Supply Chain Management - Chapter 9 Logistics: Warehousing, Transportation, and Reverse Logistics

Department of Transportation Act (1966)

established US Department of Transportation to coordinate all US transportation-related matters

Rail and Motor Carriers

offer point-to-point pickup and delivery service known as trailer-on-flatcar (TOFC)

Reverse Logistics Add-In

Six Sigma and quality are key parts of process

Warehouse Networks

number of, and relationship between, warehouses that company has in its organizational structure

Tax Avoidance

company doesn't own property, user not subject to property taxes

Greater Emphasis on Cross Docking

cross docking eliminates the need to store inventory (waste); waste reduction/elimination is the key element of LEAN cross docking is a form of consolidation that reduces transportation (waste)

Warehouse

facility used to store inventory

Granger Laws (1870s)

regulated railroads

Pipeline Disadvantage

fixed route of service that cannot be easily extended into door-to-door service limited geographical flexibility or accessibility use of pipelines is limited to select number of products: crude oil, oil products, natural gas, water, and limited number of chemicals

Repackaging

for specific customer orders

Railroad Revitalization and Regulatory Reform Act (1976)

allowed railroads to change rates without ICC approval

Shipping

function for outgoing shipment of parts, components, and products includes packaging, marking, weighing, and loading for shipment

Warehousing

all activities related to receiving, storing, and shipping materials to and from production or distribution locations function that allows a company to store all the types of inventory (raw materials, work in process, and finished goods) the company may have or need

Motor Carrier Act (1935)

brought motor carriers under Interstate Commerce Commission control

Public Warehousing

business that provides storage and related warehouse functions to companies on a short or long-term basis, generally from month to month typically own their own equipment and hire their own staff to manage the operations of the facility often divided into zones for a variety of goods, and can include temperature-controlled storage, dry storage, and general storage

Public warehousing mainly short-term

can also be long-term as companies become accustomed to convenience of public warehouse services offer companies a range of labor solutions up to and including a dedicated workforce

Important Questions to ask for reverse logistics

what are the causes? what can and must be done about it?

Intangible Benefits

when a company distributes its products through a private warehouse, it gives its customers a sense of permanence and continuity of business operations customer perceives company as stable, dependable and long-term supplier of products

Shipping Act (1984)

allowed ocean carriers to pool shipments, assign ports, publish rates, and enter into contracts with shippers

Interstate Commerce Act (1887)

created Interstate Commerce Commission (ICC)

Federal Aviation Act (1958)

created air traffic and safety regulations and the national airport system

APICS model 8 specific return points

3 return points at the supplier 2 return points at manufacturing company level 3 return points at customer and customer's customer level

Cost (private)

operating cost can be 15%-25% lower if company achieves at least 75% utilization

Freight Forwarders

"middle man" between carrier and organization shipping product take small shipments (LTL) from numerous companies and consolidate them to make larger shipments (FTL) larger consolidated shipments can take advantage of lower transportation rates associated with volume some of these savings can then be passed along to individual shippers

Technology and Trends in Transportation

"technological trends have disrupted trucking industry to extent that early adopters are set to become most effective and efficient operators" ~American Journal of Transportation

Carrier

company or service provider that actually transports goods or materials

Hybrid approach (Hub-and-Spoke Network)

used to balance costs and inventory against customer service centralized warehouse (hub) holds most of the inventory, linked to a series of similar decentralized and geographically dispersed warehouses (spokes), which hold only a small amount of inventory to support the local area in the immediate time frame hub warehouse feeds spoke warehouses with inventory as necessary on a regular basis operating costs lower b/c spoke warehouses are smaller than in a purely decentralized model inventory is lower b/c all safety stock is held centrally, which generally means that less total safety stock is required b/c all risk and uncertainty is managed centrally customer service generally better than purely centralized model b/c some inventory is maintained in spoke warehouses closer to customers demand in local areas must be well understood and monitored closely for mdoel to work well

5 R's of Reverse Logistics

returns, recalls, repair, repackaging, recycling

Mode

way in which goods are transported

Rail Transportation Advantages

- better structured than any other form of transportation. fixed routes and schedules making its services more certain and regular compared to other modes of transport - most dependable as it is least affected by weather - economical, quicker, and best suited for carrying heavy and bulky goods over long distances - best speed over long distances except for air; but it can carry heavy bulky goods making it more versatile than air - least expensive. has lower variable costs and most operating expenses are fixed costs. economical in terms of labor as 1 driver and 1 crewman can handle a much larger shipping load than other modes like motor - carrying capacity is extremely large and can be easily expanded even further by adding more railcars - safest

Transportation Company Classification

- common carrier - contract carriers - exempt carriers - private carriers regardless of type, carriers may be prohibited by law from carrying certain types of items, including illegal and dangerous materials

Private Warehousing Advantages

- control - flexibility - cost - labor - tax benefits - intangible benefits

3PLs Disadvantages

- control: company will not have direct control over logistics operation; relying on 3pl to consistently deliver promised services; lack of direct control means companies are at risk of any problems that 3pl faces - dependency: outsourcing logistics to a 3pl is a large commitment; when businesses contract with 3pls it creates a dependency which can be significant; dependency puts company in an uncomfortable situation if pricing or service from 3pl is not as expected; logistical downtime can translate into large amounts of lost productivity and revenue; although free market dictates that a business dissatisfied with its 3pl could switch to another 3pl , reality not so simple; switching logistical support can create great problems in unforseen costs and high risks resulting from transistion - pricing: contracting with 3pl means company is locked into pricing model specified in business agreement; outsourcing logistics to 3pl, companies are forgoing possibility that an in-house logistics department could discover a less expensive or more efficient solution - loss of expertise: companies outsource in-house logistics to a 3pl may lose their own logistics by outsourcing - risk: sharing confidential info with an outside partner may leave some companies feeling vulnerable

