Supply Chain Management- EXAM 3

SCM

Logistics

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

Logistics is necessary to

move goods and materials from supplier to buyers, move goods and materials between sites- internal and external, move finished goods to the customer

Products have little value to the customer until they are moved to the customer's point of consumption

delivered at the right time at the desired location

Warehousing

true value lies in having the right product in the right place, at the right time, provides time and place utility, the availability necessary to give materials true value

Warehouse

a facility used to store purchases, work-in process (WIP) and finished goods inventory

Warehousing

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

Decisions driving warehousing management

site selection, number of warehouse facilities in network, layout of warehouse, method of receiving/storing/retrieving/distributing products and materials

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 shipments

Picking

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

Packing

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

Shipping

outgoing shipments of parts, components, and products. Includes packaging, making, weighing, and loading for shipment

Quality inspections

incoming and outgoing

Repackaging

for specific customer order

Assembly operation

warehouse operation that puts products together with other items/components before shipping them out to the final customer

Examples of assembly operation

literature, spare parts, advertising materials

Primary functions of warehousing

receiving, storage, picking, packing, shipping

Secondary functions of a warehouse

quality inspections, repackaging, assembly operations

Types of warehouses

ownership and functional

Ownership

public warehouses, contract warehouses, private warehouses

Functional

consolidation, break-bulk, cross-docking

Public warehouse

a business that provides storage and related warehouse functions to companies on a short-term or long-term basis, generally from month-to-month, own their own equipment and hire own staff to manage facility, fees are typically a combination of a monthly storage fee plus a pallet-in fe and a pallet-out fee, fees based on what is stored and document fees, and account management fees

Fees for Public Warehouses vary based on what is being stored and/or based on

size and weight of pallet, if they can be stacked, how fragile the product is, value of goods (risk of theft) hazards associated with the goods

Advantages of public warehouse

no capital investment or property taxes, flexibility (ST or LT contracts, seasonal products, add capacity even in short notice), lower costs and reduced risk, access to special features and services (temperature controls, customer service, inventory ordering, office space for customer sales)

Disadvantages to public warehousing

potential for incompatible computer systems, specialized services may not be what is required, space may not be available when/where needed

Contact warehouse

a variation of public warehousing that handles the shipping, receiving, and storage of goods on a contract basis, can be for entire or part of the building, commitment to service for years, fixed-cost or cost-plus fee structure, company owning space controls employees, equipment, and maintenance

Think of public warehousing as a

hotel for inventory

Think of contract warehouse as

renting an apartment for inventory

Advantages of contract warehouse

services (client can obtain specialized services tailor-made to suit their needs), cost (can be bundled in the contract and negotiated at a lower cost), control (contract warehousing offers a degree of control at a reasonable price

Disadvantages to contract ownership

duration: client company expected to enter into a contract for a specific period of time, generally 3 years

Private warehouse

a storage facility that is owned by the company that owns the goods being stored in the facility, usually for companies with a large volume/highly valuable goods/or need for specialized storage, can be operated as separate division of company, co-located on site with manufacturing or off-site

Advantages of private warehousing

control (greater flexibility in designing warehouse, control over operations), visibility (inventory, material flow, handling, supervision, associated costs) cost (costs can be 15-25% lower if company achieves 75% utilization)

Disadvantages of private warehousing

high start-up cost (capital to build or buy a warehouse, long, risky investment, cost of hiring employees, purchase of material handling equipment), fixed location (not easy to move to another location), fixed size and cost (when volume low, company still assumes the fixed costs)

Consolidated warehouse

warehouse operation that receives products from different plants or suppliers, sorts them, and then combines them with similar shipments from other plants or suppliers for further distribution

Consolidated warehouses are located

closer to the supply base so that smaller LTL shipments travel shorter distances and can be consolidated into larger FTL shipments traveling longer distances to the customer

LTL shipments

less-than-truckload shipments

FTL shipments

full truckload shipments

Break bulk warehouse

warehouse operation that divides full truckloads of items from a single source or manufacturer into smaller, more appropriate quantities for use or further distribution

