Sales Distribution & SCM - Class 6

Logistics Management
Sales Distribution & Supply Chain Management 1

Elements of Logistics Management
Customer Order Processing
Flow of Actions:
• Filling order form
• Deciding specs of the product
• Deciding the quality check list of product
• Deciding the delivery schedule
• Deciding the location of delivery
Important Factors
• Cost of order processing
• Whether the co is competent/ capable to produce the product/ component
• Detailed list of specification
Techniques
• Electronic Data Interchange (EDI)
• E-ERP or CPFR (collaborative planning, forecasting and replenishment)
• web portal
Logistics Management Sales Distribution & Supply Chain Management 2
Location Analysis
Flow of Actions:
• Cost of transportation of finished goods, proximity to customers
• Availability and type of land
• Availability of secondary resources
• Availability of desired manpower at affordable cost
• Communal harmony
• Govt. regulation and taxation
Important Factors
• Cost of operations as % of sales
• Shelf life of products

Inventory Control
Flow of Actions:
• On hand inventory analysis
• Communicating the quantity, timing, quality of materials with supply points
• Getting the material of right quality, right quantity at the right time
Important Factors
• Inventory control at Planning stage
• Lead time
• Cost Vs. importance of material
Techniques
• DRP and replenishment order control
• Fixed order interval system
• EOQ with ROP system
• Selective inventory control (ABC, VED, FSN, etc…)
• Order forecasting using statistical tools
Material Handling
Flow of Actions:
• Type of materials
• Material handling equipments (e.g. fragile, inflammable,… )
• Cost ratio of material handling to material/ product cost
• Material default location, identification and traceability
Important Factors
• Product breakages
• Pilferage
• Cost of material handling
• Number of handlings
Techniques
• Operational Research
• Material flow analysis
• Computerized material retrieval system
• ASRS (Advanced storage and retrieval system)

Packaging
Flow of Actions:
• Primary requirements for materials (Refrigeration, fragile, etc…)
• Primary packaging
• Secondary package
• Cost of Packaging
• Transportation requirement (vibration proof, water or moisture tight)
Important Factors
• Protection and holding of Product
• Customer’s requirements for packaging
• Communication to customer
• Reverse logistics for packaging
• Recycling of packaging material
• Cost of packaging
Techniques
• Standardized box packaging; Containerization of packaging
• ISO 4001; Part marking ; Eco friendly packing material; bar coding
• GPS; RFID
Transportation
Flow of Actions:
• Modes of Transport
• Speed of Transport
• Ambience requirement of material (Refrigeration, Vacuum, etc…)
• Cost of Transportation
•Urgency of product to customer
Important Factors
• Urgency of the product
• Cost of the product
• Cost of Transportation
Techniques
• Containerized Transportation
• Cool chain Transport
• Multi modal logistics
• Milk run distribution system
• Cross Docking
• Direct Shipment
Warehousing
Flow of Actions:
• Location of warehouse
• Inventory level of warehouse
• Storage requirement of the product
• Packaging and repackaging requirement of the product
• Shelf life of the product
Important Factors
• Availability of space
• Availability of proper material handling systems
• Strategic location
• Packing and re-packing facilities
• Information and allied services
Techniques
• Third Party Logistics
• Third Party Warehousing

Customer Service
Flow of Actions:
• Contractual services offered to client
• Type of customer service required for the product
• Location of the service center
• Service level at the service center
• Cost of service Vs. Replacement
Important Factors
• Contractual requirements of customer
• Service Quality
• Reverse logistics
Techniques
• AMC and free replacements
• Limited (free) trial period
• Guarantee and Warantee
• User clubs
• Help lines, toll free number, call center
• CRM
Distribution Management
Distribution decisions have significant implications on:

• Product margins and profits
• Marketing budgets
• Final retail pricing
• Sales Management Practices

Distribution Management
Distribution channels can include one or more intermediaries option:

• Retailer
• Wholesaler
• Direct Mail
• Telemarketing
• e- Commerce
• Sales force

Inventory Management
Effective Inventory Management allows distributor meet/ exceed customer
expectations - product availability, and maximizes the distributors’ net profits.
Reactive Inventory System

