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What is Logistics Management? The objective is to plan and
coordinate all the activities
necessary to achieve desired level of delivered service
and quality at lowest possible cost.
The scope of logistics include the entire gamut of
activities starting from the procurement and management
of raw materials through to delivery of final product to
the customer.
The ultimate purpose of any logistics system is to satisfy
the customer by establishing linkages of people at all
levels in the organization directly or indirectly to the
market place.
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2
As it is getting increasingly difficult to maintain a
competitive edge through product alone, customer
service has started to provide the distinctive
difference between one companys offer and that of
its competitors.
The underlying concept is The process of
strategically managing the procurement, movement
and storage of materials, parts and finished inventory
and the related information flows through the
organization and its marketing channels in such a
way that the current and future profitability are
maximized through the cost effective fulfillment of
orders.
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Competitive Advantage
Customers seeking benefits at acceptable cost
Company A
(Asset utilization)
Company B
(Asset utilization)Cost differential
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Commercial success
Cost advantage Value advantage
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Cost advantage or Productivity advantage
-C
haracterized by low cost of production due togreater sales
volume, economies of scale enabling
fixed costs to be spread over a greater volume and
the impact of the experience curve.
Value advantage is in terms of product offering adifferential
plus over competitive offerings.
- Based on marketing concept that customers that
customers don't buy products, they buy benefits.
- Benefits may be intangibles and may not relate tospecific
product features.
- It can be an image or reputation or even some
functional aspects.
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Adding value through differentiation is
extremely powerful means of achievingcompetitive edge in the
market.
One of the significant method of adding
value is service.
Service helps in developing relationship with
the customers through provision of an
augmented offer.
Augmentation takes many forms such asdelivery services,
after-sales services,
financial packages, technical support etc.
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Productivity and Value Matrix
Commodity Market
(1)
Cost Leader
(2)
Service Leader
(3)
Cost and Service
Leader
(4)
Productivity Advantage
V
a
lu
e
A
d
v
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Value Chain ActivitiesValue Chain Activities
Primary Activities
Inbound Logistics
Operations
Outbound LogisticsMarketing & Sales
Service
Secondary Activities
Infrastructure
Human Resource ManagementTechnology Development
Procurement
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Primary activities represent the functional
areas like arranging inputs for transformingthem into output,
and managing distribution,
marketing, sales, and services.
The secondary activities facilitate the
integration of all the functions across the
entire organization.
The companies can achieve competitive
advantage and create differentiation byorganizing and performing
these activities
more efficiently or in a unique manner than
their competitors.
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Factors affecting value and
productivity advantage
A. Productivity advantage
- Capacity utilization
- Asset utilization
- Inventory reduction
- Integration with the suppliers.
B. Value advantage- Customized services
- Reliability
- Responsiveness.
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Underlying Philosophy Behind
Logistics Concept
Suppliers Procurement Operation Distribution Customers
Materials Flow
Information Flow
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How do we define logistics
management?
A process of satisfying customer needs through
coordination of materials and information flows that
extend from the market through the firms operationand beyond
that to the suppliers.
A shift to an integrated orientation from the
conventional manufacturing or marketing
orientation.
Traditionally, manufacturing and marketing have
been considered as separate activities each having
different priorities.
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Manufacturing priorities and objectives areconcerned with
achieving operating efficiencies
based on long production runs, minimized set upsand changeovers,
and product standardization.
Marketing priorities and objectives are concernedwith achieving
competitive advantage based on
varieties, high service levels, and frequent productchanges.
Customer orientation and cost competitiveness has been
integrated by introducing flexiblemanufacturing systems, practicing
inventory
management policies based on manufacturingrequirement planning
and just-in-time inventorypolicy, laying sustained emphasis on
quality andintegrating supply side issues in strategic plans.
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Is Supply chain management
same as vertical integration?
SCM is not the same as vertical integration.
Vertical integration implies ownership of upstream
suppliers and downstream customers.
Earlier, vertical integration used to be the desirable
strategy but increasingly the companies are focusing
on their core business i.e. the activities that they do
really well and where they have a differentialadvantage.
Everything else is outsourced.
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How does Logistics differ from
SCM? Logistics management is primarily concerned with
optimizing flows within the organization.
Supply chain management deals with integration ofall partners in
the value chain.
Logistics is essentially a framework that creates asingle plan
for flow of products and informationthrough a business.
Supply chain builds upon this framework and seeksto achieve
linkage and coordination between processes of other entities in the
pipeline i.e.suppliers and customers, and organization itself.
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Consumer
FranchiseBrand values
Corporate image
Availability
Customer
Franchise
C
ustomerServices
Partnership
Quick
Response
Supply Chain
Efficiency
Flexibility
ReducedInventory
Low cost
supplier
Marketing
Effectiveness
Market
ShareCustomer
Retention
Superior
ROI
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Activities Included in Logistics
Logistics competency is achieved by
coordinating the following functional areas.
- Network design
- Information
- Transportation
- Inventory
- Warehousing, material handling andpackaging.
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Network Design
Network design is the prime responsibility oflogistics managers
since a firm facilities andstructure is used to provide products
and materialsto the customers.
Logistics facilities typically include manufacturingplants,
warehouses, cross-dock operations, and retailstores.
Determining the number and type of facilityrequired, their
geographic locations, and the work to
be performed at each is an important part of networkdesign.
In certain situations, some of the facility operationsmay be
outsourced to service specialists.
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Network design determines the type of the
inventory and the quantity to be stocked at eachfacility, and
the assigning of customer orders
for shipment.
Network of facilities also includes information
and transportation as a part of entire structurefrom where
logistical operations such as
processing of customer orders, maintaining
inventory and material handling are performed. The network
design must consider
geographical variations.
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The factors influencing modifications of
network design are:(a) Change in demand and supply
(b) Product assortments
(c) Changes in suppliers source of supplies.
(d) Manufacturing requirements.
The first step towards achieving competitiveadvantage lies in
superior network design,
as the real competition is not between twocompanies but between
efficiency andeffectiveness in managing their supply
chainnetwork.
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- Internal customers are organizational units
within a firm that require logistical supportto perform their
designated work.
(c)The process of order management involves
- Receipt of an initial order
- Invoicing- Delivery, and
- Collection.
Incorrect information and delays in order processing can cripple
the logisticsperformance; thus quality and timeliness arethe key
issues in logistical operations.
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Transportation
Transportation is the operational area oflogistics that
geographically positions theinventory i.e. provides for place
utility.
Companies accomplish transportation inthree different ways:
(a) A private fleet of vehicles may be operated.
(b) Contracts may be entered into with
transport companies.(c) The service of different transport
companies may be engaged on anindividual shipment basis.
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A. Cost of transportation
- The payment for movement between two
geographical locations and expenses related to
administration and and maintaining in-transit
inventory.
B.S
peed of transportation- The time required to complete a
specific
movement.
