Supply Chain Logistics Questions and Answers

Supply Chain Logistics Questions and Answers W1. Logistics is defined as The movement and storage of goods, services and related information W1. Three major building blocks of logistics Network Transportation, Warehousing and Inventory W1. Motor Freight Advantages Speed, Reliability, Low Damage and Accessibility W1. Motor freight is very efficient in A financial sense, roads are paid for by the government (taxpayers) it's a subsidized industry W1. Motor freight costs involve mostly Fuel, Wages, Maintenance, equipment and user charges W1. Kind of trucks in Motor freight City Trucks (Mostly used in cities), Line Haul Vehicles (40, 53ft) mostly used of international shipment and intermodal, Specialty Vehicles such as refrigerated, livestock containers, automobile carriers and tankers. W1. When we use different trucks We connect them with terminals W1. What terminals do? They take products from one truck, sort them and then people in charge move products to another truck W1. Kind of terminals Pickup and delivery (From a city truck to a line hall vehicle), Cross Docks (To connect networks of transportation together) and Relay terminals (Switch out the cab to put the trailer on a new cab with a fresh driver) W1. Cost structure of Motor freight Is majority Fuel and wages W1. Infrastructure is made up of vehicles and terminals W1. Cost Structure of Motor Freight Fuel 39% / driver salary 26% / cab and trailer 17% / maintenance 12% / insurance and fees 5% W1. Motor Carrier Industry Structure Trucks moved roughly 67% of the nation's freight by weight W1. According to US Department of transportation in 2010 1.3 Million trucking companies, 400k for hire carriers, 660k private carriers, 168k interstate motor carriers W1. Most trucking companies are small businesses 90.2% operate 6 or fewer trucks, 97.2% operate fewer than 20 trucks W1. Trucking is a vital industry for the economy 7 million people employed in positions related to this field, 3 million drivers employed W1. Truckload (LTL) Moved directly from shipper to consignee, Average 242 miles, Many small carriers, Weight 20,000 to 50,000 lbs. W1. Less-than-Truckload (LTL) Picked up, moved to a terminal, reloaded for line-haul, delivered to terminal, locally delivered Average distance about 550 miles Requires national or regional network Weight 50 to 10,000 lbs. About 150 carriers W1. Parcel Home/business pickup, consolidated, moved to sortation facility, trucked/flown/railed to distribution center and home/business delivered Weight 1 to 150 lbs. Fast (good for time-sensitive goods) Very expensive W1. Competition There are few ways in which firms can differentiate themselves, the main area of competition is price. W1. Cost structure High variable costs (70-90%), Low fixed costs (10-30%) W1. Operating cost in the United States Are currently between$1.20 - $1.80 per mile W1. Carriers use fuel surcharges to recover some of cost W1. Air Freight Service Characteristics When importance of speed outweighs cost, then air is attractive for freight! W1. Air freight special for Emergency shipments Typical commodities include mail, communications products, racehorses, etc. W1. Speed of service considerations Speed, travel time advantage can be off-set by flight frequency and timing. Smaller communities have experienced reduced frequencies. In-direct routing due to hub and spoke networks. W1. Cost Structure The industry operates at High variable costs (70-90%) Low fixed (10-30%) W1. High variable costs (about 60% of total, but can be as high as 80%) About 30% attributable to flight operations About 12% for maintenance About 17% for aircraft and traffic servicing W1. How to deal with fuel costs: Increases have major impact on operating costs. More fuel efficient aircraft and smaller planes on low-density routes. W1. Types of Equipment All cargo, Belly Cargo W1. All Cargo Extra-large planes Wide body Narrow body W1. Belly Cargo Existing airliners Smaller loads - maybe a few containers W1. All-cargo airlines are operating similar to TL you rent the entire plane W1. Commercial airlines are similar to LTL Able to carry smaller quantities as belly cargo W1. Parcel carriers are also using planes for small shipments but they are often very expensive W1. Competition in air freight is divided in Fuel Costs and Managing the delays using technology W1. Fuel costs who can best manage the largest expense and hedge against future price increases W1. Who can manage the delays put on by security concerns Technology is starting to help alleviate these issues W1. Intermodal When we use 2 different kind of transportation to carry a group of containers which merchandise remains untouched W1. if the cargo comes in full containers then it is a good candidate for intermodal W1. The key to intermodal is The use of containers and its seamless transfer from one mode to another. W1. On long distances rail transportation has a significant advantage over truck in