Intro to Supply Chain Exam 3 (Ch. 9-12) Rutgers Taitt

Logistics is

The part of supply chain management that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information, from the point of origin to the point of consumption, to meet customer requirements

Logistics is necessary to:

- Move goods and materials from suppliers to buyers (Inbound Logistics)
- Move goods and materials between sites (Material Handling)
- Move finished goods to the customer (Outbound logistics)

Products have little value to the customer until

They are moved to the customers point of consumption
(to the right place at the right time)

Customers can be

Internal or External

The true value of warehousing lies in

Having the right product in the right place at the right time
- Time and place utility

Warehouse

A facility that stores purchases, work in process (WIP), and finished goods inventory

Warehousing

The function that allows a company to receive, store, breakdown repackage, and distribute items to a manufacturing location or fiished products to a customer

Decisions driving Warehouse Management

- Number of warehouse facilities in the network
- Site selection
- Layout of the warehouse(s)
- Methods of receiving, storing, retrieving, and distributing products and materials

Primary Functions of a Warehouse

- Receiving
- Storage
- Picking
- Packing
- Shipping

Receiving

Physical receipt of material, identification, inspection for conformance with the purchase order (quantity and damage), put-away, and preparation of receiving reports

Storage

The safe and secure retention of parts or products for future use or shipment

Picking

Withdrawing components from stock to make assemblies or finished goods or to ship to a customer

Packing

Placing one or more items of a customer order into an appropriate container for safe shipping, marketing and labeling the container with customer shipping destination data, and other information that may be required

Shipping

Outgoing shipment of parts, components, and products. Includes packaging, marking, weighing, and loading for shipment (DOES NOT INCLUDE TRANSPORTATION)

Secondary Functions of a Warehouse

- Quality Inspections (Incoming & Outgoing)
- Repackaging
- Assembly Operations (Combining products w/ components)

Warehouse Robotics

Uses automated systems, robots, and specialized software to transport materials, perform various tasks, and streamline warehouse preocesses

Automated Guided Vehicles (AGVs)

Replace manually driven forklifts to transport materials within warehouse facilities. AGVs navigate warehouse facilities by following routes marked by wires, tracks, or sensors embedded in the floor or other physical guides

Automated Storage and Retrieval Systems (AS/RS)

automate the storage/retrieval of goods to speed up order fulfillment and materials handling operations. They operate as cranes on fixed tracks that traverse product aisles and vertical heights to deposit or remove items

Collaborative Robots

(cobots) are semi autonomous mobile robots that help human workers perform tasks. they can speed up order fulfillment by delivering inventory items to stationary pick stations where human operators fulfill orders

Public Warehouse

A business that provides storage and related warehouse functions to companies on a short or long term basis, generally on a month to month basis for a fee
- Fees can vary based on size, weight, stackability, fragility, value, and hazards
(Hotel for Inventory)

Advantages of Public Warehouse

- No capital investment or property taxes
- Flexibility (short or long term, seasonal, add storage capacity on short notice)
- Lower costs and reduced risk
- Access to special features and services (Temperature controlled, customer service, etc)

Disadvantages of public warehouse

- Potential for incompatible computer systems
- Specialized services may not be what is required/needed
- Space may not be available when/where needed

Contract Warehouse

- Variation of public warehousing that handles the shipping, receiving, and storage of goods on a contract basis for a fee
- Usually required commitment for multiple years
- Fee may be fixed, cost-plus, or a combo
- Company providing space handles employees, equipment, and maintenance
(Apartment for inventory)

Contract Warehouse Advantages

- Service: Clients can obtain specialized services tailor made to suit their needs
- cost can be bundles in contract and negotiated
- Control: Contract warehousing offers a degree of control
(many adv and disadv of public warehouse apply to contract too)

Contract Warehouse Disadvantages

Duration: Client company is expected to enter a contract for specific time period, typically 3 years

Private Warehouse

Storage facility owned by the company that owns the goods being stored in the facility
- Usually for companies with large volume or valuables
- can be operated as separate division in company
- can be co located
(House for Inventory)

Private Warehouse Advantages

- Control: Greater flexibility in designing the warehouse & control over operations
- Visibility: Inventory, material flow, handling, supervision
- Cost: Operating costs can be 15-25% lower if company achieves at least 75% utilization

Private Warehouse Disadvantages

- High Startup Cost
- Fixed Location
- Fixed Size and Costs

Types of Warehouses

- Consolidation
- Break Bulk
- Cross Docking

Consolidation Warehouse

Warehouse Operation that receives products from different plants or suppliers stores them and then combines them with similar shipments from other plants or suppliers for further distribution
(Located closer to supply base)

