Logistic - Appunti Prime 5 Lezioni Logistic - Appunti Prime 5 Lezioni

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Logistic - appunti prime 5 lezioni
Logistics management (Politecnico di Milano)
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Scaricato da Andrea Aglietti (aglio99@hotmail.it)
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Logistics and SC Management

martedì 3 ottobre 2017
Logistics:
• Transportation of goods
• Warehousing
• Packaging
• Coordination
• Management of flows
The military context has been the first to recognize the importance of logistics due to the need of
moving army and supplies.
"The science of planning and carrying out"
Our perspective is the business context.
Logistic management: part of the supply chain management that plans, implements and controls
the efficient, effective forward and reverse flow and storage of goods and services.
Focus on the global optimum not only local one.
Dimension of analysis and description

We have 4 dimensions of analysis:
• Activity
• Scope
• Object
• KPI/Performance
Using this 4 dimensions we can describe the evolution of the logistics during the years.
PHYSICAL
60's/70's
Only physical distribution of goods.
Focus on:
• Distribution of the end products or supply of raw materials/production
•

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• Single company
• Reduction of the distribution or supply/production costs
INTEGRATED
Further step of logistic.
Focus on:
• Supply, production and distribution of goods
• Single company
• Reduction of the overall logistics costs
Inbound logistic: from suppliers to me

Outbound logistic: from me to clients
Inbound + outbound = integrated logistics
SUPPLY CHAIN MANAGEMENT
Focus on:
• Entire supply chain
• Value of the customer service
• Overall logistics cost to serve the final customer
•
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• Supply chain based competition
e.g. Food SC
Players
• RM suppliers
• Manufacturers (Ferrero, Barilla)
• Wholesalers
• Large retailers
• Small shops
• Hotel/restaurant/catering (Ho.Re.Ca)
Infrastructures
• Factories
• Warehouse
• Facilities

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Stacks of logistics management and recap

We have 3 main stacks of logistics management

1. Logistic execution (basis of logistic)
2. SC planning
3. SC design and strategy
CYCLE STOCK: inventories that deal with two consecutive stages of the SC
Q: average order quantity

D: daily average demand
T: time between two orders
SAFETY STOCK: inventories that deal with the uncertainty of demand and the variability of the lead
time
K: constant depending on the service level

LT: lead time
AICC: annual inventory carrying cost
AIL: average inventory level= CS + SS

v: value
m: incidence of inventory cost
REORDER POINT MODEL

WHAT?
The model takes into account one item at a time (single-item, single location model)
HOW MUCH?
A constant order quantity (Q)
WHEN?
When the inventory level goes under the Reorder Point quantity (ROP)

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Since the demand and the lead time cannot be known for sure (because of their unpredictability) we
have to add to the regular stock (that is maintained to meet the average demand in the average lead
time) the safety stock.
ROP= Reorder Point [Units]

EDLT= expected demand during the replenishment lead time
SS = safety stock
PERIODIC REORDER MODEL

WHAT?
This model can be applied both to the single item and the multi-item cases
WHEN?
Orders are placed every T (order interval)
HOW MUCH?
The order quantity aims at reaching a determined availability target
If the lead time and the demand are uncertain, safety stock is required in order to avoid the stock
out during T+LT
AT: Availability Target [Units]

EDLT= expected demand during LT+T

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SS = safety stock
EXERCISE
Annual revenues: 100
Annual operating costs: 90
Fixed assets: 50
Current assets: 50
Outsourcing
Additional annual operating cost: 1
Reducing fixed assets: 5
ROA' < ROA --> not convenient
ROA = 10%
Impact on current assets +2
Fixed assets +2
Need to maintain the same ROA
Increase ROA:
• Increase price: premium price policy (A)
• Increase sales: sales volume higher (B)
(A)
(B)
Costs'' : Revenues '' = Costs' : Revenues '

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The Importance of Logistics

venerdì 22 settembre 2017
The importance of logistics

A company needs to have the 4 P in order to compete with others.
• Price
• Product
• Promotion
• Place (customer service)
The logistic process affects directly the customer service (Place) and indirectly the Price.
Main trade-off in logistics: Logistics cost - service level
You can be different by SKU (Stock Keeping Unit) and Price.
2 choices:
1. SKU: 60 000. All the items. Higher service level but we are increasing, at the same time,
inventory carrying level and the price.
Risks: sell only class-C items --> reducing revenues.
2. SKU: 40 000. Not all of the items just focus on a part of them. Lower service level but we can
reduce the inventory carrying cost so we can reduce the price.
In traditional way we are going to choose number 2 but in an alternative way, as number 1, we can
use our service level in order to serve the pharmacies in different ways (different size of order
different service level). I use the service level to increase the customers ???.
Logistics is not only cost reduction but also an opportunity to increase the revenues of the company.
Logistics must be considered for many reasons:

• 4 Ps
• Globalization: with globalization the local markets are less and less important. The grow of
GDP (gross domestic products) is very low toward the exports. Big flow of products between
two countries, passing borders and this implies a complex logistics organization. In the last
years, the incident of eCommerce in the market is very impressive.
• Logistics is a source of competition advantage towards the other company.
• Logistics affects the service level
Logistics affects the revenues of an eCommerce's company.
Logistics is expensive, 5-15% of the revenues of the company. The main cost items:
• Transportation (50-60%)
• Warehousing costs
• Inventorying carrying costs
• Administration cost: Administrative task and the SC planning cost.
In the last years we had an increasing of the cost of transportation due to the fuel's price, instead we
had an optimization of the incidence of inventory costs.
Different industries <--> different impact of logistics costs.

Reasons:
• Different complexity of the logistics process (size of items, quantity of items to move)
• Different value density (Value of the product in relation with his weight and his volume).
E.G.
Washing Machine. Value: 300€/unit (V). Weight: 42.5kg/unit (W).

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Mobile Phone. V=400€/unit. W: 0.17kg/unit.
Transportation cost = 0.5€/kg
Incidence of transportation costs
Washing Machine
Mobile Phone
This example suggests that a benchmark among logistics costs of different sectors has no
sense, given the huge difference of value density.
During the crisis if you increase the price, the incidence grows so if you want to maintain the
incidence the same you have to reduce logistics costs.

