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

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Presentation on theme: "Business Processes Sales Order Management Aggregate Planning Master Scheduling Production Activity Control Quality Control © 2001 Victor E. Sower, Ph.D.,"— Presentation transcript:

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2 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.

3 Distribution/Logistics Management

4 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

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

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

7 Intermodal Transportation Piggyback (TOFC) Fishyback

8 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

9 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

10 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

11 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

12 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.

13 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)

14 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)

15 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)

16 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)

17 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)

18 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

19 Supp to Ch 9 - 2 © 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

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

21 Supp to Ch 9 - 3 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Transportation Problem Grain ElevatorSupply 1. Kansas City150 2. Omaha175 3. Des Moines275 600 tons MillDemand A. Chicago200 B. St. Louis100 C. Cincinnati300 600 tons

22 Supp to Ch 9 - 4 © 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

23 Supp to Ch 9 - 5 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e The Transportation Tableau To From Kansas City Omaha Des Moines Demand ChicagoSt. LouisCincinnatiSupply 6 7 4 8 11 5 10 11 12 200100300600 275 175 150

24 Supp to Ch 9 - 6 © 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) 4 7 11 6 8 5 12 10

25 Supp to Ch 9 - 7 © 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

26 Supp to Ch 9 - 8 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Solution For Grain Shipment Mill Elevator Chicago St. LouisCincinnati Supply Shipped Kansas City250125150150 Omaha00175175175 Des Moines1751000275275 Demand200100300600 Shipped200100300 Cost4525

27 Supp to Ch 9 - 9 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Unbalanced Problems Location Demand (tons) 1. Richmond120 2. Winston-Salem100 3. Durham110 330 Location Capacity(tons) A. Charlotte90 B. Raleigh50 C. Lexington80 D. Danville 60 280

28 Supp to Ch 9 - 11 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Transportation Initial Tableau To From Charlotte Raleigh Lexington Richmond Winston- Salem DurhamSupply 500 120 70 100 90 50 40 110 120100110 60 80 50 90 Demand Danville 907050

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