Study Notes on Logistics: Warehousing, Transportation, & Reverse Logistics

Supply Chain Management

Chapter 09: Logistics - Warehousing, Transportation, & Reverse Logistics

Video Introduction

  • Title: "Move It" - Transportation and Logistics

  • Duration: 3:15 minutes

Logistics Defined

  • Definition: Logistics is defined as:

    • "…that 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."

    • Source: Council of Supply Chain Management Professionals

Necessity of Logistics

  • Logistics is crucial for:

    • Moving goods and materials from suppliers to buyers.

    • Transporting goods and materials between internal and external sites.

    • Delivering finished goods to customers.

  • Importance of Logistics:

    • Products hold little value until moved to the customer’s consumption point.

    • Delivery considerations include:

    • Right Timing: Delivered at the right time.

    • Right Location: Delivered to the desired location.

  • Customers can be classified as either internal or external.

Inbound and Outbound Logistics

  • Inbound Logistics: Activities involved in receiving and storing incoming goods.

  • Outbound Logistics: Activities involving the distribution of finished products.

Warehousing Overview

  • Definition of Warehouse: A facility that stores purchases, work-in-process (WIP), and finished goods inventory.

  • Warehousing Function: Allows companies to receive, store, breakdown, repackage, and distribute items.

Key Decision Factors in Warehouse Management

  1. Number of warehouse facilities in the network.

  2. Site selection for warehouses.

  3. Layout of the warehouse(s).

  4. Methods of receiving, storing, retrieving, and distributing products and materials, which can include:

    • Manual

    • Semi-Automated

    • Fully Automated

Primary Functions of a Warehouse

  • Receiving:

    • Physical receipt of material.

    • Identification and inspection for conformity with orders (quantities and damage).

    • Put-away and preparation of receiving reports.

  • Storage: Safe retention of parts or products for future use or shipment.

  • Picking: Withdrawal of components from stock to make assemblies or fulfill customer orders.

  • Packing:

    • Placing items into containers for safe shipping.

    • Marking and labeling containers.

  • Shipping: Outgoing shipment of components and products, including packaging, marking, weighing, and loading.

Secondary Functions of a Warehouse

  • Quality Inspections: Incoming and outgoing checks for product quality.

  • Repackaging: Tailored repackaging for specific customer orders.

  • Assembly Operation: Combining products with other components before shipment, including:

    • Literature

    • Spare Parts

    • Advertising Materials

Warehouse Robotics

  • Automated Guided Vehicles (AGVs):

    • Replace manually-driven forklifts for material transport within warehouses.

  • Automated Storage and Retrieval Systems (AS/RS):

    • Automate the storage/retrieval of goods, enhancing order fulfillment.

  • Collaborative Robots (Cobots):

    • Semi-autonomous robots assisting humans in tasks, improving order fulfillment.

Warehouse Robotics has gained prominence, enhancing efficiency in warehousing operations.

Types of Warehouse Ownership

  • Ownership Types:

    • Public Warehouses

    • Contract Warehouses

    • Private Warehouses

Public Warehouses

  • Definition:

    • Facilities providing storage and related functions to companies on a temporary basis.

  • Characteristics:

    • Operate under a monthly fee structure, including various charges related to storage and handling.

Advantages:

  • No capital investment required.

  • Flexibility in contract length.

  • Lower operational costs and risks.

Disadvantages:

  • Possible compatibility issues with computer systems.

  • Specialized services may not be available when needed.

Contract Warehouses

  • Definition: Stores and handles goods under contract for a fee, typically requiring longer commitments than public warehouses.

Advantages:

  • Tailored specialized services.

  • Potential for lower negotiated costs.

  • Offers reasonable control over logistics operations.

Disadvantages:

  • Contract duration often requires a commitment of multiple years.

Private Warehouses

  • Definition: Storage facilities owned by the company owning the goods stored therein.

  • Used by firms with high volumes or need for specialized handling.

Advantages:

  • Control over warehouse design and operations.

  • Visibility of material flow and costs.

  • Lower operating costs with high utilization.

Disadvantages:

  • High initial capital investment.

  • Fixed operational location and size, risking inefficiencies in changing markets.