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Logistics and the sources of value

How does logistics affect the profit of a company?
Main goals:
• Increase efficient (capability to use the logistics resources) and effectiveness (capability of the
system to reach the target's outcomes)
• In
Effectiveness: to meet customers' requirements. The right materials, in right quantities, of the right
quality, in the right place, at the right time.
Efficiency: to control costs.
Using effectiveness we can increase the revenues and with efficiency we can decrease the costs.
Return on Assets (ROA): how much money the company can achieve compared to the capital used
Logistics affects in terms of customer services, logistics costs, assets and payments.
How logistics affect ROA

• Costs: reduction of costs.
– Improving the efficiency/productivity of transportation, saturation of the trucks,
handling storage, packaging, administrative procedures
– Increasing the efficiency/productivity of the entire logistics process by integrating the
individual activities
– Improving the quality of the logistic activities and thus reducing the non-conformity
management costs. Reducing the no-quality costs (we delivered a wrong delivery in
quantity, quality or products. We have to get rid of the wrong products or if we are lucky
we can resell them.) and errors in order of order fulfillment.
• Revenues: increasing the revenues
– KPI
– Improving customer service
▪ Getting premium price for the better service
▪ Increasing customer retention
▪ Increasing the number of customers
▪ Entering new markets
– Active outsourcing: providing logistic services to other companies
• Reducing the current assets
– Reducing inventories
▪ Removing dead inventories
▪ Right-sizing and deploying the safety stocks
▪ Right-sizing the cycle stocks
– Reducing/controlling the cash-to-cash cycle time
• Reducing the investment in fixed assets: reducing fixed cost
– Better logistics/supply chain planning (less variability and less unpredictability)
▪ Reducing manufacturing and warehousing capacity
▪ Reducing the transport assets
▪ Reducing personnel/staff
▪ Focus on MAPE (forecast accuracy)
– Outsourcing logistic activities (passive)
• Managing the trade-offs between different sources of value:
–

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– Improving productivity through investments in fixed capital

– Improving the efficiency of the logistics activities accepting an increase in inventory level
– Improving customer service and revenues accepting a less than proportional increase in
the logistics costs
– By reducing the fixed capital through outsourcing accepting an increase in the logistics
costs.
KPI
Product Range: #items managed by the logistics process. Families (width) and number of items per
each family (depth).
Fill Rate: indicators that measure the capability of the supplier to satisfy the customers' requirement
through the inventory on hand in the warehouse.
Time-related: indicators that have to do with speed or punctuality in relation to what the customer
expects or was promised.
• Order Cycle time
• Punctuality/On time
• Delivery Frequency
Accuracy: it includes all the indicators that measures the capacity of the supplier to be accurate and
compliant with the requests of the customer.
TRADE OFF SERVICE LEVEL AND LOGISTIC COST
Cost-to-serve: low the cost to a specific service level and think if they are justified or not in terms of
impact on the revenues
Segmentation: customers are not equal and they will to pay for a service level is completely
different. Higher margin at 95% of service level. Low frequency for local shops, higher frequency for
supermarket
CASH-TO-CASH
Working capital
Cash-to-cash cycle time

"the average days required to turn a dollar invested in raw material into a dollar collected from a
customer"
C2C is similar to WC and so are their terms.

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DSO: Days of Sales Outstanding. are the average days required to collect accounts receivable from
customers
DIH: the average Day of Inventory Holding
DPO: Days of Payables Outstanding, are the average days allowed by suppliers to settle accounts
payable
The three components depend on the quality of data.
C2C can be <0 or >0.

If C2C >0 the company needs money to fund its activities and if C2C <0 the company gets money
from its industrial activities.
The logistics affects the DSO with the quality of deliveries getting payed first and then affects DIH
reducing the amount of inventory.

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Logistics Strategies
martedì 26 settembre 2017
How does logistics can affect the setting of strategy?

How to manage the different components during logistics process.
We are in a context with limited resources so we have to manage them in order to maximize our
profit.
A good logistics strategy is made up by two factors:

1. Consistency with corporate strategy
2. Harmony among different parts of the logistic network
Lee's method
• Know your(s) supply chain(s)
• Choose your supply chain strategy approach
• Define your supply chain strategic policies
• Review your strategy over time
KNOW YOUR SUPPLY CHAIN
According to Lee I have two dimensions:

• Supply-side uncertainty: comprehension of supply chain
– Number of suppliers per item: lower the number higher the uncertainty.
– Stability of the supplier base
– Level of dependency on the supplier base: higher incidence on the revenues for the
supplier, stronger relationship with that supplier
– Country risk of suppliers
• Demand-side uncertainty: variability and unpredictability of demand.
– Product variety: product mix
– Consumer demand volatility: CV (coefficient of variation):
– Product life cycle: in maturity lower variability of demand. It's important the position
and also the length of the curve (lower the length higher the uncertainty level)
– Price fluctuation
– %Sales induced by promotions/discounts
– More "relaxed/stable" market it is, less uncertainty it has.

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CHOOSE YOUR SUPPLY CHAIN STRATEGY APPROACH

1. Lean supply chain strategy
Objective:
Optimization, maximize the ROA. Key-word: OPTIMIZATION
Policies (examples):
– Non value adding activities elimination
– Focus on economies of scale
– Stock control and centralized management
– Optimization techniques aim at distribution and production capacity maximization
– Client-supplier info sharing automation
2. Agile supply chain strategy
Objective:
Reduce the risk on both the supply and demand side. It doesn't make sense to optimize
something that will change in the future. Minimize the variability of ROA. We don't want to
optimize the profitability but to reduce the risk. Key-word: FLEXIBILITY
Policies (examples):
– Reduce the negative events' happening and mitigate the risk (lowest impact of the
negative events)
– Short lead times
– Short TTM (time to market)
– Postponement: producing the level-base product and then the latest stages only when
we receive an order.
– Supply chain visibility and collaboration
– Inventory and other capacity resources shared between partners to face stock out and
capacity interruption
– Alternative suppliers: in case of failure of one supplier we can switch him with an
alternative suppliers.
3. Risk hedging supply chain strategy

