Logistics 1

1
Logistics

• The basics
• transportation
• modes
• mixed mode and containers
• A step up
• materials handling and warehousing
• True SCM

2
Step back

• So far we have examined
• trust
• what we do internally
• some of the processes related to managing our
  suppliers of materials and information
• Logistics is then managing these flows of goods
  and information. Not only the inbound side (from
  our suppliers) but the outbound side (to our
  customers)

3
Logistics as a Source of competitive advantage

• Sharing the load 10 million plus employees
• What did the CEO of WalMart do before he took
  over the company?
• Delivering the goods
• Globalization is not possible without changes in
  logistics
• North American companies need to expand globally
  to grow
• UPS, Fed-EX and Yellow are logistics providers-
  doing this well is their competitive advantage
• So what are they doing?

4
Some other key issues from articles

• US cost of logistics 1998- 898 billion or 10.6
  of GDP / 2002 1,027 billion
• Mixed modes and containers change shipping
  tremendously
• Move to 3rd parties

5
Stepping forward

• Some people look at inbound logistics separately
  from outbound logistics.
• This often leads to treating purchasing as a cost
  center
• This assumes that managing the flows is
  significantly different. What is contained in the
  flows may differ greatly but the flows themselves
  are similar
• Transportation - usually defined as movement of
  goods. This is the foundation of logistics so we
  will build off of basic transportation

6
How goods actually move (modes)

• There are five basic modes of transportation
  what are their pluses and minuses
• Motor - basically trucks
• Air - planes
• Water - boats/ barges and the like
• Rail
• Pipeline
• Intermodal (mixed mode) transportation is a major
  issue as well

7
Mixed mode

• The container has significantly changed
  transportation
• containers are 8 foot high, 8 foot wide metal
  boxes than range in length from 20 feet to 53
  feet
• a good can be loaded into a container at a plant
  in Corvallis, taken by truck to a rail terminal
  in Eugene, placed on a train that goes to Los
  Angles, placed on a boat to Japan, unloaded from
  the boat and placed on a truck to be delivered to
  the customer.
• never unloaded
• time to change modes of transport is minimal
• Why does this matter so much ?

8
Mixed mode continued

• Containers, piggy back and other innovations have
  enabled mixed mode transport which makes
  transportation a more strategic function
• can have the access of trucks and the cost of
  trains
• can reduce costs of long hauls increases range
  of possible suppliers
• if we use a single logistics provider can get
  from the middle of Africa to the Middle of
  America using a single relationship
• By improving time and place utility (usually at
  lower costs) transport starts to become more than
  a cost center

9
Transportation in a Post 9/11 world

• Transportation safety is not just an airline
  industry issue
• You might have noticed trucks with special
  license plates (trusted carrier) or plastic seals
  on their doors.
• Containers are both easier to control (only
  opened once) and harder to control (out of sight
  for longer periods of time- arrive in bunches
  large volume).
• Food safety is the probably the area we will deal
  with next the lettuce story

10
Mixed modes have lead to the rise of 3PL

• As we move away from using inventory logistics
  must be much more precise
• Moving stuff 10 of costs
• Transportation has traditionally been very
  fragmented but why should a company spend lots
  of time coordinating various shippers when they
  can outsource this?
• How many companies get their competitive
  advantage from logistics?
• How many put their competitive advantage at risk
  if logistics is not done well?

11
Description of typical 3Pl relationship

• Penske, Yellow Freight, and dozens of other large
  transport companies offer these services.
• This also occurs in the movement of information
• Though at this point most of the companies
  providing integrated data management are trying
  to perform all services

12
Physical functions of transportation beyond
movement

• All of the following are done to provide time and
  place utility.
• Sorting out Physically separating a homogeneous
  subgroup from a heterogeneous population of items
  
• ( e.g. grading, separating by sizes, or other
  physical characteristics)
• lumber / paper / beef
• Accumulating Combining homogeneous stocks of
  products or materials into larger quantities
• Allocating (breaking bulk) Dividing up stocks of
  homogeneous items into smaller quantities
• break truckloads or carload shipments into
  smaller local shipments
• Assorting Mixing heterogeneous items into
  assortments needed by customers and end users

13
What are we basically trying to achieve ?

• Efficient flow of goods
• Small shipments travel short distances
• Largest shipment possible over long distances
• Minimal number of touches
• Minimal amount of materials stored
• Effective flow of goods
• On time delivery
• Deliver in the quantities the customer wants
• Right materials stored

14
Looking ahead

• Our discussion to this point is about
  transportation. One of the key notions of
  logistics is that it adds value. Containers and
  mixed mode transport are part of moving toward a
  view of logistics.
• note US bombers in Afghanistan taking off without
  targets
• Reexamining how we store goods is the next step.
• Much like transportation , warehousing has become
  much more sophisticated and is now seen as part
  of the potential for logistics to add value.

