PAPER 11 LOGISTICS AND SUPPLY CHAIN MANAGEMENT
PAPER 11 LOGISTICS AND SUPPLY CHAIN MANAGEMENT.
Dec 11. 1 Discuss the various systems used for tracking consginments with their merits and demits.Dec 10. Discuss various service attributes of the logistic stystem. Which are the value added lostical services extended by logistical service provider ?June 10. Discuss various types of logistics strategies being used in the industry.Dec 09. Discuss the imp of various linkages of supply chains in the light of prevailing business environment . Please list the benefit of e business solution implementation.Jun 09. What are the steps in the process of distribution channel design? Discuss the role of logistics variable in decision as to where to locate plant or warehouse.
Dec 11. Discuss the various types of logistics strategies being used in the industry.Dec 10. What are the components of supply chain? Please discuss importance of each in brief. Describe the role of logistics in the success of supply chain of a firm.Jun 10. What is meant by supply chain mapping? How does it help in success of organization?Dec 09. What are the warehousing strategies organizations normally adopt , based on their product market characteristics? Discuss the various warehouse performance parameters.June 09. What is meant by Supply chain mapping? How does it help in the success of organization?
Dec 11. How Logistics operations differ from within and between countries ?Dec 10. Discuss the functions of warehousing . Discuss the various warehouse performance parameters.Jun 10. Discuss the various objectives of logistical packaging.Dec 09. Inventory Control is the key to the profitable running of a business comment. Discuss the various approaches to control inventory investment.Jun 09. Please discuss role of cutting edge technogoies in logistics &supply chain management. Please Discuss how bar code, RFID, GPS and automated material handling system. Describe the role of logistics in the success of the supply chain of the firm.
Dec 11. Why do corporations outsource logistics functions and what benefits are they getting?Dec 10 Discuss the reasons for carrying inventory. Discuss the various techniques for inventory control with merits and demerits.Jun 10. Why is it important to measure the performance of supply chain? What are the various world class performance measures. Give examples.Dec 09. Describe the role logistics in the distribution channel of a firm. Discuss the role of information technology in logistics and channel management.
Dec 11. Which are the different networks used for providing transportation services? Discuss their merits and demerits in the context of the existing transportation infrasture in India. June 09. Discuss role of material handling in logistics. Desribe various available material handling equipments. Pl elaborate how packaging can improve overall supply chain performance.
Dec 10. Discuss the various system used for tracking consignments. Howe the usage of new technologies will help in effective asset utilization in logistics supply chain?June 10. Discuss the role of material handling in logistics. Describe various available material handling equipments. Dec 09. Discuss various systems used for tracking consignments with their relative merits and demerits.
LOGISTICS MANAGEMENT
GROUP PROJECTS
Presentation Duration 30 minutesNo of slides 5/10 nosNo of Members in Team 3 or 4Methodology- Visit, Internet, Interview.
1. BEST PRACTICES IN ROAD TRANSPORT:CAST STUDY IN ROAD TRANSPORT: BEST PRACTICES IN RAIL TRANSPORT
2. BEST PRACTICES IN WATER TRANSPORT
3. BEST PRACTICES IN AIR TRANSPORT
Criteria for Selection of Carrier, Market coverage, Size of fleet, Types of vehicles, Use of IT, Loss/Damage Performance. Determination of freight, freight cost sheet, Freight for different materials, Factors affecting freight, Value added services, JIT Deliveries, Customer Service. Insurance Claims, Applicable laws. Major Players. Industry Problems. Routing Scheduling.
4. BEST PRACTICES IN MATERIALS HANDLING
5. BEST PRACTICES IN WAREHOUSING
LOGISTICS MANAGEMENT
EVOLUTION OF LOSTICS
Around 2700 BC man realized use of horse.18th Century Steam Engine19th Century Locomotives trains20th Century Cars, Aero plane1969 Man landed on Moon-Neil Armstrong2000 Internet E commerce
Logistics Management?
Logos means supply/support.Logistics means delivering Right Product in Right Quantity at Right Condition, Place at Right Time at Right Cost to Right Customer.
Logistic is that part of the supply chain process that plans, implements and controls the effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers requirements.
SCM is the integration of business processes from end user through original suppliers that provide products, services and information that add value for customers
SCM is the process to examine everything from needs identification through the actual use disposal of purchased materials and services while maximizing the value of money spent.
SCM includes- Suppliers supplier Supplier Manufacturer Distributor Retailer Customer Customers Customer.
LOGISTICS SCOPE / FUNCTIONS / ACTIVITIES
1. Order Processing:Order Registration, Checking, Order status, communication to customers, Expediting supplies.Check Customer Credit.
2. Inventory Management: Holding adequate inventory to avoid sale loss at the same time avoid blockage of funds in slow/non moving inventory. Updated information facilitates decision making, movement of inventory closer to customer
3. Warehousing:Warehouse location, design, automation. Material Storage, Load Unitizing, Net work planning. Safety,Legal Aspect, Environmental issues.
4. Transportation: Optimizing transport cost, Rout Planning, Mode Selection, vehicle scheduling. Time deadlines, Safety of materials and vehicle, drivers.
5. Materials Handling & Storage:Non value adding activity, eliminate where possible. Optimize use of MH Equipment, Maintenance of equipment, Use of gravity.
6. Packaging Packaging protects and products and sells it. Co-ordination of Packaging Dept dept for storage,transit requirement of products to prevent damage, comply with legal requirement- Weight & Measurement Acts etc, information to customer.
7. Information Flow:Building a robust system which will keep informationof all the activitites, trace flow material from suppliersto customers and flow of fund from customers to organization.
8. Demand Forecasting: Estimating demand for products in future.
9. Reverse Logistics: Organizing collection of defective product, dismantling, repairing, recycling, and return of unsold products.
10. Waste Management- Salvaging defective, disposing surplus, scrap at better prices. Disposing of hazardous material.
11. Customer Service: Updating customers with status of order, after sales service, upgrading of product,
SYSTEMS CONCEPT
It is the study of Relationship of various activities in SCM and how these activities affect each other. To give better service is related to level of inventory.The various activities to be focused are-Information flow- Warehousing- Inventory control-Packaging, Transportation.
SUPPLY CHAIN CONCENTS 1. Value Chain Mapping.2. Market Industry Analysis3. Total Cost of Ownership
Value Chain MappingIt is study of all activities in SCM and beyond. The tasks are sorted out as value added tasks and non value adding tasks. How the non-value adding tasks can be reduced/eliminated or improved. This can be achieved by drawing diagram of activities from Suppliers to Customers and then examine which task add value and which dont.
Market and Industry Analysis can be carried.It will help understand areas to be improved and underline- Industry Trend Competition -Substitutes - Cost Levers
Customer Value ChainThe objective to SCM to satisfy the customer and add value to him.To achieve this smooth flow of data from origin of raw material to customer hands required. It can be sourced from Inbound Logistics and Outbound Logistics.
Inbound Logistics: It covers the transportation of materials from suppliers to place of mfg. The activity starts from planning of materials based on orders. It requires co-ordination with Suppliers, Purchase and Production.Firms may have less control over inbound transport.Nature of handling is different than Finished Goods.
Outbound Logistics:It is movement of goods, it storage, transportation, distribution to customers. The success of organization depends on efficiency and effectiveness of inbound and outbound logistics.Market demand generates need for outbound movement .It is uncertain and fluctuating.Evaluate the following offers and suggest best proposal.
AB
Basic 100000110000
Sales Tax2% CSTVAT 13%
Excise Duty10%10%
Freight1000500
Insurance500500
Education Cess3%3%
Octroi 2%Nil
Installation Cost70005000
Payment TermsAdvance30 days
Interest Rate18% p.a.
