Professional Documents
Culture Documents
1. INTRODUCTION
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runs out. This type of stock can be eliminated by programmes
like Total Productive Maintenance
2
Changeover stock is held after a sub-process that has a long
setup or change-over time. This stock is then used while that
change-over is happening. This stock can be eliminated by
tools like SMED.
3
cost recovery, transfer pricing, and the separation of direct from
indirect costs. This, supposedly, precluded "anticipating
income" or "declaring dividends out of capital". It is one of the
intangible benefits of Lean and the TPS that process times
shorten and stock levels decline to the point where the
importance of this activity is hugely reduced and therefore
effort, especially managerial, to achieve it can be minimised.
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potential to skew inventory value, UK GAAP and IAS have
effectively banned LIFO inventory accounting.
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Below is an example of a very simple supply chain for a
single product, where raw material is procured from vendors,
transformed into finished goods in a single step, and then
transported to distribution centers, and ultimately, customers.
Realistic supply chains have multiple end products with shared
components, facilities and capacities. The flow of materials is
not always along an arborescent network, various modes of
transportation may be considered, and the bill of materials for
the end items may be both deep and large.
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Unlike commercial manufacturing supplies, services such
as clinical supplies planning are very dynamic and can often
have last minute changes. Availability of patient kit when
patient arrives at investigator site is very important for clinical
trial success. This results in overproduction of drug products to
take care of last minute change in demand. R&D manufacturing
is very expensive and overproduction of patient kits adds
significant cost to the total cost of clinical trials. An integrated
supply chain can reduce the overproduction of drug products by
efficient demand management, planning, and inventory
management.
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organization---there were as many plans as businesses.
Clearly, there is a need for a mechanism through which these
different functions can be integrated together. Supply chain
management is a strategy through which such integration can
be achieved.
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essence, Supply Chain Management integrates supply and
demand management within and across companies.
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from raw materials suppliers through factories and warehouses
to the end customer.”
2. SIEMENS
SIEMENS is one of the world's largest companies and Europe's
largest engineering firm. Siemens has six major business
divisions: Communication and Information; Automation and
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Control; Power; Transportation; Medical; and Lighting.
Siemens' international headquarters are located in Berlin and
Munich, Germany. Siemens AG is listed on the Frankfurt Stock
Exchange, and has been listed on the New York Stock
Exchange since March 12, 2001. Worldwide, Siemens and its
subsidiaries employ 480,000 people in 190 countries and
reported global sales of €87.325 billion in fiscal year 2006
HISTORY
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In 1881, a Siemens AC Alternator driven by a watermill was
used to power the world's first electric street lighting in the town
of Godalming, United Kingdom. The company continued to
grow and diversified into electric trains and light bulbs. In 1890,
the founder retired and left the company to his brother Carl and
sons Arnold and Wilhelm. Siemens & Halske (S&H) was
incorporated in 1897.
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In the 1950s and from their new base in Bavaria, S&H started
to manufacture computers, semiconductor devices, laundry
machines, and pacemakers. Siemens AG was incorporated in
1966. The company's first digital telephone exchange was
produced in 1980. In 1988 Siemens and GEC acquired the UK
defense and technology company Plessey. Plessey's holdings
were split, and Siemens took over the avionics, radar and traffic
control businesses — as Siemens Plessey.
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In 2004, Siemens took over the mantle of official Formula One
timekeeper, replacing TAG Heuer.
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Westinghouse Competition in maths, science, and technology,
which annually grants scholarships up to US$100,000 to both
individual and team entrants. According to the foundation
website, Siemens awards a total of nearly US$2 million in
scholarship money every year.
KCR
Novartis
Calgary Transit
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Deutsche Bahn AG ( German rail transport company)
BBC
Indian Railways
Airtel
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Products
Siemens-Duwag U2 LRV
Siemens-Adtranz LRV
S4000 metro
Metro 5001
Eurosprinter locomotive
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Gigaset, Home entertainment products, including Gigaset M740
AV, a set-top box to receive TDT and integrate it in a domestic
network (using WLAN or cable), i.e. for home streaming media.
Hicom Trading E
Hicom 300
HiPath
MSR32R
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Radio and core products for 2G and 3G Mobile Networks
(GSM, UMTS, ...)
