Logistics Answers

7/31/2019 Logistics Answers

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1.What is logistics? Explain the different perspectives of Logistics?

The process of planning, implementing and controlling the efficient, cost effective flowand storage of goods, services and related information, from point of origin to point of

consumption, for the purpose of conforming to customer requirement.

Logistics involves the integration of Information, Transportation, Inventory,Warehousing, Material Handling & Packaging

Responsible for the geographical positioning of Raw materials, Work in Process &Finished Goods inventory where required at the lowest cost possible.

Logistics facilitates the flow of products through marketing channels to consumersSl.No Perspective Definition

1 Inventory Management of materials in motion & at rest

2 Customer (eight R oflogistics)

Right product, At the right time, In the right quantities, In the right condition, At the right place To the right customer At the right cost Right documentation

3 Dictionary The branch of military science concerning

processing,maintaining & transporting

materials, personnel & facilities

4 International Society ofLogistics The art & science of management, engineering& technical activities concerned with

requirements, design & supplying and

maintaining resources to support objectives,plans & operations.

5 Utility / value Providing Time & place utility / value of

materials & products in support oforganizational objectives.

6 Council of Logistics

Management

That part of the supply chain which

plans,implements & controls the efficient &

effective flow & storage of goods, services &

related information from point of origin topoint of consumption in order to meet

customer requirements.

7 Component support Supply management for the plant (inboundlogistics) and distribution management for the

firms customer (outbound logistics)

8 Functional Management Determination of materialrequirement,purchasing,transportation,


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inventory management, warehousing, material

handling, industrial purchasing,facility locationanalysis, distribution,return goods handling,

information management, customer service,and

all other activities concerned with supporting

the internal customer (manufacturing) withmaterials and the external customer (retailer)

with finished products.

9 Common Culture Handling the details of an activity

2. Who are the key players in logistics management?

Customers Shippers Suppliers of logistics services Transport providers Transport infrastructure operators & providers Governmentregulator of logistics

3. What are the major elements of logistics costs? Describe how they could be leveraged for

competitive advantage.

Transportation costs

Inventory costs Packaging costs Warehousing costs Administrative costs like taxes, duties & insurance

4. What do you understand by Integrated Logistics Management?

Integrated Logistics is defined as the process of anticipating customer needs and wants,acquiring the

capital, materials, people, technologies and information necessary to meet those needs, optimizing the goods or service


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producing a network to fulfill customer requests and utilizing the network to fulfill customer requirements in a timely way.

System-wide management of entire logistics chain as a single entity, instead of separate

management ofindividual logistical functions.

Integrated Logistics Support (ILS) is foremost used in the civil and military industry and

describes procedures and methods for the integrated technical-logistic support of operation, of

maintenance as well as of monitoring of operation risks. The use of integrated logistics ensures

the cost-efficient deployment of available resources and minimizes the production and operation

costs during the whole life-cycle of a product. The optimization of logistic processes within your

company implies substantial cost savingsyou can increase your margin towards your

customers or partners.

5. What are the different network elements? Explain each element briefly.

Network Elements

1. Information: Most important element of the logistics network.Todays technology iscapable of handling most demanding requirements on a real-time basis.Deficiencies in

the quality of information can create operational problems.

2.Transportation: Operational area of logistics that geographically positions

inventory.Facility selection establishes a network structure that creates the framework of

transportations requirements. Typical metrics of transportation are cost, speed & consistency

3. Inventory: This depends on the network structure and the desired level of customerservice. Typical objectives would be to achieve the desired customer service with the

minimum inventory commitment. Inventory policy would be based on the following

Customer segmentation Product requirements Transport integration Time based requirements Competitive performance

4.Warehousing, material handling & packaging

6. What are the objectives of Integrated Logistics Management?

Operating Objectives


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There are several objectives that must be simultaneously

achieved in a well designed logistical system.They include

Rapid response Minimum variance Minimum inventory Movement consolidation Quality Lifecycle support

Rapid Response:

Is concerned with a firms ability to satisfy customer requirements in

a timely manner.The ability to respond rapidly results in reducing the

inventory levels.RR shifts the focus from dependence on forecasting

and stocking to increased operational efficiencies.

