Intermediate Logistics LOG 310
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This 14 page Class Notes was uploaded by Johnathon Lynch MD on Monday October 26, 2015. The Class Notes belongs to LOG 310 at University of Tennessee - Knoxville taught by Lloyd Rinehart in Fall. Since its upload, it has received 39 views. For similar materials see /class/229888/log-310-university-of-tennessee-knoxville in OTHER at University of Tennessee - Knoxville.
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Date Created: 10/26/15
Transportation is the connecting the firm to its suppliers and customers Physical Link Transportation also adds value to the product by providing and utility for the firms goods time and place utility As firms engage in transportation cost are becoming even more significant global competition Outbound transportation was clearly the largest component of total physical distribution costs abound in transportation and are typified by trading lower inventory cost for higher transportation costs Cost tradeoffs ton mile one ton of cargo carried one mile and is a standard statistical measurement used in the transportation industry Types of Motor Carriers Motor Rail Water Air and Pipeline Motor CarriersMost widely used form of transportation in the domestic supply chain economic structure of the industry contributes to the vast number of carriers in the industry comprised of for hire and private fleet operations low fixed cost high variable cost do not own the right of way High accessibility faster transit time than rail or water reliability can be affected by weather Small vehicle size coincides with lower inventory strategies and quick replenishment RailroadsCapable of carrying a wide variety of products much more so than other modes Very small number of carriers likely only one wil be anle to serve any one customer location Is a long haul large volume system High fixed cost low variable cost Accessability can be a proble and transit times are spotty but are generally long Sercvice is biggest customer concern Corridor Capacity Projects Meridian Speedway Heartland Corridor Rickenbacker Global Logistics Park i81 Crescent Corridor WaterMajor facilitator of international trade with 81 internationalfreight movement High variable and low fixed cost Relatively low cost mode do not own rights of way easy entry and exit Typically a long distance mover of low value bulk type mineral ag and forest products Low rates but long transit times low accessability but high capacity General Cargo ships large high capacity cargo holds engage on a contract basis many have self containedcranes for loading and unloading Bulk Carriers specially designed to haul minerals can handle multipple cargos Tankers specially designed for liquid cargos largest vessels afloat some at 500k tons Container ships high speed for ships increasineg more common and important standard vessel can handle up to 5000 TEU39s larger vessels can carry 13000 TEU39s RORO Roll onRoll offbasically a large ferry that facilitates the loading and unloading process by using drive onoff ramps many also have the capacity to haul containers Air CarriersLimited number of large carriers earn about 90 of the revenue Does not have to be specifically made to carry freight Cost structure highly variable and do not own rights of way fastest transit times of any mode but rates are highest seek goods with a high value to weight ratio Accessibility is low as is capability Reliability subject to weather more than other modes Pipelinesnot suitable for general transportation accessability is very low own rights of way much like RR major advantage is low rates Railroad high fixed cost and low variable cost that carry bulk food mining and heavy manufacturing Motor low fixed cost with medium variable cost that carry consumer goods and medlight manufacturing Water medium fixed cost with low variable cost that carry bulk food mining chemicals Air low fixed cost with high varible cost that carry high value goods and rush shipments Pipeline High fixed cost with low variable cost that carry petroleum chemical mineral slurry Intermodal transportation two or more modes cooperating on a shipment by publishing a through rate takes advantage of the best characteristics of each mode Containerization goods are placed in a large box where they are untouched until the arrive at the consignees unloading dock this reduced theft damage multiple handling cost and transfer times Changes materials handling from labor intensive ti capital intensive and may reduce cost 10 to 20Carrier Selection DecisionsVarious modes of transportation should be considered Choose a carrier or carriers within the selected mode if there is a choice Carefully examine the service capabilities of the carrier as services can vary widely between carriers Economic regulation entry regulation rates servicessafety regulation labor standards hazardous materials shipping vehicle maintance insurance and public safety issuesEconomy of distance the cost per unit of distance decreases as distance increases because the tapering principle speads fixed cost over a larger distance baseEconomy of scalethe cost per unit weight decrease as the size os the shipment because fixed cost can be spread over a larger weight basereconsignmentchanging the consignee while the shipment is in transit Popular in certain industries where goods are shipped before they are soldDiversionchangin the destination of a shipment in transit Often used in conjuntion with reconsignmentPoolingprovides the ability for a shipper to use a CL or TL rate by consolidating many smaller shipments going to one destination and one sondignee into a pool car or truckStopping in Transitpermits the shipper to use a CL or TL rate and drop off portions of the load at various intermiediate destination the carrier charges a stopoff charge for each stop but this is usually much less than shipping the load at LCL or LTL rates Transit Privilegepermits the shipper to unload a car or trailer process the shipment and reload and ship the processed product to its final destination using a through rateFactors in Rate determinationCost of Service Value of serive distance and weight of shipmentCost of servicein economic terms the supply side of