MAGNETOM(TM) Espree
SOMATOM(R) Definition CT
SOMATOM(R) Sensation CT
SOMATOM(R) Emotion CT
AXIOM Artis
AXIOM Sensis
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Magnetom Espree, a Tim system, open bore MRI
Sinorix(TM)
Sistore(TM)
ABB
Alcatel-Lucent
Alstom
Automated Logic
Bombardier
Cisco Systems
Computrols
Eaton
Ericsson
General Electric
Honeywell
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Johnson Controls
Lantronix
Nortel
Philips
Reliable Controls
Rockwell Automation
Samsung
Schneider Electric
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3. OBJECTIVES AND NEED OF SUPPLY CHAIN
MANAGEMENT
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Moreover, shortened product life cycles, increased
competition, and heightened expectations of customers have
forced many leading edge companies to move from physical
logistic management towards more advanced supply chain
management. Additionally, in recent years it has become clear
that many companies have reduced their manufacturing costs
as much as it is practically possible. Therefore, in many cases,
the only possible way to further reduce costs and lead times is
with effective supply chain management.
inventories,
transportation systems and
whole distribution networks
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The major objective of supply chain management is to
reduce or eliminate the buffers of inventory that exists between
originations in chain through the sharing of information on
demand and current stock levels.
2. Logistics:
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The cost of transporting materials as low as possible
consistent with safe and reliable delivery. Here the supply chain
management system enables a company to have constant
contact with its distribution team, which could consist of trucks,
trains, or any other mode of transportation. The system can
allow the company to track where the required materials are at
all times. As well, it may be cost effective to share
transportation costs with a partner company if shipments are
not large enough to fill a whole truck and this again, allows the
company to make this decision.
3. Smooth Production:
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Ensuring no sales is lost because shelves are empty.
Managing the supply chain improves a company flexibility to
respond to unforeseen changes in demand and supply.
Because of this, a company has the ability to produce goods at
lower prices and distribute them to consumers quicker then
companies without supply chain management thus increasing
the overall profit.
5. Reduction in Costs:
6. Mutual Success:
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have access to current, reliable information, obtain lower
inventory levels, cut lead times, enhance product quality,
improve forecasting accuracy and ultimately improve customer
service and overall profits. The suppliers also benefit from the
cooperative relationship through increased buyer input from
suggestions on improving the quality and costs and though
shared savings. Consumers can benefit as well through higher
quality goods provided at a lower cost.
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4. ACTIVITIES/FUNCTIONS OF SCM IN SIEMENS
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can be grouped into strategic, tactical, and operational levels of
activities.
(a) Strategic:-
Strategic network optimization, including the number,
location, and size of warehouses, distribution centers and
facilities.
(b) Tactical:-
Sourcing contracts and other purchasing decisions.
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Production decisions, including contracting, locations,
scheduling, and planning process definition.
(c) Operational:-
Daily production and distribution planning, including all
nodes in the supply chain.
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Inbound operations, including transportation from
suppliers and receiving inventory.
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This results in overproduction of drug products to take
care of last minute change in demand. R&D manufacturing is
very expensive and overproduction of patient kits adds
significant cost to the total cost of clinical trials.
Stage 1:
Complete functional independence where each business
function such as production or purchasing does its own thing in
complete isolation from other business function. For instance,
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production function seeking to optimize its unit cost of
manufacture by long production runs with out regard for build
up of finished goods inventory and advance impact it will have
on the warehousing as well as working capital.
Stage 2:
Companies recognize the need of limited integration between
adjacent functions such as distribution and inventory
management or purchasing and material control.
Stage 3:
A natural extension of stage two, leading to establishment and
implementation of end- to-end integration. A concept of linkage
and coordination is achieved.
STAGE 4:
The linkage achieved in stage three is extended upstream to
suppliers and down stream to customers. It represents true
supply chain integration. This concept is also called ‘co-
managed inventory’ (CMI).
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Inventory Decisions:
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5. INVENTORY CONTROL
MANAGEMENT
Inventory database
An important component of inventory planning involves access
to an inventory database. It is a structured framework that
contains the information needed to effectively manage all items
of inventory, from raw materials to finished goods. This
information includes the classification and amount of
inventories, demand for the items, cost to the firm for each
item, ordering costs, carrying costs and other data.
