Elements of Logistics Management Notes DEFINITION OF LOGISTICS
Accor Accordin ding g to the Counci Councill of Logist Logistics ics Manage Managemen mentt (CLM) (CLM) “Logistics is the process of planning, implementing and controlling the ecient and eective ow of goods, services services and related related information information from point of origin origin to point of consumption in order to meet customer requirements” requirements” .
OPERATING OBJECTIVES OF LOGISTICS 03, 06)
(Nov.
1. Rapid Response: Rapid response is concerned with a rms a!ilit" to satisf" customers re#uirement in a timel" manner. $nstead of stoc%ing the goods and suppl"ing s uppl"ing on demand& orders are e'ecuted on shipment toshipment !asis. ere $* helps to postpone the logistical operations to the latest possi!le time and then e'ecute rapid deli+er" as when needed !" customer. ,. Minimum Variance: Variance: -ariance is an" une'pected e+ent that disrupts s"stem. Logistical operations are disrupted !" e+ents li%e dela"s in orde orderr recei eceipt pt&& disr disrup upti tion on in manu manufa fact ctur urin ing& g& good goodss dama damage ged d at customers location and deli+er" to an incorrect location etc. *raditional *raditional solution to deal with +ariance was to %eep safet" stoc% or use high cost transportation. uch practices were e'pensi+e and ris%" and thus ha+e !een replaced !" information technolog" to achie+e positi+e logistics control. Minimum Inventor Inventory: y: *he o!0ecti+e of minimum in+entor" in+ol+es /. Minimum asset commitment and in+entor" turno+er. Asset commitment is the nancial +alue of in+entor" de+eloped throughout the logical s"stem and in+entor" turno+er is the rate of in+entor" usage o+er time. *he o!0ec o!0ecti ti+e +e is to redu reduce ce the the in+e in+ent ntor" or" witho without ut sa sacr cri ici cing ng cust custom omer er satisfaction.
. Movement Consolidation: Consolidation: 2ne of the most signicant logistical costs is transportation. *ransportation cost depends on t"pe of product& si3e of shipment and distance. Mo+ement consolidation means grouping small shipments together in order to reduce transportation cost. uality Improvement Improvement:: Logistics is a prime part of de+eloping and 4. uality maintaining continuous *5M impro+ement. $f the #ualit" of product fails& logistics will ha+e to ship the product out of customers premises and and repea epeatt the the logi logist stic ical al func functi tion on agai again. n. *his *his adds adds to cost cost and and customer dissatisfaction.
!i"e#Cycle e $upport: $upport: Life c"cle support is also called cradletocradle 6. !i"e#Cycl logi logist stic ical al supp suppor ort. t. $t mean meanss goin going g !e"o !e"ond nd re+er e+erse se logi logist stic icss and and rec"cling to include the possi!ilit" of after a fter sale ser+ices& product recalls and product disposal. *his means that rms must consider how to ma%e a product and its pac%age (cradle) and the how to rema%e and reuse them (to cradle). E.g. Cold drin% industries use their glass !ottle again and again whereas the cans are reused in ma%ing pf paper dishes. TYPES OF LOGISTICS 1. Reverse Logistics (May !,"#
Re+erse logistics is also %nown as 7roduct Recall. $t ma" !e dened as a process of mo+ing goods from their place of use& !ac% to their place of manufac manufactur ture e for repr reproce ocessi ssing& ng& rell relling ing&& repai repair& r& and rec"c rec"cli ling ng or waste waste disposal. Reasons "or Reverse !o%istics
1. Rigid #ualit" #ualit" standards standards it is critical critical in case of contamina contaminated ted products& products& which can cause en+ironmental ha3ard. ,. Rigid laws laws prohi!iti prohi!iting ng unscienti unscienticc disposal disposal of items /. Rigid laws ma%ing rec"clin rec"cling g mandator" mandator" . *rans ransit it dama damage ge 8 e.g. e.g. lea% lea%in ing g cont contai aine ners rs cont contai aini ning ng ha3a ha3arrdous dous material. 4. 7rodu 7roduct ct e'pir e'pirati ation. on. 6. Erroneou Erroneouss order order processi processing ng !" suppli supplier er 9. E'change E'change of of new product product for for the old ones. ones. :. Return eturn for for repair repair or rel rell. l. &rivers in Reverse !o%istics ($ov% &, May '#
*he success of re+erse logistics depends upon the e;cienc" of following su!s"stems< 1. roduct roduct Location) Location) =or product recall it is necessar" to identif" the product location in the ph"sical distri!ution s"stem of the rm. $t is
!i"e#Cycle e $upport: $upport: Life c"cle support is also called cradletocradle 6. !i"e#Cycl logi logist stic ical al supp suppor ort. t. $t mean meanss goin going g !e"o !e"ond nd re+er e+erse se logi logist stic icss and and rec"cling to include the possi!ilit" of after a fter sale ser+ices& product recalls and product disposal. *his means that rms must consider how to ma%e a product and its pac%age (cradle) and the how to rema%e and reuse them (to cradle). E.g. Cold drin% industries use their glass !ottle again and again whereas the cans are reused in ma%ing pf paper dishes. TYPES OF LOGISTICS 1. Reverse Logistics (May !,"#
Re+erse logistics is also %nown as 7roduct Recall. $t ma" !e dened as a process of mo+ing goods from their place of use& !ac% to their place of manufac manufactur ture e for repr reproce ocessi ssing& ng& rell relling ing&& repai repair& r& and rec"c rec"cli ling ng or waste waste disposal. Reasons "or Reverse !o%istics
1. Rigid #ualit" #ualit" standards standards it is critical critical in case of contamina contaminated ted products& products& which can cause en+ironmental ha3ard. ,. Rigid laws laws prohi!iti prohi!iting ng unscienti unscienticc disposal disposal of items /. Rigid laws ma%ing rec"clin rec"cling g mandator" mandator" . *rans ransit it dama damage ge 8 e.g. e.g. lea% lea%in ing g cont contai aine ners rs cont contai aini ning ng ha3a ha3arrdous dous material. 4. 7rodu 7roduct ct e'pir e'pirati ation. on. 6. Erroneou Erroneouss order order processi processing ng !" suppli supplier er 9. E'change E'change of of new product product for for the old ones. ones. :. Return eturn for for repair repair or rel rell. l. &rivers in Reverse !o%istics ($ov% &, May '#
*he success of re+erse logistics depends upon the e;cienc" of following su!s"stems< 1. roduct roduct Location) Location) =or product recall it is necessar" to identif" the product location in the ph"sical distri!ution s"stem of the rm. $t is
di;cult in case of consumer goods !ut easier in case of industrial goods. ,. roduc fter the produc productt locati location on is identi identie ed& d& roductt *olle *ollecti ction on +yste +ystem) m) After product collection is to !e done through compan"s eld force or third part". /. ecycling - .isposal *enters) *his ma" !e compan"s plant& warehouse or an" other location. Called !ac% products must !e inspected !efore rec"cling or disposal etc. .ocumentat ntation ion +ystem +ystem)) 7roper documents should !e maintained at . .ocume each le+el& this would help in tracing the product location.
2. I!o"# Logistics ($ov% !# •
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All the acti+ities related to the material mo+ement till the dispatch of the products out of the factor" gate are called as in!ound logistics acti+ities. Creation of +alue in the products depends upon a+aila!ilit" of inputs on time. Ma%ing a+aila!le these inputs on time at minimum cost is the essence of $n!ound Logistics. Acti+ities of a procurement performance c"cle come under the scope of $n!o $n!oun und d Logi Logist stic ics. s. *he" *he" are are tran transp spor orta tati tion on duri during ng proc procur urem emen entt operation& storage& handling and o+erall management of in+entor" of inputs.
$. O"t!o"# Logistics ($ov% !# •
•
•
All the acti+ities in which the +alue added goods are to !e made a+aila!le a+aila!le in the mar%et for customers customers are called called as out!ound out!ound logistics logistics acti+ities. ucc ucces esss of the the rm rm depe depend ndss upon upon the the supp suppl" l" of prod produc ucts ts to the the customer on time. uppl"ing the products of rm at mar%etplace at minimum cost is the essence of 2ut!ound Logistics. Acti+ities of distri!ution performance c"cle come under the scope of 2ut!ou 2ut!ound nd Logis Logistic tics. s. *he" *he" are are order order manage managemen ment& t& transp transport ortati ation& on& warehousing& pac%aging& handling etc.
%. T&ir#'P(rt) Logistics *$PL+
$n order to %eep the costs of in!ound and out!ound logistics acti+ities under control& an outside agenc" appointed to perform these logistics functions is called >*hird 7art" Logistics?. ,. Fort&'P(rt) Logistics *%PL+ (No+. @6)
=orth 7art" 7art" Logistics is a complete outsourcing of manufacturing and logistics functions including selection of *hird 7art" ser+ice pro+ider. pro+ider. Need "or '!:
1. E+erincr E+erincreasing easing custome customerr re#uirement re#uirements. s. ,. Competiti+ Competiti+e e and comple' comple' mar%e mar%ett scenario scenario /. Rising Rising glo!alisatio glo!alisation& n& li!erali3ati li!erali3ation on and pri+atisatio pri+atisation. n. . Rising Rising accessi!ilit accessi!ilit" " of suppl" chain technolog technolog" ". 4. $nclinatio $nclination n of companies companies to enter enter into higher higher margin !usines !usiness. s. $ervices provided y '!
1. 7rocure 7rocurement ment and storage storage of material materials. s. ,. Manufac Manufacturi turing ng of produ products cts.. /. elect election ion of of /7L comp compani anies es . *ransportatio ransportation n and warehousin warehousing g management management 4. Collection Collection of pa"ment pa"ment and cash cash ow management management 6. Ris% Ris% managem management ent and and insuran insurance. ce. 9. haring haring of information information&& $* solution. solution.
LOGISTICS -ANAGE-ENT IN INDIA TODAYS TODAYS CONTE/T (Nov. 0*) Logistics i I#i( B"siess Eviro0et (May '# •
Li!erali3ation opens our door to competition.
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Blo!al !usiness has long suppl" distri!ution lines.
IN
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Changing $ndian customer& aware& demanding and less !rand lo"al Competition ensures that product diDerentiation in terms of #ualit" is di;cult.
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7roduct life c"cles are shrin%ing
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2ur mar%ets are shifting from sellers to !u"ers
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Man" consumer products are mo+ing into commodities mar%et
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$n $ndia& large distances separate production and consumption centers. Esse Essent ntiial commo ommodi diti tie es ha+e a+e to tra+e ra+ell from from =oo ood d Corp Corpor orat atiion arehouses to consumers through 7F. till Logistics performance in $ndia has not !een impressi+e 8 =ruits =ruits and +egeta!les are grown at +arious places !ut do not en0o" access to mar%et.
