Distribution Network dictates:

• Inventories

• Transportation

• Facilities and Handling

• Information
Options for Distribution Networks
The initial question is: delivery to a customer location or a
prearranged site? vs. product distribution using an intermediary?
and based on the response there are 6 possible designs:

1. Manufacturer storage with direct shipping

2. Manufacturer storage with direct shipping and in-transit
merge
3. Distributor storage with carrier delivery
4. Distributor storage with last-mile delivery
5. Manufacturer/Distributor storage with customer pickup
6. Retail storage with customer pickup
SC Challenges
• Delays in production
• Expensive inventories - Outdated
• Lack of partners coordination
• Uncertainties in deliveries - tracking
• Poor demand forecast
• Interference with production
• Poor quality – manufacture/ raw material/
processes/ selling cycle
 Sourcing
Procurement and Materials Management
 Sourcing Stages

Discovery Evaluation Selection Development Management

 There are 6 Global Sourcing
Critical Factors
• Global sourcing factors that must be understood
and balanced can be segmented into six
categories:
– Material costs
– Transportation costs
– Inventory carrying costs
– Cross-border taxes, tariffs, and duty costs
– Supply and operational performance
– Supply and operational risks
 Harmonized (HS) Code
• An HS Code is a globally accepted six- to 10-
digit number used to dictate the fees and
restrictions associated with goods crossing a
border.
• Globally, there are hundreds of thousands of HS
codes, each representing a different tariff or
potential trade restriction.
• International trade requires that these codes be
assigned (i.e., "harmonized") prior to any goods
crossing a country border.
 International Commerce Terms
(Incoterms)
• There are 11 standard International
Commerce Terms (Incoterms) that define
the roles and responsibilities of buyers and
suppliers for cross-border shipping. Each
Incoterm assigns a different set of
responsibilities, costs and liabilities to the
buyer and the seller.
Warehousing
 Need and importance
• Regular supply
• Quality
• Stock of trade
• Price stabilization
• Seasonal products
• Perishable goods
• Continuous production
• Seasonal demand
 Warehouse Objectives
1. Maximize effective use of space.
2. Maximize effective use of equipment.
3. Maximize effective use of labor.
4. Maximize accessibility of all items.
5. Maximize protection of all items.
6. Maximize effective use of information.
7. Maximize the protection of company’s assets.
8. Minimize goods Handling.
9. Minimize the company operating Cost.
Operational Process
 ORDER PICKING
Process of selecting products to fulfill an order

Types of REVERSE
DISCRETE BATCH OR
ORDER
picking OR PICK- PICK-BY- WAVE (CROSS-
BY-ORDER ARTICLE
methods DOCKING)
 Types of warehouses
PRIVATE PUBLIC
GOVERNMENT
WAREHOUSE WAREHOUSE WAREHUOSES
S S

DISRIBUTION
CO-OPERATIVE BONDED CENTERS OR
WAREHOUSES WAREHOUSES WAREHOUSE
S

COLD
EXPORT CLIMATE –
AND CONTROLLE
STORAGE D
IMPORT

FIELD
AGRICULTURAL
WAREHOUS WAREHOUSES
ES
 INVENTORY
MANAGEMENT
 …….Types of inventory
• Raw Materials – Basic inputs that are converted
into finished product through the manufacturing
process.
• Work-in-progress – Semi-manufactured
products that need some more work before they
become finished goods for sale.
• Finished Goods – Completely manufactured
products ready for sale.
• Supplies – Office and plant cleaning materials
that do not directly enter production but are
necessary for production process and do not
involve significant investments.
 Objectives: inventory mngmnt
• To maintain an optimum size of inventory for
efficient and smooth production and sales
operations.
• To maintain a minimum investment in inventories to
maximize the profitability.
• Effort should be made to place an order at the right
time with right source to acquire the right quantity
at the right price and right quality.
 Success mantra
• Ensure a continuous supply of raw materials to
facilitate uninterrupted production.
• Maintain sufficient stocks of raw materials in periods of
short supply and anticipate price changes.
• Maintain sufficient finished goods inventory for smooth
sales operation, and efficient customer service.
• Minimize the carrying cost and time.
• Control investment in inventories and keep it at an
optimum level.
Transportation
 Transportation Management
Transportation happens to be the most fundamental part of logistic
management. Transport costs include all costs associated with
movement of products from one location to another.

