1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 28.

1-1

Logistics ManagementLSM 730

Dr. Khurrum S. Mughal

Lecture 28

Consolidation warehouse

A

A B C D

B

C

D

Manufacturer A

Manufacturer B

Manufacturer C

Manufacturer D

10,000 lb.

8,000 lb.

15,000 lb.

7,000 lb.

40,000 lb.

Customer

Consolidation Warehouse

Similar to a merge-in-transit facility

11-6

CR (2004) Prentice Hall, Inc.

Distribution warehouse

Manufacturer Customer B

Customer C

Customer A

Low rate TL shipment

LTL

LTL

LTL

Distribution, Break Bulk, or Pool Point Warehouse

Warehouse may or may not hold inventories

11-7

11-4CR (2004) Prentice Hall, Inc.

The Materials Handling SystemMaterials Handling Functions

· Loading and unloading

· Movement to and from storage

· Order filling

Materials - Handling Considerations

· Load unitization

· Space layout

· Storage equipment

· Movement equipment

11-5

Shipping and ReceivingO

utgo

ing

load

s

Inco

min

g lo

ads

Audit spurfor loadchecking

To auxiliarystorage areas

Automated cranestorage and orderpicking

An Automated Warehouse



Economics of Storage/Handling Alternatives

Private warehousing,automated handling

Publicwarehousing

Private warehousing,pallet-forklift truckhandling

Leased warehousing

a b c d

Cost

to c

ompa

ny, $

Annual system throughput, cwt.0

a Economical range for public warehousing.b Economical range for leased warehousing, manual handling.c Economical range for private warehousing, pallet-forklift truck handling.d Economical range for private warehousing, automated handling.


Virtual Warehousing•Don’t hold all inventories needed for sale in company’s warehouse•Ship selected items directly from suppliers•Reduces investment in inventories•Requires a first-rate order management system•May require sharing critical information with vendors

15-8

Logistics/Supply Chain Organization


A good organization structure does not by itself produce good performance--just as a good constitution does not guarantee great presidents, or good laws, or a moral society. But a poor organization structure makes good performance impossible, no matter how good the individual managers may be. To improve organization structure…will therefore always improve performance.

Peter F. Drucker

15-9

Organizing for Logistics/Supply Chain Management


ORGANIZING

CONTROLLING

PLANNING

Organization scope• Intrafunctional• Interfunctional• Interorganizational

Structure forSupply ChainPerformance

Organization design• Choices• Positioning

Partnerships & Collaboration• Information sharing• Alliances• Contracting

ORGANIZING

CONTROLLING

PLANNING

Organization scope• Intrafunctional• Interfunctional• Interorganizational

Structure forSupply ChainPerformance

Organization design• Choices• Positioning

Partnerships & Collaboration• Information sharing• Alliances• Contracting


Objectives for Organization

•Definitively defines responsibility, accountability, and authority–essentials for good management

•Collects people together in a meaningful way to achieve the goals of supply management

•Sets initial conditions so that proper cost tradeoffs can be realized

•Facilitates the implementation of plans as well as the planning process

•Aids administration


Activity Fragmentation in the Supply Chain

PresidentPresident

MarketingMarketing FinanceFinance OperationsOperations

•Distribution channels

•Customer service

•Field inventories

•Revenue

•Cost of capital•ROI•Inventory

carrying costs

•Supply alternatives

and supply costs

•Warehousing•Purchasing•Transportation

Responsibilities

15-4


Activity Fragmentation in the Supply Chain (Cont’d)

PresidentPresident

MarketingMarketing FinanceFinance OperationsOperations

•More inventory•Frequent &

short production runs

•Fast order processing

•Fast delivery•Field

warehousing

•Less inventory

•Cheap order processing

•Less warehousing

•Long production runs

•Lowest cost routing•Plant warehousing

Objectives

15-5

15-13

Activity Fragmentation in the Supply Chain (Cont’d)

Reasons for fragmentation•Lack of understanding of key cost tradeoffs•Traditions and conventions•Other areas considered to be more important to the firm than logistics•Organization structure can be in an evolutionary state

Benefits of fragmentation elimination•Encourages important cost tradeoffs to be effected•Focuses on an important, defined area by top management•Sets the structure within which control can take place



Organizational Choices•Informal structure- Persuasion of top management- Coordinating committees- Incentive arrangements- Profit sharing- Cross charges

•Semi-formal structure- Matrix organization

•Formal structure- Line--creates value in products, therefore it has operating status- Staff--provides assistance to the line organization


Logistics Matrix Organization

Tra ffic& w areh ou s in g

C u s tom erservice

S a lesfo recas itn g

M a rke tin g

In ven to rym an ag em en t

A ccou n tin g& in fo rm ation

p rocess in g

F in a n ce

P rod u c tionsch ed u lin g

Q u a lityassu ran ce

P u rch as in g& m ate ria ls

m an ag em en t

P ro d u c tio n

P re s id e n t

Fun

ctio

nal a

utho

rity

Project authorityLogistics\SC coordinator

Tra ffic& w areh ou s in g

C u s tom erservice

S a lesfo recas itn g

M a rke tin g

In ven to rym an ag em en t

A ccou n tin g& in fo rm ation

p rocess in g

F in a n ce

P rod u c tionsch ed u lin g

Q u a lityassu ran ce

P u rch as in g& m ate ria ls

m an ag em en t

P ro d u c tio n

P re s id e n t

Fun

ctio

nal a

utho

rity

Project authorityLogistics\SC coordinator

15-8


Formalized, Centralized Organization

Vice-presidentFinance

Vice-presidentOperations

ManagerProcurement

ManagerWarehousing andmaterials handling

ManagerOrder processing

and customerservice

ManagerTransportationand packaging

ManagerInventory and

productionscheduling

Vice-presidentLogistics

Vice-presidentMarketing

Chiefexecutive

officer


Alliances and PartnershipsBenefits

•Reduced cost and lower capital requirements•Access to technology and management skills•Improved customer service•Competitive advantage such as through increased market penetration•Increased access to information for planning•Reduced risk and uncertainty

1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 28.

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