Logistics Management. Where We Are Now CHAPTER ELEVEN. Measurement. Organizational. Sustainability. Management. Globalization. Culture/Ethics Change

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1 CHAPTER ELEVEN Logstcs Management McGraw-Hll/Irwn Copyrght 2011 by the McGraw-Hll Companes, Inc. All rghts reserved. Where We Are Now Relatonshps Sustanablty Globalzaton Organzatonal Culture/Ethcs Change Management Chapter Part 1 Supply Chan: A perspectve for Operatons Management 1. Introducton to Managng Operatons Across the Supply Chan X X X 2. Operatons and Supply Chan Strategy X X X X X X Part 2 Foundatons of Operatons Management 3. Managng Processes and Capabltes X X 4. Product/Process Innovaton X X X X 5. Manufacturng and Servce Process Structures X X X X 6. Managng Qualty X X X X X X 7. Understandng Inventory Fundamentals X X X 8 Lean Systems X X X X X Part 3 Integratng Relatonshps Across the Supply Chan 9. Customer Management X X 10. Suppler Management X X X X X 11. Logstcs Management X X X Part 4 Plannng of ntegrated Operatons Across the Supply chan X 12. Demand Plannng: Forecastng and Demand Management X X X 13. Sales and Operatons Plannng X X X 14. Independent Demand Inventory Plannng X X 15. Materals and Resource Requrements Plannng X X X Part 5 Managng Change n Supply Chan Operatons 16. Project Management X X X X X X 17. Evolvng Busness Models and Change Drvers n the Supply Chan X X X X X Measurement

2 Learnng Objectves 1. Explan logstcs and major manageral decsons 2. Explan role of government n transportaton 3. Descrbe mpact of consoldaton on cost 4. Descrbe carrer selecton process 5. Explan roles and actvtes of warehousng and dstrbuton 6. Explan mportance of packagng and materals handlng 7. Explan network desgn decsons 8. Descrbe benefts of ntegrated servce provders 11 3 Logstcs Management Logstcs Management: movement and storage of materals to meet customer needs and organzatonal objectves - Includes forward and reverse flow - Includes flow of materals and nformaton - Load, offload, move, sort and select materal

3 Actvtes of Integrated Logstcs Management Fgure Logstcs Cost Mnmzaton & Trade-offs Cost-to-Servce: servce levels = costs Cost-to-Cost: cost of one actvty, of another Total Landed Cost: sum of all product and logstcs related costs - Country costs of manufacturng - Cost n transt to country of sale - Cost wthn country of sale

4 Transportaton Management Government s Role: - Economc Regulaton: entry of new carrers, rates and servces provded - Safety Regulaton: safe for carrers and publc, ncludng ncreased emphass on securty from terrorst actvty 11 7 Transportaton Management Transportaton Economcs: - Economy of Scale: cost per unt of weght decreases as shpment sze ncreases - Economy of Dstance: cost per unt traveled decreases as dstance moved ncreases Cost Per Unt of Weght Cost Per Unt of Dstance Weght of Shpment Dstance

5 Consoldaton Consoldaton: one large shpment made of many smaller shpments - By Market Area: combne small shpments from one shpper gong to the same area - Pooled Delvery: combne small shpments from dfferent shppers gong to the same area - Scheduled Delvery: delvery at specfc tmes 11 9 Consoldaton A frm has orders of 12,000lbs each of goods for three customers. It s $15.75 per hundredweght (cwt) to shp drect, or $10.50 cwt for shpments of greater than 30,000lbs wth a $300 fee for each stop. Cost of ndvdual shpments: $15.75 x (12,000/100) = $15.75 x 120cwt = $1,890 total for all three shpments = 3 x $1, 890 = $5,670 Consoldated shpments: $10.50 x (36000/100) = $10.50 x 360cwt = $3,780 ncludng stop charge = 3 x $300 + $3780 = $4,680 Savng wth consoldaton = $5,670 - $4,680 = $990 Example

6 Transportaton Modes Cost, speed and flexblty trade-offs Shpments are often Intermodal Operatng Characterstcs Truck Ral Water Ppe Speed Avalablty Dependablty Capablty Frequency Cost Ar 1=best, hghest; 5=worst, lowest Fgure Carrer Types Value Densty: rato of value to weght, often determnes the type of carrer used - Common: provde servce to the publc wth publshed rates - Contract: provde servce only to select, contracted customers - Prvate: frm owns ts own equpment

7 Transportaton Servce Selecton A frm must shp a 10lbs parcel of 30 tems valued at $500 each a dstance of 1,000 mles. Transportaton optons are 8-day ground for $50 or 2-day ar for $90. Holdng cost s 20% of product value. How should the frm shp ther product? Total cost = In-transt holdng cost + Freght cost In-transt holdng = days n transt/365 x value x holdng cost Ground: [(8days/365) x $15,000 x 20%] + $50 = $ Ar: [(2days/365) x $15,000 x 20%] + $90 = $ Example Warehouse Management cont d Break-Bulk Consoldaton Cross-Dockng

8 Warehouse Management cont d Reverse Logstcs: - Materal moves upstream n the supply chan - Especally mportant n onlne retal ( Value Added Servces: provdng addtonal value to the customer, such as postponement Warehouse Management cont d Warehouses must perform a varety of operatons on a daly bass: - Recevng and unloadng - In-storage handlng - Storage - Order pckng - Stagng - Shppng

9 Materals Handlng and Packagng Handlng materal ncreases costs and rsk of damage Packagng can decrease handlng costs and rsk of damage - Contanerzaton or Untzaton: fllng or creatng a larger contaner from smaller ones - Automated Storage and Retreval Systems: robots that get, move and put-away materal - RIFD: electronc trackng of materal Network Desgn Most mpact on supply chan operatons Multple factors to consder Labor Proxmty to supplers and customers Cost of land and constructon Taxes, ncentves and regulatons Infrastructure Qualty of lfe for employees

10 Network Desgn cont d Center of Gravty Method: fnds the lowest cost based on demand and dstance, usng X,Y coordnates to defne a geographc poston X * = D X D D = Demand at locaton X = X coordnate at locaton Y = Y coordnate at locaton Y * = D Y D Network Desgn cont d Locaton X coordnate Y coordnate Weght Shppped A ,000 lbs B ,000 lbs C ,000 lbs 20( 200, 000) 95( 100, 000) 60( 500, 000) 43, 500, 000 X * + + = = 200, , , , 000 = ( 200, 000) 75( 100, 000) 30( 500, 000) 40, 500, 000 Y * + + = = 200, , , , 000 = Example

11 Network Desgn cont d Fgure Network Desgn cont d Number of locatons s determned by balancng nbound and outbound transportaton costs Fgure

12 Network Desgn cont d Fgure Logstcs Management Summary 1. Flow of materal and nformaton between supplers, producers and customers 2. Meet customer needs at lowest landed cost 3. Includes multple decson areas 4. Economes of scale and dstance mpact costs 5. Multple warehouse type to facltate materal storage and flow 6. Network desgn and faclty locaton mpact costs and customer servce