- Transport firms capable of providing faster
services normally charge higher rate.- The faster the
transportation services, shorter is
the time interval during which the inventory is in
transit and unvailable.
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C. Consistency of transportation
- Refers to variations in time required toperform a specific
movement over a number
of shipments.
- Consistency is a measure of dependability of
transportation.
- Inconsistency in transportation leads to
inventory safety stocks required to protect
against unpredictable service breakdowns.
jS peed and consistency combine to create
quality aspect of transportation.
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Inventory
The objective is to achieve the desired
customer service with minimum inventory
commitment, consistent with lowest total cost.
Excessive inventories may be helpful incompensating for
deficiencies in network
design but ultimately result into higher total
logistics cost.
The best practice of inventory management is
to achieve maximum turnover while satisfying
customer commitments.
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Warehousing, Material Handling,
And Packaging Merchandise needs to be warehoused at selected
times, transport vehicles material handling for
efficient loading and unloading and goods are mostefficiently
handled when packaged together into
shipping cartons or other type of containers.
The logistical activities carried out in warehouse are
sorting, sequencing, order selection, transportconsolidation and
sometimes product modification
and assembly.
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Within the warehouse, products must be
received, moved, sorted, and assembled tomeet customer order
requirements and for
these activities material handling becomes
significant.
Products packed in cans, bottles or boxes are
handled more efficiently when combined into
larger units such as MasterCartons.
Master units can further be consolidated intolarge units such as
pallets, containers etc.
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Inventory Management Policy The following factors are required
to be
considered while formulating inventory
management policy.
- Customer segmentation
- Product requirements
- Transport integration
- Time-based requirements
- Competitive performance.
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Thus, it may be desirable to hold slow-moving
or low profit items at a central distributionwarehouse whereas
core customers may be
served by fast, reliable air services.
Orders to fringe customers may be delivered
by less expensive ground transportation.
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Transport Integration
A sound inventory management strategy
would be to stock sufficient products at
warehouse to be able to arrange consolidated
shipments to a customer or a geographic area. The corresponding
savings in transportation
may more than offset the increased cost of
holding the inventory.
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Time-Based Requirements Time-based arrangements reduce the
overallinventories by developing the capability to respondrapidly
to exact to exact manufacturing or retail
customers. If the products/materials can be delivered quickly,
itmay not be necessary to maintain inventories atmanufacturing
plants/ retail stores.
If replenishment can be achieved rapidly less safetystock will
be required and instead of stockpiling andholding safety stock the
requirement will be toreceive the exact quantity of inventory at
the timerequired.
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Time-based programmes tend to reduce
shipment sizes, which in turn increases thenumber, frequency,
cost of shipments and
hence higher transportation cost.
An effective logistical arrangement will be to
achieve a trade-off resulting into desired
customer service at the lowest total cost.
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Integrated Logistics
CustomersPhysical
distribution
Manufacturing
supportProcurement Suppliers
Inventory Flow
Information Flow
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The entire process of integration can be
viewed in terms of two interrelated activities.
- Inventory flow, and
- Information flow
Inventory Flow
Physical
distribution
Manufacturing
supportProcurement
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Manufacturing Support
Concerned with managing work-in-process
inventory as it flows between the stages of
manufacturing.
Formulates a master production schedule thatsubsequently
facilitates arranging for timely
availability of materials, component parts,
and work-in-process inventory.
Is not concerned with how production
occurs but rather what, when, where
products will be manufactured.
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Difference between Physical distribution
and Manufacturing Support
Physical distribution attempts to serve the
desires of the customers and therefore must
accommodate the uncertainties of consumerand industrial
demand.
Manufacturing support involves movement
requirements that are under the control ofmanufacturing
enterprise.
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Procurement Concerned with purchasing and arranging in- bound
movement of materials, parts, and/orfinished inventory from
suppliers to
manufacturing or assembly plants ,warehouses, or retail stores
thereby ensuringavailability of materials/ assortments whereand
when needed. -Inbound logistics.
In a given marketing situation, manufacturers physical
distribution is same as retailers procurement operations.
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Information FlowA. Planning & Coordination Flows- Nature
& Location of customers
- Required products & services matching to needs of
customers.- Limitations or bottlenecks within manufacturing
capabilities thus helping to decide outsourcingrequirements.
- Requirements of logistical facilities based
uponforecasting.
- MPS and MRP to support manufacturing/procurement
requirements.
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Logistical Performance Cycles
The logistical integration through performance
cycles provides interface and link the
suppliers, the firm and its customers by means
of communication and transportation.
Performance Cycle
Transaction creatingactivities
Physical fulfillmentactivities
Advertising & Selling Physical distribution
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Physical distribution performance
cycle
Customer orderOrder transmissionOrder processing
Order selection Order transportation Order deliveryto the
customer
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How to reduce physical
distribution operational variance Improve accuracy of
forecast
Improve order management and
coordination with the customers.
Have responsive and flexible cycle.
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Manufacture Support
PerformanceC
ycle It provides production logistics being positionedbetween
the physical distribution and procurementoperations of a firm.
Movement and storage of product, materials, andsemi-finished
parts and components betweenenterprise facilities represent the
responsibility ofmanufacturing support logistics.
In context of wholesale & retail trade, it implies
selection of assortment of inventory to be moved tothe next
level of value chain.
Basically, supports what, where and when of theproduction and
not how.
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Features of manufacturing
support performance cycle. Initiates provision of materials and
externally
manufactured components at a place and time
needed. Operations are restricted to dock-to-dock movement
within the firm and where intermediate storage is
required.
After completion of manufacturing cycle the finishedgoods
inventory is allocated and deployed either
directly to the customers or to distribution
warehouses for further customer shipment.
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Procurement Performance Cycles
SourcingOrder placement and
ExpeditingS
U
P
PL
I
E
R
STransportationReceiving
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Procurement performance cycles are
invariably longer excepting in those cases
where the value of material or component may justify paying
higher freight rates for faster
inbound transport.
A critical issue in procurement is uncertainty
in respect of price change, and/or supply
discontinuity.
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A few terms used in Inventory
Management Buffer stock= {Average lead time}x{Average usage
rate}.
Safety stock= Average usage during the extension oflead
time.
Reserve stock= Excess usage requirement during the
average lead time.
Re-order level= B.S.+ S.S.+ R.S.
Minimum Inventory Level= S.S.+R.S.
Max. Inventory Level= {Minimum Level} + {Order
quantity}
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Average Inventory Level= (Min.
level+Max.level)/ 2
In case of periodic review the buffer stock will
be modified to {Average consumption
rate}x{Average lead time+Review period}
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Inventory decisions-High risk &
high cost Without the proper inventory assortment, marketing
may find that sales are lost and customer
satisfactiondeclining.
Overstocks increase cost and reduce profitability
through added warehousing, working capitalrequirements,
deterioration, insurance, andobsolescence.
