Supply Chain Management Exam 3

Lead Factory

Source of product and process innovation and competitive advantage across the entire organization (world-class) -competitive advantage of the organization -source of innovation

Global Location Decisions

-Companies can locate anywhere in the world due to increased globalization, technology, transportation, and open markets. -decisions involve: defining each facility' strategic role, determining the location for each facility, identifying the market(s) that each facility serves

Global Location Factors

-Competitiveness -Taxes and Incentives -Currency Stability -Access and Proximity to Markets -Labor Issues -Right to Work Laws -Access to Suppliers and Cost -Utility Availability and Cost -Environmental Issues -Land Availability and Cost -Quality of Life Issues -Business Clusters -Trade Agreements

Transportation Company Classifications

-Contract Carriers -Private Carriers -Common Carriers -Exempt Carriers

Technology and Trends in Transportation

-Driver Monitoring -Traffic Coordination -Safety Technology -Platooning -New Concept Trucking -Vertically Folding Shipping Containers -Driverless Trucks -Drone Delivery

12 Pillars of Competitiveness

-Institutions -Infrastructure -Macroeconomic stability -Health and primary education -Higher education and training -Goods market efficiency -Labor market efficiency -Financial market sophistication -Technological readiness -Market size -Business sophistication -Innovation

Global Facility Types

-Offshore Factory -Source Factory -Server Factory -Contributor Factory -Outpost Factory -Lead Factory

Poor Reverse Logistics Can Hurt a Company

-Problems include: (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.) -Can affect the entire supply chain financially. -Can have a large impact on how a consumer views a product or brand, potentially impacting future sales. -Retail returns = 6% to 10% of sales.

Decisions driving Warehouse Management include

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

Access and Proximity to Markets

-The trend in manufacturing is to be within delivery proximity of your customers. -In the service industry, proximity to customers is even more critical

Pipeline

-accounts for approximately 2% of total US freight spend -most reliable form of transportation -lowest per unit for transportation -limited variety of commodities -materials are transported in a liquid or gaseous state; petroleum, natural gas, drinking water, gasoline -limited maintenance needed once the pipeline is running

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 high cost to weight ratio -half of the goods shipped by air are carried by freight-only airlines. other half in passenger planes with luggage -paired with trucks for door-to-door delivery

Water

-accounts for approximately 5% of total US freight spend -includes inland waterways, coastal and intercostal, and deep-sea cargo shipments -inexpensive -very slow and flexible -primarily used for heavy, bulky, low-value materials like coal, grain, sand, and petroleum -competes with rail and pipeline for some cargo shipments -paired with trucks for door-to-door delivery

Rail

-accounts for approximately 9% of the total US freight spend -competes for transportation when the distance is long and the shipments are heavy or bulky -rail is slow and inflexible but it has the most capacity -paired with trucks for door-to-door delivery

Types of Warehouses

-consolidation -break-bulk -cross-docking

Regulation Cons

-discourages competition -does not allow prices to adjust based on demand or by negotiation

Typical Services Offered by 3PL's

-inbound and outbound transportation -warehousing -pick and pack -freight forwarding -customs brokerage -customs clearance -order taking -billing and invoicing -inventory auditing -freight bill auditing and payment

Truck

-most flexible mode of transportation -carries > 80% of US freight -carries nearly anything from packaged household goods to building materials, to liquid petroleum -competes with rail and air for short-to-medium hauls (short haul=under 200 miles and long haul=over 200 miles) -impacted by the truck driver shortage and hour-of-service rules

Logistics is necessary to

-move goods and materials from suppliers to buyers (inbound logistics) -move goods and materials between sites (internal and external) -move finished goods to the customer

Main Reasons for Cross Docking

-provided a central site to be sorted and combined for delivery to multiple destinations in the most productive and fastest method possible -consolidate: combine smaller product loads into one method of transportation to save on transportation costs -break bulk: break down large product loads into smaller loads for transportation for an easier delivery process to the customer

Warehouse Ownership Types

-public warehouses -contract warehouses -private warehouses

Secondary Functions of Warehouse

-quality inspections -repackaging -assembly operation: operation that puts products together with other items/components before shipping them out to final customer

Free on Board (FOB) Destination

-seller places goods Free in 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 public goods passes to the buyer when the public carrier accepts the goods from the seller -buyer assures the risk for in-transit loss of damage

Taxes and Incentives

-several levels of government must be considered when evaluating potential locations -tariffs are federal taxes that are designed to protect local businesses -countries with high tariffs discourage importing goods into the country and encourage multinational corporations to produce locally

Roll-on/Roll-Off Ship

-specifically designed to allow trucks to be driven directly on and off the ship without the use of cranes. -Provides flexibility and speed

Regulations Pros

-tends to assure adequate transportation service throughout the country -protects consumers from monopoly pricing, safety, and liability

Repackaging

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 in secondary channels.