Electricity Consumption units/5000 copies500400
Toner Consumptions /5000 copies 100110
Annual Maintenance Rs50007000
Up gradationNot possiblePossible
Scrap value /Buy back 1500010000
Total Cost of Ownership:
While evaluating the offers one should consider all related costs and find out hidden cost.In addition to the price, excise, freight, taxes etc other costs such as Operating Cost, Maintenance Cost, Training Cost, Administration Cost, Service Cost, Disposal Cost should be considered. At the end of life scrap realization should be added.
TOTAL COST OF OWNERSHIP
AB
Basic 100000110000
Excise1000011000
Education Cess300330
Freight1000500
Insurance500500
CST 2%/ VAT 13%220615903
Octroi 2%2280Nil
Installation Cost70005000
Add Interest @18% pa1849Nil
Total Landed Cost125135136015
Less Excise1130011330
Less VATnil15903
Net Landed Cost113835108782
ADD: OTHER COST
Electricity Consm @Rs 10/unit500400
Toner Consm100110
Annual Maintenance50007000
UpgradationNot possiblePossible
Grand Net Landed Cost119435116292
Less : Scrap value /Buy back 1500010000
Total Cost of Ownership104435106292
LOGISTICS COST AND GDP
Logistics CostIt is a performance indicators. It shows the costs incurred for logistics activities.It is also Service Indicators which results from logistics activities. It includes-
Cost of transport activities by road, rail, water, air.Cost of Storage/warehousing activitiesCost of Material Handling- loading, unloadingCost of packaging, Consolidation or de-ConsolidationCost of material transfer. Overheads, etc
GDP- Gross Domestic Product
It is total value of all goods and services produced during a year.Total value of GDP is equal to the total value of final use or demand.All purchases for transportation by consumers, Government, Foreign Buyers (export) would be clubbed assuming if it accounts for 10% of GDPIt is said logistic cost is 10% of GDP. Generally Logistic Cost of any country is between 8 to 20%. In 2009 Logistics Cost of various countries as % of GDP.
CHINAINDIASINGAPOREU.K.FRANCEJAPANUSA
14.50 14.00 12.50%12.20%11.70 %10.50 8.70%
OBJECTIVES OF LOGISTICS MANAGEMENT
1. Inventory Reduction: Maintain optimum inventory so that there is no loss of business and nor excess inventory which will affect profitability. A Good Inventory Management System to decide when to order, how much to order. It reduces wastes, spoilage, reduces space requirement.
2. Reliable and consistent Delivery Performance: Timely availability of products enhances customer loyalty, Creates better image of the company.
3. Freight Economy: Selection of right mode of transport- Road- Well spread network, better connectivity Flexible,small Loads, Door to Door Service Freight is major component of logistics cost. Air : Fast mode, High Cost Better for Light weight, small items. Rail: Low cost, High volume, Inter-modal Service Water: Low cost, High volume. Slow, Bulky Heavy loads. Pipeline: Mainly for oil, High Investment, Low operating cost, Reliable, Low losses. Borders/ Terrain problems.
4. Minimum Damage to Products:Ensure no damage to goods during transit, warehousing. It can be achieved through proper packaging, safe handling and Better storage conditions.
5. Quick Response:Faster Response to all internal and external customers is mustIt help plan better, reduce inventory, lesser obsolescence.Satisfy ultimate customers. EDI, Bar coding, IT System plays Important role in this.
6. Contribution towards Business:Earlier Logistics was considered as Cost Centre. However, it it is capable to add profit if Logistics functions are carried out professionally.
Logistics Planning.
Logistics planning is done at 3 levels-Strategic Planning: Long Term more than 1 year.Tactical Planning: Less thank 1 yearOperational Planning- Daily basis.
TypeStrategic TacticalOperational
LocationFacilities, size, locationInventory positioningRouting
TransportationMode selectionSeasonal service mixReplenishment Qty and timing
Order ProcessingSelecting order entry systemPriority rules for customersExpediting orders
CUSTOMER SERVICE
Customer service is a series of activities designed to enhance the level of customer satisfaction. It is a process for providing significant value added benefits to Supply Chain in cost effective way.
DYNAMIC LOGISTICS ENVIRONMENT
1. Customer Service Explosion:
Customer is more demanding, want better quality, faster service. The organizations who implemented this become successful Eg McDonald, Domino, DHL, Dell Computers.
2. Time Compression: Product Life Cycle has become short eg New Car models now and in the past. Customer expect JIT service, dont want to wait and goes for alternatives available.This requires integration of all functions- marketing, manufacturing, purchase, R&D.
3. Globalization of Industry.Earlier competition was limited to few domestic companies. Now material can be sourced globally resulting in stiff competition.
4. Organizational Integration.The old rigid structure of organization does not suit modern needs of customers.Hence implementation of SCM, customer oriented policies is vital.
PHASES OF CUSTOMER SERVICES
Customer Service is related to availability. Availability is affected by delivery frequency, reliability, stock levels etc. CS is divided in 3 phases- Pre Transaction, Transaction and Post Transaction Elements.
1. Pre Transaction Elements: There should be written Customer Service Policy and informed to customers.How easy for Customers to approach the OrganizationCustomer Service should be well structured and placed.System should be flexible to adapt to the changing needs of customers.
2. Transaction Elements:What is Order Cycle Time, its dependability?Is Inventory adequate to satisfy demand or inadequate or excess. How fast Replenishment is done.System to trace order status and quick Communication to customer.
3. Post Transaction ElementsIt relates to post sales service, repairs, replacement, warranty. System placed to service customer complaints. How fast complaint is solved. Customer Survey reports.
SERVICE ATTRIBUTES
Ability of the company to meet promised delivery date.Supplying right product Competitive Price. Advance intimation of delay. Timely response to request from the customer. Consistency in order cycle. Lead Time
VALUE ADDED SERVICESCurrent business is not about selling Products or services.It is about selling relationships, solutions, supports, and care. This can be achieved by having Shared Vision involving all stakeholders.
RESPONSIVE SUPPLY CHAIN/SERVICE DRIVEN SCM SYTEM.
1. Identify Customers Service Needs2. Define Customer Service Needs3. Design Logistics System
Identifying Customers Service Needs:
Find out customer needs in areas of price, product, quality, delivery through market research.Establish relative importance of service components to customers. eg. in Car- speed, fuel efficiency, aesthetics, maintenance.
Defining Customer Service:
To achieve service excellence Perfect Order can be used. Perfect Order is achieved when customers requirements are met fully. OTIF- On Time In Full.On Delivery 90%, In Full 80%, Error Free 90%Actual Perfect Order performance: 90% x 80% x 90% = 64.8%
Setting Customer Service Priorities:
Customers can be classified as A,B, C and serviced accordingly. While determining stocking policy basis should be Profit rather than sales revenue or volume.
Product CategoryABC
Stock Availability99%97%90%
Managing Product Service Level: High1. Seek Cost Reduction2. Product High Availability
3. Review
4. JIT Delivery
Volume (By SKU)
Low High Profit contribution (by SKU)
Q. 1: Re-define Product & Logistics costs to reduce.
Q. 2: Offer highest levels of services by holding items close to the customers.
Q. 3: Reduce/drop items due to low contribution.
Q. 4. Arrange JIT deliveries to reduce inventory cost
Setting Service Standards:
Standards to be set after customer survey benchmarking competitors-
1. Order Cycle Time,2. Stock availability, 3. Order size constraints,4. Ordering Convenience. 5. Frequency of delivery. 6. Delivery Reliability 7. Quality of Documentation. 8. Claims Procedure 9. Technical support 10. Order status information.