Transportation Pricing and Considerations

- cost of service pricing - value of service pricing - combination pricing - net-rate pricing

3PLs Advantages

- cost: eliminates need for company to invest in warehouse space, technology, transportation, and staff to execute logistics process - logistics expertise: 3PLs are knowledgeable of industry best practices, and stay up to date with latest developments in technology (core competency) - efficiency: improved efficiency by exploiting a 3PL's economies of scale; 3PLs can leverage relationships and volume discounts, which results in lower overhead and fastest possible service - flexibility: ability to rapidly scale space, labor, and transportation according to business needs - focus on core competency: outsourcing logistics allows your company to focus on your core competencies

Regulation Cons

- discourages competition - doesn't allow prices to adjust based on demand or through negotiation

Regulation Pros

- ensure adequate transportation service throughout the country - protects consumers from monopoly pricing, unsafe practices, and liability

Private Warehousing Disadvantages

- flexibility - fixed size and costs - high opportunity cost risk - high startup cost

Logistics Covers:

- flow on left side from supplier to buyer - flow in middle moving goods and materials between sites (internal and external) - flow on right side going out to customers, whether the customer is a wholesaler, distributor, or retailer, or even the final consumer of a product all movement activities

Other Transportation Intermediaries

- freight forwarders - load or transportation brokers - shippers' associations - intermodal marketing companies (IMC)

LEAN Principles

- greater emphasis on cross docking - reduced lot sizes and shipping quantities - increased automation - tendency to be green

Fundamental questions to be answered in establishing warehouse network

- how many warehouses should company have? - where should they be located?

Trade-offs that determine how many warehouses company needs and where they should be located

- level of customer service that company wants to provide - amount of inventory in which company is willing to invest

Contract Warehousing Advantages

- logistics expertise - services - cost - fees - control

Warehouse Network Strategies

- market positioned strategy - product positioned strategy - intermediately positioned strategy

5 Major Modes of Transportation

- motor carriers (trucking) - rail carriers - air - water - pipeline

Public Warehousing Advantages (Due to Flexibility)

- no capital investment - tax avoidance - flexibility - accommodates seasonality - capability to expand - lower costs and reduced risk - access to lower freight rates - access to special features and services - knowledge of exact storage and handling costs

Cross Docking Advantages

- operational efficiency = material doesn't have to be stored in warehouse, and directly moves from receiving docks to shipping docs, warehouse operations are more efficient - inventory efficiency = inventory moves directly from receiving to shipping docs, there is no storage at warehouses, and that reduces the total system inventory in the supply chain

Main Reasons Cross Docking Implemented

- provide central site for products to be sorted and similar products combined to be delivered to multiple destinations in most productive and fastest method possible - combine numerous smaller product loads into one method of transportation to save on transportation costs (consolidation) - break down large product loads into smaller loads for transportation to create an easier delivery process to the customer (deconsilidation or break bulk)

Types of Warehouses

- public - contract - private - consolidation - break bulk - cross docking

Functions of a Warehouse

- receiving - storage - picking - packing - shipping

Business Value of Fully Developed TMS Should Achieve

- reduced costs through better route planning, load optimization, carrier mix, and mode selection - improved accountability with more visibility into transportation chain - greater flexibility to make changes in delivery plans

Rail Transportation Disadvantages

- requires large capital investment in infrastructure and investment is fixed (not easily adaptable to changing volume requirements). construction costs, maintenance, and overhead expenses are very high compared to other modes. infrastructure and aging equipment in US are also problems. rails, bridges, and other aspects are old and deteriorating, and require a lot of upkeep and further capital expenditure. some infrastructure improvements rail can make themselves but others must be handles through local, state, or federal gov't - inflexible as trains run on a specific timetable and schedule and therefore must arrive and depart according to their set timetable. routes and timings cannot be adjusted to individual requirements - cannot provide door to door service (some carriers have begun purchasing motor carriers to offer point to point delivery and pickup service) - unsuitable and uneconomical for short distance and small volume goods. considered slow and inflexible and compares unfavorably with motor in terms of transit times and frequency of service in short and medium distance hauls - due to high capital investment, rail cannot be operated economically in rural areas, creating inconvenience - time and labor necessary to book and take delivery of goods is unfavorable compared to motor - must fully utilize all of its available capacity to operate economically, and it has a very large carrying capacity, which can create significant financial problems - companies use each other's railcars to build a rail transport, so keeping track of railcars and getting them where needed can be problematic - time and cost of terminal operations

Criteria for Choosing Public Warehouse

- short-term and long-term needs - price companies willing to pay for service - geographical location - type of technology needed vs what is available - whether public warehouse has capability to expand if more space is needed - how flexible public warehouse is to respond to changes in volume or other needs

Warehousing decisions driven by

- site selection - number of warehouse facilities in network - layout of warehouse(s) - methods of receiving, storing, and retrieving products and materials

Public Warehousing Disadvantages

- systems compatibility - lack of specialized services - space availability

Special Features

- temperature-controlled storage (cool, cold, frozen) - crane capabilities - ultraclean segregated areas - guard service 24/7/365 - dedicated docking areas for special customers - special staff functions like customer service, inventory ordering, etc - office space to rent for customer's sales, accounting, etc.