Objective:

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Reduce the risk for disruption

4. Responsive supply chain strategy
Objective:
Mitigate risks (related to the changes and the diverse needs of the customers) on the demand-
side
WHEN AND WHAT
Lean: stable market

Agile: high uncertainty of both sides
Coyle's theories
TIME BASED STRATEGIES
Aim: reduce order-delivery cycle and the length of the replenishment process
• Cycle time reduction
– Reduce logistic processes time
– Using ICT solutions
– Faster decision making: reduce authorization for every stages
• Time-reduction logistic initiatives
– Cross docking (no storage, products flow faster): after receiving the products we ship
them, no storage
– Collaborative planning
• Pull approach
– Fast manufacturing systems to reduce cycle time for ATO (assembly to order)
– Postponement
ASSET PRODUCTIVITY STRATEGIES

Aim: high efficiency in the utilization of the resources. High utilization of the logistic resources.
• Inventory reduction
– Collaborative planning
– Cross docking
• Equipment utilization
– Reduction of logistic facilities: reducing warehouse
– Use the technology to improve utilization rate of the assets to move and store products
– Direct delivery: touching the product as least as possible
• Third party/contract logistics services
– Outsourcing
TECHNOLOGY BASED STRATEGIES

Aim: favor the adoption of technologies seen as factors that allow the company to increase the
logistics effectiveness and efficiency
• eCommerce B2B
• Automatic identification projects
– RFId-enabled process
• Automation of warehousing and material handling

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RELATIONSHIP BASED STRATEGIES

Aim: optimize the logistic process looking outsides the boundaries of the company in order to find
opportunities of improvement.
• Integration of Supply chain processes
– Standardization of industrial labels and packaging: using the same barcode the
collaboration is possible
– Digitalization and integration of the order-to-payment cycle
• Collaboration
– Standardization of packaging: define standard sizes of packaging. In this way is possible
to optimize the logistic process

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Case studies
mercoledì 27 settembre 2017
Impact On Return of Asset

(ROA)
Company Project Logistics Revenues Operating Fixed assets Working
strategy costs capital
Dell Location of Time based Higher • Shipping Lower
plants (ATO)
close to
customer
satisfaction,
cost
• 2-3%
/ investmen
t
market higher postpone
revenues ment
Michelin Outsourcing Asset based • Improvement • Reduction They sold their No figures
distribution of return of fleet network of or
network management- (vehicles) transportation. numbers
-> higher managem Decrease of
revenues ent reduction
• Reduction of • Reduction in
LT--> higher of quality inventory
revenues costs level
(damage)
Ikea Introduction Technology • Reduction Lower
of GS1
standard.
based / of the
time for
/ investmen
t
GS1: barcode registratio
on the pallet n of goods
not on the • Reduction
product of the
time to
unload
the trucks
(44%)
HP Introduction Relationship • Higher Lower
of based revenues due investmen
collaborative to the t:
approach reduction of
made of the out of stock
sharing of
data and the
redesign of
replenishmen
t process
Applying the scheme of the theories to the practical cases.
HP has a segmentation on shops based on sales volume. They pay back the obsolescent product of
the suppliers and they have to dispose of those products.

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Role of warehouses
martedì 26 settembre 2017
The warehouse is part of a more complex system called logistic system.
Logistic system: all resources and structures through goods and relative service are transferred from the
point of origin (fabric) to destination point (customers).
SLIDE 4
Warehouse with flow management and storage vs warehouse only with flow management
Storage capacity: how many or the number of unit loads should be stored in the warehouse.
Throughput capacity: number units to be moved in a period of time.
Diagram chart: platting of the flows among the different areas of the warehouse in terms of type handling
units and of entity of flows
Typical solution adopted by all the warehouses. We use a standard pallet in Europe so called Europallet
(800mm x 1200 mm). Pallets are used to perform one move.
Full pallet load: only one SKU. Cartons that belong to the same keeping unit
Mixed pallet load: different SKU.
STORAGE FUNCTION: related to the reasons of the first logistic channels

• Keep the inventories
– Guarantee a determined safety stock coverage
– Keep the goods safe
FLOW MANAGEMENT/ MATERIALS HANDLING: transformation of the flows and the products happens in
the warehouses.
• From full pallets to mixed pallets
• From unpacked products to packed products
• From untailored products to tailored products. Customization of the products. E.G. from a
"standard" phone to a customized one

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NODES
• Warehouse, depots, distribution centers: both storage and flow management functions
Orders from downstream are fulfilled by using inventories
Upstream orders aim at replenishing the inventories in the warehouse (replenishment flow)
– Cycle stock and safety stock

– Needs materials planning and materials management
– Big surface (20 000/ 30 000 m2)
– All the typical activities of a depot
• Logistic point: Only the Flow Management Function (goods are stored only for sorting purposes)
Orders from downstream are sent straight to upstream. Orders are fulfilled upstream, but they are
delivered and sorted through the transit point.
– We don't need inventory planning because we don't have stock (max 1/2 day)
– No stock inside the transit point just transit stock
– Surface is very small (3000/4000 m2)
– Only sorting activities:
▪ Cross docking
▪ Delivery
▪ Re-packing
CROSS DOCKING
We unload the goods and then we move the goods to the bay on which we deliver the goods. Only transit
stocks no remaining stock in the logistic point.
E.G.
Fashion industries work as MTO (make to order).