SUPPLY CHAIN MANAGEMENT
It is the integration of business processes from end user through original suppliers that provide products, services and information that add value for customers
Chain: of processes, transactions and information that take product/service from suppliers thru mfg, distribution to end customer.
Network: is a group of organizations that interact to buy, sell, deliver.
Supply Chain Management:
is integration & mgt of sc organizations through co-operative relationships, effective processes information sharing to create high performing value system that provide sustainable competitive advantage.
OBJECTIVES OF SC:
1. Reduce Cost2. Reduce Lead Time3. Provide Best Quality4. Better Product Availability5. Enhanced Service6. Flexibility7. Reliability
DRIVERS/ELEMENTS/COMPONENTS OF SC:
1. Inventory: Comprises Raw Materials, WIP, FG, stock in trade. A fine balance between over stocking and under stocking is to be achieved.
2. Manufacturing: Producing goods to meet customers demands involves scheduling workload, equipments, maintenance, ensuring quality, flexibility, cycle time reduction, outsourcing.
3. Transportation: Includes inbound and outbound logistics safety, economy and speedily reaching of goods without damage.
4. Warehousing, Packaging: Involves safe storage, packing, handling, sorting, recording, inventory status.Space and cost optimization.
5. Information: Updated accurate information flow of materials, money is required for rapid decision making, analysis. Connectivity to entire sc is vital.
6. Responsiveness: Quick response to customers, market change, trends is must.Integration of above components are vital for success of SC.
ROLE OF LOGISTICS:
Logistics Mgt is a vital link between market place, distribution, mfg and procurement. A swift and cost effective logistics gives competitive advantage. Logistics adds value by creating utilities-
1. Form Utility: It is a process of creating goods/services in proper form for customer.
2. Possession: Possession of goods by customer. In both utilities forms logistics brings RM, PM for mfg and brings FG to Customers at Right time R. place, Right Condition, Right Cost.
3. Time Utility: Adds value by having an item when it is needed within organization and in market place.
4. Place Utility: Making product available where it is needed.
Reduction is cycle time; inventory and better customer service is possible through Logistics Management.
SUPPLY CHAIN MAPPING:
SC consists of flow of materials through procurement, mfg, distribution, sales and consumption and flow of related information.
The objective of SC mapping is to understand the processes and improve them. This is done through a flow chart to identify value adding time which adds benefits to customers and non-value adding activities which adds to cost. SCM Activities-
Planning Sourcing Mfg Delivering Servicing
E-BUSINESS SOLUTIONS IN SCM
It can be divided in E Commerce, E Procurement and E collaboration.
E Commerce:
It includes (B2C) business to customer and Business to Business. (B2B).It performs various tasks.
1. Executes orders by customers, connects the information hub with customers.
2. Communication between members of chain- connects the hub with back end members of chain.
3. Electronic, instantaneous order tracking.
4. Remote sensing, testing, diagnosis of problems
5. Records performance data of supply chain.Amazon .com sells books, medicines, toys on line.
E-Procurement:
Manufacturers procure products from suppliers. Ariba, Free Markets, chemconnet.com offer active network of trading partners. E-Tendering. It reduces inefficiencies, offer best market price, quotes, reduces time and effort on procurement.
E-Collaboration
It connects employees, suppliers, distributors, shareholders, customers. It allows real-time sharing of sales, forecast, collaborative planning, production, product development.Collaborators jointly reduce inventory cost, raise customer service.
Advantages of E Business
1. Saving of time, efforts
2. Accuracy of data, Transparency
3. Improves efficiency
4. Reduced Lead Time
5. Reduced Inventory
6. Better decision making
7. Improved customer service
Adopting to E-Business:
1. Well defined process
2. Integration of functions
3. Selection of appropriate technology
4. Training of people
5. Phased implementation
WAREHOUSING IN SUPPLY CHAIN
Warehousing is vital part of logistics system that stores products (RM,WIP, FG) at and between point of origin and point of consumption and provides information to the management on the status, condition and disposition of items
Warehouse is a vital linkStores all materialsIdentification of materialsEnsures smooth flow of materialsMatches Demand and SupplyOptimizes Logistic CostPreserve ProductsProtection and safety of materialsMinimum value addition
Advantages of Warehouse Management System1. Facilitate faster decision making due to availability of related data.
2. Better service to customers as information is available.
3. It help to reduce inventory due to its visibility.
4. Accuracy of data
5. Reduces monotony of job.
MODERN CONCEPTS IN WAREHOUSING
Cross-docking
It is unloading of materials from an incoming truck and loading these materials directly into outbound trucks with little or no storage in between. This may be done to change type of conveyance, to sort material intended for different destinations, or to combine material from different origins into transport vehicles (or containers) with the same, or similar destination.
Advantages of Cross Docking Reduces handling costs, operating costs, and the storage of inventory Faster movement of matetrials to distributor/customers Reduces, or eliminates warehousing costs May increase available retail sales space. Alliances through Outsourcing.Instead of owning the warehouse, outsourcing the function.Saves investment, Advantages of better technology, Better serviceWarehouse Automation.Identification of goods by RFID, Barcodes, Pick/Put by light, Voice Picking (DHL)Automated Storage and Retrieval system. Carousels. Use of WMS
VALUE ADDED SERVICES BY WAREHOUSE
Sub-assembly, co-packing, customization, Postponement.REVERSE LOGISTICSIt is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. It includes Remanufacturing, Refurbishing, sale of surplus. Goods move from Customer to manufacturer/distributor.
WAREHOUSING FUNCTIONSA) MOVEMENT OF GOODS:a) Receiving includes unloading of materials, inspection for quantity, damage, verifications of documents and recording.b) Transfer of material for storage, consolidation, or outbound shipment.c) Order Selection: Picking products arranging packing as per order priority.d) Cross-docking: Transfering material from one truck to another directly without storing in warehouse.e) Shipping: Dispatching goods, consolidating, preparing documents, updating inventory records.B) STORAGE & PRESERVATION:A place for everything and everything in its placea) Provide suitable storage according to nature of material. Perishable items- Cold storage, Electronics- dust free, away from heat. b) Adequate safety and security of materials.c) Prevent spoilage due to moisture, heat, dust, water.d) Ensuring adequate space for handling, counting. checking, issue.e)Types of storage- Bins, Trays, Pallets, Slotted Angle Shelves, Cupboards, Tanks- underground/over groundC) INFORMATION TRANSFER:a) Information on inventory help to take decisions.b) Provides means of costingc) Comply with legal requirement, disclosure in Balance Sheet.d) Annual stock verification, reveal fraud, theft or loss.
BREAK BULK:Goods are received from different units in Central Warehouse which are consolidated in bulk or small units and dispatched to various customers.
MIXING/PACKING WAREHOUSESGoods/parts are received from various units in Central Warehouse. Then assembled/combined together and dispatched to customers.
WAREHOUSING STRATEGIESManagement has option to decide to build own warehouse or take on lease/rent or use Public Warehouse.
