Section M: Physical Distribution

Question 1

distribution

Answer 1

distribution (physical distribution)

The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer.

These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management.

It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses.

Question 2

Objectives of Physical Distribution

Answer 2

A primary objective of physical distribution is to add value to the product by moving it from a place where it is less in demand to a place where it is more in demand and thus increase the product’s utility or usefulness. In other words, distribution provides availability.

A second objective is to provide this increase in value in a profitable manner, meaning that the increase in price for offering the good at a time and place convenient to the customer is greater than the cost of offering this service.

Question 3

Physical Supply

Answer 3

Physical supply is transportation and warehousing leading to the factory, and this may require specialized logistics to move and store bulk raw materials and so on.

Question 4

Physical Distribution

Answer 4

Physical distribution is transportation and warehousing from the factory to the customer using one or more distribution channels, which are the specific network of distribution centers, wholesalers, and/or retailers the goods travel through to get to the customer.

Question 5

Distribution channel

Answer 5

Distribution channel : The distribution route, from raw materials through consumption, along which products travel.

Question 6

Transaction channel

Answer 6

Transaction channel : A distribution network that deals with change of ownership of goods and services including the activities of negotiation, selling, and contracting.

Question 7

drop ship

Answer 7

drop ship

to take the title of the product but not actually handle, stock, or deliver it (i.e., to have one supplier ship directly to another or to have a supplier ship directly to the buyer’s customer).

Question 8

Transportation

Answer 8

Transportation.

The physical movement of goods via road, air, water, rail, or pipeline. This is usually the largest part of distribution costs.

Question 9

Managing distribution inventory

Answer 9

Managing distribution inventory

This is the value of all finished goods at any point in the physical distribution channel(s). It is often the second largest part of distribution costs.

Question 10

Managing distribution centers (warehouses)

Answer 10

Managing distribution centers (warehouses)

These inventory storage locations may reduce net costs by reducing transportation costs and/or increase time and place utility for customers. The customer must be willing to pay more for this increase in one or both types of utility.

Question 11

Inventory control

Answer 11

Inventory control

This involves securing distribution inventory, release procedures, and auditing inventory records

Question 12

Materials handling

Answer 12

Materials handling

This is the movement of goods to and from storage locations and vehicles within and around a DC. It is one part of inventory carrying costs and is often the largest part of warehousing costs.

Investing more in equipment and automation can reduce labor costs. Choices in this tradeoff between labor and handling equipment relate to labor rates as well as the return on investment for the equipment. High volumes may be required to justify the investment. Subsets include picking, packing, sorting, etc.

Question 13

Order administration

Answer 13

Order administration

These are the costs of customer orders, order status tracking, credit terms, billing, collections, and service. These add cost, and order-taking increases lead time.

Good communication with intermediaries and customers is a vital component of any distribution system.

Question 14

protective packaging

Answer 14

protective packaging

Wrapping or covering of material that provides containment, protection, and identification of inventory in a warehouse. The material must be contained in such a way that will support movement and storage and will fit into the dimension of storage space and transportation vehicles.

Question 15

Postponement

Answer 15

Postponement

Distribution centers may perform light manufacturing such as final assembly or perform other final differentiation activities such as adding country-specific packaging, documentation, power cords, etc.

Question 16

third-party logistics (3PL)

Answer 16

third-party logistics (3PL)

A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.

Question 17

4PL

Answer 17

A 4PL is like a 3PL, but this party manages the entire logistics function, possibly subcontracting work to other logistics providers but coordinating and supervising the work as a whole.

Question 18

Incoterms

Answer 18

Incoterms ®

a set of rules established by the International Chamber of Commerce that provides internationally recognized rules for the interpretation of the most commonly used trade terms in foreign trade and is routinely incorporated in the contracts for the sale of goods worldwide to provide guidance to all parties involved in the transaction.

Question 19

Advance ship notice (ASN)

Answer 19

Advance ship notice (ASN)

An electronic data interchange (EDI) notification of shipment of product.

Question 20

Duty

Answer 20

Duty : A tax levied by a government on the importation, exportation, or use and consumption of goods.

Question 21

Tariff

Answer 21

Tariff : An official schedule of taxes and fees imposed by a country on imports or exports.

