MBA 4. 2: LOGISTICS MANAGEMENT
Module 1 Introduction to Logistics and its interface with production and Marketing; Measures of Logistics; Physical distribution and logistics. Introduction to Logistics •When total supply chain system is integrated over a firm, it is known as logistics •It is an integrated effort aimed at helping customer value at a lower cost. •Without logistical support, marketing and manufacturing departments cannot accomplish product in timely or fresh manner. The value of logistics is evaluated when the inventory is correctly positioned to facilitate sale. It is very costly to create a logistical value. •A firm gains competitive advantage by providing customer with superior service through quality logistics. •Logistically leading firm have information system capability of monitoring logistical performance on a real time basis by giving them the capability to identify potential operational breakdowns and take corrective action prior to customer service failure Definitions
Council of logistics management defines logistics as the process of planning, implementing and controlling the efficient and effective flow of storage of goods, services and related information from the product point of origin to the point of consumption for the purpose of confronting the customer According to Philip Kotler,” Logistics is defined as planning, implementing and controlling the physical flow of materials from the point of origin to the point of use, to meet customer needs at a profit. ”
According to American Marketing Association, logistics may be defined as, “the management of all activities which facilitates movement and the coordination of supply and demand in the creation of time and place utility in goods. ” Logistics is an integration of information, transportation, inventory, warehousing, material handling and packaging. The operating responsibility of logistics is the geographical positioning of RM, WIP required at the lower possible cost. It is through logistical process that the material handling and product distribution takes place.
Objectives 1. Inventory cost reduction – carrying cost, ordering cost, transportation cost. 2. Reliable and consistent delivery 3. Freight economy 4. Minimization of product damage 5. Quick response Functions The generic functions of logistics management are making available the required quantity of required quality products at the point of use as and when required at the least cost. In other words logistics management is concerned with the movement of goods from the point of inspection to the point of consumption. 1.
Procurement function – it ensures smooth flow of raw materials, parts and components of specified quality and quantity from quality certified suppliers to the production centers. It includes identification of the inputs needed in terms of the quality specification and quantity requirement, study of sources for procurement, negotiations with them, final supply contract, order placement and shipment of inputs. 2. Production function – it deals with efficient and effective management of work in progress inventory and its flow between different stages of manufacturing.
Hence this logistics function ensures timely availability of semi processed materials and components and inventory to support the production schedule. A set of logistic components is crucial at this stage comprise inputs inventory, production schedule, material handling, storage, temporary packaging if required, and final packaging if any. 3. Physical distribution function – it refers to the movement of finished goods for the last point of production to customers or end users.
In other words this function of logistics facilitates marketing and sales performance of the enterprise by means of timely and economical product availability. Hence the major logistics component which comes under this function is inventory management of output products, transportation, distribution, warehousing, order processing, protective packaging, and ultimate customers. The physical distribution function of logistics ensures zero defects services and prohibits stock outs by making the product available regularly with the minimum inventory level.
Components In order to achieve logistics operational objectives, while achieving its mission, a large no. of individual activities are required to perform, which constitutes functions of logistics management system. Different components constitute differently in the achievement of logistics mission and objectives which can be grouped in 3 broad categories. a. Generic components b. Primary components c. Supportive components Generic Components Primary Components Supportive Components Components of a typical logistical system
Purchasing, packaging, inventory control, material handling, order processing, customer service, demand forecasting, distribution communications, parts & service support, plant or warehouse selection (location analysis), return goods handling, salvage & scrap disposal, traffic and transportation, and warehousing and storage. Logistics Management Definition Logistical management includes the design and administration of system to control the flow of material, WIP and finished inventory to support business unit strategy. Overall goal of logistics is to achieve a targeted level of customer service at the lowest possible total cost.
LOGISTICAL TOTAL COST – includes the cost of physical distribution system and cost of logistical supply chain PHYSICAL DISTRIBUTION SYSTEM cost includes •Manufacturing •Wholesale •Inventory •Transportation •Administration LOGISTICAL SUPPLY CHAIN cost includes •Cost of inventory •Production cost •Service cost Logistical Integration Hierarchy Basic ? Functions ? Performance Cycle ? competencies ? strategic positioning (universal process) Basic work – consists of specific job essential to logistical performance. E. g. , order pricing/ truck driving.