•Channel member’s inventory needs are drawn from the inventory channel
•Retailer independently decides when & how much to order
•Wholesalers in turn independently orders to their suppliers
•Independent actions create huge uncertainty – need for safety stock
Planning Approach
•Based on forecasted demand
•Coordinates inventory requirement across various locations - sharing information
• Fair Share allocation
• Distribution Requirement Planning (DRP)
Fair share Allocation

• provides “ fair share” of inventory from a common source (warehouse) to
each distribution center

Distribution Requirement Planning (DRP)
• Tool that estimates inventory requirements at stocking locations
• ensures that supply sources are able to meet the demand
• it is a key requirement for JIT production and logistics system
• DRP is defined as a planning approach that considers multiple distribution stages

and the characteristics associated with each stage.
• it is the logical extension of MRP system (Manufacturing Requirements Planning)
• MPS defines weekly/ daily production plan and machine schedules
• Based on MPS, MRP coordinates purchase and arrival of materials and

components to support the manufacturing plan

DRP MRP
Determined by customer demand Determined by production
and organizations have no control schedule, managed by the
over it enterprise
Operates on independent demand Operates on dependent demand
Co-ordinates once finished goods Controls inventory till

are received in the plant warehouse manufacturing or assembling is
completed
• DRP – Process that co-ordinates inventory levels, plans the inventory

movement, and reschedules inventory between levels.
• Fundamental planning tool is the schedule.
• Co-ordinates the requirements across the planning horizon

Benefits:
• integration of various distribution centers – provides timely delivery to customers
• timely delivery – reduction in customer complaints, increased CSI
• helps forecast future requirements – helps anticipate shortages
• improved inventory co-ordination – MPS and MRP
Logistics benefits:
• Considerable reduction in distribution costs – due to coordinated shipments
• Contributes to maintain low inventory – can predict timely requirement & qty
• Reduction in Warehouse space – due to low inventory levels
• Improved coordination between distribution and manufacturing divisions
• Increase in Budgeting capabilities – effective simulation of inventory and
transportation requirements

Constraints:
•Need for accurate forecasted demand for each distribution center & for all SKUs.
•Three kinds of errors possible:
• Forecast itself maybe wrong
• Requires stable, consistent and reliable performance cycles
• System nervousness major constraint for effectiveness of DRP
• production breakdowns
• delay in supply transportations

Distribution Strategies
Distribution Strategies could be of the following types:
• Cross docking
• Milk runs
• Direct shipping
• Hub and Spoke model
• Pool Distribution

Cross docking
Coordinates supply and delivery so that goods arrive at receiving area and
are transferred straight away to loading areas, where they are put in
delivery vehicles.
Reduce costs due to:

•No need for inventory and material handling
•Storage in warehouse – space utilization
•Reduction is obsolescence
Two basic forms of Cross Docking

•Basic Cross Docking
•Flow Through Cross Dock

Cross docking
Basic Cross Docking
•Packages moved directly from the arriving vehicles to departing vehicles
•No need to warehouse and simple transfer point is enough
Flow Through Cross Dock
•Material arrive in large packages, multiple packages
•Package opened broken into smaller packages,
•Sorting and/ or creating sub packages of multiple components
•Smaller quantities consolidated to deliver to different customers
•Transferred to vehicles
Cross docking – developing a phase where nothing moves through a warehouse

Stock kept within vehicles – Stock on Wheels
Wholesalers use method of Drop- shipping
• Coordinate movement of goods - upstream suppliers to down stream buyers
Cross docking
How Cross Docking works
Shipping

