SCM Ch.9

Returns

An item may be defective, damaged, seasonal, fail to meet expectations, or be excess inventory.

Hub-and-Spokes

A hybrid approach of warehouse network where there is a centralized warehouse which holds most of the inventory linked to a series of smaller geographically dispersed warehouses which hold only a small amount of inventory to support their local area in the immediate time frame

Pipeline

Accounts for approximately 2% of total US freight spend Most reliable form of transportation Lowest per unit cost for transportation Limited variety of commodities. Materials are transported in a liquid or gaseous state; petroleum, natural gas, drinking water, gasoline Little maintenance needed

Air

Accounts for approximately 5% of total US freight spend Generally the fastest mode of transportation. Most expensive mode of transportation Cannot carry extremely heavy or bulky cargo. Ideally, items with a high cost to weight ratio. Shipments involve very light, high-value goods that need to travel long distances quickly including; jewelry, fine wines, pharmaceuticals, racehorses, etc. Half of the goods transported by air are carried by freight-only airlines, e.g., FedEx.

Rail

Accounts for approximately 9% of total US freight spend. Competes for transportation when the distance is long and the shipments are heavy or bulky. Shipments involve building materials, construction equipment, coal, gravel, sand, lumber, etc. Aging infrastructure and equipment are an issue. It's slow and inflexible but has the most capability

Advantages of Cross-Docking Warehouse

Transportation cost savings: 8 FTL Shipments are less expensive per unit than 16 LTL Shipments. Operations efficiency: Warehouse operations are more efficient as the material does not have to be stored at the warehouse, moving directly from receiving to shipping. Inventory efficiency: As there is no storage at the warehouses, total inventory in the supply chain can be reduced.

Transportation Management System (TMS)

Used to select the best mix of transportation services and pricing.

Consolidation Warehouse

Warehouse operation that receives products from different plants or suppliers, stores them, and then combines_them with similar shipments from other plants or suppliers for further distribution Located closer to the supply base so that smaller LTL shipments travel shorter distance and can be consolidated into larger FTL shipments traveling longer distance to the customer.

Picking

Withdrawing components from stock to make assemblies or finished goods, or to ship to a customer.

Secondary Functions of a Warehouse

1. Quality Inspections 2. Repackaging 3. Assembly Operation

Outbound Logistics

Move finished goods to the customer

Primary Functions of a Warehouse

1. Receiving 2. Storage 3. Picking 4. Packing 5. Shipping

Green Reverse Logistics Programs

Can have a positive impact on the environment though activities such as recycling, reusing materials and products, or refurbishing unused products. These programs can reduce environmental impact on landfills and deal with dangerous contaminants.

Increase Automation

Companies are using automated systems like pick to light, voice picking, conveyor systems, automatized guided vehicles (AGV's), and robotics to improve efficiencies and throughput times in the warehouse.

Advantages of Private Warehouse

Control: Offers greater flexibility in designing the warehouse and gives users significant control over operations. Visibility: inventory, material flow, handling, supervision, and associated costs. Cost: Operating cost can be 15% - 25% lower if the company achieves at least 75% utilization.

Advantages of Single Warehouse

Less complicated Operating costs and inventory will be lower No duplication of equipment, warehouse staff, and managers Network will be centralized and the company will have its best people, equipment and inventory systems concentrated in one place. Warehouse can more actively focus on the needs of its customers.

Intermediary Positioned Strategy

Midway between supply source and customers, when distribution requirements are high and product comes from various locations Relatively equal number of suppliers and customers.

Internal-External

Move goods and materials between sites

Inbound Logistics

Move goods and materials from suppliers to buyers

Shippers' Association

Nonprofit cooperatives which arrange for members' shipping

Contract Carriers

Person or company who transports freight under contract to one or a limited number of shippers.

Transportation

The function of planning, scheduling, and controlling activities related to the mode, carrier, and movement of inventories into and out of an organization.

Warehouse Management Systems (WMS)

Track and control the flow of goods from receiving dock to outbound shipment. New technologies, such as RFID tags, facilitate tracking.