terms of fuel efficiency - which translates into a large cost advantage W1. On long distances (over 500 miles) rail is not much slower than truck W1. Accessibility: by combining the advantages of rail and truck The freight can reach any spot a regular truck could reach W1. Major Powerhouses in the express delivery field DHL, UPS, FEDEX W1. Express Delivery by RAIL is the cheapest and reasonably fast over long distances W1. Express Delivery by Motor is fast for short distances and can pickup and deliver everywhere W1. Express Delivery by Air is fastest and cost is justified for certain items W1. Express delivery firms use several modes to the best of their advantage: Photo 1 W1. The general purpose of these terminals (Rail, Motor, Air) is fourfold: Photo 2 W1. Speed of Transportation Modes Photo 3 W1. Distance of Transportation Modes Photo 4 W1 Cost of Transportation Modes Photo 5 W2. Why we need warehouses? Photo 6 - to consolidate raw material supply, it has several advantages such as efficiency, risk pooling (hold inventory in 1 location) and service. W2. 3 basic functions of warehousing 1 Movement: warehouses are meant to facilitate the movement of products, 2 Storage: For having an assortment of products in my warehouse available readily, 3 Information: about inventory, what's coming in, what you currently have and when's going to go out W2. There are different types of warehouses: Private and Public Private Warehouse: Built for a company for their products, they run and manage it and only serves them / Public Warehouses: Serves multiple companies, shipping process is managed by a special warehousing company, known as a third party logistics company W2. What makes a warehouse really good? 1 Speed: we want to be able to ship the items as sooner as possible, 2 Quality/redundancy: we don't want to send to our customers the wrong item, that makes them angry, therefore we have multiple checks in our distribution system,to ensure that our product that our customer asks for is tha one that we deliver 3 Productivity: We want to reduce, reuse and recycle as much as possible W2. Warehouses are full of racks and shelves, where we store our products Conveyors and sorters are what we move our products about in the warehouse, before shipping the products we assemble and package the orders W2. For a productive warehouse we need: 1 Shortest Distance Possible for all products, but more importantly, the items that are selling the best must be located as close as possible to the shipping dock. 2 Quality: We don't want to ship out the wrong processes, so we need to have redundancies in our process / 3 Throughput (Rendimiento) : Pushing items quickly as possible. W2. Warehouse Flow Process Photo 7 - Most important items, shorter distances, then we assemble the items, shorter distances and move them out! W2. Types of Storing Areas in a Warehouse Photo 8 - case lot/fast mover *bulk storage/slow mover *flow racks/broken cases W2. A better warehouse layout: Notice how we have two docking areas (Areas de Atraque), one on each side of the building. This enables us to focus on each task in the best way possible - without impeding on each other. Photo 9 - We do give up some storage space, but in this case it is a good trade-off to make since the staging areas are typical bottleneck spots that hinder the efficient movement of products into and out of the warehouse. W2. We also gain two staging areas which improves the Flow into and out of the warehouse. W2. Here are a number of best practices for setting up a warehouse: 1-Streamline the picking process - reduce order pick time, 2-Implement efficient dock management practices, 3-Add automation wisely, (Technology) 4-Implement Warehouse Management Software (WMS) to sequence orders and organize the workflow inside the warehouse. W2. Types of Inventory: Cycle Stock and Safety Stock (We don't really expect it to be used, but it's there when we need it, like a safety policy) Photo 10 - Cycle Stock: Has to do with inventory that goes up and down during regular sales and replenishments. Safety Stock: We hold it in case something we did not anticipate happens W2. Future is not always certain, that's why We cannot rely on cycle stock alone, so we need something called safety Stock W2. Uncertainity can come in two forms, therefore we need to hold safety stock Demand: Our demand is not what we expected it to be, Logistics: Our replenishment does not arrive when we want it to arrive. W3. How to pick your Logistic Network location Is really and art form as you don't know what your need are going to be in the future, nevertheless, goof planning pays off. W3. The decision on planning your logistis network is a tradeoff Do you want to save money building facilities and holding inventory, or do you want quick access to your customers. W3. You can use your ransportation network as a storage device Some car makers put several weeks worth of inventory into trains and rail yards to get to the dealers. That