Logistics Exam #2 Materials

Four methods of payment include:

-Cash in advance -Letters of credit -Bills of exchange -Open account

The attractiveness of a particular mode depends on the following attributes:

-Cost -Speed -Reliability -Capability -Capacity -Flexibility

Warehousing facilitates the regrouping function in a supply chain

Involves rearranging the quantities and assortment of products as they move through the supply chain

Expediting

Involves the need to rapidly move a shipment to its final destination

Potential drawback of public warehouses

Lack of control by the user

A unit load (unitization)

consolidation of several units (cartons or cases) into larger units to improve efficiency in handling and to reduce shipping costs.

Carriers prefer

higher classification number (higher rate)

Shippers prefer

lower classification number (lower rate)

Research indicates shippers are

more interested in transportation metrics than in modes

Distances are simplified through...

rate basis numbers

Macroenvironmental influences

refer to the uncontrollable forces and conditions facing an organization and include cultural, demographic, economic, natural, political, and technological factors.

Warehousing

refers to "that part of the firm's logistics system that stores products (raw materials, parts, goods-in-process, finished goods) at and between points of origin and point of consumption."

Assorting

refers to building up a variety of different products for resale to particular customer

Packaging

refers to materials used for the containment, protection, handling, delivery, and presentation of goods1

Transportation management

refers to the buying and controlling of transportation service by either a shipper or consignee

T/F Transportation is the most costly logistics activity

true

Domestic shipments

typically only require several pieces of documentation

Export shipments

typically require approximately 10 pieces of documentation

Weight groups

used to simplify shipment weight

Less-than-truckload (LTL)

• 150 to 10,000 pounds • Too big to be handled manually, too small to fill a truck • LTL trucks carry shipments from many shippers

Weight group examples:

• <500 lbs (highest rate) • 500-999 lbs • 1000-1,999 lbs

Consolidating small shipments

• Shipments > 150 and < 500 pounds • To get a lower rate, shipment consolidation may occur: aggregating customer orders across time or place or both

Sorting out

"separating products into grades and qualities desired by different target markets"

5 ways to transport

-Air -Water -Rail -Pipeline -Motor carrier

Incoterms history

-Developed in the 1930's and is periodically revised -Current version - Incoterms 2010 reflects rapid expansion of global trade with focus on improved cargo security and new trends in cross-border transportation1

Packaging design decisions involve a number of departments within an organization

-Engineering -Quality Control -Manufacturing -Transportation -Marketing -Warehousing

Airfreight

-Generally the fastest mode for shipment exceeding 600 miles -Expensive -Accessorial service, if needed, adds transportation cost and time -Best suited for high-value, lower-volume urgent, perishable or time-specific deliveries -Dimensional weight used for rates

Freight bill

-Invoice submitted by the carrier requesting to be paid -Freight bill-paying service

Containers

-Large reusable steel boxes used for intermodal shipments1 -Provide significant reduction in freight handling costs -Are interchangeable among rail, truck, and water carriers

Motor Carriers

-Most important business user of the Interstate Highway System -Primary advantage is flexibility -Cost is generally lower when compared to airfreight -LTL vs. TL

Railroads

-Neither "best" or "worst" on any of the six attributes -Superior to air, motor, and pipeline, but inferior to water when transporting different kinds of products • Less flexibility, but more when compared to air, water, and pipeline

Freight claims

-Refers to a document that notifies a carrier of wrong or defective deliveries, delays, or other delivery shortcomings -Concealed loss or damage difficult for shippers and carriers

Two categories of material handling equipment

-Storage Equipment -Handling Equipment

Labeling

-Typically occurs at the end of the assembly process -Boxes must be labeled when contents are hidden -Many regulations govern labeling

Cross-border trades can require more than

100 separate documents

Identifying Packaging Inefficiencie

Building-blocks concept is useful for analyzing packaging inefficiencies.