Advantages of Public Warehousing1. Saves investment in land, building, infrastructure.2. Flexibility to increase or reduce warehousing operations according to its needs.3. Lesser risk 4. Benefit of use of new technology.5. Own space can be used for more profitable business6. No / minimum labour problem.7. Economies of scale, can negotiate better rent for higher volume.Disadvantages of Public Warehousing1. Lesser control over the operations2. Speedy communication may not be possible3. May have limited space, facilities 4. Confidentiality may be at riskAdvantages of Private/owned Warehousing1. Higher control over the operations2. Economical over long term. 3. Better service 4.Tax benefits can be availed. 5. Flexibility of operationsDisadvantages of Private/owned Warehousing1. Financial investment to be made, funds are blocked2. Rate of return may be low.3. Risk of Labour Problem4. May not investment in latest technology.WAREHOUSE SITE SELECTIONFactors determining site selection-1. Place closer to market provides better service to customers.2. Place closer to Production facilities 3. Place between final customer and producer4. Place closer to raw material availability- cement-lime stone, steel- iron ore, 4. Accessibility by Road, Rail, Port, Airport.5. Availability of power, water, communication6. Tax levies- Mumbai octroi7. Labour availability quality, quantity and cost8.Cost of land, construction cost9. Tax Incentives10. Nature of local community.11. Availability of school, hospital, recreationWAREHOUSE SIZE:It will depend on following factors.1. Nature/size of products to be stored.2. Volume of material to be stored.3. Customer service level required4. Material Handling System, aisle requirement5. Types of storage systems- racks, shelves used6. Volume of receipt and dispatch7. Demand size and its pattern- seasonal WAREHOUSE LAYOUT BENEFITS1. Increase productivity2. Lower costs3. Better Customer Service4. Smooth product flow, Better utilization of space5. Better working conditions for employeesFACTORS AFFECTING OPTIMAL LAYOUT1. Type of product stored.2. Availability of finance3. Needs of customers 4. Cost benefit of labour, equipment, space and information.5. Competitive environmentWAREHOUSING COST:1. Warehousing Cost: Labour, Overheads-electricity, communication, Licensing fees, preservation cost, 2. Inventory Cost: Value and quantity of stocks held, insurance, material handling, spoilage of stocks3. Transportation Cost: Inbound and outbound transportation of material. Loading, Unloading. It depends on the volume carried per vehicle, maintenance of vehicle if owned.4. Cost of Sales Lost- difficult to decide, bad image of coWAREHOUSING STRATEGIES:Strategy is derived from customer service goals. it can be strategic or operational. 1. Number of warehouses, its size, location and facilities2. Private of Public Warehousing or combination3. Material handling equipment to be used, bought, hired4. Assignment of demand to stocking/sourcing pointsVIRTUAL WAREHOUSING A single storage system located at a convenient place to take care of the worldwide requirements of products and services thereof based on information in a real time environmentThe success of VW depends on availability- Efficient transportation system. Fast communication and computing system. Networking facilities. Real time tracking system. Demand management software.
Virtual Warehousing Salient Aspects:All Inventories are not stock in warehouse required for sale. Selected items are directly shipped from suppliers to customers. It reduces inventory and require sharing or information with suppliers.Adv of Information System/Warehouse Management System:
Accurate and timely information help to1.Reduce inventory 2. Improve routing and scheduling of transportation.3. Reduce direct labour.4. Increase material handling efficiency 5.Increase warehousing space utilisation.PERFORMANCE PARAMETERS1. Methods related 2. Equipment Related 3. System Related4. Training/Motivation RelatedMethods Related Parameters: Warehouse cube utilisation Warehouse Layout & Design Methods & Procedures Analysis Batch picking of small orders Combined picking Warehouse consolidationEquipment Related Parameters Use of new technology like Optical scanners Automatic labeling devices Automated materials handling equipment Communication devices, carousels etcSystems Related Parameters Use of router/location systems Geographic or zone picking Random location of products in the warehouseTraining/Motivation related Parameters Employee training Management Development Programme Incentive Systems Awards recognition Work Teams
COLD CHAIN INFRASTRUCTUREIt is used for preserving perishable materials milk, flowers, vegetables, frozen foods, medicines etc. The major hurdles in the development of it are as under:High cost of setting upLow returns, longer payback periodHigh operating cost due to high power tariff
ROLE OF MATERIALS HANDLING IN LOGISTICS
M.H.is the function of moving Right Material to Right Place at Right Time in Right Condition at Right Cost.
Objectives/Goals of Materials Handling:
Plan all handling and storage activities to obtain maximum efficiency
Integrate and co-ordinate operations covering supplier, receipt, storage, packaging, warehousing, shipping.
Avoid movement wherever possible
Mechanise/automate handling where feasible
Reduce damage to materials
Ensure safety and better working conditions
Improve productivity thru- Use gravity. It is free.
Flow material in straight line
Move more at one time
Reduce tare weight (dead weight)
PRINCIPLES OF MATERIALS HANDLING
1.Planning Principle: Plan every move, storage and need to minimise cost.
2. System Principle: Integrate, co-ordinate all operations of receiving, inspection, storage, shipping, information flow and physical flow within supply chain.
3. Simplification Principle: Handling can be simplified by reducing, eliminating or combining unnecessary ovement /equipment.
4. Gravity Principle: Use gravity to move whenever possible. It is free.
5. Space Utilization P: Use cube. It reduces space requirement. Use racks, mezzanines, overhead conveyors.
6. Unit Load P: Unit load should be appropriately sized at every stage of supply chain eg different types of pallet like wooden pallets, plastic/steel/cardboard pallets.
7. Automation Principle: Automation improves productivity, reduces cost it should used when feasible.
8. Equipment Selection P: While selecting equipments consider all aspects. Hence ask what, where, when, how, who and why for each move to get right solution.
9. Standardization Principle: Standardization of handling methods, equipments would help to reduce cost, space, time.
10. Dead Weight Principle: Reduce ratio of equipment weight to product weight. Excess capacity equipment is waste and can save cost.
11. Maintenance Principle: Plan preventative maintenance and schedule repairs of handling equipments, storage facilities will extend life increase efficiency.
12. Capacity Principle: Select equipment to match production capacity. Maximize utilization of equipments.
MATERIAL HANDLING EQUIPMENTS/SYSTEMS
1. Transport Equipment: Industrial Trucks, monorails, cranes, hoists, conveyors, Automated Guided Vehicles.
2. Storage Systems: Bulk Storage, Rack Systems, Shelves, Bins, Drawer Storage, Automated Storage Systems
3. Unitizing Equipment: Pallets, Containers
4. Identification & Tracking Systems Bar Codes, RFID, Voice Recognition, Global Positioning System.
DESIGNING MATERIAL HANDLING SYSTEM
Design system for continuous flow of material Use standard equipments for low investment and flexibility Use gravity flow, it saves energy Reduce ratio of deadweight to payload of handling equipment. Equipment to suit
FACTORS TO BE CONSIDERED:
A) Material Characteristics:
Physical state: Solid, liquid, Gas. Size: L W H T Shape: Long,square, round. Condition: Hot,Cold,wet Safety risk: Toxic, flammable, Explosive, fragile
B) Flow Rate : Frequency, volume
C) Plant Layout:
1. Fixed Position: Product size is large, fixed. Production rate is low. Eg ship building, construction of building. MHE used cranes, hoists.
2. Process Layout: Product size varies, production rate varies. Eg chemical, paints, pharma, printing.MHE used forklift trucks, hand trucks, AGVs
3. Product Layout: Product variety limited, production rate high. Eg TV, Mobile. MHE conveyors, trucks to deliver components to work stn
MH EQUIPMENTS & SYSTEMS
1. Manual 2. Mechanized. 3. Semi-automatic4. Automatic 5. Information Guided.
Manual System:It is cheap and common method. It has limitation of volume, speed is slow, depends on physical characteristics of product and distance.
Mechanized System:MHEs are selected according to layout. More space required for movement, loading, unloading, storage, retrieval. It increases productivity. Criteria for selection of equipments should be as under: Higher space utilization, Saving of labour Lesser time for material movement Faster material flow Lesser damage to material during handling Safer to operate Environment friendly
MATERIAL HANDLING EQUIPMENTS
1. Wheeled Trolley: It is ideal for carrying small quantities of loose materials. Sack barrows are used for bagged goods.
