Chapter 5 - Logistics Management Flashcards
Logistics
The art and science of moving things from one point to another and storing them along the way.
- Plans, implements, and controls the efficient, effective forward and reverse flow of goods, services, and info between 2 points.
Outbound logistics costs
7% to 10% of each sales dollar
Logistical mandate - Customers want:
Donald Bowersox
- To receive exactly what they ordered
- Delivery of their orders at the agreed-upon time
- To pay as little as possible.
Materials Management
- ENSURE THAT PRODUCTION HAS THE NECESSARY INPUTS AT THE RIGHT TIME AND PLACE.
Concerned with the inbound movement and storage of: - raw materials
- purchased components
- subassemblies
Physical Distribution
Focuses on the outbound transportation and storage of finished products from point of manufacture to customer.
- MEET OR EXCEED CUSTOMER SERVICE EXPECTATIONS AT THE LOWEST COST
Logistical Order Cycle
- Begins and ends with the buying company
- Buyer recognizes a need and places an order.
- Supplier processes the order
1. Order Entry
2. Production or picking of the order
3. Preparation and packaging - Order is shipped
- Order is inspected and accepted
Dwell Time Ratio
- Evaluates the number of days inventory sits idle compared to the number of days the inventory is moving.
- 90% of total order cycle is nonproductive.
The Order Cycle
- Recognition of Need
- Order Preparation
- Order Transmittal
- Order Processing
- Order Shipment
- Order Receipt
5 Primary Activities that Improve Order Fulfillment
- Inventory Management (rapidly fill orders)
- Facility Location and Design (production and delivery time)
- Transportation Management (reduces transit time and increases on-time delivery)
- Warehousing (cross docking, speeds process)
- Order Processing (eliminates delays and fills orders as specified)
Managing and Paying for Transportation
- Buy product collect or prepaid
Buying Collect
The company takes ownership of the product at the supplier’s dock and arranges for necessary transportation.
Buying Prepaid
The supplier arranges and pays for the transportation, passing the costs on to the buyer.
- Gives suppliers an opportunity to make more money.
Transportation Management
Influences:
- the number and location of facilities
- inventory management
- product and packaging design
- customer service strategies
Modal Choice
- Determines the service characteristics and costs of the transportation system.
- Driver of transportation system design
6 General Modes of Transportation
- Rail
- Motor Carrier
- Pipeline
- Airplane
- Ship
- Cyberspace
Rail
- Cost: High F, low V, inexpensive
- Speed: Slow
- Quantities: Large
- Geographical Coverage: Widespread but limited by tracks
- Environment: Low air pollution, high impact of new tracts
- Distances: Medium to long
- Required Infrastructure: tracks, rolling stock
- Product Variety: Large, bulk goods
- Reliability: Low loss, damage, less timely
- Flexibility: Routing limited to track location, little door to door delivery
Motor Carriers
- Cost: High V, low F
- Speed: Medium
- Quantities: limited capacity
- Geographical Coverage: widespread, limited by roads
- Environment: High pollution
- Distances: Short to medium
- Required Infrastructure: Roads
- Product variety: Large
- Reliability: Limited loss, damage, more timely
- Flexibility: Limited to road locations, good for JIT, door to door delivery possible
Pipeline
- Cost: High F, low V, very inexpensive
- Speed: Non-issue
- Quantities: Large of limited products
- Geographical Coverage: Widespread, limited by unidirectional movement and landmass to support pipelines.
- Environment: Pipeline leakage, impact on wildlife
- Distances: Medium
- Required Infrastructure: Pipeline
- Product Variety: Petroleum products, liquid
- Reliability: Very low loss or damage, timely
- Flexibility: Routing limited to pipelines
Ship
Cost: High V, Low F, .008/ton mile Speed: Slow, ocean is faster Quantities: Large Geographical Coverage: Global Environment: Spillage from accidents, fisheries Distances: long to very long Required Infrastructure: ports, ships Product Variety: Low variety of heavy, bulk Reliability: loss, damage is high Flexibility: Port to port
Air
Cost: High V, Low F, very expensive
Speed: Fast
Quantities: Relatively small
Geographical Coverage: Widespread, air terminals
Environment: Noise pollution
Distances: medium to very long
Required infrastructure: Airports, planes
Product Variety: Large variety of small goods, often perishable
Reliability: low loss or damage
Flexibility: Air terminal to air terminal
Cyberspace/Internet
Cost:Low V, Low F, extremely inexpensive
Speed: Extremely Fast
Quantities: Limited by # of source transmission lines or satellite access
Geographical Coverage: widespread
Environment: Non except new line construction
Distances: very short to very long
Required infrastructure: lines
Product Variety: limited to digital info.
Reliability: No loss, except through piracy
Flexibility: computer to computer
Warehousing
- Store product in a finished goods warehouse located at a manufacturing facility
- Store the product in a distribution center (intermediate storage - used when many items from different sites are to be stored in a single location)
Activities Performed in Warehouses and DCs
- Shipping and receiving goods and materials
- Materials handling and order processing
- Consolidating and distributing shipments
- Transportation management
- Product packaging and labeling
- Re-packaging and mixing of products
- Prep. of in-store displays
- light manufacturing or assembly
- Scrap and disposal
Costs incurred when products sit in storage
- Product obsolescence
- damage
- loss
Cross-docking
- Product arrives
- Product is mixed with other goods and sent in full truckloads to various locations.
Logistics Skills
- Logistics Outsourcing (3PL)
- Shared Logistics Services (full TL quantities)
- Network Rationalization
Network Rationalization
- Better understanding of customer needs, supplier capabilities, and service provider options
- More sophisticated information technology
- Need to master the art of relationship management