The task of inventory planning can be highly complex. At the
same time it rests on fundamental principles. In doing so we
must understand and determine the optimal lot size that has to
be ordered. The EOQ (economic order quantity) refers to the
optimal order size that will result in the lowest total of order and
carrying costs and ordering costs. By calculating the economic
order quantity the firm attempts to determine the order size that
will minimize the total inventory costs. In examination of the two
curves reveals that the carrying cost curve is linear i.e. more
the inventory held in any period, greater will be the cost of
holding it. Ordering cost curve on the other hand is different.
The ordering costs decrease with an increase in order sizes.
The point where the holding cost curve i.e. the carrying cost
curve and the ordering cost curve meet, represent the least
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total cost which is incidentally the economic order quantity or
optimum quantity.
PRODUCTIVITY
In the industries there will be a competitor who will be a low
cost producer and will have greater sales volume in that sector.
This is partly due to economies of scale, which enable fixed
costs to spread over a greater volume but more particularly to
the impact of the experience curve.
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of each other. It is now generally accepted that the need to
understand and meet customer requirements is a prerequisite
for survival. At the same time, in the search for improved cost
competitiveness, manufacturing management has been the
subject of massive renaissance. The last decade has seen the
rapid introduction of flexible manufacturing systems, of new
approaches to inventory based on materials requirement
planning (MRP) and just in time (JIT) methods, a sustained
emphasis on quality.
Equally there has been a growing recognition of the critical role
that procurement plays in creating and sustaining competitive
advantage as part of an integrated logistics process.
Inventory Flow:
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component part from a supplier and are finalized when a
manufactured or processed product is delivered to a customer.
From the initial purchase of a material or component, the
logistical process adds value. By moving inventory when and
where needed. Thus the material gains value at each step. For
a large manufacturer, logistical operations may consist of
thousands of movements, which ultimately culminate in the
delivery of the product to an industrial user, wholesaler, dealer
or customer. Similarly for a retailer, logistical operations may
commence with the procurement of products for resale and
may terminate with consumer pickup or delivery.
The significant point is that regardless of the size or type of the
enterprise, logistics is useful and requires continuous
management attention.
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Processing, including material
handling and packaging
Update activities, including
receiving and date-processing
There are two basic decisions that must be made for every item
that is maintained in inventory. These decisions have to do with
the timing of orders for the item and the size of orders for the
item.
Basic Inventory
Decisions
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Determination of the Determination of the
quantity to be ordered. timing for the orders.
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EOQ:
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which is generally the case; the original EOQ model must be
modified through the inclusion of a safe stock.
6. Independent orders- if multiple orders result in cost saving by
reducing paper work and the transportation cost, the original
EOQ model must be further modified. While this modification is
somewhat complicated, special EOQ models have been
developed to deal with it.
These assumptions have been pointed out to illustrate the
limitations of the basic EOQ model and the ways in which it can
be easily modified to compensate for them.
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commodity and the carrying cost can vary with the company’s
opportunity cost of capital. Thus the assumption that the
ordering cost and the carrying cost remains constant is faulty
and hence EOQ calculations are not correct.
3. Costly calculations: the calculation required to find out EOQ
is extremely time consuming. More elaborate formulae are
even more expensive. In many cases, the cost of estimating the
cost of possession and acquisition and calculating EOQ
exceeds the savings made by buying that quantity.
4. No formula is a substitute for common sense- sometimes the
EOQ may suggest that we order a particular commodity every
week (six-year supply) based on the assumption that we need it
at the same rate for the next six years. However we have to
order it in the quantities according to our judgment. Some items
can be ordered every week; some can be ordered monthly,
depends on how feasible it is for the firm.
5. EOQ ordering must be tempered with judgment- Sometimes
guidelines provide a conflict in ordering. Where an order
strategy conflicts with an operational goal, order strategy
restrictions should be developed to permit honoring the goal.
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material decreases significantly if a slightly larger quantity than
the originally computed EOQ is purchased. Quantity discounts,
freight rate schedules and price increases may create such
situations. These additional variables can also be included in
the formula.
