Supply Chain Management: Logistics - Warehousing, Transportation, & Reverse Logistics

Logistics

  • Logistics: Plans, implements, and controls efficient flow and storage of goods, services, and information from origin to consumption to meet customer requirements.

  • Necessary to move goods from suppliers to buyers and between sites and to customers.

Warehousing

  • Provides time and place utility.

  • Warehouse: Stores purchases, work-in-process (WIP), and finished goods inventory.

  • Warehousing: Receives, stores, breaks down, repackages, and distributes items.

  • Decisions include number of facilities, site selection, layout, and methods.

  • Primary Functions:

    • Receiving: Physical receipt, identification, inspection, put-away, and reporting.

    • Storage: Secure retention of parts or products.

    • Picking: Withdrawing components from stock.

    • Packing: Placing items into containers for safe shipping with labeling.

    • Shipping: Outgoing shipment, including packaging and loading.

  • Secondary Functions: Quality inspections, repackaging, assembly operations.

Warehouse Robotics

  • Automated Guided Vehicles (AGVs) replace forklifts.

  • Automated Storage and Retrieval Systems (AS/RS) automate storage/retrieval.

  • Collaborative Robots (Cobots) help human workers perform tasks.

Warehouse Ownership

  • Public Warehouses: Short or long-term storage for a fee; think of it as a hotel for inventory

    • Advantages: No capital investment, flexibility, lower costs, access to special services.

    • Disadvantages: Potential for incompatible computer systems, may not meet specific needs, space may not always be available.

  • Contract Warehouses: Handles shipping, receiving, and storage on a contract basis; think of it as renting an apartment for inventory

    • Advantages: Specialized services, bundled costs, reasonable control.

    • Disadvantages: Requires a commitment for a specific period (e.g., three years).

  • Private Warehouses: Owned by the company storing goods; think of it as buying a house for inventory.

    • Advantages: Control, visibility, potentially lower operating costs with high utilization.

    • Disadvantages: High start-up costs, fixed location and size, assumes fixed costs even when the volume is low.

Types of Warehouses

  • Consolidation: Receives products from different plants/suppliers, stores, and combines them for distribution

  • Break-Bulk: Divides full truckloads into smaller quantities for distribution.

  • Cross-Docking: Unloads materials from incoming trucks and loads directly onto outbound trucks, reducing inventory investment and storage needs.

Warehouse Network

  • Number and relationship between warehouses.

  • Considerations: Customer service level and inventory investment.

  • Single Warehouse:

    • Positives: Less complicated, lower operating costs and inventory.

    • Negatives: Slower delivery to remote customers.

  • Multiple Warehouses:

    • Positives: Faster delivery to customers with adequate inventory.

    • Negatives: More complicated, higher operating costs and inventory.

  • Hybrid Approach: Hub-and-spoke model with a centralized warehouse linked to smaller dispersed warehouses.

Warehouse Network Strategy

  • Market-Positioned: Close to customers to maximize distribution services and improve delivery.

  • Product-Positioned: Close to supply sources to collect and consolidate goods.

  • Intermediately-Positioned: Midway between supply sources and customers to balance costs and customer service.

Third Party Logistics (3PL)

  • Outsourced provider that manages logistics requirements for a fee.

  • Typical services: Transportation, warehousing, pick and pack, freight forwarding, etc.

    • Advantages: Cost savings, logistics expertise, efficiency.

    • Disadvantages: Less control, dependency, contract-based pricing.

Transportation

  • Objectives: Maximize value, provide effective service, satisfy customers.

  • Company Classifications:

    • Common Carriers: Transports freight for a fee, hired by anyone.

    • Exempt Carriers: Specializes in transporting commodities exempt from regulation.

    • Private Carriers: Transports its own cargo as part of its business.

    • Contract Carriers: Transports freight under contract to a limited number of shippers.

Modes of Transportation

  • Truck: Flexible; carries a high percentage of U.S. freight.

    • General Freight Carriers: Handle various commodities in standard trailers.

    • Specialized Carriers: Handle cargo requiring specialized equipment.

    • Less-Than-Truckload (LTL): Small freight.

    • Full-Truckload (FTL): Goods fill an entire truck.

  • Rail: Slow and inflexible but has high capability; paired with trucks.

  • Pipeline: Low per-unit cost for liquids or gases; little maintenance needed.

  • Air: Fast; expensive; for high cost-to-weight ratio items; paired with trucks.

  • Water: Inexpensive; slow; for heavy, bulky, low-value materials; paired with trucks.

Intermodal Transportation

  • Uses multiple modes; cost-efficient.

  • Common forms: Rail and motor carriers, rail and water carriers, roll-on/roll-off ships.

Transportation Regulation

  • ICC Termination Act of 1995 - The Interstate Commerce Commission (ICC) was eliminated

Transportation Pricing

  • Cost of Service Pricing: Based on costs incurred.

  • Value of Service Pricing: Based on perceived value.

  • Combination Pricing: Between cost-of-service minimum and value-of-service maximum.

  • Net-Rate Pricing: All-inclusive price tailored to customer needs.

Free on Board (F.O.B.)

  • F.O.B. Origin: Buyer pays freight costs; ownership transfers to the buyer when the public carrier accepts the goods from the seller.

  • F.O.B. Destination: Seller pays freight costs; ownership remains with the seller until the goods reach the buyer.

Other Transportation Intermediaries

  • Freight Forwarder: Consolidates LTL shipments into FTL shipments.

  • Load or Transportation Broker: Connects shippers and carriers.

  • Shippers’ Association: Nonprofit cooperatives arranging shipping for members.

  • Intermodal Marketing Company: Purchases and sells blocks of rail capacity.

Technology and Trends in Transportation

  • Driver Monitoring, Traffic Coordination, Safety Technology, Platooning, New Concept Trucking

    Self-Driving Vehicles

  • Autonomous trucking will allow companies to move more freight with the same number or fewer drivers

  • Travel more easily during off-peak hours, helping to reduce traffic congestion during the busiest times of the day while bringing significant benefits in safety.

Drones

  • The most obvious option – but public airspace is usually highly regulated.
    *Inventory management and order picking: Both are time-consuming and labor-intensive. Combined with scanning technology, drones are much faster.

  • Logistics centers are often large, and their outdoor areas are difficult to oversee. Drones keep an eye on everything.

Blockchains

  • Facilitates transparent, immutable records of supply chain activities and can help mitigate issues like counterfeit goods, compliance violations, delays, and waste.

  • Improve accountability and reducing the risk of fraud.

Logistics Management Software Applications

  • Warehouse Management Systems (WMS): Track goods from receiving to shipping.

  • Transportation Management Systems (TMS): Select the best transportation services and pricing.

  • Global Trade Management Systems (GTM): Provides global visibility and documentation for international trade regulations.