As the significance percentage of assets are inventoryrelated, a
reduction of firms inventory by a fewpercentage points can lead to
dramatic improvementin profits.
ROI= (Profit/ Fixed assets +Current assets)
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Substantial improvement in the productivity ofinventory can be
achieved by re-engineering
supply chain processes. Poor inventory management may lead to
stock
outs and hence cancellation of customersorders, overstocking
leading to insufficientstorage space and increase in the number
andrupee value of obsolete products.
Consequently, inventory management has a
large financial impact on the firm. Investments blocked in
inventory cannot beused to obtain other goods or assets that
couldimprove the enterprise performance.
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Types of Inventory Broadly there are three types of
inventory
- Manufacturing inventory
- Wholesale inventory
- Retail inventory
(a) Manufacturing inventory- Manufacturers inventory commitment
starts with
raw material and component parts, including work-in-process, and
ends with finished goods.
- Manufacturer needs to transfer the finished goodsinventory to
warehouses in closer proximity towholesalers and retailers.
- Manufacturers inventory commitment is relativelydeep and has
long duration.
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(b) Wholesale inventory
- Wholesaler purchases large quantities from
manufacturers and sells small quantities to retailers inorder to
provide retail customers with assorted
merchandise from different manufacturers in smaller
quantities.
- Thus wholesaler risk exposure is narrower but deeperand of
longer duration than that of retailers.
- In case of seasonal goods, the wholesaler is forced to
commit inventory, far in advance of selling, thus
increasing the depth and duration of risk.
- The current trend of expansion of product lines has
increased the width of inventory risk.
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(c) Retail inventory
- Retailer inventory risk is wide but not deep.
- The emphasis is more on inventory velocity.
- Inventory velocity is measured by inventory turnover.
- The risk is undertaken on variety of products but for a
given product the risk is not deep relatively. Theexception is
specialty retailer where the depth and
duration will be longer as they handle narrower lines.
- For instance, retailers risk is spread across more than
10,000SKU
s, a general merchandise and food storemay carry around 25,000
SKUs and a full line
department store may have as many as 50,000 SKUs.
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Functions underlying inventory
commitmentsA. Geographical Specialization
- It allows for geographical specialization forindividual
operating units.
- The need for geographical specialization arisesbecause various
factors of production viz. power,materials, water, labour,
manufacturing facilities arelocated at a considerable distance from
the majormarkets.
- For instance, tyres, batteries, transmissionequipments and
springs for an automobileassembly. The production facilities for
each of thethese are traditionally located near the source
ofmaterials to minimize transportation cost.
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B. Decoupling
- Provides for increasing operating efficiency within a
single manufacturing facility by stockpiling work-in-process
inventory between production operations.
- Decoupling enables manufacturing and distribution ofeconomic
lot sizes in anticipation of sales thusensuring large sized
shipments with minimum freightcost.
- Decoupling permits products manufactured over aperiod of time
to be sold as an assortment.
- Decoupling increases the operating efficiency at a
single location while geographical specializationincludes
multiple locations.
- However, JIT,DRP etc have reduced the economicbenefits of
decoupling considerably.
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C. Balancing Supply and Demand
- Balancing is concerned with elapsed time between
consumption and manufacturing as balancinginventory reconciles
supply availability with demand.
- Particularly useful in linking variations ofconsumption with
manufacturing in case of seasonal
products.- Balancing seasonal production and year round
consumption such as orange juice or year roundproduction and
seasonal consumption of blankets orknitting wool.
- In case of sort selling season, manufacturers,wholesalers and
retailers are forced to take aninventory position far in advance of
peak sellingseason.
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- From retailers perspective, an inventory position isplanned
six months prior to the peak selling period.
- The main function of balancing supply and demandis to ensure
that investment in stocks is liquidatedcompletely within the
season.
D. BufferUncertainties
- Safety stock protects against two types ofuncertainties:
- (a) Demand in excess of forecast during theperformance cycle.
For instance, customers request
of more or less units than planned.- Delays in the
performance-cycle length itself. For
instance, delay in order receipt, order processing,
ortransportation.
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Inventory ManagementS
trategy Companies can postpone positioning of inventory
by maintaining stock at the plants or they may
decide to place more products in local distribution
centres to have it closer to the market.(a) Manage inventory at
each distribution centre
independently.
(b) Consider inventory interdependence across
distribution sites by managing inventory centrally.
(c) Ensure more coordination and communication in
case of centralized inventory management.
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Inventory Cost Consideration1. Origin purchase consideration
2. Transportation cost.
(a) Origin purchase means the buyer is responsible forfreight
cost and product risk when the product is intransit.
(b) Depending on the delivery terms, the buyerassumes full risk
on inventory at the time ofshipment.
(c) Depending on the payment terms, transit inventory
would be a part of enterprise's average inventoryand therefore
subject to an appropriate charge.
(d) Transportation cost must be added to purchaseprice to obtain
an accurate assessment of the value
of goods tied up in inventory.
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The following are considered in perpetual
review:
- On hand inventory represents quantity that is
physically present in the particular distribution
facility.
- On-order inventory represents quantities thathave been ordered
from suppliers.
- If on-hand plus on-order quantity is less than
or equal to the established reorder point,inventory control
process will initiate another
replenishment order.
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Periodic Review
The inventory status is reviewed at regular intervalssuch as
weekly or monthly.
The re-order point is adjusted to consider theextended intervals
between reviews.
The formula for calculating the periodic reviewreorder point
is
jROP= D( T + P/2) +SS, where
- ROP= re-order point
- D=average daily demand- T= average performance cycle
length
- P=review period in days
- SS= safety stock
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Inventory Planning Methods
FairShare
allocation
Distribution
Requirement
Planning
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jDS = (A +7 Ij ) / 7 Dj , where
- DS
= no. of days supply for distributioncentre inventories.
- A= inventory units to be allocated from the
warehouse
- Ij= inventory in units for distribution centre j.
- Dj = daily demand for distribution centre j
jIn the above example,
DS = {500 + ( 50+100+75)} / (10+50+ 15)
DS= {500 + 225} /75 =725/75 = 9.67 days
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Thus, fair share allocation means that eachdistribution centre
should be brought up to 9.67 days
stock. The amount to be allocated to each distribution
centre is determined as under:
jAj = (DS Ij /Dj ) x Dj, where
- Aj = amount allocated to distribution centre j- DS= number of
days supply that each distribution
centre is brought upto.
- Ij = inventory in units for distribution centre j
- Dj= daily demand for distribution centre j- Thus, the amount
allocated to distribution centre 1
will be
jA1= (9.67- 50/10) x 10 = (9.67- 5) x 10= 4.67x 10=46
.7
or47
units.