pricing the cost of supplying the service establishes the minimum rate Value of Servicein economic terms the demand side of pricing the value of supplying the service establishes the maximum rate what the traffic will bear general higher valued goods cam more easily absorb higher rates Types of transportation documentationBill of Lading Freight Bill Claims FOB terms of saleBill of LadingShows title to the goods name and address if the consignor and consignee summarizes the goods in transit and their class rates includes straight bill or order billStraightBillnonnegotiable contains terms of the sale including the time and place of title transferOrder Bill negotiable consignot retains until bill is paidFreightBillCarriers invoice for charges for a given shipment credit terms are stipulated by the carrier and can vary extensively credit may be denied if the charges are worth more than the freight bill may also be prepaid or collected are typically audited internally or externallyDomesticClaimsA document filed with the carrrier to recover monetary losses due to losses damage delay or overcharges by the carrier typically claims are filed within 9 months claimant is notified wihin 30 days and settlement or refusual within 120 days claim terms can be stipulated in the contract of carriage agreement and may be atypicalDomestic Terms of SaleDetermines which party is to pat the freight bill which party had title to the goods and which party controls the movement of the goods FOB origin and FOB destinationFOBoriginbuyer pays freight owns goods once loaded controls movement of the goodsFOBdestinationseller pays freight owns goods until delivered controls movement of the goodsIncotermsinternation credit terms terms may include export packing cost inland transportation export clearace vehicle loading transportation cost insurance duties International terms of SaleEterms Fterms C terms DtermsEtermsdeparture contract seller makes shipment avaliable at plant buyer takes title at point of origin and arranges for transportationF termsseller only obligated to present the goods to buyers carrier buyer pays for all other cost FCA free delivery to the carrier FAS Water only free alongside ship FOB Water only Free on Board C Terms seller pays main carriage and insurance cost CFRcost and frieghtseller pays main carriage and insurance water CPT carriage paid to same as CFR but no insurance but used by modes other than water ClFcost insurance frieght cost water only CIP carriage and insurance paid to not water DTermsseller incurs all cost relayed to delivery to destination DAF delivered at frontier seller is accountable to a particular point buyer thereafter to final delivery DESdelivered ex ship seller pays to port responsible until goods are made avaliable to buyer onboard ship DEQ delivered ex quay seller pays to port responsible until goods are unloaded onto dockquay and paid duties DDUdelivered duty unpaid seller incurs all cost except custom duties DDPdelivered duty paid expoertdeclarationdescribes the goods for the dept of commerceexportlicenseallows export of goodscommercialinvoicedetermines value carnetseals shipment at originBill of Ladinginitiating document for all shipmentsThe role of distribution in SCMl balancing supply and demand 2protecting against uncertainty 3 Allowing quantity purchase discounts 4 supporting production requirements 5 promoting transportation economies Balanccing supply and demandWhether seasonal production must service year around demand or year around production is needed to meet seasonal demand distribution facilities can stockpile inventory to buffer supply and demand 39 U39 Laimydisu i39uuLiUII facilities can hold inventory for protection agianst forecast errors supply disruptions and demand spikesallowing quantity purchase discountssuppliers often provide incentives to purchase product in larger quantities reducing the purchase cost per unitsuporting r 39 39 1 39 ifa ing operation can reduce cost via long production runs or if outputs need to age or rippen the output can be warehoused prior to distributionpromoting transportation economiesfully utilizing container capacity and moving product in larger quantities is less expensive per unit than shipping air and moving small quantities at a time distribution facilities can be used to recieve and hold the larger delivered of inventory for future requirements Four Primary distribution facility functionsaccumulation sortation allocation assortmentaccumulationinvolves the recipt of goods from a variety of sources allows organizations to consolidate orders and shipments for production and fulfillment purposesSortationfocuses on assembling like products together for storeage in the distribution facility or for transfer to customersAllocationfocuses on matching avaliable inventory to customer orders for a SKUAssortmentinvolves the assembly of consumer orders for multiple sku39s held in the distribution facilityValue Added Roles of Distribution operationsassembly service inventory management and visibility product kitting bundling and 39 U product I r I U recycling repair and returns managementAssemblyserviceshandle limitedlight assembly of products such as building and filing in store display unitsnventory management and visibilityprovidecoinsignment and vendor managed inventory programsproduct knitting bundling and unbundlingbuild custom combinations of products to meet specific customer requirements such as all components needed for the the assembly of a desktop computer productpostponementconduct specific activities that have been delayed until customer places orderproductionsequencingprepare inventory for just in time lineside delivery to manufacturing facilities components are picked loaded and delivered in he precise sequence needed for assemblyrecycling repair and returns managementprovides services related to reverse flows of products from customers such as inspection disposal refirbishment and or creditF r 39 quot39 39 r 39 39 39 39 must drive the design of the distribution process such as product value durability tempurature sensitivity obsolesence volume and other factors Must analyze the inventory transportation and service trade offs before choosing between direct shipping and the use of distribution