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line Proliferation *Inventory carrying cost *inventory as percentage assets Rationale for carrying inventory Logistic Channel-indicates a number of points in logistic channel at which accountable amounts of inventory may be found. Potential Inventory Locations Supplier 1 Supplier 2 Supplier 3 Supplier 4
*Seasonal Demands *Customer service *Stable Employment *Goods for resale 4 Inventory Carrying Cost Capital Cost- Interest or opportunity cost focuses upon what having capital tied up in inventory cost company. Storage Space cost- include handling cost associated with moving products into and out inventory and storage cost such as rent heating and lighting. Service Cost-includes insurance and taxes Inventory Risk Cost- reflects the very real possibility that inventory peso value may decline for reason largely beyond capital control 2 Expected Stock out Cost- the cost of not having product available when a customer demands or needs it. Safety stock- companies facing a stock out possibility will allow for safety stock to protect against uncertainties in demand or lead time necessary for supply. Stock out cost- for company dealing with raw materials or supplies for product line a stock out may mean wholly or partially shutting down operation. 7 Functional Types of Inventory Cycle Stock- the portion of a company s inventory that depleted through normal sale or use and replenished through the routine ordering process. The amount of product the firm regularly consumes during normal business activity. In-process Stock- work in process, goods in process or semi finished goods. Because of the time necessary to manufacture goods and goods in transit. Safety Stock-which protects against uncertainties in demand rate lead time length or both. Firms hold safety stock in addition to cycle stock for the purpose of protecting against such uncertainties and their consequences. Seasonal Stock which firms accumulates and holds in advance of the season during which the firm will need it. Promotional Sock-held so that a firms logistic system may respond quickly and effectively to a marketing promotional or price deal that a firm intending to pull a product through the distribution channel offers to the customers. Speculative stock- most commonly associated with materials needed by companies involved in manufacturing or assembly operations this inventory protects against price increases or constrains availability Dead Stock-has no value for business purposes, firms will ship dead stock to the location where it demands existed.
Warehouse Plant/Manufacturing Plant/Warehouse Distribution Center 1 Retailer 1 Distribution Center 2 Distribution Center 3 Retailer 4
6 Physical supply inventory Purchase economies-firms will buy raw materials in large quantities because of available price discount. (Discount versus storage cost) Transportation Savings-firms make shipments in multiple carloads or even trainloads at even lower rates per hundredweights. Safety Stocks- or buffer stock is use to prevent an emergency production shutdown. Speculative Purchase- hedging against future price increase, strikes, changing political policies, delayed deliveries rising or falling interest rates or currency fluctuation in the world market. Seasonal Supply-agricultural products such as wheat or grains are good example of items available only at certain times of the year. Maintenance of supply sources- large manufacturing firms very often use small vendors or suppliers who manufacture subassemblies or semi finished goods for large firm even when the firm can produce items itself. 6 Physical Distribution Inventories- second inventory type consist principally of finished goods awaiting shipment to customers. *Transportation Savings *Production savings
4 EVALUATING THE EFFECTIVENESS OF CAOMPANY S APPROACH TO INVENTORY MANAGEMENT *Customers Satisfaction *Backordering/expediting *inventory turn-over *ratio to inventory to sales CHAPTER V-warehousing decision Warehouse- storage of goods, includes a wide spectrum of facilities and locations that provide warehousing Creating Time Utility- warehousing increases the utility of goods by broadening their time availability to prospective customer. 5 The role of the warehouse in logistic system 1. Transportation consolidation- by moving the LTL and LCL amounts relatively short distances to or from a warehouse, warehousing can allow firm to consolidate smaller shipment into large shipment with significant transportation savings 2. Product Mixing- companies frequently turn out a product line that contains thousand of different product, if we consider color, size, shape, and other various variations. 3. Cross-Docking is an operation that facilitates the product mixing function. 4. Service service may also be a factor for physical supply warehouse. 5. Contingencies- warehouse function is protection against contingencies such as transportation delays, 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 1. Receiving goods into the warehouse from the transport network 2. Transferring goods into a particular location in the warehouse 3. Selecting particular combination of goods for customer orders of raw material production 4. Loading goods for shipping to the customer or to the production line. *Storage-is the holding of goods Seasonal demand
Variable Cost Fixed Cost 7 Firms characteristic affecting the ownership decision Firms charac. Throughput volume Seasonal demand Dense market area Special physical control Private high stable high yes Public low fluctuating low no low low no
Customer service requirements high Security requirements Multiple use needs high yes
2 Rationale for public warehousing Limited capital investment-most significance reason for using public warehousing is financial; it requires no or limited capital investment Flexibility- a firm can rent space for thirty-day periods enabling the firm to react quickly to movements in demand or changes in quality of transportation services. 2 Public Warehousing Services Bonded warehousing- the user is usually interested in delaying the payment of taxes or tariffs, avoiding their payment altogether. Field Warehousing- firms request receipt for goods stored in public warehouse under public warehouse manager s supervision in a private warehouse. 7 Public warehousing rates Per time period- peso per square foot per time period Value- a p.w has a certain legally defined liability for stored goods. Volume and regularity- while cost of using a public warehouse is generally variable the warehouse company itself will experience fixed cost. Fragility- warehouse rate must consider commodities general susceptibility to damage because of the risk to warehouse company.