LOGISTICS OGISTIC S IN TE GL G LOBALISATION OBALISATION Logistics functions are same domesticall" and glo!all" !ut diDer in four Fs i.e. distance& documents& di+ersit" in culture and demand of customer. $n the glo!al glo!al logist logistics ics distanc distances es are are longer longer&& docume documenta ntatio tion n is more more e'ten e'tensi+ si+e& e& customer demand +aries to satisf" cultural diDerences within !oth& countries and regions. Fe+eloping strategies to respond to the F en+ironment is the glo!al challenge for logistics management. *here are some factors that facilitate glo!alisation and necessitate glo!al logistics and also some !arriers that continue to impede glo!al logistics. Logistics management must !alance the cost of o+ercoming these !arriers with the potential !enets of going glo!al.
Forces Drivig Go!(is(tio o3 Logistics 1. +conomic ro-t: After $$ there was a growth in industrial sector of de+e de+elo lope ped d coun countr trie iess and and thei theirr manu manufa fact ctur urin ing g and and logi logist stic icss producti+it" increased. *his forces the rm to e'pand their mar%eting into de+eloping nations. uch e'pansion re#uires the integration of glo!al manufacturing with mar%eting through logistics. $upply ly Cai Cain n ersp erspec ecti tive ve:: =irms ,. $upp irms tradit tradition ionall all" " sought sought logist logistic ical al contr control ol as man" man" es esse sent ntia iall acti acti+i +iti ties es as poss possi! i!le le inte intern rnal all" l"&& whic which h
resulted in pri+ate warehouses and transportation. uch pri+atisation increased the capital and assets to support logistics operations resulting in decline of Return on $n+estment and hence the concept of outsourcing and suppl" chain emerged during 1G:@s. /. Re%ionalisation: *raditionall" trade and transportation across the political !orders of countries re#uires political formalities& which adds to the logistics cost without an" +alue addition to the consumer. Regionalisation in the form of trade associations such as EH& NA=*A and AARC etc. remo+ed such !arriers and facilitates glo!al logistics. . /ecnolo%y: Mass communication and information technolog" e'posed international consumers to foreign products& thus stimulating con+ergence of glo!al needs and preferences. *his promotes glo!al mar%eting and glo!al logistics. 4. /ransportation &ere%ulation: $nitiall" there ha+e !een restrictions for international transportation ownership and operating rights e.g. foreign carriers could not operate domesticall"& steamship lines could not own land !ased transport li%e motor or rail carriers etc. !ut such restrictions ha+e !een remo+ed in most of the countries.
B(rriers to Go!( Logistics 1. Maretin% 1arriers: *his includes (i) entr" restrictions !" placing legal or ph"sical !arriers on importing (ii) poor information regarding mar%et si3e& demographics and competition (iii) pricing uctuation and tariD !arriers. ,. Competition: FiDerent rules in diDerent countries concerning competiti+e go+ernance also ser+e as glo!al logistics !arriers. /. 2inancial 1arriers: *his includes (i) di;culties in forecasting in the glo!al en+ironment (ii) institutional infrastructure !arriers result from diDerences in ser+ices oDered !" !an%s& insurance rms& legal counselors etc. . &istriution Cannels: Lac% of infrastructural standardisation such as diDerences in transportation and material handling e#uipment& warehouse and port facilities& communication s"stem etc. also ser+es as glo!al logistics !arriers. I04ort(ce o3 Logistics Decisios i i04rovig t&e 4ro5t(!iit) o3 org(is(tio (May /# CAPTER , 6 OVERVIE7 OF LOGISTICS F8NCTION
-RP 1 ($ov% 0, May /#
Material Re#uirement 7lanning is an integrated approach to the in+entor" management& ta%ing into the account purchase and production programme. *his is software that con+erts the Master chedule to the re#uirement of raw material& components& su!assem!lies& etc. $tructure o" MR*
*hree t"pes of information are fed to the computer. 1. Master chedule 8 *his is made up from sales forecast !" mar%eting department and the actual orders alread" recei+ed !" the compan". $t indicates which product is re#uired to !e deli+ered to the customer and when. ,. Iill of Material 8 *his is prepared from product design documents /. $n+entor" details 8 of each item *he MR7 software processes the data and releases the output for read" use of the management in the following wa"< 1. =or purchase components it releases 7urchase Re#uest& 7urchase 2rder etc in the form of soft cop" ,. =or inhouse manufactured components it releases 7roduction 2rder /. $t prepares diDerent t"pes of reports for the use of management as re#uired 1enets o" MR*
1. All the documents li%e purchase order& production order get read" as per re#uired time. ,. All information is read" on the screen at an" time& which is dul" updated. /. Ma%ing changes manuall" in Master chedule is di;cult tas%J this is done !" MR7 easil" and accuratel". . $t prepares the reports related to in+entor" status& production outputs& latest sales gures.
4. MR7 calculates and maintains an optimummanufacturing plan& which will reduce cash ow and increase prota!ilit". 6. Reduced in+entor" le+els 9. Reduced shortage of components :. Reduced o+ertime on shop oor and o;ces G. $mpro+ed shipping schedule 1@.
$mpro+ed production schedule
11.
$mpro+ed calculation of material re#uirements
1,.
Ietter manpower planning on shop oor
1/.
Reduction in lead time
1.
Less scrap and rewor%
Closed#!oop MR: hen MR7 e'tended to include feed!ac% from +endors
and production operations it is called Closedloop MR7
MR II (Manu"acturin% Resource lannin%): hen closedloop MR7
e'tended to include nancial accounting& personnel& engineering and mar%eting information& it is called MR7 $$ DRP ($ov% 0 &, May /#
Fistri!ution Resource 7lanning is concerned with the distri!ution of material& warehouses& and transport arrangements. $t is logicall" e+ol+ed from MR7 and hence it is more recent concept. FR7 needs demand forecasts for each warehouse and their current in+entor" le+el. MR7 is concerned with in!ound logistics whereas FR7 is concerned with out!ound logistics acti+ities. Bee5ts o3 DRP
1. Reduce distri!ution center freight costs resulting from coordinated shipments. ,. Reduce in+entor" le+el. /. Coordinate in+entor" with organisational functions.
. Fecrease warehouse space re#uirements !ecause of in+entor" reduction. 4. $mpro+e ser+ice le+el !" on time deli+eries. -RP
DRP
Buided !" production schedules Buided !" customer demand Hnder control of the rm Not under control of the rm 2perates in dependant demand 2perates in independent demand situation situation Coordinates scheduling and Coordinates demand !etween outlets integration of materials into nished and suppl" sources goods Controls in+entor" until Controls in+entor" after manufacturing and assem!l" is manufacturing and assem!l" of complete. nished goods
CAPTER 9 PLANNING
6
LOGISTICS
STRATEGY
AND
h" has logistics recentl" !een recei+ing more attention as a strategic function of the organisationK (Ma" ,@@6) 61 of reference !oo% CAPTER : 6 C8STO-ER SERVICE *CS+ &enition: Customer er+ice is dened as a process of pro+iding signicant
+alue added !enets to the suppl" chain in a costeDecti+e wa".
ELE-ENTS OF C8STO-ER SERVICE ($ov% 0, &, May /, !# A; Av(i(!iit) <($ov% !#
A+aila!ilit" is the capacit" to ha+e in+entor" when it is desired !" a customer. *he most common practice to achie+e a+aila!ilit" is to stoc% in+entor" in anticipation of customer order. A+aila!ilit" is !ased on following three performance measures< 1. *. $tocout 2re4uency: toc%out fre#uenc" is a measure of how man" times demands for a product e'ceed its a+aila!ilit". *he aggregation of stoc% outs of all products indicates how well a rm is a!le to pro+ide !asic ser+ice commitments.
,. 5. 2ill Rate: =ill rate measures the magnitude of stoc%outs o+er time. E.g. if a customer orders 4@ units and onl" 9 units are a+aila!le& the order ll rate is G (9O4@). Pust !ecause a product is out of stoc% does not mean that a customer re#uirement is going unsatised. Iefore a stoc%out aDects ser+ice performance it is necessar" to forecast customer re#uirements then to identif" the product una+aila!ilit" and to determine how man" units customer wanted. toc%out fre#uenc" and ll rate are in+ersel" related through order #uantit". i.e. if a rm places larger order the stoc%out fre#uenc" will !e less and the e'pected ll rate will !e higher. /. 3. 7rders $ipped Complete: $t is a measure of time when a rm recei+ed the entire in+entor" ordered !" a customer. $t indicates the potential times that customers will recei+e perfect orders. B; O4er(tio( Per3or0(ce
1. 7perational $peed: 7erformance speed is the inter+al !etween placement of order and shipment arri+al. Fepending upon the logistical s"stem design& the speed can !e as short as a few hours or as long as se+eral wee%s. $n critical situation ser+ice can !e performed in a few hours !" special deli+er" or on o+ernight !asis. Iut e+er" customer does not need ma'imum speed if it results in increase in logistics cost. ,. 7perational Consistency: Consistenc" refers to a rms a!ilit" to perform at the e'pected deli+er" time. hen a form fails to !e consistent it forces customers to carr" e'tra safet" stoc% to protect against possi!le late deli+er". /. 7perational 2le8iility: =le'i!ilit" refers to a rms a!ilit" to handle e'traordinar" customer ser+ice re#uests. *he e+ents that re#uires e'i!ilit" are<
Modications in !asic ser+ice arrangements
7roduct modication
7roduct introduction
7roduct phaseout
7roduct recall
Fisruption in suppl"
C; Rei(!iit)
Relia!ilit" refers to logistics #ualit" i.e. a!ilit" of rm to compl" with le+els of planned in+entor" a+aila!ilit" and operational performance. Relia!ilit" also includes rms capa!ilit" to pro+ide accurate customer information regarding logistical operations and order status. OBJECTIVES = I-PORTANCE OF C8STO-ER SERVICE (May !#
1. -(it(iig c"sto0er o)(t) (# eve o3 s(tis3(ctio. 1. Recei+ing repeat orders from customers. ,. *o win new customers and %eep e'isting customers /. An edge o+er competition C8STO-ER RETENTION
2nce a customer is own !" a compan"& it must !e retained such that customer %eep coming again and again. *his depends on the Customer er+ice. =or that the compan" has to moti+ate emplo"ees and to reinforce the ser+ice concepts with top management. 9dvanta%e:
1. Retaining more customers result in higher prot. ,. *he cost of retaining customers is much less than to ac#uire them. /. $t helps in strengthening and e'panding customer !ase. . $f a regular customer were lost& then it would cost +er" hea+il" to generate new customer. Metods:
1. 2Der onl" #ualit" ser+ices and products ,. Femonstrate the use of product or ser+ices /. 7ro+ide responsi+e customer ser+ice . hare testimonials of customers with other potential customers 4. Educate the customer a!out the mar%et and +alue of the !usiness
6. $n+ite customers opinion and feed!ac% on products or ser+ices CAPTER > 6 TRANSPORTATION AND INFRASTR8CT8RE
INTROD8CTION
*ransportation is an essential and ma0or su! function of logistics that creates time and place utilit" in goods. *ransportation management co+ers the area of hipment cheduling O Routing& =rei1ht Cost& Carrier election& hipment *rac%ing and 7arcel Management. $t helps us to ma%e the !est use of a+aila!le resources and %eeps informed on all transportation process. COST STR8CT8RE 1($ov% 0, 2#
Iasicall" there are two cost contents in+ol+ed in transportation process< (.iagram "3#
1. 2i8ed Cost =i'ed cost is the e'penses related to the procedural part li%e cost of documents& salaries of personnel& rent of the o;ce etc. As per the product needs and the en+ironments& loading and unloading charges are included in 'ed cost. 1. Variale Cost Among all logistic factors +aria!le cost consumes main e'penses. $t concentrates on the product related and mar%et related aspects< i) Q 7roduct related aspects are the ph"sical attri!utes of products& li%e< Fensit" 8 e.g. densit" of sand is more than Cotton i3e O hape 8 *ransportation cost per unit weight decreases with the si3e of the consignment. pace lling capacit" 8 e.g. spacelling capacit" of iron at is more than that of chairs or ta!les. Fi;culties in handling 8 e.g. product li%e electronic items li%e *- are di;cult to handle since the" are easil" get damaged. ii) Q Mar%et related aspects are< Fistance to !e tra+eled to customer 8 *he cost decreases with increase in the distance.
