Commodity Management Logistics Network Design GUIDELINES

Components of a Logistics Network

A logistics network is a series of specific nodes (points where commodities lie in storage) connected to each other by links (transport lanes such as roads, rail, sea lanes, and/or air corridors).

As illustrated below, the port of entry, primary warehouse, secondary warehouse, and distribution site warehouses are all nodes. Links are illustrated by the heavy black lines between these nodes.

There is no “standard model” for a logistics network. There are only options that must be examined and evaluated to identify the most cost-effective combination that is also acceptable to recipient populations. The purpose of logistics network design is:

to identify the number, location and size of warehouses and distribution sites (nodes), and transportation capacity to move commodity between them (links).

The following procedures outline logistics network design. They are presented as three distinct “stages”, but logistics network design is an iterative process. In other words, while working on one stage, information may be uncovered that will require a return to-and modification of-decisions made during a previous stage.

Identify Network Beginning and End Points

1. Clarify the beginning point-in other words, the point where you take possession of the commodity. For in-country planning purposes, this is generally the port of entry. If a through bill of lading is used, the beginning point may be an in-country warehouse.

2. Clarify the distribution frequency or the interval of time between distributions.

 More frequent (e.g., weekly or bi-weekly) distributions require more supervision and monitoring staff, and recipients spend more time (days) collecting commodity.

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 In less frequent (e.g., monthly) distributions, larger quantities are distributed, which may exceed recipients carrying capacity, create home storage problems, and increase the risk that commodity will be sold by or stolen from recipients. 3. Clarify distribution site locations. Program staff often facilitate the selection of specific distribution sites. For logistics planning purposes, the general geographic locations (e.g., neighborhood, village, total number of recipients within the catchment area, road networks, and other infrastructure) are sufficient.

4. Identify warehouse locations. The final warehouse in the network should be located in the district to minimize both transport costs and potential crowd control or looting problems.

Establish Warehouse Capacity Needs

1. Calculate minimum volume of commodity using the following formula:

Weight of per- Number of days Total recipients Volume (m3) per person ration worth of ration X served X X metric ton (MT) Total volume of (grams) stored commodity (m3) = 1,000,000 grams/MT

Number of days worth of ration stored is dependent on “flow” or the rate at which commodity arrives and is dispatched from the warehouse. This formula assumes a steady flow both into and out of the warehouse and a one-month supply of commodity in storage as safety stock. Storage capacity requirements will increase if the flow is not steady (i.e., large stocks of commodity must be maintained to compensate for seasonal access). In general, a primary warehouse will need to store an entire shipment of commodity. A secondary or tertiary warehouse will generally store (1.5) x (the number of days in distribution frequency). For example, if commodity is distributed monthly (every 30 days), there should be a capacity of 1.5 x 30, or 45 days worth of ration.

Volume (m3) per metric ton (MT) is a function of the specific item being stored, as detailed below.

Table 1. Volume and Stacking Height1 of Common Commodities

Commodity Packaging Maximum Stack Height 1 Volume (m3/MT)

Grains, beans 50 kg sacks 4 meters (20-40 sacks) 1.5

Flour, meal, 25 kg bags 3.5 meters (20-30 bags)2 2 blended foods

DSM in bags 25 kg bags 2.5 meters (20-30 bags) 2.4

DSM in tins 20 kg/carton 8 cartons if stacked individually; 4 (4 tins each) 20 if palletized

Edible oil 25 kg/carton 8 cartons if stacked individually; 2 (6 cans each) 20 if palletized

208-liter drums 2 drums upright (with wood 1.4 between rims); 3 drums on their sides

1 Always check specific recommendations from suppliers (and perhaps printed on cartons). 2 Polypropylene bags from local millers may be irregular in size/shape, reducing the maximum safe height.

20 liter pails 4 pails high

2. Calculate total floor area of storage required at each node using the following formula:

Total volume of Total floor area of commodity (m3) storage needed = X 1.2 Stacking height (m)

Stacking height is a function of the specific item being stored. The tables above provide stacking height (in meters) for common commodities.

The factor “1.2” is an additional 20% to allow for access aisles and ventilation within the warehouse.

Establish Transport Capacity Requirements 1. Calculate tonnage capacity requirement per link, using the following formula.

# of Total weight of commodity Tonnage days in X Capacity = delivery # of days in Turn -around time (TAT) period delivery period / expressed in days

#of days in delivery period is the number of working days during which commodity must be transported. The maximum number of working days in a month is 20-25 days.

For commodity transported from warehouse(s) to distribution site(s), the number of days in a delivery period cannot exceed the distribution frequency.

Total weight is determined as follows:

Ration scale, Distribution Total weight of Total population per person, frequency commodity = X size X per day (# of days in cycle)

Turnaround Time (TAT) is the time required for an empty vehicle to load, travel to its destination, unload, and return again. Factors to consider in calculating TAT include: loading time at the source, distance to be traveled, speed of vehicle (directly related to the condition of the roads), security, and unloading time at the destination.

2. Determine type of trucks needed, based on cargo capacity and road conditions.

 It is more economical to move commodity over great distances on main corridors in trucks with a gross cargo capacity of 35 MT. An additional trailer may have a gross capacity of 12 MT.  Short-haul trucks have a capacity of approximately 5-10 MT and are generally used between a warehouse and the distribution sites.

 Primary and alternate routes should be planned simultaneously to enable switching of routes (for example, during the rainy season).

3. Determine method of contracting.

The table below illustrates three methods of contracting transport. The most cost-effective method is dependent on the amount of commodity and the regularity of deliveries required.

Table 2. Types of Transport Contracts

Disadvantages Type Advantages (unless stipulated otherwise in the contract)

• Client pays for the transport • Transporter may include other regardless of the time the trip takes clients’ cargo on the truck (which might By the ton or or whether the truck is full. compromise safety of commodities). ton/km • The cost is clearly agreed upon • Driver may use a less direct route in advance. to add km to the bill.

• Client has exclusive use of the • Transporter may not fill each truck Per vehicle per truck. to its maximum capacity, thereby journey– multiplying the number of trips. trip charter • Most practical for a small amount delivered to one location

• Client has exclusive use of the • Transporter has minimal incentive truck. to complete the maximum number of Per vehicle per trips possible per day. day/month– • Usually the best option for time charter consistent and uniform short trips • In the event the truck needs repairs, the daily fee might still be applicable.