Professional Documents
Culture Documents
*HR includes
Specialists –system analyst, programmers & computer operators
End users -Anyone who uses an information
Hard Ware Resources
Machines-computers, video monitors, magnetic disc drivers, printers etc
Media -Floppy discs, magnetic ape, etc
*Software Resources
• Programmes -operating system programmes, spreadsheet programmes, word processing
programs, SCM & ERP Solutions etc
• Procedures -data entry procedures, data processing procedures, error correction procedures ,
procedure for interface of LIS with MIS
*Data resources
• It includes product descriptions, customer records, inventory data bases etc.
1. Modules the important areas of logistics were LIS could be applied they are
-order entry
-order processing
-transportation & shipping
-Distribution operation
-Inventory mgt
2. Data files- This includes data & information base to support the communications activities. The
major database structures that are required for supporting distribution communication are;
-order file
-Inventory & warehouse file
-Accounts receivable
-Distribution requirement file
3. Management & data entry activities
-this is nothing but the data must be entered in to the system relating to any specific area, or the mg
must come up with a decision with regard to any aspects relating to logistics. The general instances of
data entry include :
-order entry
-Order inquiry
-Forecast development & reconciliation
-Freight rating
-Warehouse receipts & adjustments
4. Reports
They include numerous summary, details & exception l in the form of reports relating to # of areas in
logistics.
Intranet
co ordination of the information with in an org & the information s no accessible to public.
Extranet
the information with in the org is made available to the external interested parties of the org
Internet
Satellite Communication
Procurement function
Sourcing
Procurement- is the process by which companies acquire raw materials, components, products,
services and other resources from suppliers to execute their operations
Price/cost analysis carrying out ongoing analysis of price & cost trends
-JIT just in time production whenever need arises for a particular material placing orders to the
supplier.
-Information systems replacing paper work
-Shift of R& D to suppliers -When R&D conducted internally by firm & result given to the
vendors the firm won get an immediate response from them. Shift to suppliers sets new trend
towards belongingness & more involvement of suppliers, leading to strong long term supplier
relationship
-Outsourcing to third parties -procurement of raw material function is been assigned to 3rd
parties who are specialized in it E.g.: Third party logistics (3PL)
Quality of suppliers supplier mgt often emphasizes TQM of goods supplied by a vendor to
meet the buyers/ companies expectations
Supplier responsibilities
-making the supply of goods as per quality specification in a timely & reliable manner
-quality inspection b4 delivery to the buyer by SPC ( statistical process control) or any other control
tools with appropriate procedures to ensure control & consistence
-small & continuous supply
- Zero defect delivery in terms of right assortment, correct documentation, right qty etc
Supplier Categories
-Approved suppliers
those suppliers who are currently dealt with & have a record of meeting certain minimal stands of
acceptance
-Qualified suppliers
-firms that produce goods satisfactorily & are qualified by the buyers firm’s audit teams. Delivery &
responsiveness are excellent. Typically the supplier has the capability to produce excellent goods &
ship tem at a near perfect quality level with few minor exceptions
-Certified Suppliers
All goods are shipped 100% fit for use each & every time. This is the level attained when all the
previous criteria are successfully met. The suppliers in this category are usually given a special
recognition award.
Containerization
A freight container is rectangular in shape, weather proof, used for transporting & storing a number of
unit loads, packages /bulk materials. It confines & protects the contents from loss/damage, it can be
separated from the means of transport, handled as a unit load & transshipped with out rehandling the
contents
Advantages of container
-The risk of damage to the goods during the transportation is reduced
-The cargo arrive at a better condition & this creates better impression about the exporter in the mind
of importer. The perception of delivery of goods in good condition enables an exporter to gain an
edge over other competitors
-there are no damages due to mishandling of the cargo at terminal ports in case of transshipment
Classification of containers
By raw material -of what the container is made of ,say it may be steel, aluminum, GRP glass
fiber reinforced plywood etc.
By size- The ISO has worked a grt deal on standardization on container dimension &
published recommendations. Containers are defined in multiples of 10 ft ie 20 ft ,30 ft or 40 ft.
