Transcript No Slide Title

IEGR 459: Intro to Logistics Management and
Supply Chain
Logistics Measures and Considerations
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Elements of Logistics
Transportation, Packaging and Handling Factors
Warehousing and Distribution
Inventory Considerations
Maintenance Factors
Economic Considerations
Sept. 26, 2011
Fall 2011
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Basic Elements of Logistics
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Elements of Logistics
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Logistics, Maintenance, and Support Personnel – Includes personnel required
to perform unique logistics and system maintenance activities e.g. sustaining
support of the system throughout its planned period of use
Training and Training Support - Includes all the personnel, materials and
equipment, facilities, data, documentation and associated resources necessary for
the training of operator and maintenance personnel (also included are both initial
and replenishment/replacement training)
Supply Support - Spares/Repair parts and associated inventories - This includes
all spares (repairable units, assemblies, and modules), repair parts (non-repairable
components, consumables (liquids, lubricants, fuels, etc.), special supplies,
software modules, and supporting inventories necessary to maintain the prime
mission-related elements of the system and various elements of logistics and
maintenance support infrastructure throughout the operational use phase and as
required during the retirement and recycling/disposal phase
Computer resources (both hardware and software) - All computers and
associated software, connecting components, networks, special facilities, and
interfaces necessary to support the day to day operations and flow of information
for all logistics functions
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Elements of Logistics
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Technical data, reports, and documentation – may include procedures for
installation and maintenance, inspection and calibration procedures, overhaul
instructions, engineering design data, etc. (Included also is the ongoing and
iterative process of data collection, analysis and reporting covering the system
throughout its life cycle)
Maintenance support facilities and utilities – Includes all special facilities that are
unique and are required to support logistics and maintenance activities at all levels
e.g. physical plants, mobile vans, calibration laboratories, fixed maintenance
shops etc.
Packaging, handling, storage/warehousing and transportation (Distribution) Includes all materials, equipments, special provisions, containers, and supplies
necessary to support the packaging, safety and preservation, security, storage,
handling, and/or transportation of the prime mission-related elements of the
system and various elements of the logistics and maintenance support
infrastructure throughout the entire system life cycle.
Test, measurements, handling and support equipment – All tools, condition
monitoring equipment, diagnostic and checkout equipment, special test equipment
etc. required to support operational and maintenance functions of the system.
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Elements of Logistics
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Logistics information - Includes all the resources necessary to ensure that an
effective and efficient logistics and maintenance information flow is provided
throughout the system life cycle, and to all organizations involved and responsible
with various logistics and supply chain activities e.g. Electronic data interchange
(EDI), emails, internet, or any of the latest electronic commerce (EC) methods
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Key Logistics Functions/Factors Consideration
• The five functions of logistical work are interrelated
Integrated logistics framework
• Goal is to achieve customer satisfaction at the lowest Total Cost
• Decisions in one functional area will impact cost of all others
• We integrate the logistical functions into a coherent framework starting with the customer
(Order processing) and ending with the customer (Transportation and Delivery)
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Purchasing and Material Flow - Order Processing
• Order processing is the transmission of customer requirements
to the supply chain
• Accurate information is needed to achieve superior logistical
performance
• Responsive supply chains require accurate and timely
information about customer purchase behavior
• Fast information flow enables improved work balancing
Purchasing and Material Flow - Order Processing
• In Purchasing a major objective is perfect order fulfillment
– Delivered complete - All items delivered in the quantity requested
– Delivered on time – Using the customer’s definition of on-time delivery
– Complete and accurate documentation (e.g. packaging slip, bills of
lading, invoices) to support the order
– Delivered in perfect condition and in correct configuration to be used by
customer, faultlessly installed
Purchasing and Material Flow - Order Processing
• Perfect order Percentage (POP) as a Logistics performance
measure
– Perfectly entered by the means the customer desired in a single
entry
– Perfectly fillable with the exact quantity of each item available for
delivery within the customer specified delivery window
– Perfectly picked with the correct quantities of the correct items
– Perfectly packaged with the customer-designated packaging and
labeling
– Perfectly delivered in the customer designated time window and to
the customer designated location
– Perfectly communicated with order status reports available 24
hours a day
– Perfectly billed with on-time payment; and
– Perfectly documented with customer specified documentation
means, including paper, fax, EDI, and/or internet
Transportation
• Transportation is the operational area that geographically moves and
positions humans and materials resources (including inventory) in
support of both operational and maintenance support
– Critical to logistical performance
– Provides major services/Functions
 Product Movement
 Product Storage
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Less visible. Product in transit is being stored
• There are basic ways to satisfy transportation requirements
– Operate a private fleet of equipment
– Contract with dedicated transport specialists
– Engage carriers that provide different transportation services as needed on a
per shipment basis
– Third party Logistics (3PL) Companies - Server in partner relationships with
the major carriers and coordinate the necessary transportation services for
others without owning transportation equipment's
Transportation
• Transportation is the operational area that geographically moves and
positions humans and materials resources (including inventory) in
support of both operational and maintenance support
– Critical to logistical performance
– Provides major services/Functions
 Product Movement
 Product Storage
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Less visible. Product in transit is being stored
• There are basic ways to satisfy transportation requirements
– Operate a private fleet of equipment
– Contract with dedicated transport specialists
– Engage carriers that provide different transportation services as needed on a
per shipment basis
– Third party Logistics (3PL) Companies - Server in partner relationships with
the major carriers and coordinate the necessary transportation services for
others without owning transportation equipment's
The various forms of transportation.
Transportation
Factors considered in transportation effectiveness evaluation
– Transportation route – (National and international)
 Distances, geographical locations, custom requirements, labor
resources, political and social factors, etc.