Packaging's Influence on Transportation Considerations

Carrier's tariffs and classifications influence the type of packaging and packing methods that must be used

Examples of representative measures include:

Cases shipped per person Product lines shipped per person Pallets shipped per person Average warehouse capacity used Forklift capacity used

Environmental Regulation

Environment Protection Agency (EPA) is the federal regulatory agency established to protect human health and the environment

Third party logistics companies (3PLs)

Find clients with complimentary transportation needs to maximize equipment utilization

Freight forwarders

Give volume discounts to customers shipping large quantities of freight at one time

Nontariff barriers

Import quota

Rate Determination

One key responsibility of transportation managers Weight x rate = transportation charge

Commodity rate

One specific rate for every possible combination of product, weight, and distance

Order-picking versus stock-replenishing functions

Organizations must decide whether workers who pick outgoing orders and those who are restocking storage facilities should work at the same time or in the same area

Demurrage

Penalty payment made to the railroad for keeping a railcar beyond the time when it should be released back to railroad

Rate

Price charged for freight transportation

Fare

Prices charged for passenger transportation

Owning

Private warehousing

Amodal shipper

Refers to a transportation manager who purchases a prespecified level of transportation service and is indifferent to the mode(s) and or carrier(s) used to provide the actual transportation service.

Tracking

Refers to determining a shipment's location during the course of its move

Key area of decision making in transportation management involves making and receiving shipments

Refers to tactical planning and control of shipments along with supervision of freight loading and unloading

Detention

Same concept as demurrage except it usually refers to the trucking industry

International Freight Forwarders

Specialize in handling either vessel shipments or air shipments

Incoterms.

Terms of sale for international shipments

Transportation

The actual, physical movement of goods and people between two points

T/F Necessary documents are required at the point of importation

True

T/F Warehousing and transportation are substitutes for each other, with warehousing having been referred to as "transportation at zero miles per hour."

True

Transportation managers can appeal

a commodity's classification

Transit times can be significantly impacted by

a country's infrastructure and modal operating characteristics.

Flow of documentation is

as much a part of the main logistical flow as the flow of product

Key reason for warehousing

because patterns of production and consumption do not coincide

Economic deregulation allowed for

both price and service competition resulting in a need to measure performance

Commodity Classification Standards Board

develops and maintains commodity freight classifications

Allocating (bulk breaking)

involves breaking larger quantities into smaller quantitie

Accumulating (bulk making

involves bringing together similar stocks from different sources

Short-sea shipping (SSS)

is an alternative to surface transporting

Node location

location of firm, warehouse, retail store

International logistics

logistics activities associated with goods that are sold across national boundaries

Macroenvironmental changes have caused

organizations to demand higher levels of service quality

Example of Intermodal transportation

piggyback transportation

Intermodal transportation

refers to transportation when using a container or other equipment that can be transferred from the vehicle of one mode to the vehicle of another mode without the contents being reloaded or disturbed • Two or more modes are employed to utilize advantages of each while minimizing their disadvantages

Materials handling

short-distance movement that usually takes place within the confines of a building such as a plant or DC and between a build and a transportation service provider."

Storage equipment

• Shelves • Racks • Bins

Methods of payment

the manner by which a seller will be paid by a buyer.

Embargoes

the prohibition of trade between particular countries

International logistics occurs when:

• A firm exports a portion of a product made or grown • A firm imports raw materials • Goods are partially assembled in one country and then shipped to another, where they are further assembled or processed • The firm is global in outlook and sees almost all nations as being markets, sources of supply, or sites for markets or for assembly operations • Because of geography, a nation's domestic commerce crosses foreign borders, often in bond

Principle functions of International Freight Forwarders include:

• Advising on acceptance of letters of credit • Booking space on carriers • Preparing an export declaration • Preparing an air waybill or bill of lading • Obtaining consular documents • Arranging for Insurance • Preparing and sending shipping notices and documents • Serving as general consultant on export matters

Contract warehousing

• Also referred to as third-party (3PL) warehousing or dedicated warehousing • "a long term, mutually beneficial arrangement which provides unique and specially tailored warehousing and logistics services exclusively to one client, where the vendor and client share the risks associated with the operation.

Ocean Shipping

• Approximately 60% of cross-border shipments move by water transportation • Shipping conferences and alliances pool resources and extend market coverage

Conventional, narrow, or very narrow aisles

• As aisle space increases, storage space decreases • Easier to operate mechanical equipment in wider aisles • Reduce the chances of accidents and product damage with wider aisles • Narrower aisles require specialized storage and handling equipment (more expensive)

Rate and Service Negotiations

• Both rates and service levels may be negotiated due to economic deregulation • Allows transportation managers to take advantage of trade-offs between price and service

Railroads: U.S. dominated by four carriers?

