Distribution & Logistics Exam 1

Logistics Management

• Process and activities that create value focused on the design and administration of a system to control the timing and geographical positioning of raw materials, work-in-process, and finished inventories at the lowest total cost

Form Utility

Using raw materials to transform into finished products of value

Sub-optimization

Process within a system is isolated leading to reduced efficiency

Availability

Having inventory meet customer requirements. Measure: stockout frequency, fill-rate, order shipped complete

Operational Performance

Time required to deliver an order. Measures: speed, consistency, flexibility, malfunction-recovery time

Service reliability

Quality of performance, how consistent

Cost Minimum

concept of total landed costs: the tradeoff between individual cost elements to achieve lowest total system cost

Static/Short run analysis

Cost analysis at a point in time/output level

Dynamic/Long-run analysis

Cost analysis over a stretch of time/range output levels

Product Movement

Is the movement of inventory to specified destinations

Product Storage

occurs while product is in transit or waiting to be moved or unloaded

Restrictive Element

in-transit inventory is “captive” usually inaccessible during transportation

Flexible Element

Inventory can be diverted during shipment to a new destination

Shipper and consignee

have a common interest in moving goods from origin to destination within a give time at the lowest cost

Carriers

• desire to maximize their revenue from movement while minimizing matching

Government

desires a stable and efficient transportation environment to support economic growth

Public

is concerned with transportation accessibility, expense, and standards for security, safety, and the environment

Parcel service

• Traditionally carrier of significant size, capability, and influence

• Impact as e-commerce has grown

• Highly specialized services with significant flexibility

Intermodal

• Combining the use of truckload and rail

• Best known and most widely used is trail-on-flat-car or container-on-flat-car

• Containership

Economy of distance

•  the cost per unity weight decreases as distance increases

  • Cost curve starts above zero?

Tapering principle

rate of cost decreases as distance increases

Economy of weight

• the cost per unit weight decreases as total weight increases

  • Cost per pound decreases as weight increases until carrier vehicle is full

  • Small loads should be consolidated into larger loads to maximize scale economies

economy of density

• the cost per unit weight decreases as the density of the shipment increases

  • Volume is important because vehicles are typically constrained more by cubic capacity than by weight loaded

  • Cost per unit of weight declines as product density increases

Lane volumes

economy of scale

Balance

movements both ways between a given market/lane

back haul

Opportunity to avoid empty miles

Dead head

Also knwn as empty miles to reloca

Lardners Law

• is a principle in transportation economics stating that if transportation costs are reduced (e.g., by half), the relevant market area for a product increases by a much larger typically quadrupling the area (400%) This concept explains how improved transport efficiency dramatically expands the reach of goods. 

competitive structure, financial/cost structure (fixed v/s variable), equipment, products primarily transported, service capabilities (pages 130/209 to 141/220)

Mode

identifies a basic transportation method or form

Variable

costs that change in a predictable, direct manner in relation to some level of activity are labeled variable costs. Variable costs include direct carrier costs associated with movement of each load. These expenses are generally measured as a cost per mile or per unit of weight. Typical variable cost components include labor, fuel, and maintenance.

Fixed

 Expenses that do not change in the short run and must be paid even when a company is not operating, such as during a holiday or a strike, are fixed costs. The fixed category includes costs not directly influenced by shipment volume. For transportation firms, fixed components include vehicles, terminals, rights of way, information systems, and support equipment. The the short term, expenses associated with fixed assets must be covered by contribution above variable costs on a per shipment basis.

Cross Docking center

a facility focused on getting the products out rather than the focus on storing the product

Geographical specialization:

allows geographical positioning across manufacturing and distributive units of an enterprise. Inventory maintained at different locations and stages of the value-creation process allows specialization

decoupling

allows economy of scale within a single facility and permits each process to operate at maximum efficiency rather than having the speed of the entire process constrained by the slower

supply/demand balancing

accommodates elapsed time between inventory availability (manufacturing, growing, or extraction) and consumption

buffering uncertainty

accommodates uncertainty related to demand in excess of forecast or unexpected delays in order receipt and order processing in delivery and is typically referred to as safety stock