Types of Warehouses

  1. Consolidation Warehouse:

    • Receives products from various sources and combines them for distribution.

    • Located near supply bases to reduce distances traveled by smaller loads.

  2. Break-Bulk Warehouse:

    • Divides bulk shipments from one supplier into smaller loads.

    • Positioned closer to customers for efficient delivery.

  3. Cross-Docking Warehouse:

    • Unloads materials from incoming trucks and loads them onto outbound vehicles with minimal storage, facilitating rapid shipments.

    • Increases operational efficiencies and reduces inventory costs.

Warehouse Network Strategies

  • Warehouse Network: Definition of relationship between a company's warehouses, addressing location and quantity.

Network Strategies

  1. Market-Positioned Strategy:

    • Warehouses near customers to improve service and reduce transportation costs.

  2. Product-Positioned Strategy:

    • Warehouses near supply sources for better inventory collection and consolidation.

  3. Intermediately-Positioned Strategy:

    • Warehouses positioned midway between suppliers and customers to balance costs and service.

Third Party Logistics (3PL)

  • Definition: An outsourced provider managing logistics processes for a fee.

  • Typical Savings: 10-20% reduction in logistics costs; prevalent among small businesses.

Services Offered by 3PL

  • Inbound and Outbound Transportation

  • Warehousing

  • Pick and Pack

  • Freight Forwarding

  • Customs Brokerage

  • Billing and Invoicing

  • Inventory Auditing

Advantages of Using a 3PL

  • Cost savings from not having to invest in logistics infrastructure.

  • Expertise in industry best practices.

  • Enhanced efficiency through negotiation and relationship leveraging.

Disadvantages of Using a 3PL

  • Loss of direct control over logistics processes.

  • Dependency on an external partner.

  • Contractual pricing structures may limit flexibility.

Transportation in Supply Chain Management

  • Objectives of Transportation:

    • Maximize value through price negotiations.

    • Ensure effective service delivery.

    • Satisfy customer needs.

    • Defined as the function of planning and controlling the movement of inventories.

Transportation Company Classifications

  • Common Carriers: Transport freight for a fee, available to all.

  • Exempt Carriers: Specialize in regulated commodity transportation; exempt from certain regulations.

  • Private Carriers: Transport their cargo as part of their business activities.

  • Contract Carriers: Transport freight under contract for specific shippers.

Modes of Transportation

  1. Truck: Mainly used for freight transport across diverse loads.

  2. Rail: Suitable for heavy, bulky items despite slower speed.

  3. Air: Fastest, most expensive, excels in high-value items.

  4. Pipeline: Economical for liquids and gases but limited to low-cost/low-weight items.

  5. Water: Affordable, slow-moving, ideal for heavy, bulk cargo.

  6. Intermodal: Combination of different transportation methods for efficiency.

Transportation Regulation History

  • Regulation Period: Covered various acts regulating transportation from the 1870s until the early 1990s.

  • Deregulation Era: Focused on eliminating regulations to enhance competition and flexibility.

Pricing Strategies in Transportation

  • Cost of Service Pricing: Prices set based on service provision costs.

  • Value of Service Pricing: Prices based on perceived customer value.

  • Combination Pricing: Price set between cost and value basis.

  • Net-Rate Pricing: All charges included in a single price.

Freight Terms of Sale

  • F.O.B. Origin: Risk and ownership pass to the buyer at the seller’s location.

  • F.O.B. Destination: Risk and ownership remain with the seller until delivery to the buyer.

Other Transportation Intermediaries

  • Freight Forwarder: Consolidate smaller shipments into larger ones.

  • Transportation Broker: Match shippers with carriers.

  • Shippers’ Association: Nonprofit cooperatives that handle shipping arrangements.

  • Intermodal Marketing Company: Purchases rail capacity to sell to shippers.

Technology and Trends in Transportation

  • Emerging technologies such as:

    • Driver Monitoring

    • Safety Technology

    • Autonomous Vehicles

    • Drone Delivery

    • Blockchain integration in logistics for improved transparency and efficiency.

Conclusion

  • Upcoming technologies present both opportunities and challenges for logistics and transportation management in the future, emphasizing the need for adaptation in the face of rapid developments.