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96Plant Warehouse
Regional warehouse Regional warehouse
Distribution
centre
Distribution
centre
Distribution
centre
Distribution
centre
Distribution
centre
Distribution centre
C US T O M E RS
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Raw Materials Warehouse
Part A Part B
Sub-assembly A
Part C Part D Part E
Sub assembly B Sub assembly C
Final Assembly (Manufacturing)
Plant Warehouse
DRP/MRP t i t t fi i h d d k i
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DRP/MRP system integrates finished goods, work-in-process, and
materials planning.
DRP provides a schedule for eachSKU
and eachdistribution facility.
For each planning period, the schedule will report
thefollowing:
- Gross requirements reflecting demand from customersbeing
catered to by different distribution facilities.
- Scheduled receipts i.e.replenishment shipmentsplanned for
arrival at the distribution centre.
- Anticipated week ending total deliveries.
- Projected on-hand inventory i.e. prior weeks on-handinventory-
current weeks gross requirement +scheduled receipts.
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Benefits of DRP
Improved service levels by increasing on timedeliveries and
decreasing customer complaints.
Better planning of new product launches.
Improved ability to anticipate shortages so that
marketing efforts are not expended on products withlow
stock.
Reduced distribution centre freight costs resultingfrom
coordinated shipments.
Improved inventory visibility and coordinationbetween logistics
and manufacturing.
Reduced warehousing space requirements because ofinventory
reductions.
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Demand Forecasting
Forecasting process comprises of twoelements
(a) Nature of demand, and
(b) Forecast components
Nature of Demand
Dependent demand Independent demand
Dependent versus Independent
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Dependent versus Independent
Demand Vertical dependent is characterized by
sequence of purchasing and manufacturing,such as number of tyres
used for assembly
of automobiles. Horizontal dependent occurs in a situation
where an attachment, promotion item oroperators manual is
included with each item
shipped.
(a) The demanded item may not be required tocomplete the
manufacturing process but may
be needed to complete the marketing process.
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(b) Once manufacturing plan for base item is
determined , requirements of components/
attachments can be calculated directly and noseparate
forecasting is done.
Independent demands are ones that are not related
to the demand for another item.
For instance, demand for refrigerator is not relatedto the
demand for milk.
Independent demand items are forecasted
individually.
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Forecast Components
1. Base demand
2. Seasonal factors
3. Trends
4. Cyclic factors
5. Promotions
6. Irregular quantities.
Mathematically forecast is expressed as
jFt+1= (Bt x St x Tt x Ct x Pt) + I, where
- Ft+1= forecast quantity for period t+1
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- Bt= base level sales demand (average sales level)for period
t+1
- St= seasonal factor for period t- T= trend component (quantity
increase or decrease
per time period)
- Ct= cyclic factor for period t
- Pt= promotional factor for period t- I= irregular or random
quantity.
j All forecasts may not include all components.
A. Base demand is based on average demand over an
extended period of time.(a) There is no seasonality, trend,
cyclic or
promotional component.
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B. Seasonal component is characterized by upwardand downward
movement in demand pattern,
usually on annual basis e.g. emand for woollen blankets is at
peak during winter months andlowest during summer.
(a) Seasonality at wholesale level precedes consumerdemand by
approximately one quarter.
(b) An individual seasonality factor of 1.2 indicatesthat sales
are projected at 20% higher than anaverage period.
C. Trend Component exhibits long range movement in
sales over an extended period of time.
(a) Trend may change number of times over the entireproduct life
cycle.
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Forecast Approaches
A. Top-Down Approach
Plant Distribution Centre
Field
Distribution
Centre# 1
Forecast4000 units
Field
Distribution
Centre#2
Forecast3000 units
Field
Distribution
Centre#3
Forecast2000 units
Field
Distribution
Centre#4
Forecast1000 units
A th fi h t thl
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Assume the firm has an aggregate monthly
forecast for the entire country as 10,000 units
and it use four distribution centres to service thedemand with a
historical split of40, 30, 20, and
10 per cent respectively.
Forecasts for individual distribution centres willbe projected
to be 4,000, 3000, 2,000 and 1,000
respectively.
In top-down approach a national level SKU
forecast is developed and then the forecasted
volume is spread across locations on the basis
of historical sales pattern.
B B tt A h
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110
B. Bottom-up Approach
Decentralized approach since each distribution
centre forecast is developed independently.
Results into more accurate forecast as it tracks
and considers demand fluctuations within
specific markets. Requires more detailed record keeping and
is
more difficult to incorporate demand factors
such as impact of promotion.jTrade-off the detail tracking of
bottom-up
approach with data manipulation ease of top-
down approach.
Components of Forecasting
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Components of Forecasting
Process
Orders
History
Tactics
Forecast
database
Forecast Administration
Forecast
Technique
Forecast
Support
System
Forecast ProcessForecast
Users
Finance
Marketing
Sales
Production
Logistics
A Forecast data base keeps information about
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A. Forecast data base keeps information about
Orders
Order history Tactics used to obtain orders such as
promotions,
schemes, special promotional programmes.
State of economy and competitive actions.
B. Forecast process integrates forecast techniques,support
system and administration.
Two prominently used forecasting techniques aretime series and
correlation modelling.
Forecast support system is the capability to gatherand analyze
data, evaluate impact of promotion,develop forecast and communicate
to the relevantpersonnel.
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Issues addressed by Forecast
Administration Who is responsible for developing the
forecast?
How is forecast accuracy and performance
measured? How does forecast performance affect job
performance, evaluation and rewards?
Do the forecast analysts understand the impact
of forecasting on logistics operations?
Do they understand the differences in variousforecasting
techniques?
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Transportation Transportation decisions are more strategic
ones
closely linked with inventory decisions.
Decisions are based on trade-off between the cost of
using a particular mode of transport with the cost ofinventory
associated with that mode.
For instance, air shipments may be fast, reliable , and
warrant less safety stocks; they are expensive whereas
shipping by sea or rail may be much cheaper but theynecessitate
holding relatively large amount of
inventory to protect against the inherent uncertainty
associated with them.
Customer service levels and geographic
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Customer service levels and geographic
locations are important aspects in transportation
decisions. Transportation accounts for roughly 30% of the
logistics costs and therefore operating
efficiencies become important aspects . Shipment sizes i.e.
consolidated bulk shipments
versus smaller lot sizes; routing and scheduling
of vehicles become important part of
companys transport strategy.
Transportation is one of the most visible
elements in the logistics operation.
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Transportation Functionality
Product Movement Product Storage
A. Product Movement
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- Primary function is the movement up and down thevalue
chain.
- As transportation uses temporal, financial andenvironmental
resources, the movement of materialsshould take place only when it
enhances the productvalue.
(a) Uses temporal resources because the product isinaccessible
while in transit.
- Due to JIT strategies transit inventories are becoming more
significant thereby reducing
manufacturing and distribution centre inventories.(b) Expenses
incurred internally for private fleet of
vehicles or externally for commercial or publictransportation
constitute financial resources.
