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Warehousing Functions


Material handling

Customer service

Information transfer

Storage function

Receive goods Identify goods Sort goods Despatch to storage Hold inventory Recall, select goods Marshal the shipment Despatch the shipment Prepare records and advices



Purpose of Warehousing

To provide desired level of customer service at the lowest possible total cost  It is that part of the firm’s logistics system that stores products (RM, Packing Materials, WIP, FG) at and between point of origin and point of consumption and provides info to management on the status, condition and disposition of items being stored  Distribution warehousing relates mainly to FG

Reasons for Warehousing Service related Maintain source of supply Support customer service policies Meet changing market conditions Overcome time and space differentials Support JIT programs of suppliers and customers Provide customers with the right mix of products at all times Temporary storage of materials to be disposed or re-cycled Cost related Achieve production economies Achieve transportation economies Take advantage of Quantity Purchase discounts and forward buys Least Logistics cost for a desired level of customer service .

Warehouses Support manufacturing  Mix products from multiple facilities for shipment to a single customer  Break-bulk  Aggregate  Used more as a ‘flow-thru’ point than as a ‘hoarding’ point  .

depots or distribution centers  Macro location strategies: – Market positioned – Production positioned – Intermediately positioned .Distribution Warehousing  The objective is to set up a network of warehouses closest to the customer locations to service markets better and minimise cost  Could be C&FA s.

.Distribution Center Warehouse designed to speed the flow of goods and avoid unnecessary costs  Speeds bulk-breaking to avoid inventory carrying costs  Helps to centralise control and coordination of logistics activities  Products can also be cross-docked (one vehicle to another)  Market positioned. .

Market Positioned Warehouses located nearest to the final customer  Factors influencing are:  – Order cycle time – Transportation costs – Sensitivity of the product – Order size – Levels of customer service offered Production positioned…. .

FTL .In between… Production Positioned  Warehouses located close to the production facilities or supply sources  Not the same level of customer service as the earlier one  Serve as points of aggregation / collection for products made in a number of plants  Factors influencing are: – – – – Perishability of raw materials Number of products in the product mix Assortments ordered by customers Transport consolidation rates ex.

.Intermediate Positioned  Mid point locations between the final customer and the producer  High customer service levels possible even if products made in number of units  Other macro approaches look at cost minimisation or cost and demand elements to maximise profitability Transportation management….

Transportation  Very important in the Logistics function: – Movement across space or distance adds value to products – Transportation provides time and place utility  Role of transportation includes: – Provides opportunity for growth under competitive conditions – Deeper penetration into markets – Wider distribution means greater demand – Can influence product prices favourably Principles…. .

equipment and personnel Process…. .stackability Maximum vehicle unit – capacity utilization Adaptation of vehicle unit to volume and nature of traffic Standardisation Compatibility of unit load equipment Minimum of dead weight to total weight Maximum utilization of capital.Transportation Principles         Continuous flow Optimise unit of cargo .

government regulations.The Selection Criteria       Environmental analysis: shipper. public influence Deciding objectives Selecting mode Select transport type within the mode Define functions of transport Evaluation and control – customer perception / satisfaction. carrier. best practice benchmarking .

Government regulations. air. location of markets. rail. seasonality of movements and impact on customer service  Five prominent modes: – Road. ease or difficulty of handling and liability  Market related: competition. – Sixth one is use of Ropeways .Cost Factors  Can be product related or market related. stowability. water and pipeline. traffic in and out of the market.  Product related: density.

Customer Service Factors Consistency. dependability  Transit time  Coverage – door-to-door for example  Flexibility in handling a range of products  Loss and damage performance  Additional services provided  Reverse logistics… .

surplus Surplus. obsolescence can result due to: – Over optimistic sales forecasts. errors in estimating material usage.Comparison of modes…… Reverse Logistics  Movement of goods from the market or customer back to the company  The need: – – – –  Increased awareness of the environment Stringent legislation For some it is part of the business Profitability of dealing with scrap. losses in processing or overbuying based on incentives . change in product specs.

Advantages of Rail Economy – more so for goods over long distances  Efficiency of energy  Reliability – not affected by weather conditions  .

.Disadvantages Uneconomical for small shipments and short distances  Not suitable for remote stations  Costly terminal handling facilities  Inflexible time schedules  Road transport…. .

operate day and night Less capital costs – for own fleet + immunity from industrial action Fast turn-around – if articulated units like tractors and trailers are used Minimum delays . no transshipment Flexibility – routes and loading routines can be easily altered.Road Freight Advantages      Through movement – direct from consignor to consignee.

Disadvantages Susceptibility to weather and road conditions – in spite of the best protection  Unsuitability for heavy loads – rail transport more economical for bulk loads  Unsuitability for long distances – again the rail telescopic rates are more favourable  Air transport…. .

Air Transport Advantages Faster mode  Reduction in cost particularly inventory  Broad service range  Increasing capabilities  Disadvantages:  – High cost – Weather affects flight conditions – Limitations on heavy consignments Water transport…… .

Water Transport  Advantages: – Mass movement of bulk – Lowest freight cost – Preferred for long haul of low value commodities  Disadvantages: – Not for quick transit – Suitable for certain types on commodities only Pipeline…. .

all weather transport Low energy consumption – hence low cost Low maintenance and operating costs Underground. no space problem Can traverse difficult terrain Minimal transit losses Operation round the clock. safe Economies of scale – double the throughput for only 30% additional cost  Disadvantage is in the investment cost Ropeways…. . continuous.Pipeline Movement  Advantages: – – – – – – – – Reliable.

Ropeways  Advantages: – In hilly or inaccessible areas – Long and circuitous routes with streams / deep valleys – For commodities capable of movement in ropeway buckets – Short haulages of less than 50 kms – Areas where other carriers are uneconomical  Disadvantages: – Heavy investments – Limitations on size and quantity of haul How to decide on the right carrier? .

Carrier Selection Traffic Related Length of haul Consignment weight Dimensions Value Urgency Regularity of shipment Fragility Toxicity Perishability Type of packing Special handling required Shipper related Size of firm Investment priorities Marketing strategy Network of production and distribution Availability of rail sidings Stockholding policy Management structure System of carrier evaluation Service related Speed (transit time) Reliability Cost Customer relationship Geographical coverage Accessibility Availability of special vehicles / equipment Monitoring of goods Unitisation Ancillary services – bulk breaking. storage .

1 5 4.7 1 5.1 4 5.0 6 .1 5 5.Chart of Relative Merits Parameter Speed Versatility Reliability Weight age 30 10 20 Rail 5 6 6 Road 6 8 8 Air 8 5 5 Water 4 6 5 Pipe line 3 3 7 Rope way 3 2 4 Availability Continuity of service Distribution cost 10 10 20 7 6 4 8 7 5 5 5 6 6 5 6 3 8 7 2 3 8 Total score Overall ranking 10 10 5.4 2 6.

Key Learnings  Support to customer service has evolved from materials management to logistics and to supply chain management  Production and marketing are the two internal customers of Logistics  Logistics also has a direct impact on the financials of a company  Three important functions of logistics are inventory management. warehousing and transportation .

its suppliers and customers .Key Learnings  Inventory directly supports customer service but also adds to the cost and has to be managed carefully  Warehousing provides the place utility and works as a balance between production and meeting customer needs  Transportation supports the place and time utility and uses different modes to reach the products to the consumer  Modern day supply chains integrate the operations of a firm.