Presentation is loading. Please wait.

Presentation is loading. Please wait.

1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 32.

Similar presentations


Presentation on theme: "1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 32."— Presentation transcript:

1 1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 32

2 Importance of Effective Transportation System Comparison of developing Vs developed countries Increased Competition and access – Perishable Items Economies of Scale – Auto Parts Reduced Prices – Oil and Middle East 13-2 CR (2004) Prentice Hall, Inc.

3 6-3 Transport System Defined CR (2004) Prentice Hall, Inc.   Performance - Average transit time - Transit time variability - Loss and damage - Other factors including availability, capability, frequency of movement, and various less tangible services   Cost - Line haul - Terminal/local - Accessorial orspecial charges

4 6-4 Transport Choices CR (2004) Prentice Hall, Inc.   Primary intercity carriers  Air  Truck  Rail  Water  Pipe   Coordinated services  Piggyback  Birdyback  Fishyback   Small shipment carriers  UPS  Federal Express  Postal services  Bus Package Express   Agents  Freight forwarders  Shipper associations   Others  Autos  Bicycles  Taxis  Human  Electronic

5 6-5 Importance of Modes CR (2004) Prentice Hall, Inc. By Products Hauled  Air --very high-valued, time sensitive products  Truck --moderately high-valued, time sensitive products. Many finished and semifinished goods  Rail --low-valued products including many raw materials  Water --very low-valued products moved domestically, high-valued if moved internationally  Pipe --generally limited to petroleum products and natural gas

6 6-6 Foreign (Free) Trade Zone CR (2004) Prentice Hall, Inc.

7 6-7 Rate Types  Line haul rates  Class >Freight classification of items >(National Motor Freight Classification of Selected Products) >Rate tables of tariffs  Contract rates  Drayage (local delivery)  Commodity and contract rates  Specific rates for given shipment sizes for specific products moving between designated points  Special service charges  Extra charges  Diversion and reconsignment  Stop-off privilege example

8 Break Weight where: Break Weight = Weight above which the next higher weight break rate should be used for lower transport costs Rate Next = Rate for next higher weight break Weight Next = Minimum weight of next higher weight break Rate Current = Rate for true weight of shipment. Question Suppose 9,000 lb. of Class 100 merchandise is to be shipped from New York to Dallas. From Table 6-4, the rate would be $52.21/cwt. However, should the shipment be priced at the next higher weight break rate of $40.11/cwt. for a lower cost? CR (2004) Prentice Hall, Inc. 6-12

9 6-9 Stop-Off Privilege Example CR (2004) Prentice Hall, Inc. Suppose 3 shipments of J=8,000 lb., K=12,000 lb., and L=10,000 lb. originating at I are to be delivered in the following way.

10 6-10 Private carrier costing  Service Reliability  Short Order Cycle Times  Emergency Response Capability  Improved Customer Contact  Costs:  Fixed Costs  Operator Costs  Vehicle Operating Costs CR (2004) Prentice Hall, Inc.

11 8-11 What’s Forecasted in the Supply Chain? Demand, sales or requirements Purchase prices Replenishment and delivery times CR (2004) Prentice Hall, Inc.

12 The Effect of Inaccurate Forecasting Copyright 2011 John Wiley & Sons, Inc.12-12

13 Types of Forecasting Methods Depend on – time frame – demand behavior – causes of behavior Copyright 2011 John Wiley & Sons, Inc.12-13

14 8-14 What’s Forecasted in the Supply Chain? Spatial Vs Temporal Demand Lumpy Vs Regular Demand Derived Vs. Independent Demand CR (2004) Prentice Hall, Inc.

