Logistics

Management
Lecture No. 7-8

Instructor

Asher Ramish
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A Project of UMT
Contents to be covered

1. Essentials of material handling process

2. Order picking as a function of material handling

3. Use of Cube per order index (CPO)

4. Equipment selection

5. Material handling performance measures

Where to look into the In-Plant Logistics

 Most heavily traveled routes

 No. of times the materials are approached or
touched
 No. of times the materials are moved
vertically or horizontally

 Relocating a heavily used item may be enough to go

change its handling from a $40,000 forklift with a
certified driver to a $400 pallet jack anyone can use.
Essentials of material handling process
1) Planned
1) A long range deliberate plan, Defining (what & how much)
material is moving (where & when) with description of (how) it
will be moved and by (whom)
2) Standardized (both equipment &
products)
3) Optimized i.e. removal of NVA activities
1) Material handling work should be minimized without
sacrificing productivity or the level of service. Simplifying
processes by reducing, combining & eliminating unnecessary
moves will reduce work.
4) Ergonomical & simple where ever
possible
1) Equipment should be selected that eliminates repetitive
manual labor and increases safety of workers
Essentials of material handling process

5) Designed on optimal space

considerations
1) Material Handling equipments while moving should not hinder
the manufacturing or production process.
6) Automated as much as its feasible
7) Ecological
1) Environmental impact and energy consumption should be
considered as criteria, Design for reusability when possible
8) Economical on life cycle basis.
1) A thorough economic analysis should account for the entire
life cycle of all material handling equipment.
Marking transportation aisles
 No blockage of pallets etc.
 No accidents
 Cost reductions
 Handling is typically a labor intensive activity
 Costs are decreased by (principles)
- Reducing distance traveled
- Increasing number of units handled at one time
- Seeking multiple order picking in a single order-picking
round trip
- Increasing storage density

 Cost reduction is also achieved by

- Carefully planning the physical layout of the building
- Carefully locating the items within the order-picking area
- Using automation and mechanical assists as labor
substitutes
- Using computer systems to help plan the flow of work
through the building
 Cube per Order Index

The
Thecube-per-order
cube-per-orderindex
indexis
isthe
theratio
ratioof
ofaaproduct’s
product’saverage
average
required
requiredcubic
cubicfootage
footagefor
forstorage
storagetotothe
theaverage
averagenumber
number
of
ofdaily
dailyorders
orderson
onwhich
whichthetheitem
itemis
isrequested.
requested. The
The
products
productswith
withthe
thelowest
lowestindex
indexvalue
valueare
arelocated
locatednearest
nearest
the
theoutbound
outbounddock.
dock.

· Layout example
- By popularity
- By cube
 Product Layout Example
(1 ) (2 ) (3 )
(4 )=(2 )/250 (5 )=(1 ) ´(3 ) (6 )=(5 )/(4 )
Average Required
Item Expected Average Number Storage Cube-
Size, Number of Inventory, of Daily Space, Per-Order
a
Product cu. ft. Orders/Yr. Units Orders cu. ft. Index
A 6.0 6,750 800 27 4,800 177.8
B 4.0 15,750 16,000 63 64,000 1015.9
C 1.0 11,250 25,120 45 25,120 558.2
D 8.0 25,500 18,600 102 148,800 1458.8
E 3.0 17,750 12,533 71 37,599 529.6
F 5.0 3,500 3,936 14 19,680 1405.7
G 15.0 6,250 907 25 13,605 544.2
Totals 86,750 77,896 313,604
a
Based on 250 selling days per year

By cube Basic data By CPO

By popularity
 Layout by CPO

Highest index values

Inbound rail dock

D D

F,D D

Lowest index values

C,B B,F

A,E E,G,C

Outbound truck dock

 Pallet Layout in Warehouses
Storage bay

Top-down
view of
storage bays Center line of aisle
(a) On-the-square pallet placement
(b) Angular pallet placement

Storage bay

Center line of aisle

 Equipment Selection
One-time purchase of equipment of different types can
be decided on basis of present value analysis, or by
selecting the alternative with the lowest NPV.

(1  i ) n  1 Sn
NPV  I  C 
i (1  i ) n
(1  i )n
where
NPV = net present value of equipment over its useful
life ($)
I = initial investment ($)
C = annual operating cost ($)
i = the discount, or hurdle, rate that such
investments are expected to return
Sn = salvage value in year n ($)
n = useful life of the equipment (years)
 Equipment Selection
Problem Two type A forklift trucks can do the same
work as three type B trucks. Additional data are:

Two Type A Three Type B

Trucks Trucks
Total initial investment $20,000 $15,000
Useful life (planned) 7 7
Salvage value $ 5,000 $ 2,000
(estimated)
Annual operating $ 4,000 $ 6,000
expenses
Hurdle rate 0.20 0.20
 Equipment Selection
Solution
Solve the NPV equation for the two alternatives.
For truck type A,

(1  0.2)7  1 5,000
NPVA  20,000  4,000   $33,000
0.2(1  0.2) (1  0.2)
7 7

For truck type B,

(1  0.2)7  1 2,000
NPVB  15,000  6,000   $36,040
0.2(1  0.2) (1  0.2)
7 7

Choose two type A trucks

MHS performance measures
 Vehicle travel : Discrete (or travel time)

VT=TL/TE TL : total loaded travel time, TE : total empty

travel time
 Vehicle travel : response time
 define response time for a pick-up call as the time from
when the pick-up request is made until the vehicle (starting
from an idle and empty condition) arrives at the pick-up
location
 Number of loads completed : the number of
loads (or deliveries) completed over a period of
time by all of the MHD
 MHS performance measures
 Vehicle blocking time
 The time where vehicles are unable to move
due to other vehicles

 Vehicle waiting time