It involves many people. Functional Areas – served as the organizational focus to perform and administer logistics work. E. g. Traffic dept ? transportation. These are the area of logistics essential for operational excellence. The resources are to be integrated over function. It is a cross functional coordination. Performance cycle •Operational cycle for logistics execution •Provides operational structure for logistics integration •Linking basic work and function to complete order to delivery operation •Logistical temporal integration Logistical Competency
It is a relative measurement of firm’s capability to provide competitively superior customer service at lower possible cost. It is achieved through •Alternative logistical capabilities •Emphasizing flexibility •Time based performance •Operational control •Postponement capabilities •Commitment o perfect service performance Strategic positioning It is the expectation concerning logistical competency directly depend upon firm’s strategic positioning. It focuses on; •Creating customer value for gaining or retaining loyal customers •To excel in one or more of core competencies (more resources and management attention is given)
Importance of logistics •It creates value in terms of time and place to customer and supplies of a firm. •Significant costs. •Logistics customer service expectations are increasing through lesser error rates and high inventory turn over for finished goods. •Supply and distribution line are lengthening with greater complexity. •Logistics is more important to strategy •It adds customer value •Customers increasingly want quick, customized response. Activity mix of Logistics It refers to the activities that make up business logistics.
It varies upon organizational structure, management opinion about supply chain, and importance of operational activities. Primary activities 1. Transportation a. Mode of transport service selection b. Freight consolidation c. Carrier routing d. Vehicle scheduling e. Equipment selection f. Claim processing g. Rate auditing 2. Inventory management a. RM and FM stocking policies b. Sales forecasting c. Product mix at stocking point d. Number, Size and location of stocking point e. JIT, push & pull strategies 3. Information flow and order processing a. Sales order inventory and interface procedures b. Order information transmitted methods c.
Ordering rules Secondary activities 1. Warehousing a. Space determination b. Stock layout and spatial design c. Warehouse configuration d. Stock placement 2. Material handling a. Equipment selection b. Equipment replacement policies c. Order pricing procedures d. Stock storage and retrieval 3. Purchasing a. Supply source selection b. Timing c. Quantity 4. Packaging a. Package handling b. Storage c. Protection from loss and damage 5. Information maintenance a. Information collection b. Storage c. Manipulation d. Data/control procedures These support activities co-operate operations and production department to; •Specify aggregate quantities Sequence and time of production output •Schedules supplies for production and operations Logistics Interface with production and marketing Increasingly, organizations are recognizing the importance of integrating their marketing and logistics activities. According to recent trade publications, “whatever the definition, warehousing and distribution are critical to the successful marketing of products: if the product is not where customers want it, when they want it, it is unlikely to sell. ” Also, increasingly, marketing managers are operational managers, balancing complex trade-offs along the line. At a conceptual level, managers may well understand and agree to the importance of integrating marketing and logistics activities, but at a practical level integration is often quite difficult to achieve. Firms that are integrated can expect to provide higher levels of customer service, at lower costs, as well as create more satisfied customers and increase profits over the long term. This comes about through both improved efficiencies as well as effectiveness in both the marketing and logistics areas and at their interface points throughout the organization.
For firms that focus on developing supply chain competencies, process integration and information sharing across firms is necessary to long-term success. Internal integration of a firm’s processes has been identified as a key component of achieving supply chain success! Marketing theory, in the form of the marketing concept or its more modern conceptualization of market orientation, provides a rationale for integration, and research supports a direct, positive relationship between integration and performance success or achievement of a competitive advantage.
Although there is a strong rationale for integrating marketing and logistics functions, the process is often left to practitioners to figure out for themselves. The purpose of this article is an empirical investigation of issues relating to marketing-logistics integration within a firm. Little is known about what contributes to or detracts from a firm’s ability to these functions. This study does not seek to confirm the integration-performance link but more practically to address how a firm might go about becoming more integrated.
The specific research problem is to identify factors related to inter-functional integration that are managerially relevant. The marketing discipline itself emerged early in the 20th century as a catalyst for solving the “distribution problem” that existed because of the geographic separation of the manufacturer and customer. This physical separation created the need for strategy development in distribution activities at a time when attention was squarely focused on production methods.