15 Forecasting Process 12-15 6. Check forecast accuracy with one or more measures 4. Select a forecast model that seems appropriate for data 5. Develop/compute forecast for period of historical data 8a. Forecast over planning horizon 9. Adjust forecast based on additional qualitative information and insight 10. Monitor results and measure forecast accuracy 8b. Select new forecast model or adjust parameters of existing model 7. Is accuracy of forecast acceptable? 1. Identify the purpose of forecast 3. Plot data and identify patterns 2. Collect historical data No Yes

16 8-16 CR (2004) Prentice Hall, Inc. Some Forecasting Method Choices Qualitative Surveys Expert systems or rule-based Historical projection Exponential smoothing Causal or associative Regression analysis Collaborative

17 Demand Behavior Trend – a gradual, long-term up or down movement of demand Random variations – movements in demand that do not follow a pattern Cycle – an up-and-down repetitive movement in demand Seasonal pattern – an up-and-down repetitive movement in demand occurring periodically Copyright 2011 John Wiley & Sons, Inc.12-17

18 Simple Moving Average 12-18 MA n = n i = 1  DiDi n where n =number of periods in the moving average D i =demand in period i

19 3-month Simple Moving Average 12-19 Jan120 Feb90 Mar100 Apr75 May110 June50 July75 Aug130 Sept110 Oct90 Nov- ORDERS MONTHPER MONTH MA 3 = 3 i = 1  DiDi 3 = 90 + 110 + 130 3 = 110 orders for Nov – 103.3 88.3 95.0 78.3 85.0 105.0 110.0 MOVING AVERAGE

20 8-20 Classic Time Series Decomposition Model Basic formulation F = T  S  C  R where F = forecast T = trend S = seasonal index C = cyclical index (usually 1) R = residual index (usually 1) Some time series data 1234 Last year12007009001100 This year14001000? Quarter CR (2004) Prentice Hall, Inc.

21 Moving Average Naive forecast – demand in current period is used as next period’s forecast Simple moving average – uses average demand for a fixed sequence of periods – stable demand with no pronounced behavioral patterns Weighted moving average – weights are assigned to most recent data 12-21

22 8-22 CR (2004) Prentice Hall, Inc. Regression Analysis Basic formulation F =  o   1 X 1   2 X 2  …   n X n Example Bobbie Brooks, a manufacturer of teenage women’s clothes, was able to forecast seasonal sales from the following relationship F = constant   1 (Time)   2 (consumer debt ratio) +  3 (no. nonvendor accounts)

23 8-23 CR (2004) Prentice Hall, Inc. Collaborative Forecasting Demand is lumpy or highly uncertain Involves multiple participants each with a unique perspective—“two heads are better than one” Goal is to reduce forecast error The forecasting process is inherently unstable

24 8-24 CR (2004) Prentice Hall, Inc. Managing Highly Uncertain Demand  Delay forecasting as long as possible  Prioritize supply by product’s degree of uncertainty (supply to the more certain products first)  Apply the principle of postponement to the most uncertain products (delay committing to a final product form until an order is received)  Create flexible supply to changing demand (alter capacity and output rates through subcontracting, computer technology, multi-purpose processes, etc.)  Be able to respond quickly to uncertain demand levels

25 9-25 CR (2004) Prentice Hall, Inc. What are Inventories? Finished product held for sale Goods in warehouses Work in process Goods in transit Staff hired to meet service needs Any owned or financially controlled raw material, work in process, and/or finished good or service held in anticipation of a sale but not yet sold

26 9-26 Reasons for Inventories Improve customer service - Provides immediacy in product availability Encourage production, purchase, and transportation economies - Allows for long production runs (buffer against demand fluctuations) - Takes advantage of price-quantity discounts - Allows for transport economies from larger shipment sizes Act as a hedge against price changes - Allows purchasing to take place under most favorable price terms Protect against uncertainties in demand - Provides a measure of safety to keep operations running when demand levels and lead times cannot be known for sure Act as a hedge against contingencies - Buffers against such events as strikes, fires, and disruptions in supply

27 9-27 CR (2004) Prentice Hall, Inc. Reasons Against Inventories They consume capital resources that might be put to better use elsewhere in the firm They too often mask quality problems that would more immediately be solved without their presence They divert management’s attention away from careful planning and control of the supply and distribution channels by promoting an insular attitude about channel management

28 9-28 Pipeline - Inventories in transit Speculative - Goods purchased in anticipation of price increases Regular/Cyclical/Seasonal - Inventories held to meet normal operating needs Safety - Extra stocks held in anticipation of demand and lead time uncertainties Obsolete/Dead Stock - Inventories that are of little or no value due to being out of date, spoiled, damaged, etc. Types of Inventories