Bo+ernment regulations& 2ctro"& Road *a'es& *olls& etc. $ntramode O $ntermode =reight *ra;c Fomestic O $nternational *ransport eason EDect F8NCTIONS OF TRANSPORTATION ($ov% !#
1. roduct Movement: *ransportation facilitates the mo+ement of raw material& seminished items& $7& nished goods& pac%aging material& re0ected material. ,. roduct $tora%e: *ransportation pro+ides temporar" storage in stationar" +ehicles or -ehicles %ept mo+ing on a circuitous route. *hough the product storage is e'pensi+e in a transport +ehicle& !ut this is adopted in case of< 1. when unloading and loading is more e'pensi+e than storage. ,. when storage space is limited. SELECTION OF CARRIERS = -ODAL CARACTERISTICS ($ov% ', May "#
I seectio o3 ( tr(s4ort(tio 0o#e? t&e tr(s4ort(tio 0((gers cosi#er t&e 3oo@ig criteri(. 1. Cost: $t includes freight charges& warehousing& !uDer stic%& !ro%er fees& custom charges octro" etc. Benerall" cost per mile is considered which is should !e economical. ,. /ransit /ime: $t is the time from the shipment of goods to the receipt of goods at the destination. $t should !e as less as possi!le. /. $peed: Methods of wor%ing for the deli+er" of goods to the customers place should ensure the on time deli+er".
. $a"ety: afet" of goods at e+er" le+el from start to the end of deli+er" should !e ensured. 7roper pac%aging should !e done to a+oid an" damage to #ualit" or #uantit" of goods. 4. Claims Record: Claims against damages& pilferage or theft of goods should !e a+aila!le. *hough the supplier gets mone" !ac% !ut the customer remains unsatised in such cases. 6. Responsiveness: *ransporter has to respond the changing needs of the supplier and he should !e a!le to handle +arious products. 9. Capaility: *ransporter should !e in a position to deli+er the goods at an" remote areas. e should ha+e large num!er of geographic ser+ice points. :. 9ccessiility: *ransporter should !e easil" accessi!le !" pro+iding doortodoor pic% up and deli+er". G. Reliaility: $t is the meeting of schedule on time as per re#uirement of the customer. =aster the mode relia!ilit" increases& !ut it has to !e weighed against cost. -ODES OF TRANSPORTATION (May !# 1. Airies
Air transport is mainl" used for international transport and in emergenc" rather than in normal times. 4dvantages)
1. $t is the fastest mode of transportation. ,. =i'ed costs are lower than rail or road or pipeline. /. $t !rings distant mar%ets closer. . $t o+ercomes the hassle and cost of setting up depots and ser+ice centers o+erseas. 4. =ull potential of pea% seasonal demand can !e e'ploited. 6. Ma%es test mar%eting eas" 8 7roducts can !e shipped directl" from the factor" .isadvantages)
1. Most e'pensi+e 8 2perating costs are highest. ,. Benerall" used to transport small +olume items. /. Certain categories of items are not allowed . Re#uire secondar" mode of transport to deli+er to ultimate customer
2. 7(ter Tr(s4ort *his mode of transportation is the lin% !etween countries separated !" water. ater transport is classied into deepwater transportation and inland water transportation on la%es& ri+ers or canals. 4dvantages)
1. ater transport has low capital costs and low operating costs. ,. ea+" and !ul% goods of large #uantities are transported !" this mode. /. 7ri+ate or for hire shippers a+aila!le in water transport. .isadvantages)
1. ater transport is limited due to a+aila!ilit" of har!or. ,. ater transport is the slowest mode of transportation. /. Re#uire secondar" mode of transport to deli+er to ultimate customer. . Feepwater ships designed for ocean and la%es are limited to shallow water ports. 4. hallow water +essels li%e dieseltowed !arges are e'i!le !ut are limited !" their range of operations and speed. $. R(i@()s 4dvantages)
1. Railwa"s is comparati+el" fastest mode of transport ,. Railwa"s is an ine'pensi+e mode of transportation /. Railwa"s are suita!le for large #uantities.
. Railwa"s pro+ide door deli+eries for industries. .isadvantages)
1. Hnrelia!le mode 8 especiall" for high +alue goods and directl" usa!le consumer goods. ,. Railwa"s lac% e'i!ilit" of highspeed deli+er". /. Railwa"s re#uire modal com!ination alongwith roadwa"s. . Rail networ% needs a high capital in+estment due to right of wa"& switching "ards& terminals. %. Ro(#@()s 4dvantages)
1. peed" 8 Feli+er the goods directl" to the consignee +er" fast. ,. ighl" e'i!le 8 handling diDerent t"pes of goods /. Hltimate mode 8 consignment reaches the doorsteps of the customer. . Low capital cost as compared to railwa"s. 4. 7ri+ate or for hire shippers a+aila!le. .isadvantages)
1. igher operating costs 8 due to fuel re#uirement and higher la!or re#uirement. ,. 2ccasional fuel shortages 8 leads to dela" in deli+er". /. tri%es of carriers 8 due to disputes with go+ernment ma%ing the transportation idle. . Limited a+aila!ilit" of truc%s poses a constraint. 4. 2ctroi 8 posts are notorious for dela"s and harassment of carriers. 6. Restricti+e permits for licenses 8 imposed !" the go+ernment all o+er the countr".
Pi4eie (Nov. 0*) 7ipeline mode of transportation facilitates the mo+ement of li#uids li%e oilsJ crude petroleum products and water etc. $n $ndia more than 4&@@@ %m of pipeline e'ists for crude and petroleum products. lurries& gases& +apors and solids in powder form are also transported in pipelines. 4dvantages)
1. 7ipelines are relia!le mode 8 pilferage and loss of product is not possi!le. ,. 7ipelines ha+e low energ" consumption. /. 7ipelines !eing under ground& space occupation is minimal. . 7ipelines operate all the time e'cept when it is shut down for maintenance. 4. No need to !ring !ac% empt" container or wagon. .isadvantages
1. ighest 'ed costs 8 due to l"ing of pipeline !ut lowest operating costs. 1. 7ipelines are 'ed 8 so the accessi!ilit" of product is limited on the rout. ,. 2nl" li#uid commodit" can !e transported.
INTER-ODAL TRANSPORTATION (Nov. 03, May 0, 06) $ntermodal transportation is the use of more than one mode of transport to mo+e a shipment to its destination. $ntermodal mo+ements com!ine the cost and ser+ice ad+antages of two or more modes in a single product mo+ement. Ienets of long haul& short time e'i!ilit" are optimi3ed for achie+ing o+erall cost reduction
Fepending upon the t"pe and amount of goods& time of deli+er"& and prices following three $ntermodal com!inations are a+aila!le< 1. i%%yac: $t is coordination !etween railwa"s and road transport. $t is also called as *2=C (*railer on =latcar) or C2=C (Container on =latcar). $n pigg"!ac% the motor carrier trailer placed on rail atcar& which mo+es the trailer !" rail for a long distance. *hen the motor carrier mo+es the trailer for short distance for deli+eries. ere the placement of trailer on a railcar can lead to damages. ,. 2isyac: $t is coordination !etween waterwa"s and road transport. $n sh"!ac% the truc% or trailer rides on the ship for small portion of its 0ourne". *his ser+ice is pro+ided in coastal waters !etween Atlantic and Bulf ports. /. 1irdyac: $t is coordination !etween airwa"s and road transport. $n !ird"!ac% the ma0or portion of 0ourne" is co+ered !" airwa"s then the cargo is transported !" truc%s or trailers. . 7ters: ater and railwa"s& air and railwa"s& air and waterwa"s& pipeline and water& pipeline and roadwa"s etc. INALND CONTAINER DEPOTS *ICDs+
$CFs are dr" ports at a distance far awa" from the shoreline and handle all the import e'port formalities. *his a large warehouse where e'porter !oo%s his cargo and completes all e'port formalities. *hen $CF mo+es the containers to natural seaport. *he customs department& shipping companies& handling agencies& !an%s& customs house agents and clearing and forwarding agents are all !ased at the $CFs. 9dvanta%es ;
1. Connect ma0or ports to hinterland i.e. land depri+ed of natural deep water ports !ecause of geograph". ,. andle containers from road and rail to a container "ard. /. 7erforming acti+ities li%e weighing& inspection of scales& damages and safet" stic%ers. . =acilitate customs clearance and e'port import formalities. 4. $ncrease the e'port potential of industries in the hinterland and also simplies import of goods !" hinterland.