Question 22

Waybill

Answer 22

Waybill : A document containing a list of goods with shipping instructions related to a shipment.

Question 23

Shipping manifest

Answer 23

Shipping manifest : A document that lists the pieces in a shipment.

A manifest usually covers an entire load regardless of whether the load is to be delivered to a single destination or to many destinations.

Manifests usually list the items, piece count, total weight, and the destination name and address for each destination in the load.

Question 24

Bill of lading (uniform) (B/L)

Answer 24

Bill of lading (uniform) (B/L) : A carrier’s contract and receipt for goods the carrier agrees to transport from one place to another and to deliver to a designated person.

In case of loss, damage, or delay, the bill of lading is the basis for filing freight claims.

Question 25

Freight forwarder

Answer 25

Freight forwarder : The “middle man” between the carrier and the organization shipping the product. Often combines smaller shipments to take advantage of lower bulk costs.

Question 26

Customs broker

Answer 26

Customs broker : A person who manages the paperwork required for international shipping and tracks and moves the shipments through the proper channels.

Question 27

reverse logistics

Answer 27

reverse logistics a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

Question 28

remanufacturing

Answer 28

remanufacturing 1) An industrial process in which worn-out products are restored to like-new condition. In contrast, a repaired product normally retains its identity, and only those parts that have failed or are badly worn are replaced or serviced. 2) The manufacturing environment where worn-out products are restored to like-new condition.

Question 29

green reverse logistics

Answer 29

green reverse logistics the responsibility of the supplier to dispose of packaging materials or environmentally sensitive materials such as heavy metals.