Sorting

Transfer Area

Receiving

Cross docking
Benefits:
•Helps improve speed of flow of products – supplier to stores
•Helps reduce costs:
•labor eliminated from storage
•eliminates two big tickets – warehouse and storage
•Helps reduce amount of finished goods inventory (safety stock)
•Help in better profitability
Constraints:
•Needs strong IT base & real time information sharing – Bar codes, RFID ..
•Appropriate for products with large predictable demands – benefits of
transportation
•Greater degree of coordination and synchronization between incoming
and outgoing shipments – better information and planning
•Product availability, accuracy and quality are critical
Milk Runs
•Route-truck either delivers product-fm single supplier to multiple retailer,
or
•Goes from multiple suppliers to single retailer
•Direct movement of goods
•Main job of Logistics Manager to decide on the routing of each milk run
Suppliers Retail Stores Suppliers Retail Stores
1 A 1 A
B B
2
2 C C
3
3 D D
4 4
E E

Milk Runs
Benefits:
Reduce Cost
•Reduce transportation cost s by consolidating shipments to
multiple stores on a single truck
•Better utilization of asset (truck) and comparatively lowered costs
Proximity of Suppliers
•Milk runs helpful for frequent, small deliveries needed on regular basis
for a set of suppliers or set of retailers in geographical proximity
Reduces Inventory
•Reduce amount of inventory needed to be kept in warehouses
as safety stock
Major Challenge:
High degree of coordination and synchronization required among members
of the supply chain
Direct Shipping
•Method – goods come directly from the supplier to retail stores
•Network, routing specified only to decide quantity &Transport mode
•Eliminates need of intermediate facilities (warehouse, distribution ctr)
•For perishable items, high volume, high bulk items & specialty products
Suppliers Retail Stores

Benefits:
1 A •Elimination of intermediaries
•Saves times
B •Less damages
•Improved accuracy
2 C
Challenges:
3 •Large retail stores
D
•Higher costs
4
E •Hassle for stores personnel
•No Safety Stock
Hub and Spoke model
•Hub is the location that hold inventory for a large region
•Each spoke leading to small distribution center (housing inv fr smaller reg)
•Main driver–customer proximity – supply max customers in min time
•Today – restricted to fulfilling JIT needs
ex. If co expands supplier need to move to nearby areas to supply more
efficiently (Co –hub and suppliers – spoke)
•Products that cannot be air freighted distributed thru hub-spoke model
Example:
Nicolas Piramal Group uses hub and spoke model to reduce the finished goods
inventory . The stock holding at carrying and forwarding agent was at a level of 30
days. Once the hubs were setup, the response time reduced to 10-2 days. Using this
system the stock at the carrying and forwarding agent was reduced to 7 days and
the hubs were also 7 days bringing the overall level to 14 days. The co set up 2
hubs and one more in the pipeline. Some high volume products would directly go
carrying and forwarding agent. The problem of full truck load was solved by
supplying to the hubs

Pool Distribution
•Distribution of products to numerous destination points (customers,
stores or stop points) within particular geographic region.
•Characteristics include high frequency regular shipments in LTL quantities
•Excellent cost effective alternative to higher cost of individual LTL shipmts
•Instead of LTL direct, product is shipped to regional terminals in truckload
quantities, offloaded segregated, sorted at delivery points then reloaded
on local delivery trucks for delivery to individual destination

Pool Distribution
Benefits:
•Multiple shipments bound for a specific region, pool distribution simple,

cost effective alternative to LTL
•Speed merchandise to retail outlets
•Truckload transit time is shorter and shipments delivered next day
•Reduce claims (less handling than LTL service)
•Meet customer delivery requirements
•Reduces delivery costs to customer
•Handles peaks effectively

Transportation
•Understand Transport function
•Planning – choosing right kind of carrier
•Services according to requirements of different industries
•Integration with other supply chain functions for total
operations efficiency
Definition:
Means through which goods are transferred from one place
to another.
•Most important function and has most visible cost

Transportation
Place in the Supply Chain
Supplier Transportation Stores Transportation
Manuf. Process 2 Transportation Manuf. Process 1
Transportation Warehouse Transportation
Customer Dealer

Transportation
Functionality
•Product Movement
•Product Storage
Product Movement
•Primary transport function
•Movement of product up and down the value chain
•Some loss on account of damage or product loss
•Product is accessible for use when in transit
•Environmental hazards – pollution
•Transportation decision making – cost of temporal, financial and
environmental resources considered
Product Storage
•Less common function – vehicles expensive storage facility, useful when…
•In- transit product requires to be moved shortly, cost of loading &
unloading is more
•Origin and destination warehouse space is limited, longer route taken
•Cost of storage in veh. < Cost of unloading + Cost of Reloading + Cost of Warehouse cost

