Chapter 9 Supply Chain

Secondary Functions of a Warehouse

* Quality Inspections - incoming and outgoing * Repackaging - for specific customer orders * Assembly Operation - Operations putting products together with other items/components before shipping to a final customer

Transportation Pricing

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

Advantages of Public Warehouse

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

Advantages of Cross-docking warehouse

-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. Transportation Cost Savings: 8 FTL Shipments are less expensive per unit than 16 LTL Shipments.

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.

Warehouse Network Strategy

1. Market Positioned Strategy 2. Product Positioned Strategy 3. Intermediately Positioned Strategy

Primary Functions of a warehouse

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

5 R's of Reverse Logistics

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

3PL

A 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. 3PL providers charge a fee for their services Favored by small businesses

Public Warehouse ownership

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

Private Warehouse

A storage facility that is owned by the company that owns the goods being stored in the facility Generally established by companies that have a large volume or highly valuable goods, or the need for some type of specialized storage or handling

General Freight Carriers

A trucking company which handles a wide variety of commodities in standard trailers. Freight is generally palletized.

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

Contract Warehouse

A variation of public warehousing that handles the shipping, receiving, and storage of goods on a contract basis for a fee. The contract can be for an entire buildig or for a defined portion within the building

Warehouse Network

A warehouse network is simply the number of, and the relationship between, the warehouses that a company has in their organizational structure. How many warehouses are needed? Where should they be located?

Pipeline

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

Rail

Accounts for approximately 9% of total US freight spend. Competes for transportation when the distance is long and the shipments are heavy or bulky. Slow and inflexible but it has the most capability

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 supplier; few customer

Freight Forwarder

Consolidates LTL shipments into FTL shipments

Types of warehosue

Consolidation Break-Bulk Cross-docking

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. Change: Once locked in to a 3PL it is difficult to change 3PL suppliers

Advantages of Private Warehouse

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

Advantages of using 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.

Disadvantages of Contract Warehouse

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

Warehouse

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

4PL

Fourth-party logistics (4PL) is an interface between the client company and multiple logistics service providers. 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.

Warehousing

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

Disadvantage of Private Warehouse

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

Water

Includes inland waterways, coastal and intracostal, and deep-sea cargo shipments Inexpensive Very slow and inflexible. Primarily used for heavy, bulky, low value materials like coal, grain, sand, and petroleum.

Intermodal Transportation

Intermodal is 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 a growing substantially because it is fairly cost-efficient and cost-effective

Positives of Warehouse Network (Single warehouse)

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

Intermediately Positioned

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

Negatives of a Multiple Warehouse Network

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

Logistics is necessary to:

Move goods and materials from suppliers to buyers Move goods and materials between sites Move finished goods to the customer

Shippers' Association

Nonprofit cooperatives which arrange for members' shipping

Hybrid Approach of Warehouse Network

One hybrid network is 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 Inventory is also lower Customer service is generally better

Shipping

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

Receiving

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

Packing

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

Disadvantages of Public Warehouse

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

Positives of a Multiple Warehouse Network

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

The main reasons that cross docking is implemented is to:

Provide a central site for products 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 transport 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.

Global Trade Management Systems

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

Warehouse ownership types

Public Warehouses Contract Warehouses Private Warehouses

Intermodal Marketing Company

Purchase blocks of rail capacity and sell it to shippers

Free on Board Destination

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

Advantages of Contract Warehouse

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

Fees will vary based on what is being stored and or based on:

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

ICC Termination Act of 1995

The Interstate Commerce Commission (ICC) was eliminated

Transportation

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

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.

Negatives of Warehouse Network (Single Warehouse)

The single warehouse (i.e., centralized network) may take longer to deliver product to some customers who are remote from the central location.

Products have little value to the customer until

They are moved to the customer's point of consumption

Objectives of Trans

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

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 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.

LEAN Warehousing

Warehouses and distribution centers are continuing to develop their LEAN capabilities

Picking

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

Load or Transportation Broker

bring shippers and carriers together

Interstate Commerce Act

creates the interstate commerce commission

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.

Full-Truckload

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

Less-than-truckload

is the transportation of relatively small freight, i.e., the freight does not require the entire space of a truck. Can be cost effective. Ideal for small businesses But increases risk of theft/damage

Modes of transportation- Truck

most flexible mode of transportation

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

Carrier

refers to the company that transports the goods

Modes

refers to the way in which goods are transported

Free on Board Origin

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

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 the point of origin to point of consumption, in order to meet customer requirements

Reverse Logistics

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.

Storage

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

Warehouse Management Systems

track and control the flow of goods from receiving dock to outbound shipment. New tech such as RFID tags

Transportation Management Systems

used to select the best mix of transportation services and pricing