6. Fecongest ma0or ports. PN7* is directl" connected to the following $CFs< L"#&i((
er((
N(g4"r
7(#i!"#er Chinchwad C&e(i Paipur
Podhpur
Iaroda Mulund
B(g(ore
Mirage De&i
Sandla S(!(r0(ti
)#er(!(#
P"e
Vis(&(4(t(0
-"r(#(!(#
o(t( 7itampur
TRANSPORTATION NET7OR OPTIONS
1. 1. Direct S&i44ig 8 =rom shipper directl" to retailers. ,. 2. Direct S&i44ig "sig -i R"s 6 ingle supplier to a num!er of retailers& deli+er li%e a mil%man. /. $. A S&i44ig vi( CDC 6 uppliers send the supplies to Central Fistri!ution centers and distri!ution center caters the needs of retailers. . %. A S&i44ig vi( CDC 8sig -i R"s 6 uppliers send the supplies to CFC and from CFC to large num!er of suppliers. 4. ,. T(iore# Net@or ' *ailor made networ% as per the compan" needs. 2ne model for some logistical mission and another model for some other mission.
-i R" Mil% Run is a transportation networ%& in which uppliers send the supplies to CFC and from CFC to large num!er of suppliers. Mil% Run reduces out !ound transportation costs !" consolidating small shipments. CROSS DOCING ($ov% 2#
Cross Foc%ing is a new logistics techni#ue used in the retail and truc%ing industries which means recei+ing goods at one door and shipping to the other door almost immediatel" without putting them into storage. 9dvanta%es ; 7=ectives
1. $t helps to reduce operating costs !" eliminating handling and storage of products. ,. $t helps to reduce in+entor" le+el !" direct shipment to the customers. /. $t helps to increase sales !" pro+iding on time deli+er" to the customers. . $t encourages the electronic communication !etween the supplier and retailers. TER-INAL DELAYS
Fela"s which ta%e place at terminals due to documentation pro!lems& congestion& poor unloading facilities etc. $nuence +ehicle turnaround time. Adds cost to transportation& as +ehicle is unutili3ed. E.g. at sea port or airport cargos can get stuc%. i##e Cost o3 Tr(s4ort(tio (May /#
CAPTER 7AREO8SES
6
TRANSPORTATION
TO
8!((ce Tr(s4ort(tio Pro!e0 (May /#
A transportation pro!lem is !alanced if the rim re#uirements are same& i.e. the sum total of the plant capacities is e#ual to the sum total of the mar%et re#uirements. Iut in most of the practical life pro!lem !oth are not same& i.e. it is un!alanced transportation pro!lem. $n this situation& the un!alanced pro!lem is to !e !alanced for solution purpose !" introducing a dumm" plant or a dumm" mar%et as the case ma" !e. CAPTER 1 6 LOGISTIC INFOR-ATION SYSTE- *LIS+ De5itio o3 LIS
L$ is an interacting structure of people& e#uipment and procedures that together ma%e rele+ant information a+aila!le to the logistics manager. L$ is a part of Management $nformation "stem.
O!ectives o3 LIS 1. 2!taining correct and prompt information. ,. Maintaining and updating the information collected. /. Communicating the information to all the concerned as and when re#uired. . *a%ing proper decisions at all le+els in the organisation. 4. upporting planning function. I04ort(ce o3 LIS
1. L$ is a %e" element to de+elop logistical competence. ,. L$ integrates +arious acti+ities of logistics. /. L$ is one of the three pipelines managed !" logistical management. . L$ is important to customer ser+ice. 4. L$ underwent re+olutionar" change due to changes in technolog". Pri0(r) Activities o3 LIS
1. Recei+ing& anal"sing& processing and storing related information within organisation. ,. Communication of data to the decision ma%ers. /. Communication of information to the supplier& ser+ice pro+iders and customers. . Receipt of feed!ac% from e'ternal sources (supplier& ser+ice pro+iders and customers) I3or0(tio F"ctio(it)
*he organisation has diDerent functional le+els. Each le+el has diDerent needs of information.
1. 2perating le+el 8 $t is the lowest le+el. Benerall" data gets generated here which is transferred to further le+el to ta%e decision in the form of information. ,. Control le+el 8 ere the eDorts are to !e ta%en to impro+e e;cienc" of the operating le+el !" anal"sing the information. /. Fecision le+el 8 ere the manager has to e+aluate the information to see the operations and customer needs are e#ualised . 7olic" le+el 8 Manager has to decide the polic" on the !asis of factors warehouse& transportation s"stem etc. Eectroic D(t( Iterc&(ge *EDI+ ($ov% !#
EF$ is the electronic& computertocomputer transfer of standard !usiness documents !etween organisations. EF$ is e'tensi+el" used in $L$ ($ntegrated Logistics $nformation "stem) to enhance the speed& timeliness and accurac" of the information. EF$ has replaced the traditional transmission of documents such as mail& fa' etc. Bee5ts o3 EDI
1. Breater accurac" due to reduction in manual processing. ,. =aster speed in order processing. /. Reduced clerical eDorts in data entr"& ling& mailing and related tas%s. . Reduced in+entor" due to reduced order c"cle time. 4. $ncreased producti+it" though faster information transmission. 6. $mpro+ed channel relationships !" reducing num!er of indi+iduals in+ol+ed in data entr". 9. Fecreased operating cost !" reduction of la!our and material cost associated with paper wor% and telephone fa' e'penses. :. $ncreased a!ilit" to compete internationall" Str(tegic Roe o3 IT i Logistics -((ge0et ($ov% ', May "#
CAPTER 11 6 LOGISTIC PLANNING PROCESS
Roe o3 P(ig i Logistics -((ge0et ($ov% 2# •
•
•
•
Role of planning is central to logistics management Mission of logistics management is to plan and coordinate all those acti+ities necessar" to achie+e desired le+els of ser+ice and #ualit" at lowest possi!le cost. Logistics is fundamentall" a planning concept that see%s to create a framewor% through which needs of the mar%etplace can !e translated into a manufacturing strateg" and plan. *o match the changing en+ironment in the logistics due to the changes in the mar%ets& competitors& suppliers and technolog"& there is a need for a s"stematic planning.
CAPTER 12 DECISIONS
6
FACILITIES
F(ctors 3or Seectio o3 Loc(tio
1. A+aila!ilit" of Land ,. Manufacturing =acilit" /. *a'ation and Regional Concession . Access to *ransport 4. 7ower& =uel& ater 6. Climate 9. A+aila!ilit" of or%force :. Hnion Acti+ities G. 7olitical 7ressure 1@.
Ian% and =inance =acilities
11.
Raw Material
1,.
afet" and ocial ecurit"
LOCATION
1/.
upporting $ndustries
1.
Mar%et ite
14.
7eople Culture and ite
CAPTER 1$ 6 INVENTORY CONCEPT
DEFINITION OF INVENTORY $n+entor" ma" !e dened as usa!le !ut idle resource. $n+entor" management is the 0o! !asicall" done for maintaining the stoc%.
NEEDS OF INVENTORY 1. $mootin% out irre%ularities in supply: $n+entor" of raw materials pro+ide a !uDer to o+ercome the pro!lems of uncertainties in supplies such as dela"ed deli+eries and suppl" of short #uantities !" +endors. ,. &ealin% -it uncertainty o" demand: *he customer demand ma" increase suddenl"& in such case an in+entor" of nished goods will act as a !uDer against the uncertainties in demand. /. 1uyin% or producin% in atces: hen the demand for a good does not re#uire its continued production& it is produced in !atches. *hus during the period when the good is not !eing produced& demands are met from the in+entor" which is accumulated from the !atch production. . /o meet seasonal demand: hen the demand is seasonal it ma" !ecome economical to ha+e in+entor" during period of low demand to ease the strain of pea% period demand. 4. /o tae 4uantity discount: $n+entories ma" also !e !uilt up ta%e ad+antage of price discounts& as hedge against anticipati+e price rise in the future. 6. /o maintain continuity in production process: $t is necessar" to maintain inprocess in+entories or pipeline in+entories at diDerent stages in a manufacturing process to continue production process smoothl" without an" wor% stoppage and dela".
9. $toc uilt up "or $cale o" economy: $n+entories ma" also !e maintained to get the econom" of scale so that total cost due to ordering& carr"ing and !ac%logging are minimi3ed. TYPES OF INVENTORY *. Ra- Material Inventory
Raw Material $*R T
Annual use of RM
A+erage RM 5. >or#in#rocess Inventory
or% in 7rocess $*R T Cost of Manufacture A+erage $7 3. 2inised oods Inventory
=inished Boods $*R T
Cost of 7roduct old Uearl"
A+erage $n+entor" of 7roduct at Cost '. $pares and 7ter Indirect Materials PIPELINE INVENTORY ($ov% 0#
$n an" manufacturing organi3ation the material undergoes diDerent stages of processing from the supplier place to the !u"ers place. *hese stages are called pipeline. *here is no pro!lem when material mo+es from one department to another& !ut material waiting an"where is not good. $ndian industries ha+e longer pipeline& as the organi3ation is more sophisticated. Longer the pipeline& longer the time material waits. *he +alue is added on the material onl" at stages where it is !eing processed& !ut no +alue is added where it waits. o it is referred as waste. torage of material at an" stage& inspection of an" %ind& pac%ing& re0ection& rewor% and leadtime etc. are the operations to !e eliminated. *hat is e'actl" done in the process of P$*. *hese acti+ities add to the cost of product and not to the +alue of the product. *he customer is not willing to pa" for these. $n the pipeline there are two t"pes of periods in+ol+ed< 1. 7eriod in which the material is under the process on machine. -alue addition acti+it".
,. *otal period when material is %ept in an" form O place in the organi3ation. *he ratio of I to A should !e 1& which is ideal& !ut it ma" !e di;cult. LEAD TI-E ($ov% ', May !#
Lead *ime is an inter+al !etween placement of order and deli+er" of material. $t is a measure of logistical performance. Logistic manager should ensure minimum leadtime so that the material arri+ed as soon as possi!le. Local supplier needs the shortest lead time while the out of town supplier re#uires much longer lead time. Leadtime also +aries from supplier to supplier and e+en same supplier will ha+e diDerent lead times for a gi+en item at diDerent times. -ariations in lead are one of the most di;cult logistical pro!lems. RE'RODER LEVEL *ROL+ ($ov% !#
R2L is that in+entor" le+el at which an order should !e placed to replenish the in+entor". R2L T Lead *ime ' A+erage Hsage $f safet" stoc% is present then reorder le+el !ecomes< R2L T afet" stoc% V lead time consumption SAFETY STOC (May "#
afet" toc% is a component of a+erage in+entor" that ta%es care of short term uctuations in leadtime and consumption. 2actors 9?ectin% !evel o" $a"ety $toc:
1. -alue of $tem< afet" stoc% for high +alue items need !e low. ,. Criticalit" of $tem< afet" stoc% for critical items that aDect the !usiness need !e high. /. Lead *ime< Longer the leadtime more is the chances of uctuation and hence more is the re#uirement of safet" stoc%. . Num!er of uppliers< $f more num!er of suppliers is a+aila!le for an item& there is no need to %eep high le+el of safet" stoc%& as it can !e procured from an" alternate source.