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 Carriers

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

Single Warehouse

Advantages -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 Disadvantages -the single warehouse may take longer to deliver product to some customers who are remote from the central location

Multiple Warehouses

Advantages -potentially faster delivery to customers from a decentralized network from a geographically dispersed throughout the market, assuming adequate inventory in each warehouse Disadvantages -more complicated -operating cots 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 lager network

Rail and Motor Carriers

Offer point-to-point pickup and delivery service known as Trailer-on-Flatcar (TOFC)

Market Positioned Strategy

Close to customers to maximize distribution services and improve delivery -few suppliers, many customers

Product Positioned Strategy

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

Increased 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.

Freight Forwarder

Consolidates LTL shipments into FTL shipments

Net-Rate Pricing

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

Returns

Customers return products for a number of reasons. An item may be defective, damaged, seasonal, fail to meet expectations, or be excess inventory

Outpost Factory

Factory set up in an area with an abundance of advance supplier, competitors, research facilities, etc. -advance suppliers -competitors -research facilities and universities for materials, components and products

Contributor Factory

Focused on product development and engineering for products that they manufacturer -product development -production planning -procurement decisions -supplier development

Return of Unsold Goods

In some industries, goods are distributed to downstream members in the supply chain with the understanding that the goods may be returned for credit if they are not sold e.g., newspapers, magazines, even pharmaceuticals. -this acts as an incentive for downstream members to carry more stock, because the risk of obsolescence is borne by the upstream supply chain partner -the risk is that the downstream member in the supply chain might exploit the situation by ordering more stock than is required and returning large volumes

Intermediately 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

Repairs

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

Rail and Water Carriers

Offer point-to-point pickup and delivery service known as Container-on-Flatcar (COFC)

Green Warehousing

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

Exempt Carriers

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

Contract Carriers

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

Recalls

Recalls are 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

Primary Functions of a Warehouse

Receiving, Storage, Picking, Packing, Shipping

Five R's of Return Logistics

Returns, Recalls, Repairs, Repackaging, Recycling

Logistics

That part of supply chain management that plans, implements, and controls the flow of goods, services and information between the point of origin and the final customer.

Terms of Sale

The delivery and payment terms agreed between a buyer and a seller.

Storage

the safe and secure retention of parts and products for future use of shipment

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 specialized storage or handling -can be located as a separate division within a company -can be located on site with manufacturing, or off-site Advantages -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 Disadvantages: -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 cost: when volume is low, the company still assumes the fixed costs

Warehouse Network

a warehouse network is simply the number of, and the relationship between, the warehouses that a company has in their organizational structure -fundamental questions to be answered in establishing a warehouse network are how many warehouses are needed and where should they be located -trade-offs that will determine how many warehouses the company needs and where they should be located are level of customer service and amount of inventory

Load or Transportation Broker

bring shippers and carriers together

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 ti transport large shipments. ideal for high risk or delicate freight shipments, considerably faster than LTL disadvantages: costs more than LTL

Public Warehouses

business that provided 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 equipment and hire own staff to manage facility -fees are typically a combination of a monthly storage fee plus a pallet in fee and pallet out fee Advantages: -no capital investment or property taxes -flexibility -lower costs and reduced risk -access to special features and services Disadvantages -potential for incompatible computer systems -specialized services may not be what is required/needed -space may not be available when/where needed

Reduced Lot Sizes and Shipping Quantities

by reducing lot sizes and shipping quantities, a company can increase velocity in the warehouse, and get shipments out faster

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 -ex: unused pharmaceutical product returned to the pharmacy rather than flushing it down the toilet which ultimately causes the drug to end up in the water supply

