1. IEGR 459: Intro to Logistics Management and Supply Chain
Logistics Measures and Considerations
Elements of Logistics
Transportation, Packaging and Handling Factors
Warehousing and Distribution
Inventory Considerations
Maintenance Factors
Economic Considerations
Sept. 26, 2011
Fall 2011

2. Basic Elements of Logistics

3. Elements of Logistics
Logistics, Maintenance, and Support Personnel – Includes personnel required to perform unique logistics and system maintenance activities e.g. sustaining support of the system throughout its planned period of use
Training and Training Support - Includes all the personnel, materials and equipment, facilities, data, documentation and associated resources necessary for the training of operator and maintenance personnel (also included are both initial and replenishment/replacement training)
Supply Support - Spares/Repair parts and associated inventories - This includes all spares (repairable units, assemblies, and modules), repair parts (non-repairable components, consumables (liquids, lubricants, fuels, etc.), special supplies, software modules, and supporting inventories necessary to maintain the prime mission-related elements of the system and various elements of logistics and maintenance support infrastructure throughout the operational use phase and as required during the retirement and recycling/disposal phase
Computer resources (both hardware and software) - All computers and associated software, connecting components, networks, special facilities, and interfaces necessary to support the day to day operations and flow of information for all logistics functions 3

4. Elements of Logistics
Technical data, reports, and documentation – may include procedures for installation and maintenance, inspection and calibration procedures, overhaul instructions, engineering design data, etc. (Included also is the ongoing and iterative process of data collection, analysis and reporting covering the system throughout its life cycle)
Maintenance support facilities and utilities – Includes all special facilities that are unique and are required to support logistics and maintenance activities at all levels e.g. physical plants, mobile vans, calibration laboratories, fixed maintenance shops etc.
Packaging, handling, storage/warehousing and transportation (Distribution) - Includes all materials, equipments, special provisions, containers, and supplies necessary to support the packaging, safety and preservation, security, storage, handling, and/or transportation of the prime mission-related elements of the system and various elements of the logistics and maintenance support infrastructure throughout the entire system life cycle.
Test, measurements, handling and support equipment – All tools, condition monitoring equipment, diagnostic and checkout equipment, special test equipment etc. required to support operational and maintenance functions of the system. 4

5. Elements of Logistics
Logistics information - Includes all the resources necessary to ensure that an effective and efficient logistics and maintenance information flow is provided throughout the system life cycle, and to all organizations involved and responsible with various logistics and supply chain activities e.g. Electronic data interchange (EDI), s, internet, or any of the latest electronic commerce (EC) methods 5

6. Key Logistics Functions/Factors Consideration
The five functions of logistical work are interrelated
Integrated logistics framework
Goal is to achieve customer satisfaction at the lowest Total Cost
Decisions in one functional area will impact cost of all others
We integrate the logistical functions into a coherent framework starting with the customer (Order processing) and ending with the customer (Transportation and Delivery)

7. Purchasing and Material Flow - Order Processing
Order processing is the transmission of customer requirements to the supply chain
Accurate information is needed to achieve superior logistical performance
Responsive supply chains require accurate and timely information about customer purchase behavior
Fast information flow enables improved work balancing

8. Purchasing and Material Flow - Order Processing
In Purchasing a major objective is perfect order fulfillment
Delivered complete - All items delivered in the quantity requested
Delivered on time – Using the customer’s definition of on-time delivery
Complete and accurate documentation (e.g. packaging slip, bills of lading, invoices) to support the order
Delivered in perfect condition and in correct configuration to be used by customer, faultlessly installed

9. Purchasing and Material Flow - Order Processing
Perfect order Percentage (POP) as a Logistics performance measure
Perfectly entered by the means the customer desired in a single entry
Perfectly fillable with the exact quantity of each item available for delivery within the customer specified delivery window
Perfectly picked with the correct quantities of the correct items
Perfectly packaged with the customer-designated packaging and labeling
Perfectly delivered in the customer designated time window and to the customer designated location
Perfectly communicated with order status reports available 24 hours a day
Perfectly billed with on-time payment; and
Perfectly documented with customer specified documentation means, including paper, fax, EDI, and/or internet

10. Transportation
Transportation is the operational area that geographically moves and positions humans and materials resources (including inventory) in support of both operational and maintenance support
Critical to logistical performance
Provides major services/Functions
Product Movement
Product Storage
Less visible. Product in transit is being stored
There are basic ways to satisfy transportation requirements
Operate a private fleet of equipment
Contract with dedicated transport specialists
Engage carriers that provide different transportation services as needed on a per shipment basis
Third party Logistics (3PL) Companies - Server in partner relationships with the major carriers and coordinate the necessary transportation services for others without owning transportation equipment's

11. Transportation
Transportation is the operational area that geographically moves and positions humans and materials resources (including inventory) in support of both operational and maintenance support
Critical to logistical performance
Provides major services/Functions
Product Movement
Product Storage
Less visible. Product in transit is being stored
There are basic ways to satisfy transportation requirements
Operate a private fleet of equipment
Contract with dedicated transport specialists
Engage carriers that provide different transportation services as needed on a per shipment basis
Third party Logistics (3PL) Companies - Server in partner relationships with the major carriers and coordinate the necessary transportation services for others without owning transportation equipment's