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Warehouse operations
mercoledì 27 settembre 2017 12:18
Macro-activities
• Receiving: from the upstream part of the logistic network to the facility
• Put-away: moving of goods from the receiving area to the storage locations
• Order fulfillment: retrieve products from the storage locations to satisfy the customers' orders
• Shipping: loading of good aboard the trucks in order to ship them to the customers
Receiving + put-away: inbound flow

Order fulfillment + shipping: outbound flow
RECEIVING
• Schedule carrier: spreading the arrives of the vehicles over the hours of the day. Planning the
arrives
• Unload vehicle: moving the good into the receiving dock. In the receiving dock we have a check of
the goods in terms of:
• Presence of damage: in case of damage we reject the goods
• Compare to P/O: comparison between the content of the order and the content of the goods.
PUT-AWAY
• Identify product: identification of the product through the barcode
• Identify storage location
• Move products: moving the product to the location
• Update records: updating the records in order to find the product in the warehouse
ORDER FULFILLMENT
• Manage order info: we can have the retrieval of the full pallets (amount required by the customer is
higher or equal to a pallet) or retrieval of the small quantity of goods (amount required smaller than
the pallet) --> picking activity: selective retrieval of units load from high level units load.
• Pick goods: smaller quantity. Need the picking activity.
– Creation of picking list: in the picking list we find the items that we need to pick
– Cartons on the pallet
– Wrapping pallet
– Shipping label is attached to the shipping package
• Move goods
• Label package
SHIPPING
• Schedule carrier: similar to receiving
• Load vehicle: loading of goods in the vehicle
• Bill of lading: carrier signs the B/L, in this truck there are the following items. If you lose something
the fault is of the carrier not of the warehouse
• Record update: updating the systems to reflect removal of the products from the warehouse
Main functional areas

• Storage: biggest part (reserve area)
• Picking/order assembly: very small, the aim is to allow an efficient retrieval/picking of small
quantities of goods.
• Receiving/shipping:

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Talking about transit point we can delete storage and picking area. The replenishment flow is the flow of
goods from the reserve storage area to the picking area. We have an internal replenishment. 4 main areas
then additional areas such as offices and service areas (charging station for the electric forklift). The
number of docks depends on the size of the flow.
RECEIVING AND SHIPPING AREA

It's very easy to design this area. We estimate the number of docks so we can understand the space we
need for each dock. BUT we need to consider that there is around a meter between the ground floor and
the floor of the truck. We have that the floor level is at the same level of the floor of the truck.
DIAGRAM CHART
When we design a warehouse we need to draw the chart of the main flows. It is represent all the flow that
we have within the warehouse. This solution is very important when we outsource the warehouse so we
can offer the diagram chart as a standard that show our flows.
Warehouse Management System (WMS)

We use the WMS software in order to manage the warehouse. It enables the accurate management of the
receiving, put away, packing, shipping, storage location, workflow planning and analysis activities. WMN
provides the information in order to a future optimization of the warehouse.
• In the receiving the WMS verifies the purchase order with the items that arrived
• Adds the item to the inventory
• Determinates the location
• Keeps track of the item location
• Creates the picking list
• Keeps track of the staging location of the complete orders

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WMS has a radiofrequency system of communication so it can dialogue with the workers.
The WMS can increase the efficiency of workflow planning
The modern warehouses are no longer place only to store the goods. They are a place where the new
value adding activities can be executed.
• Customization: I can within a warehouse customize product:

– By market area: e.g. the plugs of a notebook, different plugs, different countries. I can insert
the right plug in the local warehouse
– By sales channel: chiedere
– On a customer base: customization asked by the customer (m&m, baci Perugina, temporary
shops for supermarket)
• Technical support: we can transform the warehouse as a technical supports point. Repairing and
replacing activities
• Return management: collection of the return products/packaging and the collection of the expired
products

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Storage system
mercoledì 27 settembre 2017
DESIGN PARAMETERS
STORAGE CAPACITY (SC): number of unit load locations that should be store in the storage area with dimensions: a x b x
h and a determined weight capacity. Europallet: a = 0.8 b=1.2 h= depends on the height of the pallet
THROUGHPUT CAPACITY (TC): flow of unit loads (UL/h). Sometimes it is useful to split the TC into:
– Input capacity: storage activities
– Output capacity: retrieval of full pallets
DESCRIPTIVE PARAMETERS
AREA UTILIZAZION RATE (AUR) [UL/m2]
CUBE UTILIZAZION RATE (CUR) [UL/m3]
SELECTIVITY: capability to directly access to the pallet or the unit loads location
SATURATION COEFFICIENT OF THE SC:
COST INDICATORS
ANNUAL STORAGE COST PER UNIT LOAD LOCATIONS [€/(UL*Year)]
• Annual cost is function of:

– Building (rental) and facility services (lighting, A/C and security service)
– Racks (storage solution)
HANDLING COST PER UNIT [€/UL]
• Annual cost:
– Materials handling system (forklift cost)
– Labor (handling operators)
– Energy consumption related to handling (electricity for the forklifts)
– Handling equipment maintenance (management of the batteries of the forklifts)

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Handling system affects the storage costs directly and indirectly. CHIEDERE
We have an indirect effect of using space. (Area Utilization Rate).
Cheap forklift less handling costs.
Strong connection between selection of storage system and handling system.

Reduce storage cost:
• Reducing the selectivity we aspect higher or longer TC of the system.
• Working on the vertical development of the warehouse. Store the goods at a significant height but you have to use
more expensive forklift. More handling costs
When you design a storage system you have to take in account the connection of the storage system with the handling
system.
Storage systems for small size UL (later on <--> picking systems)

• Miniload
• Carousels
• Vertical AS/RS systems
Storage systems for big size UL

Block stacking
Put the UL over the top of the other, it is arranged in terms of lanes.
• Single lane can manage just one SKU.
• The same SKU can occupy one or more lanes.
• We don't use racks or other system to store the goods.
• Very cheap solution, no investment costs.
• Vertical issues, the vertical development is low.
• Low selectivity
• Difficult to saturate
• Used for beers, drinks or washing machines.
• The forklift has to enter the lane
• Store the goods on the long side not the short one
• Conditions for the use:
– Looking at the characteristic of the items in term of fragility
– Work with FIFO policy
– High inventory level of the items (15/20 pallets/item)
Rail racks
Put the goods on rails that run along their axle.
• More expensive (50€/pallet location)
• Work in the same way and application field of block stacking but it works also for fragile items
• The forklift has to enter the lane
• High entry level (15/20 pallets/lane)
• Low selectivity
• Low cycle time
• Drive-in racks
– Forklift enters and exits from the same side
– Important to put the pallets on the long side (1.2 m)
– Benefit: higher vertical development
–