(c) Transportation consumes fuel and oil and also
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(c) Transportation consumes fuel and oil and also
creates environmental expenses through
congestion, air pollution and noise pollution.
Objectives of Transportation
Move product
from original
location to
prescribeddestination while
minimizing temporal,
financial and environmental
Costs.
Minimize
expenses
incurreddue to
loss and
damage.
Meet customer
demand regarding
delivery and
shipment
information
availability
B Product Storage
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B. Product Storage
- Temporary storage through vehicles becomes
expensive as in-transit storage is required to be
moved again in a short duration of time.
- Sometimes temporary storage becomes
advantageous as the cost of unloading andreloading the product
in a warehouse may
exceed the daily charge of storage in
transportation vehicles.
- Many times where the warehouse space is
limited, utilizing transportation vehicles
becomes a viable option.
The options available to a transporter in case of
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The options available to a transporter in case of
warehouse space constraints are
(a) Instruct driver to take a circuitous or indirect routeto its
destination, as the transit time would be
greater as compared to direct route. Thus transport
vehicle is used as temporary storage option.
(b) Change the shipment destination i.e. temporarystorage is
achieved through diversion.
- For instance, product that is, say, scheduled initially
from Mumbai to Hyderabad gets diverted mid way
to Vishakapatnam (Vizag) as Vizag warehouse maybe in greater
need of product and has the storage
capacity.
T diti ll th t l h d t di t
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- Traditionally, the telephone was used to direct
diversion but nowadays satellite
communications between headquarters and
vehicle handle such tasks more efficiently.
- Though product storage in vehicles can be
costly, it can be justified from a total cost perspective when
loading, unloading costs,or
capacity constraints are considered.
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Principles of Transportation
Economies ofS
cale Economies of Distance
A Economies of Scale
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A. Economies ofScale
Transportation cost per unit of weight decreases
when the size of the shipment increases i.e.
shipments that utilize the entire vehicles
capacity like truck load (TL) cost less per kg
than less than truck load (LTL) shipments. Fixed costs in
transportation include
administrative costs of taking transportation
order, time to position the vehicle for loading or
unloading, invoicing and equipment cost.
It costs as much to administer a shipment of 1
kg as it does to administer a 1000 kg shipment.
B. Economies of Distance
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B. Economies of Distance
Transportation cost per unit of distance
increases at a decreasing rate as distanceincreases. Also called
Tapering Principle
For instance, a shipment covering a distance of
800 kilometers will cost less than twoshipments of same combined
weight covering
400 kms.
Fixed expenses incurred to load and unload the
vehicle get spread over more kilometers
resulting in lower overall per kilometer charges.
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Tapering Principle
Distance
C
OS
T
Participants in Transportation
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Participants in Transportation
decisions
Government
Shipper Carrier Consignee
Public
Role and Perspective of each
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Role and Perspective of each
partyA. Shippers and Consignees Expectations
Move the goods from origin to destination
within a prescribed time at the lowest cost. S pecified pick up
and delivery times,
predictable transit time, zero loss and damage,
accurate and timely exchange of informationand invoicing.
B. The Government Role
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. e Gove e t o e
Stable and efficient transportation environment
to sustain economic growth. Product availability throughout the
country at a
reasonable cost.
Providing right-of-way such as road or railwaysor air traffic
control system.
C. The Public concerns
Accessibility, cost effectiveness and protection
of environmental and safety standards. Development of transport
infrastructure to have
goods from global sources.
Features of Different Modes of
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Transportation
Modes of Transportation
Rail Highway Water Pipeline Air
A. Rail
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- Capability to transport large shipments
economically with more frequency.
- High fixed costs because of expensive
equipment, right of way, switching yards, and
terminals.- Variable cost per kg/km has been consierably
reduced by electrification.
- Bulk industries and heavy manufacturing use
railways more frequently.
- Can improve effectiveness of transportation
by having alliances with other modes.
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Cost Structure in respect of
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Cost Structure in respect of
Motor Transport
Fixed costs
such as
overheads
and vehiclecost are
low relative
to railway
Variable costssuch as driver,
fuel, tyres and
repairs arehigh relative
To railways.
Motor carriers are best suited to handle small
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shipments moving short distances.
Favour light manufacturing and distributivetraders, short
distances and high value
products.
Have captured significant market share of
railways in medium and light manufacturingindustries.
Because of delivery flexibility, motor transporthas captured
almost all freight moving fromwholesalers or warehouses to retail
stores.
Higher cost in replacing equipment, higherwages to driver and
other dock labour.
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- Unless the point of origin and point of destination are
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adjacent to a waterway, it needs to be supplementedby rail or
trucks.
D. Pipelines
- Used for transporting natural gas, manufacturedchemicals,
pulverized dry bulk materials such ascement and flour via hydraulic
suspensions, sewage
and water within the cities and municipalities.
- Operate on 24x7 basis are limited only by commoditychangeover
and maintenance.
- No empty container or vehicle that must be returned.
- Highest fixed cost an lowest variable cost.
- High fixed costs due to right-of-way, construction
andrequirements for control station and pumpingcapacity.
- As pipelines are not labour intensive, variable
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operating cost is extremely low once the pipeline
isconstructed.
- Inflexible and limited to products in the form of gas,liquid
or slurry.
E. Air
- Significant advantage lies in the speed with which ashipment
can be transported.
- Though the freight cost is very high, the same may betrade-off
with reduced warehousing or inventory.
- Characterized by load size constraints and
aircraftavailability.
- Fixed cost associated with aircraft purchase andrequirements
for specialized handling systems is lowas compared to rail, water
and pipeline.
- Airways and airports are generally
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Airways and airports are generally
developed and maintained with public funds.
- Airfreight variable cost is extremely high as
a result of fuel,maintenance and intensity of
in-flight and ground crew.
- Airfreight is justified in following situations:(a) High value
products
(b) Perishables
(c) Limited marketing period.(d) Emergency.
Nature of Traffic versus Mode of
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TransportationMode Nature of Traffic
Rail Extracting industries, heavy manufacturing,
agricultural commodities
Highway Medium and light manufacturing, distributionbetween
wholesalers and retailers.
Water Mining and basic bulk commodities, chemicals,
cement, agro-based products.
Pipeline Petroleum, gases, slurry.
Air Emergency, perishables, limited marketing period,
high value premium products.
Cost Structure for Each Mode of
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TransportationMode Fixed Cost Variable Cost
Rail High- equipment terminals, tracks etc. Low
Highway Low-highways provided by public funds Medium- fuel,
maintenance.
Water Medium- ships and equipment Low-capability to
transport
large amount of tonnage.
Pipeline Highest-rights-of-way, construction,
control stations, pumping capacity.
Lowest-no labour cost of
any significance.
