Logistics Chapter Chapter Objectives Be able to: Describe why logistics is important and discuss the major decision areas that make up logistics List the strengths and weaknesses of the various modes of transportation and discuss the role of multimodal solutions Identify the major types of warehousing solutions and their benefits Discuss the purpose of a logistics strategy and give examples of how logistics can support the overall business strategy Calculate the percentage of perfect orders Calculate landed costs Explain what reverse logistics systems are, and describe some of the unique challenges they create for firms Use the weighted center of gravity method to identify a potential location for a business Develop and then solve, using Microsoft Excel’s Solver function, an assignment problem Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-2 Logistics Management Logistics management – That part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements © CSCMP – Council of Supply Chain Management Professionals Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-3 Logistics Management Transportation Warehousing Material handling Packaging Inventory management Logistics information systems Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-4 Why Logistics Is Critical Impact on cost, flexibility, and delivery performance Advances in information systems Globalization of markets Push toward sustainability Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-5 Transportation Highway Water Air Rail Pipeline Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-6 Comparison of Modes from 1997-2007 Table 8.1 Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-7 Highway Dominates the logistics infrastructure due to: Geographic extension of supply chains Greater emphasis on delivery speed and flexibility Has become more cost effective over time due to: Better scheduling and use of vehicle capacity More efficient and reliable vehicles Increased cost competition due to deregulation Involves different types of shipments Direct truck – Shipment made with no stops Less than truckload (LTL) – Smaller shipment combined with other loads Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-8 Water Ideal for materials with high weight-to-value ratio, especially if delivery speed is not critical Examples: farm produce, timber, petroleum-based products Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall 8-9 Air Ideal for customers with a low weight-to-value ratio, especially if delivery speed or delivery reliability is critical Higher shipping costs and improvement in other modes have reversed the rise in air growth over the past decade Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 10 Measuring Logistics Performance The perfect order Delivered on time (according to buyer’s delivery dates) Shipped complete Invoiced correctly Undamaged in transit Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 27 Perfect order – Example 8.4 Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 28 Landed Costs Landed cost – The cost of a product plus all costs driven by logistics activities, such as transportation, warehousing, handling, customs fees, etc Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 29 Reverse Logistics Systems Reverse logistics system – A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling © 2010 APICS Dictionary Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 30 Reverse Logistics Systems Challenges: Firms have less control over the timing, transportation modes used, and packaging for goods flowing back up the supply chain Goods can flow back up the supply chain for a variety of reasons and a reverse logistics system needs to be able to sort and handle these different flows Forward logistics systems typically aren’t set up to handle reverse logistics flows Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 31 Weighted Center of Gravity Method Weighted center of gravity method – A logistics decision modeling technique that attempts to identify the “best” location for a single warehouse, store, or plant given multiple demand points that differ in location and importance Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 32 Weighted Center of Gravity Method Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 33 Example 8.6 – CupAMoe’s Current location and population of the three towns to be served by the warehouse Figure 8.6 Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 34 Example 8.6 – CupAMoe’s Suggested location for the new warehouse Figure 8.7 Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 35 Optimization Optimization model – A type of mathematical model used when the decision maker seeks to optimize some objective function subject to some constraints Objective function – A quantitative function that an optimization model seeks to optimize (minimize or maximize) Constraint – A quantifiable condition that places limitations on the set of possible solutions Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 36 Optimization Business problems that can be addressed through optimization modeling: Table 8.5 Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 37 The Assignment Problem The assignment problem – A specialized form of an optimization model that attempts to assign limited capacity to various demand points in a way that minimizes costs Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 38 The Assignment Problem The generalized form of the assignment problem Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 39 Logistics Case Study Green Reverse Logistics in the Electronics Industry Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 40 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher Printed in the United States of America Copyright © 2013 Pearson Education, Inc publishing as Prentice Hall - 41 ... used, and packaging for goods flowing back up the supply chain Goods can flow back up the supply chain for a variety of reasons and a reverse logistics system needs to be able to sort and handle... 22 Inventory Management Implications for transportation: Using slower and cheaper transportation modes will cause inventory levels within the supply chain to rise Using faster and more... management – That part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information