Question 30

The four Ps of marketing

Answer 30

``` The four Ps of marketing Product Price Place Promotion ```

Question 31

Objectives of Distribution Inventory Planning Systems

Answer 31

The objectives of distribution inventory planning systems include providing the targeted level of customer service at the lowest cost and the smoothest interaction with supply chain partners.

Question 32

What are two major controllable costs for distribution inventory planning ?

Answer 32

Two major controllable costs for distribution inventory planning are materials handling and inventory turnover. Finding ways to reduce the number of times materials need to be handled reduces carrying cost.

Question 33

What are the three major types of distribution inventory planning systems?

Answer 33

Three major types of distribution inventory planning systems include: - pull systems, which decentralize control, - push systems, which centralize control, - and distribution requirements planning (DRP) systems, which require integrating information systems to achieve some of the benefits of both push and pull.

Question 34

decentralized inventory control

Answer 34

decentralized inventory control “inventory decision making exercised at each stocking location for SKUs at that location.” These are also called pull inventory planning systems because DC demand pulls inventory from suppliers. However, this is usually just orders that are pulling inventory, not ultimate customer demand. Thus, decentralized pull systems use independent demand ordering systems.

Question 35

order point system

Answer 35

a common method for regional or centralized DC reordering is an order point system. When an order point system is used, the orders will be for fixed amounts (possibly the economic order quantity), but the timing of when the order point occurs will vary.

Question 36

What is the primary advantage of a pull system, like order point system?

Answer 36

The primary advantage of a pull system is that DCs have autonomy and can order or not order based on their knowledge of local demand. This also entails reduced expense for maintaining communications and relationships with other supply chain partners. A main disadvantage is that this is the primary cause of the bullwhip effect.

Question 37

centralized (push) inventory control

Answer 37

centralized inventory control “inventory decision making for all stock keeping units exercised from one office or department for an entire company.” This is also called push inventory planning because inventory is pushed out to the central DC and from there to the regional DCs based on information on demand, promotions, and so on.

Question 38

What are the advantages of centralized (push) inventory control?

Answer 38

A key advantage of this method is that total distribution inventory levels can be controlled carefully. As the definition indicates, however, usually this is possible only when the organization owns the distribution channel, since independent DCs would need to agree to accept (and pay for) whatever inventory was sent, even when this results in overstocks or stockouts.

Question 39

What are the disadvantages of centralized (push) inventory control?

Answer 39

A key disadvantage of centralized (push) inventory control, however, is that local information on demand may not be gathered sufficiently or in a timely manner and service errors are therefore more likely to occur. For example, central planning may still not have information on local retailer promotions or other reasons for variations in ordering. For this reason, many organizations have turned to a third option, called distribution requirements planning.

Question 40

distribution requirements planning (DRP)

Answer 40

distribution requirements planning (DRP) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are “exploded” via MRP logic to become gross requirements of the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies

Question 41

time-phased order point (TPOP)

Answer 41

time-phased order point (TPOP) MRP-like time planning logic technique for independent demand items, where gross requirements come from a forecast, not via explosion. Can be used to plan distribution center inventories as well as to plan for service (repair) parts, because MRP logic can readily handle items with dependent demand, independent demand, or a combination of both. An approach that uses time periods, thus allowing for lumpy withdrawals instead of average demand. When used in distribution environments, the planned order releases are input to the master schedule dependent demands. DRP has features of both pull and push.

Question 42

Net requirements (calculation)

Answer 42

Net requirements = Gross requirements - Scheduled requirements - Prior Projected Available

Question 43

transportation

Answer 43

transportation the function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization.

Question 44

traffic

Answer 44

traffic a department or function charged with the responsibility for arranging the most economic classification and method of shipment for both incoming and outgoing materials and products.

Question 45

Transportation Objectives

Answer 45

The objectives of transportation include meeting the targeted level of customer service while minimizing transportation costs and in-transit time. Transportation costs include the costs of transportation itself plus the carrying cost of in-transit inventory, which is a function of the carrying cost rate and the number of days in transit.

Question 46

There are four basic types of shipping costs:

Answer 46

There are four basic types of shipping costs: - Line-haul costs - Pickup and delivery costs - Terminal-handling charges - Billing and collecting costs

Question 47

line-haul costs

Answer 47

line-haul costs Basic costs of carrier operation to move a container of freight, including drivers’ wages and usage depreciation. These vary with the cost per mile, the distance shipped, and the weight moved.

Question 48

pickup and delivery costs

Answer 48

pickup and delivery costs as follows: Carrier charges for each shipment pickup and the weight of that shipment. Costs can be reduced if several smaller shipments are consolidated and picked up in one trip.

Question 49

terminal-handling charges

Answer 49

terminal-handling charges 1) Carrier charges dependent on the number of times a shipment must be loaded, handled, and unloaded. Cost can be reduced by consolidating shipments into fewer parcels or by shipping in truckload quantities. 2) For shipping lines, the costs of paying container terminals for unloading and loading during shipment. These costs are borne by the shipping lines at the port of shipment or destination.

