logistics phase i reporter1

7/27/2019 Logistics Phase I Reporter1

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Chapter 18: Planningand Design Methodology

Group 6:Barrameda Irinco

Ledesma Orozco Garbo

Opea Arguelles


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Ope a gue es

Methodology

Phase I: Problem Definitionand Planning

Methodology

Feasibility Assessment

Project Planning


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MethodologyThe logistics relational and operating environment

is constantly changing. Even established industries, afirms markets, demands, costs, and servicerequirements change rapidly in response to thesechanges, firms often face questions such as:

1.) How many distribution center should be used, andwhere should they be located?

2.) What types of transportation equipment should beused, and how should be vehicles be routed?

3.) Should a new material-handling technology be

applied in our distribution centers?


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Those are questions that represent the issues logisticsmanagers regularly face. Such questions are usually

characterized as COMPLEX and DATA-INTENSIVE.

The COMPLEXITYis due to the large number offactors influencing logistics total cost and the number of

potential alternatives, the DATA-INTESIVENESS isdue to the large amount of information required toevaluate logistics alternatives.

Typical information analyses must include possibleservice alternatives, cost characteristics and operatingtechniques. These analyses require that a structuredprocess and effective analytical tools be applied to solve

logistics problems.


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Phase I: Problem Definition and Planning

Phase I of logistics system design andplanning provides the foundation for the entireproject. A thorough and well-documentedproblem definition and plan are essential to allthat follows.


Project Planning


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A. Feasibility Assessment

Logistics design and planning must begin with acomprehensive evaluation of the current logisticssituation. The objective is to understand theenvironment, process and performance characteristics ofthe current system to determine what if anymodifications appear appropriate.

The process of evaluating the need and desirabilityfor change is referred to as feasibility assessment and itincludes the activities of situational analysis, supportinglogic development, and cost-benefit estimation.


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A.) Situational Analysis is thecollection of performance measures andcharacteristics that describe the current

logistics environment.A typical appraisal requires an internal

review, a market assessment, a competitiveevaluation and a technology assessment todetermine improvement potential.


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Internal Review- is necessary to develop a clearunderstanding of existing logistics

processes. It profiles historical performance,data availability, strategies, operations, andtactical policies and practice. The review

usually covers the overall logistics processas well as each logistics function.


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A complete self-appraisal for an

internal interview examines all majorresources such as workforce, equipment,facilities, relationships and information. In

particular, the internal review should focuson a comprehensive evaluation of existingsystems capabilities and deficiencies. Each

element of the logistics system should becarefully examined with respect to its statedobjectives and it s capabilities to meet those

objectives.


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For example.

Is the logistics management information systemconsistently providing and measuring thecustomer service objectives desired by the

marketing department?

Likewise, does the material management process

adequately support manufacturing requirements?The comprehensive review attempts to identifythe opportunities that might motivate or justifylogistics system redesign or refinement.


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Process consideration- focus on physical

and information flows through the value-added chain

Decision consideration- focus on thelogic and criteria currently used for valuechain management

Measurement considerations- focus onthe key performance indicators and the

firms ability to measure them


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Processes Decisions Measurements

TRANSPORTATION(TOPIC)

What modes arecurrently used?

What is the weight

profile orders andshipments, and how arethey different?

What is the flow for

requesting, paying, andexchanging informationwith carriers?

What is the informationflow for shipment

documentation?

How is the modeand carrierchoice decision

made for eachshipment?

How are carriersevaluated?

What are the keytransportationperformance measures?

How are they measured?

What is the currentperformance level?

What are the relativeeconomic performancecharacteristics of each

mode and carrier?


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The purpose of the internal review

is not detailed data collection but rathera diagnostic look at current logisticsprocessed and procedures as well as a

probe to determine data availability.Most significantly, the internal review

is directed at the identification areaswhere substantial opportunity forimprovement exists.


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External Assessment is a review of the trendsand service demands required by customers.

Market Assessment objective is to documentand formalize customer perceptions and desires

with regard to changes in the firms logisticscapabilities.

Technology Assessment focuses on theapplication and capabilities of key logisticstechnologies, including transportation, storage,material-handling, packaging and informationprocessing.


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External Assessment: Consumers

Market Trends Enterprise capabilities Competitive capabilities

How are consumerspurchasing patternschanging withrespect to purchaselocations, times, and

selection criteria?

How are theconsumer trendswith respect to

logistics activitiessuch as purchasequantities,packaging, homedelivery, andproduct quality?

How are we able torespond to changesin consumerpurchasing

patterns andselection criteria?

How our competitorsresponding tochanges in consumerpurchasing patterns

and selectioncriteria?


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Technical Assessment : Order Processing

Current Technology State-of-the-art technology

What is the process toallocate available

inventory to customerorders?

What are the limitations

of the current approach?