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– LIFO stock management
• Drive-through racks
– Forklift enters from one side and exits from the other
– High risk of not-saturation
Flow racks
Roll conveyor in every lane, they are slightly inclined so the pallets can automatically go down then the first pallet is
retrieved.
• We dedicate one channel to one item.
• Minimum space dedicated to one item is one channel
• Reducing cycle times and optimizing the performance of handling system
• Low selectivity
• High cost (150 €/pallets) (investment and maintenance for the rolls conveyors)
• Medium stock level
• Push-back rack systems
– Roll conveyors
– Loading and unloading from one side
– Not more than 4 UL
– Items can't be fragile
– Used in shipping area for small companies
Selective pallet racks

We join beam (correnti) and upright (montanti) and we have n-bays.
Every bay can host more than one pallet
• Most common and used solution
• This solution works with the aim of reduction of the cost of iron for the upright
• In depth you have just one pallet so if you see the racks from the frontal view you have bays on the left and on the
right
• Selectivity = 1
• Broken pallets (picking activity)
•

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• Possible to perform picking activity (first floor) and storage

• Flexibility in characteristic of the bays: you can modify the height of every location. You can shift the position of
the beams and change the bays
• Cheap solution (20-30€/pallets)
• Efficiency: width of the aisle, the narrower the aisle the higher the utilization rate. The height of the rack, the
higher it is the higher is the utilization rate
Pallet handling trucks

Walkie stackers
Type of forklift only for horizontal movement (pallet jack).
Used in the loading or unloading of goods from the tracks.
Front loading forklift trucks

They can take the pallets only from the front side. It is a problem because when we work with the selective pallet racks
we have to take in consideration the space for the curve in the aisle.
Counterbalance forklift truck (carrello a contrappeso)

The main risk is the overturning. The forks are at the lowest level during the moving but when we reach the pallets we
increase the height of the forks.
The width of the aisle using this type of forklifts is between 3 and 3.5 meters.
Vertical development 6 meters.
Both the storage area and the loading and uploading area
Straddle reach truck (carrello a montante retrattile)

Warehouses Page 25
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We can eliminate the counterbalance because the center of gravity falls between the 2 tires of the forklift and we
reduce the risk of overturning. The forks move horizontally.
Thank to this way of working we can reduce the width of the aisle and reduce the storage costs. But this solution is more
expensive. Now the width is between 2.5 and 3 meters. In terms of maximum height we can reach 10 meters.
Only in the storage area
Side loading forklift trucks

With this solution is possible to retrieve the pallets from the left and from the right. We do not need to curve while
retrieving the goods and so we reduce the width (1.6 meters). Due to the risk of going against the racks we install rails
near the racks.
Only used in the storage area.
Synchronize the flows with the rest of the warehouse, the management is complex.
Side loader (Carrello bilaterale)

We use telescopic fork.
Only from the left and the right side.
Swing fork turret truck (Carrello trilaterale)

We can rotate the fork by 180° and retrieve the pallets from the right, left and front side.
Exercise
You are required to estimate the handling cost per unit and the storage cost per unit.
Cost of area: 40€/m2 year

Handling cost (workers + forklifts): 40 000 €/year forklift
STORAGE COST PER UNIT

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(assumption of the number 2)
In general we have the receiving, the shipping, the storage and the picking areas. But in this case we have just receiving,
shipping and storage areas + other services area.
Storage area --> area utilization rate is affected by the choice of the handling and storage systems
We are assuming that AUR = 2.
HANDLING COST PER UNIT
HU: handling units shipped per year

We are assuming that the workload per day is the same for the whole year.
For the number of forklift we have to look at the TC.
L: length of standard shift (assumption 8 hours/day)

P: productivity of the forklift (assumption 20 pallets/hour)
Workload: depends on the relationship of the unload and retrieval operations and if we use the same resources to
perform it.
• Dedicated resources (option A)
– In: 1 000 pallets/day
– Out: 1 000 pallets/day
• Shared resources (option B)
– In + out: 2 000 pallets/day
Option A
7 + 7 because we have dedicated resources
Option B
We save the money for one forklift
But we want to work with option A because the optimization is not good with option B.
To have a better performance I have to decrease the storage cost per unit so I have to optimize the use of the area,
exploit it better and see the productivity of the resources.

Warehouses Page 27
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L'Orèal
• What is the role of the Logistics/Supply Chain Executive in the corporate organization chart?
• What are the activities under his responsibility?

– Demand & supply: forecast and stock
– Customer care: all the people that manage the order to cash cycle, in the last years it
has been involved a lot. Collaborations with client. Key point is to meet consumers'
needs and the only way to make it possible is to work together with them (collaborative
way). UK: suppliers seen as partner
– Credit management: financial part
– Data management: need to provide right data to the distribution companies
– Physical distribution: logistics, getting stock in and distribution (inbound vs outbound)
– EHS security: Environmental Health Safety. Sustainability
• Why is Logistics/Supply Chain Management important in the company and how does
logistic/supply chain performance relate to the overall corporate performance?
• How is the Logistic/Supply Chain Executive aligning the Logistic/Supply Chain strategy with the
overall corporate strategy?
Fabio Sensidoni - Operations Director L'Oreal Italy
Understand core mission and vision of the company and the ultimate value of it.
"Universalization of beauty"
S&OP: input of sales is working aligned with the operations. Sales & Operation.
82 880 employees
1st cosmetic group worldwide
32 international brands (Diesel, YSL, Giorgio Armani).
ITALY
+3.2% sales
2 000 employees
2 sites (Milano, Settimo Torinese)
Most complex and fragmented market
DIGITAL
Digital is a core business (5% of the sales, 1.3Bn done on eCommerce, 1000 digital experts, 38% of
our growth and 25% of our media spending)
SUSTAINABILITY
Innovate, develop, produce and live.
CONSUMERS
• We are hyper-connected
• We are eco-conscious
• We want safe products
• We want to find any product, anytime, anywhere. If you don't find a product you change
brand so this is an huge challenge for the logistic division. Logistic division is fighting for
perfection.
• We want products that meet our specific needs. Specific personalization, late customization. In
the warehouse you have to organize machines that can do that.
•

