scm logistics (1)
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Chapter Objectives Be able to: Describe why logistics is important and discuss the major decision areas that make up logistics.
List the strengths and weaknesses of the various modes of transportation and discuss the role of multimodal solutions.
Identify the major types of warehousing solutions and their benefits.
Discuss the purpose of a logistics strategy and give examples of how logistics can support the overall business strategy.
Calculate the percentage of perfect orders.
Calculate landed costs.
Explain what reverse logistics systems are, and describe some of the unique challenges they create for firms.
Use the weighted center of gravity method to identify a potential location for a business.
Develop and then solve, using Microsoft Excel’s Solver function, an assignment problem.
Logistics Management
Logistics management – That part
of supply chain management that
plans, implements, and controls
the efficient, effective forward and
reverse flow and storage of goods,
services, and related information
between the point of origin and
the point of consumption in order to meet customers’ requirements.
© CSCMP – Council of Supply Chain Management Professionals
Logistics Management
Transportation
Warehousing
Material handling
Packaging
Inventory management
Logistics information systems
Why Logistics Is Critical
Impact on cost, flexibility, and
delivery performance
Advances in information systems
Globalization of markets
Push toward sustainability
Highway
Dominates the logistics infrastructure due to:
Geographic extension of supply chains
Greater emphasis on delivery speed and flexibility
Has become more cost effective over time due to:
Better scheduling and use of vehicle capacity
More efficient and reliable vehicles
Increased cost competition due to deregulation
Involves different types of shipments
Direct truck – Shipment made with no stops
Less than truckload (LTL) – Smaller shipment combined
with other loads
Water
Ideal for materials with high
weight-to-value ratio, especially if
delivery speed is not critical.
Examples: farm produce, timber,
petroleum-based products.
Air
Ideal for customers with a low weight-
to-value ratio, especially if delivery
speed or delivery reliability is critical.
Higher shipping costs and improvement
in other modes have reversed the rise in
air growth over the past decade.
Rail
Characteristics similar to Water but
more flexible.
To accommodate growth, rail carriers
have doubled the number of lines
along busy corridors, changed the
physical configuration of the trains, and
utilized multimodal solutions.
Multimodal Solutions
Multimodal solution – A transportation
solution that seeks to exploit the
strengths of multiple transportation
modes through physical, information,
and monetary flows that are as
seamless as possible
Roadrailer – A specialized rail car the size of
a standard truck trailer that can be quickly
switched from rail to ground transportation
without changing the wheels.
Warehousing
Warehousing – Any operations that
stores, repackages, stages, sorts, or
centralizes goods or materials.
Warehousing can be used to:
Reduce transportation costs
Improve operational flexibility
Shorten customer lead times
Lower inventory-related costs.
Consolidation Warehousing
Consolidation warehousing – A
form of warehousing that pulls
together shipments from a number
of sources in the same geographic
area and combines them into
larger and more economical loads
Cross-docking
Break-bulk
Hub-and-spoke system
Postponement Warehousing
Postponement warehousing – A
form of warehousing that
combines classic warehouse
operations with light
manufacturing and packaging
duties to allow firms to put off final
assembly or packaging of goods
until the last possible moment.
Types of Warehouses
Assortment warehouses – A form of
warehouses in which a wide array of
goods is held close to the source of
demand in order to assure short
customer lead times.
Spot stock warehouses – A form of
warehouses that attempts to position
seasonal goods close to the
marketplace.
Logistics Information Systems
Decision support tools
◦ Real-time simulation and optimization
◦ Cost estimations
Planning systems
◦ Carrier selection
◦ Scheduling deliveries
Execution systems
◦ RFID
Material Handling and
Packaging Material handling system – A system that
includes the equipment and procedures
needed to move goods within a facility,
between a facility and a transportation mode,
and between different transportation modes.
Packaging – The way goods and materials are
packed in order to facilitate physical,
informational, and monetary flows through the
supply chain.
Inventory Management
Implications for transportation:
Using slower and cheaper transportation
modes will cause inventory levels within the
supply chain to rise.
Using faster and more expensive
transportation modes will enable firms to
lower inventory levels.
Implication for warehousing:
Warehousing and inventory managers must
work closely to achieve the desired business
outcome.
Logistics Strategy
Logistics strategy – A functional
strategy which ensures that an
organization’s logistics choices are
consistent with its overall business
strategy and support the
performance dimensions that
targeted customers most value.
Owning vs. Outsourcing
Does the firm have the volume needed to
justify a private logistics system?
Would owning a logistics system limit the firm’s
ability to respond to changes in the
marketplace or supply chain?
Is logistics a core competency for the firm?
Outsourcing options:
Common carriers
Contract carriers
Third-party logistics providers (3PL)
Measuring Logistics Performance
The perfect order
Delivered on time (according to
buyer’s delivery dates)
Shipped complete
Invoiced correctly
Undamaged in transit
Landed Costs
Landed cost – The cost of a
product plus all costs driven by
logistics activities, such as
transportation, warehousing,
handling, customs fees, etc.
Reverse Logistics Systems
Reverse logistics system – A
complete supply chain dedicated
to the reverse flow of products and
materials for the purpose of returns,
repair, remanufacture, and/or
recycling. © 2010 APICS Dictionary
Reverse Logistics Systems
Challenges: Firms have less control over the timing,
transportation modes used, and packaging
for goods flowing back up the supply chain.
Goods can flow back up the supply chain
for a variety of reasons and a reverse
logistics system needs to be able to sort and
handle these different flows.
Forward logistics systems typically aren’t set
up to handle reverse logistics flows.
Weighted Center
of Gravity Method Weighted center of gravity
method – A logistics decision
modeling technique that attempts
to identify the “best” location for a
single warehouse, store, or plant
given multiple demand points that
differ in location and importance.
Example 8.6 – CupAMoe’s
Current location and population of the three towns
to be served by the warehouse
Figure 8.6
Optimization
Optimization model – A type of
mathematical model used when the
decision maker seeks to optimize some
objective function subject to some
constraints.
Objective function – A quantitative function
that an optimization model seeks to optimize
(minimize or maximize).
Constraint – A quantifiable condition that
places limitations on the set of possible
solutions.
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