– Transportation capability/capacity
 Type and volume of goods transported, security/safety provisions,
tons-miles per month/year, number and frequency of loads, etc.
– Transportation time –
 Short-haul vs. long-haul time, mean delivery time, time per carrier
mode, time per transportation leg
– Transportation Cost
 Cost/shipment, transportation cost/mile, packaging costs
Transportation
Transportation Cost structure
– Variable costs
 Cost only incurred if you operate the transportation equipment
 Generally measured per mile or unit weight or both e.g. per ton-miles
– Fixed costs
 not influenced by shipment volume
 Includes vehicles, terminals, rights-of-way, information systems, and
support equipment
 Must be covered by contribution above variable costs on a per shipment
basis
– Joint cost
 Unavoidably created by decision to provide a particular service e.g. a
backhaul from a destination
– Common costs  Carrier costs that are incurred on behalf of all or selected shippers
Transportation
• Fixed and Variable costs
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Two fundamental transport principles
• Economy of scale is the cost per unit weight decreases as the
size of the shipment increases
– At least until you totally fill the carrying vehicle!
– Cost decreases because the fixed cost of the carrier is allocated over a
larger weight of shipment
• Economy of distance is the cost per unit weight decreases as
distance increases
– Often called the tapering principle
– Longer distances allow fixed cost of the carrier to be spread over more
miles, lowering the per mile charge
• Goal is to maximize the size of the load and distance shipped
while still meeting service expectations
Transportation
Transportation cost drivers/factors
– Distance
 Directly contributes to variable expenses
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Labor, fuel, and maintenance
measured per mile or unit weight or both e.g. per ton-miles
Rate of cost decreases as distance increases (tapering principle)
– Weight
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Cost per pound decreases as weight increases until the carrier vehicle is
full
Small loads should be consolidated into larger loads to maximize scale
economies
Transportation
Transportation cost drivers/factors
– Volume
 Volume is important because vehicles are typically constrained more by cubic
capacity than by weight loaded
– Density
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Combination of weight and volume
Cost per unit of weight declines as product density increases
Higher density products allowed fixed transport costs to be spread over
more weight
Transportation
Transportation cost drivers/factors
– Stowability - how product dimensions fit into transportation equipment
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Odd package shapes and sizes can waste cubic capacity
Items with rectangular shapes are easier to stow
Nesting refers to ability of product to be placed in itself or collapsed for
better stowability
– Handling some products may require special equipment
– Liability includes product characteristics that can result in damage
 Carriers must pay for liability insurance or accept financial responsibility
– Market factors such as lane volume and balance influence transportation
cost
Transportation
Metrics associated with Transportation
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Speed/time is the elapsed movement time from origin to destination
Availability is ability of a mode to service any given pair of locations
Dependability is the potential variance from expected delivery schedule
Capability is the ability to handle any load size or configuration
Frequency is the quantity of scheduled movements a mode can handle
Reliability – transportation is available when required and probability will
complete its mission as planned
– Maintainability – Probability that the applicable tranportation capbility can
be repaired within a specified time and with the specified resources in the
event of failure
– Cost transportation, or the cost per one-way trip
– LCC of a given transportation capability for a designed period of time
Transportation
• Rail
– low-value, high-density, bulk
products, raw materials,
intermodal containers
– not as economical for small
loads, slower, less flexible than
trucking
• Trucking
– main mode of freight transport
in U.S.
– small loads, point-to-point
service, flexible
– More reliable, less damage than
rails; more expensive than rails
for long distance
Transportation
•Air
– most expensive and fastest, mode of
freight transport
– lightweight, small packages <500 lbs
– high-value, perishable and critical goods
– less theft
•Package Delivery
– small packages
– fast and reliable
– increased with e-Business
– primary shipping mode for Internet
companies
Transportation
•Water
– low-cost shipping mode
– primary means of international shipping
– U.S. waterways
– slowest shipping mode
•Intermodal
– combines several modes of shipping-truck,
water and rail
– key component is containers
•Pipeline
– transport oil and products in liquid form
– high capital cost, economical use
– long life and low operating cost
Copyright 2009 John Wiley & Sons, Inc.
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Transportation
Cost Structure for Different Mode of Transportation
Relative Operating Characteristics by Mode
Packaging and Material Handling
Packaging for Materials Handling Efficiency (Functions)
• Package design - Packaging in standard configuration and
order quantities facilitates logistical efficiency
• Unitization - Process of grouping master cartons into one
physical unit for material handling or transportation
• Master carton – containers used to group individual
products
• Communication
• Content identification e.g. through UPC numbers
• Tracking e.g. using RFID
• Handling instructions
Illustration of four basic patterns to tier master cartons
Basic Pallet Master Carton Stacking Patterns
Role of packaging in logistics
• Unitization—modular packaging
• Handling—appropriate for
automation?
• Security—can package be sealed to
detect break-in
• Stowability—cube efficiency
• Information—identification and
tracking
• Protection—spoilage or damage
Warehousing and Distribution
• Functions
– Movement
– Information transfer
– Storage
• Metrics associated with
warehousing
– Time to ship the product
– Cost of each product shipment
– Value of product shipped
– % of space utilization and cost per
utilization
– Volume of products to be handled
Warehouse decisions that determine handling and storage
efficiency
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Site Selection
Design
Product-Mix Analysis
Expansion
Materials Handling
Layout
Sizing
Warehouse management system
Accuracy and audit
Security
Safety and maintenance
Transportation and Transshipment
Problem
Further Reading
Homework
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Transportation Method: Example
Transportation Problem
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