The average transport costs ranges from 5 to 6% of the recommended

retail price of the product.

Transportation is the movement of products, materials and services

from one area to another, both inbound and outbound.
 Modes of Transportation

Air Water Surface Multimodal

Package
Carrier
Inland Oversea

Road Rail Pipeline

 TRUCK

• Trucking industry is divided into two parts i.e.

FTL: Full Truck Load and LTL: Less than Truck load.

• FTL: FTL pricing display the economic of scale with respect

the distance travel. FTL shipping suited for transportation
between manufacturing facilities and warehouses.

• LTL: LTL operations are priced to encourage shipments in

small lots, usually less than half a TL. LTL shipping is suites

for shipments that are large to be mailed as small packages.

 Air
• Air freighting is commonly used by companies who
work with short lead times, or advanced service levels.
• Air transportation is best suited for small, high- value
items or time sensitive emergency shipments that have
to travel a long distance.
• Air carriers normally move shipments that have high
value but light weight .
 Package Carrier

• Package carriers are transportation companies which carry

small packages. Examples: FedEx, UPS, DHL. Etc.
• Package carrier use air, truck and rail to transport the goods.
Packages carriers also provide other value added services
that allow shippers to inventory flow and track order status,
shipper can proactively inform the customer about their
packages.
• Package carrier is suited for e- business.
 Rail
• Rail transport uses freight trains for the delivery
of merchandise. Freight trains are usually
powered by diesel, electricity and steam.
• Rail is suited for bulk shipment of products like
fertilizer, cement, food grains and coal etc. from
the production plant to the warehouses.
 Water
• Water transport uses ships and large commercial vessels that carry
billions of tons of cargo.

• Water transport is used primarily for the movement of large bulk

commodity shipments and it is the cheapest mode for carrying such
load.

• Water transport is particularly effective for significantly large

quantities of goods that are non-perishable in nature and for cities or
states that have water access.
 Pipeline
• Pipeline is used primarily for the transport of crude
petroleum, refined petroleum products and natural gas.
• It include a significant initial fixed cost in setting up the
pipeline and related infrastructure.
• Pipelines are not flexible and this scope is limited with
respect to commodities.
• Unable to transport a variety of materials
 Intermodal Transportation
• Intermodal Transportation is use of more than one mode of transport
for the movement of shipment from origin to its destination.

• Intermodal operation is used two or more mode of transport

to take the advantage of inherent

economies of each and thus

provide the integrated service at

lower cost.

For example: truck/water/rail.

Packing and Packaging
INVENTORY
MANAGEMENT
Empaque y Embalaje
 Definición
• Se entiende por empaque todo elemento fabricado con materiales de
cualquier naturaleza que se utilice para contener, proteger, manipular,
distribuir y presentar un producto (desde insumos y materias primas hasta
artículos terminados), en cualquier fase de la cadena de distribución física.
El empaque también es conocido bajo el término envase, por lo que la
utilización de cualquiera de estos dos conceptos es válida.
• Respecto al embalaje, se entiende como tal cualquier medio material
destinado a proteger y consolidar una mercadería para su expedición
(manipuleo, carga y descarga, transporte interno e internacional, entre
otros), y/o su conservación en depósitos o almacenes.
• El término embalaje tiene dos significados:
• Acción de embalar los productos, es decir colocarlos dentro de un
determinado empaque o envase.
• Es la caja, pallet, contenedor destinado a brindar protección severa con el
objeto de afrontar un conjunto de riesgos.
Clasificacion de Empaques
 Vidrio
Papel y
Cartón
Metal
Empaques
Rigidos
y Embalajes
Plástico
Flexibles
Madera