4. A+aila!ilit" of su!stitutes< Lesser safet" stoc% can !e %ept for items where su!stitutes are easil" a+aila!le. 6. Ris% of Feterioration< $t is !etter to ha+e low safet" stoc% where the cost of deterioration is more then the cost of stoc% out. Roe o3 Fiis&e# Goo#s Ivetories i P&)sic( Distri!"tio S)ste0 (May "# Ivetor) F"ctio(it) (# Prici4es (May ', $ov% '#
CAPTER 1% 6 ANALYSIS OF INVENTORY SELECTIVE INVENTORY CONTROL
Each item of in+entor" has its own criteria of importance& thus depending upon the t"pe and importance of the in+entor" there will !e +ariations in the controls emplo"ed. *his is the selecti+e control of in+entories. Metods o" $elective Inventory Control ($ov% ', May !#
1. AIC Anal"sis ,. -EF Anal"sis /. =N Anal"sis . 75 "stem ABC ANALYSIS ($ov% 2#
7rinciple< *he !asic principle of AIC Anal"sis is >1@ percent of items hold 9@ percent of +alue?. 5nder 46* 4nalysis) •
A categor" items account for 1@ of item 9@ of the +alue.
•
I categor" items account for ,@ of item ,@ of the +alue.
•
C categor" items account for 9@ of item 1@ of the +alue.
Mecanism: *he steps in+ol+ed in AIC Anal"sis are as follows
1. Calculate the Annual Consumption -alue (AC-) for each item !" multipl"ing the num!er of units with the unit price of the item. ,. Arrange all the items in the order of descending se#uence of AC-. /. Calculate the cumulati+e AC- for each item. . Calculate the cumulati+e percentage AC- for each item. 4. Locate the items in the list for which cumulati+e AC- is 9@. Categories all the pre+iousl" listed items upto this item as A categor" item. 6. Locate the items in the list for which cumulati+e AC- is G@. Categories the items listed after A categor" item upto this item as I categor" item. 9. Categories the remaining items as C categor" item. 9dvanta%es: (9pplication in Inventory Mana%ement) ($ov% &#
1. $t helps to ha+e a selecti+e in+entor" control. ,. afet" stoc%s are %ept low for the high +alue items to reduce total in+entor" costs. /. afet" stoc% is %ept much higher for low +alue items to pre+ent stoc% outs. &isadvanta%es:
1. $t should !e re+iewed periodicall" so that changes in prices and consumption are ta%en into account. ,. $mportance is gi+en onl" to the annual consumption +alue of items and not its criticalit" for the production. /. $t does not appl" to the dependent demand in+entor"& which is controlled !" Material Re#uirement 7lanning (MR7).
VED ANALYSIS rinciple: -EF Anal"sis classif" items into three categories depending upon
the conse#uences of material stoc% out when demanded.
Hnder -EF Anal"sis< •
•
•
-ital items are the most critical which can cause stoppage of the production& if not a+aila!le& hence should !e a+aila!le in stoc% at large. Essential items are #uite critical whose nona+aila!ilit" ma" not ad+ersel" aDect productionJ hence a low stoc% of essential items should !e a+aila!le. Fesira!le items do not ha+e +er" serious conse#uences if not a+aila!le !ut can !e stoc%ed.
FSN ANALYSIS rinciple: =N Anal"sis classif" items into three categories depending upon
the past consumption pattern. $n+entor" policies and models for these three categories ha+e to !e diDerent. Hnder =N Anal"sis< •
•
•
=ast mo+ing items are those which drawn fre#uentl" from stores. low mo+ing items are those which drawn onl" once or twice a "ear from stores. Nonmo+ing items are those which not at all drawn for the past two "ears from stores.
INVENTORY CONTROL SYTE- (May !# 1. Fie# Or#er H"(tit) S)ste0 *H'S)ste0+
ere the #uantit" to !e ordered is wor%ed out as the E25 and the minimum stoc% le+el is also wor%ed out. hen the stoc% in hand reaches this le+el& an order is placed for # #uantit" e#ual to the E25. Fe(t"res o3 H'S)ste0
1. Reorder #uantit" is alwa"s the same& which is e#ual to the E25 ,. *ime inter+al !etween the orders +aries. /. Reordering is done when the stoc% in hand is e#ual to safet" stoc% plus the leadtime consumption.
. Minimum in+entor" will !e e#ual to the safet" stoc%. 4. Ma'imum in+entor" will !e e#ual to the safet" stoc% plus order #uantit". 6. *his s"stem is used for low +alue items where orders are placed infre#uentl". 2. Fie# Or#er Perio# *P'S)ste0+
ere the stoc% in hand is re+iewed at periodic inter+als and an order is placed which +aries with le+el of stoc% in hand. $t is also %nown as >7eriodic Re+iew "stem? and >2rder C"cling "stem?. Fe(t"res o3 P'S)ste0
1. Re+iew period is decided to minimi3e the sum of annual procurement cost and annual in+entor" carr"ing cost. ,. 5uantit" ordered is decided depending upon the stoc% in hand& so that it will ta%e care of the re#uirement till the ne't re+iew period. /. *he inter+al !etween two orders is 'ed. . *his s"stem is used for high +alue items needing a strict control. CAPTER 1, 6 ECONO-IC ORDER H8ANTITY
ECONO-IC ORDER H8ANITY ($ov% 2, '#
E25 is the techni#ue& which sol+es the pro!lem of the in+entor" management. $t is the order si3e at which the total costJ comprising ordering cost plus carr"ing cost& is the least. *he cost of carr"ing in+entories is called >$n+entor" Carr"ing Cost? and the cost of purchasing and processing the order is called >2rdering Cost?. 2ne of the most important goals in materials department is to stri%e the most economic !alance !etween $CC and 2C in determining order #uantit". *he graph shows the relation of the $CC and 2C. As the order #uantit" increases the ordering cost reduces. hile the $CC goes on increasing with increase in the order #uantit". Iut at a certain stage it is e#ual to the 2C. *his is shown !" the crossing two lines& this is %nown as Economic 2rder 5uantit" (E25). For0"(
5 T WX,IAX 7C 5 T 2rder #uantit" A T Annual consumption I T 2rder Cost 7 T 7rice per unit C T Carr"ing cost percent * T *otal ordering cost Ass"04tios o3 EOH ($ov% 2#
=ollowing assumptions are implied in the calculation of E25 1. Femand of the material occurs uniforml" o+er the period at a %nown rate. ,. Feli+er" of the materials is instantaneous. /. 7rice per unit is 'ed and is independent of order si3e. . 2rdering cost is 'ed and does not +ar" with the order si3e. 4. Carr"ing cost +aries directl" and linearl" with the order si3e and e'pressed as percentage of a+erage in+entor" cost. 6. Leadtime i.e. inter+al !etween placing order and recei+ing in+entor" is 3ero. 9. Materials can !e procured in an" desired #uantit"J there is no an" restriction of #uantit". :. Materials ha+e fairl" long shelf lifeJ there is no fear of deterioration or spoilage. Li0it(tios *Nov. 2+
o3
EOH
1. *he assumptions of E25 ma" not true in real life& thus limiting the use of E25 model.
,. 7rice of material ma" not remain same throughout the "ear. /. *here can !e dela"s in real time situation in placing orders. . =ormula presumes that the usage of materials is !oth predicta!le and e+enl" distri!uted. hich ma" not !e possi!le. 4. 2rdering cost +aries from commodit" to commodit" and the carr"ing cost can +ar" with the compan"s opportunit" cost of capital. 6. 2ften in+entor" carr"ing cost and ordering cost cannot !e identied accuratel" and sometimes cannot !e e+en identied. 9. Calculation of E25 is time consuming and e'pensi+e. $n man" cases& the cost of calculating E25 e'ceeds the sa+ings made !" !u"ing that #uantit" EOH V=S JIT (May /#
CAPTER -ETODS
19
6
INVENTORY
CONTROL
J8ST IN TI-E P$* is an organi3ed approach to introduce in manufacturing c"cle timelines& #ualit"& producti+it"& e'i!ilit"& and wor% simplication and waste reduction. *his is a techni#ue from *5M acti+it". Iasicall" this is waste control methodJ it is not the in+entor" control techni#ue. TECNIH8ES 8SED IN JIT 1. (!( 6 A Itegr(te# JIT S)ste0
San!an stands for Sancard& Iansignal. San!an concept suggest that a supplier or the warehouse should onl" deli+er components to the production line as and when needed& so that there is no storage in the production area. $n this s"stem& wor%stations located along production lines onl" produce or deli+er desired components when the" recei+e a card and empt" container. 9dvanta%es o" @anan rocess:
1. $t is a simple and understanda!le process. ,. 7ro+ides #uic% and precise information.
