SCM - Logistics

Logistics in SCM

  • Logistics is the largest section of the SCM module.

Distribution

  • Shipment of end products through the distribution system downstream to customers.
  • A distribution system is the network of shipping and receiving points.
  • Includes warehouses, distribution centers, and transporters.

Distribution Requirements Planning (DRP)

  • Planning step for the movement of end product from the production or storage point to the client.
  • Ensures the right quantity at the right time.
  • Often a software module within an ERP system.
  • Primarily a pull system approach (demand led).
  • DRP feeds Regional Warehouse requirements into Central Distribution Centre requirements, which are then summed and fed into the MPS which then feeds the MRP.
Key Terms
  • Scheduled receipts: Previously-placed orders expected to arrive in a given week (pull).
  • Planned receipt of shipments: Orders planned, but not yet placed, for the future (push).
  • Projected ending inventory:
    Previous week’s projected ending inventory + Planned receipt of shipments in current week + Scheduled receipt of shipments in current week - Forecasted demand in current week
    A=60+0+50−30=80A = 60+0+50-30 = 80
Gross Requirements (GR)
  • Total quantity of end product needed to satisfy demand in a given period.
  • End product already in stock may satisfy some of the GR.
  • The rest is made up of actual demand and forecast demand volumes for the period.
  • Other sources of demand (e.g., promotions, trade fairs, R&D) need to be included in the MPS.

Master Production Schedule (MPS)

  • Main input to the MRP (Material Requirements Planning).
  • Contains a statement of the volume and timing of the end products to be made based on real-time info. from the business logistics network.

Transportation

Modes of Transport
  • Truck: Most used, flexible, small loads, door-to-door.
  • Ship: Low-cost, high-volume, slow, for bulky/heavy items. Standardized containers improve service.
  • Rail: Low cost, high-volume, for heavy industry, minerals, chemicals, agricultural products, autos, etc.
  • Air: Rapidly growing, lightweight, small items, quick, reliable, expensive, often combined with trucking.
  • Pipeline: Primarily for water, oil, gas, refined oil products, high capital investment, low operating costs, can cross difficult terrain.
Traffic Management
  • Traffic management is often done by Freight Forwarders.
  • Key activities: shipping methods, timetables, ways of expediting deliveries.
  • Vehicle Routing: Finding the optimal set of routes for a fleet of vehicles to deliver to a given set of customers.
Technological Breakthroughs
  • Standardized containers for ease of transfer.
  • Multi-modal solutions (RORO).
Role of the Freight Forwarding Agency
  • Organizes shipments for individuals or organizations to get goods from the manufacturer or producer to a market, customer or final point of distribution.
  • Handles pick-up, customs clearance, warehousing, and securing transport.