Level of customer service Amount of Inventory

Trade-offs that will determine how many warehouses the company needs and where they should be located are ____________ and _____________.

Assembly operations

Warehouse operation that puts products together with other items/components before shipping them out to the final customer

Fourth-Party Logistics (4PL)

an interface between the client company and multiple logistics service providers A company will select a lead logistics partner that is then charged with managing the activities of all the other 3PL's being used by the company. Ideally, all aspects of the client company's supply chain handled by 3PL's would be managed by this organization.

Private Carriers

person or company that transports its own cargo as a part of a business that produces, uses, sells or buys the cargo that is being hauled.

Warehousing

the function that allows a company to receive, store, breakdown, repackage, and distribute items to a manufacturing location, or finished products to a customer

Transportation Broker

Bring shippers and carriers together

Market Positioned Strategy

Close to customers to maximize distribution services and improve delivery. Few suppliers, many customers

Disadvantages of Regulations

Discourages competition Does not allow prices to adjust based on demand or by negotiation.

Disadvantages of Contract Warehouse

Duration: The client company is expected to enter into a contract for a specific period of time; generally three years.

Truck

Most flexible mode of transportation Carries > 80% of U.S. Freight Because of interaction with other transportation modes to and from ports & warehouses Carries nearly anything from packaged household goods, to building materials, to liquid petroleum, etc.

Shipping

Outgoing shipment of parts, components, and products. Includes packaging, marking, weighing, and loading for shipment.

Receiving

Physical receipt of material, identification, inspection for conformance with the purchase order (quantity and damage), put-away, and preparation of receiving reports

Recycling

When products reach the ends of their useful lives and must be scrapped, companies must find safe, cost-effective and environmentally friendly ways to dispose of them. Companies can reduce costs and minimize waste.

Short Haul

0-200 miles from the driver's home terminal

Reasons for Cross Docking

1. Provide a central site for products to be sorted and combined for delivery to multiple destinations in the most productive and fastest method possible. 2. Consolidate: Combine smaller product loads into one method of transport to save on transportation costs. 3. Break-Bulk: Break down large product loads into smaller loads for transportation for an easier delivery process to the customer.

Five R's of Reverse Logistics

1. Returns 2. Recalls 3. Repairs 4. Repackaging 5. Recycling

Objectives of Transportation

1. To maximize the value to the company through price negotiations 2. To make sure service is provided effectively 3. To satisfy customers' needs

Repackaging for Reverse Logistics

95% of returned products are because customers are dissatisfied with them not because there are defective. These products are typically repackaged and returned to inventory for restock or resale.

Cross Docking

A LEAN concept because it eliminates the need to store inventory, and reduces some transportation, which are both wastes.

Warehouse Network

A __________________ is simply the number of, and the relationship between, the warehouses that a company has in their organizational structure.

Public Warehouse

A business that provides storage and related warehouse functions to companies on a short or long-term basis, generally on a month-to-month basis for a fee. Own their own equipment and hire their own staff to manage the facility. Fees are typically a combination of a monthly storage fee plus a pallet-in fee and a pallet-out fee

Private Warehouse

A storage facility that is owned by the company that owns the goods being stored in the facility. Generally established by companies that have a large volume or highly valuable goods, or the need for some type of storage and handling. Can be operated as a separate division within a company Can be co-located on-site with manufacturing, or off-site.

General Freight Carriers

A trucking company which handles a wide variety of commodities in standard trailers. Freight is generally palletized. These can be LTL or FTL carriers. They carry the majority of goods shipped. Does not require the use of specialized equipment.

Specialized Carrier

A trucking company which handles the movement of cargo that requires specialized equipment for transportation because of the shipment's size, weight and shape. Transport commodities like liquids, petroleum, household goods, building materials, and other specialized items.

Contract Warehouse

A variation of public warehousing that handles the shipping, receiving, and storage of goods on a contract basis for a fee. The contract can be for an entire building, or for a defined portion within a building. Usually requires a client to commit to services for years rather than months

Water

Accounts for approximately 5% of total US freight spend. the oldest form of transport in the United States, dating back to the birth of the nation. Like rail, it is slow and inflexible but is also inexpensive compared to the other modes of transportation. It's primarily used for heavy, bulky, and low-value materials (e.g., coal, grain). Since it's so comparatively inexpensive, almost any item may be shipped by water, including automobiles, petroleum, containerized cargo, and produce.