Cost of carrying inventory:
Carrying material in inventory is expensive. A number of
studies indicated that the annual cost of carrying a production
inventory averaged approximately 25% of the value of the
inventory. The escalating and volatile cost of money has
escalated the annual inventory carrying cost to a figure
between 25% - 35% of the value of the inventory. The following
five elements make up this cost:
1) Opportunity cost (12% -20%)
2) Insurance cost (2% – 4%)
3) Property taxes (1% - 3%)
4) Storage costs (1%- 3%)
5) Obsolescence and deterioration (4% - 10%)
Total carrying cost (20% - 40%)
Let us briefly look into these costs:
Opportunity cost of invested funds
When a firm uses money to buy production material and keeps
it in the inventory, it simply has this much less cash to spend for
other purposes. Money invested in external securities or in
productive equipment earns a return for the company. Thus it is
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logical to charge all money invested in inventory an amount
equal to that it could earn elsewhere in the company. This is
the opportunity cost associated with inventory investment.
Insurance cost
Most firms insure the assets against possible losses from fire
and other forms of damage.
Property taxes
This is levied on the assessed value of a firm’s assets, the
greater the inventory value, the greater the asset value and
consequently the higher the firm’s tax bill.
Storage costs
The warehouse is depreciated every year over the length of its
life. This cost can be charged against the inventory occupying
the space.
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Generally speaking, this group of carrying costs rises and falls
nearly proportionately to the rise and fall of the inventory level.
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called buffer stock. The absence of inventory is called a
shortage.
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2. Total Fixed Costs: The sum of all costs required to
produce the first unit of a product. This amount does not
vary as production increases or decreases, until new
capital expenditures are needed.
3. Variable Unit Cost: Costs that vary directly with the
production of one additional unit.
Total Variable Cost The product of expected unit sales and
variable unit cost, i.e., expected unit sales times the variable
unit cost.
4. Forecasted Net Profit: Total revenue minus total cost.
Enter Zero (0) if you wish to find out the number of units
that must be sold in order to produce a profit of zero (but
will recover all associated costs)
Break-Even Point in siemens: Number of units that must be
sold in order to produce a profit of zero (but will recover all
associated costs). In other words, the break-even point is the
point at which your product stops costing you money to
produce and sell, and starts to generate a profit for your
company.
where:
Q = Break-even Point, i.e., Units of production (Q),
FC = Fixed Costs,
VC = Variable Costs per Unit
UP = Unit Price
Therefore,
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Break-Even Point Q = Fixed Cost / (Unit Price - Variable Unit
Cost)
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Normal Inventory
As it sounds, this type of inventory item will be used for the
majority of your parts. It will correctly track the inventory
received and sold on a first in first out basis, will handle cost of
sales, and will warn you when you're out of stock.
Non-Inventory Type
This is used for selling things that are not really inventory items.
For example, you could be selling warranty, but because you
don't have warranty in a box to sell, and you'll never run out of
stock, you won't need to keep inventory control on it. As well,
there is no cost of sale adjustments with non-stock items. The
system will not calculate how much you paid for the item, and
therefore will not try to remove that value from inventory in the
general ledger. If you are selling something that does cost you
money, you will have to handle these details manually.
Labor Parts
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reports showing who did what work. As well, the system will
optionally ask for a comment to explain what was done so that
the description of the service work can be printed on the
invoice.
Note too that you can optionally keep track of how much time
was spent and how much time was billed for on a per job basis.
At the end of the month, you can then print technician
productivity reports to compare total time spent compared to
billable hours. In the automotive industry, some mechanics can
do the work faster than is what is billed because the billing is
based on industry standards.
Consignment Items
Consignments can be used to keep track of inventory that you
don't own, but at the time you sell it, you must pay for it. You'll
be able to generate several reports, including a list of inventory
that is on consignment but not sold and a list of inventory sold
on consignment, but not yet paid for.
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store for a negotiated period of time. However, you do own the
inventory and do have to pay for it sometime.
Tire Inventory
Windward System Five has the ability to sort and categorize
tires by their size, aspect ratio and rim size. In addition, you will
also be able to search for the tires by just entering in some of
the search criteria and having the system bring up a window of
all matches.