Air Low-aircraft and cargo handling system. High-fuel, labour
and
maintenance.
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Transport Economies
Distance
Volume
Density
Stow ability
Handling
Liability
Market factors
A. Distance
- Cost curve increases at a decreasing rate as a
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141
- Cost curve increases at a decreasing rate as afunction of
distance and is known as tapering
principle.- Cost curve does not begin at the origin because
of
the fixed costs associated with shipment pick up anddelivery
regardless of distance.
- Tapering effect comes into existence, as the longermovements
tend to have a higher percentage of inter-city rather than urban
kilometers.
- Frequent intermediate stops, typical of urbankilometers, and
additional loading and unloading addto the costs.
- Inter-city miles are less expensive since moredistance is
covered with same fuel as a result ofhigher speed.
B. Volume
T t t it f i ht d l d
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142
- Transport cost per unit of weight decreases as loadvolume
increases.
- Fixed costs of pick up and delivery as well asadministrative
costs get spread over additionalvolumes.
- Smaller loads must be consolidated into larger loads.
C. Density
- Transportation cost per unit declines as productdensity
increases.
- In terms of weight and space, an individual vehicle
isconstrained more by space than by weight. Once isthe vehicle is
full, it is not possible to increase theamount carried even if the
product is lightweight.
- Higher density products allow fixed costs to bed dditi l i ht
lt th
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spread across additional weight, as a result theproducts are
assessed at a lower transport cost perunit.
- Attempts are made to increase product density so thatmore can
be loaded in a vehicle to utilize its capacity.
D. Stow ability
- Refers to product dimensions and impact of the sameon vehicle
utilization.
- Odd sizes and shapes as well as excessive weightsand lengths
do not stow well and typically waste
space.- Though density and stow ability are similar,
products
may have same density that stow differently.
- Items with regular shapes are easier to stow than oddh d
it
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shaped items.
- While the steel blocks and rods have the samedensity, rods are
more difficult to stow because oftheir length and shape.
E. Handling
- S pecial handling equipments may be required forloading or
unloading trucks, trains, or ships and theunitization/
palletization affects the handling cost.
F. Liability
- Product characteristics such as susceptibility to
damage, perishability, susceptibility to to theft,susceptibility
to explosion affect the risks and henceclaims.
G. Market factors
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(a) Back-haul i.e. vehicle returning back to the
point of origin with load.
(b) Dead head to be avoided because empty
returns incur labour, fuel, and maintenance
costs.(c) Thus design of logistics system must add
back-haul movement wherever possible.
Multimodal Transport System
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Multimodal or Intermodal transport refers to journeys that
involve two or more different
modes of transport.
For instance, if materials are moved from
Lanchow in central China to Warsaw in Poland
goods may be loaded on to trucks, transferring
them onto rails for a journey across China to
Shanghai, then ship to Rotterdam, back intorails to cross
Europe, then truck for local
delivery.
For Logistics managers intermodal services become
necessar beca se of their characteristics and costs
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necessary because of their characteristics and costs.
For example, limited accessibility of air transportrequires
coordination with a land carrier to make the
pick ups and deliveries.
Similarly, inaccessibility applies to rail, water and
pipeline but not to the motor which has a definiteadvantage
here.
The intermodal services maximizes the primary
advantages inherent in the combined modes and
minimize their disadvantages. The combined services will have
both good and bad
aspects of the utilized modes.
For instance, coordinate of rail and water willh l l h ll il
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have a lower total cost than an all-rail
movement but higher cost than that of all-water. Likewise,
combined system transit time will be
lower than all water movement but higher thanall-rail.
The decision to use multi-modal system mustconsider the effect
on total logistics costs.
The aim of intermodal transport is to combinethe benefits of
several separate modes but avoidthe disadvantages of each, like,
combining thelow cost of shipping with flexibility of the road,or
getting the speed of air with the cost of road.
However, each transfer between modes causes
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delays and adds costs of extra handling.
Intermodal transport works well when transfer
can be done efficiently.
Transfer of motor carrier trailer to another
transport mode is facilitated throughcontainerization.
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Choice of Mode Factors influencing the choice of mode are as
under:
- Bulkiness of the materials; heavy items would beshipped by
ocean going vessels.
- Value of materials; expensive items raise inventorycosts and
thus encourage faster modes.
- Criticality of materials; even low unit value items thathold
up the operations need fast and reliable transport.
- Susceptibility to market changes; operations that
respond quickly to changes cannot wait for criticalsupplies
using slower transport.
- Reliability with consistent delivery is important.
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Containerization
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C
ontainer is large rectangular box into which a firmplaces
commodities to be shipped.
After initial loading, the commodities themselves are not
rehandled until they are unloaded at their final
destinations. Throughout the movement, the carrier handles
the
container, not the commodities.
The shipper can transfer the container from one mode to
another, eliminating the need to handle the commoditieseach time
thus reducing handling costs, damage costs,
theft, pilferage and the time required to complete the
modal transfer.
Many firms that modify their material
h dli t t i l d f klift
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handling systems to include cranes, forklift
trucks, and other equipment capable ofhandling large, heavy
containers have found
containerization to be desirable avenues for
increasing productivity and controlling
material handling costs, especially in periods
of continually increasing labour costs.
As the objective of intermodal transport
system is to provide virtually seamlessjourney, the best way to
achieve same is to use
modular or unitized loads.
Piggyback Trailer on Flat Car
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ggy
TOFC
is a specialized form of containerizationin which rail and motor
transport coordinate.
Carrier places motor carrier trailer on a rail
flatcar, which moves the trailer by rail for long
distance.
A motor carrier then moves the trailer for short
distance pickups and deliveries.
This service combines the long-haul, low costadvantage of rail
with accessibility of motor.
Piggyback services mostly move under contract.
Material Handling
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g
The primary material handling objective is toefficiently move
large quantities of inventory into
and specific customers orders out of the warehouse.
The functions performed in a warehouse are
classified as movement or Handling and storage. Movement or
handling is emphasized and storage is
secondary.
Handling is divided into
- Receiving
- In storage handling , and
- Shipping
An extremely important aspect of logistics is theproductivity
potential that can be realized from
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productivity potential that can be realized fromcapital
investment in material-handlingequipment.
S pecialized handling equipment is required forunloading bulk
materials such as for solids, fluids,or gaseous materials.
The guidelines suggested in designing the materialhandling
systems are:
(a) Equipment for handling and storage should be asstandardized
as possible.
(b) When in motion, the system should providemaximum continuous
flow.
(c) Investment should be made in handling ratherthan stationery
equipment.
(d) Handling equipment should be utilized to themaximum extent
possible
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maximum extent possible.
(e) In selecting handling equipment, the ratio ofdeadweight to
payload should be minimized.
(f) Whenever possible, gravity flow should beincorporated in the
system design.
The handling systems can be classified asunder:
- Mechanized
- Semi automated- Automated, and
- Information directed.
