1. Lecture 7-1 Supply Chain Performance Measurement and Warehousing M.Tariq Yousafzai Innovator and Business Creator ibc208tamu@gmail.com

2. Discussion questions  Warehouses used to be places where goods were stored, often for long period, until they were needed. Has this role significantly changed over time? Lecture 7-2

3. Virtual inventories  Customers are assigned to a primary stocking site  So demand can be cross filled from other sites holding the same items  Cross filling demand from multi- stocking lowers system wide inventory levels, and stockouts Lecture 7-3

4. Virtual inventories

5. Virtual warehousing  An extension of virtual inventory concept  Virtual inventory satisfy customer demands  A virtual warehouse is one where not all items for sale are stocked in a companys warehouse.  Amazon stocks high volume titles in its warehouse but cannot stock low volume and rare titles Lecture 7-5

6. Storage in Transit  Various modes of transportation are available and their transit times vary  Rail  Motor  Air  Sea Lecture 7-6

7. What is cross-docking and when can you use it?  It co-ordinates the flow of materials through a facility so that they are never put into storage  but are delivered, sorted and taken straight to a departure bay. Lecture 7-7

8. How would you measure the capacity of a warehouse, and why is it important?  Amount of materials that can be stored,  or the throughput within a specified period and so many others Lecture 7-8

9. Why is the layout of a warehouse important? Supermarkets are really a type of warehouse, so the same factors are important. Is this true? T  The layout of any facility determines the ease and efficiency that materials move around.  Some facilities (warehouses, shops, bus stations, libraries, etc) are well designed and allow a free movement of materials – others are badly designed. Lecture 7-9

10. What is the point of reverse logistics?  returning packaging, returning defective units, returning unused goods, recycling gods, etc –  Avoidance, gatekeeping, reducing reverse cycle times, return centers, refurbishment Lecture 7-10

11. Lecture 7-11 Warehouse locations  Geometric arguments can be used to find to find the centre of demand  If we assume that demand is proportional to some part of the population we can develop general models to suggest good locations  Intel in Costa Rica

12. Lecture 7-12 The five basic elements of a warehouse are

13. Distribution warehouse (Poo point, cross dock or terminal) Lecture 7-13

14. Distribution warehouse consolidation Lecture 7-14

15. Product mixing Lecture 7-15

16. Lecture 7-16 The fie basic elements of a warehouse are 1.Arrival bays 2.Storage area 3.Departure bays 4.Material handling system 5.Information system  There are many variations on this basic pattern

17. Lecture 7-17 PURPOSE OF WAREHOUSES  Stock is traditionally kept in a warehouse  A warehouse is any location where stocks of material are held on their journey through supply chains.  Warehouses take many forms and do other activities in addition to storage  There are two main types of warehouse:  Those linked to upstream suppliers and dealing with the raw materials  Those linked to downstream customers and dealing with finished goods

18. Lecture 7-18 Moving beyond storage  Organisations are increasingly trying to move materials quickly though supply chains, without interrupting the flow or having them sit in stock  So the focus of warehouses has changed, moving away from long-term storage and towards giving convenient locations for a range of associated activities, such as:  Consolidating loads  Break bulk  Cross docking  Finishing for postponement  etc

19. Lecture 7-19 Options for ownership  Private warehouses have benefits  greater control over a central part of the supply chain  closer integration of logistics activities  facilities tailored to the organisation’s needs, being in the right location, right size, fitting in with customer service, etc  easier communications with integrated systems throughout the organisation  lower costs, without the profit needed by another organisation  possible tax advantages and development grants  enhanced corporate image, giving an impression of reliability and long term dependability.

20. Lecture 7-20 Public warehouses also have benefits  flexible capacity to deal with changing demand, perhaps due to seasonality  avoids large capital investment, giving lower fixed costs and higher return on investment  has costs that are directly related to the level of use  provides skills and experience that firms do not have internally  gives access to the latest technology, systems, equipment and practices  allows easy access to new markets and a wider geographical area  allows short-term tests to assess new methods and areas  uses economies of scale to reduce unit transaction costs  consolidates work with other organisations to reduce unit costs  guarantees a high quality and efficient service

21. Several services of public warehousing  Bonding Arrangements  Made with Govt for certain goods on which taxes or duties are levied  The arrangement is between merchandise owner and Government  Tobacco  Liquor Lecture 7-21