• Burlington Northern (BN) (west of the Mississippi) • CSX (east of the Mississippi) • Norfolk Southern (NS) (east of the Mississippi) • Union Pacific (west of the Mississippi)

The Unit Load Platform

• Can be constructed from wood, wood composites, plastic, paper, and metal • Each pallet material has advantages and disadvantages • Should be less than 50 pounds

Commonly used documents include:

• Certificate of origin • Commercial invoice • Shipper's export declaration (SED) • Shipper's letter of instruction (SLI)

Three types of international airfreight operations include

• Charted aircraft • Integrated air carriers • Scheduled air carriers

Brokers

• Companies that look to match a shipper's freight with a carrier to transport it • May consolidate LTL shipments and then give to motor carriers, freight forwarders, or shippers' associations

Air forwarders

• Consolidate shipments • Tender to airlines in containers ready for loading • Forwarders provide retailing function • Airline provides wholesaling function

Handling equipment

• Conveyor systems • Lift trucks • Carts • Cranes

Regulation

• Costs money • Needs to be codified • Is enforced by government agencies

Economic factors on International Logistics

• Currency fluctuations • Market size • Income • Infrastructure • Economic integration

Carrier selection is more challenging

• Difficult to be aware of every possible carrier • Lack of agreement on the number of relevant factor

Variety of ship types include:

• Dry-bulk • Dry cargo • Liquid bulk • Parcel tanker • Containerships

Group 1 Terms

• EXW (ExWorks) • FCA (Free Carrier) • CPT (Carriage Paid To) • CIP (Carriage and Insurance Paid To) • DAT (Delivered at Terminal) • DAP (Delivered at Place) • DDP (Delivered Duty Paid)

6 Logistical Dimensions

• Efficiency of the clearance process by border control agencies, including customs • Quality of trade- and transport-related infrastructure • Ease of arranging competitively priced shipments • Competence and quality of logistics services • Ability to track and trace consignments • Timeliness of shipments in reaching the destination within the scheduled or expected delivery time

Distribution centers

• Emphasize rapid movement of products through the facility • Attempt to maximize throughput •Throughput is defined as the amount of product entering and leaving a facility in a given time period

Warehouses

• Emphasize the storage of products • Primary purpose is to maximize the usage of available storage space

Warehouse safety categories include:

• Employee • Property • Motor vehicles

Hazardous materials "hazmat"

• Explosives • Flammable liquids • Flammable solids

Group 2 Terms

• FAS (Free Alongside Ship) • FOB (Free on Board) • CFR (Cost and Freight) • CIF (Cost, Insurance, and Freight)

Two-step process

• First determine appropriate mode(s) • Then select carrier(s) within the chosen mode(s)

Truckload (TL)

• Focus on shipments > 10,000 lbs • Close to the amount that would physically fill a truck trailer • Possible that large shipments from several customers can be consolidated

Bill of lading

• Functions as a delivery receipt when products are tendered to carriers • THE MOST IMPORTANT PAPER WHEN TRANSPORTING

Build out (horizontal) versus build up (vertical

• General rule of thumb is that it is cheaper to build up than build out • Illustrates the importance of understanding interfunctional trade-offs when thinking about warehousing design

Labeling - Hazardous Materials

• Governmental regulations address labeling of hazardous materials • Requirements involve -Labeling -Packaging and repackaging -Placing warnings on shipping documents -Notifying transportation carriers in advance • Globally Harmonized System of Classification and Labeling of Chemicals (GHS) is a global system to classify and label hazardous materials.

Cross-docking facilities

• Has grown due to the increased emphasis on time reduction in supply chains • Defined as "the process of receiving product and shipping it out the same day or overnight without putting it into storage" • Key benefits include improved service by allowing products to reach their destinations more quickly as well as reduced inventory carrying costs from less stock because of faster product delivery • Is differentiated from distribution centers by the length of time a product is in a facility (24 hours or less for cross-docking facility) • Design of the facility is an important consideration to facilitate quick movement of product

Private warehousing potential drawbacks

• High fixed cost of private storage • Necessity of having high and steady demand volumes • Less attractive when interest rates are high • May reduce an organization's flexibility Internally Externally

Fixed versus variable slot locations for merchandise

• In fixed slot locations each SKU has one or more permanent slots assigned to it • Variable slot location involves empty storage slots being assigned to incoming products based on space availability

Packaging inefficiencies can have a number of undesirable logistics consequences including:

• Increased loss • Increase damage • Slower materials handling • Higher storage costs • Higher transportation costs

The five modes are influenced by federal, state and local government regulations. Examples?