Although marketing was originally conceived as including activities related to demand creation (personal selling, advertising, sales promotion) and demand supply (physical distribution), the discipline has evolved to focus primarily on demand creation (product management, promotional activities). A new discipline called logistics has emerged to address the demand supply activities inherent in the physical distribution functions. This disciplinary split has been reflected in business practice as well.
Marketing and logistics functions have evolved separately in most organizations, where logistics is now often a major corporate function, distinct and separate from marketing and production functions. Yet, both marketing and logistics functions play an important role in creating satisfied customers. Marketing focuses on demand creation through product, price, and promotion mixes whereas logistics typically is more operationally focused on demand satisfaction, which is, getting the right product to the right place at the right time. The typical interface between the two is in the area of customer service.
Logistics usually is an operational function within an organization, but its strategic importance is increasingly recognized, particularly as part of demand creation activities. Logistics leverage is the “ability to effectively influence market demand through the application of excellent logistics systems, techniques and programs. ” Porter’s value chain clearly points out how both marketing and logistics functions are important and linked in a firm’s efforts to create value, which suggests that these two functional areas be coordinated in order to maximize value creation.
Indeed, as Bowersox et al. argue, integration of marketing and logistics functions is necessary in order to achieve the demand creation capabilities of the logistics function. A reason for integrating these functions can also be found in the marketing concept, which emerged about forty years ago as “a corporate state of mind that insists on the integration and coordination of all of the marketing functions which, in turn, are melded with all other corporate functions, for the basic objective of producing maximum long-range corporate profits.
More recent manifestations of the marketing concept have re-emerged in discussion of market orientation, stemming mainly from the work of Kohli and Jaworski and Narver and Slater. The exact interpretation of market orientation differs across these two groups of work, but each focuses on the core pillars of the marketing concept in some way. Functional integration forms an important part of the market orientation construct in both conceptualizations. Measures of Logistics
To establish, that logistics is properly addressed throughout its life cycle, one must establish the appropriate measurements to support requirements in the early stages of conceptual design. These measures are; 1. Reliability factors – the profitability that a system or product will perform in a satisfactory manner for a given period of time, under specified operating conditions. Reliability is highly depended on the Frequency of maintenance of that item. When frequency of maintenance decreases reliability increases and vice versa. Extensive maintenance is required for unreliable systems. . Maintainability factors – maintainability means an inherent design characteristic dealing with the ease, accuracy, safety, and economy in the performance of maintenance functions. Maintainability factors can be measured in terms of elapsed time, personal labour hour rates, maintenance frequencies, maintenance cost, related logistics support factors. Corrective maintenance – unscheduled actions, initiated as a result to restore a system to its required level of performance. These activities are troubleshooting, disassembly, and repair, remove & replace reassembly.
Preventive maintenance – scheduled actions necessary to retain a system at a specified level of performance. Theses activities include periodic inspections, servicing, calibration, and condition monitoring. Elapsed time can be reduced by applying additional human resources. The objective is to maintain a proper balance between elapsed time, labour time and personnel skills at a minimum maintenance cost. 3. Supply support factors – It includes the spare parts and the associated inventories for the accomplishment of maintenance actions. a.
Spares are major replacement items that are repairable, whereas the repair parts are non-repairable smaller components. b. At each maintenance level, one must determine the type of spare parts, quantity to be purchased and stocked, frequency of ordering and order lot. c. An additional stock level should be maintained in order to meet the following situations; i. To compensate for the procurement lead times required for item acquisition ii. To compensate for repairable items in the process of undergoing maintenance iii. To compensate for the condemnation or scrapage of repairable items . Transport, packaging, and handling factors It includes the movement of human and material resources, in support of both operational and maintenance activities. The factors to be considered are; a. Transportation route, both national and international b. Transportation capability or capacity c. Transportation time, cost and made d. Products transported must e designed in such a way to eliminate damage, possible degradation etc. e. Does the package incorporate the desired strength and material characteristics f. Can it stand rough handling or long term storage without degradation g.