Question 50

Billing and collecting costs

Answer 50

Billing and collecting costs. These are the fixed administrative costs related to paying for the services described above. Fewer shipments or fewer pickups and deliveries will reduce these costs (similar to ordering costs).

Question 51

quantity discount as “a price reduction allowance determined by the quantity or value of a purchase.”

Answer 51

quantity discount as “a price reduction allowance determined by the quantity or value of a purchase.”

Question 52

carriers rates can depend on what is being shipped What are examples of that?

Answer 52

Carriers charge different rates based on what is being shipped and how it is packaged. Here are some factors that influence these rates: - Hazardous materials cost more and may require specialized vehicles and certified handlers. - Perishable, frozen, and refrigerated goods may require special vehicles and handling equipment. - High-value goods have premium charges for providing security and to compensate for the carrier’s increased liability related to damages. - Goods that are susceptible to damage cost more, but the quality of packaging can reduce these risks and thus also the charges. - Goods that are packaged for easy handling (e.g., on pallets) have lower rates than items that need more handling or specialized handling equipment

Question 53

backhauling

Answer 53

backhauling The process of a transportation vehicle returning from the original destination point to the point of origin. The 1980 Motor Carrier Act deregulated interstate commercial trucking and thereby allowed carriers to contract for the return trip. The backhaul can be with a full, partial, or empty load. An empty backhaul is called deadheading.

Question 54

Detention

Answer 54

Detention : Carrier charges and fees applied when truck trailers are retained beyond a specified loading or unloading time.

Question 55

Demurrage

Answer 55

Demurrage : The carrier charges and fees applied when rail freight cars and ships are retained beyond a specified loading or unloading time.

Question 56

break-bulk

Answer 56

break-bulk 1) Dividing truckloads, railcars, or containers of homogeneous items into smaller, more appropriate quantities for use. 2) A distribution center that specializes in break-bulk activities. 3) Unitized cargo in bales, boxes, or crates that is placed directly in a ship's holds rather than in containers.

Question 57

freight consolidation

Answer 57

freight consolidation The grouping of shipments to obtain reduced costs or improved utilization of the transportation function. Consolidation can occur by market area grouping, grouping according to scheduled deliveries, or using third-party pooling services such as public warehouses and freight forwarders.

Question 58

ways

Answer 58

ways , defined in the APICS Dictionary, 16th edition, as follows: Paths over which a carrier operates, including right-of-way, roadbed, tracks, and other physical facilities. May be owned by the government, privately held by the carrier, or provided by nature.

Question 59

Transportation Mode

Answer 59

Water - slow/low cost Rail - rough ride/low cost. Best for durable, dense, low-value goods. Road - flexible, smaller capital costs than rail; fast/moderately priced Air-fast/expensive. gentle on cargo Pipeline

Question 60

intermodal transport

Answer 60

intermodal transport 1) Shipments moved by different types of equipment combining the best features of each mode. 2) The use of two or more different carrier modes in the through movement of a shipment.

Question 61

Private carrier.

Answer 61

Private carrier. The APICS Dictionary, 16th edition, defines a private carrier as “a group that provides transportation exclusively within an organization.” This is a fleet of vehicles owned or leased by an organization for its private use. For example, Frito Lay resupplies its snacks using a private fleet. The investment in assets, staffing, maintenance, and insurance is high for a private carrier. Therefore, large volumes in all seasons are needed to justify the investment. Others with a core competency in transportation might do it better for less, so return on investment must be considered.

Question 62

Common carrier.

Answer 62

Common carrier. The Dictionary defines a common carrier as follows: Transportation available to the public that does not provide special treatment to any one party and is regulated as to the rates charged, the liability assumed, and the service provided. A common carrier must obtain a certificate of public convenience and necessity from the Federal Trade Commission for interstate traffic. Common carriers are licensed to carry specific types of goods or commodities and to offer their services to anyone willing to pay their rates. However, pricing is highly competitive, and this service is generally treated as a commodity itself, though dependability may be a differentiator.

Question 63

Contract carrier.

Answer 63

Contract carrier. According to the Dictionary, a contract carrier is a carrier that does not serve the general public, but provides transportation for hire for one or a limited number of shippers under a specific contract.

Question 64

truckload (TL) carriers

Answer 64

truckload (TL) carriers , which the Dictionary defines as “carriers that deliver/charge only for full truckload shipments.”

Question 65

warehousing

Answer 65

warehousing the activities related to receiving, storing, and shipping materials to and from production or distribution locations.

Question 66

distribution center (DC)

Answer 66

distribution center (DC) Typically a finished goods warehouse designed for demand-driven rapid distribution to retailers (retail distribution centers), wholesalers, or direct shipments to customers (order fulfillment centers). Cross-docking warehouses are another type of distribution center.

Question 67

distribution warehouse

Answer 67

distribution warehouse A facility where goods are received in large-volume uniform lots, stored briefly, and then broken down into smaller orders of different items required by the customer. Emphasis is on expeditious movement and handling.

Question 68

One way warehousing provides this value at an acceptable cost is by maximizing materials-handling efficiency. What is materials handling?

Answer 68

