Decision Strategies in Transportation

1
CHAPTER 9 Decision Strategies in Transportation
2
(No Transcript)
3
Areas in the Supply Chain Affected by
Transportation
Source Adapted from The Emergence of Third Party
Logistics, White Paper no. 4 (Atlanta, GA
PricewaterhouseCoopers, 1998), p. 5.
4
Terms

• Bill of Lading
• Manifest
• Claims
• Tracing and Expediting
• Inbound
• Outbound

5
Mode/Carrier Selection

• Problem recognition
• Search process
• Choice process
• Post-choice evaluation
• similar to the MDMP process

6
Cost Factors Often Considered in Mode Carrier
Selection
a

• Freight costs
• Inventory carrying costs
• inventory in pipeline
• cycle stock at the receiving location
• required safety stock at the receiving location
• Investment cost required to produce the inventory
  to fill the pipeline

7
Service Factors Often Considered in Mode Carrier
Selection

• Perceived quality of customer service
• Shipment tracking and tracing capabilities
• Billing/invoicing accuracy
• Electronic data interchange (EDI) capabilities
• Potential to develop mutually beneficial
  long-term partnership
• Cargo capacity limitations
• Ability to provide service that does not damage
  goods in transit
• Customs clearance capabilities for international
  shipments
• Impact on the shippers negotiating
  position/leverage on other shipping activities

8
Compairdata.com
9
(No Transcript)
10
(No Transcript)
11
(No Transcript)
12
Freight Brokers
13
(No Transcript)
14
Tracking and Expediting
15
(No Transcript)
16
(No Transcript)
17
Transportation Security
18
C-T PATCustoms-Trade Partnership Against
Terrorism

• Joint government - business program
• voluntary - 7000 participants
• Security - procedural, physical personnel,
  manifest
• prevent incoming dirty bomb/material in
  containers
• ensure integrity of practices
• reduced inspections
• reduced losses from theft

19
Questions?
20
CHAPTER 10 Warehousing
21
Objectives

• Why is warehousing important - 2-5 of sales
• Types of warehouses
• functions
• why have warehouses in a JIT economy?
• Is there a difference between a Distribution
  Center and a Warehouse?

22
Warehousing Management

• Warehousing emphasizes storage of products.
• Distribution centers emphasize rapid movement of
  products through the facility.
• Throughput is the amount of product entering and
  leaving a facility in a given time period.
• Regrouping function
• Accumulating (increasing quantity)
• Allocating (reducing quantity)
• Assorting (building up a variety of products)
• Sorting (separating products into grades and
  qualities)

23
Uses of Warehousing

• Manufacturing support
• Product - mixing
• Consolidation
• Breakbulk
• Cross Docking
• shorten customer wait times and transportation
  lead times

24
Functions

• Receive
• putaway
• Store
• order entry
• Pick
• Pack
• Ship
• Value added services
• postponement

25
Factors Influencing Warehousing in the Future

• Time - The best warehouse operations are those
  designed to reduce every aspect of order cycle
  time.
• Quality - Users now expect performance that
  approaches perfection.
• Asset productivity - Reduce total cost, reuse,
  and recycle.
• New kind of workforce - Requirements for both
  management and labor will change significantly.

26
Private Warehousing

• Private warehousing is owned or occupied on a
  long-term lease
• Offers control to owner
• Assumes both sufficient demand volume and
  stability so that warehouse remains full
• High fixed costs

27
Advantages of Private Warehousing

• Control
• Flexibility
• Less costly
• Better use of human resources
• Tax benefits
• Intangible benefits

28
Advantages of Public Warehousing

• Conservation of capital
• Use of space to meet peak requirements
• Reduced risk
• Economies of scale

• Flexibility
• Tax advantages
• Specific knowledge of storage and handling costs

29
Disadvantages of Public Warehousing

• Effective communication may be difficult because
  of system incompatibility
• Specialized services may not always be available.
• Space may not be available on demand.

30
Attributes of World Class Warehouses and
Distribution Centers

• 100 Inventory Accuracy
• Perfect Order Fulfillment
• Value added services
• Cleanliness
• Time Definite Delivery
• On-time deliveries
• Logical warehouse flow

31
World Class

• Employee Education Programs
• Safety
• Layout
• Obsolete Stocks
• Turns
• Processing Times
• Cross Docking

32
Ideal Facility for Pure Supplier Consolidation
(Full Pallet Movement)
33
(No Transcript)
34
Poor Warehouse Warning Signs

• Excessive handling
• poor utilization/cube
• obsolete equipment
• obsolete merchandise
• old docks
• manual procedures
• lack of barcodes

35
Cycle Counting

• Reduce losses
• identify problems earlier
• security
• costs
• Significant cuts in inventory come only from
  finding and fixing the causes of excess.