gives them a storage option, even though it is transportation per se. W3. When you build your logistics network, you trade-off two important factors. The one is cost, the other one is service. If we want better service to our customers, we probably have to spend more money. W3. But logistics networks are already expensive, so most companies try to reduce those costs as much as possible while still maintaining a high-level of service. The cheapest logistics network looks different from the most expensive one. W3. Also remember, that the choice of how much weight you give to cost and how much you give to service has to do with the company's strategy: If your customers expect better service they typically are willing to pay a higher price. W3. The reason why Urban Outfitters chose this location, probably has to do with the proximity to their home office, Their commitment to the local area and the ability to distribute up and down the eastern seaboard right from here in Lancaster county. W3. Two major drivers affecting logistics network are the cost of money Interest rates and the cost of fuel driven by the cost of crude oil. W3. When interest rates are high, the cost of holding inventory goes up, because most of the money spent holding inventory is cash tied up that you could use otherwise. When fuel costs are going up, remember, fuel costs are the single largest expense of most transportation, the overall cost of transportation goes up. W3. So when transportation is expensive, you want to have less of it. Therefore, you need more warehouses. So when transportation is expensive, you want to have less of it. Therefore, you need more warehouses. W3. So as you see those two economic drivers that most companies do not have any control over, impact how their logistics networks should look. And it is important to anticipate where does factors are going to be in the future, so your network Is as up to date as possible. W3.Nevertheless, you can make small adjustments by using rented warehouses And evolve it over time to make sure that your cost is as low as possible while delivering the best service possible. W3. The goal of your logistics network is to make sure your customers are happy, and you keep them happy by keeping your promises to them. So for example, if you tell your customer you will buy a product from me and two days later, it will be at your door step, you should make it happen. W3. In order to provide your customers with that top logistics customer service, you can have no stock-outs and you should have the lead time that you advertise, two concepts I will discuss next. Lead time (Tiempo de espera) is one of the most metrics and logistics, it's measured from the time of order submission to the time of order receipt. W3. And we want it to be short, as short as possible but We also do not want it to vary at all because we cannot plan for variability. W3. An example of that would be if you're shipping parts to a car manufacturer and that line is moving, if your part is delayed and they cannot build their cars, the cost of waiting for a part is astronomical. So you want to avoid any delays in your lead times as much as possible. An equally important metric is fill rate, which is defined as the percentage or orders that is shipped from inventory. W3. Lead time will be affected by the fill rate (Tasa de relleno) because if you don't have the item in inventory, you will not be able to meet your aggressive lead time. Therefore we need to maintain enough inventory to ensure our fill rate is as high as possible and we don't have any stock-outs. W3. Ultimately, the overall goal of logistics is to deliver the right product, at the right price to the right customer, at the right place, at the right time, in the right quantity, in the right condition. W3. Those are known as the seven Rs of logistics, companies are striving to achieve the seven Rs, but there's a wrinkle. Not every item that they sell is equally important. W3. So, for example, we have different SKUs, known as stock keeping units, and some sell a lot, others sell a lot less. In Arrocha products are categorized by A,B and C based on their sales rate. W3. Our A items is where we need our best fill rate and our lowest lead time. And then, the other items, we can reduce cost while offering lower levels of service. And that is how most companies achieve low cost in logistics while maximizing their service levels when it matters. W3. It's a pro-customer and pro-business logistic network, considering the time, proximity and location of the warehouses in relation to all the customers I'm planning to sell Gun Massagers, it's a product that many people are demanding, more often by people that go to the gym or those ones that have pain in some part of their bodies due to the stressful routine that they face everyday, it's a very useful product for blood circulation as well, it helps to Relieve Lactic Acid Build Up After Exercise faster, it's a great product.