Break Bulk Warehouse

Warehouse operations that divides full truckloads of items from a single source or manufacturer into smaller, more appropriate quantities for use or further distribution
(Located closer to customer base)

Cross Docking Warehouse

Practice of unloading materials from an incoming truck/railcar and loading them directly onto outbound trucks/railcars with little to no storage in between

Main reasons cross docking is implemented

- Provide a central site for products to be sorted and combined for delivery to multiple destinations in the most productive and fastest method possible
- Consolidate: combine small loads into one to save costs
- Break Bulk: break down large loads into smaller for easier delivery

Warehouse Network

Number of, and relationship between, the companies warehouses in their organization structure

Fundamental questions in establishing a warehouse network

How many are needed and where should they be located

Trade offs to determine fundamental questions of warehouse network

Level of customer service (Higher customer service = more warehouses diversity)
Amount of Inventory (More inventory = more warehouses)

Single Warehouse Pros and Cons

Pros:
- Less Complicated
- Lower operating and inventory costs
- No duplication of equipment or staff
- Centralized network
- More actively focused on needs of customers
Cons:
- longer delivery times

Multiple Warehouse Pros and cons

Pros:
- Faster Delivery
Cons:
- More complicated
- Higher operating and inventory costs
- Duplication of equipment and labor
- Decentralized network

Hub and Spoke

- Hybrid warehouse network
- Centralized (hub) holds most inventory linked to smaller ore dispersed (Spokes) that hold small inv to support local area

Main Warehouse Network location strategies

- Market Positioned Strategy
- Product Positioned Strategy
- Intermediately positioned Strategy

Market Positioned Strategy

- Warehouses set up close to customers
- Used when companies have more customers than suppliers and customers are spread out

Product Positioned Strategy

- Warehouses set up close to supply sources
- Used when companies have more suppliers than customers

Intermediately Positioned Strategy

- Warehouses are set up midway between supply sources and customers to balance costs, inventory, and customer service
- Strategy used when distribution requirements are high and product comes from various supply locations

Third Party Logistics (3PL)

Outsourced provider that manages some to all of an organizations logistics
- Typically a 10-20% logistics savings
- Typically favored by small business and international logistics

Third Party Logistics Services

- Inbound & Outbound Transportation
- Warehousing
- Pick and Pack
- Freight Forwarding
- Customs Brokerage & Clearance
- Order Taking
- Billing & Invoicing
- Inventory & Freight bill auditing

3PL Advantages

- Cost (eliminates need for warehouse space, staff, tech)
- Logistics Expertise
- Efficiency

3PL Disadvantages

- Loss of Control
- Increased dependency
- locked into prices

Transportation

Planning, scheduling, controlling activities related to mode, carrier, and movement of inventories in and out of an org
(Get right product to right place at right time as efficiently as possible)

Objectives of Transportation

- Maximize value to company through price negotiations
- Make sure service is provided efficiently
- Satisfy customer needs

Transportation company classifications

- Contract Carriers
- Common Carriers
- Private Carriers
- Exempt Carriers

Contract Carriers

Transports freight under contract to a limited number of shippers

Common Carriers

transports freight for a fee and can be hired by anyone

Private Carriers

Transports its cargo as part of a business that produces, uses, sells, or buys the cargo being hauled

Exempt Carriers

person or company specializing in transporting commodities is exempt from regulation by the interstate commerce act

Modes of Transportation

-Truck
- Rail
- Air
- Water
- Pipeline

Mode VS Carrier

Mode = transportation method
Carrier = company thats transporting the goods

Truck

- Most flexible mode of transpo
- Carries > 80% of US Freight
- carries nearly anything
- Competes w/ Rail and Air for short to medium hauls
- Impacted by truck driver shortage and hour service rules

General Freight Carriers

Trucking company that handles various commodities in standard trailers. Freight is generally palletized
- Can be LTL or FTL
- Carry majority of Goods
- Doesnt require special equipment

Specialized Carriers

Trucking company that handles movement of cargo that requires specialized equipment
- commodities like liquids, petroleum, household goods, building materials

Less Than Truckload (LTL)

Small Freight that doesnt require entire space of truck

Pros & Cons of LTL

Pros:
Cost effective
More carrier options
Ideal for small business
Cons:
Increased risk of theft and damage
Increased shipping times and delays

Full Truckload (FTL)

Transport of goods that fill up a truck

Pros and Cons of FTL

Pro:
Best for large shipments
Best for high risk or delicate shipments
Faster than LTL
Cons:
Costs more than LTL