Minimum Variance:

Variance is due to unplanned events that disrupts system

performance. Traditional solutions to overcome variance was to

establish safety stock or use high cost premium transportation.

Logistical productivity improves as variances are minimized.

Minimum Inventory:

The objective of logistical operations is to reduce inventory

deployment to the lowest level consistent with customer service

goals to achieve lowest total logistics costs.

Movement Consolidation:

Transportation cost, which is one of the major logistical costs


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can be optimized through movement consolidation. The larger the

overallshipment and longer the distance, the lower is the

transportation cost per unit.Innovative ways to consolidate

movement by grouping small shipments through overall supply chain

integration can lower transportation costs significantly.

Quality:

Total Quality Management or TQM has become a major commitment

and one of the major forces contributing to the emergence of

Logistics as an important function of the firm.The value provided by

logistics is keeping service promises and ensuring products do not

become defective.Aim is to achieve Zero-defect Performance.

Lifecycle Support:

Majority of the products sold today comes with someguarantee on Performance over a specified period (life of the product)

Some times value added inventory flow towards customers may have to be reversed. Also return logistics requirements results from the laws prohibiting disposal and

encouraging recycling. Examples would be beverage containers and packaging materials.

For firms marketing consumer durables or industrial equipment, commitment to life-

cycle support constitutes a versatile and demanding operational requirement.

8. What do you understand by performance cycles?

Performance cycle is the primary unit of analysis for integrated logistics. Performance cycles

provide a basic perspective of the dynamics, interfaces, & decisions that must link to create anoperating system. At a basic level, suppliers, the firm and its customers are linked together by

communications and transportation. The facility locations that performance cycles linked

together are referred to as nodes.

In addition to nodes and links, a logistical performance cycle requires inventory. Within

nodes, inventory is stocked or flows through the node, necessitating a variety of different

types of material handling and at least limited storage. Performance cycles become dynamic

as they accommodate input /output


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Performance Cycles

The primary unit of analysis for logistics is the performance cycle and generally spans the overall supply chain and link the participating firms Reflects the input/output requirements. The input to a performance cycle isan order that specifies requirements for a product or material. System output is the level of

performance expected from the logistical operation

To better understand the similarities and differences in the nature of physical distribution,

manufacturing support and procurement performance cycle are discussed below.

1) Procurement cycle (Inbound):-

Procurement is concerned with purchasing and arranging inbound movement of materials, parts

and/or finished inventory from supplier to manufacturing and assembly plants, warehouses or

retail stores. The acquisition process is called purchasing in manufacturing organization, ingovernment organisation it is called procurement and in retailing and whole selling it is called

buying. All these three term namely purchasing procurement and buying are referred to asinbound logistics. These activities are related to product and materials from outside suppliers.

It includes-

(i) Resource planning,

(ii) Supply sourcing, negation,(iii)Order placement,

(iv) Quality assurance,

(v) Inbound transportation,(vi) Receiving and inspection

(vii) Storage and handling.

2) Manufacturing support performance cycle:-The manufacturing support performance cycles provides production logistics. Manufacturing can

be viewed as being positioned between the physical distribution and procurement operations offirm. Manufacturing logistical support has the primary objective of establishing and maintaining

an orderly and economic flow of materials and work in process inventory to support production

schedules.The isolation of manufacturing support as a distinct operating area is a relatively new concept in

logistic management. The justification for focusing on performance cycles to support

manufacturing is found in the unique requirements and operational constraints of modern

production strategies. It is important to once again stress that the mission of logisticsmanufacturing support is to facilitate the what, where, and when of production, not the how.

Manufacturing support is significantly different when compared with either physical distribution

or procurement. Manufacturing support logistics is typically captive to firm, whereas the othertwo performance areas must deal with behavioural uncertainty of external customers and

suppliers. Even in situation when contract manufacturing is used to augment internal capacity,

overall control is greater than in the other two operating areas.