Presently 20 ft -40 ft containers are used pre dominantly & around 65-70 % of world fleet consist of
20 ft containers.
By use
-the general cargo container to carry all types of general cargo both solid /liquid .This type of
containers it doesn’t require temperature control also called Dry cargo Container
Thermal container
mainly designed for cargo requiring refrigerated/insulated storage They are classified in to 3 they are;
-Refrigerated containers -for food stuff like meat , fish, vegetables etc
-Insulated containers- for fruits /vegetables ,here dry ice is used as cooling agent instead of any
devices for cooling /heating.
-ventilated container- allows for the passage of air by means of apertures on sides of containers
.Cargos like fruits ,veg, which require respiration, tea coffee which may lose moisture etc are carried in
this type of containers.
Advancement In case of refrigerated containers
*In the controlled atmosphere computerized controller, the controller maintains ideal atmosphere by
sensing the products consumption of oxygen & production of carbon dioxide.
*In modified atmosphere system The desired atmosphere is created in container when it is stuffed
,the container is then sealed to prevent changes in the original atmosphere due to ventilation
Special containers
-bulk containers - carriage of dry powders & gram substances in bulk
-Half height containers – is designed for carriage of heavy dense cargo’s such as steel, pipes & tubes
-Tank containers - for specific product/range of products
-Open sided containers- these containers are designed to accommodate specific commodities such as
plywood, perishable commodities & live stock.
Dry cargo container -is a box type with a door at one end ( std model)
-open top container- no roof its open on the top of the container, polithene lined tarpaulin to cover the
container
-Flat container -it has its base only cargo of odd size & weight are put on to this container
-Bulk container -fitted with manholes to facilitate loading & unloading of bulk cargo through gravity
Garment container -filled with hangers to help loading large # of garments on hangers in to the
containers
-Liquid containers -usually made of stainless steel & have manholes for loading & unloading liquid
cargo.
-Gas containers - are containers with fixtures & fittings for filling & emptying liquid gas.
Other containers
-Insulated containers
-Fruit containers -they are also insulated containers with internal dimensions slightly longer
-Refrigerated containers -these containers are fitted with their own refrigeration units which require an
electrical supply for their operation
-Hanger containers -mainly for garments with inbuilt immovable beams in the upper part.
-Bin containers -These containers have no doors & are ideal for heavy dense cargo such as steel, pipes
etc.
Constraints in containerization
-Capital intensive
-The container in itself is a high capacity carrying unit & in consequence, exporters with limited trade
are unable to fill the container capacity & there by cannot take full advantage of an economical rate
-The container owning company has a complex task of monitoring & ensuring full utilization of such
equipment
-in some countries restrictions exist regarding internal movement of containers especially 40 footer
Benefits to trade
-No intermediate handling at terminal port, transshipment points
-low risk of cargo damage & pilferage
-Elimination of intermediate handling enables substantial labor savings
-less packing needed for containerized shipments
-Cargo arrives at better conditions
-Transit are much faster due to faster vessels, quicker cargo handling etc
-encourages trade development & provides quicker payment of export invoices
-Container vessels attain much improved utilization & are generally more productive
-Faster transit encourages many importers to hold reduced stock/spares
-Stimulates trade expansion through much improved service standard
-More reliable transit
-Emergence of new market
-Overall total quality service
In short containerization helps in saving time & cost while handling, loading, discharging, &
transporting .Cargoes are consolidated & made as huge a unit possible like (5 tons, 20 tones & 40 tons
etc). So that at every point of handling of the unit, time is saved hence cost is saved.
Transportation
Participants in Transportation Decision
1. The shipper (originator)
2. The consignee (destination party/receiver)
3. The carrier
4. The government
5. The public
The government
-desire a stable & efficient transportation environment to sustain economic growth
-Expects efficient movement of products to markets through out the country there by ensuring product
availability at a reasonable cost
-govt involvement may take the form of regulation, promotion/ownership
-may regulate carriers by restricting the markets that they can serve by setting the prices they can
charge
-May support carriers by providing R&D, by providing right of way such as roadways /air traffic
control systems.