2. Pallet trucks : These are fitted with forks and are designed to handle pallets.
3. Hand stackers: It consists of a vertical framework of angle-iron with platform which can be raised or lowered for stacking or unstacking.
4. Monorails: It is I section rail fixed overhead, used for handling heavy loads from or into vehicles in receipt or dispatch section.
5. Cranes: It is used for heavy loads. There are various types capacities of cranes eg Overhead crane, Goliath Cranes, Mobile Jib road cranes.
6. Conveyors: Various types of conveyors are used are Roller Conveyor, Belt Conveyor, Overhead conveyor. These are power driven.
7. Lifts and Hoists: These are electrically driven and used for carrying material between floors.
8. Forklift Trucks: The two forks are pushed under a load and then raised automatically. Used for stacking, moving material. These are driven by electric,, battery, petrol. STORAGE & PICKING SYSTEMS:
Bin Shelving System: Suitable for storing small parts which can be handpicked. Less costly.
Cabinets & Modular Storage Drawers: It needs lesser space, drawers are pulled out for picking or storing items like nuts, bolts, rivets etc
Gravity Flow Storage Racks: It is suitable for uniform size items of high demand. Goods are loaded from back, picking is done from front.
Automated Materials Handling Systems:
Automated Storage & Retrieval Systems (AS/RS):Its benefits are lesser space, low labour cost, time saving, accurate inventory. Updated information. Disadvantages are high cost, high maintenance, training of people, software up gradation.
Carousels: It is a form of AS/RS equipment that houses and rotates items for order picking. It can be vertical or horizontal.Automatic Guided Vehicle (AGV) Systems:AGVs are battery powered vehicles controlled by computers. It is used in automated warehouses involving AS/RS. Benefits of AGVs- Saving of manpower. * Lower handling cost Lesser damage, better safety * Reliability It can interface with other automated systemsROBOTS: used for picking, transferring & issuing items. These are very costly.INVENTORY MANGEMENT
Inventory means idle resource of any kind having economic value Fred Hansman
Inventory is a sum of value of Raw Materials, spare parts, consumables, semi-processed and Finished Stock, Merchandise at any given point of time
Classification:1. Production Inventory: a) Raw materials purchased from market b) Spares, components, chemicals manufactured within organisation for captive consumption.
2. Work In Progress, Semi Finished Goods3. MRO-Maintenance Repairs & Operating Supplies4. Finished Goods, Merchandise5. Goods in Transit
PURPOSE OF INVENTORY
Take care of variation in demand Take care of delay in transit, delay by supplier Ensure smooth production Protect against stock out Hedge against price increase Avail quantity discount To improve customer service Saving in transportation cost Protection from strikes, natural disaster Buffer against poor quality/rejection
REASONS AGAINST INVENTRY
Inventory does not add value Funds are blocked, opportunity to earn better is lost Inventory deteriorates, become obsolete Inventory carrying cost 30%
COSTS ASSOCITED WITH INVENTORY
1. Ordering Cost/Purchasing Cost: Salary, wages of Purchase Dept, Rent, Vendor devt, Stationery, follow up cost, cost of receipt, inspection. Bill passing expenses.2. Inventory Carrying Cost: Interest, Rent, Overheads, salary, wages of stores, Insurance, Spoilage,Handling3. Under Stocking Cost: KU : Loss of sale, Image4. Over Stocking Cost : KO : Opportunity loss
INVENTORY CONTROL TECHNIQUES
Objectives 1. Maximize customer service avoid stock out2. Ensure smooth production flow3. Maintain optimum inventoryTechniques-1. Selective Inventory Control2. Economic Order Quantity.3. Re Order Level4. Q System-Qty Review technique5. P System- Periodic Review System6. Material Requirement Planning- MRP, ERP7. Distribution Requirement Planning- DRP8. Just in Time-JIT. 9. Vendor Managed Inv.VMI10. Kanban. 11. Demand ForecastingInventory Control Techniques:
EOQ: is that qty at which cost of procuring annual requirement of an item and inventory carrying cost are equal. It help to control inventory costs. It should be modified suit practical considerations. __________________________EQO =/2 A (Anl Cons qty) x P (Ord.Cost) C(Inv Carry.Cost %) x U (Unit cost)
Re Order Level: is the level at which order has to be placed so that material is replaced before stock out.ROL= D (demand per period) x LT (Lead Time)Q System: Quantity of item is monitored regularly and order is placed at ROL. This is suitable for C class item.
P System: Stock is reviewed periodically at a fixed date. Considering the stock, pending order, demand and market situation, order is placed.
MRP: It indicates when what quantities are required after considering demands, stocks at hand and pending
ERP: All functions are connected and information is available real time basis.JIT: Material arrives just before production. It is not checked for quality. Least or nil stock of inventory kept.VMI: Supplier keeps inventory at buyer place, payment made for quantity consumed.Demand Forecasting: It is sales forecasting technique help to estimate forecast.Service Level: Stock kept according to service level to be provided to customers.It differ from customer to custTRANSPORTATION MANAGEMENT
Transportation is a backbone of supply chain.A vital link between manufacturer and customer.Major cost in logistic. Effective transportation results in better inventory management and increased customer satisfaction. Transportation Management includes-1. Mode selection- Road, Rail, Air, Water, Pipeline2. Routes selection 3. In house or outsourcing transpt.
ROAD TRANSPORT:More than 34000 kms of National Highways.Road quality poor but improving, Delays at toll boothsInadequate transport facilities/equipments.Advantage: Cost effective. Point to Point service, Communication with driver, Ideal for short distanceDisadvantage: Delay due to traffic jams, damage in transit, breakdown.
RAIL: Over 60,000 kms, 7000 stationsSuitable for long distance and can carry bulkAdv: Faster and has high capacity, cost effectiveDisadv: Subject to Govt schedule, pilferage, claims
AIR: 6 International airports, 85 domestic airportsFastest mode.Suitable for high value, light weight. Perishable itemsAdv: Fast delivery, safe, less inventory, better serviceDisadv: Lack of direct connection. Delay in customs formalities, high cost.WATER: 11 Major ports, 140 minor ports.Suitable for bulk volume. Long lead times. Disadv: Long Lime, delayCustoms formalities, port congestion delaysPIPELINE: Suitable for liquid, gas.Adv: Mass movement possible, low operating costDisadv: High Investment, Limited application, not widely spread.
Types of Carriers:COMMON CARRIERS: Available for service at published rates for particular distantCONTRACT CARRIERS: Available by entering into contract with shipper.PRIVATE CARRIERS: Owned/taken on lease and operated by firm for own transport.EXEMPT CARRIERSS: Available for transporting certain products only life farm supplies, fish, livestock, poultry etc.
Freight Forwarders:They buy transport services from carriers. Since they consolidate big volume, their rates are lower than shipper could get directly from carrier. They can provide faster and better service. They can be domestic and international and provide service by road, rail, water,rail.FREIGHT/TRANSPORT COSTS:Freight optimization is achieved through balance between cost and service.
Factors affecting freight cost are as under:
Market related factors1. Location of markets- major cities vs small village2. Seasonality of product movement- apple- HP, Mango3. Availability of various modes- road, rail, water, air4. Competition5. Transport unions in region. 5. Government regulations
Product related factors1. Density of product (product weight to volume ratio)Freight is charged whichever is higher weight or volume.2. Stack-ability in the truck.3. Nature of product- Hazardous, inflammable, special requirement- ss, insulation, etc4. Liability- damage, pilferage, moist affected areas
TRANSPORTATION NETWORKS:
1. Inbound Transportation Network: It includes transportation from suppliers to firms facility. If suppliers are located closer to each others, loads can be consolidated. It require prior planning. In many cases freight is included in delivered cost. It hides inefficiencies
2. Inter-facility Transportation Network: When company has more units, these units are connected. Cross docking enable it to provide range to products to market. It help to reduce freight, warehousing, inventory costs.