Transportation
Participants in Transportation
•Shipper ( originating party) • accessibility,
expense
•Consignee (destination party or receiver)
effectiveness
•Carrier •Environmental and
safety standards
•Government
• affects economy –
•Public high level of int. Legend
• regulations, Goods
Public
promotions, taxes
flow
etc.. Flow of
information
• Specific pickup • Max revenue asso • Specific pickup
•Delivery time with transaction •Delivery time
•Transit time •Min cost – lab, •Transit time
•Zero loss Government fuel, veh. cost •Zero loss
•Accurate and •Charge highest •Accurate and
timely transaction acceptable timely transaction
Shipper Carrier Consignee
Shipper can take the role of Carrier as well

Transportation
Transportation Format
•Private Fleet
•Contract Carrier
•Common Carriage

Transportation
Private Fleet
•Firm providing own transportation (not for hire no
economic regulation)
•Must comply with regulations – hazardous, pollution
norms, safety, etc…
•Firm must own or lease and provide managerial directions
for operations
•Could be expensive for longer distances – option for –hire
carriers
•Transportation activity incidental to main business
activities of firm
•Ex: Domino’s Pizza

Transportation
Contract Carrier
•Transportation services for select customers
•Contract – agreement between carrier and shipper for
specified transportation service for agreed cost and service
terms
•Agreement basis for carrier to receive permit to transport
commodities
•Charge different rates to different shippers
•They have fleet of vehicles based on commodities carried
•Contract carrier is cheaper than own for :
•Privately owned fleet – need for basic fixed cost of vehicles
•Privately owned fleet require – maintenance, drivers, etc..
•Not the core competencies
Transportation
Common carriage
•Non discriminatory prices to public
•Heavy consignments best transported thru common carr.
•Areas where few contract transporters are available
•Ex: Indian Railways

Transportation
Modes of Transportation
Five basic modes:

•Rail
•Road
•Air
•Water
•Pipeline

Transportation
Rail
•2nd largest network in the world – most cities and towns
•Capable for large consignments, long distance – economical
•Railways have high fixed cost, low variable operating costs
•Greatest source of tonnage – raw material extractive inds
•Becoming more responsive to:
•Customer needs
•Unit trains (coal, grain, etc..)
•Part wagon, boxes, etc..
•http://www.irfca.org/faq/faq-freight.html
Transportation
Roadways
•Most common means of transport
•Motor carriers have relatively small fixed investments
•Cost of license, user fees, toll–over the road units & miles
•Variable cost per km is high
•Handle small shipments and high value products
•Flexibility of delivery
•TL, LTL and specialty carriers

Transportation
Airways
•Less utilized, high cost
•Speed of delivery – most significant advantage
•Potential opportunity than a reality
•Ideal for firms with large no. of high value products and
time sensitive requirements
•Variable cost is very high

Transportation
Waterways
•Oldest mode of transport – ocean, seas, lakes, canals, rivers
•Capacity to move extremely large shipments
•Deep water vessels and Diesel towed barges
•Ranks between Rail and Motor transport – fixed cost
•Limited range of ops and speed – major constraints
•Supplementary haul of road and rail required (most times)
•Capability to carry high tonnage at low variable cost when
low freight desired and speed is secondary consideration
•Slow passage of inland river transport – form of
warehousing in transit – fully integrated in design
Transportation
Pipelines
•Significant part in crude, petroleum and natural gas
•Utilized for manufacturing chemicals, pulverized dry bulk
•Operate on 24 x7 basis – commodity change over and maint.
•No empty container, vehicle to be returned
•Highest fixed cost and lowest variable cost
•Pipelines not flexible and limited materials can be
transported – major dis-advantage

Transportation
Decision Factors
Three fundamental factors:
•Cost
•Includes direct cost and expense related to administration
•Indirect cost – maintaining in transit inventory
•Speed
•Greater speed – higher cost and vice versa – need to balance
•Consistency
•Variation in time required to perform movement
•Dependability of the transport