True Value of Warehousing...

...lies in having the right product in the right place at the right time warehousing provides time and place utility, the availability necessary to give materials true value

Single Warehouse

1 centralized warehouse operation, operating costs and inventory will be lower fewer warehouses require less complicated infrastructure, and less or no duplication of equipment, warehouse staff, and managers network becomes more centralized and company will have its best people, equipment, and inventory systems concentrated in fewer places can be beneficial to customer service in that warehouse can more actively focus on needs of its customers centralized network may take longer to deliver product to some customers who are remote from central location

Transportation Objectives

1) maximize value of company through price negotiations (transportation adds value by getting the best price to transport goods whether goods are coming from supplier or going out to customer) 2) make sure service is provided effectively (move products in as few moves as possible and make sure the product is not damaged or somehow otherwise negatively affected) 3) satisfy customers' needs (ensure that product gets to the right place at the right time; if you moved the product efficiently, effectively, and at the lowest possible cost, but it isn't at the place where customers want it, when they need it to be there, the transportation function is not actually adding value)

Logistics Necessary to Accomplish

1) to move goods and materials from suppliers to buyers 2) to move goods and materials between sites, either internally or between internal and external sites 3) to move finished goods out to customers

Air Freight Deregulation

1977

Returns

1st step in reverse logistics flow could be due to item being defective, damaged, and seasonal; fail to meet expectations; represents excess inventory key to handling is effectively having processes in place for receiving, inspecting, and testing products, along with return material authorization (RMA) verification and tracking systems some companies find it more efficient to decouple return and repair processes completely

Driverless Trucks

3.5 million truck drivers in US alone 75% cheaper than cost of human beings driving for 25% of the cost economic efficiency boost will include fact that driverless trucks never get tired and can drive for 24 hours straight, non-stop drivers restricted by law from driving for more than 11hrs/day and are required to take breaks each day

Intermodal

6th mode of transportation (really use of multiple modes of transportation to execute a single transport shipment fairly cost efficient and cost effective - rail and motor - rail and water - water and motor - roll-on/roll-off ship

Repackaging (for Restock or Resale in Secondary Channels)

95% of returned parts and products are b/c customers are dissatisfied with them not because there is something wrong with them; these can be repackaged and returned to inventory parts/products with minor flaws may be repaired, reconditioned, and repackaged for resale co-locating forward and reverse logistics processes can deliver important returns secondary channel ex: overstock.com

Terms of Scale Examples

FOB Origin: - seller states price at point of origin and agrees to load a carrier - buyer selects carrier and pays for transportation - title passes to buyer when shipment originates - buyer assumes risk for in-transit loss or damage FOB Destination: - seller arranges for transportation and adds charges to sales invoice - seller assumes risk for in-transit loss or damage - title not pass to buyer until delivery is complete

High Opportunity Cost Risk

ROI on other investments may be greater if funds are channeled into other profit-generating opportunities rather than investing in warehouse b/c ROI is about same as company's other investments, most companies find it advantageous to use combo of public and private (best to use private to handle basic inventory levels required for least cost logistics in markets where volume justifies ownership; any extra volume can be stored in public warehouse during peak periods if private warehouse is full) there is also potential of not being able to sell warehouse in future if no longer needed

Long-Haul

anything over 200 miles from driver's home terminal drivers transport goods over hundreds and even thousands of miles spend a lot of time traveling on large highways and generally carry loads for 2+ days before unloading may drive flatbed rigs (used for carrying things like steel or drive tankers, or tractor trailers) usually drive at night when traffic is light routes are driven by most experienced drivers b/c its challenging work and cargo can be extremely valuable

Majority of errors causing returns

attributed to human error and not technological systems (but that becomes a scapegoat)

Control (private)

can be constructed to meet user specifications companies can also control product placement within facility providing access to productions when organization needs them allows company to integrate warehousing function more easily into its total logistics system company has clear visibility of inventory control, internal material flow, handling, supervision, and associated cost control

Customers

care very little about transportation and logistics activities and are more interested and more directly impacted by the transportation and logistics activities on the back end when the product is actually in proximity to where they are going to use it, whether than is a wholesaler, a distributor, a retailer, or the actual end consumer real value delivered by the logistics function is ensuring that the product is delivered at the right time and to the right location

Traffic Coordination

companies and drivers can improve delivery times with ability to communicate and access fleet information remotely achieved by coordinating driving patterns, delivering real-time traffic reports, updating information on surrounding areas, and even telling driver about something in his or her blind spot resolved many road transport issues for truckers

Driver Monitoring

companies can keep track of driver and vehicle progress through data sharing technology mileage, distance, routes, and all other behaviors can be monitored remotely now, which gives companies ability to make real-time changes and improvements

High Startup Cost

companies have to generate enough capital to build or buy a warehouse warehouse is often a long, risky investment there is cost of hiring and training employees, and purchase of material handling equipment high cost necessitates high and steady demand volumes for investment to make sense high fixed cost alternative becomes less attractive in times of high interest rates, because it is more costly to secure the necessary financing

Increased Automation

companies using automated systems like pick to light, voice picking, conveyor systems, automatized guided vehicles (AGVs), and robotics to improve efficiencies and throughput times in the warehouse automation can help to speed up picking process and move products through a warehouse faster and more accurately than manual systems with less resources, reducing waste