Does the package provide adequate protection against various environmental conditions such as rain, temperature etc. h. Is the package sufficient with existing transportation and handling method 5. Test and support equipment factors These factors include precision electronic best equipments, mechanical test equipments, ground handling equipments, special jigs and fixtures, maintenance stands etc. The objective is to provide the right item for the job intended, at the proper location, and in quantity required. 6. Organizational factors These factors includes a. Direct maintenance labor time b. Indirect labor time required . Personnel attrition rate d. Personnel training rate e. Number of maintenance work orders f. Average administrative delay time. The right personnel quantities and skills must be available when required, and the individuals trained and motivated. 7. Facility factors Different factors in facility are; a. Item process time or turn around item – it is the elapsed time necessary to process an item for maintenance, returning it to full operational status. b. Facility utilization – it is the ratio of time utilized to the time to the time available for use, perfect utilization in terms of space occupancy and so on. . Energy utilization is the process of maintenance. d. Total facility cost for the system operation and support. 8. Software factors Software can be suppliment to many of the maintenance functions. Thus it should be evaluated in terms of language levels or complexity, number of programs, cost per maintenance etc. a. Software cannot degrade in the same way as equipment; the reliability is important and must be measured. b. Software reliability is the probability of failure free operation of a software component or system in a specified environment for a specified time. . Technical data and information system factors The objectives of these factors are to; a. Simplify the task of generating and processing technical data through; Better packaging, eliminating redundancies, reducing processing time, and accessible of information to all organizations. b. It provides a means for the introduction of design changes and for better implementation of configuration management requirements. c. It also enables faster, timely, accurate and more reliable communications between multiple locations on a current basis. 10.
Availability factors It is often used as a measure of system readiness (i. e. the probability that a system will be readily available when required for use). They are of 3 types; a. Inherent b. Achieved c. Operational Physical distribution and Logistics There are 3 views about SCM and Logistics. 1. SCM is another name of IBLM (Integrated Business Logistics Management) 2. Logistics is a subset of SCM. SCM contains additional issues beyond product flow (oprtnl flow, fund flow) 3. Logistics is the sum of inbound SCM and outbound PDS. END OF MODULE 1 Module 2
Logistics system analysis and design; warehousing and distribution centres; location; transportation system: facilities and services; dispatch and routing decisions and models; inventory management decisions. Logistics audit and control; packaging and material handling; international logistics management; logistics future direction. Logistics system analysis and design Warehousing and Distribution centres Warehousing Definition A warehouse can be defined as “a planned space for efficient accommodation and handling of goods and materials”. It is a planned space for efficient accommodation and handling of goods and materials.
Both the physical processes of material handling and stocking as well as the underlying methodologies are commonly denoted by the word warehousing. According to Roos warehousing may be defined as, “the segment of an enterprise’s logistics function that is responsible for handling and storage of inventories. Management of these processes includes the maintenance of accurate and timely information relating to the status location, condition and disbursement of inventory. ” We need warehouses; 1. Top provide adequate buffer storage against inequalities caused by unpredictable variations in supply and demand. . To safeguard stock from damage, deterioration and unauthorized removal by providing an environment which is an appropriate area to the material being stored. 3. To record accurately receipts stock holding and dispatches and to provide an efficient communicational interface with all appropriate parts of the system that are being served Functions According to Lamber and Stock, there are four functions 1. Material handling •Receiving refers to physical order acceptance. This includes activities which lead to inflow of materials into the warehouse like unloading of the order audit. Storing deals with putting away received inventory in such a manner that it complements the order picking activity. •Shipping deals with the performing task relating to dispatching of an order. •Order picking refers to physical selection of products from their location on receipt of customer order. Orders are picked with the help of a document called pick list. This document contains sales order number, required shipment date, item details, quantity details, product code. •Sorting. •Traffic management analyze the carriers suitable for a product shipment so as to increase customer satisfaction but decrease total transportation cost. . Storage •Stock piling refers to the storing of products and materials so as to allow a company to exploit economies in production and transportation. •Product rotation ensures that proper value addition takes place in products but at the same time there is minimum loss from obsolescence and spoilage. •Consolidation and breaking of bulk means a manufacturer converts many small shipments into full carloads and then ships them to a local or a regional consolidation centres. At these centres the bulk is broken down according to order specification of individual distributors and this activity is called bulk breaking function. . Information transfer – in a warehouse, irrespective of how small or large an activity is, details are maintained in a record by activities of book keeping and stock taking and control. These records are later used to calculate space utilization, equipment and manpower availability, throughput time, order picking time and efficiency of various other activities. 4. Customer service – it is considered as the measure of how well the logistics system is performing in creating time and space utility for products including post sales support.