When the list brings up a list of tires that can all fit the vehicle,
the system can sort the list to show the items with the highest
quantity in stock at the top of the list and the items that are out
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of stock at the bottom of the list. This will help you sell what you
actually have to sell instead of creating special orders.
Product Inventory
Products are items such as vehicles that you might service or
repair after selling them to the customer. That is, they are an
item in the database that can be sold, and when sold, are
automatically added to the customer's list of products that can
be worked on.
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Serialized Inventory
Those items that need to be tracked by their serial numbers
can be marked as serialized inventory. For example, fridges,
stoves, computers, and chainsaws might all be serialized. Note
that if you plan on servicing these items in the future and
keeping track of all work you do on them, they should be
entered as products instead of serial numbers.
TYPES OF INVENTORY
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The specific commodity inventory is a physical count of all
items under the same cognizance symbol, FSC, or that
support the same operational function, such as- boat
spares, electron tubes, boiler tubes, or fire brick. This
inventory is taken under the same conditions as a bulkhead- to-
bulkhead inventory; however, prior knowledge of specific
stock numbers and item location is required to conduct a
specific commodity inventory
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Your inventory can be valued on a LIFO, FIFO or Average cost
basis. You can choose to use parts explosions, serialized
inventory, parts allocations, vendors, warehouses and an audit
trail. The system can also track the quantity sold for each item
for the last 12 months and, using this data, provides a sales
analysis report to help you better manage your stock. Financing
is aided by the serialized aged report that shows which
serialized items have been in your inventory the longest and
how much you have outstanding. Pricing can be standardized
by rounding to a given factor or by being set to a specific suffix.
With the Below Minimum report, reordering stock is automatic
and accurate. Inventory Control is a stand–alone module that
can also be integrated with Purchase Orders, Point of Sale,
Billing/Order Entry, Job Cost, Time Billing and Quick Sale.
21–character alphanumeric item number field
Lookup on item number, item description (21 characters) and
group (15 character) fields
Tracks serialized items
Allows for superseded, preceded and substitute items
Unlimited additional descriptions can be added to items
Handles markup and gross profit cost basis
Can automatically update item pricing and discounts
Handles core pricing
Produces a re–order report based on minimum stock quantities
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Tracks unlimited vendors per item and recommends a ‘best’
vendor
Tracks allocations including explosion allocations
Up to 254 discounts per item, including quantity break
discounts
Unit conversions can be defined for each item for both buying
and selling quantities
Allows for warehouse transfers and other quantity adjustments
Set up special sale dates for item discounting
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(one way);
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disassembly of returned products. The simulation results
indicate that the method indeed leads to (nearly) DCF optimal
inventory strategies.
Packaging
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systematization among the few methods used and discusses
how these can be used to build a systematic and
multifunctional evaluation model in order to utilize the
information from different studies to build a knowledge base for
the future
Vendor-Managed Inventory
Siemens is a leading global manufacturer, focused on
delivering operational services to high-tech companies, needed
to take advantage of vendor-managed inventory (VMI)
postponement and optimal fulfillment solutions to stay
competitive in its low-margin manufacturing marketplace. Its
objective was to find ways to reduce inventory redundancy,
improve customer responsiveness by reduced cycle times and
simplify supplier management and procurement administration.
The manufacturer also needed to augment existing
infrastructure, while reducing investments in additional
personnel, facilities and systems Vendor Managed Inventory
(VMI)
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Move your inventory in and out of our distribution centers and
manage demand planning. We can store and stage product for
replenishment at our often freeing or limited store rooms. We
provide forecast visibility, comparing actual demand against
DC-on-hand, store-on-hand and in-transit inventory. When
store or inventory falls below pre-determined levels, auto alerts
are sent to you and your supplier to prompt replenishment.
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Vendor Managed Inventory by Kuehne + Nagel supports the
efficient flow of materials into the market. Working closely with
you and your suppliers, we automate the forecast management
process with Web-based software that enables the flow of
supply to more accurately mirror store – and even shelf-level –
demand.
Move your inventory in and out of our distribution centers and
manage demand planning with Web-based applications. We
can store and stage product for replenishment at our DCs,
often freeing up your own DC space or limited store rooms. We
provide forecast visibility, comparing actual demand against
DC-on-hand, store-on-hand and in-transit inventory. When
store or DC inventory falls below pre-determined levels, auto
alerts are sent to you and your supplier to prompt
replenishment.