Speeches Page 28
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• We want new experiences. I want to receive my product with specific packaging not just the
product.
Complexity comes from the number of brands and from the customers' needs.
OPERATIONS' MISSION
Contribution at L'Oreal's growth, integrated value chain. Developing the most agile, innovative and
efficient and responsible solutions to meet the specific needs and diversity of consumers.
• Quality: protect customers and the brand
• Sustainability: protect the environment and the communities
– Reduction of 67% of CO2 emissions
– 48% reduction of water consumption
– -35% waste generation
– 98% waste recovered
– L'Oreal overproduce energy and sells it to the local network
• Focus on safety & security: protect customers and assets
DISTRIBUTION CHAIN
• Mass market: Esselunga, Coop
• Department stores perfumeries: la Rinascente
• Pharmacies drugstores and medispas
• Branded retail: brand shops
• Travel retail: duty-free shops
• eCommerce: online market
• Deep trade:
• Hair & beauty salons:
1 order shipped every 2 seconds to > 500 000 delivery points
Today
From factories to local distribution center/distribution center (DC) then to the retail DC then to the
stores and after to the DC.
Omnichannel supply-chain
in the future the delivery method will be more and more complex
• Service/quality: lead-time, OTFR (on time fill rate): how many products on time, OTIF (on time
in full), fill rate, OSA, invoice accuracy (bill), dispute rate (claims and so on), perfect order (right
product, right time, right invoice).
• P&L value: %cost vs Net Sales, Cost per unit served, obsoletes and slow movers
• Cash flow: Stock (value, coverage, % of Bad Stock), total credit and credit overdue
Distribution technology changes depending on the country.
Design & develop

Source
Manufacture
Serve
Operations are more:

• Universal and consumer centric
• Digital (operations 4.0)
• Sustainable

Speeches Page 29
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Pirelli & Goodyear

venerdì 6 ottobre 2017
• What is the role of the Logistics/Supply Chain Executive in the corporate organization chart?
• What are the activities under his responsibility?
• Why is Logistics/Supply Chain Management important in the company and how does
logistic/supply chain performance relate to the overall corporate performance?
• How is the Logistic/Supply Chain Executive aligning the Logistic/Supply Chain strategy with the
overall corporate strategy?
Walter Falavigna - Supply chain director
Pirelli has been split off into:

• Pirelli tires
• Pirelli industry (china government)
SC is different from company to company. SC is a mind-set.
"Which is our strategy?"

We need to understand our company strategy, the SC strategy is a part of the company strategy.
• Product
– Product type: different product, different approach
– Product cycle life
– Sales seasonality
• Sales channel
– Different supply the car producer or the retailers (higher profitability)
– Distribution/wholesalers
– If I move from one channel to another the approach changes
• Customer/LSA
– We are not in a business where there is loyalty. Everything could change.
– Price is the main variable
– Extreme high volatility -> flexibility
Company is born to make money. We need sustainable profits and cash flow. We have to be
efficient in the whole SC. The company must do money, sustainable profits and cash flow.
CASE 1 - Europe
• Well-developed market
• Twice a day deliveries
• Strong presence in retailers
• Priority to UHP, 4x4, OE premium
CASE 2- China
• Redesign all the processes, very fast changing environment
• Distributors
• Focus on fleets
• Full products coverage
• OE (Original Equipment)
Market seasonality vs FRC accuracy

• CASE 2: no planning just moving into trends. So it is very difficult to forecast the demand
• CASE 1: more accuracy in forecasting but higher seasonality (moto & car winter)

Speeches Page 30
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Monthly volatility vs Stock along expected SC

• CASE 2: M-H volatility and stock.
Logistics is not physical logistics anymore, it is industrial logistics.

• Industrial:
– Product design: semi-finished SKU rationalization. Process standardization
– Production flexibility (you product what market asks not whatever you want): stock
reduction. Visibility is a key for SC
– Product allocation logistic: multi source or single source. Product must be manufactured
in more than one plant due to the optimization of the saturation. Resilience (low price
and costs in fluctuating environment)
• Physical:
– Two levels network: local and central network. Short delivery times
– Local stock with pull logic:
– Outsourcing: higher flexibility to volumes variations and higher efficiencies
We have to start from the planning because without a correct plan we can't deliver. You have to be a
pusher for all the other functions. SC positions are different from company to company.
CASE 1
Two levels, no products multi source
CASE 2
Rationalize product allocations and product range to minimize delivery distances. No network just
"chaos". The problem is the sell approach. 36 brands 4 companies belonging to the same holding. I
can't rationalize the distribution network without a good sell approach. We are reducing brands
from 36 to 14. What is behind case-1-structure is strategy not technicality.
Potential set
• 1 factory one part of china but this not can be possible because of the average distance in
china (1200 km)
• Product multi source: 4 independent factories but they use 2 RDC (regional distribution
center). No warehouse because the retailers are not well-developed yet.
If I change one variable I can change everything. Not focus only in my area

Speeches Page 31
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Management policies
Understand the policies to increase the performance of the warehouse.
Two main polices

• Management of the operative cycles:
– Variable times:
▪ Transfer with the load
▪ Transfer without the load
▪ Lifting with/without load
▪ Descent with/without load
– Fixed times:
▪ Waiting for data transfer
▪ Maneuvers and curves
▪ Positioning
▪ Loading/unloading the UL
–
CT= forklift cycle time
VCT= part of the CT that depends on the travel of the forklift (horizontal and vertical travel)
FCT= part of the CT that doesn't depend on the travel of the forklift
– Single command cycle: single forklift performs one activity/job per cycle either the storing of
one pallet of the retrieving of one pallet
▪ We waste time because we return empty without pallets
– Dual command cycle: the forklift performs two activities in one cycle both the storing and the
retrieving of the pallet
▪ Short travel in the middle to a different pallet location where it retrieves a pallet and
goes back with it abroad -> cost effect way of working if the distance between the pallet
locations is small.
▪ The dual command cycles are in general more efficient than single command cycles
because:
➢ It is possible to move 2 Unit Loads per cycle
➢ The average time to complete the dual command cycle is shorter than two times
the average time for a single command cycle
BUT it is required that the storage and retrieving activities are concurrent
WMS and the logistic manager decide their time allocation. We choose to work with dual or single
command cycle.
• Rules to allocate the goods to the location of the storage system.