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Within a typical manufacturing organization, procurement provides materials and externallymanufactured components when and where needed. Once a firm's manufacturing operation is

initiated, subsequent requirements for interplant movements of materials or semi finished

products are classified as manufacturing support.

When a firm has multiple plants that specialize in specific production activities, the

manufacturing support system may require a vast network of performance cycles manufacturing

support operations, as contrasted to either physical distribution or procurement, are limited to

movement under internal management control

3) Physical Distribution Performance Cycle (Outbound Logistics):-

Physical distribution operations involve processing and delivering customer order. Physicaldistribution is integral to marketing and sales performance because it provides timely and

economical product availability. The overall process of gaining and maintaining customers can

be broadly divided into transaction creating like advertising and selling and physical fulfilmentactivities.

From the logistical prospective physical distribution links a firm with its customers. It resolves

marketing and manufacturing initiatives into an integrated effort. The interface between

marketing and manufacturing can be conflictive. On the other hand marketing is dedicated to

delighting customers. The expectation is that zero defect service will be achieved and customer

focused marketing efforts will be supported.

9. What functions does a warehouse perform in a logistical system?

A warehouse is typically viewed as a place to store inventory. In modern logistical system design, the role of the warehouse is more properly viewed as a switching facility as contrasted to a storage facility. Warehouses are the nodes of the supply chain network that extend the operational reach

of the firm and provide a strategic thrust to its objectives

A warehouse is a static unit in the material & product pipeline, necessary to

match products in a timing sense with consumers, for storage of products.

Typically a warehouse is a godown or storage space where a firm holds raw

materials, semi-finished or finished goods for different periods of time.A

warehouse receives merchandise by railroad or truck. The items are moved to


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a storage area within the warehouse and piled in stacks. When customer

orders are received, the products are handpicked for placement on wagons and

transported to the shipping area where the merchandise is loaded on to

delivery trucks.

10. Describe the economic benefits of the warehousing network in a logistical system?

Economic Benefits

A warehousing function is meant to improve the time and place capability of

the overall logistical system both in terms of economic benefits and service. The

cost of adding a warehouse should get offset by the benefits of increase in market

share, revenue and gross margins .No warehouse should be included unless

backed up by a cost benefit analysis.Economic benefits of warehousing can be

quantified by the return on investment in the direct cost to cost tradeoff. If adding

a warehouse to a logistical system reduces the overall transportation costs by an

amount exceeding the fixed and variable cost of the warehouse, then the

warehouse is economically justified. This means that the total costs have been

reduced. Typically cost reductions are attainable through the following four basic

steps.

(1) Consolidation (2) Break bulk and cross-dock (3) Processing / postponement

(4) Stockpiling


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11. What is the difference between a consolidation and break bulk?

Consolidation:

Shipment consolidation is when a warehouse receives and consolidates materials

from a number of mfg plants destined to a specific customer on a single

transportation shipment.Prime benefits are the realization of the lowest

transportation rates.

Break bulk:A break bulk operation receives combined customer orders

from manufacturers, sorts or splits individual orders and delivers them to

individual customers. Long distance transportation is consolidated to

lower costs.

12.What do you understand by cross docking in a warehousing system

Cross Dock: is similar to break bulk except that it involves multiple manufacturers.

Here truckloads of product arrive from multiple manufacturers. The products are

Received, sorted customer wise,moved across the dock to be loaded into the trucks

destined for the appropriate customers. Retail chains make extensive use of cross-

dock operations to replenish fast moving store inventories. Cross docking provides

cost savings as full trucks move from manufacturers end to the warehouse and from

the warehouse to retailers

13. What are the different types of warehouses? Describe briefly

Types of Warehouse

1. General Merchandise warehouse Store goods that are readily handled & packaged Does not require controlled environment

2. Refrigerated warehouse


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Specialized warehouse to handle & maintain products that are perishablefood,medical drugs & other chemicals

Needs to follow environmental regulations3.