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Perform value-added services, allowing you to more efficiently
manage the flow of goods into manufacturing or directly to
market.
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6. WAREHOUSE
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a database driven computer program. The WMS is used by
logistics personnel to improve the efficiency of the warehouse
by directing putaways and to maintain accurate inventory by
recording warehouse transactions.
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the top parts. In this way the same building is used both as a
retail store and a warehouse.
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7. TRANSPORTATION
Air transport
Cable transport
Conveyor transport
Human-powered transport
Hybrid transport
Rail transport
Ship transport
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Space transport
Sustainable transportation
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Other environmental impacts of transport systems include
traffic congestion and automobile-oriented urban sprawl, which
can consume natural habitat and agricultural lands.
Toxic runoff from roads and parking lots that can also pollute
water supplies and aquatic ecosystems.
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energy using fuel cells, which may eventually be two to five
times as efficient as the internal combustion engines currently
used in most vehicles. Another effective method is to
streamline ground vehicles, which spend up to 75% of their
energy on air-resistance, and to reduce their weight.
Regenerative braking is possible in all electric vehicles and
recaptures the energy normally lost to braking, and is becoming
common in rail vehicles. In internal combustion automobiles
and buses, regenerative braking is not possible, unless electric
vehicle components are also a part of the powertrain, these are
called hybrid electric vehicles.
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8. DISTRIBUTION
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Who should control the channel (referred to as the channel
captain)?
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Selling direct, such as via mail order, Internet and telephone
sales
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for the service sector. Outlets such as estate agencies and
building society offices are crowding out traditional grocers from
major shopping areas..
CHANNEL MEMBERS
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as effectively applied to each subsidiary's, or each
department's, 'internal' customers.
CHANNEL MANAGEMENT
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the producer is large enough, the use of intermediaries
(particularly at the agent and wholesaler level) can sometimes
cost more than going direct.
Channel membership
Channel motivation
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Good Distribution Practice or GDP deals with the guidelines
for the proper distribution of medicinal products for human use.
GDP is a quality warranty system, which includes requirements
for purchase, receiving, storage and export of drugs, intended
for human consumption.
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9. PACKAGING AND LABELLING
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controlled atmospheres are also maintained in some food
packages. Keeping the contents clean, fresh, and safe for the
intended shelf life is a primary function.
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Packages can be engineered to help reduce the risks of
package pilferage: Some package constructions are more
resistant to pilferage and some have pilfer indicating seals.
Packages may include authentication seals to help indicate that
the package and contents are not counterfeit. Packages also
can include anti-theft devices, such as dye-packs, RFID tags,
or electronic article surveillance tags, that can be activated or
detected by devices at exit points and require specialized tools
to deactivate. Using packaging in this way is a means of loss
prevention.
Packaging types
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package form used to ship, store, and handle the product or
inner packages. Some identify a consumer package as one
which is directed toward a consumer or household.
Primary packaging
Bags-In-Boxes
Beverage can
Wine box
Bottles
Blister packs
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Carton
Cushioning
Envelopes
Plastic bags
Plastic bottles
Skin pack
Tin can
Wrappers
Secondary packaging
Boxes
Cartons
Shrink wrap
Tertiary Packaging
Bales
Barrel
Crate
Container
edge protector
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Insulated shipping container
Pallets
Slip Sheet
Stretch wrap
Packaging machines
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High speed conveyor with bar code scanner for sorting
transport packages
Cartoning Machines
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Form, Fill and Seal Machines
Wrapping Machines
Converting Machines
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10. CONCLUSION
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FINALLY I CONCLUDE THAT SIEMENS HAVE THE BEST
INVENTORY CONTROL MEASURES THEY HAVE BACK UP
FOR EVERYTHING I LEARNT
JUST IN TIME
PRICE FIXING
COST ACCOUNTING
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VALUE ENGINEERING
STANDARDIZATION
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12. BIBLIOGRAPHY
WWW.GOOGLE.COM
WWW.WIKIPEDIA.COM
WWW.SIEMENS.CO.IN
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