– Retrieving index: how many times you went to the storage location to retrieve the pallets. If
we retrieve a quantity smaller that the pallet capacity (cut unit load).
–
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– Access index: the ration between the retrieving index for the item i and the number of
location assign to the item i.
Example (1)
Assumptions:
– Item: soft drink 1500 ml (PET package)
– Retrieval of full UL
Data:
– Number of UL sent in a month: 80
– Average stock: 10
– Number of assigned locations: 20
Example (2)
Assumptions:
– Item: peeled tomatoes in cans weighting 500 gr
– Retrieval both Full UL and cut UL (picking)
Data:
– Number of UL sent in a month: 80
– Average stock: 10
– Number of retrieved UL: 200
– Number of assigned locations: 20
Allocation policies
• Randomized Storage: the unit load can be stored in each pallet location, if available you can allocate
the items wherever you want: no criteria.
– We don’t use RI or AI
• Dedicated Storage: the unit load of a specific item must be stored in a specific set of pallet locations
(usually on the basis of the AI, i.e. the items with the highest access index have to be stored in the
pallet locations closest to the Input/output)
– We assign a part of the storage area to each item.
– We assign the item with the highest AI as close as possible to the I/O while the further from
I/O has the lowest AI value.
• Class Based Storage: the unit load of a specific family of items must be stored in a specific set of

lOMoARcPSD|4792658
pallet locations (usually on the basis of the AI)
– Items are classed with the AI. The ones with the highest value are of class A, the ones with
lower values are classified as class B the remaining ones are class C.
– We assign a part of space to each class of item.
– An item that belongs to a class can occupy whatever location within the class; this means that
we can classify the allocation policy in the class as random.
– The class with the average highest AI is stored as close as possible to the I/O
– We can decide the boundaries between the class with the ABC curve
ITEMS STOCK AI
= (S/R) / average stock
Steps to follow:
1. We can calculate the AI for each item
2. The items are ordered with the AI from the one with the highest value (first row) till the one with
the lowest
3. We can calculate the average AI = sum of all the movements (S/R) / sum of the stock = movements
(A+ B +C) / inventories (M) (A+ B +C)
4. All the items whose AI is higher than the average AI are put in class A
5. We calculate again the average AI without items of class A of the remaining items: M (B+C) / G (B+C)
6. The ones with higher values are of class B the other ones of class C
The marginal benefit of the division in classes decreases as the number of classes increases. In addition we
have that the risk and the un saturation level of the storage system decreases as the n° of class increases,
it’s harder to saturate the classes. So at maximum we work with 3 classes not more.
How we do we decide the shape of each zone?

lOMoARcPSD|4792658
The shape depends on the boundary curve between one zone and the following one. This curve is called
equal time curve = made of a set of points that can be reached in the same time from the I/O point.
Criteria to form the zones

Shape of the zones: the boundary curves between a zone and the following are equal time curves starting
from the I/O point of the storage system
Number of classes: the marginal advantage in reducing the average operative cycle times, coming from
the increasing of the number of classes (and therefore the number of zones) is decreasing (significantly
decreasing with more than 3 zones)
In the meanwhile the marginal disadvantage in terms of storage capacity (and complexity), coming from
the increasing of the number of classes (and therefore the number of zones) is increasing
First example: the forklift moves only in a rectilinear distance, it moves first horizontally and then
vertically.
The equal time curve represents the shape of the zone, while the size depends on the inventory level of
the items of that class. In this case the shape depends on the type of storage system and forklift.
Second example: each class as a rectangular shape when the I/O is distributed along a side of the
warehouse
Third Example: the two sides of the triangle are different, the horizontal one is longer, it’s slower to move
vertically the forklift that’s why we have a different shape.
It’s efficient to use a class based storage depends on the shape of ABC curve. A 70-20 curve is a curve
where the 20% of locations represent the 70% of the movements.
The higher the concentration (higher curve) of accesses in a small part of the storage area the higher the
benefits in terms of reduction of the variable cycle time respect to the randomised storage policy.
Marginal benefit (slide 20): the marginal benefit is 10% from B to A
Conclusion: saturation of storage capacity and reduction of storage area= benefit

negative= we don’t optimize the cycle time.
We optimize the travel time but we need a higher storage capacity and there’s a risk of un saturation
(dedicated storage). Class storage is a good compromise (strong reduction of the cycle time and a slight
increase of the travel time).

lOMoARcPSD|4792658
Randomized storage
– PROs: better use of the storage capacity that can be sized in order to store the maximum overall
stock
– CONs: limitations in the applicability of the UL allocation criteria in the locations
Dedicated storage
– PROs: it is possible to use the UL allocation criteria (on the basis of the access index)
– CONs: higher storage capacity required (it is required to have storage capacity equal to the sum of
the maximum storage capacity required for each item)
Class based storage
– It is a good trade-off as it is possible to allocate the items to the locations following the allocation
criteria, but with a good utilization of the storage capacity

lOMoARcPSD|4792658
Storage System design principles

giovedì 5 ottobre 2017 16:54
CRITERIA TO CLUSTER THE ITEMS

• Technical features:
– Dimension: standard items -> whose size fits the dimensions of a pallet ( 1,8 x 1 m)
– Weight
– Fragility
• Environmental requirements
– Temperature (8-18 degrees for chocolate)
– Humidity (important for fashion products
• Safety Requirements
– Fire preventions (ex. L’Oreal: alcohol product must be separated)
– Hazardous Goods
– Non- compatibility between different items (Ex. Cheese/fish)
DESIGN COSTRAINTS
• Urban
– Maximum height
– Distances
• Technical
– Surface and shape of the ground
– Integration with other activities
• Safety (depends on the country)
– Escape routes: The maximum distance between the position of a worker and the closest
emergency door must be lower than 6 m. if It’s not possible you need solutions like
elevators that bring people to underground tunnels
– Based on the fire loads of the goods, the warehouse is subdivided in some blocks.
– Subdivision
• Economical
– Available resources (max investment, min IRR, mas Pay-Back)
Now for each part of the warehouse we have to identify a possible system for storage and handling.
Then we have to do the raft design: estimate the productivity of the system and the cost of the
solution (storage and handling cost per unit).
If the solution is ok we design and fine tube the solution. If there are some weak points we have to
select a new system. We can use the simulation to see the average cycle time of the forklifts.
How do we select the storage and handling systems?

