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| HOME > OptiLogis |
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| 1. Isn’t
it more necessary to save on the logistics expenses nowadays?
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Facing with severe cost competition system, companies are
nowadays coping with the global operation strategy to manufacture
products in the country with low wage and supply to the country
with high demand of the product. As the percentage of the logistics
expenses in the product cost is increased, the necessity to
reduce the logistics expenses is also increased. |
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| 2. Do
you feel the change of the logistics environment in the Northeast
Asia? |
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China rising as a global manufacturing base and a location
of immense potential demand, Japan with the second economic
scale of the world a nd Korea in continuous economic development
with expensive consumption are all located in the Northeast
Asia, and the economic bloc among these three nations are being
accelerated. Moreover, these nations are providing various incentives
to attract foreign investment positively, confronting with the
new change of the logistics environment. |
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| 3. Do
you feel the necessity of moving the logistics position now?
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Realizing the market potentiality in the Northeast Asia, many
companies either moved their logistics positions to the Northeast
Asia or are planning to move to a better place within the Northeast
Asia, utilizing the incentives provided by Korea, China and
Japan. Establishment of such new logistics systems is expected
to improve and reduce the logistics expenses systematically
to a great extent. |
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| 4. Isn’t
it easy to select the most appropriate logistics position? |
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Consumers purchase goods not only on the basis of price but
also on the basis of the satisfaction of complex service such
as precise delivery, quality, information management and etc.
Therefore, the establishment of new logistics position for company
should be made when the customer satisfaction such as delivery,
quality and preciseness are fulfilled, and it is not as easy
as one thinks. |
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| 5. Do
you have enough information to analyze the most appropriate
logistics position? |
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In order to select the optimum logistics position in the Northeast
Asia, it is indeed necessary to gather the logistics network
information in the Northeast Asia such as the locations of the
logistics positions proposed and possible logistics routes,
along with the immense information on the expenses such as ocean
freight, land freight, wages for processing, inventory level
and etc. |
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| 6. How
many manpower and how much time should be invested? |
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Selection of the logistics position requires specialized personnel,
along with the information gathering. Company should invest
immense resources and time on this matter. |
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| The MOMAF, together with Doloitte, a world famous consulting
company, established the decision support system, OptiLogis, to select
the optimum logistics position in the Northeast Asia .
OptiLogis has all the logistics information required in the Northeast
Asia in their database, including major logistics positions proposed,
routes between the positions, logistics expenses occurring between
the positions and etc. OptiLogis can generate the scenarios of various
logistics system by selecting characteristics of product, characteristics
of logistics, transportation method and etc., and propose the optimum
logistics position to minimize the company’s logistics expenses
by using OR (Operations Research) technique based on the scenario
and the logistics information database. Moreover, OptiLogis can
also prove how the logistics position proposed is superior to other
positions proposed in terms of the logistics expenses, lead time
and inventory, and specify which logistics expense is superior in
detail.
OptiLogis will be you reliable partner to select the optimum logistics
position in the Northeast Asia. |
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| Model for logistics flow
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| OptiLogis divides the logistics position into 6 categories
such as origin, hub port, CDC (Central Distribution Center), RDC (Regional
Distribution Center), feeder port and destination, and also divides
the product flow passing through such logistics positions into 8 categories
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| - Direct import |
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| - Transshipment import |
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| Logistics network |
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| The world is divided into 13 origins
where product supply is possible, and 6 hub ports and 18 feeder
ports are selected to take care of the cargos in the Northeast
Asia. 6 CDC and 18 RDC are defined, and the market in each country
is established as 24 destinations |
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| Database on the logistics
information in the Northeast Asia |
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| OptiLogis stores the types of the
logistics flow and its networks in the database form by using
the modeling object of Node and Arc. |
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| And, OptiLogis stores the data on the logistics
expenses occurring while moving between the logistics positions
into three steps of structure. |
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| The expense structure defined as such has data
on the logistics expenses acquired from those who are actually
providing the logistics services in the Northeast Asia, such
as liner company, 3PL companies, warehouse construction company,
feeder line and etc. The data on the logistics expenses are
divided into ocean, land, logistics center, tax and incentive,
and is continuously updated. OptiLogis can decide on the optimum
logistics position by using the data on the logistics expenses. |
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| 1.
Definition of scenario |
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| Characteristics of company logistics should be considered
to select the optimum logistics position. Information
reflecting the characteristics of company, such as logistics
system, finance, product, quantity of demand and supply,
transportation method and logistics center, can be established
on the basis of the definition function of the OptiLogis
scenario. |
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| 1.1
Information on the logistics system |
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How to establish the logistics system in the Northeast
Asia can be defined into the following 4 types.
