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Information flow
Information flow
Customer’s Supplier’s
Customer Lead Firm Supplier
customer supplier
margin
Strategic Operational
Receive goods
Identify goods Temporary Permanent
Sort goods
Despatch to storage
Hold inventory
Recall, select goods
Marshal the shipment
Despatch the shipment
Prepare records and
advices
SDM – Ch 15 Tata McGraw Hill Publishing 30
Purpose of Warehousing
• To provide desired level of customer
service at the lowest possible total cost
• It is that part of the firm’s logistics system that
stores products (RM, Packing Materials, WIP,
FG) at and between point of origin and point of
consumption and provides info to
management on the status, condition and
disposition of items being stored
• Distribution warehousing relates mainly to FG
SDM – Ch 15 Tata McGraw Hill Publishing 31
Reasons for Warehousing
Service related Cost related
Maintain source of supply Achieve production economies
Support customer service Achieve transportation
policies economies
Meet changing market Take advantage of Quantity
conditions Purchase discounts and forward
Overcome time and space buys
differentials Least Logistics cost for a
Support JIT programs of desired level of customer
suppliers and customers service
Provide customers with the right
mix of products at all times
Temporary storage of materials
to be disposed or re-cycled
Production Positioned
• Warehouses located close to the production facilities
or supply sources
• Not the same level of customer service as the earlier
one
• Serve as points of aggregation / collection for
products made in a number of plants
• Factors influencing are:
– Perishability of raw materials
– Number of products in the product mix
– Assortments ordered by customers
– Transport consolidation rates ex; FTL
Principles….
SDM – Ch 15 Tata McGraw Hill Publishing 39
Transportation Principles
• Continuous flow
• Optimise unit of cargo - stackability
• Maximum vehicle unit – capacity utilization
• Adaptation of vehicle unit to volume and nature of
traffic
• Standardisation
• Compatibility of unit load equipment
• Minimum of dead weight to total weight
• Maximum utilization of capital, equipment and
personnel
Reverse Logistics
• Movement of goods from the market or
customer back to the company
• The need:
– Increased awareness of the environment
– Stringent legislation
– For some it is part of the business
– Profitability of dealing with scrap, surplus
• Surplus, obsolescence can result due to:
– Over optimistic sales forecasts, change in product
specs, errors in estimating material usage, losses
in processing or overbuying based on incentives
SDM – Ch 15 Tata McGraw Hill Publishing 44
Advantages of Rail
• Economy – more so for goods over
long distances
• Efficiency of energy
• Reliability – not affected by weather
conditions
Road transport…..
Air transport….
Pipeline….
SDM – Ch 15 Tata McGraw Hill Publishing 50
Pipeline Movement
• Advantages:
– Reliable, continuous, all weather transport
– Low energy consumption – hence low cost
– Low maintenance and operating costs
– Underground, no space problem
– Can traverse difficult terrain
– Minimal transit losses
– Operation round the clock, safe
– Economies of scale – double the throughput for
only 30% additional cost
• Disadvantage is in the investment cost
Ropeways….
SDM – Ch 15 Tata McGraw Hill Publishing 51
Ropeways
• Advantages:
– In hilly or inaccessible areas
– Long and circuitous routes with streams / deep valleys
– For commodities capable of movement in ropeway
buckets
– Short haulages of less than 50 kms
– Areas where other carriers are uneconomical
• Disadvantages:
– Heavy investments
– Limitations on size and quantity of haul