It is also seen as related to aspects of inventory management and storage, including acquisition of raw materials, coordination of WIP inventory and delivery of FG inventory. Warehousing Costs These are primarily associated with; Land:Rental cost Buildings:Rents and Rates Storage and Material handling equipment:Maintenance Services:Electricity, telephone Labour:Pickers and Packers Supervision:Warehouse management Consumable:Materials In addition to the above factors warehousing costs are influenced by location and number of warehouses. Warehousing Types
The object is to select a type that provides the firm with the ability to achieve the least total cost necessary to efficiently and effectively execute logistics functions while facilitating attachment of enterprise strategic performance targets. The optimal warehouse decisions should permit the firm to leverage inventory levels and transportation models that effectively support marketing, sales, order processing and inventory planning in quest for competitive advantage. Warehouse can be categorized into categories on various variables. 1. On the basis of the ownership a. Company owned warehouses b. Public warehouses . Contract warehouses 2. On the basis of operations a. Planned or base warehouses (centralized warehouses) b. Distribution centre warehouse (decentralized warehouses) 3. Other popular types of warehouses a. General merchandise warehouse b. Refrigerated or cold storage warehouses c. Special commodity warehouse d. In bond warehouses (shops) e. Open bonded warehouses f. Bonded warehouses g. Free trade zones h. Combination warehouses Distributing Centres •Special kind of warehouse designed to speed the flow of goods and avoid unnecessary storing costs. •Speeds bulk breaking to reduce inventory carrying cost. Helps to centralize control and coordination of logistics activities. •Products may immediately move (cross docking) from a truck or train at an incoming loading dock to an outgoing loading dock. Location The location of a warehouse depends upon the characteristics of the firm in question like the distribution channel, the resources a company has, the customer service level etc. depending upon these variables a company can opt for either of the three locations; 1. Market oriented – Warehouse which is located near to target market or customers. This facilitates; a. short delivery movement b. peed of service to the customers. 2. Production oriented – Warehouse which is nearer to the production point, and only after processing the goods are shipped. This facilitates a. economies in transportation cost b. the products once received in production oriented warehouses are then shipped in assorted lots to retailers. 3. Intermediately oriented – These warehouse not only service the market by decreasing the lead time but also provide the facility of transport cost. In order to locate a warehouse at the most optimum position we should consider two scenarios; i. e. 1. Single depot location 2. Multiple depot location
Transportation system Transportation is just one part of complex international supply chains. However, today, with growing challenges in our transportation system, we must avoid that transportation becomes the weakest link in the chain, and threatens the efficiency of conception, production, and distribution of our products. This is the reason why people responsible for logistics and supply chains have a keen interest in understanding today’s transportation challenges. As the final user of freight transport, they want to participate in the debate and in new ideas on the future of the transport system.
The transportation system, and transport policy, is well advised to better understand the requirements of modern logistics today. Responding to the challenge of smoother, more efficient transportation for increasingly sophisticated supply chains will improve the overall performance of the transport system. It will eliminate waste and thus gives an opportunity, by responding more intelligently to transport demand, to reduce the negative impacts of transport. Because the logistics sector is of such fundamental importance to transportation, and logistics cannot work without transportation. Facilities and services
Dispatch and routing Decision Models Dispatch Dispatch is a procedure for assigning employees (workers) or vehicles to customers. Industries that dispatch include taxicabs, couriers, emergency services, as well as home and commercial services such as maid services, plumbing, HVAC, pest control and electricians. With vehicle dispatching, clients are matched to vehicles according to the order in which clients called and the proximity of vehicles to each client’s pick-up location. Telephone operators take calls from clients, then either enter the client’s information into a computer or write it down and give it to a dispatcher.