-Govt control can have a major impact on the economic success of region, industries/firms
The public
-concerned with the transportation accessibility, expense, & effectiveness as well as environmental &
safety stds
-determines the need for transportation by demanding goods frm around the world at reasonable prices
-Considers trade off btw the cost & environmental & safety stds
Contract carriers
-contract carrier is a hire for carrier that does not serve general public but rather serves one/limited #
of shippers with whom it is under specific contract.
-The contract contains terms pertaining to the carrier’s rates, liability, type of service *& equipment
-it provides specialized type of service to the shipper, it can tailor its services to meet specific shippers
needs by utilizing special equipment & arranging special pick ups & deliveries
-A contract carriers rate are lower than common carrier
-Contract carrier is available to a shipper with whom the carrier has signed the contract
Pvt carrier
-it is essentially a firms own carrier
-the basic reason for a firm to enter in to pvt transportation is cost & service
-other advantages like increase in control & flexibility result in lower inventory levels, greater
customer satisfaction & greater efficiency at loading & unloading docks.
-Its major drawback is huge capital investment & problems in labor & mgt.
Exempt carrier
-the exempt carrier is a for hire exempt from economic regulation regarding rates & services
-the law of market place determine the rates & services
-An exempt carrier gains this status by the commodity it holds/or by nature of its operations
-basically used for bulk movement like coal, grains etc.
Modes of Transportation
1. Rail (train)
Characteristic features
-It has a capability to transport large shipments economically with more speed/frequency
-rail road operations incur high fixed costs because of expensive equipment ,right of way (railways
maintain their own track) switching yards & terminals
-the replacement of system by diesel power & further by electrification has considerably reduced the
VC associated with this mode of transportation
-bulk industries & heavy manufacturing use railways more frequently
-Railways can improve the effectiveness of transportation by having alliances with other modes.
Ability to pay principle –differential rates are charged to different commodities ie for
essential commodities like pulses, grains, etc & heavy plant & machinery etc.
Speed- freight carried by faster train will be naturally higher than those carried by slower train.
Distance- longer the distance he higher will be the freight cost & visa versa
Liability of risk- freight in transit risks carried by the railways risk will be more than owners
risk
Frequency of service- frequency of services affects the forces of demand & supply of the
services & will have a bearing on the cost
Types of wagon- special rates are applicable for different types of special wagons e.g.closed,
refrigerated, shock absorbing etc.
Natures of commodity (bulk & qty) railways do give considerations for bulk booking of
freights. Of late the railways are offering advance booking of space by pvt parties.
Nature of commodity - liability to damage a premium rate is attached to the freight of a
highly damage prone commodity
Nature of commodity liability to inflammation/explosion-hazardous goods would also attract
special freight rates
Nature of commodity- size & packing of consignment railways have stipulated packing
conditions for various items of goods & also dimensions & the freight charges applicable there to.
Limitations
-increase cost to replace equipment, maintenance ,driver & dock wages
-motor carriers being more labor intensive causes increased wages to be major concern.
3. Water
-this mode helps in moving extremely large shipments
-fixed cost is moderate compared to rail & roads right of way is developed & maintained by the govt
-Typically bulk commodities such as mining ,chemicals, cement & certain selected agricultural
products are transported by ocean going vessels
Limitations
-speed & limited range of operations
-unless the point of origin & destination of movement are adjacent to a waterway it needs to be
supplemented by rail/trucks
4. Pipelines
-Operate on 24 hr basis & are limited only by commodity change over & maintainance
-unlike other modes there is no empty container/vehicle that must be returned
-Pipeline highest fixed cost cause of right of way, construction & maintenance requirements
-pipelines are not labor intensive, the variable operating cost is extremely low once the pipeline is
constructed.
Limitation
-This mode are not flexible & and are limited with respect to commodities that can be transported
through that mode
-the initial cost of laying the pipeline are very high
-prone to sabotage in distributed area.
5. Ropeways
The most important technical & economic advantage of a ropeway system as a mode of transport is
that it can connect 2 places with large differential of altitude without much difficulty.
