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Distribution Center Location

Ahlgren, Nils and Wennerström Gille, Jakob (2017) MIO920
Production Management
Abstract
Purpose: The purpose of this study is to develop a framework for distribution center location
in order to reduce distribution costs for small, fast growing companies on the Nordic market.
Methodology: In the methodology chapter, relevant research methodology for the type of study
conducted in this report is presented. It is concluded that a case study is the most suitable approach
for the purpose of the study. The case study method described by Yin (2009) with the six main
steps plan, design, prepare, collect analyse and share is used as the foundation. The method is
contextualised by additional theories presented by Hillier and Liebermann (2010) to make it more
relevant in an operations research case study. Using The Company as a... (More)
Purpose: The purpose of this study is to develop a framework for distribution center location
in order to reduce distribution costs for small, fast growing companies on the Nordic market.
Methodology: In the methodology chapter, relevant research methodology for the type of study
conducted in this report is presented. It is concluded that a case study is the most suitable approach
for the purpose of the study. The case study method described by Yin (2009) with the six main
steps plan, design, prepare, collect analyse and share is used as the foundation. The method is
contextualised by additional theories presented by Hillier and Liebermann (2010) to make it more
relevant in an operations research case study. Using The Company as a case study is motivated
and data collection is described.
Frame of reference: The frame of reference chapter explains relevant theory as well as some
secondary data needed to investigate and understand the subject and fulll the purpose. The
basics of logistics are explained and the relevance of supply chain network design in this context.
Chopra and Meindl's (2007) four ideas to consider when making network design decisions under uncertainty
is used for applying the theory to small, fast growing companies. Furthermore, recognised
models for facility location are explained, these will later be applied to the problem of distribution
center location. A list of factors to keep in mind for facility location, presented by Daskin (1995) is
also explained and later used in the empirical studies. Furthermore, necessary tools for statistical
analysis are presented which will be used for developing a dynamic model for pricing logistics costs
at dierent potential distribution center locations.
Empirical studies: The empirical studies describe the ndings from the case company. A list
of gathered data is presented and The Company and its current distribution network is described.
The theories regarding facility location are applied to The Company case and adapted to its speci
c characteristics. An estimated model of transportation costs is also developed using the new
insights. Furthermore, in order to adapt the distribution center location to future business conditions,
unstructured interviews were conducted with decision makers to gain understanding and
estimates about future sales. A linear programming model to be used for determining the optimal
central warehouse location is developed.
Results and Analysis: The results from applying the developed location model are presented
here. It is discovered that the dierent objective functions suggested in the Empirical Studies
generate very similar results, implying that the characteristics of the distribution network of The
Company is such that the choice between which of these objectives to use is not vital for decision
makers. A sensitivity analysis of the model is constructed. A discussion follows leading to the analysis
section where a framework for central warehouse location for small, fast growing companies is
developed.
Conclusions: Finally, the study can be concluded by presenting a general framework for central
warehouse location for small, fast growing companies. General conclusions are drawn as well
as specic recommendations to the company. (Less)
Please use this url to cite or link to this publication:
author
Ahlgren, Nils and Wennerström Gille, Jakob
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
other publication id
17/5589
language
English
id
8928927
date added to LUP
2017-11-28 14:51:41
date last changed
2017-11-28 14:51:41
@misc{8928927,
  abstract     = {Purpose: The purpose of this study is to develop a framework for distribution center location
in order to reduce distribution costs for small, fast growing companies on the Nordic market.
Methodology: In the methodology chapter, relevant research methodology for the type of study
conducted in this report is presented. It is concluded that a case study is the most suitable approach
for the purpose of the study. The case study method described by Yin (2009) with the six main
steps plan, design, prepare, collect analyse and share is used as the foundation. The method is
contextualised by additional theories presented by Hillier and Liebermann (2010) to make it more
relevant in an operations research case study. Using The Company as a case study is motivated
and data collection is described.
Frame of reference: The frame of reference chapter explains relevant theory as well as some
secondary data needed to investigate and understand the subject and fulll the purpose. The
basics of logistics are explained and the relevance of supply chain network design in this context.
Chopra and Meindl's (2007) four ideas to consider when making network design decisions under uncertainty
is used for applying the theory to small, fast growing companies. Furthermore, recognised
models for facility location are explained, these will later be applied to the problem of distribution
center location. A list of factors to keep in mind for facility location, presented by Daskin (1995) is
also explained and later used in the empirical studies. Furthermore, necessary tools for statistical
analysis are presented which will be used for developing a dynamic model for pricing logistics costs
at dierent potential distribution center locations.
Empirical studies: The empirical studies describe the ndings from the case company. A list
of gathered data is presented and The Company and its current distribution network is described.
The theories regarding facility location are applied to The Company case and adapted to its speci
c characteristics. An estimated model of transportation costs is also developed using the new
insights. Furthermore, in order to adapt the distribution center location to future business conditions,
unstructured interviews were conducted with decision makers to gain understanding and
estimates about future sales. A linear programming model to be used for determining the optimal
central warehouse location is developed.
Results and Analysis: The results from applying the developed location model are presented
here. It is discovered that the dierent objective functions suggested in the Empirical Studies
generate very similar results, implying that the characteristics of the distribution network of The
Company is such that the choice between which of these objectives to use is not vital for decision
makers. A sensitivity analysis of the model is constructed. A discussion follows leading to the analysis
section where a framework for central warehouse location for small, fast growing companies is
developed.
Conclusions: Finally, the study can be concluded by presenting a general framework for central
warehouse location for small, fast growing companies. General conclusions are drawn as well
as specic recommendations to the company.},
  author       = {Ahlgren, Nils and Wennerström Gille, Jakob},
  language     = {eng},
  note         = {Student Paper},
  title        = {Distribution Center Location},
  year         = {2017},
}