3. Outbound Transportation Network: This connects firms units to its customers and markets. This is vital for success of supply chain. It help to reduce total cost and provide better service to customers.
ROUTING & SCHEDULING:A well planned Routing & Scheduling contributes to profit eg reduction is frequency of pick ups and deliveries reduces cost and increases productivity.Its benefits are:
1. Higher utilisation of vehicles2. Better customer service3. Lower transport cost4. Less investment in equipments5. Lesser handling minimizes damages.
PACKAGING FOR LOGISTICS
Packaging provides protection to product during storage and transit. It also promotes and identify product.
Unitization for Packaging: It is a process of consolidating a large number of items in convenient packs is known as unitization. It reduces frequent loading, unloading, storing, handling and damages to items.
PALLETS: These are made of wooden, plastic, steel.The products/master cartons are stacked on pallets and tightly wrapped by film or metal straps. These handled by forklifts. The standard sizes are 40x48, 32x40,32x 36. Advantages of Pallets:1. Less handling cost. 2. Reduced frequency of material handling3. Fast movement4. Lesser damage.5. Higher productivityCONTAINERS:It protects the products from damage during transit storage, handling and transshipment. These are made of steel or aluminum. Mainly used for long distance.Advantages:1.Very less damage2. Handling cost reduced, it is handled by automated MH equipments.3. Less warehousing and transportation costs4. It can be used as temporary storage.
Disadvantage: 1. Small ports may not have facility of handling containers.2. It may cause delay if adequate facilities is not available at port for handling it.3. Investment is to be made in handling and manufacturing containers.SLIP SHEETS:These are disposable platforms made of highlytensile laminated paper. These are moved by push/pull attachment. The sizes are similar to pallets.
PACKAGING DESIGN:While designing packaging, Material handling, transportation, storage and communication requirements are taken into consideration.
MATERIAL HANDLING: Damage occurs during loading, unloading, transit, transshipment or storage. It may be due to Height of loading platform, Method of Handling, vehicle condition. Hence while designing care is taken to avoid itTRANSPORTATION: Freight depends on gross weight, Volume, size and shape of material/product. While designing care is taken to protect from damage and avoid extra weight.
STORAGE: A well designed packaging ensure better utilization of storage space. Strong packaging enables higher stack ability.
COMMUNICATION: It has to meet legal requirements.Provide name of product,Manufacturer,Quantity, name of consignor, consignee. Bar code, warning for handling.
Packaging Materials used: Corrugated Board: used for FMCG, pharma. Light engg items. Available easily.
Steel: Drums are used for packing oils, chemicals. It is strong and protect material from transport hazards.
Plastic: Drums, bags, bottles, films, pouches are used packing liquid, powder, flakes, granules. Plastic strapsShrink films, pallets are made of it.
Wood: Wooden Pallets, crates are used.Thermopolis: Very light, absorbs shocks Benefits of Packaging:1. Lighter packaging saves transport cost2. Protective packaging reduces damage3.Allows better space utilization.4. Information on packaging reduces shipment delays.5. Standardised Packaging decreases handling costs.6. Recycling of packages reduces disposal cost.INFORMATION SYSTEM FOR LOGISTICS
A sound information system is required which can provide information right from receipt of order to fulfillment of order. A Good Logistics Information System designed with 4 levels:
1. Operating Level 2.Tactical Level. 3. Control Level4. Strategic Level.
1. OPERATING LEVEL: Customer Order Registration, Order Processing Inventory Planning, Warehousing & Distribution, Procurement.
2. TACTIVAL LEVEL: Information for decision making-Facility Planning, Vehicle Routing, Scheduling, Inventory Management, Channel Integration, Outsourcing, customizing services.
3. CONTROL LEVEL: Information for Management Control- Asset Management, Customer Service, Cost Control, System Productivity
4. STRATEGIC LEVEL: Formulating Strategies.Capability and Capacity Planning, Alliances and Partnership.Benefits/Characteristics of effective information system:1. Accuracy 2. Ready availability, easy retrieval3. Timeliness 4. Flexibility, 5. Format of users choice, 6. Interactive.Bull Whip effect is known as Forrester Effect or Tidal wave effect.ROLE OF LOGISTICS IN DISTRIBUTION
Marketing or Distribution Channel is an organization involved in making a product or service available to customer.FUNCTIONS OF CHANNELS:
1. Provide information of products. 2. Promotion of products. 3. Negotiation4. Increasing contacts, matching requirement5. Physical distribution.6. Financing.7. Risk taking
FACTOR S AFFECTING CHANNEL STRUCTURE:
1. Nature of product eg FMCG require multi structure but capital goods company may sale directly to user.2. Cost of establishing direct channel distribution3. Coverage can be increased through use of indirect channel.4. Control is enhanced using direct distribution channel.5. Requirements of Channel Members: Wholesaler need large consignment at intervals with lower freight per unit. Retailers buy small quantities from wholesalers frequently due to storage constraint. Dealers/Stockiest carries stock on consignment sale basis and has facility of warehousing. Selling Agents appointed on contract basis. Brokers facilitate sales/purchase dont store products
Logistics Manger has to study requirement of channel members and fix service standard. LOGISTICS OUTSOURCING
1980. Logistics outsourcing involves third party warehouses and use of public/contract carriers.
Drivers of Outsourcing: 1. Increased competition. 2. Increase in cost.3. Customers increasing demand of service4. Short Product Cycle Life.
Benefits of Outsourcing:1. Firms can focus on core competencies2. Wider geographical coverage3. No investment in warehousing, transport, MHE4. Flexibility in operations. 5. Customized service6. Less Man power. 7. Implementation of best practices, 8. Better service. 9. Cost reduction.10.Company can focus on critical issues for survival and growth
3 PL THIRD PARTY LOGISTICS PROVIDERA specialist that provides Logistics service such as transportation, warehousing, distribution inventory management, packaging, repacking, labeling salvage, scrap disposal etc for a given period of contract
TYPES OF 3 PL SERVICE PROVIDERS:1. Transportation based: 2. Warehouse/distribution based3. Forwarder based4.Financial based: Provide freight payment, auditing, cost accounting, controlling, tracking inventory.5. Information based: Internet based, B2B, electronic markets for transportation and logistic services.Advantages of 3 PL.
PROBLEM AREAS:1. Service Level commitments are not realized.2.Firm may lack strategic management skills3. Cost reduction goals may not be met, firm is not committed.4. Cost creep up due to lack of monitoring.5. Technology capability may not be delivered.
4 PL FORTH PARTY LOGISTICS PROVIDER:New concept4PL provider is a Supply chain integrator who assembles and manages resources, capabilities and technology of its own organization with those of complementary service providers. 4PL is an outsourcing specialist assess entire supply chain and contracting those best able to provide required service.
SELECTION OF SERVICE PROVIDER:Successful Implementation:
A Right Supplier is vital to achieve Customer Satisfaction.Switching Cost to be reasonable and should be monitored, elements and its cost to be specifiedAvailability of trained staffGood Electronic interface and systemMatch logistics services with channel partnersComply with legal requirements, licenses.Visit and inspect facilitiesDetermine Performance Measure, Review PeriodClients service historyDeveloping mutual trustValue added facilities- Inventory Management, Packaging, Reworking, Reverse Logistics, Spread of network.