Special commodity warehouse

Used for handling bulk materials like rice,wheat,jute,fertilizers etc4. Bonded warehouse.

These are licensed by government to store goods prior to payment of taxes / dutiesGenerally imported goods are stored to defer the payment of duties/taxes

14. What do you understand by the term Public Warehouse? What are the different types of

public warehouse?

-primary function to store agri-products,seeds,manures, fertilizers etc

-total capacity of public warehouse's is56.50 million tonnes

types of public warehouses

1.food corporation of india (FCI)

-capacity24.4 million tonnes

2.central warehousing corporations ( CWC's)

-setup in 1957

-largest public warehousing org.

-4564 warehouses

two types

1.owned capacity

- capacity 8 million tonnes

2.Hired capacity

-2.4 million tonnes

3.State warehousing corporations (SWC's)

-17 states have swc's


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-capacity 19.40 million tonnes

Warehousing Act: The CWC was set up in 1957 under the Agriculture Produce Development &

Warehousing Corporations Act, 1956

1.

Acquire & build godowns & warehouses at suitable places in India

2. Run warehouses for storage of agriculture produce, seeds, manures, fertilizers etc3. Arrange facilities for transport of agriculture produce etc to and from warehouses4. Subscribe to share capital of State Warehousing Corporations5. Act as agent of government for the purpose of purchase,sale,storage and distribution of

agriculture produce etc

Carry out such functions as may be prescribed.

15. Describe briefly the various warehouse strategies?

Warehousing Strategies

Strategies are based on the following.

1. Level of availability of products & services to the customer2. Level of availability & support for manufacturing3. Degree of customer service to be offered / desired4. Minimization of total distribution costs.

Broadly based on the above, warehousing strategies could be

Market positioned-typically positioned near key customer location to provide inventory replenishment to

customer

-to provide assembled product a soon as order is placed

-ex. HP keep chipset in various location to serve the customers soon

Manufacturing positioned-typically positioned closer to production plant

-serves as assembly or consolidation point for items being produced


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-ex. DHL consolidates all the consignments to be exported or delivered at a centralized

place to reduce the ground rent.

Intermediately positioned-located between customer and manufacturing plants are intermediately

-all types of stocks are stored in one place to reduce the transportation cost for the various

types of stock ordered by the customer.

Strategies could also be based on

Owner operated-facilities may cover the basic year-round requirement

Private-used to handle peak seasons.

16. What are the guiding principles of transport management?

Guiding Principles of Transport Management

Mode of transport Economy of scale Economy of distance

here in the above diagram we see the relationship between fright rate and distance and

mode of transport to be used


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total thing to minimize financial and environmental resource and also reach the customer

on time and proved real-time info of their consignment and reduce loss and damage to

their goods

17. What are the different modes of transportation available in India? Describe briefly each

mode

Mode of transport

Road Railways Water Pipeline Air Animal drawn vehicles

18.Who are the key players in a transportation model? Describe each playersfunctions/objectives.

Transactions are influenced by 5 parties

1. Shipperoriginating party2. Consigneedestination party or the receiver3. Carrierresponsible for movement of goods4. Government5. Public

Shipper & consignee share a common objective of moving goods within a prescribed time and at

the lowest cost

Carriers want to charge the maximum rate that the shipper or consignee are willing to pay and

minimize the cost of fuel, labor & vehicle costs

Government is the largest investor in infrastructure and has the highest impact on the economy

by providing roadways, ports,airports and traffic control systems. Also responsible for

regulations & promotions

The final participant - Public is concerned with the transportation accessibility, expense &

effectiveness as well as environmental and safety standards.Public determines the need

for transportation by demanding goods & Services. Development of air freight industry


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shows that consumers may find cost less important than speed.

19. What are the factors that influence Transport economics? Describe each factor briefly.

Transport Economics:

There are 7 factors that influences economics

1. Distance2. Volume3. Density4. Stowability5. Handling6. Liability7. Market factors


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Density : Product weight is a function of density & volume.Vehicles are limited by both space &

weight considerations. Higher density products are assessed for lower transport cost per unit of

weight.