22. Field Warehousing  A method by which public warehousemen helps the owner of stored goods increase working capital  It is conversion of private warehouse space to public warehouse space for securing credit  Temporary arrangement lasting the duration of loan Lecture 7-22

23. Stock Spotting  Extension of break-bulk function  Used to provide higher level of service to wholesalers and retailers who maintain little inventory to meet their sales needs.  Producers spot an assortment of their goods in public warehouse close to their markets Lecture 7-23

24. Lecture 7-24 Logistics managers always balance competing aims

25. Lets discuss  If you were in hospital and needing a blood transfusion, would you rather the transfusion service used a traditional system of holding stocks of blood, or a just-in-time system? What does this tell you about JIT in other organisations? Lecture 7-25

26. Lecture 7-26 Simplified supply chain for medicine

27. Lecture 7-27 Part of traditional SC for pharmaceuticald

28. Lecture 7-28 Some conceptualities  Difference between a measure and a metric  A measure is easily defined with no calculations and with simple dimensions  A metric needs definition, involves a calculation or is a combination of measurements, and is often a ration

29. Lecture 7-29 Question????  Is it really true that logistics affects all aspects of an organization's performance?

30. Lecture 7-30 Dimensions of Performance Metrics  Establishing appropriate metrics is a complex problem.  Measuring inappropriate performance can lead to a company chasing the wrong goal.  Metrics drive behavior --- what you measure is what you get.

31. Lecture 7-31 Common areas where there are inefficiencies 1.Quality – 2.Production level – 3.Processing – 4.Waiting – 5.Movement – 6.Stock –

32. Lecture 7-32 Specific measures for logistics  Product availability  Reliability of delivery  Total travel time and distance  Delivery cost  Prices and discounts offered  Information available  Order location and tracking  Orders received on time  Mistakes in deliveries  Customer satisfaction  Flexibility and customisation  Frequency of delivery service  Loss and damage  Availability of special equipment

33. Lecture 7-33 Specific measures for logistics  Helpfulness of drivers  Handling of queries  Time to load and unload  Total weight moved  Number of errors in deliveries  Areas covered  Size and capacity of vehicles  Skills of drivers  Utilisation of vehicles  Advance warning of supply problems  Convenient delivery size  Consistency of service  Errors in processing and administration  Additional services provided

34. Lecture 7-34 Performance of warehouses  Order cycle time  Number of orders processed  Cost of each stock transaction  Time taken to prepare each shipment  Customer services  Errors in order picking  Damage and loss  Special storage facilities  Amount of product substitution

35. Lecture 7-35 Performance of warehouses  Average stock value  Changes in stock value  Utilisation of storage area and volume  Proportion of orders met from stock  Proportion of demand met from stock  Weeks of stock held  Stock turnover

36. Lecture 7-36 Dimensions of Performance Metrics  Logistics cost metrics should focus on the total supply chain, not on just one link.

37. Lecture 7-37 Raising the Performance Bar

38. Lecture 7-38 Characteristics of Good Measures

39. Lecture 7-39 Other Useful Performance Guidelines  The metrics must be consistent with overall corporate strategy.  The metrics must focus on customer needs and expectations.  Prioritize your metrics.  Focus upon processes not functions.  Use a balanced approach in selecting and developing metrics.  Precise cost measurement is an important aspect for gauging improvement.  Use technology to enhance efficient performance measurement.

40. Lecture 7-40 Evolution of Metrics Utilization  Most organizations go through several phases in the development of meaningful metrics: Stage 1 – awareness of the importance of using the appropriate metric Stage 2 – developing the actual metric Stage 3 – performance improvement Stage 4 – integration internally and across the supply chain

41. Lecture 7-41 Supply Chain Metrics  Supply chain metrics are very different from traditional logistics metrics in that they measure inter-company performance rather than just internal performance.  These measures of performance must be common across the firms in the supply chain to be meaningful.

42. Lecture 7-42 Measures are often used in comparisons against  Absolute standards  Target performance  Historical standards  Competitors’ standards – typically through benchmarking, which 1.Identifies the logistics process to benchmark 2.Finds the competitor with the best performance 3.Compares operations and analyses differences 4.Finds reasons for the differences 5.Designs new operations to give improved performance 6.Implements the plans and monitors progress