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Published by: jayveeacequimson on Mar 27, 2010
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Chapter IV-inventory in logistic systemStock
-other term for inventory3 Growth and Significance of Inventory Cost*Product line Proliferation*Inventory carrying cost*inventory as percentage assetsRationale for carrying inventoryLogistic Channel-indicates a number of points in logisticchannel at which accountable amounts of inventory maybe found.
Potential Inventory Locations
6 Physical supply inventory
Purchase economies
-firms will buy raw materials in largequantities because of available price discount.(Discount versus storage cost)
Transportation Savings-
firms make shipments in multiplecarloads or even trainloads at even lower rates perhundredweights.
Safety Stocks-
or buffer stock is use to prevent anemergency production shutdown.
Speculative Purchase-
hedging against future priceincrease, strikes, changing political policies, delayeddeliveries rising or falling interest rates or currencyfluctuation in the world market.
Seasonal Supply-
agricultural products such as wheat orgrains are good example of items available only at certaintimes of the year.
Maintenance of supply sources-
large manufacturingfirms very often use small vendors or suppliers whomanufacture subassemblies or semi finished goods forlarge firm even when the firm can produce items itself.6 Physical Distribution Inventories- second inventory typeconsist principally of finished goods awaiting shipment tocustomers.
*Transportation Savings*Production savings*Seasonal Demands*Customer service*Stable Employment*Goods for resale
4 Inventory Carrying Cost
Capital Cost-
Interest or opportunity cost focuses uponwhat having capital tied up in inventory cost company.
Storage Space cost-
include handling cost associated withmoving products into and out inventory and storage costsuch as rent heating and lighting.
Service Cost-
includes insurance and taxes
Inventory Risk Cost-
reflects the very real possibility thatinventory peso value may decline for reason largelybeyond capital control2 Expected Stock out Cost- the cost of not having productavailable when a customer demands or needs it.
Safety stock-
companies facing a stock out possibility willallow for safety stock to protect against uncertainties indemand or lead time necessary for supply.
Stock out cost-
for company dealing with raw materialsor supplies for product line a stock out may mean whollyor partially shutting down operation.7 Functional Types of Inventory
Cycle Stock-
the portion of a companys inventory thatdepleted through normal sale or use and replenishedthrough the routine ordering process. The amount of product the firm regularly consumes during normalbusiness activity.
In-process Stock-
work in process, goods in process orsemi finished goods. Because of the time necessary tomanufacture goods and goods in transit.
Safety Stock-
which protects against uncertainties indemand rate lead time length or both. Firms hold safetystock in addition to cycle stock for the purpose of protecting against such uncertainties and theirconsequences.
Seasonal Stock 
which firms accumulates and holds inadvance of the season during which the firm will need it.
Promotional Sock-
held so that a firms logistic systemmay respond quickly and effectively to a marketingpromotional or price deal that a firm intending to pull aproduct through the distribution channel offers to thecustomers.
Speculative stock-
most commonly associated withmaterials needed by companies involved inmanufacturing or assembly operations this inventoryprotects against price increases or constrains availability
Dead Stock-
has no value for business purposes, firms willship dead stock to the location where it demands existed.
Supplier 1 Supplier 2 Supplier 3 Supplier 4WarehousePlant/ManufacturingPlant/WarehouseDistributionCenter 1DistributionCenter 2DistributionCenter 3Retailer 1 Retailer 2 Retailer 3 Retailer 4
*Customers Satisfaction
*Backordering/expediting*inventory turn-over*ratio to inventory to sales
CHAPTER V-warehousing decisionWarehouse-
storage of goods, includes a wide spectrumof facilities and locations that provide warehousing
Creating Time Utility-
warehousing increases the utilityof goods by broadening their time availability toprospective customer.
5 The role of the warehouse in logistic system1.
Transportation consolidation-
by moving the LTLand LCL amounts relatively short distances to orfrom a warehouse, warehousing can allow firm toconsolidate smaller shipment into large shipmentwith significant transportation savings
Product Mixing
- companies frequently turn out aproduct line that contains thousand of differentproduct, if we consider color, size, shape, andother various variations.
Cross-Docking 
is an operation that facilitatesthe product mixing function.
Service 
service may also be a factor for physicalsupply warehouse.
Contingencies- warehouse function is protectionagainst contingencies such as transportationdelays, vendors stock-out or strike.6 Basic warehousing decisions
*private vs public warehouse*centralized vs decentralized warehousing*warehouse size and location*layout*items stocked*employee safety
2 Basic warehouse operations*Movement
Receiving goods into the warehouse from thetransport network2.
Transferring goods into a particular location inthe warehouse3.
