Logistics Management LSM 730 Lecture 28 Dr. Khurrum S. Mughal

Similar to a merge-in-transit facility Consolidation Warehouse Consolidation warehouse A B C D Manufacturer A Manufacturer B Manufacturer C Manufacturer D 10,000 lb. 8,000 lb. 15,000 lb. 7,000 lb. 40,000 lb. Customer Similar to a merge-in-transit facility 11-6

Distribution, Break Bulk, or Pool Point Warehouse Customer A LTL LTL Low rate TL shipment Manufacturer Distribution warehouse Customer B LTL Warehouse may or may not hold inventories Customer C CR (2004) Prentice Hall, Inc. 11-7

The Materials Handling System Materials Handling Functions · Loading and unloading · Movement to and from storage · Order filling Materials - Handling Considerations · Load unitization Space layout Storage equipment Movement equipment CR (2004) Prentice Hall, Inc.

An Automated Warehouse CR (2004) Prentice Hall, Inc.

Economics of Storage/Handling Alternatives Private warehousing, automated handling Public warehousing pallet-forklift truck handling Leased warehousing a b c d Cost to company, $ Annual system throughput, cwt. Economical range for public warehousing. Economical range for leased warehousing, manual handling. Economical range for private warehousing, pallet-forklift truck handling. Economical range for private warehousing, automated handling. CR (2004) Prentice Hall, Inc.

Virtual Warehousing Don’t hold all inventories needed for sale in company’s warehouse Ship selected items directly from suppliers Reduces investment in inventories Requires a first-rate order management system May require sharing critical information with vendors CR (2004) Prentice Hall, Inc.

Logistics/Supply Chain Organization A good organization structure does not by itself produce good performance--just as a good constitution does not guarantee great presidents, or good laws, or a moral society. But a poor organization structure makes good performance impossible, no matter how good the individual managers may be. To improve organization structure…will therefore always improve performance. Peter F. Drucker CR (2004) Prentice Hall, Inc.

Organizing for Logistics/Supply Chain Management CR (2004) Prentice Hall, Inc.

Objectives for Organization Definitively defines responsibility, accountability, and authority–essentials for good management Collects people together in a meaningful way to achieve the goals of supply management Sets initial conditions so that proper cost tradeoffs can be realized Facilitates the implementation of plans as well as the planning process Aids administration CR (2004) Prentice Hall, Inc.

Activity Fragmentation in the Supply Chain Responsibilities President Marketing Finance Operations Distribution channels Customer service Field inventories Revenue Cost of capital ROI Inventory carrying costs Supply alternatives and supply costs Warehousing Purchasing Transportation CR (2004) Prentice Hall, Inc. 15-4

Activity Fragmentation in the Supply Chain (Cont’d) Objectives President Marketing Finance Operations More inventory Frequent & short production runs Fast order processing Fast delivery Field warehousing Less inventory Cheap order processing Less warehousing Long production runs Lowest cost routing Plant warehousing 15-5 CR (2004) Prentice Hall, Inc.

Activity Fragmentation in the Supply Chain (Cont’d) Reasons for fragmentation Lack of understanding of key cost tradeoffs Traditions and conventions Other areas considered to be more important to the firm than logistics Organization structure can be in an evolutionary state Benefits of fragmentation elimination Encourages important cost tradeoffs to be effected Focuses on an important, defined area by top management Sets the structure within which control can take place CR (2004) Prentice Hall, Inc.

Organizational Choices Informal structure Persuasion of top management Coordinating committees Incentive arrangements Profit sharing Cross charges Semi-formal structure Matrix organization Formal structure Line--creates value in products, therefore it has operating status Staff--provides assistance to the line organization CR (2004) Prentice Hall, Inc.

Logistics Matrix Organization 15-8 CR (2004) Prentice Hall, Inc.

Formalized, Centralized Organization Chief executive officer Vice-president Vice-president Vice-president Vice-president Finance Operations Logistics Marketing Manager Manager Procurement Warehousing and materials handling Manager Manager Order processing Transportation and customer and packaging service Manager Inventory and production scheduling CR (2004) Prentice Hall, Inc.

Alliances and Partnerships Benefits Reduced cost and lower capital requirements Access to technology and management skills Improved customer service Competitive advantage such as through increased market penetration Increased access to information for planning Reduced risk and uncertainty CR (2004) Prentice Hall, Inc.