Models for designing the production-distribution system in supply chains of the Finnish nursery industry (dissertation)


Rantala, Juho. 2005
Finnish Forest Research Institute. Research Papers. 936. 64 p. + appendices I - IV.
[ISBN 951-40-1948-2]

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economies of scale, logistics, seedling, optimization, operations research, transportation planning


1 Introduction.
1.1 Background.
1.2 Theoretical framework.
1.2.1 Economies of scale and mechanization.
1.2.2 Supply chain, logistics and production-distribution system.
1.2.3 Operations research.
1.3 State of the art research.
1.4 Aims of the research.

2 Materials and methods.
2.1 Work study of mechanized packing of seedlings.
2.2 Characteristics of the production-distribution system.
2.3 Optimization techniques applied.
2.4 Formulation of the models.

3 Computational results.
3.1 Quantifying ES in seedling production: A case study
  of mechanized packing.
3.2 Effects of production strategy and transportation planning
  method on transportation costs.
3.3 Optimization of the production-distribution network.

4 Discussion.
4.1 Contribution and synthesis of the results.
4.2 Assessment of the research.
4.2.1 Relevance.
4.2.2 Validity and reliability.
4.2.3 Possibilities and limitations of generalization.
4.3 Outlook for the future.
4.4 Needs for further research.



This research introduces models for improving cost-efficiency in the production-distribution systems (PDSs) of the forest nursery industry. The primary research question is placed into the framework of the theories of logistics and economies of scale (ES). The main approach is operations research (OR), but the methods of work studies and business economics are also applied. As a result, the effects of different decisions related to production and distribution activities on costs of the PDS are quantified, and tools for managing these activities are introduced. The research was carried out in the operational environment of a Finnish nursery company. This dissertation summarizes, and partly complements, four scientific research articles cited as I, II, III and IV.

In Article I, the productivity and costs of packing seedlings and disinfecting seedling trays were studied in the mechanized packing-disinfection line. The economic rationality of the mechanization of the line was evaluated by comparing the observed costs to the corresponding costs of manual operation. In addition, sensitivity analyses were carried out to demonstrate, for instance, the effects of the interest requirement and the duration of the depreciation period on annual packing volume needed for economically profitable mechanization. The results indicated that the annual number of packed seedlings must be many times that of the study year before the unit costs with mechanization are lower than those for manual packing. In conclusion, it seems that most of the nursery units in Finland are still too small to gain a real advantage from ES by mechanizing production stages such as packing of seedlings.

In Article II, the management strategies used by the nursery company for transportation of seedlings were compared in different production strategies. To determine the optimal transportation plan, linear programming (LP) was applied. The relative improvement in cost-efficiency caused by the centralized transportation planning system (CTS) using LP, compared to the current decentralized transportation planning system (DTS), varied from 13.0 % to 36.5 %. In Article III, the applicability of LP in management of seedling transportation was compared to that of nonlinear mixed integer programming (MIP). The differences between models based on these methods, observed in the allocation of orders among nursery units, were small. Thus, in the actual business situation of Finnish nursery companies, LP seems to be an adequate tool for management of seedling transportation.

Article IV combines Articles I, II and III indirectly by introducing a capacitated mixed integer programming (CMIP) model for solving an integrated production-distribution system design problem (PDSDP). As a result, optimal production-distribution network of a nursery company is presented on different planning levels. The model was developed primarily from a strategic perspective but is also used for solving operative and tactical level problems. Compared to the company's current production-distribution network with five nursery units, the optimal number of nursery units decreased by 2 - 4 units depending on the planning level applied; and cost savings varied from 11.3 % to 21.3 %.

Altogether, the results showed that by centralizing production to a smaller number of nursery units ES could be utilized in seedling production more than the company does today. In this research, the rationality of the production centralization was not, however, studied from the standpoint of the nursery business as a whole. In general, increasing the performance of the total logistics chain by improving cost-efficiency of the PDS can be seen from a larger perspective as providing a win-win situation for each participant in the supply chain. For that reason, the results of this research are noteworthy, not only for nursery companies but also for forest owners and forest service providers such as forest owners' associations (FOAs) aiming for more profitable forestry.


ISBN: 951-40-1948-2 (printed), 951-40-1951-2 (pdf)

Unit: Suonenjoki Research Station
Project: Technology, organising and logistics of plantation forestry


 Metla database  17.06.2008 15:00   Comments

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