29 9-29 CR (2004) Prentice Hall, Inc. Pull - Draws inventory into the stocking location - Each stocking location is considered independent - Maximizes local control of inventories Push - Allocates production to stocking locations based on overall demand - Encourages economies of scale in production Just-in-time - Attempts to synchronize stock flows so as to just meet demand as it occurs - Minimizes the need for inventory Inventory Management Philosophies

30 9-30 CR (2004) Prentice Hall, Inc. Supply-Driven - Extensive Forecasting needed - All supply must be accepted and processed - Inventories are controlled through demand Aggregate Control - Classification of items: › Groups items according to their sales level based on the 80-20 principle › Allows different control policies for 3 or more broad product groups Inventory Management Philosophies (Cont’d)

31 9-31 CR (2004) Prentice Hall, Inc. Costs Relevant to Inventory Management Procurement Costs Carrying costs Out-of-stock costs

32 9-32 Inventory Management Objectives Good inventory management is a careful balancing act between stock availability and the cost of holding inventory. Customer Service, i.e., Stock Availability Inventory Holding costs Service objectives - Setting stocking levels so that there is only a specified probability of running out of stock Cost objectives - Balancing conflicting costs to find the most economical replenishment quantities and timing CR (2004) Prentice Hall, Inc.

33 Inventory’s Conflicting Cost Patterns Cost Replenishment quantity Stockout cost Procurement cost Carrying cost Total cost Minimum cost reorder quantity CR (2004) Prentice Hall, Inc. 9-16

34 11-34 The Storage System Except where customer service is a concern: Storage is an economic convenience, not a necessity Reasons for storage  Transportation and production costs can be reduced  Better coordination of supply and demand  Storage can be an integral part of the production process  Storage may enhance sales Storage Functions  Holding  Consolidation  Break-bulk  Mixing (merge-in-transit)

35 11-35 CR (2004) Prentice Hall, Inc. The Storage System (Cont’d) Storage Space Alternatives  Ownership  Leasing  Rental  In-transit Note Storage functions are performed in an attempt to reduce transportation, production, and purchasing costs, which justify their added expense.

36 Consolidation warehouse A ABCD 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 Consolidation Warehouse Similar to a merge-in- transit facility 11-6

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

38 11-38 CR (2004) Prentice Hall, Inc. Space Comparison Ownership alternative Less expensive under high utilization High degree of control over operations Benefits of real estate ownership Space may be converted to uses other than storage Rental alternative No fixed investment Lower cost under seasonal or low utilization of an owned facility Location flexibility

39 11-39 CR (2004) Prentice Hall, Inc. 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

40 11-40 CR (2004) Prentice Hall, Inc. A Low Throughput, Holding Warehouse Semipermanent storage bay Product Inbound and outbound

41 CR (2004) Prentice Hall, Inc. Semi-permanent storage bay Product Order picking and product mixing bays Inbound Outbound A B C D CA Replenishment Order-picking route A High Throughput, Distribution Warehouse 11-13

42 11-42 CR (2004) Prentice Hall, Inc. Storage/Handling Systems  Manual handling system  Forklift truck-pallet system  Conveyorized system  Automated storage and retrieval system

43 11-43 Semipermanent storage bay Product Inbound and outbound A B C Order-picking route Order Picking  Area System CR (2004) Prentice Hall, Inc.

44 Semipermanent storage bay Product Order picking and product mixing bays Inbound Outbound A B C D C A Replenishment Order-picking route Order Picking  Modified Area System 11-16

45 11-45 An Automated Warehouse CR (2004) Prentice Hall, Inc.

46 11-46 CR (2004) Prentice Hall, Inc. Economics of Storage/Handling Alternatives

47 11-47 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

48 CR (2004) Prentice Hall, Inc. Activity Fragmentation in the Supply Chain 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 Responsibilities 15-4

49 CR (2004) Prentice Hall, Inc. Activity Fragmentation in the Supply Chain (Cont’d) 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 Objectives 15-5

50 15-50 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.