One way warehousing provides this value at an acceptable cost is by maximizing materials-handling efficiency. Materials handling is : Movement and storage of goods inside the distribution center. This represents a capital cost and is balanced against the operating costs of the facility.

Question 69

Unitization

Answer 69

Unitization : In warehousing, the consolidation of several units into larger units for fewer handlings.

Question 70

Unit load

Answer 70

Unit load : A shipping unit made up of a number of items; bulky material arranged or constrained so the mass can be picked up or moved as a single unit. Reduces material handling costs. Often shrink-packed on a pallet before shipment.

Question 71

cross-docking

Answer 71

cross-docking : The concept of packing products on incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination. The items are carried from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse. Cross-docking reduces inventory investment and storage space requirements.

Question 72

Receiving

Answer 72

receiving as the function encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.

Question 73

Put-away

Answer 73

Put-away. Put-away involves moving goods to picking or storage areas as directed by the WMS and recording the completion of the move and the storage location.

Question 74

Storage

Answer 74

Storage. Activities performed on goods in storage include physical security, inventory accuracy auditing such as cycle counting, and authorized relocations.

Question 75

order picking

Answer 75

order picking as selecting or “picking” the required quantity of specific products for movement to a packaging area (usually in response to one or more shipping orders) and documenting that the material was moved from one location to shipping.

Question 76

Packaging

Answer 76

Packaging includes adding industrial packaging to protect shipments from damage. It may involve placing individual units into containers or boxes, palletizing and shrink-wrapping orders, and forming other unit loads.

Question 77

Post-manufacturing services.

Answer 77

Post-manufacturing services. Postponement and other delayed manufacturing strategies may require light manufacturing to assemble-to-order or other delayed differentiation, such as adding the power supply, documentation, and packaging for a given country.

Question 78

Staging (marshalling).

Answer 78

Staging, or marshalling, involves assembling individual orders, which may include rearranging pallets or other unit loads; generating pallets, cartons, or other unit loads from individual items; checking orders for completeness; rectifying omissions or errors; and recording backorders or other variances in both shipping documents and system records.

Question 79

Shipping.

Answer 79

Shipping. Shipping involves verifying orders, preparing bills of lading and other documents, and loading outgoing vehicles in the proper sequence as directed by the WMS or TMS. (Vehicles may be traveling to more than one destination and need to be unloaded in the right order.)

Question 80

Discrete order picking

Answer 80

Discrete order picking : A method of picking orders in which the items on one order are picked before the next order is picked.

Question 81

Batch picking

Answer 81

Batch picking : A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the individual orders are constructed.

Question 82

Wave picking

Answer 82

Wave picking : A method of selecting and sequencing picking lists or items to minimize the waiting time of the delivered material. Shipping orders may be picked in waves combined by common carrier or destination, and manufacturing orders in waves related to work centers.

Question 83

Zone

Answer 83

Zone : The specific warehouse location assigned to an order picker. In picking items for an order, the stock picker gets only the items for each order that are within his/her zone. The picker then fills the next order for items from his/her zone.

Question 84

Zone picking

Answer 84

Zone picking : A method of subdividing a picking list by areas within a storeroom for more efficient and rapid order picking. A zone-picked order must be grouped to a single location before delivery or must be delivered to different locations such as work centers.

Question 85

picking list

Answer 85

picking list “a document that lists the material to be picked for manufacturing or shipping orders.” This list could be printed or exist electronically and be read from a handheld or wearable reader, or it could take the form of voice-prompted directions.

Question 86

Fixed-location storage

Answer 86

Fixed-location storage : A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse. Although more space is needed to store parts than in a random-location storage system, fixed locations become familiar, and therefore a locator file may not be needed.

Question 87

Random-location storage

Answer 87

Random-location storage : A storage technique in which parts are placed in any space that is empty when they arrive at the storeroom. Although this random method requires the use of a locator file to identify part locations, it often requires less storage space than a fixed-location storage method.

Question 88

Zone

Answer 88

Zone : A warehouse location methodology that includes some of the characteristics of fixed and random location methods. Zone locations hold certain kinds of items, depending on physical characteristics or frequency of use.

Question 89

pallet positions

Answer 89

pallet positions: A calculation that determines the space needed for the number of pallets for inventory storage or transportation based on a standard pallet size. Pallet dimensions vary around the globe, but are typically a constant in regional markets. The term is frequently used to quote storage and transportation rates.

Question 90

Bar code

Answer 90

Bar code : A series of alternating bars and spaces printed or stamped on parts, containers, labels, or other media, representing encoded information that can be read by electronic readers. A bar code is used to facilitate timely and accurate input of data to a computer system.

Question 91

Radio frequency identification (RFID)

Answer 91

Radio frequency identification (RFID) : A system using electronic tags to store data about items. Accessing or retrieving this data is accomplished through a specific radio frequency and does not require close proximity or line-of-sight access.

Question 92

bonded warehouse

Answer 92

bonded warehouse Buildings or parts of buildings designated by the US Secretary of the Treasury for storing imported merchandise, operated under US Customs supervision.