Transportation
Decision Factors
Other factors:
•Distance
•Directly contributes to variable cost
•Greater distance efficient utilization – lower cost per unit
distance
•Volume
•Greater load lesser cost per unit of weight, limited to capacity
•Density
•Weight and space consideration
•Increased density allows more units of product, limited capacity
•Stow ability
•Product dimensions – space utilization – odd sizes excessive
space
•Handling
•Fragile
Logistics Management materials require minimum handling
Sales Distribution & Supply Chain Management 43
Transportation
Transport Documentation
Three primary documents:

•Bill of Lading
•Serves as receipt, documents commodities and quantities
shipped
•Accurate description and count essential
•Basis for damage claims
•Designated buyer is bonafide receiver of goods
•Carrier responsible for proper delivery as per instructions
•Title is transferred with completion of delivery
•Specifies terms and conditions, carrier liability
•Freight Bill
•Represents carriers’ method of charging for transportation
•Developed on the information contained in Bill of Lading
•Bill may be either prepaid or collect
Transportation
Transport Documentation
Three primary documents:

•Shipping Manifest
•Lists individual consignees when multiple shipments are placed in
a single vehicle
•Manifest lists the stop, bill of lading, weight, and case count for
each shipment (each needs a separate bill of lading)
•Purpose to provide a single document that defines the content of
the total load without requiring to review individual bill of lading
•Single stop shipment, manifest is same as Bill of Lading

Transportation
Fleet Management
Study – improper management of operating assets

result in 35% increase in running cost
Issues to be considered
•Running most suitable types of vehicles
•Selecting the most appropriate type of fuel
•Ensuring vehicle safety
•Controlling associated costs
•Minimizing environmental impact

Transportation
Fleet Management
Process
1.Develop a fleet action plan
2.Assess current position
3.Identify outline objectives (measurable)
•Cost saving
•Reduction in overall mileage
•Reduction in fuel used
•Reduction in emission
•Time scales
4.Review performance
Factors
1.Transport/ mobility requirements
2.Vehicle Driver
3.Vehicle Selection

Transportation
Intermodal Transportation
Mode – term used to differentiate basic ways of transport
Intermodal transport refers to the journey that involves two or

more different modes of transport

Transportation
Choice of mode
Apart from nature of materials to move, volume and distance
other factors affecting choice of mode….
• Value of Materials – expensive items higher inv. cost – faster mode
• Importance – even low value items holding production
•Transit times - ops responding quickly to changes
•Reliability with consistent delivery is important
•Cost and flexibility to negotiate rates
•Reputation and stability of carrier
•Security loss and damage
•Schedule and frequency of delivery
•Special facilities available
• Faster movement through Supply chain need fewer warehouses
• Cheapest modes are sometimes the least flexible
Transportation
Choice of mode
Selection Mode
determinants Railroad Motor Water Air Pipeline
Cost 3 4 2 5 1
Transit time 3 2 4 1 -
Reliability 2 1 4 3 -
Capability 1 2 4 3 5
Accessibility 2 1 4 3 -
Security 3 2 4 1 -
1 = Best; 5 = Highest, Worst

Transportation
Choice of mode
• Organization do not have to use the same mode for the
entire
journey
• Divide the journey into stages
Main run
Forward
Final Run
Run

Transportation
Limitation
•Carriers reluctant to participate
•Transport of freight from one to another – time delays, adds transport cost
• Brought in the concept of Containerization
• Usual containers are 20 feet and 40 feet long
Benefits of Containerization:
• Simplified transport and flow of goods
• Easier and faster handling
• Faster deliveries
• Reduced loss due to damage, pilferage, misplacement
• Reduced packaging cost
• Separation of incompatible goods
•Protection from environment
•Can act as storage anywhere
•Piggy back or trailers on flat car (TOFC)
Warehousing
Common Warehousing decisions:
• Number of Warehouses
• Types of Warehouses
• Location of Warehouses

