Logistics: Warehousing, Transportation, & Reverse Logistics

Transportation Company Classifications

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

Disadvantages of Using a 3PL:

-Control: A company will not have direct control over the logistics operation. -Dependency: Outsourcing logistics creates a dependency on the 3PL. -Pricing: The company is locked into the pricing model specified in the contract

True value of warehousing

Lies in having the right product in the right place at the right time

Warehouse Network

- the number of, and the relationship between, the warehouses that a company has in their organizational structure.

4PLs duties

-A company will select a lead logistics partner (referred to as a 4PL) 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 the 4PL organization.

How is reverse logistic is viewed as

-An "unwanted" supply chain activity. Many companies outsource this activity to a 3PL -A cost of doing business -A quality or regulatory compliance issue

Rail

-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 capability -Rail companies use each other's rail cars. Keeping track of rail cars and getting them where needed can be problematic -Paired with trucks for door-to-door delivery

Functional

-Consolidation -Break-Bulk -Cross-Docking

Types of Functions:

-Consolidation Warehouse -Break-Bulk Warehouse -Cross-Docking Warehouse

Private Warehouse : 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.

Transportation Pricing

-Cost of Service Pricing -Value of Service Pricing -Combination Pricing -Net-Rate Pricing

Advantages of Using a 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: 3PL's can leverage relationships and volume discounts, which result in lower overhead and the fastest possible service.

LEAN Warehousing

-Cross Docking - A LEAN concept because it eliminates the need to store inventory, and reduces some transportation, which are both wastes. -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. -Faster throughput is a LEAN concept. -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. -Green Warehousing - One of the more sustainable goals for a green warehouse is to make it a net zero energy user.

Products have little value to the customer until they are moved to the customer's point of consumption

-Delivered at the right time. -Delivered to the desired location.

Other Transportation Intermediaries

-Freight Forwarder - -Load or Transportation Broker -Shippers' Association -Intermodal Marketing Company

Private Warehouse duties

-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 operated as a separate division within a company -Can be co-located on-site with manufacturing, or off-site.

Transportation Regulation

-Granger laws -Interstate Commerce Act -Transportation Act Motor Carrier Act -Transportation Act -Federal Aviation Act -Department of Transportation Act -Railroad Revitalization and Regulatory Reform Act -Air freight deregulated -Motor carriers deregulated -Shipping Act -ICC Termination Act -Ocean Shipping Reform

Private Warehouse : 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 Costs: When volume is low, the company still assumes the fixed costs.

Poor Reverse Logistics Can Hurt A Company

-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 have a large impact on how a consumer views a product or brand, potentially impacting future sales.

Third Party Logistics Services

-Inbound Transportation -Outbound Transportation -Warehousing -Pick and Pack -Freight Forwarding -Customs Brokerage -Customs Clearance -Order Taking -Billing and Invoicing -Inventory Auditing -Freight Bill Auditing and Payment

Water

-Inexpensive -Very slow and inflexible -Competes with rail and pipeline -Includes inland waterway, coastal and intercoastal, and deep-sea cargo shipments. -Primarily used for very heavy, very bulky, and very low-value materials (e.g., coal, grain, sand).

Single Warehouse - Positives

-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

Pipeline

-Lowest per unit cost for transportation -Limited in the variety of commodities they can carry. -Most reliable form of transportation -Little maintenance needed once the pipeline is running. -Materials are transported in a liquid or gaseous state.

Multiple Warehouse - Negatives

-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.

Air

-Most expensive mode of transportation -Generally the fastest mode of transportation. -Transports about 5% of U.S. freight. -Cannot carry extremely heavy or bulky cargo. -Mostly for light, high-value goods, over long distances, quickly -Paired with trucks for door-to-door delivery

Truck

-Most flexible mode of transportation. -Carries > 80% of U.S. Freight. -Competes with Rail and Air for short-to-medium hauls. ~Short haul = 0 - 200 miles of the driver's home terminal ~Long haul = over 200 miles from the driver's home terminal

Logistics is necessary to

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

Advantages : 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.

Cross-Docking Warehouse: Advantages

-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.

Types of Warehouses

-Ownership -Functional

Disadvantages: Public Warehouse

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

Regulation -vs- Deregulation

-Pro - Regulation tends to assure adequate transportation service throughout the country. Protects consumers from monopoly pricing, safety, and liability. -Con - Regulation discourages competition and does not allow prices to adjust based on demand or by negotiation.

Ownership

-Public Warehouses -Contract Warehouses -Private Warehouses

Secondary Functions of a Warehouse

-Quality Inspections -Repackaging -Assembly Operation

The most common forms of intermodal transportation

-Rail and Motor Carriers: Trailer on Flatcar -Rail and Water Carriers: Container on Flatcar -Roll-on/Roll-off Ships: allow trucks to be driven directly on and off the ship without use of cranes

Free on Board (F.O.B.) Destination

-Seller arranges for transportation and adds charges to the sales invoice. -Seller assumes the risk for in-transit loss or damage. -Title does not pass to the buyer until delivery is completed.

Free on Board (F.O.B.) Origin

-Seller states price at point of origin and agrees to load a carrier -Buyer selects the carrier and pays for the transportation -Title passes to the buyer when the shipment originates. -Buyer assumes the risk for in-transit loss or damage

Advantages: 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 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.