/. 7ro+ides #uic% response to changes. . Low costs associated with the transfer of information. 4. A+oids o+er production. 6. Minimi3e waste. 9. Felegates responsi!ilit" to line wor%ers. 2. Gro"4 Tec&oog) *GT+
B* is a modular manufacturing s"stem& which in+ol+es organi3ing machineries so that related products can !e manufactured in a continuous ow. ere& products ow smoothl" from start to nish& parts do not wait for mo+e. *his can !e contrasted to a t"pical production s"stem& where machines are grouped !" function and products mo+e from one function to another and !ac% again. *his results in long waiting times !etween procedures. Bee5ts o3 GT
1. Reduction in wor% in process ,. Reduction in o+er all stoc%s of material /. Reduction in o+erdue orders . $ncrease in out put per emplo"ee 4. implication of material ow s"stem. 6. $mpro+ement of production and planning control 9. $mpro+ement in material handling $. S-ED *Sige Digit -i"te Ec&(ge Die+
MEF is a techni#ue for performing setup operations in num!er of minutes e'pressed in a single digit. Mr. hingo re+olutioni3ed the MEF method since 1G4@ in Papan. E.g. Iottling industries sometimes spend more than ,@ of their planned production time on changeo+ers. *hese setup and changeo+er times can !e reduced signicantl" when the changeo+er MEF s"stem is applied. %. JIDOA *A"to0(tio+
P$F2SA is the concept of adding an element of human 0udgment to automated e#uipment. o that the e#uipment can identif" unaccepta!le items and the automated process !ecomes more relia!le. P$F2SA means not allowing pro!lems to pass from one wor%station to the ne't. uch that the production of a defecti+e part is detected immediatel" and machine responds !" stopping and re#uesting help. E.g. $n *o"ota power loom the shuttlecoc%s would stic% and create defects in the cloth !eing produced. *he *o"ota loom incorporated a simple stopper that was acti+ated !" a stic%ing shuttlecoc%. *he operator could stop machine when the shuttle would stic%. O!ective o3 JIDOA
1. Ensuring 1@@ #ualit". ,. 7re+enting e#uipment !rea%downs. /. Hsing manpower e;cientl". ,. Tot( Pro#"ctive -(ite(ce *TP-+
$n an" factor" it is necessar" to run all the e#uipments on continuous !asis to get ma'imum out put. $t is found that generall" that does not happen. *here is loss if an" tool or machine is not in use. Fue to an" reason li%e material not a+aila!le or the machine is not wor%ing. $n order to a+oid such losses *7M is implemented. =or this purpose following steps should !e ta%en. 1. All the reason for the loss of e#uipment should !e a+oided. ,. 7re+enti+e Maintenance program is to !e made. /. 2perator should !e gi+en training to maintain his e#uipment when re#uired. . Autonomous maintenance !" the operator is to !e done. 9. Po()oe *-ist(e Proo5g+
7o%a"o%e in+ented !" higeo hingo in the 1G6@s. *he term >7o%a"o%e? comes from the Papanese words >po%a?(mista%e) and >"o%e? (pre+ent). 7o%a"o%e suggest that people are human and cannot !e e'pected to do e+er"thing li%e a machine& e'actl" the same each time. *he !asic principles of 7o%a"o%e ad+ocate de+eloping tools& techni#ues and processes such that it is impossi!le or +er" di;cult for people to ma%e mista%es. E.g. a plate that must !e screwed down in one orientation onl" could ha+e the screw holes in nons"mmetrical positions so that it can onl" !e screwed in the right orientation.
Ve#or -((ge# Ivetor) (May "#
Management of in+entor" is passed on +endor. 7urchase order is redundant. trong mutual sta%e in each others !usiness is a !asic re#uirement. $t is !enecial to !oth customer and supplier. -et&o#s 3or I04rovig Ivetor) -((ge0et Per3or0(ce ($ov% !# CAPTER 1: 6 P8RCANING AND PROD8CT SCED8LING DECISIONS
PRINCIPLES OF P8RCASE *:'R R8LE+
*he suppl" chain management is controlled !" the purchase function. *he purchase function is assuming the following se+en principles %nown as 9Rs. *he Rule of se+en Rs means& !u"ing the material 1. at right price ,. of right #ualit" /. in right #uantit" . at the right time 4. from the right source 6. at right place 9. with right mode of transport *his is !asic factor in logistics management. $t is the lin% !etween the production unit and the customer directl" or through the warehouses. Logistic cost !ased mainl" on customer ser+ice. Ietter ser+ice and supplies pro+ides economic ad+antage to the customer. *he suppliers logistic manager has to !alance the high ser+ice le+el that the customer desires and the !elief that the supplier ma" gain from possi!le increased sales against the cost of pro+iding that ser+ices. ORDER PROCESSING CYCLE (May "#
1. Gettig Re"isitio 3ro0 8ser De4(rt0ets *he department in need of a material presents a completed re#uisition form. uch re#uisition form includes details li%e department name& re#uisition reference num!er& description of the material& #uantit" re#uired& suggested supplier& purpose and the appro'imate date when the material will !e re#uired& followed !" the name and signature of the person preparing and authori3ing the re#uisition form. ,. Se#ig E"iries 3or H"ot(tios 7urchase department in+ite suppliers to #uote the rates materials. =or this purpose a standard format is used which is similar to a purchase order& e'cept that words such as >this is onl" a re#uest for #uotation? or >this is a not a purchase order? are printed so as to ensure that the supplier does not construe the re#uest for #uotation as a rm order. /. Negoti(tig @it& Ve#ors to Fi t&e Price $f the presented cost does not match the compan"s !udget& the purchasing department can negotiate with the seller price and terms are met with. Another method that can !e adopted here is competiti+e !id method. *his method is widel" used !" go+ernmental purchasing departments !ecause of statutor" re#uirements !ut also applied !" industrial purchasing department. . Pre4(r(tio o3 P"rc&(se Or#er (# P(cig t&e Or#er a+ing selected the supplier and the rates agreed& the !u"er places the purchase orderJ e'pressing terms and conditions. All orders should !e in writing and should !e on the !u"ers purchase order to a+oid possi!ilit" of le+el di;culties. hen order is placed !" telephone it is the practice to conrm the order !" sending the supplier a regular order. 4. Foo@ 84 @it& Ve#or After the order has !een placed& the purchasing department has the responsi!ilit" of followingup of the order. =ollowup essentiall" holds the supplier to his promise of deli+er". A followup procedure is must when the costs or ris%s resulting from dela"ed deli+eries or nondeli+eries are greater than the cost of followup procedures. 6. Recei4t o3 -(teri(? Is4ectio (# Storig t&e -(teri( *he material should !e inspected properl"& chec%ed for its #ualit" as well as #uantit". $n addition to this& it should !e reser+ed in a proper room in a disciplined manner& so it is eas" to reco+er it at an" point of time. 9. -(ite(ce o3 Recor#s 7urchase orders re#uisition and similar other legal contracts and documents should !e preser+ed. ince the"
constitute the authorit" on which the purchasing department had ta%en its actions to a gi+en item. S8PPLIER SELECTION (May /#
hile selecting the suppliers& the following factors must !e ta%en into account< 0% Lead times and on7time delivery) •
hat leadtime the supplier can pro+ide.
•
hat procedures does the supplier ha+e for assuring ontime deli+er"K
•
hat procedures does the supplier ha+e for correcting deli+er" pro!lemsK
2% rice) •
Are prices gi+en reasona!leK
•
$s the supplier willing to negotiate pricesK
•
$s the supplier willing to engage in a 0oint eDort to reduce costs !" +alue anal"sisK
&% 8ualities and 8uality 4ssurance) •
•
hat procedures does the supplier ha+e for #ualit" control and #ualit" assuranceK 7ro!lems and correcti+e actions for #ualit" are considered or not.
'% roduct or +ervice *hanges) •
•
ow much ad+ance notication does the supplier gi+e when changes are made in products or ser+icesK *o what e'tent does the !u"er ha+e inputs regarding changesK
/% 9le:i;ility) •
ow e'i!le is the supplier in handling changes in #uantit"& deli+er" schedules and product or ser+ices design changes.
!% eputations and 9inancial +ta;ility) •
hat is the reputation of supplierK
•
ow nanciall" sta!le is the supplier
"% Location) •
$s the supplier located near!"K
S8PPLIER EVAL8ATION (May /#
=or rating the suppliers& following factors should !e considered< 0% elia;ility in all 9ields) •
$s the supplier reputa!le& sta!le and nanciall" strongK
•
$s the supplier going alongwith product de+elopmentK
•
$s the suppliers competiti+e strength pro+ed !" past e'perienceK
2%
Can he pro+ide assistance as to the application engineeringK
•
Can he pro+ide assistance as to the anal"tical engineeringK
•
Can he pro+ide design assistanceK
&% *onvenience to deal with) •
Can he help to reduce the ac#uisition costK
•
$s he #ualied to help in sol+ing di;cult pro!lemsK
•
Foes he pac% his product con+enientl"K
'% 4vaila;ility) •
Foes he assure deli+er" in timeK
•
Are his stoc%s locall" a+aila!le at short timeK
•
Can he plan his suppl" to minimise the in+entor".
/% 4fter7+ales +ervices) •
Foes the supplier ha+e a ser+ice organisationK
•
$s an emergenc" ser+ice a+aila!leK
•
Are parts a+aila!le when neededK
6. +ales 4ssistance) •
Can the supplier help in !uilding mutual mar%et.
•
ill he recommend our productsK
•
Foes his products enhance the appearance of our products.