Warehousing
Types of Warehouses
Private Warehouses– more control, ties up capital, less

flexible
Public Warehouses – charges for rented space, additional cost
for inspection, packaging, wider choice and types, availability.
Basic Types of Warehouses:

•Bonded Warehouses
•Field Warehouses
•Cold Storages
•Agricultural warehouses
•Distribution warehouses
•Buffer storage warehouses
•Facilities
•Export
Logistics and Import warehouses
Management Sales Distribution & Supply Chain Management 54
Warehousing
Warehouse Operations
•Receiving Goods
•Identifying Goods
•Sorting Goods
•Dispatching Goods
•Holding Goods
•Retrieving Goods
•Marshalling Goods
•Dispatching Goods
•Preparing records and advices

Warehousing
Site Selection Process
Factors for analysis
Quantitative factors:
•Demand Centers and patterns
•Transportation costs and requirements
•Labour cost
•Facility costs
•Utility costs
Qualitative factors:
•Customer service levels
•Top management preferences

Warehousing
Site Selection Process
•Create a strategic plan

•Develop location strategies
•Get buy-in from all levels and functions
•Use site selection models to assist analysis

Warehousing
Warehouse Layout and Design
Importance….
•Require substantial investments – money and effort
•Involve long term commitments
•Significant impact on cost and efficiency of short term ops
Some essential elements:
•Arrival bay – goods delivered and sorted
•Cross Dock area
•Storage bay – goods kept as stock
•Departure bay – deliveries loading
•Material handling system
•Information system
Warehousing
Warehouse Layout and Design
Characteristics of Good layout:

•Layout should give smooth flow of materials into, through and out
•Simplify movements, eliminating or combining separate movements
•Layouts where high level of storage possible
•Layouts having movements in straight lines
•Layouts have spare roof space for overhead movement of materials
•Good illumination
•Parking / maintenance facilities for material handling equipment
Warehouse efficiency is judged by turnover per cubic meter,

rather than turnover per square meter
Warehousing
Warehouse Racks layout
Racking:
• What type of racks to be used?
• What is best layout for Racking?
•Where should different items be stored on the racks?
Approach:
•Mark out grids on floor space – identify different locations for bulk, racks etc..
•Use of shelves, racks for smaller components kept in pallets
•Estimate demand for materials over next 5 years appox.
•Translate forecast into movement of materials
•Compare available equipments for storing and handling
•Find space needed for storing each item
•Identify which materials need to be next to each other, and far apart
•Develop outline plans and choose best after iterations
•Add details to final plan
Warehousing
Warehouse Material handling equipments

Warehousing
Warehouse Automation
Components
•Fixed Machinery
• Automated cranes
• Conveyors
• Sortation systems – barcode, RFID…
• Mobile Technology
• Radio Data Terminals – PDAs or truck mounted – built in barcode
reader
• Software
• Integration software
• Operational Control Software – low level decision making
• Business control software – higher level functionality – incoming
deliveries, scheduling order fulfillment, assignment of outgoing

Warehousing
Benefits
• Automated Goods in Process
• Automated Goods retrieval for Orders
• Automated Dispatch processing
WMS
• Primary purpose – control the movement and storage of materials
within an operation.
• Directed picking, Directed replenishment and directed put away
• increased accuracy, reduction in labour cost and greater ability to
service the customer by reducing cycle times

Warehousing
WMS - Other functionalities

• Integration with Automated Material Handling Equipment – can
integrate with ASRS
• Advance Shipment notification (ASN) – Vendor sends e advanced
shipment notification – attaching compliance labels to shipment
•Cycle Counting
•Labour Tracking/ Capacity Planning – labour report, standard times,
machine hrs , tasks per shift – determine capacity and load
•Activity Based Costing/ billing
•Browser Based

Warehousing
Third Party Warehousing
• Global warehousing business – exceeding USD 100 bn.
•Public Warehousing, Private warehousing and Contract Warehousing
•India – Contract warehousing growth – 12-15% p.a.
•State Warehousing Corportation
•PSU Warehousing viz:
•Punjab State Warehousing Corp (Conware)
•Central Warehousing Corporation (CWC)
•444 warehouses
•Storage capacity of 7.3 million tonnes
•Foodgrains, custom bonded,
•Container Freight Stations
• inland clearance depots
• air cargo complexes

