Lscm Flashcards
Inbound logistics
Meaning:
Inbound Logistics (Upstream Logistics)
In order to produce a particular product, it is important to make the raw materials available at right time, at right place and in right quantity. Thus, inbound logistics involves all the activities associated with procurement, of raw materials from the vendors.
The various activities involved in inbound logistics are:
Sourcing
Order placement
Transportation
Receiving
Storage
Issue
Inbound Logistics is also known as Upstream Logistics. It is concerned with procurement pertormance cycle.
Inbound logistics involves
preproduction logistics activities. It involves movement of material from suppliers to the company.
The major functions performed in inbound logistics are material handling, warehousing, inventory management, vehicle scheduling, etc.
Outbound logistics
Outbound Logistics (Downstream Logistics)
Once the product is manufactured, it has to be made available to the customers so that they can purchase it. Thus, outbound logistics involves all the activities associated with physically distributing the product to the customers.
The various activities involved in outbound logistics are:
Customer order
Order transmission
Order processing
Order selection
Order transportation
Customer delivery
Outbound Logistics is also known as downstream logistics. It is concerned with physical distribution performance cycle. Outbound logistics involves post production logistics activities. It involves movement of finished goods from warehouse to customer.
The major functions included in outbound logistics are distribution of finished goods, order processing, warehousing, material handling, vehicle scheduling, shipping, etc.
Logistics functions/logistics mix
Logistics is a process of making goods available where they are needed and when they are needed. This process consists of various functions:
Transportation
Warehousing
Material Handling
Packaging
Inventory Management
Order Processing
Information Management
Customer Service
1 Order Processing: In the first step, customer feels the need for certain products and places an order to the supplier. Once the customer order is received, many internal activities are undertaken. Order processing includes:
• Checking whether quantity ordered is available.
• If not available start its production.
• Checking whether customer’s credit is satisfactory.
• Acknowledging the order given by the customer.
Order processing time can be shortened through the use of computers.
- Inventory Management:
• Inventory management involves maintaining the required level of stocks to meet customer requirements simultaneously ensuring minimum inventory carrying cost.
• The success of an organisation to a larger extent depends upon how well they manage their inventory level.
• Moreover, inventory is associated with a huge baggage of costs such as transportation cost, warehousing cost, material handling cost, etc.
• An increase in level of inventory will lead to an increase in all the associated costs and vice - versa
• Thus, one of the objective of logistics is to reduce inventory to the lowest possible level consistent with achieving customer service goals at the lowest overall logistical cost
• Without proper inventory management, the firm will not be able to meet the demands of its customers. - Warehousing: Warehouse is a storage place where goods are stored until they are sold. Thus, warehousing is basically holding goods before dispatch after it is produced. Although warehousing is traditionally considered to be a storage facility, it plays a much higher role from logistics viewpoint. It is perceived to be a switching facility rather than a storage facility.
A firm may have a private warehouse, public warehouse or a contract warehouse. Location of warehouse is an important consideration as in order to provide good customer service, warehouse should be located near the market. Warehouse provides a number of economic and service benefits to the logistical system.
4 .Transportation: Transportation refers to physical movement of products from one place to another. Since products are produced in a different area and are consumed in a different area, transportation physically moves the products from where they are produced to where they are needed. It acts as a physical link that connects the company to its suppliers and customers .
Transportation is accomplished in three ways:
One’s own fleet- Private carriage
Contract with specialists on long term basis- contract carriage
Contract on individual shipment basis- common carriage
Determinants of effective transport system
• Cost: The cost refers to total cost for the movement of goods between the two geographical functions and expenses related to administration and maintaining in-transit inventory.
• Speed: Speed of transportation refers to the speed with which goods reach the destination.
• Consistency: Consistency in speed means achieving the same speed over a long period of time.
- Material Handling: Material handling means providing the right amount of right material, in the right condition, at the right place, at the right time. Material handling involves movement, protection, storage and control of materials.
Material handling cycle starts from receipt of materials, followed by storage of materials, followed by moving the materials to production unit, followed by moving of finished goods to the warehouse and then it waches to final customer. Around 15% to 20% of the cost of the product is spent on material handling.
Material handling is an important and specialised function of industrial activity. Even though this activity does not add to the value of the product, it is essential from the point of space and time utility. - Packaging: Packaging is an important logistical management function.
It has a significant impact on the cost and productivity of the logistical system. Packaging influences both the efficiency and the effectiveness of logistical operations.
Basically there are two types of packaging: Consumer packaging and Industrial packaging. Consumer packaging focuses on customer convenience, market appeal and product protection.
Industrial
(Logistics) packaging includes individual units, master cartons and containers. It focuses on handling, protection and communication.