ㅇ No DC: Direct distribution to customer from the origin
without going through the distribution center
ㅇ CDC Only: Direct distribution to customer from the central
distribution center in the Northeast Asia
ㅇ RDC Only: Direct distribution to customer from the regional
distribution center nearby to the customer
ㅇ CDC/RDC: Distribution to customer through both central
distribution center and regional distribution center |
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| If there is any particular position
of hub port/CDC/RDC which company prefers on the basis of the
types of the logistics system defined, OptiLogis will select
the position and define the logistics flow in accordance with
the company’s preference. |
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| 1.2
Information on finance |
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| OptiLogis can define the information on finance that
may reflect to the logistics expenses. Information on
finance is such as IRR (Internal Rate of Return), profit
on sales before tax, exchange rate and whether to apply
incentives. OptiLogis calculates the logistics expenses
on opportunity cost for inventory, direct and indirect
taxes and incentives. |
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| 1.3
Information on product |
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| OptiLogis defines the characteristics of product moving
through the fixed logistics system. The characteristics
of product include industry, specification, value and
life cycle. Such information reflect the product characteristics
of the company own when calculating ocean/land freight,
inventory cost, logistics center expenses and direct/indirect
taxes. |
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| 1.4
Information on the quantity of supply and demand |
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| OptiLogis can input the quantity of supply for 13 origins
in the world and the quantity of demand for 24 destinations
in Korea, China and Japan. This information can be used
to find out the optimum logistics route by the quantities
of supply and demand for each company. |
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| 1.5
Transportation method |
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| OptiLogis can define the transportation from the producing
center to the hub port in the Northeast Asia, the transportation
in the Northeast Asia by using the feeder line, the transportation
between the logistics positions and the transportation
from the logistics position to the customer. The logistics
expenses, including transportation cost, will be calculated
in accordance with the transportation method defined and
unit by using the logistics information database. |
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| 1.6
Information on the logistics center |
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| Many companies nowadays introduce the concept of postponement
in the management of the logistics system, and distribute
products to their customers after processing the products
at the logistics center that is the final place for distribution.OptiLogis
can assist the management of the distribution processing
information to present the forms of the logistics center
and to calculate the expenses concerned with the logistics
center. |
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| 2.
Performance of optimization |
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| ‘Minimum Cost Flow Optimization’ in OR (Operations Research)
is a well-known algorithm to select the optimum logistics
position.
The optimization engine of OptiLogis goes a step ahead
of this algorithm and decides the optimum logistics
position with input of the logistics information database
and the company’s scenario.
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| 3.
Check on the result |
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| OptiLogis shows in graphic form the logistics position
to minimize the logistics expenses by optimizing the given
scenario. Moreover, OptiLogis can present the result diagram
of the logistics system on such factors as freight quantity,
logistics expenses, lead time and inventory flowing through
each logistics position. |
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| 4.
Multi-dimensional analysis report |
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| After deciding on the optimum alternative for each
scenario, OptiLogis compares between the optimum alternatives
by using the function of OLAP (On-Line Analytical Processing).Company
can use this function to decide on the optimum alternative
among various feasible alternatives. |
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| Multinational food and
beverage company A |
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The company A, with its business activity in the Northeast
Asia, can generate rapidly the alternatives for the optimum logistics
position with the application of OptiLogis.
The company A manufactures the products in South America and distributes
to the sales agencies in Korea, China and Japan, and the sales agencies
sell the products to the customers. Detailed characteristics of the
logistics are as follows:
As a result of the study on the characteristics of the logistics,
three types of the logistics system formation were decided. |
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| Part |
Contents |
| Place to supply |
South America |
| Place of demand |
Korea / China / Japan |
| Product |
Coffee: 1/2lb Coffee: 5lbs |
| Distribution and processing |
Classification → Labeling → Packaging |
| Limitation on the customer |
| ㅇ |
Frequency on the delivery of the products:
once a day |
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Lead time required by the sales agencies |
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Korea / Japan: 3 days |
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China: 5 days |
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ㅇ Central Distribution : Supply Chain Type 2 (CDC Only)
ㅇ Regional Distribution : Supply Chain Type 3 (RDC Only)
ㅇ Central & Regional Distribution : Supply Chain Type 4 (CDC/RDC)
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| Considering two types of the logistics system
given and the strategic position of the company, 5 feasible
alternatives are defined as follows
ㅇ Alternative 1: SC Type 2 (CDC Only), Busan CDC
ㅇ Alternative 2: SC Type 2 (CDC Only), Shanghai CDC
ㅇ Alternative 3: SC Type 4 (CDC/RDC), Busan CDC and
ㅇ each RDC
ㅇ Alternative 4: SC Type 4 (CDC/RDC), Shanghai CDC and
ㅇ each RDC
ㅇ Alternative 5: SC Type 3 (RDC Only), each RDC |
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Comparative diagram on the total logistics expenses
below is the result of exercising the optimization process for each
alternative, and alternatives 1 and 2 show the optimum superiority
in terms of the logistics expenses with a little difference to each
other.
ternative 2 could not fulfill the lead time required by the sales
agencies, and, in terms of the frequency on the delivery of the products
to the customers in Japan/China, was not feasible due to the lack
of the number of shipping service of the feeder line. |
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| (Unit : Day) |
To Nation |
Min |
Avg |
Max |
| Alternative1 |
China |
3 |
4 |
5 |
| Japan |
3 |
3 |
3 |
| Korea |
1 |
1 |
1 |
| Alternative2 |
China |
1 |
1.75 |
3 |
| Japan |
4 |
4.82 |
5 |
| Korea |
4 |
4 |
4 |
| Alternative3/4/5 |
China |
1 |
1.13 |
2 |
| Japan |
1 |
1 |
1 |
| Korea |
1 |
1 |
1 |
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| Alternative 1 is turned out to be the optimum feasible
solution in comparison with the logistics expenses and the lead-time.
The company A is now working on the detailed analysis of alternative
1 with ILCC and will soon establish an action plan based on the analysis. |
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| The MOMAF is ready to extend cooperation and assistance
to those who consider the movement of the logistics position to optimize
the logistics system in the Northeast Asia.
OptiLogis operates with the following procedure.
- STEP1
Send brief information on the company to the ILCC to check on the
possibility (telephone, fax, e-mail)
- STEP2
Prepare Logistics Questionnaire” to use OptiLogis which will be
sent by the ILCC
- STEP3
Preparation of comparative report on the alternatives for the logistics
positions analyzed by OptiLogis
- STEP4
Discussion on the action plan in detail |
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Your company may have the following issues in the Northeast
Asian market