12. The various forms of transportation.

13. Factors considered in transportation effectiveness evaluation
Transportation route – (National and international)
Distances, geographical locations, custom requirements, labor resources, political and social factors, etc.
Transportation capability/capacity
Type and volume of goods transported, security/safety provisions, tons-miles per month/year, number and frequency of loads, etc.
Transportation time –
Short-haul vs. long-haul time, mean delivery time, time per carrier mode, time per transportation leg
Transportation Cost
Cost/shipment, transportation cost/mile, packaging costs

14. Transportation Cost structure
Variable costs
Cost only incurred if you operate the transportation equipment
Generally measured per mile or unit weight or both e.g. per ton-miles
Fixed costs
not influenced by shipment volume
Includes vehicles, terminals, rights-of-way, information systems, and support equipment
Must be covered by contribution above variable costs on a per shipment basis
Joint cost
Unavoidably created by decision to provide a particular service e.g. a backhaul from a destination
Common costs -
Carrier costs that are incurred on behalf of all or selected shippers

15. Transportation
Fixed and Variable costs

16. Two fundamental transport principles
Economy of scale is the cost per unit weight decreases as the size of the shipment increases
At least until you totally fill the carrying vehicle!
Cost decreases because the fixed cost of the carrier is allocated over a larger weight of shipment
Economy of distance is the cost per unit weight decreases as distance increases
Often called the tapering principle
Longer distances allow fixed cost of the carrier to be spread over more miles, lowering the per mile charge
Goal is to maximize the size of the load and distance shipped while still meeting service expectations

17. Transportation cost drivers/factors
Distance
Directly contributes to variable expenses
Labor, fuel, and maintenance
measured per mile or unit weight or both e.g. per ton-miles
Rate of cost decreases as distance increases (tapering principle)
Weight
Cost per pound decreases as weight increases until the carrier vehicle is full
Small loads should be consolidated into larger loads to maximize scale economies

18. Transportation cost drivers/factors
Volume
Volume is important because vehicles are typically constrained more by cubic capacity than by weight loaded
Density
Combination of weight and volume
Cost per unit of weight declines as product density increases
Higher density products allowed fixed transport costs to be spread over more weight

19. Transportation cost drivers/factors
Stowability - how product dimensions fit into transportation equipment
Odd package shapes and sizes can waste cubic capacity
Items with rectangular shapes are easier to stow
Nesting refers to ability of product to be placed in itself or collapsed for better stowability
Handling some products may require special equipment
Liability includes product characteristics that can result in damage
Carriers must pay for liability insurance or accept financial responsibility
Market factors such as lane volume and balance influence transportation cost

20. Metrics associated with Transportation
Speed/time is the elapsed movement time from origin to destination
Availability is ability of a mode to service any given pair of locations
Dependability is the potential variance from expected delivery schedule
Capability is the ability to handle any load size or configuration
Frequency is the quantity of scheduled movements a mode can handle
Reliability – transportation is available when required and probability will complete its mission as planned
Maintainability – Probability that the applicable tranportation capbility can be repaired within a specified time and with the specified resources in the event of failure
Cost transportation, or the cost per one-way trip
LCC of a given transportation capability for a designed period of time

21. Transportation Rail Trucking
low-value, high-density, bulk products, raw materials, intermodal containers
not as economical for small loads, slower, less flexible than trucking
Trucking
main mode of freight transport in U.S.
small loads, point-to-point service, flexible
More reliable, less damage than rails; more expensive than rails for long distance

22. Transportation Air Package Delivery
most expensive and fastest, mode of freight transport
lightweight, small packages <500 lbs
high-value, perishable and critical goods
less theft
Package Delivery
small packages
fast and reliable
increased with e-Business
primary shipping mode for Internet companies

23. Copyright 2009 John Wiley & Sons, Inc.
Transportation
Water
low-cost shipping mode
primary means of international shipping
U.S. waterways
slowest shipping mode
Intermodal
combines several modes of shipping-truck, water and rail
key component is containers
Pipeline
transport oil and products in liquid form
high capital cost, economical use
long life and low operating cost
Copyright 2009 John Wiley & Sons, Inc.

24. Transportation Cost Structure for Different Mode of Transportation
Relative Operating Characteristics by Mode

25. Packaging and Material Handling
Packaging for Materials Handling Efficiency (Functions)
Package design - Packaging in standard configuration and order quantities facilitates logistical efficiency
Unitization - Process of grouping master cartons into one physical unit for material handling or transportation
Master carton – containers used to group individual products
Communication
Content identification e.g. through UPC numbers
Tracking e.g. using RFID
Handling instructions

26. Illustration of four basic patterns to tier master cartons
Basic Pallet Master Carton Stacking Patterns

27. Role of packaging in logistics
Unitization—modular packaging
Handling—appropriate for automation?
Security—can package be sealed to detect break-in
Stowability—cube efficiency
Information—identification and tracking
Protection—spoilage or damage

28. Warehousing and Distribution
Functions
Movement
Information transfer
Storage
Metrics associated with warehousing
Time to ship the product
Cost of each product shipment
Value of product shipped
% of space utilization and cost per utilization
Volume of products to be handled

29. Warehouse decisions that determine handling and storage efficiency
Site Selection
Design
Product-Mix Analysis
Expansion
Materials Handling
Layout
Sizing
Warehouse management system
Accuracy and audit
Security
Safety and maintenance

30. Transportation and Transshipment Problem
Further Reading
Homework

31. Transportation Method: Example

32. Transportation Problem