LEVEL OF OUTSOURCING1. Transactional Outsourcing: It is based on transaction from time to time no contract.2. Tactical Outsourcing: Long term based. There is free of information as IT systems are integrated.3. Strategic Outsourcing: Long term relationships with 3PL companies.
SERVICE CONTRACTS:Scope of Service: Geographical coverage,Logistical services- road, rail, air, waterManagement and usage of customers assets.Delivery Requirements, Frequency, Service Charges, basis for revision, Extra service & costPerformance Measurement Criteria, penaltyDamage Liability: Loss due to fire, pilferage, rains, floods Insurance, Demurrage for delay.Risk SharingResponsibilities: Employees, Warehouse Management, Inventory Management, Transportation, Communication,Reports.Contract Period, Notice Period, Renewal, Applicable Laws
TECHNOLOGY FOR LOGISTICS
Information Technology vital for efficiency and effectiveness of Logistics Functions.Advantages:High Speed: Fast storage, retrieval of data possibleCost Saving: Increases productivity, Accuracy of data, Convenient user friendly technology.
BAR CODES:It is sequence of parallel bars of various widths at varying space. Universal Product Coding (UPC) andEuropean Article Numbering (EAN) are leading agencies for obtaining bars.Application: Identification, handling, pick up, packing, inspection, dispatch, storage, retrieval of goods.Advantages: Easy identification, Reduction of paper work, higher productivity, no human error, facilitate system automation
RADIO FREQUENCY IDENTIFICATION (RFID)It transfers data quickly. Commonly used RFID tools-
Memory Buttons: It is suitable for product identification and can act as portable database. Ideal for identification of storage retrieval and movement of large sized unit loads with large number of items.
Radio Frequency Tags: It is silicon chips to store data.Applied to pallets, containers etc. As soon as material is moved, fixed readers in walls, ceilings can identify its location. RF tags are unaffected by dirt, dust,grease.Voice Interactive System: It allows worker to communicate data to central computer without using key board. He can carry out his activities.
COMMUNICATION TECHNOLOGY:
1. EDI 2. E-Tracking 3. VSAT 4. GPS Systems
Electronic Data Interchange (EDI)Started in 1970. There is consensus on format of documents, information to be shared, network to be used. User creates a document in his software. EDIre-formats as per EDI standard and put in e envelop which is transmitted through VAN to the trading partner.
Advantages of EDI1. No duplication of data entry.2. Lesser error 3. Saving of time4. Saving of labour cost.5. Better customer service6. Auto inventory replenishment possible.
Limitation:1. Cost of hardware and software, infrastructure2. Private network. In India Public Private Sector 3. Unreliable communication protocols4. Lack of consensus
Suitability:Large volume of repetitive standard actionsWhere paperless documents requiredStrong competition requires high serviceE-TRACKING
Vehicle tracking is vital for effective service.It improves productivity of vehicle and ensure timely delivery of goods. Dependence on drivers communication is not reliable. Track and Trace system is more useful. Customer can trace progress of cargo on Companys website on daily basis.
VSAT (Very Small Aperture Terminal) Communication:It is a small fixed earth station that provides communication link. It is useful for networking with many sites/offices. It is compatible with Internet, LAN. It allows communication between Driver, Consignor and Consignee.
GPS (Geographical Positioning Systems)It is more accurate and effective system. Through Geo Stationary Satellite vehicles are traced. It provides facility to communicate by mobile, can also send data.
ERP (Enterprise Resource Planning)Business software system that integrates all business processes of organization It facilitates optimum utilization of resources and enables quick response.It allows all users to input data that can be processed with other data and accessed as reports on real time basis across the enterprise. Eg SAP, Oracle, PeoplesoftJD Edwards.
DRIVERS OF ERP INVESTMENT:
A Technology: Need for infrastructure that provide information of all functions, all locations.2. Old system absolete. 3. Limitations of integration with other acquisitions/vendors.
B. Business Process: are complex, not integrated, difficulty in monitoring, become ineffective.
C. Strategy: Globalization, Expansion, new products, services, venturing E Business.
D. Competition: Competitors have ERP.
Advantages of ERP:
1. Control of all functions of enterprise.2. Integration of data provides real time information.3. Improves customer service4. Better cost control, financial management5. Reduction cost, inventory, wastage6. Faster decision making, better analysis7. Adopting to different languages, currencies, accounting standards.
DRP (Distribution Requirement Planning)It is extension of MRP. It is guided by customers demand.DRP determines inventory of finished goods Considering the variables at multiple distribution centres.It helps to reduce freight, inventory, warehousing cost .It improves visibility of inventory in supply chain.REVERSE LOGISTICS
It is role of logistics in product return, recycling, reuse, waste disposal, refurbishing, repairs and manufacturingIt is after Market Supply Chain and depends on Product Life Cycle and different from Forward Logistics.
Forward Logistics: It covers New Product Development, Materials Management, Manufacturing and Distribution.
Importance:Cost of handling returns is highCustomers are demanding, it affects customer satisfaction, retention and perception.It impact revenue and profit.
SCOPE: Environmental Law: There are strict regulations for removal/disposal of packaging materials.
REFILLING:Widely practiced in- Oil, LPG, Soft Drinks, Bottled water, liquor etc. Reusable packages cylinders, jars, tins, bottles are used. Delivery Van delivers packages to Retailers and collects empty containers. Thus transport cost is reduced.
REPAIRS AND REFURBISHING:Repair services provided when goods are sold under warranty. Refurbishing is done when goods are damaged/defective and returned by customers during warranty period or subsequently on chargeable basis.PRODUCT RECALL:In emergency situations products are recalled by company. RL network used to increase customer satisfaction.Quality complaints from many customersDefective product causing harm human life.Product not giving guaranteed performance.Product beyond expiry dateViolation of Government regulationsEthical considerations
RECYLING & WASTE DISPOSAL:To reduce wastage, recycling is done. In certain countries it may be mandatory. Eg. paper, plastic, glass bottles. Certain used materials are to be disposed of without causing environmental problem. RL collect it and recycle.
SYTEM DESIGN: Following factors to be considered.Cost of collection, Refilling, Repairs, documentation, nature of product. Legal issues with Excise, Sales Tax, Octroi to be handle properly.
REVERSE LOGISTICS- a competitive tool.Today quality is taken for granted. Hence by providing value added service- high speed, reliability in above services is vital to win over the customers. This can be done by two ways-
1. In House Reverse Logistics: The company itself handles internally all activities.2. Outsourced Reverse Logistics: It can be sourced from Company specialized STRATEGY AND PERFORMANCE MEASUREMENT
Objective of Logistics- Superior Customer Service and Cost Reduction.Objective of Logistics Strategy to support Business Strategies to support service at optimum cost.Logi.strategies varies according to Product Life Cycle
INTRODUCTION: While product is being launched, Logistic ensure product availability at places where Marketing creates product awareness.
GROWTH: Demand for product goes up cost comes down. Reliable and consistence service is required.
MATURITY: Multiple channels are tried by marketing. Here customized value added logistics services help to retain market share.
DECLINE: Volume drops, margin reduces, Logistic cost to be monitored.
Logistic Strategy formulation must consider;1. Meeting customer needs2. Identify target customers3. Resources required for strategy implementation
Generic Logistics Strategies:Cost LeadershipValue addition- Packing, Labeling, assembling etcVendor Managed InventoryPayment collection. Outsourcing. Customs clearanceSTRATEGY IMPLEMENTATION:
For successful implementation resource allocation, planning, selection, training of manpower and monitoring is must.
PERFORMANCE MEASUREMENTObjectives of Performance System are:
Monitoring: Ensure periodical reporting, highlighting critical areas tor quick action.Controlling: Identifying deviation from the actual performance.Directing: Guide, motivate individuals to improve performance and achieve target.