Logistics packaging provides various benefits such as damage protection, material handling efficiency, communication and storage
space economy, - Information Management: Information management is an invisible element in the process of logistics management. Information plays a crucial role in the process of logistics management.
Need for information
• Demand forecasting and order processing are two areas of logistical work dependent on information.
• Information is needed by the organisation to make better tactical and strategic decisions for the benefits of the organisations as well
as for the benefits of the customer.
In short, logistics involves various functions, like transportation, warehousing, material handling, inventory management etc. but all these functions depend upon availability of relevant information.
8. Customer Service: Customer service is series of activities designed to enhance the level of customer satisfaction customer satisfaction is achieved when right product reaches the right customer at right place and right time in right quantity and right condition at right price.
Transportation meaning
Transportation is derived from the Latin word Transportare, where trans means across’ and Portare means to carry’. Transportation refers to physical movement of products from one place to another. Since products are produced in a different area and are consumed in a different area, transportation physically moves the product from where they are produced to where they are needed. It acts as a physical link that connects the company to its suppliers and customers. A good transportation system is one of the fundamental pillar for growth of industry and commerce.
Difference between Private and public warehouse
TESCOG
Term : suitable for long term, short term
Tax benifit : enjoys tax benifit , does not enjoy tax benefit
Suitability: suitable if the company has special needs , suitable if the needs are general
Control: has greater control , has lesser control
Owner : owned by the company that owns the product , owned by a third party
Operational flexibility: has high flexibility, has limitations flexibility.
Operating cost : has high operating cost ,
Has lower operating cost
Geographical flexibility: has low geographical flexibility, has high
What is private warehouse
A private warehouses is owned by those who own the product . Often it is not possible to find a warehouse that meets the company’s requirements. Therefore the company opts for private warehouse
What is public warehouse
A public warehouse is a warehouse that is owned and operated by a third party. Companies take such warehouse on contract bases to strong their products .
Public warehouse are of specialised conditions:
1. General merchandise warehouses are used to store regular goods
2. Refrigerated warehouses are used to store perishable goods and medicines that require temperature control.
3. Special commodity warehouse are used to store agricultural goods
4. Bonded warehouses are licensed by the government to store products before payment of taxes and duties
5. Household warehouses are used to store large and bulky items
Factors influencing transportation decisions
Fdancrs
1.frequency: the number of times the carrier goes to and fro . Good frequency is a good indication
2.distance: depending upon the distance. For shorter distances roadways for greater distances airways or waterways
3. Availability and accessibility: transportation that is easily accessible or available at the moment.
4. Nature of goods: goods that are perishable should be transported using airways and large and bulky by sea or rail
And gas and liquids by pipelines
5.cost : cost should be taken into consideration: water transport is cheapest but slowest, air transport is fastest but costliest.
6.capability of mode : should be capable to accommodate goods . For larger bulky rail and water . Road for medium .
7.reliability: choosing transportation that is reliable. Pipeline is the most reliable .
8. Delivery time: urgent by air and not so urgent but other modes
9. Speed.
10. Safety and security: should ensure that goods reach without any damage and loss.
Airways advantages
Fastest mode of transportation. Costliest mode of transportation. Fixed cost are cost of construction of aircraft and airports . Variable costs are expensive, they include maintenance, cost on in flight and on ground crew.
Advantages : Bans
1. Brings the world closer: brings new and far market closer to the business man , increases international market etc.
2. Easily access: it is accessible where no other transport is available
3. Natural highways: it is in the air so there are natural highways ,no construction cost .
4. No physical barriers: because it is in the air there are no physical barriers like mountains, etc
5.high speed: it is the fastest and the most comfortable mode of transportation
6. Quick service : it is fastest and considered as the best mode of transportation for perishable goods.
Airways disadvantages
Anchr
A: affected by weather : it is dependent on the weather. Can’t fly at times because of rains storm etc
N: not suitable for heavy bulky goods. Less carrying capacity
N : narrow coverage : not easily accessible as only available in bigger cities.
C: cost : most expensive mode of transportation.
C: limited carrying cost : lowest carrying capacity
H: huge investment: cause a hefty amount for construction and maintenance .
R: restricted products: can’t transport products that are hazardous or harmful
Principles of transportation
Economies of scale :
Is a principle that states that transportation cost per unit of weight decreases when size of the shipment increases
This is because the fixed cost incurred is spread over a larger shipment. Thereby decreasing the cost per unit
Fixed cost are those cost that do not vary with the size of the shipment.
Economies of distance is a principle that states that transportation cost per unit pf distance decreases when distance increases
For example, the delivery of a shipment of 800 kilometres will cost the same as a shipment of ( same combined weight ) of 400 kilometres.
This is called as tapering principle as the rates taper or reduce
This is mainly because the fixed cost incurred for loading and unloading the vehicle gets spread over the larger distance .