Flexibility

company can establish a short-term public warehouse commitment, if business conditions change, company not tied into long-term commitment, and they can reduce or expand their storage needs accordingly

Rail Carriers

company whose business is transporting persons or goods by railroad best for very heavy shipments (building materials, construction equipment, and coal) when transport distance is long

Choosing Warehouse Type

consider all services desired, level of control that is required, and length of time the storage facility would be required consider cost too

Logistics Expertise

contracts will be experienced in warehouse operations and supply chains often have knowledge that business owners don't long-term associated setup, it is in their interest to see that client company's needs are met

Terms of Scale

delivery and payment terms agreed between buyer and seller international trade terms of scale also set out rights and obligations of buyers and sellers as applicable in transportation of goods

Tax Benefits

depreciation allowances on buildings and equipment help to reduce taxes

Contract Warehousing Disadvantages

duration = client company is expected to enter into contract for specific period of time (generally 3 years) public warehouse allows client to store for short and long periods of time allowing flexibility when it comes to duration

ICC Termination Act (1995)

eliminated the ICC

Ocean Shipping Reform Act (1998)

ended requirement for ocean carriers to file rates

Transportation Act (1940)

established ICC control over domestic water transportation

Consolidation Warehouses

established at strategic location between suppliers and customers ideally, in order to minimize total transportation costs, consolidation warehouse should be located closer to supply base so that the smaller LTL shipments travel shorter distance and can be consolidated more quickly into larger FTL shipments traveling the longer distance to customers 3PL provider manages and maintains the warehouse and info system needed to run it, and these operations can either be client-dedicated or multiple-user facilities

Net-Rate Pricing

established discounts and accessorial charges are rolled into all-inclusive price pricing tailored to individual customer's needs

Cost

facilities and specialized services provided under contract are similar to those provided by a private warehouse, however these facilities come at a cheaper price, because significant capital costs are involved in construction and maintenance of a private warehouse, whereas a contract warehouse is owned and operated by a 3rd party that bears the burden of captial costs

Public Warehousing (cont)

fees generally combination of monthly storage fee plus a pallet-in fee and a pallet-out fee. storage and handling fees will vary based on exactly what is being stored and handled (reasons include size, and weight of palletized loads, how high pallets can be stacked, how fragile they are, risk of theft, value of goods, any hazards associated with goods, etc) offers variety of al la carte services including order picking and order packing, order consolidation, cross docking, packaging services, kitting, returns processing, inspection services, inventory management, physical inventory counts, assembly operations, and shipping. they charge separate fee for each service

Load or Transportation Brokers

find shipments for carriers for a fee bring shippers and carriers together

Receiving

function encompassing physical receipt of material, identification, inspection for conformance with the purchase order (quantity and damage), put-away (delivery to a warehouse storage location), and preparation of receiving reports

Transportation

function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization attempts to fulfill 3 of the 7 Rs (get right product to right place at the right time) by ensuring that the product is moved as efficiently and effectively as possible from point of origin to point of destination

Multiple Warehouses

geographically dispersed throughout the market they will likely be able to distribute product to their customers much faster than if they only have a centralized warehouse, assuming that they maintain adequate inventory in each warehouse every part of market could potentially be better served through a multiple warehouse network as responsiveness and delivery service increase, however, warehouse operating costs and inventory costs also increase as each warehouse costs money to staff and operate trade-offs between costs and customer services must be considered basic fact is that as number of warehouses increase, the network becomes more decentralized, which may or may not be beneficial

Vertically Folding Shipping Containers

goal = reduce number of container ship movements as well as interstate truck movements at ports related to empty containers foldable containers will reduce cost and inefficiencies involved in moving empty intermodal containers containers folded vertically by collapsing doors of container and pushing outer walls of container in toward each other 5 empty collapsed containers can fit into same space as on normal, non folding container

Return of Unsold Goods

goods can be returned for credit if they are not sold (ex: newspapers, magazines, even pharmaceuticals) incentive for downstream members to carry more stock, b/c risk of obsolescence is borne by upstream supply chain member distinct risk that downstream member in supply chain might exploit situation by ordering more stock than required and returning large volumes so downstream provider can offer high level of service without carrying risk associated with large inventories

Labor

greater care goes into handling and storage when company's own workforce operates warehouse company can utilize expertise of its technical specialists company may also be able to better utilize its overall workforce during period of manufacturing, company could shift manufacturing workers over to warehouse temporarily to help; or vice versa during period in warehouse or peak manufacturing the company might be able to shift warehouse workers over to manufacturing temporarily

Shippers' Association

group of shippers that consolidates or distributes freight on a nonprofit basis for members of group to obtain volume rates or service contract rates associations will contract for physical movement of cargo from members with motor carriers, railroads, ocean carriers, air carriers, and others

Motor Carriers Deregulation (1980)

helped promote competitive, safe, and efficient motor transportation

Repair (and Refurbishment, Reuse, and Remanfacturing)

if faults not too severe, manufacturers identify failure and repair, refurbish, or remanufacture product to like-new condition and return to stock at end of life, manufacturers may harvest various functional components for reuse more common as manufacturers recognize value of reusing materials from returned goods advance sustainability efforts, recoup costs, or both visibility and tracking are essential to ensuring efficiency

No Capital Investment

immediately takes away need for company to own and operate storage infrastructure, including the staff and security that go along with it. variable cost component