PERFORMANCE LEVEL:1. External- Customer Satisfaction/Perception- about Delivery, Reliability, Responsiveness, Relationship.2. Internal- Productivity, cost, Quality etc.
Logistics Benchmarking Measures:
Order Processing Procedure/TimeTransportation- Routes, freight rationalizationWarehousing- Storage, Material Handling system, automation.Packaging,Delivery service,Information flow, connectivity.
FINANCIAL MEASURES:
Operating Cost: It covers warehousing cost, freight, running and maintenance cost of MH Equipment, Labour Cost, cost of Return, Inventory Carrying Costs.
Return on Investment:Investment made in assets like warehouse, equipment, storage
NON FINANCIAL MEASURES
Productivity: Ratio of input and output
Asset Management:Proper utilization of capital investment in Logistics Assets- Inventory Turnover Ratio is a measure.
Order Fulfillment:Cycle Time, On Time Delivery, Order Fill Rate, Stock Out frequency, Shipping Errors.
Quality:Transit damage frequency, Value of damage, Frequency and Cost of Goods Return by Customers, Frequency of Materials shortage and Delivery Commitment deviations.
PERFORMANCE CONTROL:
A strong system required for controlled performance for efficient and effective logistics system.
GOVERNMENT POLICIES AND REGULATIONS RELATED TO LOGISTCS:
Ministry of Consumer Affairs and Public DistributionFrames warehousing policies and legislation.
Warehousing Corporation Act 1962It provides for formulation of Central Warehosing Corporation, State Warehousing Corporation whichActs as agents of Govt for storage, distribution, purchase and sale of agricultural produces, fertilizers.
Licensing of Warehouses: License is to be obtained from appropriate authority- Local Municipal Corporation.For Warehousing of pharmaceutical products approval from Food and Drug Authority (FDA).For Bonded Warehouse for storing imported Goods from Customs Department. Conditions for licensing- Maintenance of proper storage condition, Payment of fees, Issue of Warehouse Receipt, Insurance of goods.
Regulations affecting Logistics Industry:
Motor Vehicles Act 1988:Vehicle Registration, Driving License, permits, Safety Rules, Control of air and noise pollution, capacity limits.
Carriage of Goods by Sea Act 1925:Transport of goods by Sea. Bill of Lading serves as Receipt of goods, Evidence of contract and Title of document of goods.Carriage of Goods by Air
Multi-Modal Transportation of Goods Act 1993:Regulation of multi-modal transportation of goods.
Environmental Protection Act 1986:It regulate environment through following two Rules:Hazardous (Waste Management and Handling) Rule 2000.Manufacture, Storage and Transportation of hazardous Chemicals Rule 1984.
Consumer Protection Act 1986:Protects consumer interest, settlement of consumer disputes, compensation.
Drugs & Cosmetics Act:It covers public Health & Hygiene.
Weight & Measurement ActIt deals with size of packages, text matter to be printed on inner outer cartons etc.
Heavy Package Act 1951:It covers guidelines for quality standards, testing, export inspection, identification marks, languages.
Central Excise Act 1944
Central Sales Tax 1956:Applicable when goods are sold inter-state transaction
LOGISTICS FOR E-COMMERCE
E Commerce is buying, selling, transferring or exchanging of products, services or information via computer networks including internet.
Types of E Commerce:Business to consumers (B2C)Business to Business (B2B)Consumer to Consumer (C2C)Business to employee (B2E)E-Government
Logistics plays important role in E Commerce:Delivery options to customers-1. Electronically (advice, software, electronic cards)2. By mail (tickets, subscriptions, CDs)3. Parcel carriers, like DHL4. By delivery services (TVs, Pcs)5. By specialized- transport (cold storage)
Logistics Role in International Trade 3 Global Logistics Strategies 1. Focused Factories Company limits the number of products to be manufactured in single location to achieve economy of scale. One Unit manufacture for local demand whereas another would meet demand of world market. Following trade offs to be considered. a) Effect on transport cost and delivery lead time especially for low value products.b) Needs of local packaging requirements in different languages, local laws.C) Customer may order many products in single order which would be supplied from different units.
2. Centralization of Inventories: Inventory at few locations reduce inventory cost.Holding inventory at factory or near customer point and controlling it centrally is known as virtual or electronic inventory.
3. Postponement and Localization:Customers demand large variety to meet it, Company assembles common design and final assembly takes place at market or when customer requirement is known. Its benefits area) Inventory held at generic level so fewer SKUs heldb) It offers greater flexibility as common platform can be used in variety of end products.c) Forecasting is easier at generic level than skuse) Enable company to customize product and offer variety.
CHALLENGES OF GLOBAL LOGISTICS:1. Extended Lead times of Supply: Consolidation of global production in single/fewer units creates complication of local product variation. Hence units tend to add imaginary lead times. Therefore buffer stock is held between unit and customer.
2. Extended and Unreliable Transit Times Sea shipments takes longer transit time whereas air freight shorter. Longer transit further aggravated by delay in custom clearance. Hence trade off between sea and air may decide mode.3. Multiple Consolidation and Break Bulk Option:Various options can be explored- Direct ship from source to final market in FCL. Or consolidate in supply region for final market in FCL. Or consolidate each source with each kind of operation with break bulk for specific markets.
4. Multiple Freight Mode and Cost Options :Shipping companies offer mixed sea/air/road services, Different container sizes, schedule and unscheduled services. Door to Door transport can be used after considering inventory holding cost, revenue loss, cost of transport and market flexibility.
Organizing Global Logistics : Effectiveness in global logistics can be achieved through- a) Centralized control of logistics. b) Customer Service for specific market must be controlled and managed locally. Customer Service Management: Local markets have specific needs, the marketing strategies will have to be local but within global guidelines. CSM involves monitoring of service needs,Order fulfillment process.
Outsourcing and PartnershipsTrend today is towards outsourcing of products, materials and services. Activities like transport, warehousing, inventory control are subcontracted.Management of partnership needs central and local involvement. Strategic decision are taken centrally and performance evaluated locally.Logistics Information:A strong information system capable of end to end visibility of materials, requirement, replenishment in real time basis is the need.
Future functions separation:
GLOBAL:Network structuring for production and transportation optimization.Information system development and controlInventory controlSourcing decisionsInternational transport modeTrade off analysis
LOCAL: Customer service managementMarket intelligenceWarehouse management, local deliveryCustomer profitability analysisLiaison with local sales team
Handling CapacityNumber of movementsWeightStaffEquipment
Volume
Basic information needed to design a warehouse
M11:U5:5.3-2End-point deliverySupplierSupplierSupplierUsing cross-docking centresEnd-point deliveryEnd-point deliveryEnd-point deliveryEnd-point deliveryEnd-point deliveryHand trolleyPallet truckForklift truckMaterials handling and equipment
Pallets
M11:U5:5.5-6
Semi-automated handling equipment: conveyor systems
M11:U5:5.5-11Unloading, putting away and picking equipmentForklift trucksReach truckPicker-stacker truckMaximum height 15m.
PantographM11:U5:5.5-12Highly-automated fixed handling equipmentMaximumheight: 40 m.Picker-stackercraneAutomaticallyguided vehiclePost pallets
ShelvingM11:U5:5.5-7Mezzanine Storage
M11:U5:5.5-9Added Value and the Flow of Funds along a Supply ChainPRIMARYSOURCESCUSTOMERS added value added value added value added valuePROCESSOR added valueMANU-FACTURER added valueRETAILERValue Added Material FlowFunds FlowInformation Flow that triggers the replenishment cycleI added value
