2 Chapter Objectives Be able to: Describe why logistics is important and discuss the major decision areas that make up logistics.List the strengths and weaknesses of the various modes of transportation and discuss the role of multimodal solutions.Identify the major types of warehousing solutions and their benefits.Discuss the purpose of a logistics strategy and give examples of how logistics can support the overall business strategy.Calculate the percentage of perfect orders.Calculate landed costs.Explain what reverse logistics systems are, and describe some of the unique challenges they create for firms.Use the weighted center of gravity method to identify a potential location for a business.Develop and then solve, using Microsoft Excel’s Solver function, an assignment problem.
8 Highway Dominates the logistics infrastructure due to: Geographic extension of supply chainsGreater emphasis on delivery speed and flexibilityHas become more cost effective over time due to:Better scheduling and use of vehicle capacityMore efficient and reliable vehiclesIncreased cost competition due to deregulationInvolves different types of shipmentsDirect truck – Shipment made with no stopsLess than truckload (LTL) – Smaller shipment combined with other loads
9 WaterIdeal for materials with high weight-to-value ratio, especially if delivery speed is not critical.Examples: farm produce, timber, petroleum-based products.
10 AirIdeal for customers with a low weight-to-value ratio, especially if delivery speed or delivery reliability is critical.Higher shipping costs and improvement in other modes have reversed the rise in air growth over the past decade.
11 Rail Characteristics similar to Water but more flexible. To accommodate growth, rail carriers have doubled the number of lines along busy corridors, changed the physical configuration of the trains, and utilized multimodal solutions.
13 Multimodal SolutionsMultimodal solution – A transportation solution that seeks to exploit the strengths of multiple transportation modes through physical, information, and monetary flows that are as seamless as possibleRoadrailer – A specialized rail car the size of a standard truck trailer that can be quickly switched from rail to ground transportation without changing the wheels.
14 WarehousingWarehousing – Any operations that stores, repackages, stages, sorts, or centralizes goods or materials.Warehousing can be used to:Reduce transportation costsImprove operational flexibilityShorten customer lead timesLower inventory-related costs.
15 Consolidation Warehousing Consolidation warehousing – A form of warehousing that pulls together shipments from a number of sources in the same geographic area and combines them into larger and more economical loadsCross-dockingBreak-bulkHub-and-spoke system
19 Postponement Warehousing Postponement warehousing – A form of warehousing that combines classic warehouse operations with light manufacturing and packaging duties to allow firms to put off final assembly or packaging of goods until the last possible moment.
20 Types of WarehousesAssortment warehouses – A form of warehouses in which a wide array of goods is held close to the source of demand in order to assure short customer lead times.Spot stock warehouses – A form of warehouses that attempts to position seasonal goods close to the marketplace.
21 Logistics Information Systems Decision support toolsReal-time simulation and optimizationCost estimationsPlanning systemsCarrier selectionScheduling deliveriesExecution systemsRFID
22 Material Handling and Packaging Material handling system – A system that includes the equipment and procedures needed to move goods within a facility, between a facility and a transportation mode, and between different transportation modes.Packaging – The way goods and materials are packed in order to facilitate physical, informational, and monetary flows through the supply chain.
23 Inventory Management Implications for transportation: Using slower and cheaper transportation modes will cause inventory levels within the supply chain to rise.Using faster and more expensive transportation modes will enable firms to lower inventory levels.Implication for warehousing:Warehousing and inventory managers must work closely to achieve the desired business outcome.
24 Logistics StrategyLogistics strategy – A functional strategy which ensures that an organization’s logistics choices are consistent with its overall business strategy and support the performance dimensions that targeted customers most value.
25 Owning vs. OutsourcingDoes the firm have the volume needed to justify a private logistics system?Would owning a logistics system limit the firm’s ability to respond to changes in the marketplace or supply chain?Is logistics a core competency for the firm?Outsourcing options:Common carriersContract carriersThird-party logistics providers (3PL)
26 Making Transportation/Warehousing Decisions Based on Order Winners Table 8.3
27 Measuring Logistics Performance The perfect orderDelivered on time (according to buyer’s delivery dates)Shipped completeInvoiced correctlyUndamaged in transit
31 Reverse Logistics Systems Challenges:Firms have less control over the timing, transportation modes used, and packaging for goods flowing back up the supply chain.Goods can flow back up the supply chain for a variety of reasons and a reverse logistics system needs to be able to sort and handle these different flows.Forward logistics systems typically aren’t set up to handle reverse logistics flows.
32 Weighted Center of Gravity Method Weighted center of gravity method – A logistics decision modeling technique that attempts to identify the “best” location for a single warehouse, store, or plant given multiple demand points that differ in location and importance.
34 Example 8.6 – CupAMoe’sCurrent location and population of the three townsto be served by the warehouseFigure 8.6
35 Suggested location for the new warehouse Example 8.6 – CupAMoe’sSuggested location for the new warehouseFigure 8.7
36 OptimizationOptimization model – A type of mathematical model used when the decision maker seeks to optimize some objective function subject to some constraints.Objective function – A quantitative function that an optimization model seeks to optimize (minimize or maximize).Constraint – A quantifiable condition that places limitations on the set of possible solutions.
37 Business problems that can be addressed through optimization modeling: Table 8.5
38 The Assignment Problem The assignment problem – A specialized form of an optimization model that attempts to assign limited capacity to various demand points in a way that minimizes costs.
39 The Assignment Problem The generalized form of the assignment problem
40 Green Reverse Logistics in the Electronics Industry Logistics Case StudyGreen Reverse Logistics in the Electronics Industry
41 Printed in the United States of America. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.Printed in the United States of America.