Break-bulk warehouses are located

closer to the customer base so that the smaller LTL shipments travel the shorter distance, while the larger FTL shipments from the single source travel the longer distance before arriving at the break-bulk

Cross-Docking warehouse

logistics practices of unloading materials from an incoming trucker railcar and loading these materials directly onto outbound trucks or railcars, with little or no storage in between to reduce inventory investments and storage space requirements

Main reasons that cross docking is implemented

1. provide a central cite for products to be sorted and combined for delivery to multiple destinations in the most productive and fastest method possible, 2. consolidate, combine smaller product loads into one method of transport to save on transportation costs, 3. break-bulk, break down large product loads into smaller loads for transportation for an easier delivery process to the customer

Advantages of cross-docking warehouse

operational efficiency: warehouse operations are more efficient as the material does not have to be stored at the warehouse moving directly from receiving to shipping; inventory efficiency: as there is no storage at the warehouses, total inventory in the supply chain can be reduced

Operational efficiency

warehouse operations are more efficient as the material does not have to be stored at the warehouse, moving directly from receiving to shipping

Inventory efficiency

as there is no storage at the warehouse, total inventory in the supply chain can be reduced

Warehouse network

the number of, and the relationship between, the warehouse that a company has in their organizational structure

Questions answered when establishing a warehousing network:

1. how many warehouses does the company need, 2. where will they be located??

Tradeoffs that will determine how many warehouses the company needs and where they will be located are

1. level of customer service the company wants to provide, 2. amount of inventory the company is willing to invest

Single warehouse positives

less complicated, operating costs and inventory lower, no duplication of equipment staff or managers, network will be centralized and the company will have its best people equipment and inventory systems concentrated in one place, warehouse can more actively focus on needs of customers

Single warehouse negatives

may take longer to deliver product to some customers who are remote from central location

Multiple warehouses positives

potentially faster delivery to customers from a decentralized network that is geographically dispersed throughout the market, assuming adequate inventory in each warehouse

Multiple warehouses negatives

more complicated, operating costs higher as each warehouse will need equipment staff etc., duplication of equipment, network will be decentralized and company will spread out its best people equipment and inventory systems

Hybrid approach

companies may choose to do some type of a hybrid approach to balance costs and inventory against customer service, lowering operating costs (spoke warehouses small), inventory lower (all safety stock held and managed centrally), customer service better (more inventory held closer to customer)

Hub-and-spoke

centralized warehouse (hub) which holds most of the inventory linked to a series of smaller geographically dispersed warehouses (spokes) to support local area in immediate time frame, hub feeds spokes with inventory regularly

Market positioned strategy

close to customers to maximize distribution services and improve delivery

Product positioned strategy

close to supply source to collect goods and consolidate before shipping products out to customer

Immediately positioned strategy

midway between supply source and customers, when distribution requirements are high and product comes from various locations

LEAN warehousing

cross docking, reduced lot sizes and shipping quantities, increased automation, green warehousing

Cross docking

LEAN concept bc it eliminates the need to store inventory, and reduces some transportation, (both wastes)

Reduced lot sizes and shipping quantities

by reducing lot sizes and shipping quantities, a company can increase velocity in the warehouse, and get shipments out faster (faster\= LEAN)

Increased automation

companies are using automated systems and shipping light, voice picking, conveyor systems, automatized guided vehicles (AGVs) and robotics to improve efficiencies and throughput times in the warehouse

Green warehousing

one of the more sustainable goals for a green warehouse is to make it a net zero energy user

Third party logistics (3PL)

company is an outsourced provider that manages all, or a significant part, of an organization's logistics requirements for a fee, charge fee for services, generate 10-20% savings in logistics costs, favored by small businesses, used significantly for international logistics

Typical services offered by 3PLs

inbound transportation, outbound transportation, warehousing, pick and pack, freight forwarding, customs brokerage, customs clearance, order taking, billing and invoicing, inventory auditing, freight bill auditing and payment