In some cases, calls may be assigned a priority by the call-taker. Priority calls may jump the queue of pending calls. In the first scenario, a central computer then communicates with the mobile data terminal located in each vehicle; in the second, the dispatcher communicates with the driver of each vehicle via two-way radio. With home or commercial service dispatching, customers usually schedule services in advance and the dispatching occurs the morning of the scheduled service. Depending on the type of service, workers are dispatched individually or in teams of 2 or more.
Dispatchers have to coordinate worker availability, skill, travel time and availability of parts. The skills required of a dispatcher are greatly enhanced with the use of computer dispatching software. •1 Manual dispatch systems o1. 1 Cards o1. 2 Punched tags o1. 3 Plastic icons •2 Airline dispatch •3 Mobile dispatch •4 Capacity and metrics o4. 1 Radio o4. 2 Telephone •5 Zone system to assign service calls Routing Dispatch and routing Decision Models Logistics audit and Control Logistics Audit The logistics audit is framed by the answers to the following questions 1.
Are current logistics strategic objectives consistent with current corporate marketing and production strategies? 2. How is the company performing with respect to customer requirements and preferences? 3. What is the true total cost of the logistics function and how do those costs compare with others in the same industry or market segment? 4. Is the company using its logistics resources and capacity effectively? 5. Is the company managing its material flow effectively through the supply chain? 6. Are the information systems and technologies meeting the needs of the users, the business and the customers?
Process 1. Consistency of logistics strategic objectives 2. Determine customer requirements and preferences and obtain performance targets 3. Detail current logistics operations and practices 4. Analysis of logistics data 5. Identify and prioritize projects and initiatives 6. Prioritizing projects 7. Develop an Implementation plan 8. Implement and Audit 9. Monitor and corrective action Logistics Control The control activity intense to reduce performance alteration in a planned process. That is reducing the gap between the planned and actual performance.
The control process is a function which monitors changes in the internal operations and external conditions and provides useful pointers for effective organizational management in future. Therefore logistics control aims at monitoring planning activities so as to decrease variance between benchmark and actual output. There are three types of logistics control systems; 1. Open loop 2. Closed loop 3. Modified loop Packaging and Material handling Packaging It is defined as, “element of product which helps in retaining its quality till it reaches the consumer. ” It is an “art, science and technology of preparing goods for transport and sale. Functions 1. Packaging helps protect product during movement. •To protect the goods against breakage, contamination or distortion. •To reduce the cube space occupied by the product and thus cut the freight cost. •To facilitate handling of product. •To facilitate storage. •To group goods into a convenient unit for distribution. •To reduce pilfering opportunities. 2. It attracts attention to a product and reinforces a product’s image. •Display •Ease of opening •Convenience •Dispensing 3. Provides convenience (for both middlemen and consumers) of handling and storing the product. Cost of Packaging
Delivery of a product at a minimum overall cost is a very important function of packaging but still it becomes important to clear as what is included in the overall cost of packaging. The main elements are; •Package cost (delivered to the factory) •Storage and handling cost of the empty package •Filling cost (including quality control and handling of filled package) •Storage cost of filled package •Insurance costs involved in transport •Losses due to breakage or other spoilage of the product (including loss of goodwill) •Effect of package on sale Package design Packaging materials 1. Paper and Board Fibre board outer cases •Paperboard cartons •Paper sacks and balers •Labels or wrappers •Fibre drums and tubes 2. Metal containers •Tin plate •Steel •Aluminium •Aerosols 3. Plastics •Blow moulding •Injection moulding •Extruded fillings •Thermo forming 4. Glass containers Material Handling Methods or Equipments 1)Manual 2)Trolleys 3)Forklift trucks a)Straddle trucks b)Reach trucks c)Free path narrow aisles machines d)Rising cabs 4)Conveyors Factors influencing the choice of material handling equipment; 1. Space required for the free movement of the equipment and the space available. 2.
Damage percentage of the equipment. 3. Reliability and flexibility of material handling system. 4. The product characteristics. 5. Investment required for the equipment. 6. Compatibility of material handling system with other operations of the warehouse and business. International Logistics Management Definition According to council of logistics management – “international logistics is the process of planning, implementing and controlling the flow and storage of goods and services and related information from a point of origin to a point of consumption located in a different country. Components 1.