Mechanized Systems
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Mechanized Systems
A. Forklift Trucks Forklift trucks can move loads of master
cartons both horizontally and vertically.
A pallet or slip sheet forms a platform upon
which master cartons are stacked.
A slip sheet is a thin sheet of solid fibre orcorrugated paper
and are used for situationswhen product is handled only a few
times.
A forklift truck normally transports amaximum of two unit loads
i.e. two pallets ata time
High stacking trucks are capable of up to 40 feet ofvertical
movement.
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Even trucks capable of operating in aisles as narrow as
56 inches ar also found in warehouses. The significance of
narrow-aisle forklift trucks has
increased as warehouses seek to increase rack storagedensity and
overall storage capacity.
Forklift trucks are not economical for long distancehorizontal
movements because of high ratio of labourper unit of transfer.
Most effectively utilized in shipping and receiving
and placing merchandise in a predetermined storagespace.
Common sources of power are propane gas andelectricity.
Many forklift operations are utilizing radiofrequency data
communication to speed up
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frequency data communication to speed upload put away and
retrieval assignments.
Under the above system, workers receive theirassignments through
either handheld or vehicle
mounted RF terminals.
RF technology provides real-timecommunication capability to
central data
processing systems, and when combined with bar code scanning of
cartons and pallets,it
allows fork lift operators to receive and updateitem status
inquiry, material orders andmovement and inventory adjustments.
B. Walkie-Rider Pallet Trucks
Low cost effective method of material
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Low cost, effective method of material
handling. Highly versatile low-lift pallet and/or skid
handlers with load capabilities from 3,000 to
8,000 lbs.
Typical applications include loading and
unloading, order selection and shuttling over
longer distances throughout the warehouse.
Popular in grocery warehouses.
Electricity is the power source.
C. Towlines
Either in-floor or overhead mounted drag devices.
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Either in floor or overhead mounted drag devices.
The major advantage is the continuous movement butlacks
flexibility of forklift trucks.
Most common application is for order selection withinthe
warehouse. Order selectors place merchandise on afour wheel
trailer, which is then towed to the shipping
dock.D. Conveyors
Conveyors are classified according to power, gravityor
roller/belt movement.
Portable gravity style roller conveyors are often usedfor
loading and unloading.
In some cases these are transported on the over-the-road
trailers to assist in unloading at the destination.
Semi automated Handling
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j Semi automated system supplements a mechanizedsystem by
automating a specific handling
requirements.
j Semi automated warehouse is a mixture of
mechanized and automated handling.A. Automated-Guided Vehicle
Systems
Performs similar kind of handling function as a
mechanized tow tractor with a trailer.
The essential difference is that an AGVS does notrequire an
operator and is automatically routed and
positioned at destination with intervention of the
operator.
Typical AGVS equipment relies on an optical
or magnetic g idance s stem
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or magnetic guidance system.
In the optical application, tape is placed on thewarehouse
floor, and the equipment is guide by
a light beam that focuses on the guide path.
A magnetic AGVS follows an energized wireinstalled in the
floor.
The primary advantage is the elimination of a
driver and newer AGVS use video and
information technology to follow paths without
the need for fixed tracks.
B. Sortations
Typically used in combination with conveyors
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Typically used in combination with conveyors.
The products are selected in the warehouse, they aresorted as
per specific specific shipment docks and
taken onto the conveyors for moving out.
Master cartons have a distinguishing code, these are
read by optical scanning devices and automaticallyrouted to the
desired locations.
The rate of flow is customized to meet changing
requirements.
The benefits are
(a) Reduction in labour, and
(b) Increase in speed and accuracy.
C. Robotics
Humanlike machine that can be programmed
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Humanlike machine that can be programmed
by microprocessors to perform variousactivities.
Robots are use in warehouses to break downand build unit loads
to accommodate exact
merchandise requirements of a customersorders.
In break down process, the robot isprogrammed to recognize
stocking pattern and
place products in the desired position on aconveyor belt.
Similarly, robots are used to build unit loads.
Robots are used effectively in warehouses
where prevailing environments make it
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where prevailing environments make it
difficult for humans to work such as highnoise areas and extreme
temperatures like cold
storage freezers.
The capability to incorporate artificialintelligence in addition
to speed,
dependability, and accuracy makes robotics an
attractive alternative to traditional manual
handling systems.
Automated Handling
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g
Substitutes capital investment in equipment for labourrequired
in mechanized handling systems.
Though operates faster and more accurately, requires
high degree of capital investment and complex to
operate. Most automated systems are custom deigned and
constructed for each application.
Automated handling concentrates on order selection
system at the master carton level as well as on highrise storage
and retrieval system.
A. OrderSelection System
The handling of fast moving products in master
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g g pcartons is fully automated from the point of
merchandise receipt to placement in over-the-roadtrailers.
Such systems use an integrated network of powerand gravity
conveyors linking the storage.
System is controlled by computer coupled withinventory and order
processing systems ofwarehouse.
Upon arrival, merchandise is automatically routed to
storage position and inventory records are updated. U pon order
receipt, merchandise is unitized to
vehicle size and schedules made for selection.
At an appropriate time, all merchandise is selected in
loading sequence and automatically transported by
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loading sequence and automatically transported by
conveyor to th loading dock. The only manual handling of
merchandise occurs
while stacking into transport vehicle.
B. Automatic Storage and Retrieval System (ASRS)
High rise handling systems are fully automated fromreceiving to
shipping.
The components of this system are storage racks,
storage and retrieval equipment and control systems.
The high rise are the vertical storage racks up to the
height of 120 feet.
The storage and retrieval machine travels
b k d f th ith th i bj ti f
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back and forth with the primary objective of
moving products in and out of storage.
jFunctions of storage & retrieval equipment
(1) To reach the desired position rapidly.
(2) To deposit or retract a load of merchandise.
(3) To ensure merchandise flowing from
production is automatically stacked to create
a unit load.(4) To transport the unit load to the high rise
storage area by power conveyor.
C. Information-directed Systems
All material handling movements are directed
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All material handling movements are directed
and monitored by the command ofmicroprocessors.
To begin with all required handlingmovements are fed into the
computer for
analysis and equipment assignment.
Analysis of handling requirements andequipment assignment is
done in such a waythat direct movements are emphasized anddeadhead
movements are minimized.
Work assignments are provided to individualforklifts by
terminals located on the truck.
Communication between the computer and thetruck uses radio
frequency (RF) waves with
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q y ( )antennae located on the forklifts and high upin the
warehouse.
Information-directed systems can increase productivity by
tracking material handler
performance and allowing compensation to bebased on activity
level.
A single handling equipment may be involvedin loading or
unloading several vehicles,
selecting many orders, and completing severalhandling
assignments, thus increasing thecomplexity of work direction.
