Topic 8 - Agenda

Physical distribution and logistics management Objectives Components

Supply chain management

Efficient consumer response

Three objectives of Distribution Management

Customer Service Reduce cycle time Reducing Total Distribution Costs
.

Physical Distribution

Logistics management
Order Processing

Transportation

Inventory Management

Warehousing

Material s Handling

Physical Distribution

Logistics management
Order Processing

3 phases to Order Processing

Order Entry

Order Handling

Order Delivery
.

Physical Distribution

Logistics management

Inventory Management

Inventory Management
Order lead time

Usage rate Stock-out

Safety stock

Physical Distribution

Logistics management

Material s Handling

Materials handling
Electronic data interchange Unit loading Containerisation Material requirements planning Just in time (JIT)
.

UPC number machine-readable bar code readable 12-digit UPC number

first six digits of the UPC number - 6 3 9 3 8 2 manufacturer identification number

next five digits - 0 0 0 3 9 item number
+ check digit

Materials handling
Electronic data interchange Unit loading Containerisation Material requirements planning Just in time (JIT)
.

The meaning of MRP (Materials Requirements Planning

Supply of products and services The operations resources

MRP Deciding the volume and timing of materials flow in dependent demand conditions

Demand for products and services The operations customers

What is required to run MRP?

Customer orders
Master production schedule

Forecast demand

Bills of materials

Materials requirements planning

Inventory records

Purchase orders

Materials plans

Works orders

The meaning of just-in-time

Traditional approach
Focus on high capacity utilisation More stoppages because of problems

JIT approach
Focus on producing only when needed

Fewer stoppages

More production at each stage

High inventory reduces the chance of the problems being exposed and solved

Lower capacity utilization, but

Low inventory so problems are exposed and solved

Extra production goes into inventory because of continuing stoppages at earlier stages

No surplus production goes into inventory

Physical Distribution

Logistics management

Warehousing

Warehousing functions
Supply side and demand side

In
Receiving goods

Out
Picking goods

Identifying Goods
Sorting Goods

Putting together shipments (orders) Dispatching the shipment

Dispatching goods to storage Holding goods

.

Recalling goods

Physical Distribution

Logistics management

Transportation

Physical distribution management

Operations performance dimension Delivery speed Reliability Quality Cost Route flexibility Mode of transport Road 2 2 2 3 1 Rail 3 3 3 4 2 Air 1 4 4 5 3 Water 5 5 5 2 4 Pipeline 4 1 1 1 5

1 - best performance, 5 - worst performance

Efficient consumer response

A form of strategic alliance

Efficient Consumer Response

P&G value pricing - lower list price no discounts and promotions etc

Traditional supermarkets having a tough time (costs and margin) Efficient Consumer Response
Focus from gross to net (retailer and manufacturer)
Efficient assortment Efficient replenishment Efficient promotion Efficient product introduction Activity based cost accounting Economic value added

Structural and organisational implementation

8 Agenda
Physical distribution and logistics management Objectives Components

Supply chain management

Efficient consumer response