Damage to other goods- in a public warehouse setting incompatible stored goods always run the risk of damaging each other Weight Density- warehouse generally sets rates in terms of space, usually square foot. Services- public warehouse is a comprehensive and sophisticated industry today, willing and able to offer variety of services beyond the general storage function. 4 Factors affecting the number of warehouse 1. Need for customer service 2. Inadequate transportation 3. Favoring decentralized warehousing is small quantity buyers 4. Favoring decentralized warehousing would be instances when customers allow insufficient times before being stock out. CHAPTER VI-Material Handling and Packaging Material handling- efficient short distance movement that usually takes place within the confines of building such as plant or warehouse and between building and transportation agency 4 dimension of material handling *Movement- the movement aspects of material handling involves the conveyance of goods (raw materials, semifinished goods and finished goods)into and out storage facility as well as within such facilities * Time- the time dimension of material handling is concerned with readying goods for production or for customer filling *Quantity- the quantity issue addresses the varying usage and delivery rate of raw materials and finished goods respectively *Space- Material handling equipment consume space in the warehouse and plant. Objective of Material Handling 1. 2. 3. 4. 5. 6. Increase effective capacity Improve operating efficiency Develop effective working condition Reduce heavy labor Improved logistic service Reduce cost
Dock Seals- a cushioned frame around the dock door opening that connects the trailers to the truck Trailer restraint system- vehicle restraints prevents the trailer from drifting away from the dock during loading and unloading. Pallets- provide a base to hold individual items together. Other material handling equipment Conveyors-this system decrease handling cost increase productivity of workers and equipment Cranes Bridge cranes- are more common in physical supply warehouses or where the companies have to move. Stacker Cranes- they can function in narrow isle effective utilizing warehouse cube capacity. Other picking and storage equipment Picker-to-part- the order picker must travel to the pick location within the aisle Bin Shelving- the oldest and more basic storage system available for storing small parts. Modular Storage drawers-are cabinets and further subdivided into compartments Flow Racks-store items in cartons having uniform size and shape Order Picking Vehicle- order picking trucks and person abroad storage and retrieval (s/r) vehicles increase orderpicking rates and maximize cubic space utilization Part-to-picker- the pick location travels through an automated machine to the picker. Carousels- are shelves or bins link together through a mechanical device that stores and rotates items in order picking. Mezzanines- doubled layer storage system that utilizes a second level bin shelving modular storage cabinets above first storage levels. Types of material handling equipment-a design perspective Flexible Path- includes manual hand trucks all forklift truck and other picking equipment. Its design advantage is versatility and flexibility. More labor intensive Continuous-flow-fixed path- includes draglines and conveyors. These are usually very efficient and highly automated. Investment is high Intermittent-flow fixed path-includes cranes and monorails. With the ability to stop unneeded equipment. Equipment selection factors *physical attributes of product and packaging
Dock Equipment Forklift-a very versatile piece of equipment that can provide a very reasonable cost. Warehouse usually use forklift in conjunction with pallets Dock Bumpers- are molded rubber piece that protect the building from impact of a docking trailer Dock Levelers- level out the angle between the dock and the trailer that providing a ramp that enables the forklift to drive into the trailer safely.
*characteristic of physical facility *time requirements Role of packaging 1. Identify product and provide information 2. Improve efficiency in handling and distributing packages 3. Customer interface 4. Protect product Packaging Material 1. 2. 3. 4. Softer material Plastic Environment Recycling
Packaging Selection Physical Dimension- one factor that affects a package physical dimension is product characteristic-things such as size, shapes, and weight Material- a products physical dimension will affect a company s packaging material choice. Unitizing or palletizing- is the process of accumulating and stacking cases or other containers to form a single larger unit. CHAPTER VII-Transportation System Transportation- is actual transfer or movement of goods from one place to another creating place and time utility. Modes of transportation 1. Land Transportation- our focus will be on truck as buses and jeepneys are most often used to transfer people not freight a. Advantages of using trucks i. Convenience- provide door to door services ii. Fast- moving goods by trucks is faster that by inland waterways iii. Flexible- in terms of physical or economic feasibility compare to air and pipeline iv. Can reach even the remote area v. Can travel over public highway system b. Disadvantages of using trucks i. High cost loading and unloading small less than truckload shipment ii. Less desirable for transporting bulk goods because of comparatively small size iii. Slow due to frequent rest stop and traffic congestion iv. Unprofitable return tips 2. Railroads-is a low cost transportation for distances over 120 kilometers. a. Advantages i. Suitable for movement of bulk goods
b. Disadvantage i. Accessibility- not enough rail cars and trucks to meet demands and needs ii. At least one other mode of transport must be used iii. Management has few efforts to update equipment a. PIGGYBACK SERVICES- a flat car design to carry pre-loaded trucks 3. Pipelines- are exclusively used for the shipment of liquids and gases and so are of a little use for manufacturers 4. Water Transportation- cheapest form of transportation as large bulk of commodities can be ship at one time a. Two types of ocean vessels i. Passengers lines-which primarily transport people ii. Freighters- or cargo vessels which may include tankers and refrigerated vessels. a. Fishy backservice identical to piggyback except that the truck bodies are loaded into vessels instead of flat cars b. Containerization - is use to large standards sized vans for shipping goods. 5. Air Transportation- is the fastest form of transportation thus highly used for perishable goods such as flowers and foods The transportation mix Speed- time required to moved goods to pick up point to the point of delivery Cost- the predominant carrier selection determinant in early carrier selection works. Frequency- scheduled shipment per day Dependability- on meeting schedules and safety delivery of the goods Availability- For frequent use Capability- ability to meet nature and kind of commodities to be shipped.