O8TSO8RCING 2utsourcing is the contracting compan"s !usiness process to outside ser+ice pro+iders for increasing rms prota!ilit" !" primaril" reducing o+erall operating cost and focusing on core competencies. O!ectives o3 O"tso"rcig
1. *o reduce operating costs. ,. *o focus on core competent functions. /. *o ac#uire new s%ills. . *o a+oid la!our pro!lems. 4. *o a+oid nancial ris%s 6. *o impro+e e'i!ilit" in functions. 9. *o enhance mar%et credi!ilit". :. *o impro+e o+erall mar%et performance. rocess o" 7utsourcin% (May "# CAPTER 1> 6 LOGISTICS ORGANISATION
Logistics Iter3(ce @it& -(retig ($ov% 0#
2ut!ound logistics pla"s an important role in selling the product of the compan" through the distri!ution s"stem. Relation of logistics with 7s of mar%eting can !e e'plained as follows< 1. rice: Logistics ena!les mar%eting to #uote a competiti+e price !" pro+iding discount opportunities on account of transportation cost sa+ings. Logistics Management has to !alance in+entories to tac%le anticipated pricetriggered sales. ,. roduct: i3e and shape of the product are #uite important for logistics. eightO+olume ratio pla"s +er" important role in deciding economics of logistics. /. romotion: Logistics Manager and Mar%eting Manager need to wor% closel" in deciding promotional strategies for the product in order to manage in+entor" needed to match sales triggered !" promotional acti+ities in the mar%et. . lace: Mar%eting decision to distri!ute the product directl" to retailers or through wholesalers has a great impact on logistical operations. Retailers demand often re#uires time sensiti+e transportation methods& which are e'pensi+e. RESPONSIVE ORGANISATION ($ov% !#
*he competiti+e scenario at mar%etplace necessitated the logistics organisation to !e responsi+e. $t see%s to put customer at the center of !usiness and design new s"stems and procedure to impro+e the response. Logistics organisation should change its s"stems< 1. 9rom function to process) emphasis on managing processes rather than managing resources. ,. 9rom pro=t to performance) emphasis on e;cient performance& prot will follow. /. 9rom products to customers) emphasis on customer +alue and not on !rand +alue. . 9orm transaction to relationship) emphasis on longterm relationships with customer and supplier rather than 0ust ha+ing !usiness transactions. CAPTER 1 6 LOGISTICS COSTING AND PERFOR-ANCE A8DITING
TOTAL COST ANALYSIS ($ov% 2#
*he e'penses in+ol+ed in logistics acti+ities are< 1. 7rocurement Cost ,. $n+entor" Cost /. arehousing Cost . Material andling Cost 4. 7ac%aging Cost 6. *ransportation Cost 9. Fistri!ution Channel Cost :. Customer er+ice Cost G. Communication and $nformation 7rocessing Cost Activit) B(se# Costig V=S -issio B(se# Costig (May '#
Activit) B(se# Costig ($ov% 2, May !, "#
Acti+it" !ased costing is !ased on the concept that the e'penses need to !e assigned to the +alue adding acti+ities rather than to !udget unit. $t suggests that !usiness acti+ities are made up of a series of acti+ities that consumes costs. 9dvanta%es (May !#
1. $t pro+ides !etter operational performance. 1. $t pro+ides information a!out cost dri+ers and the relationship of these dri+ers with resource consumption. ,. $t gi+es more accurate picture of the e'penses and helps managers to ma%e strategic decisions a!out costs. /. $t identies the acti+ities to !e impro+ed in order to reduce the cost . $t simplies the internal audit operations
-issio B(se# Costig ($ov% 2, &, !# -issio !(se# costig sees to i#eti3) "i"e costs t&(t (re geer(te# (s ( res"t o3 s4eci5c ogistic (ctivities @it& ( 0issio to (c&ieve cert(i o!ectives i ( s4eci5c 0(ret. It is t&e ogistic costig @&ic& c( i#eti3) t&e tot( costs o3 0eetig ( #esire# 0issio. St(ges o3 I04e0etig -BC
1. Fene the customer ser+ice segment ,. $dentif" the specic resource use to support that customer segment /. $dentif" the factors that produce +ariations in the cost of ser+ice. . Attri!ute acti+it" costs !" customer segment. L2B$*$C 7ER=2RMANCE MEAHREMEN* 7erformance measurement is a process of monitoring and e+aluating acti+ities to determines their conformance to the re#uirements. OBJECIVES (May !, $ov% 2, &, !#
1. Monitorin% Measures: *o trac% historical logistics performance for reporting to management and customers mainl" on ser+ice le+el achie+ed and logistics cost components. $t ma" !e monitored dail"& wee%l"& or monthl" depending upon the +olume and criticalit". ,. Controllin% Measures: *o trac% ongoing performance and rene a logistics process in order to !ring it into compliance when it e'ceeds control standards. *o compares the actual performance with the set standards. E.g. transportation damages trac%ing. $f a s"stem can periodicall" report the product damage& logistics management can identif" the cause and ad0ust the pac%aging and loading process as needed. /. &irectin% Measures: *o moti+ate the warehouse or transportation personnel to enhance their performance. E.g. pa" for performance practices to encourage achie+ing higher le+els of producti+it". hen such directed measures are used& it is important that !oth positi+e and negati+e performance to !e measured. Iter( Per3or0(ce -e(s"res ($ov% &#
$nternal performance measures focus on comparing acti+ities and processes to pre+ious operations.
+lements (May "# 4> 9inancial Measures)
1. 0% ?perating *ost) $t reects the e;cienc" of eDecti+eness of the logistics s"stem. $t is measured in terms of percentage of sales +alue. 1. eturn on @nvestment) $t indicates whether the in+estment made in logistical assets li%e warehouse& material handling etc. is pa"ing di+idends. 6> $on 9inancial Measures)
1. *ustomer +ervice) $t e'amines rms capacit" to satisf" customer. $t is measured !" ll rate& stoc% out& or c"cle time etc. ,. roductivity) $t is a relationship !etween the goods and ser+ices produced and the amount of input utilised !" the s"stem. /.
*he main o!0ecti+e of e'ternal performance measures is to understand& maintain& and monitor customer perspecti+e. +lements (May "#
1. *ustomerAs erception) Customers feed!ac% on deli+er"& relia!ilit"& and responsi+eness of the compan" needs to !e regularl" o!tained to achie+e competiti+eness in logistical operations. ,. *ompetitorAs erformance) Customers feed!ac% pro+ides the compan" a comparati+e anal"sis of ser+ice le+el and +alue added ser+ices oDered !" its competitors. /. 6enchmarBing) BENC-ARING ((May '#
Ienchmar%ing is a process of measuring organisations o+erall performance against the other organisation from the same industr" or other industries. $t is a part of e'ternal performance measurement. istor)
$n the late 1G9@s hen the Papanese competitors Canon and Mitsu!ishi etc. entered into H mar%et& the Yero' compan" pioneered the process of !enchmar%ing its manufacturing costs against these competitors. *his concept has !ecome widel" accepted in the late 1G:@s. Ste4s i Bec&0(rig *-() :+
1. Identi"y te items to e encmared and dene them categoricall" i.e. ne+er ta%e !road su!0ect area. ,. Create a encmarin% team and dene rules and responsi!ilities of each mem!er. /. /race out te encmar partners& who ma" !e a worldclass !enchmar% leader& articles from maga3ines or newspapers& pu!lications of consultancies& trade literatures. . Identi"y te data collection process from diDerent sources such as postal sur+e"s& direct inter+iews& #uestionnaire& and research through $nternet etc. 4. 2inalise te encmar study & after anal"3ing all the data discarding the irrele+ant and inaccurate data. Compare "our compan"s strength and wea%nesses with those of !enchmar%ing partners. $f "ou nd an" performance gap !etween "ours and the !enchmar%ing partners& ll that gap. 6. Implement te ndin%s into the tas% force of predetermined operation& function or ser+ice. Ste4s i Per3or0(ce A44r(is( ($ov% 0# G"i#eies 3or Per3or0(ce -e(s"re0et (May '# F(ctors Aectig Per3or0(ce -e(s"re0et ($ov% '# CAPTER 2 6 7AREO8SES
DEFINITION OF 7AREO8SING ($ov% !#
arehouse is a location pro+ided with ade#uate facilities& where !ul% shipments are recei+ed from production centers& which are then !ro%en into small order si3e for shipment to the customers as per their re#uirement. F8NCTIONS OF 7AREO8SING *7(re&o"sig O4er(tios+ ($ov% 2#
1. Recei+ing nished goods from production centers ,. 7erforming #ualit" and #uantit" chec%s /. orting goods at specic locations . 7ac%ing the products for e'ecuting customers order 4. hipping goods !" selected mode of transport 6. 7reparing records and documents of stoc%. 9. $nformation transfer to management OBJECTIVES OF 7AREO8SING (May ', /, $ov% ', !#
1. *o fulll e'pected customer ser+ice le+el. ,. *o achie+e transportation economies !" mo+ing higher +olume of goods. /. *o achie+e economies of scale in production !" accommodating additional #uantit" of produced. . *o maintain stead" source of supplies !" !alancing suppl" and demand. 4. *o pro+ide mi'ed products option to customers. 6. *o pro+ide temporar" storage of materials to !e disposed oD (re+erse logistics) 7AREO8SING DECISIONS ($ov% &#
1. *"pe of arehouses ,. Location of arehouses /. i3e of arehouses
. La"out arehouses 4. Num!er of arehouses
TYPES 7AREO8SE
OF (May 06, 0A)
1. Priv(te 7(re&o"se *hese are the warehouses owned !" the compan" for their e'clusi+e use of storing the goods manufactured or traded !" them for onward selling in the mar%et. Ad+antages< 1. Ietter control o+er storage and mo+ement of goods ,. Less chance of errors in handling the goods /. Customised design and e'i!ilit" in operations . Cost eDecti+e and economic Fisad+antages< 1. Lac% of geographical e'i!ilit" ,. Re#uires sta!le demand and high product throughput /. Re#uires initial larger nancial in+estment . as permanent lia!ilit"
2. 7(re&o"ses
P"!ic
*hese are the warehouses hired from other agencies for storing the goods for a specic period of time !" pa"ing agreed rent. E.g. Central arehousing Corporation (CC)
4dvantages) ($ov% /#
1. Benerall" located near ports and mar%et place and thus has 'ed periodic operating cost ,. Breat e'i!ilit" in location changeo+er. /. No permanent lia!ilit". . Ad0ustments as per season are possi!le. .isadvantages)
1. Lac% of e'i!ilit" in operations ,. Not suita!le for specialised ser+ices. $. Cotr(ct 7(re&o"ses
$t is a specialised form of pu!lic warehouses managed !" *hird 7art" Logistics companies for pro+iding total warehousing ser+ices !" pa"ing the agreed charges. 4dvantages)
1. Breat e'i!ilit" in location changeo+er ,. No permanent lia!ilit". /. Ad0ustments as per season are possi!le. . A+aila!ilit" of e'pert manpower and dedicated resources. .isadvantages)
1. Less control on operations ,. 7erformance of organisation depends on the performance on third part" %. Co'o4er(tive 7(re&o"ses
*hese warehouses are owned& managed and controlled !" cooperati+e societies. *he" pro+ide warehousing facilities at the most economical rates to mem!er of societ".
LOCATION OF 7AREO8SE *he primar" considerations while locating the warehouse are< 1. Cost 8 arehouse ma" !e located near production plant to reduce operating cost. ,. Customer er+ice 8 arehouse ma" !e located near mar%et to ser+e the customer well. Ste4s i Site Seectio o3 7(re&o"se ($ov% 2#
hile deciding the location of warehouse following factors are to !e considered< 1. Fesired le+el of customer ser+ice ,. Nature of product i.e. seasonal& perisha!le etc. /. 7resence of Competitors warehouse . Mar%eting oriented 8 closer to mar%et 4. 7roduction oriented 8 closer to plant 6. Cost of distri!ution to mar%et area 9. A+aila!ilit" of transportation facilities and its cost :. A+aila!ilit" and cost of !asic infrastructure i.e. power& water& gas& sewerage etc. G. A+aila!ilit" and cost of la!our suppl" 1@.
Local ta'ation le+ied !" the local authorit" in the area.
11.
7otential for further e'pansion of warehouse.
1,.
Beographical ha3ards li%e oods& earth#ua%e etc.