The rope way is an ideal means of transportation in the following cases
-hilly otherwise inaccessible areas
-the long routes with streams & deep valley
-commodities capable of transportation in ropeway buckets
-short haulage say less than 50 km
Disadvantage
-heavy initial investment
-Limitation as to size & quantity
6. Air
- High speed
- Highly costly/expensive
- It is limited by the load size & air craft availability
- VC high as result of fuel cost maintenance etc.
- Fixed cost low since airways & air ports are generally developed & maintained by public funds
Package carriers
-Very popular in US Postal service, transportation companies like fed ex & UPS carry out small
packages ranging from letters to shipments weighing abt 150 pounds. Package carriers use air truck &
rail to transport time critical smaller packages
-Very expensive
-Rapid & reliable delivery also provide value added services that allow shippers to speed inventory
flow & track order status
-Package carrier are preferred mode of transportation for e- business like Amazon.com, Dell etc.
Truck
TL Truck Load- full charge for operation irrespective of the qty carried ,rates vary with distance
traveled.
LTL Less Than Truck Load -charge based on qty loaded & distance traveled
-door to door delivery
-Shorter delivery time
-No transfer btw pick up & delivery
-Good in case of transfer btw manufacturing facilities & warehouses/btw suppliers & manufacturing
plant.
Transportation Network
#1 Direct shipment network
Advantages
-Elimination of warehousing & related infrastructural facilities
-widely used by cement, fertilizer & petroleum co’ s for those customers which are very near to their
plant.
Limitation
-this method may prove to be highly costly when the qty to be shipped is not equal to the load
capacity of the vehicle
-It is also not suitable to ensure better customer service in the case of replenishment of lot sizes.
#2 Direct shipments with milk runs ,companies which follow this network design is Frito lays,
Toyota etc
Advantages
-Milk runs lowers transportation cost by consolidating shipments to multiple stores on a single tuck
-This method prove to be less costly as the inventories accumulated to fill the load capacity of
vehicle/truck
-Better customer service
-No investment in warehousing & related infrastructure facilities
Limitation
-Only suitable in case of cluster of customers/plant concentrated in & around near by places.
#3 Direct shipment Via DC -the company which follows this network is Wal-Mart
Advantages
-lower plant to warehouse transportation cost by way of bulk transportation
-consolidation ensures better service by lowering inventory requirement at customers end resulting
in to better return to them
-cross docking helps in saving handling cost ,storage cost & CD is good for products having large
,predictable demand
Disadvantages
-higher logistical cost due to increased inventory cost & warehousing infrastructure & facility costs to
the company.
#4 Shipping Via DC using milk runs -company to follow this network includes Pepsi Co, Coca cola
-soft drinks
Advantages
-lower plant to warehouse & ware house to customer transportation costs
-milk runs lowers transportation cost by consolidating shipments to multiple stores on a single tuck
Disadvantages
-Increase in inventory & warehousing costs along with complexity of co ordination if cross docking
is also entertained.
Inventory mgt
Stock valuation method
The two important valuation methods used for materials issue are
1First in first Out( FIFO)
2Last in First Out( LIFO)
1First in First Out- under this method materials are used in which they are received in stores. In other
words, materials received first will be issued first as a result closing stock those remaining will be
valued at latest purchase prices & will represents current conditions as far as possible.
Advantages
-Simple to understand & easy to operate
-Materials cost represent old (earlier )price which should be charged to a product
-When prices are falling this method will give better result
Disadvantages
- When the prices rise ,it will give low charge to production so that product cost will be under
stated which will invite many problems which effects the profitability of the company etc.
- If the price fluctuates frequently this method may lead to clerical error
Advantages-
- material cost will represent current prices as far as possible
- In times of rising prices it will show high charge to production there by increasing cost of
production/product & in turn the margin of the product.
- This method will iron out the fluctuations in prices, over a period of changing price levels.
Disadvantages
-When prices are falling it will lead to low charge to production /product in turn less margin earned
-Closing stock is valued at a cost which doesn’t represent current conditions .As a result there will be
understatement of current assets In the balance sheet
-Frequent fluctuations in prices may lead to clerical error