Reduction Lot Sizing and Shipping Quantities

By reducing lot sizes and shipping quantities, a company can increase velocity in the warehouse, and get shipments out faster. Faster throughput is a LEAN concept.

Product Positioned Strategy

Close to supply source to collect goods and consolidate before shipping products out to customers. Many suppliers, few customers

Freight Forwarder

Consolidates LTL shipments into FTL shipments. They take small shipments from multiple companies and consolidate them into larger shipments.

Disadvantages of 3PL

Control: A company will not have direct control over the logistics operation. Dependency: Outsourcing logistics creates a dependency on the outsourced company Pricing: The company is locked into the pricing model specified in the contract

Advantages of 3PL

Cost: Eliminates the need for a company to invest in warehouse space, technology, and staff to execute the logistics process. Logistics Expertise: Knowledgeable of industry best practices and the latest developments in technology. Efficiency: They can leverage relationships and volume discounts, which result in lower overhead and the fastest possible service.

Lean Warehousing

Eliminate non-value-added steps and waste in storage process Include: cross docking, reduction lot sizing and shipping quantities, increase automation, and green warehousing

ICC Termination Act

Eliminated most truck economic regulations

Net Rate Pricing

Established discounts and accessorial charges are rolled into one all-inclusive price. Pricing is tailored to the individual customer's needs

Interstate Commerce Act

Established the ICC (Interstate Commerce Commission) - monitors the business operation of carriers transporting goods and people between states - created to regulate railroad prices

Disadvantages of Private Warehouse

High Start-up Cost: Capital to build or buy a warehouse. Long, risky investment. Cost of hiring and training employees. Purchase of material handling equipment. Fixed Location: Not easy to move to another location if the market changes. Fixed Size and Costs: When volume is low, the company still assumes the fixed costs.

Problems of Poor Logistics

Inability of information systems to handle returns Lack of worker training in reverse logistics procedures Little or no identification on returned packages Need for adequate inspection and testing of returns Danger of placing returned products back into sales stocks

Quality Inspection

Incoming and outgoing

Disadvantages of Single Warehouse

It may take longer to deliver product to some customers who are remote from the central location.

Disadvantages of Multiple Warehouses

More complicated Operating costs and inventory will be higher as each warehouse costs money to staff and operate. Duplication of equipment, warehouse staff, and managers Network will be decentralized and the company will have to spread its best people, equipment and inventory systems across a larger network.

Advantages of Public Warehouse

No capital investment or property taxes. Flexibility: -Can be short or long term contract. -For seasonal products. -Add storage capacity even on short notice. Lower costs and reduced risk. Access to special features and services: -Temperature-controlled storage. -Customer Service, Inventory Ordering, etc. -Office space for customer's sales, accounting, etc.

Repairs

Not all products that are returned are disposed. Manufacturers may identify the failure refurbish or remanufacture the product to like-new condition and return it to stock, or harvest various components for re-use

Green Warehousing

One of the more sustainable goals for a green warehouse is to make it a net zero energy user.

Advantages of a Hybrid Approach to Warehouse Network

Operating costs are lower because the spoke warehouses are smaller than in a purely decentralized model. Inventory is also lower as all of the safety stock is held centrally, which generally means that less total safety stock is required because all of the risk and uncertainty is managed centrally. Customer service is generally better than in a purely centralized model since some of the inventory is maintained closer to the customer.

Long Haul

Over 200 miles from the driver's home terminal

Exempt Carriers

Person or company specializing in services or transporting commodities exempt from regulation by the Interstate Commerce Act.

Common Carriers

Person or company who transports freight for a fee that can be hired by anyone to transport goods.

Packing

Placing one or more items of an order into an appropriate container for safe shipping , and marking and labeling the container with customer shipping destination data, and other information that may be required.