DESIGN AND LAYO8T OF 7AREO8SE ($ov% /# Ste4s i Desig = L()o"t o3 7(re&o"se ($ov% 2#
1. Num!er and nature of acti+ities to !e performed
1. Nature of products to !e stored ,. =re#uenc" of in and out mo+ement of the products /. torage and handling e#uipments to !e used . *otal space a+aila!ilit" 4. tatutor" re#uirements 6. afet" and securit" of people and products
N8-BER OF 7AREO8SES 2actors &ecidin% Numer o" >areouse (May ', /, $ov% '#
1. Fesired le+el of customer ser+ice ,. Nature of the products /. 7resence of Competitors warehouse . i3e of the mar%et 4. Num!er of customer and their !u"ing ha!its 6. Current and potential demand 9. *otal operating cost of warehouse SH8ARE ROOT LA7 ($ov% &, May '#
#uare Root Law states that the total in+entor" in a s"stem is proportional to the s#uare root of the num!er of warehouses. !a-: *he law determines the e'tent to which in+entor" reduces !" reducing
the num!er warehouses. 7ro+ided that the total customer demand remains constant. L T L1W X,X 1 L T *otal in+entor" in future warehouses
L1 T *otal in+entor" in e'isting warehouses 1 T Num!er of e'isting warehouses , T Num!er of future warehouses Ass"04tios
1. $n+entor" transfer from one warehouse to other is not done. ,. Leadtime for suppl" of goods is constant. /. Customer ser+ice le+el does not change from an" warehouse. . Femand le+el is well distri!uted from all the warehouses. (May /#
7AREO8SE DISTRIB8TION CENTER
arehouses !elong to organisation arehouses stores all products
an Fistri!ution center is a separate entit"
$t %eeps minimum in+entor" of high demand items. $t handles products in four stages 8 $t handles products in two stages 8 recei+e& store& pic% and ship. recei+e and ship. $t performs minimum +alue added $t performs more +alue added acti+ities. acti+ities. $t focuses on reducing operating $t focuses on ma'imi3ing the prots. costs CA7*ER ,1 8 MA*ER$AL ANFL$NB ANF 7ACSAB$NB
-ATERIAL ANDLING SYSTE-(teri( &(#ig is ( 4rocess o3 0ove0ets o3 r(@ 0(teri(s? 7IP (# 5is&e# goo#s @it&i ( 3(ciit) 0ost eKciet) (t t&e o@est 4ossi!e cost. OBJECTIVES OF -S -() 9+
*Nov. ,? Nov. 9?
1. *o achie+e e;cienc" in mo+ement of products in out of stores or warehouse.
,. *o ensure mo+ement of goods in right #uantit" /. *o ensure a+aila!ilit" of products when and where re#uired. . EDecti+e utilisation of a+aila!le space& e#uipment and manpower. 4. *o sort in!ound shipments as per precise customer re#uirements
SCOPES -S (May 06) 4ctivities performed during materials handling are as follows< 4> .uring eceipt of Materials)
1. Receipt of +ehicle at nominated area ,. Hnloading the consignment from +ehicles. /. eighing& sampling and inspection of materials. . Mo+ing the materials to assigned storage space. 4. Focumentation of materials recei+ed and sold. 6. Management $nformation "stem 6> .uring .ispatch of 9inished Coods)
1. Receipt of +ehicle at nominated area ,. eighing& counting and pac%ing of goods to !e dispatched /. Mo+ement of goods to the e'it point . Loading the products to transport +ehicles 4. Focumentation of goods dispatched 6. Management $nformation "stem
OF
CLASSIFICATION OF -S 1. -("( S)ste0
Manual handling of materials is done when the weight of materials is low and distance to !e tra+eled is less. $t is the cheapest option for material handling. E#uipments re#uired are manual trolle"s& rac%s& drawers& loc%ers etc. 2. -ec&(ic( S)ste0
Mechanical handling of materials is done when the weight of materials is high and distance to !e tra+eled is more. $t is the safest option for material handling. -(teri( (#ig E"i40ets *Nov. 1? ,+
1. 0% 9orBlift
Automated handling of materials is done when the weight of materials is +er" high and distance to !e tra+eled is more as well as the warehouse space is limited. $t is the !est and e;cient option for material handling. -(teri( (#ig E"i40ets *Nov. 1? ,+
1. +ortations) $n ortations& la!els are read and the pac%ages are deli+ered to right doc%s for onward dispatch ,. o;otics) $t is a human li%e machine that can !e programmed to perform one or series of acti+ities.
/. 4utomated +torage and etrieval +ystem) $t has following merits and demerits. Merits AR< 1. 1. Reduction in la!our cost and material handling costs ,. $ncrease in producti+it" /. $ncrease accurac" and speed of ser+ices . Reduce handling related product damage. Femerits of AR< 1. 1. $t re#uires huge initial capital cost ,. $t has perpetual maintenance costs /. $t cannot not respond to the changing needs . Fowntime of e#uipment ma" cause interruptions 4. $ts user re#uired proper training 1. 4utomatic Cuided Dehicle +ystem (4CD+#) $t is as dri+erless +ehicle that are controlled !" computers for tas% assignment& path selection& and positioning?. Ienets of AB-< same as that of AR.
PRINCIPLES OF -S 1. lannin%: All material handling should !e as a result of a deli!erate planning. ,. >or rinciple: A+oid unnecessar" mo+ement the products. /. +r%onomic rinciple: uman capacities and limitations must !e recogni3ed.
.
PACAGING 7ac%aging though an integral part of logistics& also aDect mar%eting and production function. 7ac%aging helps in promotion of products and si3e& shape& material of the pac%age aDects production la!our e;cienc". Logistic( F"ctios o3 P(c(gig (May !, $ov% !#
ow pac%aging helps reducing o+erall costs and +alue additionK 1. Containment: 7ac%aging pro+ides containment for products. ,. rotection: 7rotection from en+ironment& pilferage& shoc%s of handling and mo+ing. 1. Cue MinimiBation: Reducing the space occupied !" the product to cut the freight charge. E.g. Round containers& o+al shaped containers and s#uare shaped !ottles& etc. 1. >ei%t minimiBation: Reducing the weight of the consignment to full" utili3e the capacit" of the truc%. E.g. Li#uids are pac%ed in plastic !ottles rather than glass !ottles. ,. 9pportionment: Brouping goods into con+enient unit for distri!ution. E.g. mangos in !o'es& mil% !ags in crates.
/. =acilitating handling using< fruit 0uices in tetra pac%s& handling and consumption !" users . Convenience: =acilitating handling& storage reuse. E.g. in% cartridges for printers& reusa!le corrugated !o'es& !ottles and rell pac%s. 4. Communication: 1. Content Identication 8 7roduct& manufacturer& uni+ersal code etc. ,. /racin%: Iar codes and scanners. /. andlin% Instructions: =ragile& *his side up& temperature restrictions& en+ironment concerns& potential dangers etc Cos"0er Oriete# P(c(gig V=S Logistics Oriete# P(c(gig (May "#
1. Consumer 2riented 7ac%aging< =ocuses on consumer con+enience and appeal& mar%eting consideration and displa". ,. Logistics 2riented 7ac%aging< =ocuses on handling con+enience and protection during transpiration& material handling and storage.
STAGES IN LOGISTICS PACAGING 1. 7roducts 7ac%aging< 7ac%aging the products itself& e.g. soft drin%s are pac%ed in cans. 1. Master Cartons< 7ac%aged products are pac%ed in larger cartons to facilitate #uantit" handling. ,. Hnit Load< Master cartons are consolidated into a single large unit to facilitate transportation& protection and storage. $t in+ol+es Hnitisation or 7alletisation. /. Contenerisation< Hnit load is placed in a rigid container for transportation. 8iti(tio = P(etis(tio ($ov% &, May /#
Hniti3ation is a concept where si3e shape& weight& +olume of the items is considered and master cartons are placed to form a single larger unit. E.g. !ottles in crates& steel sheets in coils& etc. 1. Leads to standardi3ation of handling e#uipments and methods. ,. =acilitates use of standardi3ed handling e#uipment li%e a for%lift or a crane. /. Reduces the time for handling and cost of handling. . implies the chec%ing of in!ound shipments. 4. $mpro+e product protection.
/ypes o" allets 1. ooden pallets 8 used commonl" !ut !rea% and disintegrate. ,. 7ressed wood !er pallet /. 7lastic pallets 8 light and rec"cla!le . olid molded plastic pallets 4. Corrugated !er!oard slip sheet 8 pro+ide cushion eDect to the unit load 6. Refrigerated pallets for refrigerated materials
Coteeris(tio (Nov. 0', May 0) Coteeris(tio is ( tec&i"e o3 #istri!"tig goo#s i "itie# 3or0 (# 0(ig coveiet to est(!is& ( iter0o#( tr(s4ort s)ste0. Cot(iers (re o3 st(#(r# sie i.e. 2 3t or % 3t. 1enets o" Contenerisation:
1. It ei0i(tes ee# 3or iter0e#i(te &(#ig (t ter0i(s. 1. tandardi3ed containers helps in sa+ing on pac%aging materials and la!our for pac%aging. ,. Less ris% of damage and pilferage. /. =acilitates intermodal transportation without intermediate reloading. /ypes o" Containers:
1. Beneral Cargo Containers 8 for general cargo li%e garments metals etc. ,. Refrigerated Containers 8 for food items that re#uire cold storage li%e sh& meat. /. $nsulated Containers 8 for items that re#uire airtight space li%e fruits and +egeta!les. . -entilated Containers 8 for items that re#uire fresh air li%e coDee seeds& tea lea+es. 4. =lat Containers 8 *he" ha+e onl" at !ase with no walls& used when cargo the cargo is of odd si3e or +er" hea+" li%e truc%s. 6. Li#uid Containers 8 *he" ha+e main holes for loading and unloading of li#uid cargo li%e mil%& oil. 9. Bas Containers 8 *he" ha+e 'tures to ll or empt" li#ueed gas. E.g. Li#uid o'"gen.
Po(ris(tio (Nov. 0', May 0) CAPTER 22 6 S8PPLY CAIN -ANAGE-ENT
CONCEPT OF SC-
According to Martin ChristopherJ uppl" Chain Management is dened as >the management of upstream and downstream relationships with suppliers and customers to deli+er superior customer +alue at lesser cost?. OBJECTIVES OF SC-
1. *o sol+e suppliers pro!lems ,. *o impro+e customers ser+ice performance /. *o reduce pre and post production in+entor" . *o minimise total cost of operations and procurement 4. *o achie+e ma'imum e;cienc" in utilisation of la!our& capital and plant. ADVANTAGES OF SCFor C"sto0ers
1. $mpro+e customers ser+ice performance. ,. Reduce product cost /. $mpro+e deli+er" performance . 7ro+ide #uic% response to change in demand For Co04()
1. Reduce pre and post production in+entor" ,. Minimise total cost of operations and procurement /. =acilitates e;cient utilisation of la!our& capital and plant. . ustained growth of sales S8PPLY CAIN -ANAGE-ENT LOGISTICS
Logistics is concerned with getting CM is concerned with mo+ement of goods and ser+ices where and when goods from raw material stage to the the" re#uired end user $t wor%s within a single organisation $t wor%s in a coordination of +arious