Stowability : This refers to space utilization and is a function of product dimensions. Odd sizes

& shapes as well as excessive weight or length do not stow well and hence result in wastage of

space. Products with good stowability attract lower transportation costs.

Handling : Special handling equipment may be required for loading / unloading trucks,railway

wagons or ships.Proper packaging - grouping together of products by taping, boxing and

palletizing products for transport & storage handling costs can be reduced.

Liability : This includes

Susceptibility to damage Property damage to freight Perishability Susceptibility to theft Spontaneous combustion / explosion


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Value per Kg-Carriers insure their cargoes to protect against claims.

-Shippers reduce the risk by improved protective Packaging.

Market Factors :

Since transportation vehicles & drivers must return to their origin,they must either find a load to

bring back (back-haul) or return empty ( deadhead). When deadhead movements occur, labor,

fuel & maintenance costs must be charged to he shipper. Balanced moves where volumes are

equal for both directions is rarely possible due to factors such as demand imbalances in

manufacturing & consumption.

20 What are the components of Total Transportation Costs? Describe each briefly

Total Transportation Costs

1.Transit time costs reflects the temporal cost of transportationcost of inventory in transit. The

longer the transit time means that the inventory is inaccessible to the user. This adds to safety

stocks and therefore requirement of working capital. If inventory is available after a longer

period of time, it will result in higher total cost.

2.Obsolescence & Deterioration Costs

Certain category of goods are perishable and delicate in nature. Their physical attributes

deteriorate over Time gradually resulting in devaluation of the product.

Examples : Any delay in transport of vegetables such as tomatoes may force marketers to sell

them at a less than desired price. Such costs are classified as obsolescence and deterioration

costs.

3.Protective Packaging Costs :

Products may require special packaging. This cost is also a part of the total transport cost.

Products shipped in a container generally requires less protective packaging for safe

shipment as compared to transportation by truck.

4.Insurance Costs :Insurance covers goods against loss or damage while in transit or under

storage during a journey.If goods are transported by sea, then a marine insurance has to be taken

out. This also includes the transit of cargo over land at each end of the voyage. A goods in transit

policy protects operators from theft, loss & damages.


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Insurance does not protect you if the goods are inferior,below standard or damaged through

inappropriate packaging.There are generally two types of insurance covers

1.New for olditems are replaced at their current market value

2.Indemnity covertakes into account general depreciation

5.Incoterms :These are standard trade codes used for international contracts. They delineate the

risk & cost obligation for both the importer and the Exporter and therefore which party needs to

take out the insurance cover.

6.Joint Costs : are expenses unavoidably created by the decision to provide a particular service.

For example, when a carrier transports a truckload from point A to point B, there is an implicit

decision to incur a joint cost for the back-haul from point B to point A. Either the cost must be

covered by the original shipper or a back-haul shipper must be found.

7.Other costs : Common costs such as terminal or management expenses are often allocated to ashipper according to a level of activity like the number of shipments handled.local taxes, octroi

& toll taxes can also be a part of other costs.

8.Class Rates : In transportation terminology, the price per Kg to move a specific product

between two locations is referred to as the rate or tariff.The classification does not define the

price charged for movement of a product.It refersto a product transportation characteristics in

comparison to other commodities.

Classification of individual products is based on a relative percentage index of 100. Class 100 is

considered for an average product, while other classes run as high as 500 and as low as 35. Each

product is assigned an item number for listing purposes and then given a classification rating.The

higher the class rating ,the higher the transportation cost. Products are also assigned different

ratings on the basis of packaging. Glass has a different rating when shipped loose,in crates or in

boxes than when shipped in wrapped protective packaging.

21.What are the cost characteristics for the different modes of transport? Illustrate through a

table.


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22. Why is timely & accurate information critical to integrating logistical activities?

Logistics Information is a critical component of the integration process. Timely and accurate information is also critical for 3 reasons

1. Information on order status,product availability,delivery schedule & invoices isperceived by customers as a necessary element of total customer service

2. Information can reduce inventory by minimizing demand uncertainty3. Information increases flexibility with regard to how,when & where resources may

be utilized for strategic advantage.

