Directorate of distance education

Direct Shipment Network
In this transportation network design, all shipments come directly 
from different plants of the supplier to stockiest or customers as shown 
in Fig. In this design option, the routing of each shipment is specified 
and the logistics and supply chain managers have to decide the quantity 
to be shipped and mode of transport preferred so as to bring a trade-off 
between transportation and inventory costs.
One of the major advantages of this transportation network design 
is the elimination of warehousing infrastructural facilities. The operation 
of this network design is very simple as well as necessitating high degree of 
coordination due to the direct interface between suppliers and customers. 
On the other hand, the major setback of direct shipment network design 
is the high cost when the quantity to be shipped is not equal to the load 
capacity of the vehicle. It is also not suitable to ensure better customer 
service in the case of replenishment lot sizes. This network design is widely 
used by cement, fertilizer and petroleum companies for those customers 
who are near to their production plants.
Supplier 
Destination 
Point 
Plant 1 
Plant 2 
Plant 3 
Plant 4 
Customer A 
Customer D 
Customer C 
Customer B 
Direct Shipping with Milk Runs

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Notes
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Direct Shipping with Milk Runs
In a milk-run transportation network design, a truck collects 
goods from various plants of the shipper/supplier and delivers them to 
a customer or collects goods from one plant and delivers them to many 
customers a shown in Fig. In the milk-run transportation network, a 
logistics and supply chain manager has to decide on the routing of each 
milk run so as to meet the requirement of the customer service.
This network design overcomes the problem of first design relating 
to small replenishment lot size as they are accumulated to fill the load 
capacity of the vehicle/truck, resulting into lower transportation costs 
and better customer service, also eliminating warehousing infrastructural 
facilities. But the major limitation of this design is in its scope, i.e. this 
design is only suitable in the case of cluster of customers/plants. For 
instance this system is widely used by MUL in India whose most of the 
component suppliers are within the 50 km radius of the manufacturing 
plant at Gurgaon, supporting the JIT manufacturing system. This network 
needs a high degree of coordination among all the concerns.