Advantages of 3PLs

Cost (eliminates the need for a company to invest in warehouse spaces, tech, and staff) logistics expertise (knowledgable of industry best practices and latest developments in tech) efficiency (3PLs can leverage relationships and volume discounts- lower overhead and fastest possible services)

Disadvantages of Using 3PL

control (company will not have direct control over logistics) dependency (outsourcing logistics created a dependency on 3PLs), pricing (company locked into the pricing model specified in contract)

Fourth party logistics

interface between the client company and multiple logistics service providers, then charged with managing the activities of all the other 3PLs being used by the company, all aspects of supply chain and 3PL handled by 4PL

Transportation

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

Objectives of transportation

maximize value to the company through price negotiations, make sure service is provided effectively, satisfy customer needs

Contract carriers

person or company who transports freight under contract to one or limited number of shippers

Common carriers

person or company who transports freight for a fee than can be hired by anyone to transport goods

Private carriers

person or company that transports its own cargo as a part of business that produces, uses, sells, or buys the cargo that is being hauled

Exempt carriers

person or company specializing in services or transporting commodities exempt from regulation by the Interstate Commerce Act

Modes of transportation

truck, rail, air, pipeline, water

Truck

most flexible mode of transportation, carries more than 80% of US freight, competes with rail and air for short to medium hauls

Short haul

0-200 miles of the driver's home terminal

Long hauls

200+ miles from the driver's home terminal

General freight carriers

carry the majority of goods shipped. Includes common carriers

Specialized carriers

transport commodities like liquids, petroleum, household goods, building materials, and other types of specialized items

Less-than-truckload (LTL)

carriers move small shipments, when you don't have enough to fill a truck, stop at depots and transfer locations to match load to the final location

Full-truckload (FTL)

carriers are used when you have enough to fill the truck or you don't want other suppliers cargo on your truck (security, faster delivery)

Rail

competes for transportation when the distance is long and shipments are large/bulky, slow and inflexible but has most capacity, rail companies use each other's rail cars, aging equipment, paired with trucks for door-to-door delivery

Air

most expensive, fastest mode of transport, 5% of US freight, cannot carry very heavy and bulky cargo, for light, high value goods, over long distances, half of the goods transported by air are carried by freight-only airlines, other half in passengers planes as luggage, paired with trucks for door-to-door delivery

Pipelines

lowest per unit cost, limited in variety of commodities carried, most reliable form, little maintenance, liquids and gaseous materials

Water

inexpensive, very slow and inflexible, competes with rail and pipeline for some cargo shipments, inland waterways, coastal and intercoastal, deep-sea cargo, very heavy/bulky and containerized cargo, paired with trucks for for door-to-door delivery

Truck best for

accessibility

Rail best for

capability (can handle most kinds of freight)

Pipeline best for

lowest per unit cost, reliability

Air best for

speed

Water best for

does not rank no.1 in any of the categories

Intermodel transportation

the use of multiple modes of transportation to execute a single transport shipment (rail & motor, rail & water, roll-on & roll-off ships)

Rail and motor carriers

offer point-to-point pickup and delivery service

Trailer-on-flatcar

offer point-to-point pickup and delivery between rail and motor

Rail and Water carriers

offer point to point pickup and delivery

Container on flatcar

offer point to point delivery between rail and water

Roll-on and roll-off ship

specifically designed to allow trucks to be driven directly on and off ships without the use of cranes, provides flexibility and speed

Transportation pricing

cost of service, value of service, combination, net-rate

Cost of service pricing

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

Value of service pricing

pricing strategy which sets prices based on the value perceived by the customer "priced what the market will bear"

Combination pricing

price set at a value between cost of service minimum and value of service max, most carriers use some form of combination pricing, common in highly volatile markets and changing competitive situations

Net rate pricing

established discounts and accessorial charges are rolled into one all-inclusive price, pricing tailored to the individual customer's needs