23. What do you understand by exception-based LIS capability?

Exception based LIS :

LIS need is to be exception based to highlight problems & opportunities. This helps management

to focus on situations that require the most attention. Managements need to continuously be

aware of

whether action has to be taken for product / replenishment orders What type of action that should be taken eg. immediate , before or after lead time

Exception reports also highlights


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Very large order inflows Products with little / no inventory Delayed shipments Declining productivity

24. Briefly describe as to what is meant by LIS architecture.?

Information Architecture

The nature of information provided by an LIS is determined by Information System

architecture.It includes information base to Maintain the data warehouse & the execution

components of information. There are two type of activities of an LIS

1. Planning & coordination activities2. Operating activities

Inventory deployment & inventory management are the interfaces between planning /

coordination and operations.

PlanningCoordination

This is the information system backbone for manufacturers & merchandisers. Reflects the activities necessary to produce & deploy inventory


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These components define the core activities that guide enterprise resource allocation &performance from procurement to product delivery

Includes planning activities both within the enterprise & between distribution channelmembers.

Key components are Strategic planning Demand planning Supply planning

Operations activities

All activities necessary to

Receive Process Ship Invoice customer orders

The information activities required to achieve these objectives are listed under the following

operational components.

Order management & processing Distribution operations Transportation & shipping Procurement inventory deployment & management

25. How does EDI work? What is the difference between a communicationstandard & an

information standard for EDI transactions?

Electronic data Interchange

1. The process involving the capability & practice of communicating information betweentwo organizations via computer systems instead of traditional forms communication for

managing distribution & procurement systems.


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2. EDI has a highly structured message communication system, with tight,pre-decidedformats of documents, which allows effective,speed & reliable communication between

different locations.

3. It uses a service provider who transfers data & provides translators between differentformats.

4. The service provider also handles EDI traffic between various sources & destinations.

26. What do you understand by customer service? Explain the concept

of value advantage. How can value advantage be achieved through

customer service?

27. Explain availability and how it is measured.Availability is the capacity to have inventory when it is

desired by a customer. Availability is based on the following

three measures.

Stock-out frequency: is the probability that a stock-out will occur.Stock-outs occur when demand exceeds supply

Fill rate: measures impact of stock-outs over time Orders shipped complete: is a measure of the times that a firm

has the entire inventory ordered by a customer.28. What is the similarities & differences between domestic &

international logistics ?


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29. What do you understand by globalization? What are the factors

that can limit the growth of global markets?Globalization & Global Economy

World economy impacts the economic conditions in every country through internationaltrade,global production & international finance

Extent of business done on a global level in India is growing rapidly. Exports grew by30% for the period 2005-2007

This trend reflects the current ability of business organizations to outsource from any partof the world that offers a cost advantage

Global logistics supply chains have the ability to move goods to any part of the world,economically & quickly due to technological developments in the fields of information &transportation

Logistics companies have been successful in using new technologies and combining themwith new ways of doing business resulting in dramatic price reductions in moving goods& services from one part of the world to another

KEY DEVELOPMENTS which have impacted global logistics

Trade Policies Global organizations

Global Transnational Multi-domestic

Inter-modal transport Port-to-port Port-to-point


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Point-to-pointNew breed of logistics organizations

Logistics Issues Compliance to regulatory environment surrounding logistics process

Currency fluctuations Visibility & tracking

30.Explain Porters Dynamic Diamond TheoryPorters Dynamic Diamond Theory

Traditional theories of international trade propose that comparative advantage of countrylies in the natural endowments like

Skilled labor Natural resources Knowledge resources Capital resources Infrastructure

Based on the study of 10 countries, Michael Porter came up with a Dynamic DiamondTheory that a countrys global competitive advantage is not just related to factor

conditions but also other conditions as well

According to Porter,competitive is related to the following 4 elements Factor conditions Demand conditions Related & support industries Company strategy,structure & rivalry

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