36
Measures

• Picks per worker per hour
• inventory accuracy
• loss/shrinkage
• stockouts
• percent of utilization
• facing fill rates

37
CHAPTER 11 Materials Handling, Computerization
and Packaging
38
Materials Handling Equipment - Manual

• Racks
• Conventional pallet racks
• Drive-in racks
• Drive-through racks
• High-rise racks
• Cantilever racks
• Pallet stacking frames
• Stacking racks
• Gravity-flow racks

• Shelving
• Drawers
• Mobile racking or shelving

39
Materials Handling Equipment - Automated

• Unit load AS/RS
• Car-in-lane
• Miniload AS/RS
• Horizontal carousels
• Vertical carousels
• Man-ride machines

40
Advantages of Automated Materials Handling
Systems

• Operating cost savings
• Improved service levels
• Increased control through more and better
  information

41
Disadvantages of Automated Materials Handling
Systems

• Initial capital costs
• Downtime of equipment
• Maintenance interruptions
• Software-related problems
• Capacity problems

• Lack of flexibility
• Maintenance cost
• User interface/ training
• Worker acceptance
• Obsolescence

42
Automated Storage and Retrieval Systems

• Productivity increases
• handling decreases
• ? less product damage
• ? less product loss
• location/inventory accuracy increases
• disadvantages include
• ? technology
• ? loss of production if system failure
• ? requirement for knowledge of manual procedures

43
Carousels

• Same concept as dry cleaners
• Reduce travel time
• space savers - vertical
• automation
• use of totes for small products

44
Automated Guided Vehicle System

• DDSP - use of wire guided system
• ? wires in the floor to guide picking and putaway
  functions
• ? Grainger - use of guided system to move picked
  supplies

45
Materials Handling Equipment
46
Storage

• Drive through
• flow racks
• single deep
• double deep
• shelves
• bins
• drawers

47
Storage Decisions

• Product
• ? drums
• ? bar racks
• ? containers
• ? bulk storage
• ? bin storage
• drives MHE decisions
• drives cycle times

48
Storage Systems
49
Warehousing in a JIT Environment

• Total commitment to quality
• Reduced production lot sizes
• Elimination of non-value-added activities
• smaller picks
• more frequent picks
• layout
• more item picks vice case or pallet
• small package packaging and shipping
• expedited shipping
• FEDEX and UPS collocated at DC

50
Packaging - Important??

• Cost of packaging
• size of items
• protection
• containment
• shipping convenience
• package design
• use of returnable totes
• use of pallets
• packaging efficiency
• package tracking and visibility

51
Functions of Packaging

• Marketing
• Information
• Promotion

• Logistics
• Containment
• Protection
• Apportionment
• Unitization
• Convenience
• Communication

52
Benefits of Good Packaging

• Lighter packaging may save transportation costs.
• Careful planning of packaging size/cube may allow
  better space utilization.
• More protective packaging may reduce damage and
  requirements for special handling.
• Environmentally conscious packaging may save
  disposal costs and improve the companys image.
• Returnable containers provide cost savings and
  environmental benefits.

53
Technologies of the Modern Warehouse

• Warehouse management systems (WMS)
• Radio frequency communication and inventory
  update
• Bar-code reading and label generation equipment
• EDI and the Internet
• Transportation management systems
• Interface to enterprise requirements planning
  (ERP) systems
• Productivity tracking software
• Activity-based costing software

54
Warehouse Management Systems

• What is it?
• What does it do?
• Compatibility
• ? bar coding
• ? ERP
• ? customer systems
• ? track and trace
• inventory management
• order entry/management
• order processing

55
Technologies of the Modern Warehouse

• Warehouse management systems (WMS)
• Radio frequency communication and inventory
  update
• Bar-code reading and label generation equipment
• EDI and the Internet
• Transportation management systems
• Interface to enterprise requirements planning
  (ERP) systems
• Productivity tracking software
• Activity-based costing software

56
Information Flows in the Supply Chain
Source Arnold Maltz, the Changing Role of
Warehousing (Oak Brook,IL Warehousing Education
and Research Council, 1998), p. 27.
57
CHAPTER 12 Procurement
58
Goals of Procurement

• Uninterrupted flow of materials, supplies, and
  services
• keeping investment at a minimum
• maintain and improve quality
• find and/or develop competent suppliers
• standardize items and procedures

59
Purchasing
What is purchasing?

• Primarily a buying activity
• A decision area to be integrated with overall
  materials management and logistics
• At times, an area to be used to the firms
  strategic advantage

Mission Securing the products, raw materials,
and services needed by production, distribution,
and service organizations at the right time, the
right price, the right place, the right quality,
and in the right quantity.
CR (2004) Prentice Hall, Inc.
60
Purchasing (Contd)
What is purchased?

