logistics assignment

By Tanishq Dixit
Roll no. 017049
1) Inventory management

Inventory management is the supervision of non-capitalized assets (inventory)

and stock items.

A component of supply chain management, inventory management supervises

the flow of goods from manufacturers to warehouses and from these facilities to
point of sale. A key function of inventory management is to keep a detailed
record of each new or returned product as it enters or leaves a warehouse or
point of sale.

The inventory management process

Inventory management is a complex process, particularly for larger

organizations, but the basics are essentially the same regardless of the
organization's size or type. In inventory management, goods are delivered into
the receiving area of a warehouse in the form of raw materials or components
and are put into stock areas or shelves.

Compared to larger organizations with more physical space, in smaller

companies, the goods may go directly to the stock area instead of a receiving
location, and if the business is a wholesale distributor, the goods may be
finished products rather than raw materials or components. The goods are then
pulled from the stock areas and moved to production facilities where they are
made into finished goods. The finished goods may be returned to stock areas
where they are held prior to shipment, or they may be shipped directly to
customers. Inventory management uses a variety of data to keep track of the
goods as they move through the process, including lot numbers, serial numbers,
cost of goods, quantity of goods and the dates when they move through the
process. Inventory management software systems Inventory management
software systems generally began as simple spreadsheets that tracked the
quantities of goods in a warehouse, but have become more complex. Inventory
management software can now go several layers deep and integrate with
accounting and ERP systems. The systems keep track of goods in inventory,
sometimes across several warehouse locations. The software also calculates the
costs -- often in multiple currencies -- so that accounting systems always have
an accurate assessment of the value of the goods.

Some inventory management software systems are designed for large

enterprises, and they may be heavily customized for the particular requirements
of those organizations. Large systems were traditionally run on premises, but
are now also deployed in public cloud, private cloud and hybrid
cloud environments. Small and midsize companies typically don't need such
complex and costly systems, and they often rely on stand-alone inventory
management products, generally through SaaS applications.

Inventory management techniques

Inventory management uses several methodologies to keep the right amount of

goods on hand to fulfill customer demand and operate profitably. This task is
particularly complex when organizations need to deal with thousands of
stockkeeping units (SKUs) that can span multiple warehouses. The
methodologies include:

 Stock review, which is the simplest inventory management methodology

and is generally more appealing to smaller businesses. Stock review involves
a regular analysis of stock on hand versus projected future needs. It
primarily uses manual effort, although there can be automated stock review
to define a minimum stock level that then enables regular inventory
inspections and reordering of supplies to meet the minimum levels. Stock
review can provide a measure of control over the inventory management
process, but it can be labor-intensive and prone to errors.
 Just-in-time (JIT) methodology, in which products arrive as they are
ordered by customers, and which is based on analyzing customer behavior.
This approach involves researching buying patterns, seasonal demand and
location-based factors that present an accurate picture of what goods are
needed at certain times and places. The advantage of JIT is that customer
demand can be met without needing to keep quantities of products on hand,
but the risks include misreading the market demand or having distribution
problems with suppliers, which can lead to out-of-stock issues.
 ABC analysis methodology, which classifies inventory into three categories
that represent the inventory values and cost significance of the goods.
Category A represents high-value and low-quantity goods, category B
represents moderate-value and moderate-quantity goods, and category C
represents low-value and high-quantity goods. Each category can be
managed separately by an inventory management system, and it's important
to know which items are the best sellers in order to keep quantities of buffer
stock on hand. For example, more expensive category A items may take
longer to sell, but they may not need to be kept in large quantities. One of
the advantages of ABC analysis is that it provides better control over high-
value goods, but a disadvantage is that it can require a considerable amount
of resources to continually analyze the inventory levels of all the categories.