Selecting particular combination of goods forcustomer orders of raw material production4.
Loading goods for shipping to the customer or tothe production line.*
is the holding of goodsSeasonal demand
Ownership DecisionVariable CostFixed Cost7 Firms characteristic affecting the ownership decisionFirms charac. Private PublicThroughput volume high lowSeasonal demand stable fluctuatingDense market area high lowSpecial physical control yes noCustomer service requirements high lowSecurity requirements high lowMultiple use needs yes no2 Rationale for public warehousingLimited capital investment-
most significance reason forusing public warehousing is financial; it requires no orlimited capital investment
a firm can rent space for thirty-day periodsenabling the firm to react quickly to movements indemand or changes in quality of transportation services.
2 Public Warehousing ServicesBonded warehousing-
the user is usually interested indelaying the payment of taxes or tariffs, avoiding theirpayment altogether.
Field Warehousing-
firms request receipt for goodsstored in public warehouse under public warehousemanagers supervision in a private warehouse.7
Public warehousing ratesPer time period-
peso per square foot per time period
a p.w has a certain legally defined liability forstored goods.
Volume and regularity-
while cost of using a publicwarehouse is generally variable the warehouse companyitself will experience fixed cost.
warehouse rate must consider commoditiesgeneral susceptibility to damage because of the risk towarehouse company.
Public warehousePrivatewarehouseThrough-put volume
Damage to other goods-
in a public warehouse settingincompatible stored goods always run the risk of damaging each other
Weight Density-
warehouse generally sets rates in termsof space, usually square foot.
public warehouse is a comprehensive andsophisticated industry today, willing and able to offervariety of services beyond the general storage function.
Factors affecting the number of warehouse1.
eed for customer service
Inadequate transportation
Favoring decentralized warehousing is smallquantity buyers
Favoring decentralized warehousing would beinstances when customers allow insufficienttimes before being stock out.
CHAPTER VI-Material Handling and PackagingMaterial handling-
efficient short distance movementthat usually takes place within the confines of buildingsuch as plant or warehouse and between building andtransportation agency
dimension of material handling*Movement-
the movement aspects of material handlinginvolves the conveyance of goods (raw materials, semi-finished goods and finished goods)into and out storagefacility as well as within such facilities*
the time dimension of material handling isconcerned with readying goods for production or forcustomer filling*
the quantity issue addresses the varyingusage and delivery rate of raw materials and finishedgoods respectively*
Material handling equipment consume space inthe warehouse and plant.
Objective of Material Handling
Increase effective capacity
Improve operating efficiency
Develop effective working condition
Reduce heavy labor
Improved logistic service
Reduce cost
 Dock EquipmentForklift-
a very versatile piece of equipment that canprovide a very reasonable cost. Warehouse usually useforklift in conjunction with pallets
Dock Bumpers
- are molded rubber piece that protect thebuilding from impact of a docking trailer
Dock Levelers-
level out the angle between the dockand the trailer that providing a ramp that enables theforklift to drive into the trailer safely.
Dock Seals-
a cushioned frame around the dock dooropening that connects the trailers to the truck
Trailer restraint system-
vehicle restraints prevents thetrailer from drifting away from the dock during loadingand unloading.
- provide a base to hold individual items together.
Other material handling equipmentConveyors-
this system decrease handling cost increaseproductivity of workers and equipment
CranesBridge cranes
- are more common in physicalsupply warehouses or where the companies have tomove.
Stacker Cranes-
they can function in narrow isleeffective utilizing warehouse cube capacity.
Other picking and storage equipmentPicker-to-part-
the order picker must travel to the picklocation within the aisle
Bin Shelving-
the oldest and more basic storage systemavailable for storing small parts.
Modular Storage drawers-
are cabinets and furthersubdivided into compartments
Flow Racks-
storeons having uniform sizeand shape
Order Picking Vehicle-
order picking trucks and personabroad storage and retrieval (s/r) vehicles increase order-picking rates and maximize cubic space utilization
the pick location travels through anautomated machine to the picker.
are shelves or bins link together through amechanical device that stores and rotates items in orderpicking.
doubled layer storage system that utilizes asecond level bin shelving modular storage cabinets abovefirst storage levels.
Types of material handling equipment-a designperspectiveFlexible Path-
includes manual hand trucks all forklifttruck and other picking equipment. Its design advantageis versatility and flexibility. More labor intensive
Continuous-flow-fixed path-
includes draglines andconveyors. These are usually very efficient and highlyautomated. Investment is high
Intermittent-flow fixed path-
includes cranes andmonorails. With the ability to stop unneeded equipment.
Equipment selection factors*
physical attributes of product and packaging

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