International transportation involved different modes of transportation, different carriers, and different transportation documents and much greater transit times. Its inherent risks and hazards are also much more significant. 2. International insurance is also much more complex and contracts are written using archaic language and terminology that varies in meaning depending on the country in which the insurance company is located. 3. International means of payment are more involved, with the risks of non payment and currency fluctuations, calling for specific strategies that are never used in domestic transactions 4.
Terms of trade are much more involved, as the greater number of nodes and links increases the number of possible alternatives for transfer of responsibility and ownership. 5. The crossing of borders also represents specific challenges. Products sold or purchased abroad have to go through customs, a complicated and paper intensive process in most countries. 6. Finally, the language, culture and physical environment of international logistics is quite distinct. Logistics Future Directions END OF MODULE 2 Module 3 Warehousing and Storage; Transportation – land, water and air.
Warehousing Refer module 2 Storage Reasons for storage •to reduce transportation – production cost •to coordinate supply and demand •to assist in production process •to assist in the marketing process Functions 1. Inventory holding (storage) •Holding •Consolidation •Break Bulk •Mixing 2. Material handling •Loading and unloading •Movement to and from storage •Order filling Storage Alternatives 1. Ownership 2. Rental 3. Lease 4. Store in transit Transportation An efficient and inexpensive transportation system contributes to; •Greater competition in the market place. Greater economies of scale in production •Reduced price of goods Selection of Modes The selection of different modes of transportation is done on the basis of; •Price •Average transit time •Transit time variability •Loss and damage Modes of Transportation Rail Rail is a long hauler and slow mover of raw materials and of low valued manufactured products and prefers to move shipment sizes of at least a full carload. Rail services exist in two legal forms; 1. Common carrier 2. Privately owned Advantages 1. Provides cheapest and fastest mode of transport for commodities in bulk. . In respect of high rated commodities like cotton piece goods, soaps and detergents, medicines and general merchandise railways provides door to door services like containers and freight forwarders. The railways also change competitive freight rates. In this case there are sizeable savings to the consignor or consignee. These rates are cheaper for longer distances. 3. Railroad documents are honoured by banks and are negotiable instruments. They provide flexibility in a commercial transaction. 4. Consignment is secure in transit with the railways. 5.
Looking from an overall national angle, Indian railway is more energy efficient and has a far superior safety record as compared to road transport. Truck Trucking is a transportation service for semi finished and finished products. Truck and rail services show some distinct differences even though they compete in many of the same product shipment. 1. In addition to the common and private legal classification of carriers trucking offers services as contract carriers as well. 2. Tucks can be judged less capable of handling all types of freight than rail mainly due to highway safety restriction that limit the dimensions and weight of shipment 3.
Trucking offers reasonably fast and dependable delivery of less than carload shipments. Air The newest but the least utilized mode of transport. The appeal of air transportation is in its unmatched origin destination speeds, especially over long distances. In addition air transport generally offers excellent frequency and reliability of services particularly to major metropolitan areas. Advantages •Speed of transportation •Emergency transport Types •Regular domestic truck line carriers •All cargo carriers •Local service airlines •Supplemental carriers •Air taxies •Commuter airlines •International carriers Water
Water transportation service is limited in scope of several reasons. Domestic water service is confined to the inland waterway system which requires shippers to be located on the water ways or to use transportation more in combination with water. Water service on the average is slower than the rail. Water services are provided in all legal form and most commodities shipped by water move free of economic regulations. Loss and damage cost resulting from transporting by water are considered low relative to other odes because damage is not much of a concerned with low valued bulk product and losses due to delay are not serious.
Pipeline It offers a very limited range of services and capabilities. The most economically feasible products to move by pipeline are crude oil and refined petroleum products. Products movements by pipeline are very slow only about 3 – 4 miles per hour. Concerning transit time, pipeline service is the most dependable of all modes because there are few interruptions to cause transit time variability. Product loss and damage for pipeline is low because; •Liquids and gases are not subject to damage to the same degree as manufactured products. •The no. of dangers that can be fall a pipeline operation is limited.