Inventory control is the area of inventory management that is concerned with

minimizing the total cost of inventory, while maximizing the ability to provide
customers with products in a timely manner. In some countries, the two terms
are used as synonyms.
2) Safety stock

Safety stock is a term used by logisticians to describe a level of extra stock that
is maintained to mitigate risk of stockouts (shortfall in raw material or
packaging) caused by uncertainties in supply and demand. Adequate safety
stock levels permit business operations to proceed according to their
plans.[1] Safety stock is held when uncertainty exists in demand, supply, or
manufacturing yield, and serves as an insurance against stockouts.
Safety stock is an additional quantity of an item held in the inventory to reduce
the risk that the item will be out of stock. It acts as a buffer stock in case sales
are greater than planned and/or the supplier is unable to deliver the additional
units at the expected time.

With a new product, safety stock can be used as a strategic tool until the
company can judge how accurate its forecast is after the first few years,
especially when it is used with a material requirements planning (MRP)
worksheet. The less accurate the forecast, the more safety stock is required to
ensure a given level of service. With an MRP worksheet, a company can judge
how much it must produce to meet its forecasted sales demand without relying
on safety stock. However, a common strategy is to try to reduce the level of
safety stock to help keep inventory costs low once the product demand becomes
more predictable. That can be extremely important for companies with a smaller
financial cushion or those trying to run on lean manufacturing, which is aimed
towards eliminating waste throughout the production process.
The amount of safety stock that an organization chooses to keep on hand can
dramatically affect its business. Too much safety stock can result in high
holding costs of inventory. In addition, products that are stored for too long a
time can spoil, expire, or break during the warehousing process. Too little safety
stock can result in lost sales and, in the thus a higher rate of customer turnover.
As a result, finding the right balance between too much and too little safety
stock is essential.
 3) Lean manufacturing

Lean manufacturing, or lean production, is a production method derived

from Toyota's 1930 operating model "The Toyota Way" (Toyota Production
System, TPS). The term "Lean" was coined in 1988 by John Krafcik and
defined in 1996 by James Womack and David Jones to consist of five key
principles; ‘Precisely specify value by specific product, identify the value
stream for each product, make value flow without interruptions, let customer
pull value from the producer, and pursue perfection.’
Insights relating to value streams, efficiency ("waste"), continuous
improvement and standardised products can most likely be traced back to the
beginning of mankind. However, Fredrick Taylor and Henry Ford documented
their observations relating to these topics and Shiego Shingo and Taiichi
Ohno applied their enhanced thoughts of this at Toyota in the 1930s. The
resulting methods were researched from mid 20th century and coined as "Lean"
by John Krafcik in 1988 then on to be defined in "The Machine that Changed
the World’ (Womack, Jones and Roos 1990) and further detailed by James
Womack and David Jones in Lean Thinking (1996).
Shigeo Shingo takes part of Frederick Taylor's views in 1910Edit
American industrialists recognized the threat of cheap offshore labor to
American workers during the 1910s, and explicitly stated the goal of what is
now called lean manufacturing as a countermeasure. Henry Towne, past
President of the American Society of Mechanical Engineers, wrote in the
Foreword to Frederick Winslow Taylor's Shop Management (1911), "We are
justly proud of the high wage rates which prevail throughout our country, and
jealous of any interference with them by the products of the cheaper labor of
other countries. To maintain this condition, to strengthen our control of home
markets, and, above all, to broaden our opportunities in foreign markets where
we must compete with the products of other industrial nations, we should
welcome and encourage every influence tending to increase the efficiency of
our productive processes."[1]
Continuous production improvement and incentives for such were documented
in Mr. Taylor's Principles of Scientific Management (1911):

 "... whenever a workman proposes an improvement, it should be the policy of

the management to make a careful analysis of the new method, and if necessary
conduct a series of experiments to determine accurately the relative merit of the
new suggestion and of the old standard. And whenever the new method is found
to be markedly superior to the old, it should be adopted as the standard for the
whole establishment."
 "...after a workman has had the price per piece of the work he is doing lowered
two or three times as a result of his having worked harder and increased his
output, he is likely entirely to lose sight of his employer's side of the case and
become imbued with a grim determination to have no more cuts if soldiering
[marking time, just doing what he is told] can prevent it."

