Business Processes Sales Order Management Aggregate Planning Master Scheduling Production Activity Control Quality Control © 2001 Victor E. Sower, Ph.D., C.Q.E. Distribution Mngt.

Distribution/Logistics Management

Mode, Carrier, Route Selection Required delivery date Cost of transportation Reliability & service quality Shipment size Time in transit Type of item being shipped Possibility of damage Available services Possibility of damage Handling of claims Carrier rating systems

Transportation Modes Parcel post Private parcel delivery service Bus service Air cargo Rail freight (CL and LCL) Motor freight (TL and LTL) Freight forwarder

Transportation Modes continued Coastal, intercoastal, and inland water freight Pipeline

Intermodal Transportation Piggyback (TOFC) Fishyback

Freight Rates Basic charge determined by class rate Quantity breaks Aggregate tender rates Flat percentage discount Increased volume-increased discount % Specific origin & destination points Through rates Released rates

Developing a Transportation Strategy Value analysis of alternatives Price analysis Consolidate freight where possible Analyze & evaluate carriers Reassess mode selection Develop close relationship with selected carriers Cost analysis/reductions

Third Party Logistics Suppliers 3PL A company that manages all or part of another company’s product delivery operations. APICS Dictionary 11ed., 2005 Dell Computer -- Roadway

Distribution Requirements Planning DRP The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse are “exploded” via MRP logic to become gross requirements on the supplying source. APICS Dictionary 11ed., 2005

Logistics Terms Bill of Lading (BOL) – The basic document used in purchasing transportation services. It serves as the receipt and documents commodities and quantities shipped. In case of loss, the BOL is the basis for damage claims. The BOL specifies terms and conditions of carrier liability. Title is transferred with completion of delivery.

Logistics Terms Continued FOB buyer’s plant (destination) FOB seller’s plant (origin) FOB seller’s plant, freight allowed to buyer’s plant (freight prepaid)

FOB Origin or FOB Freight Collect Title & control of goods passes to buyer when carrier signs for goods at point of origin. Buyer pays freight charges Buyer bears freight charges Buyer owns goods in transit Buyer files claims (if any)

FOB Destination Freight Prepaid Title of goods remains with seller until goods are delivered. Seller pays freight charges Seller bears freight charges Seller owns goods in transit Seller files claims (if any)

Incoterms EXW Ex works (supplier’s site) FCA Free carrier at (Supplier clears goods for export) FAS Free alongside ship (Buyer clears goods for export)

Incoterms Continued CAF Cost and freight (to port of destination— supplier clears goods for export) CIF Cost, insurance, & freight (Same as CFR, except supplier is responsible for insurance during main carriage)

Incoterms Continued DAF Delivered at frontier (country border) (Supplier clears goods for export) DES Delivered ex ship (Goods are available aboard ship, uncleared for export) DDU Delivered duty unpaid (at specified place of destination) DDP Delivered duty paid (at specified place of destination

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e The Transportation Model Ship items at lowest cost Sources have fixed supplies Destinations have fixed demand

The Transportation Model D (demand) D (demand) D (demand) D (demand) S (supply) S (supply) S (supply)

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Transportation Problem Grain ElevatorSupply 1. Kansas City Omaha Des Moines tons MillDemand A. Chicago200 B. St. Louis100 C. Cincinnati tons

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Shipping Cost Table Mill GrainChicagoSt. LouisCincinnati ElevatorABC Kansas City$6$8$10 Omaha71111 Des Moines4512

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e The Transportation Tableau To From Kansas City Omaha Des Moines Demand ChicagoSt. LouisCincinnatiSupply

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Network Of Routes Kansas City (150) Omaha (175) Des Moines (275) Chicago (200) St. Louis (100) Cincinnati (300)

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Solving TransportationProblems Manual methods –Stepping-stone –Modified distribution (MODI) Computer solution –Excel –POM for Windows

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Solution For Grain Shipment Mill Elevator Chicago St. LouisCincinnati Supply Shipped Kansas City Omaha Des Moines Demand Shipped Cost4525

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Unbalanced Problems Location Demand (tons) 1. Richmond Winston-Salem Durham Location Capacity(tons) A. Charlotte90 B. Raleigh50 C. Lexington80 D. Danville

Supp to Ch © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Transportation Initial Tableau To From Charlotte Raleigh Lexington Richmond Winston- Salem DurhamSupply Demand Danville