Disadvantages of Public Warehouse

Potential for incompatible computer systems Specialized services may not be what is required/needed Space may not be available when/where needed

Advantages of Multiple Warehouses

Potentially faster delivery to customers from a decentralized network that is geographically dispersed throughout the market, assuming adequate inventory in each warehouse

Global Trade Management System (GTM)

Provides global visibility, standardization, and documentation to comply with international trade regulations.

Intermodal Marketing Company

Purchase blocks of rail capacity and sell it to shippers

Free on Board (FOB) Destination

Seller places goods Free On Board to the buyer's place of business, and the seller pays freight costs. Ownership of the goods remains with the seller until the goods reach the buyer. Seller assumes the risk for in-transit loss or damage.

Free on Board (FOB) Origin

Seller places goods Free On Board with the carrier at the seller's location, and buyer pays freight costs. Ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller. Buyer assumes the risk for in-transit loss or damage

Advantages of Contract Warehouse

Services: client can obtain specialized services tailor-made to suit their needs. Cost: can be bundled in the contract and negotiated at a lower cost. Control: contract warehousing offers a degree of control at a reasonable price

Decisions driving Warehouse Management

Site selection Number of warehouse facilities in the network Layout of the warehouse(s) Methods of receiving, storing, retrieving, and distributing products and materials.

Intermodal transportation

Sometimes referred to as the sixth mode of transportation, but it is really the use of multiple modes of transportation to execute a single transport shipment. The most common forms involve: Rail and Motor Carriers (i.e., trucks) Rail and Water Carriers Roll-on/Roll-off Ships

Advantages of Regulations

Tends to assure adequate transportation service throughout the country. Protects consumers from monopoly pricing, safety, and liability.

Cross-Docking Warehouse

The logistics practice of unloading materials from an incoming truck or railcar and loading these materials directly onto outbound trucks or railcars, with little or no storage in between to reduce inventory investment and storage space requirements.

Logistics

The part of supply chain management that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information, from the point of origin to point of consumption, in order to meet customer requirements

Storage

The safe and secure retention of parts or products for future use or shipment.

Full-Truckload (FTL)

The transport of goods that fill up a full truck, or a partial load shipment occupying an entire truck. Advantages: Best way to transport large shipments. Ideal for high risk or delicate freight shipments. Considerably faster than LTL. Disadvantages: Costs more than LTL.

Less-than-truckload (LTL)

The transportation of relatively small freight, i.e., the freight does not require the entire space of a truck. Advantages: Can be cost effective. There are more available carrier options. Ideal for small businesses. Disadvantages: Increased risk of theft/damage. Increased shipping times and delays.

Break-Bulk Warehouse

Warehouse operation that divides full truckloads of items from a single source or manufacturer into smaller, more appropriate quantities for use or further distribution. Located closer to the customer base so that the smaller LTL shipments travel the shorter distance, while the larger FTL shipments from the single source travel the longer distance before arriving at the break-bulk warehouse.

Third Party Logistics (3PL)

an outsourced provider that manages all, or a significant part, of an organization's logistics requirements for a fee. They charge a fee for their services. They typically generate a 10 to 20% savings in logistics costs. Favored by small businesses Used to a significant degree for international logistics

Deregulation

encourages competition and allows prices to adjust as demand and negotiations dictate.

Repackaging Function of Warehousing

for specific customer orders

Reverse Logistics

involves the process of moving a product from the point of customer receipt back to the point of origin to recapture value or ensure proper disposal. It is all about damage control and making the process as customer-friendly as possible

Value of Service Pricing

is a pricing strategy which sets prices based on the value perceived by the customer, i.e., "priced at what the market will bear".

Recalls

more complex than basic returns because they typically involve a product defect or potential hazard and may be subject to government regulations, liability concerns or reporting requirements.

Combination Pricing

price is set at a value between cost-of-service minimum and value-of-service maximum. Most carriers use some form of this. Common in highly volatile markets and changing competitive situations

Carrier

refers to the company that transports the goods

Mode

refers to the way in which goods are transported

Cost of Service Pricing

setting of a price for a service based on the costs incurred in providing it

Warehouse

the facility used to store purchases, work-in-process (WIP), and finished goods inventory.