Quality Inspections

incoming and outgoing

4th Party Logistics (4PL) Company

interface between client company and multiple logistics service providers company will select lead logistics partner (4PL) that is then charged with managing activities of all other 3PLs being used by company ideally, all aspects of client company's supply chain handled by 3PLs would be managed by 4PL organization

Cross Docking

larger and fewer shipments translate to lower overall transportation costs both suppliers and customers will experience much more efficient use of their resources because each will only make or receive one shipment rather than 4

Cross-Docking Warehouse

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 type of consolidation and/or break bulk

Services

longer term nature of contract warehousing generally results in client company obtaining specialized services that are tailor-made to suit their needs

Important Cost Factor

loss of customer loyalty caused by poor reverse logistics processes and practices hard to calculate

Pipeline Advantage

low rates - can be extremely efficient with large-diameter pipelines operating near capacity - average revenues for pipeline companies are below 1/2 of a cent per ton-mile, which is indicative of their low-cost good loss and damage record - can provide warehousing function b/c their service is slow dependable - slow service time, scheduled deliveries can be forecasted very accurately, diminishing need for safety stock risk of terrorism reduced when pipelines buried in ground slow speed can be used as a free form of warehousing

Transportation Act (1920)

made changes to Interstate Commerce Act

General Freight Carriers

majority of trucks you see out on the roadway, carrying most of the goods trucking companies that engage in shipping packaged, boxed, and palletized goods that can be transported in standard, enclosed tractor-trailers, generally 40-48ft in length include common carriers and others

Recalls

more complex than basic returns b/c they involve a product defect or potential hazard and may be subject to gov't regulations, liability concerns, or reporting requirements high-tech devices recalled due to faulty electronics, construction issues, problems with batteries, or potential hazards key is to receive, replace, resell, or reclaim failed parts/products and try to salvage revenues and turn a potentially negative customer experience into a positive one that builds brand trust

Lack of Specialized Servides

most facilities provide local services which may not be what a company requires specialized services that a company needs may not always be available in a desired location

Transportation Regulation

most important was 1887 Interstate Commerce Act, which established Interstate Commerce Commission (ICC) main reason for implementing: monopolies in railroad industry, so gov't stepped in to break monopolies, stop profiteering in industry, and improve service offerings to public

Pipeline Carriers

most overlooked costs extremely low, dependability very high, and limited risk of damage to product being transported most efficient form of transportation b/c once set up, there is very little maintenance, very little additional infrastructure to build around, and it is a continuous flow most reliable form of transportation, not subject to weather, traffic congestion, or breakdowns along the way unique in type of commodity being hauled, ownership and visibility industry relatively unknown to general public, which has little appreciation for role and importance of pipelines limited in markets they serve and very limited in commodities they can haul only mode with no backhaul, unidirectional with products that only move in one direction through the line

Safety Technology

most significant disrupter in trucking industry - stability control - antilock braking systems - collision avoidance systems - land departure warning - interior cameras - rearview cameras - bling spot warning devices - side monitor cameras and sensors reduces accidents, injuries, fatalities, and costs

Roll-On/Roll-Off (RO/RO) Ship

most successful type of cargo ships operating today and its flexibility, ability to integrate with other transport systems, and speed of operation have made it extremely popular on many shipping routes specifically designed to carry wheeled and tracked vehicles as all or most of its cargo vehicles are driven or towed on and off ship by means of either ship's own ramps or shore-based ramps designed to accommodate cargo that cannot be stacked but varies in height, below-deck space and volume utilization generally less efficient than on a container ship commercially viable only in certain specialized trades

Less-than-Truckload (LTL) Carriers

move small shipments (don't have enough to fill a truck) some specialize in services like lift gate and residential pickups and deliveries, guaranteed services, and freeze protection stop at depots and transfer locations to match loads to the final locations (combine cargo going in the same direction) usually takes longer than FTL most costly in terms of price per unit, or price per weight, than FTL b/c carriers cannot always guarantee that they will fill the truck up and they may need to spread their fixed costs over smaller number of units/weights

Logistics Management Software Applications

need a system to manage logistics activities like warehousing and transportation

Lower Costs and Reduced Risk

no long-term commitment, users can switch to another public warehouse facility in short period of time, often within 30 days, if there is another location that may have lower rent or fees

Water and Motor Carriers

offer point-to-point and delivery service for overseas manufacturers

Rail and Water Carriers

offer point-to-point and delivery service known as container-on-flatcar (COFC)

Access to Special Features and Services

offer specialized services like broken-case handling, packaging services for manufacturer products for shipping, breakbulk services, and freight consolidation services because they can consolidate volume with noncompetitor clients who use same public warehouse

Common Carrier

person or company that transports freight for a fee that can be hired by anyone to transport goods transport majority of freight shipments that you see on the road, rail, air

Flexibility (private)

offers company greater flexibility in designing and operating warehouse to suit needs of customers and characteristics of products company can install specialized handling for its products if necessary and modify facility through expansion or renovation to facilitate product changes, which is not possible in public

Control (public)

offers compromise by allowing client company a certain degree of control at a reasonable price public requires client company to relinquish control and private allows absolute control but at a higher capital cost

Short Haul

operating within 200 miles of driver's home terminal drivers operate a day cab unit, and are performing short transportation legs, maybe within the state; small, local type routes, and drivers are home every night for the most part can make 4+ stops per day, loading and unloading at each location must master difficult driving not as profitable as long-haul trucking; however quality of life is considered to be better