• Mandatory retirement age for pilots in U.S. • Placement of lighting on truck trailers

Multiclient warehousing

• Mixes attributes of contract and public warehouses • Services are more differentiated than those in a public facility • Services are less customized than those in a contract facility • Services are purchased through minimum 1 year contracts • Are attractive to smaller organizations

Current concerns of Environmental Regulation include:

• Noise and air pollution • Resource conservation

Other space needs

• Only approximately 10 percent of a facility's cubic capacity is actually occupied by product1 • Warehousing facilities set aside space for nonstorage activities such as employee washrooms, lunchrooms, office space, specialized storage for hazardous items, warehousing supplies, and many more

Pipelines

• Only mode without vehicles • No need for vehicle operators • Transportation is one way • Most reliable mode • Tend to be the slowest mode • Accommodates only liquid, liquefiable or gaseous products • Capable of transporting large product volumes • High fixed costs, but relatively low cost per unit due to large product volume

Carriers established classifications for two main reasons

• Packaging specifications determined by product density lead to the best use of the equipment's weight and volume capabilities • Carrier specifications for protective packaging reduce likelihood of damage to products thus reducing the loss and damage claims filed against the carrier

Parcel carriers

• Parcels are packages weighing up to 150 pounds • Parcel carriers are companies that specialize in transporting parcels

Cleanliness and sanitation issues

• Particularly important in many industries, such the foodservice industry • Can have a positive impact on employee safety, morale, and productivity while also reducing employee turnover1 • Requires common sense and due diligence

Terms of sale involves:

• Parties working within the negotiations channel • Looking at the possible logistics channels

Renting

• Public warehousing • Contract warehousing • Multiclient warehousing

Degree of warehouse automation

• Refers to utilizing mechanical or electronic devices to substitute for human labor • Examples include narrow aisle forklifts, automated guided vehicles, automated storage and retrieval systems, and radio frequency identification, and others • Offers the potential to reduce labor costs and to improve warehouse productivity • Managers must ensure that automation results in noticeable improvement in warehousing effectiveness and efficiency

Water

• Relatively inexpensive • Focus on lower value bulk commodities handled by mechanical means • Many different kinds of products can be carried • Carry greater volumes than rail or truck • Slow average speeds • Somewhat unreliable

Logistics Performance Index (LPI)

• Relatively new international logistics concept (2007) • Updated in 2010 • Created in recognition of the importance of logistics in global trade • Incorporates data for approximately 155 countries • Measures a country's performance across six logistical dimensions

Cultural factors on International Logistics

• Religion • Values • Rituals • Beliefs • Languages

Workforce motivation can be difficult because the work can be:

• Repetitive in nature • Strenuous and physically demanding • On occasion dangerous

Public warehouses

• Serve all legitimate users • Require no capital investment on the user's part • Allows users to rent space as needed • Can be rented on a month-to-month basis • Warehousing companies have responsibility for personnel decisions and regulatory issues • Offers more locational flexibility • May provide specialized services

Documentation

• Serves practical function • Potentially provides legal recourse • Transportation department is responsible for completing all documents needed to transport the firm's products

Three important kinds of information needed to properly design protective packaging system

• Severity of the distribution environment • Fragility of the product to be protected • Performance characteristics of various cushion materials

TL rates < LTL rates because

• Shipper loads the goods and the consignee unloads trailer • The load goes directly from shipper to consignee without passing through terminals • Paperwork, billing, and other administrative costs are little more for a 25,000lb shipment than for 250 lb shipment

Shipper's associations

• Similar to air and freight forwarders but are not-for-profit organizations • Primarily focused on achieving the lowest rates for members

Pallet or skid alternatives

• Slip sheet • Shrink-wrap

Bill of lading classifications

• Straight bill of lading • Order bill of lading • Long-form bill of lading • Preprinted short-form bill of lading

Physical Characteristics

• Substance form (solid, liquid, and gas) • Density of bulk materials • Ability to withstand exposure to elements • Respiration

Class rate system

• System to simplify rate determination • Freight classification used to simplify the number of commodities • National Motor Freight Classification (NMFC)

Warehousing security threats

• Theft • Pilferage • Heat and humidity • Vandalism • Fire • Loss of electricit

Packaging serves three general function

• To promote • To protect • To identify (label) the relevant product

Transportation influences or is influenced by the following logistics activities:

• Transportation costs are affected by node location • Inventory requirements are influenced by mode • Packaging requirements are dictated by mode • Carrier classification rules dictate package choice • Materials handling equipment and design of the docks are dictated by mode • Maximum consolidation of loads achieved with order-management technology reduces costs • Customer service goals influence the type and quality of carrier • Customer service goals influence carrier choice