Mr. Shingo cites reading Principles of Scientific Management in 1931 and being
"greatly impressed to make the study and practice of scientific management his
life's work".
4) Just-in-time manufacturing

Just-in-time (JIT) manufacturing, also known as just-in-time production or

the Toyota Production System (TPS), is a methodology aimed primarily at
reducing times within the production system as well as response times from
suppliers and to customers. Its origin and development was in Japan, largely in
the 1960s and 1970s and particularly at Toyota.
Alternative terms for JIT manufacturing have been used. Motorola's choice was
short-cycle manufacturing (SCM). IBM's was continuous-flow manufacturing
(CFM), and demand-flow manufacturing (DFM), a term handed down from
consultant John Constanza at his Institute of Technology in Colorado. Still
another alternative was mentioned by Goddard, who said that "Toyota
Production System is often mistakenly referred to as the 'Kanban System'", and
pointed out that kanban is but one element of TPS, as well as JIT production.
But the wide use of the term JIT manufacturing throughout the 1980s faded fast
in the 1990s, as the new term lean manufacturing became established as "a more
recent name for JIT". As just one testament to the commonality of the two
terms, Toyota production system (TPS) has been and is widely used as a
synonym for both JIT and lean manufacturing

Evolution in Japan
The exact reasons for adoption of JIT in Japan are unclear, but it has been
suggested it started with a requirement to solve the lack of standardization.
Plenert offers four reasons, paraphrased here. During Japan's post-World War II
rebuilding of industry: 1) Japan's lack of cash made it difficult for industry to
finance the big-batch, large inventory production methods common elsewhere.
2) Japan lacked space to build big factories loaded with inventory. 3) The
Japanese islands were (and are) lacking in natural resources with which to build
products. 4) Japan had high unemployment, which meant that labor efficiency
methods were not an obvious pathway to industrial success. Thus the Japanese
"leaned out" their processes. "They built smaller factories ... in which the only
materials housed in the factory were those on which work was currently being
done. In this way, inventory levels were kept low, investment in in-process
inventories was at a minimum, and the investment in purchased natural
resources was quickly turned around so that additional materials were
purchased." Plenart goes on to explain Toyota's key role in developing this lean
or JIT production methodology
Objectives and benefits
Objectives and benefits of JIT manufacturing may be stated in two primary
ways: first, in specific and quantitative terms, via published case studies;
second, general listings and discussion.

A case-study summary from Daman Products in 1999 lists the following

benefits: reduced cycle times 97%, setup times 50%, lead times from 4 to 8
weeks to 5 to 10 days, flow distance 90% – achieved via four focused (cellular)
factories, pull scheduling, kanban, visual management, and employee
empowerment.

Another study from NCR (Dundee Scotland) in 1998, a producer of make-to-

order automated teller machines, includes some of the same benefits while also
focusing on JIT purchasing: In switching to JIT over a weekend in 1998,
eliminated buffer inventories, reducing inventory from 47 days to 5 days, flow
time from 15 days to 2 days, with 60% of purchased parts arriving JIT and 77%
going dock to line, and suppliers reduced from 480 to 165.
5) Green logistics

Green logistics describes all attempts to measure and minimize the ecological
impact of logistics activities. This includes all activities of the forward and
reverse flows of products, information and services between the point of origin
and the point of consumption. It is the aim to create a sustainable company
value using a balance of economic and environmental efficiency. Green
logistics has its origin in the mid 1980s and was a concept to characterize
logistics systems and approaches that use advanced technology and equipment
to minimize environmental damage during operations
Organizations have to face changes in the coming years.

In addition to increasing diversity and dynamics, environmental issues become

more important. Social, political and economic demands for sustainable
development force organizations to reduce the effect on the environment of
their supply chains and to develop sustainable transport and supply chain
strategies.
There are strong interactions between logistics, environment and natural
resources. In addition, the approach of logistics is interdisciplinary, holistic and
cross-company Realising environmental objectives can be done in synergy with
other strategic and financial goals. This is the basis of the great potential of this
new logistics problem and challenge.