Water Carriers

organizations transporting goods or people using waterways cover broad range of water transportation routes including ocean/deep water coastal and intercoastal, and in-land waterways like rivers and lakes oldest form of transport in US and plays important role in foreign trade slow and inflexible but also inexpensive compared to other modes efficient form of transportation in terms of energy costs per dollar of gross output, or compared to market value of goods water transport is primarily used for heavy, bulky, and low-value materials (coal, grain) however b/c transport by water is comparatively inexpensive, almost any item may be shipped by water including automobiles, petroleum, containerized cargo, and produce domestic water carriers compete with railroad for movement of bulk petroleum, petroleum products, and chemicals paired with trucks for door-to-door delivery

Air Carriers

organizations transporting passengers and cargo by aircraft newest and least utilized shipments relatively expensive compared to other modes b/c fuel is expensive, they have limited amount of cargo space, and have to deal with weight and balance issues on plane itself fastest for medium and long distances (best for backorder or stockout to try to get replenishment inventory back into marketplace or to customer quickly) transport high-value goods (high cost-to-weight ratio) that are very light and need to travel long distances (ex: jewelry, fine wines, pharmaceuticals, racehorses) can't transport extremely heavy or bulky cargo b/c of weight and balance restrictions or restricted items (hazardous, combustible, explosive) represents 5% of total US air freight and <0.5% of weight of all international cargo but represents 30% of total worldwide shipment value 1/2 goods transported by air are carried by cargo-only airlines like FedEx and UPS paired with trucks for door-to-door delivery

Third-Party Logistics (3PL) Company

outsources provider that manages all or a significant part of an org's logistics requirements for a fee some typical services that are offered by 3PLs include but are not limited to inbound transportation, warehousing, pick and pack, outbound transportation, freight forwarding, freight bill auditing/payment, customs brokerage, customs clearance, order taking, billing/invoicing, and inventory auditing used by large and small business but are particularly favored by small businesses that do not have their own logistics operations. small business may not want to invest in activities outside their areas of expertise, and the 3PL company can bring their substantial logistics expertise into engagement 3PLs also used to significant degree of international logistics. company more likely to use 3PL internationally rather than to try and establish an in-house operation in each foreign market themselves 3Pls likely know more about logistics in those international markets, and they will have local contacts and local contracts already established potentially must more cost effective and efficient for a company to ship product internationally using services of 3PL than to handle this activity internally, unless this is a major part of the business, and company decides to invest significant resources and manpower into developing this expertise

Logistics

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

Exempt Carriers

person or company specializing in certain services (ex: tax services) or certain commodities (ex: farm products or bulk cargo) exempt from regulation by Interstate Commerce Act usually include unprocessed or unmanufactured goods, fruits and vegetables, other items of little or no value help simple service groups like taxis, farmers, and school bus drivers to operate without any interference from gov't regulations under interstate commerce act (no threat of monopolization in these services)

Contract Carriers

person or company that transports freight under contract to one or a limited number of shippers not bound to serve general public establish agreement with shipper(s) that spells out kinds of shipments carrier will accept, where carrier will take them, and shipping fees shipper will be obligated to pay shippers may in turn collect these fees from their customers

Private Carriers

person or company that transports its own cargo, usually as part of a business that produces, uses, sells, and/or buys the cargo that is being hauled primary business is not transportation, but performing a transportation function to facilitate primary business carriers may refuse to sell their services at their own discretion whereas common carriers must treat all customers equally

Packing

placing 1 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

Systems Compatibiltiy

potential of incompatible computer systems public warehouses may not have a system to suit the needs of a specific customer and they are unlikely to invest in a new system for just 1 client

Transportation Rate Categories

price charged by transportation carrier for moving an item or commodity from point A to point B actual amount charged varies based on weight of object being moved, type of commodity being moved, and distance traveled classified as line haul rates, class rates, exception rates, commodity rates, and miscellaneous rates

Combination Pricing

price setting 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

Reverse Logistics

process of moving a product from point of customer receipt back to point of origin to recapture value or ensure proper disposal internet significant contributor includes all related activities to avoid and those used to protect a company from all aftermarket chain issues, not just returns important link between marketing and all logistical issues 4%-6% of all retail purchases are returned, costing business and industry about $40b per year

Capability to Expand

provides an economical and practical means to grow into new markets and demographics for companies that are expanding, particularly in short term

Access to Lower Freight Rates

public warehouses handle requirements of a number of companies, their volume allows them to negotiate consolidated freight rates rather than much higher less-than-truckload freight rates that result from shipping small quantities at a premium

Intermodal Marketing Companies (IMC)

purchase blocks of rail and truck transportation services, utilize equipment from multiple sources, and provide other value added services under a single freight bill to the ultimate shipper purchase rail capacity and sell it to shippers IMC company will require a min number of shipments from a client, to guarantee that shipping equipment will be available

Double-Stack Cars

railcars specially designed to carry intermodal containters, where intermodal containers are stacked 2 high on each railcar

Articulated Cars

railcars that share an axle or suspended by other railscars operated as a single unit, called a trainset reduce cost, weight, noise, vibration, and maintenance expenses reduce flexibility as additional railcars cannot easily be added to trainset when there is additional volume