Beyond the unit load

• Use of load-planning software • Bracing • Inflatable dunnage bags •Weigh out

Load is subjected various forces including

• Vibration • Roll • Pitch

Safety considerations

• Warehouses, distribution centers, and cross-docking facilities can be dangerous workplaces • Fatality rate in warehousing is higher than the average rate for all industries1 • Warehouse safety can by influenced by governmental regulations • In the U.S. safety standards have been set for warehousing equipment and operations and are enforced by OSHA

Some prominent operational issues include:

• Warehousing productivity analysis • Safety considerations • Hazardous materials • Warehousing security • Cleanliness and sanitation issues

Two-dock versus single-dock layout

• generally has receiving docks on one side of a facility and shipping docks on the other side, with goods moving between them • In single-dock system, each and every dock can be used for both shipping and receiving

Contract warehousing has evolved to include value-adding services to a greater degree than public warehousing

•Customization •Reverse logistics •Repair and refurbishment

Know the purpose to be served

•Facility with low rates of product turnover should be laid out in a manner that maximizes utilization of the cubic capacity of the storage facility •Facility that emphasizes rapid product movement with limited time in storage should be configured to facilitate the flow of product into and out of i

Process of LTL

•Local pick-up •Origin terminal used to load aboard line haul •Line haul to terminal near destination •Destination local delivery on smaller trucks •Consignee receives

Transportation managers also involved in other operations of the firm, such as

•Marketing •Manufacturing •Outbound shipping •Purchasing

Trade-offs

•Must be made among space, labor, and mechanization with respect to warehouse design •Fixed versus variable slot locations for merchandise

International Trade and Supply Chain Specialists

•Nonvessel-operating common carrier (NVOCC) •Export management company (EMC) •Export packers

Transportation Considerations in International Logistics

•Ocean shipping •International airfreight •Surface transportation

Private warehousing

•Owned by the firm storing goods in the facility •Generates high fixed costs •Should only be considered by companies dealing with large volumes of inventory •Largest uses of private warehousing are retail chain stores •Offers control to owner •Assumes both sufficient demand volume and stability so that warehouse remains full

Determining when and where to transfer the following between buyer and seller:

•Physical goods •Payment for the goods, freight charges, and insurance for the in-transit goods •Legal title to the goods •Required documentation •Responsibility for controlling or caring for the goods in transit, i.e. livestock

Routing

•Process of determining how a shipment will be moved between origin and destination1 •Routing guide

Transportation rates based on three factor

•Product •Weight •Distance

Warehousing productivity analysis

•Productivity is a measure of output/input •Numerous productivity metrics can be used to assess warehouse productivity, but not all are relevant to all facilitie

Unit Loads in Materials Handling Disadvantages

•Provides large quantity that sometimes is of limited value to resellers dealing in smaller quantities •Must use mechanical or automated device to move •Drives need for routine equipment maintenance •Lack of standard pallet size

General considerations

•Quantity and character of goods to be handled must be known—product profiling •Know the purpose to be served

Environmental Protection

•Reduce packing materials used •Use packaging materials that are more environmentally friendly with recycled content •Use reusable containers (closed-loop system) •Retain or support services that collect used packaging and recycle it (closed-loop system)

Building-blocks concept

•Smallest unit is consumer package •Each unit is stocked within the next larger one to protect the product

Political restrictions on international trade can take a variety of forms

•Tariffs •Nontariff barriers •Embargoes

Metric System

•U.S., Liberia, and Myanmar (formerly Burma) are the only 3 countries in the world that do not use the metric system of measurement •Increasing pressure on U.S. exporters to market their products overseas in metric units

Parcel carriers include what companies?

•USPS •UPS •FedEx Express •Greyhound Package Express

Package testing

•Vibrations •Dropping •Horizontal impacts •Compression •Overexposure to extreme temperatures or moisture •Rough handling

Reliability is problematic due to delays caused by:

•Weather (fog, snow, thunderstorms) •Congestion and resultant delays with air passenger transportation (belly freight)

Stowability

•refers to how easy the commodity is to pack into a load •possible considerations involve the commodity's ability to be loaded with hazardous materials and ability to load freight on top of the commodity

Density

•refers to how heavy a product is in relation to its size •Viewed as primary factor for setting a product's classification

Prominent LTL carriers include:

─ABF Freight System ─FedEx Freight ─UPS Freight ─YRC (formerly Yellow Freight and Roadway)