• Price
• Cost of goods
• Terms of sale
• Discounts
• Quality
• Meeting specifications
• Conformance to quality standards
• Service
• On-time and damage-free delivery, order-filling
  accuracy, product availability
• Product support

CR (2004) Prentice Hall, Inc.
61
Purchasing (Contd)
Importance of purchasing management

• Decisions impact on 40 to 60 of sales dollar
• Decisions are highly leveraged

• Sets terms of sale
• Evaluates the value received
• Measures inbound quality if not a responsibility
  of quality control
• Predicts price, service, and sometimes demand
  changes
• Specifies form in which goods are to be received

Activities of purchasing

• Selects and qualifies suppliers
• Rates supplier performance
• Negotiates contracts
• Compares price, quality, and service
• Sources goods
• Times purchases

10-32
CR (2004) Prentice Hall, Inc.
62
Four Buying Situations

• Routine order
• Procedural problem
• Performance problem
• Political problem

63
12 Steps in buying process

• Establish need
• establish specs
• search for alternatives
• establish contract
• set purchase and usage criteria
• evaluate alternative buying actions
• determine budget availability

• Evaluate specific alternatives
• negotiate with suppliers
• buy
• use
• post purchase evaluation

64
Purchasing Variables

• Lead Time
• Lead Time variability
• on time delivery
• in stock availability
• capacity to expedite
• downtime

• Reliability
• quality rejects - number and reasons
• price

65
Supplier Development Defined
A systematic organizational effort to create and
maintain a network of competent suppliers and to
improve various supplier capabilities that are
necessary for the buying organization to meet its
increasing competitive challenges. Why would
you want to develop your suppliers?
66
Supplier Selection
Criteria for selecting suppliers

• Past or anticipated relations
• Honesty
• Financial viability
• Reciprocity
• Measured performance
• Price
• Responsiveness to change or requests
• On-time delivery
• Product or service backup
• Meeting quality goals

CR (2004) Prentice Hall, Inc.
67
Supplier Selection (Contd)
Single vendors

• Allows for economies of scale
• Consistent with the just-in-time philosophy
• Builds loyalty and trust
• May be only source for unique product or service

Multiple vendors

• Encourages price competition
• Diffuses risk
• May disturb supplier relations, reduce loyalty,
  reduce responsiveness, and cause variations in
  product quality and service

CR (2004) Prentice Hall, Inc.
68
Supplier Selection (Contd)
Finding suppliers

• Personal contacts
• Trade publications
• Web sites, catalogs, and directories
• Advertisements and solicitations

Qualifying suppliers

• Previous experiences and formal rating schemes
• Word of mouth
• Samples of product
• Reputation
• Site visits and demonstrations

CR (2004) Prentice Hall, Inc.
69
Supplier Selection (Contd)
Criteria for selecting suppliers (Contd)

• Operational compatibility
• Informational compatibility
• Physical compatibility
• Ethical and moral issues
• Minority vendors
• Lowest price bidding
• Patriotic purchasing
• Open bidding but a pre-selected vendor

CR (2004) Prentice Hall, Inc.
70
Objectives of Systems Contracts and Stockless
Purchasing

• Lower inventory levels.
• Reduce the number of suppliers.
• Reduce administrative cost and paperwork.
• Reduce the number of purchases of small dollar
  value and requisitions that purchasers have to
  handle.
• Provide the opportunity for larger dollar volumes
  of business to suppliers.
• Provide for timely delivery of material directly
  to user.
• Standardize purchase items when possible.

71
Timing of Purchases
Methods

• Through just-in-time planning
• Material requirements planning for continuous
  work
• Gantt charts and CPM/PERT for project work
• Through inventory management
• Push methods
• Pull methods
• According to market conditions
• Speculative buying
• Forward buying
• Hand-to-mouth buying, or buying to current
  requirements

10-49
72
Timing of Purchases (Contd)
Speculative buying
Buying more than the foreseeable requirements at
current prices in the hope of reselling later at
higher prices. Some of the purchased quantities
may be used in production and some simply resold.
Generally a financial activity, not a materials
management one.
Forward buying
Buying in quantities exceeding current
requirements, but not beyond foreseeable needs.
- Takes advantage of favorable prices in an
unstable market, or takes advantage of volume
transportation rates - Reduces risk of
inadequate delivery
10-50
CR (2004) Prentice Hall, Inc.
73
Timing of Purchases (Contd)
Hand-to-mouth buying
Buying to satisfy immediate needs such as those
generated through MRP. - Advantageous when
prices are dropping - May improve cash flow by
temporarily reducing expenses of carrying
inventory
CR (2004) Prentice Hall, Inc.
10-51
74
Government Influences on Foreign Trade

• Government controls on the flow of international
  trade
• Customs or duties
• Import quotas
• Health inspections
• Safety standards
• Currency outflow
• Political or military reasons
• Port choice
• Non-trade reasons
• Country of Origin

75
Upcoming

• Chapter 13, 15, Reverse Logistics
• Final Exam