51 Logistics Matrix Organization 15-8

52 15-52 CR (2004) Prentice Hall, Inc. Formalized, Centralized Organization Vice-president Finance Vice-president Operations Manager Procurement Manager Warehousing and materials handling Manager Order processing and customer service Manager Transportation and packaging Manager Inventory and production scheduling Vice-president Logistics Vice-president Marketing Chief executive officer

53 The Cold Chain

54 Which are most sensitive to heat?

55 Which do you never want to freeze? (OPV, Measles, MR, MMR, BCG can be frozen, but not diluents) Do NotFreezeDo NotFreeze

56 Cold Chain Equipment & Logistics Refrigerators/Freezers – Generators/ Voltage Stabilizers Cold Boxes Vaccine Carriers (Foam Pad) Ice Packs Check condition every time you visit a facility!

57 Ice Lined Refrigerators (ILRs) Can maintain temperature for 16 hours without power if operate w/power continuously for at least 8 hours a day!

58 Cold Boxes Insulated for short– term use: 2-7 days Used in campaigns or when refrigerator out of order Consideration for use and storage capacity, outside temperture, available transport

59 Vaccine Carriers and Ice Packs

60 Temperature monitoring chart for facilities

61 The Agility Advantage Agility in Pakistan

62 62 Agility in Pakistan 21 Locations, Headcount: 680 & Warehouses at all major cities 21 Locations, Headcount: 680 & Warehouses at all major cities KARACHI ISLAMABAD LAHORE Sialkot Faisalabad Gujranwala Bahawalpur Peshawar Abbottabad Sahiwal Multan Quetta Hyderabad Sukkur Sargodha Head Office Branch Office Regional Office Kohat Mardan D.I.Khan Torkham

63 Case Study Platform for METRO Pakistan

64 64 – Total Area21,000 sq-ft – Covered Area6,000 sq-ft – Open Area15,000 sq-ft – Freezer Area400 sq-ft, 5-7C – Freezer Area400 sq-ft, 12-15C – Processing Hall1000 sq-ft, 18-22C – Dry Area500 sq-ft, room temp. 64 Agility in Pakistan - F&V Platform Sharaqpur Warehouse Temperature Controlled Area Services Offered Offering unique fruit & vegetable processing service to a modern retail chain. Receiving goods from the farmers, quality check, weighment, pre-cooling, washing, grading, packaging, labeling, bar coding &and transportation in a temperature controlled vehicle to the retail stores in Lahore & Islamabad.

65 McDonald’s E-Procurement Place Orders Supply Received E-MAC Digital Global Franchises Suppliers Logistics

66 McDonald’s Logistics INBOUND LOGISTICS It is the movement of materials from suppliers and vendors into production processes and storage facilities. Based on the demand forecast, Manager orders the Venus Distributors on daily basis. Venus Distributors stores all the raw materials, in its own cold stores and delivers only one-day material to the restaurant. Venus Pakistan established its dedicated McDonalds Logistics Operations in 1997. It also received the DQMP (Distribution, Quality, and Management Process) Certification from McDonalds USA Audit Team. Some branch has its own cold storage facility, which is used to store the daily-procured raw material.

67 McDonald’s Logistics INBOUND LOGISTICS There are only two products buns and Cokes, which are sent directly to the restaurants. Venus Pakistan has full-fledged facilities to pack locally manufactured products in sachets such as sugar, tomato ketchup.

68 McDonald’s Logistics COLD CHAIN LOGISTICS A cold chain is a temperature-controlled supply chain. It is used to extend and ensure the shelf life of products such as fresh agricultural produce, processed food. McDonalds’ entire network supply-chain consists of movement of goods through a cold chain An interesting and innovative feature of this cold chain is that the same truck can carry products at different temperatures ranging from: Frozen products at -18C to -25C Chilled products from 1C-4C Dry products at ambient temperatures

69 McDonald’s Logistics OUTBOUND LOGISTICS Outbound logistics is the process related to the storage and movement of products from the end of the production line to the users end. When customers enter the restaurant, they go to the counter, give their order, which they are served within a single minute.


Download ppt "1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 32."

Similar presentations


Ads by Google