Packaging
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Packaging can be categorized into two types viz.(a) Consumer
packaging, which has a marketing
emphasis, and
(b) Industrial packaging, which has more of logistics
emphasis.A. Consumer Packaging (Marketing Emphasis)
- Consumer packaging design focuses on customerconvenience,
market appeal, retail shelf utilization,
and product protection.- Large containers and odd sizes may
increase the
consumer visibility but make poor logisticalpackaging.
For example, shipping products fullyassembled such as
motorcycles results in
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y
substantial reduction in density. A low density package would
mean higher
transportation costs and greater warehousingrequirements.
B. Industrial Packaging (Industrial emphasis)- Individual
products or parts are normally
grouped into cartons, bags, bins, or barrels forhandling
efficiency.
- These containers are used to group individual products and are
referred to as mastercartons.
When master cartons are grouped into largerunits for handling,
the combination is
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g,
referred to as containerization orunitization. The master carton
and the unitized load
provide the basic handling unit in thelogistics channel.
The weight, volume, and fragility of themaster carton in an
overall product linedetermines transportation and materialhanding
requirements.
If the package is not designed for efficientlogistical
processing, overall performance ofthe system would suffer.
Standardization of master carton facilitates
material handling and transportation.
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g p
Standardization of master carton is beneficial evenin context of
retail backend operations.
(a) For instance, in case of shoe store as the contents
of each master carton are known, it is not
necessary to search through many cartons for aparticular style
or size of shoe.
(b) Allows master cartons to be more efficiently
stacked, resulting in to less backroom congestion.
(c) Complete identification of master carton contentsfacilitates
completion of retail inventory and
merchandise reorder.
Standardized cartons are selected to achieve
maximum conformity in increasing the density in the
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maximum conformity in increasing the density in the
trailer thereby eliminating dead space in stacking. The end
result of standardized master carton usage is
substantial reduction in total cost combined with an
effective material handling system at both
warehouse and the retail store. In situations, when master
cartons of more than one
size are required, extreme care should be taken to
arrive at an assortment of compatible units.
These different sizes of master cartons should resultinto
modular compatibility.
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Another critical issue to be considered in package
design is to determine the degree of protection
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required to cope with the anticipated physical and
climatic environments.
The package design and material should combine to
achieve the desired level of protection without
incurring the expense of overprotection.
In most cases the cost of absolute protection will be
prohibitive and therefore the package construction
should be a proper blend of design and material.
Three broad functions of packaging are- Damage protection,
Utility/ efficiency, and
Communication.
A.Damage Protection
A major function of the master carton is to protect
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products from damage while moving and being
stored in the logistical system.
Master carton also serve as a deterrent to pilferage.
Achieving desired degree of protection involves
tailoring the package to the product and selectingproper
material for package construction.
The determining factors are the value and fragility of
the product; higher the value, the greater is the
justification for nearly absolute protection. If the product is
fragile and has high value, then the
cost of absolute protection can be significant.
L
o
s
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Cost of Packaging
S
B
y
Da
m
a
g
e
The susceptibility to damage of a givenpackage is directly
related to the environment
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in which it moves and is stored. Product fragility can be
measured by
product/package testing by means of shockand vibration
equipment.
If packaging requirements and cost areprohibitive, alternative
product designs can beevaluated utilizing the same
testingequipment.
The end result is the determination of theexact packaging
required to protect the
product.
During the logistical process, common causesof product damage
are vibrations,i d i
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impact,puncture, and compression.
Stacking failure can also result in damagewhile the product is
in storage.
The potential physical damage of poor
stacking ranges from surface scuffing andmarring to complete
product crushing,
buckling and cracking.
Typical methods of securing the packages are
strapping, tie-downs, and use of variousdunnage materials that
limit vibrations andshock.
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jBenefits ofUnit Loads
- Unloading time and congestion at destination
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Unloading time and congestion at destination
is minimized.
- Products shipped in unit load quantities
facilitate material handling and inventory can
be positioned rapidly for order selection.- Damage in transit
can be reduced by unit load
shipping and specialized transportation
equipment.
- All above factors lead to reduction in logistical
cost.
- A unit load can increase damage potential if it
is not properly restrained during handling or
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p p y g g
transport.- Standard method of imparting stability to unit
load include rope ties, steel strapping,
adhesives, wrapping- both shrink wrap as well
as stretch wrap.
C. Communication
Critical to content identification, tracking, and
handling as the these are becoming necessaryto total channel
success.
(a) Content Identification
- A very obvious communication role is identifyingk t t f ll h l
b
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package contents for all channel members.
- The typical information includes manufacturer,product, type of
container i.e. can or bottle, countand product code number.
- The carton information is used to identify product
for receiving, order selection, and shipmentverification.
- Visibility is the major consideration, and materialhandlers
should be able to see the label from
reasonable distances in all directions.- High value products
often have small labels to
minimize the temptation of theft.
(b) Tracking
- A well controlled material handling system
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A well controlled material handling system
tracks product as it is received, stored,retrieved, and
shipped.
- A good control on movement reduces product
loss and pilferage and is useful for monitoringemployee
productivity.
- Low cost scanning equipment, and
codification increases the tracking capabilities
and effectiveness.
(c) Handling Instructions
- Final role of logistics package is to provide
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Final role of logistics package is to provide
handling and damage instructions.
- The information should be provided about any
special product handling considerations such
as glass containers, temperature restrictions,stacking
considerations, or potential
environments concerns.
- If the product is dangerous, such as an
explosive chemical , the packaging shouldprovide instructions
for ealing with spills and
container damage.
Channel Integration-PCM Packaging, Containerization, and
Material handling
i l f h l i i l i
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represent integral parts of the logistical operatingsystem; as
all three areas influence each other.
For instance, automated handling cannot beefficiently designed
without a high degree of mastercarton standardization, which in
turn provide the
opportunity to containerize individual products. The integration
between material handling capability,
transportation, warehousing, inventory policy andpackaging
communication into customers logistical
system leads to minimum handling during theexchange of
merchandise.
This type of integration is commonly found inphysical
distribution.
Scrap/Waste Disposal
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Scrap
Material InputMaterial
ProcessingMaterial
Output
Recycle Disposal
A. Scrap
Scrap is a waste created while processing the
t i l
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materials.
The process scrap is unavoidable extra material
removed from the stock of material while
generating a component.
For example, while making a machined componentsome material has
to be removed in the form of
chips.
Quite often, while manufacturing any component
some dimensions are not maintained and the lot isscrapped as
these cannot be used in the assembly of
the product.
B. Surplus
When the project or product needs a specific quantity
of the item extra leftover cannot be used and this
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of the item, extra leftover cannot be used and this
quantity is called surplus.
The surplus quantity has to be disposed off.
C. Obsolete
When the item cannot be used in the product/ projectdue to
changes that might have taken place in respect
of dimensions, shape, colour etc, these are called
obsolete items.