Consolidation Warehousing

receives products from suppliers, sorts them, and then combines them with similar shipments from other suppliers into larger, more economical, shipping loads for further distribution (small flexible shipments in, and large economical shipments out) goal is to maximize transportation utilization while minimizing costs (ex: carpooling)

Reduced Lot Sizes and Shipping Quantities

reducing lot sizes and shipping quantities, company can actually increase velocity or throughput in warehouse and get shipments out faster smaller lots or orders will take less time to pick and load for shipment, which will keep costs and inventories down faster throughput and lower inventories are LEAN concepts

Fees

requires client company to pay fee for services rendered, however due to longer commitment, services provided in contract can be bundled or negotiated usually at a lower cost

Storage

safe and secure retention of parts or products for future use or shipment includes placing goods into storage and retrieval of goods from storage

Accommodates Seasonality

seasonal businesses have the option of expanding and contracting their public space on a monthly basis. you only pay for space in month you are using it, allowing storage costs to vary directly with seasonal volume

Value of Service Pricing

sets price primarily, but not exclusively, in the value, perceived or estimated, to the customer rather than on the cost of the product or historical prices ("priced at what the market will bear") depends on value of goods being shipped used for high value goods or when no competition exists

Cost of Service Pricing

setting of a price for a service based on the costs incurred in providing it carrier estimates cost of providing service and then adds on a percent profit margin commonly used for pricing transportation of low value goods or in highly competitive situations

Full Truckload (FTL) Carriers

shipper has enough volume (or value) to fill truck generally contract entire trailer out to a single customer, thus carrier actually spreads its fixed costs out over whole shipment and generally individual per unit cost of shipping is lower than LTL shipments shipper may decide to pay for full truckload even if volume being shipped doesn't fill whole truck to avoid having another shipper's cargo on same truck for security reasons or faster delivery (shipper could also potentially avoid cargo mixups or cross contamination by using a dedicated truck)

Break Bulk Warehousing

similar to consolidation except that incoming shipments are generally truckloads of homogeneous items from single plant or supplier sorts or splits items into individual orders or shipments and arranges for local delivery established at a strategic location but closer to customer base to minimize total transportation costs so that smaller LTL shipments travel shorter distance to customers, while larger FTL shipments form single supply source travel longer distance before arriving at break bulk warehouse 3PL provider frequently manages warehouse and info system(s) needed to run it. these operations can either be client-dedicated or multiple-user facilities

Tendency to Be Green

smaller, more efficient warehouses take up less physical space and use less energy to operate one of the more sustainable goals for a green warehouse is to become a net zero energy user net zero buildings are able to sell excess energy sold some initiatives in this regard include lighting upgrades to use a more efficient fluorescent system, the use of daylighting, using solar-assisted heat pump or cooling systems, and the type of windows, doors, roofing materials, and insulation that are used, saving significant amounts of energy

Warehouse Network Optimization

software analyzes inputs including customer, manufacturer, and supplier locations, then informs optimal number of warehouses and locations based on all relevant factors programs try to minimize amount of transportation on both ends- inbound from suppliers and outbound to customers

Warehouse Management Systems (WMS)

software application that supports day-to-day operations in a warehouse enable centralized management of tasks like tracking inventory levels and stock locations may be standalone applications or part of enterprise resource planning (ERP) system goal = provide management with info it needs to efficiently control movement of materials within warehouse

Transportation Management Systems (TMS)

software that facilitate interactions between and org's order management system (OMS) and its warehouse management system (WMS) or distribution center (DC) used to select best mix of transportation services and pricing may be standalone application or part of ERP system products serve as logistics management hub in collaborative network of shippers, carriers, and customers common software modules include route planning and optimization, load optimization, execution, freight audit and payment, yard management, advanced shipping, order visibility, and carrier management

Space Availability

space may not be available when and where a company wants it shortages can occur from time to time, particularly during a peak season which may adversely affect client company

Reverse Questions of Quality

specific order: 1) was product damaged when placed upon shelf for sale by salesperson or stock person? 2) was it damaged when put into stockroom by delivery person? 3) was it damaged by shipment from either public or private transporter to retail store? 4) was it damaged when it arrived at distribution center?

Cross-Docking Advantages

speed up throughput times, reduce inventory investment, and reduce storage space requirements

Private/Proprietary Warehousing

storage facility owned by company that owns goods being stored in facility generally established by companies that have a large volume or large value of goods being stored, or the need for some type of specialized storage or handling can be operated as a separate division within company if desired, and can be co-located onsite with manufacturing, or at an offsite location

Service Lifecycle Management (SLM)

strategy to retain customers through a more efficient overall business operation important component = connection between reverse logistics and customer retention

Cross Docking (cont)

takes place in a distribution terminal usually consisting of docking doors on 2 sides (inbound and outbound) with minimal storage space on site name refers to receiving products through an inbound dock and then transferring them across to the outbound dock once inbound shipment has been received, products can be moved either directly or indirectly to outbound destinations products can be unloaded, sorted, and screened to identify their end destinations, and then moved to the other end of the cross-dock terminal via materials handling equipment (forklift, conveyor belt, or pallet truck) when outbound transportation has been loaded, products can be shipped out to customer

Transportation Deregulation

to allow US companies more freedom so they could become more competitive in the US as well as in other countries encourages competition and allows prices to be set by the market prices are adjusted by demand and an individual's ability to negotiate rates

Specialized Freight Carriers

transport articles that, because of size, weight, shape, or inherent characteristics, require specialize equipment for transportation ex: bulk tankers, dump trucks, refrigerated trucks, and motor vehicle haulers (car haulers)

