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

2. 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

3. 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

4. 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.

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

6. 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.

7. 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.

8. 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.

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

10. 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.

11. 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

12. 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.

13. 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.

14. 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.

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

16. 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.

17. 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.