How are the best firmsperforming order

processing?

What new technologies(hardware and

software) are availableto improve orderprocessingeffectiveness?


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The assessment considers the firms

capabilities in terms of current technologies andthe potential for applying new technologies. Theobjective of the technology assessment is to

identify advancements that can provide effectivetrade-offs with other logistics resources such astransportation or inventory. Such an assessment

should be completed with respect to teachcomponent of the logistics system as well as fromthe perspective of overall integration.


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Feasibility AssessmentB.) Supporting Logic Development

The second feasibility assessment task isdevelopment of a supporting logic to integrate thefindings of internal review, external assessment

and technology study,Supporting logic development oftenconstitutes the most difficult part of the strategicprocess. The purpose of situational analysis isto provide senior management with the bestpossible understanding of the strengths andweaknesses of existing logistics capabilities for

both current and future environments.


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Supporting logic development builds on thiscomprehensive review in 3 ways:

1.It must determine if there are sufficient

logistics improvement opportunitiestojustify detailed research and analysis. In a sense,supporting logic development forces a critical

review of potential opportunities and adetermination of whether additional investigationis required.


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2. Supporting logic development critically

evaluates current procedures andpractices using comprehensive, factualanalysis and evaluationthat is not

influenced by opinion. Identification ofareas with improvement potential, as well asthose whose operations are satisfactory,

provides a foundation to determine the needfor strategic adjustment.


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3.The process of developing supporting

logic should include clear statements ofpotential redesign alternative. Thestatements should include a.) definition of

current procedures and systems, b.)identification of the most likely systemdesign alternatives based on leading

industry and competitive practices, c.)suggestion of innovative approaches basedon new theory and technologies.


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C.)Cost-Benefit Estimate

The final feasibility assessment is a preplanningestimate of the potential benefits of performing alogistics analysis and implementing therecommendations. Benefitsshould becategorized in terms of service improvements,

cost reduction, and cost prevention. Thecategories are not mutually exclusive given thenan ideal logistics strategy might recognize some

degree of all three benefits simultaneously.


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Service Improvement includes results thatenhance availability, quality, or capability.Improved service increases loyalty of existingcustomers and may also attract new business.

Cost Reduction may be observed in 2 forms.

1st, they may occur as a result of a one timereduction in financial or managerial resourcerequired to operate existing system. 2nd, may be

found in the form of out-of-pocket- or variableexpenses

Cost Prevention - involvement in programs and

operations experiencing cost increases.


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Project Planning

The second phase 1 activityLogistics system complexity requires that any

effort to identify and evaluate strategic or tacticalalternatives must be planned thoroughly toprovide a sound basis for change. Involves 5

specific items: Statement of Objectives,Statement of Constraints, MeasurementStandards, Analysis Procedures, and ProjectWorkplace.


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1.)Statement of Objectives

The statement of objectives documentsthe cost and service expectations for thelogistics system revisions. It is essential that

they be stated specifically and in terms ofmeasurable factors. The objectives definemarker or industry segments, the time

frame for revisions, and specificperformance requirements.


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2.)Statement of Constraints

The second project planningconsideration concerns design constraints.On the basis of the situational analysis, it is

expected that senior management will placerestrictions on the scope of permissiblesystem modification. The nature of such

restrictions will depend on the specificcircumstances of individual firms.


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3.)Measurement Standards.

The feasibility assessment oftenhighlights the need for development ofmanagerial performance standards. Such as

standards direct the project by identifyingcost structures and performance penaltiesand by providing a means to assess success.

An important measurement requirement isto quantify a list of assumptions thatunderlie or provide the logic supporting the

standards.


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Measurement standards should includedefinitions of how cost components such astransportation, inventory, and order

processing are calculated, including detailedfinancial account references. The standardsalso include specification of relevant

customer service measures and methods forcalculation.


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4.) Analysis ProcedureOnce the critical issues and alternatives are

defined, the appropriate analysis techniqueshould be determined. Analysis techniques rangefrom simple manual methods to elaborate

computerized decision support tools. Selection ofan analysis technique must consider theinformation necessary to evaluate the project

issues and options. Specifically, criticalperformance measures and logistics system scopemust be identified and evaluated. Techniqueselection must also consider the availability and

format of required data.


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5.) Project WorkplanOn the basis of feasibility assessment,

objectives, constraints, and analysistechnique, a project workplan must bedetermined and the resources and timerequired for completion identified. Thealternatives and opportunities specified

during the feasibility assessment providethe basis for determining the scope of thestudy. In turn, the scope determines the

completion time.


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Project management is responsible for

the achievement of expected resultswithin time and budget constraints.One of the most common errors in

strategic planning is to underestimatethe time required to complete a specificassignment. Overruns require greaterfinancial expenditures and reduceproject credibility.

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