Third Party Logistics (3PL)

company is an outsourced provider that manages all, or a significant part, of an organization's logistics requirements for a fee. -providers charge a fee for their services. -They typically generate a 10-20% savings in logistics costs. -Favored by small businesses. -Used to a significant degree for international logistics. Advantages -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: can leverage relation shipment and volume discounts, which result in lower overhead and the fastest possible service Disadvantages -control: a company will not have direct control over the logistics operation -dependency: outsourcing logistics creates a dependency -pricing: a company is locked into the pricing model specified in the contract

Interstate Commerce Act

created the Interstate Commerce Commission (ICC) in 1887

Deregulation

encourages competition and allows prices to adjust as demand and negotiation dictate

Warehouse

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

Server Factor

factory set up to take advantage of government incentives and/or reduced tax/tariff barriers to meet regional or local market needs -firm uses government incentives -low exchange risk and tariff barriers to reduce axes and logistics costs -makes minor improvements to product and processes -set up serve the local market

Offshore Factory

factory that set up for manufacturing or assembly in a country where labor and/or raw materials are less expensive for eventual import back into the manufacturer's home country -manufacturer's products at low cost with minimal technical and managerial resources -take advantage of low labor costs -import or acquire parts locally, then export to the manufacturer or directly to customers -local management serves in a supervisory roll not in making management decisions

Less-than-truckload (LTL)

the transportation of relatively small freight, 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

Warehousing

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

Currency Stability

impacts business costs and consequently location decisions

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 -reverse logistics cost 4-5 times as much as forward logistics and requires on average 12 times as many processing steps -often viewed as an unwanted supply chain activity, many companies outsource this activity to a 3PL, cost of doing business, a quality of regulatory compliance issue

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".

Fourth Party Logistics

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

Source Factory

manufactures products at low cost but with skilled workers and significant managerial resources -plant management involvement in supplier selection -plant management involvement in production planning -more developed local infrastructure -access to skilled workforce -low production costs

Shipper's Association

nonprofit cooperatives which arrange for member's shipping

Warehousing Management Systems (WMS)

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

Hybrid Approach

one hybrid network is a "hub and spoke" 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 -hub warehouse feeds the spoke warehouses with inventory as necessary on a regular basis -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 come of the inventory is maintained closer to the customer

Shipping

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

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.

Common Carriers

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

Receiving

physical receipt of material, identification inspection for conformance with the purchase order, put-away, and preparation of receiving reports

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

Combination Pricing

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

Global Trade Management Systems (GTMS)

provide global visibility, standardization, and documentation of product returns, while minimizing reverse logistics costs

Intermodal Marketing Company

purchase blocks of rail capacity and sell it to shippers

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

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. -is growing substantially because it is fairly cost-efficient and cost effective -the most common forms of intermodal transportation involve (rail and motor, rail and water, roll on/off)

Transportation

the function of planning, scheduling, and controlling activities related to the mode, carrier, and movement of inventories into and out of an organization objectives -to maximize the value to the company through price negotiations -to make sure service is provided efficiently -to satisfy customers needs

ICC termination Act

the interstate commerce commission (ICC) was eliminated in 1995

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 to reduce inventory investment and storage space requirements Advantages -transportation cost-savings: 8 FTL shipments are less expensive per unit than 16 LTL shipments -operational 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

Modes of Transportation

truck, rail, air, pipeline, water

Transportation Management Systems (TMS)

used to select the best mix of transportation services and pricing

Contract Warehouse

vacation of warehousing that handles the shipping, receiving, and storage of goods on a contract basis for a fee -contract can be for a entire building, or for a defined portion within a building -usually requires a client to commit to services for years rather than months -the fee structure may be fixed cost, cost-plus, or a combination of both -the company providing the space handles the employees, equipment, and maintenance Advantages -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 Disadvantages -duration: the client company is expected to enter into a contract for a specific period of time, generally three years

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

Consolidation Warehouse

warehouse operations that received products from different plants or suppliers, stores them, and then combines them with similar shipments from other plants or suppliers for further distribution

LEAN Warehousing

warehouses and distribution centers are continuing to develop their LEAN capabilities -cross docking, reduced lot sizes and shipping quantities, increased automation, green warehousing

Recycling

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

Picking

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