metrics relevant
to logistics operations. These KPIs can include
metrics such as on-time delivery, order accuracy,
inventory turnover, transportation costs, and
customer satisfaction.
 Visualization and Presentation: MIS utilizes
visualization techniques to present the data in a
clear and understandable format.
 Historical and Comparative Analysis: MIS
reports often provide historical and comparative
analysis to enable decision makers to understand
trends and patterns over time.
5. Categorizing and Describing MIS and Organizational Levels:
Discuss the categorization of MIS based on organizational levels
in logistics management.

Management Information Systems

(MIS) in logistics management can
be categorized based on the
organizational levels they serve.
These levels correspond to
different managerial functions and
hierarchies within an organization.
Categorization of MIS based on organizational
levels in logistics management.

Here are the common categorizations of

MIS based on organizational levels in
logistics management:
Operational Level MIS: Operational
level MIS supports the day-to-day
operations and activities of logistics
management. It focuses on
transactional and operational data,
providing real-time information for
routine tasks and decision making.
Categorization of MIS based on organizational
levels in logistics management.

Tactical Level MIS: Tactical level MIS

supports middle managers or
supervisors responsible for
coordinating logistics activities and
making tactical decisions.
It provides aggregated and
summarized information from multiple
operational sources to facilitate
planning, resource allocation, and
performance monitoring.
Categorization of MIS based on organizational
levels in logistics management.

Strategic Level MIS: Strategic

level MIS serves top-level
executives and strategic decision
makers in logistics management.
It provides high-level, aggregated
information that supports long-
term strategic planning, goal
setting, and performance
evaluation.
6. Levels of Management and
Types of Decisions Made
Strategic Level: Decisions related to
long-term planning, such as network
design, facility location, and supply chain
strategy.
Tactical Level: Decisions related to
medium-term planning, such as capacity
planning, inventory management, and
transportation routing.
Operational Level: Decisions related to
day-to-day operations, such as order
fulfillment, scheduling, and resource
allocation.
7. Decision-Making Models for
Logistics Management
 Provide examples of decision-making models commonly
used in logistics management.
 Inventory optimization models: Determine optimal
inventory levels based on demand forecasts, lead times,
and cost considerations.
Inventory Management Models:
 ABC Analysis: Classifies inventory based on value and
impact, prioritizing efforts on critical items.
 Economic Order Quantity (EOQ): Determines the
optimal order quantity to minimize total inventory costs.
 Safety Stock Model: Sets minimum inventory levels to
buffer against demand fluctuations.
 Newsvendor Model: Balances the cost of stockouts
against the cost of holding excess inventory for
perishable items.
7. Decision-Making Models for
Logistics Management
 Transportation routing models: Optimize the
selection of transportation routes to minimize
costs and meet customer service requirements.
Transportation Routing Models:
 Vehicle Routing Problem (VRP): Optimizes
delivery routes for multiple stops, considering
distance, capacity, and time constraints.
 Shortest Path Algorithm: Identifies the
shortest route between multiple locations, but
may not consider other factors like traffic.
 Genetic Algorithm: Uses evolutionary
principles to find near-optimal solutions for
complex routing problems.
7. Decision-Making Models for
Logistics Management
 Warehouse layout optimization models:
Optimize the layout of warehouses to improve
operational efficiency and minimize movement.
Warehouse Layout Optimization:
 Flowchart Analysis: Maps material flow within
the warehouse to identify bottlenecks and
improve efficiency.
 Activity Relationship Chart (ARC): Analyzes
relationships between warehouse activities to
design a more efficient layout.
 Space Allocation Models: Optimizes the
allocation of storage space based on item
size, demand, and access frequency.
7. Decision-Making Models for
Logistics Management
Demand forecasting models: Use historical
data and statistical techniques to forecast
future demand and support production and
inventory planning.
Moving Average: Uses a rolling average
of past data to forecast future
demand, suitable for stable demand
patterns.
ARIMA (Autoregressive Integrated
Moving Average): Uses statistical models
to account for trends, seasonality, and past
errors in forecasting.
7. Decision-Making Models for
Logistics Management
Other Decision-Making Models:
 Supplier Selection Models: Evaluate
potential suppliers based on
price, quality, delivery reliability, and other
factors.
 Facility Location Models: Determine the
optimal location for warehouses or distribution
centres considering costs, transportation
access, and market reach.
 Network Design Models: Design efficient
logistics networks considering transportation
modes, inventory locations, and customer
demand.