Unit Trains

transport single commodity such as coal or steel similar to concept of dedicated truck

Ranking Transportation Modes

truck ranked best overall but number 1 in accessibility pipeline lowest cost and most reliable air is fastest rail most capability water not first in any category but widely used for international shipments

Motor Carriers

trucking is most prevalent and most flexible mode of transportation b/c it carries most varied kinds of freight to most locations involved in more than 80% of US freight transportation annually (overlap with other modes b/c most products moved by air, rail, water are also moved by truck to and from ports) heavily involved in "last mile" of transportation = final leg in supply chain when product is delivered to final destination transport nearly anything from packaged household goods, to building materials, to liquids compete directly with rail and air for short to medium distance hauls

Contract Warehousing

variation of public warehousing that handles shipping, receiving, and storage of goods for a specific client on a contract basis contract can be either for an entire building or defined portion of square-foot or cubic-foot space within a building usually requires client to commit to services for particular period of time. length of time varies, often stated in years rather than months fee structure varies based on transactions; may be fixed, cost-plus, or combination company providing space handles employees, equipment and maintenance expenses; also responsible for incidental expenses which further reduces costs

Platooning

vehicle-to-vehicle communication is tacking 2 of the trucking industry's largest problems - fuel and safety radar sensors, intelligent breaking, video screens, and a wireless link, vehicle-to-vehicle communication makes it possible for 2 trucks to connect in a "platoon" or "closer together than would normally be safe" 2 trucks can get as close as 20ft from each other while platooning in order to take advantage of fuel-saving aerodynamics industry reports fuel savings of 10% for second truck and 4.5% for lead truck trucks able to get close due to active safety system that wirelessly links trucks and controls truck's acceleration and breaking, while radar detects potential dangers up ahead liked trucks react within "fraction of a second" whereas truck driver needs up to 2 seconds to react to changes in conditions drivers still have complete control of truck

Flexibility (bad)

very difficult to respond to changes in external environment in short term, and expand or contract to meet increase or decreases in demand flexibility in strategic location is also an issue as private warehouses can't respond quickly to changes in market location and preferences, this may mean that excellent business opportunities may be lost not easy to just pick up and move to another location if market changes (advantage in public warehouse)

Keys to Reverse Logistics

visibility, efficiency, and service must establish return policies, process for identifying quality issues, ways to handle defective materials, poorly packaged products, shipped errors, etc. important - possibility of remanufacturing, refurbishment, and resale of goods

Advanced Vehicle Experience - New Concept Trucking

walmart advanced vehicle experience (WAVE) streamlined, aerodynamic body b/c driver's seat placed in center of cab tractor has microturbine-powered series hybrid electric drivetrain, programmed to find most efficient balance between its turbine and electric drivetrains trailer made almost entirely of carbon fiber, weighing less than 4,000lbs than a normal trailer sidewalls and roof are single 53ft long pieces, held together with advanced adhesives, eliminating need for rivets convex nose that maintains cargo capacity and improves aerodynamics

Break Bulk

warehouse operation that divides full truckloads of items from a single source or manufacturer into smaller, more appropriate quantities for use of further distribution

Assembly Operation

warehouse operation that puts products together with other items/components before shipping them out to the final customer ex: literature, spare parts, advertising materials

Consolidation Point

warehouse operation that receives products from suppliers, sorts them, and then combines them with similar shipments from other suppliers for further distribution

Market Positioned Strategy

warehouses set up close to customers to maximize distribution services and improve delivery time companies should use strategy if they have many more customers than suppliers, and customers are spread out geographically around the market if warehouses are closer to customers, company can minimize transportation costs with this strategy similar to break bulk warehouse setup there will likely be FTL shipments coming in from suppliers at a great distance, and LTL shipments going out shorter distances to customers

Product Positioned Strategy

warehouses set up closely to supply sources to collect goods and consolidate before shipping products out to customers reverse of market positioned strategy companies should use this if they have many more suppliers than customers if warehouses are closer to suppliers the company can minimize transportation cost with this strategy similar to consolidation setup, there will likely be LTL shipments coming in from suppliers at a shorter distance, and consolidated FTL shipments going out longer distances to customers

Intermediately Positioned Strategy

warehouses set up somewhere midway between supply sources and customers to try to balance costs, inventory, and customer service companies should use this strategy when distribution requirements are high and product comes form various supply locations

Knowledge of Exact Storage and Handling Costs

when a company uses public warehouse, it knows exactly how much is being spent on storage and handling costs, because the monthly bill displays all necessary information allows user to forecast costs for each different level of activity companies that operate their own private facilities often find it difficult to determine the exact fixed and variable costs

Fixed Size and Costs

when demand is low, company still assumes fixed costs as well as lower productivity linked to unused warehouse space disadvantages can be minimized if company is willing and able to rent out part of its space

Recycling, Disposal, and Disposition

when products reach ends of their useful lives and must be scrapped, electronic manufacturers are increasingly finding safe, cost-effective, and environmentally friendly ways to dispose of them engaging in 3rd party recycling companies to collect/reclaim waste and dispose of assets for them to help improve quality, cost savings, visibility, inventory management, and overall customer experience ex: mobile phones or circuit boards where companies can recover rare earth metals of gold, silver, titanium, palladium, or copper. by salvaging, reclaiming, and reusing components, companies can reduce costs and minimize waste

Picking

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