There’s no answer but we need experience.
If the inventory level is high and we have stackable products we can do the block stacking.
After this analysis we select the system.

We focus on a detailed solution where the handling system and the storage system are already
decided.

lOMoARcPSD|4792658

lOMoARcPSD|4792658
Storage System design methods

giovedì 5 ottobre 2017 17:24
1. Identification of the Design Parameters

– Storage Capacity and Throughput Capacity
2. Layout design
– To have a given storage Capacity
3. Throughput capacity Assessment
– To reach a given Throughout Capacity
Phase 3 and 2 and really linked because of the shape of the layout.
We work just with Traditional warehouse= selective racks and forklifts.

It’s a really common solution.
The design framework

We will illustrate the method for the design of a “conventional” manual storage system (selective
racks + forklifts)
Assumptions:
• The system does already exist and historical data are available
• The storage area is made of single deep selective pallet racks
• Storage of full pallet loads, no mixed pallet loads
• Handling systems are counterweight forklift trucks or straddle reach trucks
• There are no picking activities in the storage area
• The number of trucks is not connected to the number of aisles (the throughput capacity
doesn’t depend on the storage capacity, if we want to change it we just have to change the n°
of forklifts, taking them in leasing, we don’t buy them. We have a huge flexibility)
Identification of the Design Parameters (1)

1. Analyses to determinate the SC and TC
• Physical flows analysis -> TC
▪ Look at the flows means we have to plot them over the time
▪ We want to evaluate the flows per day/hour
▪ We have not only to see at the past flows but also at the future ones. Maybe the
company wants to enter new market, sell new products.

lOMoARcPSD|4792658
• Inventory analysis -> SC

2. Inbound flow forecasting:
• If the company changes factories, if they’re further from the warehouse the delivery
frequency is lower and the inbound flows are different. See how they change them.
• We have to see the management of storage activities to make a complete inbound flow
forecast. We have to see the number of unit load per hour (depends on the number of
shift and on when we want to perform the put-away activity). We have to look at the
workflow planning during the day.
3. Outbound flow forecasting:

• We have to see deeper the picking activity because it can increase the flow.
• We have to see again the number of shift per day and the time dedicated to this activity.
• The output is the expected profiles of out-inbound flows.
How do we manage the put-away and retrieving activities?

Do we manage them separately or do we look for synergies among the 2 flows?
(ex. Share forklifts)
Yes: we have to add the 2 flows. Overlap them: we build a new profile of flows
resulting from the overlapping of inbound and outbound flows. A possible
consequence can be a reduction of the number of movements for the inbound
flow.
• Peak overall flow ≤ peak inbound flow + peak outbound flow

It’s easier to manage the flow for YES.
4. Estimate the SC
•
lOMoARcPSD|4792658
• Randomized Storage
– INPUT DATA: historical data on the number of locations occupied in a
representative period of time (NSj)
– j: index of the Tj period on which the representative period is split
– FF: forecasting factor
• Dedicated Storage
– INPUT DATA: historical data on the number of locations that are occupied by the
item i during a representative period of time
– i: index of the item i
– FFi: forecasting factor of the item i
• Class based storage

– INPUT DATA: historical data on the number of locations that are occupied by the
cluster of items k in a representative period of time (NSk,j)
– k: index of the cluster of items (A, B, C, ..)
– FFk: forecasting factor of the cluster of items k


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Logistic - appunti prime 5 lezioni

Logistics management (Politecnico di Milano)

StuDocu non è sponsorizzato o supportato da nessuna università o ateneo.

Logistics and SC Management

"The science of planning and carrying out"

Our perspective is the business context.

Focus on the global optimum not only local one.

Dimension of analysis and description

Only physical distribution of goods.

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

Further step of logistic.

Inbound logistic: from suppliers to me

Inbound + outbound = integrated logistics

SUPPLY CHAIN MANAGEMENT

• Supply chain based competition

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

Stacks of logistics management and recap

We have 3 main stacks of logistics management

Q: average order quantity

K: constant depending on the service level

AICC: annual inventory carrying cost

AIL: average inventory level= CS + SS

REORDER POINT MODEL

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

ROP= Reorder Point [Units]

PERIODIC REORDER MODEL

AT: Availability Target [Units]

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

ROA' < ROA --> not convenient

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

The Importance of Logistics

The importance of logistics

You can be different by SKU (Stock Keeping Unit) and Price.

Logistics must be considered for many reasons:

Logistics affects the revenues of an eCommerce's company.

Different industries <--> different impact of logistics costs.

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

Mobile Phone. V=400€/unit. W: 0.17kg/unit.

Transportation cost = 0.5€/kg

Incidence of transportation costs

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

Logistics and the sources of value

How does logistics affect the profit of a company?

How logistics affect ROA

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

– Improving productivity through investments in fixed capital

TRADE OFF SERVICE LEVEL AND LOGISTIC COST

Cash-to-cash cycle time

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

The three components depend on the quality of data.

C2C can be <0 or >0.

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

How does logistics can affect the setting of strategy?

A good logistics strategy is made up by two factors:

KNOW YOUR SUPPLY CHAIN

According to Lee I have two dimensions:

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

CHOOSE YOUR SUPPLY CHAIN STRATEGY APPROACH

3. Risk hedging supply chain strategy

Scaricato da Andrea Aglietti (aglio99@hotmail.it)

Reduce the risk for disruption