15
Warehouses

• Go back to our physical functions of logistics.
  In general the processes of sorting,
  accumulating, allocating and assorting occur in a
  warehouse.
• A warehouse is anyplace where goods are stored.
• Note that we can have virtual warehouses (data
  bases)
• Services tend to store all sorts of facilitating
  goods
• Distribution centers are generally warehouses
  where stuff sits for very little time and other
  value adding activities occur.
• All DCs are warehouses but not all warehouses
  are DCs

16
There are a wide range of warehousing issues

• First is where in the supply chain do we wish to
  hold materials (or data).
• We do not want to duplicate these activities (in
  general)
• In addition, we need to consider the physical
  location of the facility.
• There are also issue of size, ownership,
  management and the like to consider.
• In fact this is a major issue for any supply
  chain that needs to handle a flow of goods.
• However, our focus is at a more basic level

17
Basic purposes of warehouses storage

• This is the most traditional view of a warehouse
  - a place to store stuff
• Temporary storage
• waiting for a full truckload (accumulating)
• waiting for other items in customer order
  (assorting)
• Semi-permanent storage
• buffers or safety stock
• just in case inventory
• often results from achieving economies of scale
• most supply chains try and limit this as much as
  possible (preferable eliminate)
• Abbot Aluminum?

18
Basic purposes of warehouses movement

• Types of movement
• receiving of goods from other chain members
• inspection, pricing, assembling, ect.
• transfer - moving goods through the warehouse to
  storage or some value adding activity
• order picking - retrieving goods from the
  warehouse
• shipping
• cross docking
• discuss if needed
• movement has been the focus of many improvement
  efforts - think of JIT and unnecessary movement
  or storage

19
Basic purposes of warehouses information transfer

• Warehouses tended to equal paper
• Paper tends to indicate what?
• The first use of information in warehousing was
  automation
• AS/RS systems
• faster / cheaper (fewer people) / more accurate /
  better service etc.
• But they are expensive
• There is also an old rule about automating a bad
  process
• Steelcases warehouses
• Bar coding and now RFID
• if we can do it in the warehouse can we do it for
  the entire supply chain ?

20
Logistics and information

• When we look at our supply chain models there are
  two sets of flows- the physical flows we have
  mainly focused on and equally important
  information flows.
• It is often the management of this second set of
  flows that separates the well run supply chains
  from the rest of the pack
• The computer has made this much easier
• possible to eliminate paper
• eliminate transit time for paper
• eliminate redundant entry
• so we are faster and more accurate at a lower
  cost

21
Types of info in a supply chain

• EDI for purchasing
• Demand, order quantities, due dates, deliveries,
  and so on.
• Truck information linkages
• Bar coding and scanning for tracking in
  warehouses and production next RFID
• CAD / CAM systems linking design and production
• End customer information
• Hondas web site collects info on colors, models,
  options and the like
• What else ?

22
Key point on Information

• Entire supply chain needs to be working off the
  same information
• Would bullwhips occur if third tier suppliers had
  end customer forecasts ?
• If the company at the end of the chain is
  planning a marketing promotion their suppliers
  will perform better if given enough lead time
  (Volvo example)
• If a supplier develops a new process that might
  be useful to others there needs to be a way to
  share this information
• If customers desires change the entire chain
  needs to react (preferably be ahead of the change)

23
More information

• There are many experts who can design an
  information system for you (we even train them
  here)
• But it is the managerial decisions that determine
  how well the system will work
• What information do we include?
• What form is that information in?
• Who has access?
• Really it all comes down to the first thing we
  talked about - trust and relationships

24
Information sharing

• Every person who researches supply chain
  management finds the following
• there are many tactical issue that effect success
  but it is the relationships that make or break a
  chain
• this is mainly trust
• there are also personality issues here - some
  mangers have all by themselves screwed up a
  supply chain
• Boyds boss
• With all of the information we have covered the
  companies who excel are those that understand the
  issues of trust and information sharing.

25
Logistics conclusions

• There are many physical elements to consider in
  the design of a logistical system (flows through
  supply chain)
• It is the intangible flows of information that
  are the real make or break issues.
• Do not ignore flows back from end customer
• Transportation become logistics when we start to
  include information flows. Logistics becomes SCM
  when we understand the need for these flows to be
  available to the entire chain.
• For most supply chains this is all conjecture-
  they are still getting internal chains sorted
  out.
• Recent HBR article notes that suppliers are often
  better partners than members of your own
  organization - less fighting over resources
  (trust / global view / etc.)