Rail

9% of US Freight spend
- competes for transportation when distance is long and shipments are heavy/bulky
- Slow and Inflexible, but most capability
- Paired w/ trucks

Pipeline

2% of US freight spend
- Most reliable form of transp
- Lowest per unit cost of transpo
- Limited variety of commodities
- transported in liquid or gaseous state
- little maintenance needed

Air

5% of total US freight spend
- Fastest mode of transpo
- Most expensive mode of transpo
- cannot carry heavy or bulky cargo
- ideal for items w/ high cost to weight ratio
- half of goods transported by air are carried by freight only airlines, other half in passenger planes
- Paired w/ trucks

Water

5% of total us Freight spend
- Inexpensive
- slow and inflexible
- used for heavy, bulky, low value materials
- competes w/ rail and pipeline
- Paired w/ trucks

Intermodal Transportation

-6th mode of transpo
- use of multiple modes used together

Trailer on Flatcar (TOFC)

rail and trucks paired together

Container on flatcar (COFC)

rail and water paired together

Roll on/off ship

ship designed to allow trucks to drive directly on and off ship

Interstate Commerce act

- 1887
- created the Interstate Commerce Commission (ICC)

Pros and Cons of Regulation

Pros:
- Ensured adequate transpo service throughout country
- protects consumers from monopoly pricing
Cons:
- Discourages competition
- doesnt allow prices to adjust based on demand or negotiation

ICC termination act

- 1995
- The ICC was eliminated

Cost of Service Pricing

setting a price for a service based on the costs incurred in providing it

Value of service pricing

pricing strategy that sets prices based on the value perceived by the customer

Combination Pricing

price is set between cost of service minimum and value of service maximum

Net rate pricing

established discounts and accessorial charged are rolled into one all inclusive price. pricing is tailored to the individual customers needs

Free on board (FOB) origin

-Ownership of goods passes to buyer when carrier accepts the goods
- buyer assumes risk for in transit loss
- buyer pays freight costs

Free on board (FOB) destination

- Ownership of goods passes to buyer once they receive goods
- Seller assumes risk for in transit loss
- Seller pays freight costs

Freight Forwarder

consolidates LTL shipments into FTL shipments

Transportation Broker (Load)

bring shippers and carriers together

Shippers Association

nonprofit cooperatives which arrange for members shipping

Intermodal marketing company

purchase blocks of rail capacity and sell them to shippers

Technology and trends in transportation

- Driver monitoring
- Traffic coordination
- Safety Technology
- Platooning
- New concept trucking
- Vertically folding shipping containers
- Driverless trucks
- Drone deliver

Self driving vehicles

technology senses conditionsa round it, adjusts course without human being in control

Drones

- Last mile delivery and short to medium distance transpo
- Inventory management and order picking
- surveillance and inspection

Blockchain

digitally distributed decentralized public ledger across a network. provides all parties involved with unrestricted insight into all transactions
- Facilitates transparent immutable records of activities

Warehouse Management Systems (WMS)

track and control flow of goods from receiving dock to outbound shipment

Transportation Management Systems (TMS)

used to select best mix of transpo services and pricing

Global Trade Management Systems (GTM)

Provides global visibility, standardization and documentation to comply w/ international trade regulations

Facility location Decisions

- Define each facility strategy goals
- Determine location for each facility
- Identify market that each facility serves

Offshore Factory

- Factory set up for manufacturing/assembly in a country where labor/raw materials are less expensive for import back to manufacturers home country

Source Factory

- manufactures products at low cost, but with skilled workers and significant managerial resources
- plant management involved in supplier selection & production planning

Server Factory

Factory set up to take advantage of government incentives and/or reduced tax/tariffs barriers to meet regional or local market needs

Contributor Factory

Focused on product development and engineering for products they manufacture

Outpost Factory

Factory set up in an area with abundant advanced suppliers, competitors, research facilities

Lead Factory

source of product and process innovation and competitive advantage across the entire organization

12 pillars of competitiveness

1. Institutions
2. Infrastructure
3. Macroeconomic stability
4. Health and Primary education
5. Higher education and training
6. Goods market efficiency
7. labor market efficiency
8. Financial market sophistication
9. Technological readiness
10. Market size
11. Business sophistication
12. innovation

Global Location Factors

- Competitiveness
- Taxes & Incentives
- Currency Stability
- Access and Proximity to Markets
- Labor Issues
- Right to work laws
- access to suppliers and cost
- utility availability and cost
- environmental issues
- land availability and cost
- quality of life issues
- business clusters
- trade agreements