Contract Warehouse includes

-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 -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

Logistics Management Software Applications

-Warehouse Management Systems (WMS) -Transportation Management Systems (TMS) -Global Trade Management Systems (GTM)

3PL characteristics

-providers 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

Types of warehouse network

-single warehouse -multiple warehouse -hybrid approach

Warehouse Network Strategy

1. Market Positioned Strategy: Close to customers to maximize distribution services and improve delivery. 2. Product Positioned Strategy: Close to supply source to collect goods and consolidate before shipping products out to customers. 3. Intermediately Positioned Strategy: Midway between supply source and customers, when distribution requirements are high and product comes from various locations

The main reasons that cross docking is implemented is to:

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

Primary Functions of a Warehouse

1. receiving 2. storage 3. picking 4. packing 5. shipping

Modes of Transportation

1. truck 2. rail 3. air 4. pipeline 5. water

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

3PL

A Third Party Logistics company is an outsourced provider that manages all, or a significant part, of an organization's logistics requirements for a fee.

Public Warehouse

A business that provides storage and related warehouse functions to companies on a short or long-term basis, generally from month-to-month. -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.

Warehouse

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

Private Warehouse

A storage facility that is owned by the company that owns the goods being stored in the facility.

Contract Warehouse

A variation of public warehousing that handles the shipping, receiving, and storage of goods on a contract basis

Ranking of Transportation Modes (Best to Worst)

Accessibility = truck , rail, pipeline, air, water Capability = rail, truck, water, air, pipeline Lowest cost per unit = pipeline, water, rail, truck, air Reliability = pipeline, truck, rail, air, water Speed = Air, Truck, Rail, Pipeline, Water.

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

Hybrid Approach

Companies may choose to do some type of a hybrid approach to balance costs and inventory against customer service.

Customer service - Hybrid Approach

Customer service is generally better than in a purely centralized model since some of the inventory is maintained closer to the customer

Contract Warehouse: Disadvantages

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

Net-Rate Pricing

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

4PL

Fourth-party logistics is an interface between the client company and multiple logistics service providers.

FTL Shipment

Full Truckload Shipment

FTL

Full-Truckload carriers are used when you have enough to fill the truck, or you don't want other suppliers cargo on your truck (security, faster delivery)

Warehousing

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

Single Warehouse - Negatives

However, the centralized network may take longer to deliver product to some customers who are remote from the central location.

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.

LTL Shipments

Less Than Truckload Shipments

LTL

Less-Than-Truckload carriers move small shipments, when you don't have enough to fill a truck

Break-Bulk Warehouse : Flow

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

Consolidation warehouse : Flow

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.

Mode & Carrier

Mode" refers to the way in which goods are transported. "Carrier" refers to the company that transports the goods

Shipping

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

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.

Contract Carriers

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

Receiving

Physical receipt of material, identification, inspection for conformance with the purchase order (quantity and damage), 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

Multiple Warehouse - Positives

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

Poor reverse logistic retail returns

Retail returns = 6% to 10% of sales

Cost of Reverse Logistics

Reverse logistics cost 4 - 5 times as much as forward logistics and requires on average 12 times as many processing steps

Transportation

The function of planning, scheduling, and controlling activities related to the mode, carrier, and movement of inventories into and out of an organization. "Get the right product, to the right place, at the right time by ensuring the product is moved as efficiently as possible from point-of-origin to point-of-destination."

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.

Storage

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

Fees on Public Warehouse

They may have some document fees and account management fees Fees will vary based on: -what is being stored -Size and weight of the pallets -If they can be stacked -How fragile the product is -Value of goods (risk of theft) -Hazards associated with the goods

Establishing a warehouse network: How many and where?

Trade-offs that will determine how many warehouses the company needs and where they should be located are; (1) the level of customer service the company wants to provide (2) the amount of inventory the company is willing to invest in

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.

Assembly Operation

Warehouse operation that puts products together with other items/components before shipping them out to the final customer Examples: Literature, Spare Parts, Advertising Materials

Consolidation Warehouse

Warehouse operation that receives products from different plants or suppliers, sorts them, and then combines them with similar shipments from other plants or suppliers for further distribution.

Picking

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

hybrid network

a "hub-and-spoke" where there is a centralized warehouse (i.e., the "hub") which holds most of the inventory linked to a series of smaller geographically dispersed warehouses (i.e., the "spokes") which hold only a small amount of inventory to support their local area in the immediate time frame. Operating costs are lower because the spoke warehouses are smaller than in a decentralized model.

Reverse logistics is

all about damage control and making the process as customer-friendly as possible

C carriers

carry the majority of goods shipped. Includes common carriers.

Repackaging

for specific customer orders

Quality Inspections

incoming and outgoing.

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".

Cost of Service Pricing

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

Intermodal is growing substantially because

it is fairly cost-efficient and cost-effective.

Inventory - Hybrid Approach

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

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.

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

Warehousing provides

provides time and place utility; the availability necessary to give materials true value

Intermodal Transportation

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.

definition of Logistics

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

Terms of Sale

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

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. -Backwards flow of goods from customers in the supply chain

Specialized carriers

transport commodities like liquids, petroleum, household goods, building materials, and other types of specialized items.