facilitiesTwo options for product flow1 direct shipment of goods from man to retailer from retial to consumer 2 Movement of goods through distribution facilities to customers Network design issuesinventory positioning focuses on the issue of where inventory is located within the supply chain single location vs multiple customer facing locations Second and third issue focus on the number and locations of distribution facilitites with in the supply chainFunction trade offsWarehousetransportation tradeoff trans cost go down as the number of warehouses go up warehouseinventory tradeoff inventory cost go up as number of 39 go up 39 sc vice tradeoff cost of lost sales go doen as number of warehouses go upThe ownership decisionprivate public or 3pl distribution Private DCinternal facilities owned by the organizationPublicwarehousingis the traditional external distribution optionContract Warehousing is a customized version of public warehousing in which an external company provides a 39 39 39 of quot quot 39 quot 39 39 operationMovement including recieving putaway order picking and shipping Storage including stock location warehouse management systems wmsWaerhouse layout and designdevelope a demand forecast determine each items order quantity convert units into cubic footage requirements allow for growth allow for adequate aisle space for materials handling equipment provide for the transportation interface provide order picking space provide storage space provide recouping office and miscellaneous space Layout design prnciplesuse one storage facility when possible move goods in a straight line direct product flows use the most efficient materials handling equipment minimize asile space use full building height Layout and design objectivescubic capacity utilization protection efficiency mechanization productivity Flow through distributionremove cost from and improve service of logistics processes by increasing the speed of product floe and reducing inventory through timely and coordinated warehouse and transportation operations accomplished through automated information systems that stock reorder and replenish goods from suppliers based on point of sale data factors determining space needscustomer service level size of markets number of products size of products level and pattern of demand throughput rate supply lead time stock layout handlingstorage system used Before expanding the warehousedispose of dead stock review products with low turnover review pallet slot utilization review pallet and shipper utilization assess effect of seasonality on space needs assess building cube utilization criteria for pallet storage selectionnumber of pallets to be stored rate of movement number of stock keeping units order picking method pallet storage methods block stacking non selective racking drive in drive through racking pallet live racking double deep racking selective racking high risenarrow aisle racking mobile racking block stacking few products with high volumes advantages are high storage density and low capital cost limitations are low selectivity damage potential high stock rotation difficult selective racking most common system used advantages include 100 slectivity high speed access low capital cost few height limitations relatively easily adjusted and relocated limitations are above four pallets may need height selection equipment and special floor may need wide aisles for some equipment high risenarrow racking where high land cost force high building advantages are 100 selectivity high speed access quite dense storage can be automated disadvantages are medium initial capital cost high cost handling equipment captive storageretrieval crais special floor standards additional fire protection needed drive in racking storage oriented task and small product range advantages include high storage density moderate capital custom can use standard forklift better damage control than block stacking limitations are poor selectivity poor stock rotation slow access practical height limitations rack damage possible pallets may be unsuitable palletlive racking short period storage large volume uniform product reciept dispatch areas strick stock rotation necessary advantages are very high space utilization automated stock rotation can use standard forklifts simple inventory control limitations include very poor slectivity high capital cost can be high maintenancedamage pallets may be unsuitable variable weight pallets hard to handle double deep racking best where more than one pallet of each product needs to be stored advantages include economical alternative to drivein increased density at loss of selectivity limitations are need special handling equipment need guides on rear racking and height limitations mobile racking special high density applications advantages include 100 selectivity very dense storeage can use standard equipment limitations include slow access high initial capital cost special floor standards height limitations can handle only one aisle at a time Best practices in order picking minimize travel time maximize time spent picking product facilitate accurate order picking leverage materials handling equipment minimize idle time Order picking operation options discrete order picking batchbulk picking zone picking picker to product and product to picker Picker to productfixed cost are low variable cost are high supervision is difficult systems needs are low flexibility is high maintanence is low prooduct to pickerfixed cost are high variable cost are low supervision is easy systems needs are high flexibility is low maintenance is high Materials handlingefficient short distance movement in or between buildings and a transportation agencyFour dimensions of materials handlingmovement time quantity and spaceObjectives of materials handlingincrease effective capacity minimize aisle space reduce product handling developeffecctive working conditions reduce heavy labor improve logistics service reduce cost Materials flow principle provide an operation sequence and equipment layout that optimize material flow simplification principle simply handling by reducing quot 39 39 or quot 39 y u u and or equipment gravity principle utilize gravity to move material wherever practical