Warehousing
Value Added Warehousing
• Evolved to meet the needs of today’s customer
•Use of IT to bridge gap of tomorrow’s demand based requirement
• Vendor compliant labeling
• Store Ready packaging
• complete production activities – postpone specialization, refine
product characteristics
• Master Lock, WI,USA-DC stored locks for school lockers, working with
GENCO, warehouses lock components, based on orders final assembly
done, packed and fulfillment done
•Climatizing fruits and vegetables
• Removal of protective packaging – reuse, recycle
•Sembcorp Logistics associated with a client in Nagpur over 5 years, started
Mother warehouse and distribution to state wise warehouses and delivery to
end customers. Later 3 regional warehouses – material kitted, packed,
stickered, delivery to end customer, payment collection and bank deposit.
Packaging
Packaging for Logistics
• promote economical, environmental and technology.
•Reduce metal thickness, shapes easy to open, self heating cans
•Better handling, storage, stacking and transportation
• India produces 60% of world mangoes process only 3% (processing and
packaging are key issues
•Primary package must
•Identify product
•Contain, protect, preserve and communicate the product
• contribute to physical distribution efficiency
• easy to handle, open,store,inspect, dispose,resuse, recycle
•3 levels of package – primary package, shipping container, unit load
•Unitization – consolidation of several loads into large units, to be picked up or
moved as a single unit – pallet (most common)
•Highest cube utilization – vehicles, containers designed in relationship with
pallets

Packaging
Packaging for Logistics
Important Aspects:
1.Marking/labelling
• Facilitate identification of cargo
• Indicate hazard nature of cargo
• Communicate handling stowage instructions
2.Identification marks and positioning – 2 surface, small units on top too, bales
both side, pictorial marking, danger symbol
3.Method and type of marking
• No tags, cards tie-on, capital letter, stenciled, printed, stck on label
4.Factors affecting during transit
• Destination –time to travel
• Handling – manual, mechanical
• Ability to hold
• Shocks, Vibration
• Compression, altitude
• Climate condition, magnetic fields…
Reverse Logistics
• Operations related to the reuse of products and materials
• Product Recovery Management (PRM) – care for products and
materials after they are used.
• All logistics activities to collect, disassemble, process used products,
product parts, and/or materials in order to ensure sustainable
(environment friendly) recovery.
Deals with:
• What alternatives are available to recover products, product parts, and
materials
• Who should perform the various recovery activities
• How should the various activities be performed
• Is it possible to integrate it with classic production and distribution sys.
• What are cost and benefits of reverse logistics, both economical and
environmental point of view
Important condition for recycling and reuse is the separation into useable and
not- useable items. Flow of useable parts substituted for ordered parts.
Logistics Management 69
Sales Distribution & Supply Chain Management
Third Party Logistics – TPL/3PL
• Outsourcing logistics and distribution function
• Logistics and Distribution activities add up to 5 % of cost and
inventory of 15% - need to increase operational efficiency
• Outsource to LSPs (Logistics Solution Providers)
Reasons for opting 3PL services
• Improved Strategic Focus
• Resource Constraints
• Lowered Costs (research – reduction of inventory mgmt – 15-30%)
• Expansion of markets
• Professional and scientific approach to logistical problem
• Improvement in Service Levels, improved response time
• Efficient management of inventory – better utilization of WC
• Increased flexibility
In addition to logistics and distribution, they also perform functions such as fund
collection, providing information of goods movement, consumer demographics,
warehousing and value added services – assemble, package, reverse logistics
Third Party Logistics – TPL/3PL
Infrastructure Requirements
•Warehouse
•Fleet of vehicles
•Hardware and software for information needs
•Advanced material handling capabilities
•Good team of consultants
•Trained manpower
•Reach in terms of geography
Selection factors
•Knowing where to go – define logistics management goals, visualize
orgn status after outsource, use outside consultants, alliances
•Knowing the needs and objective – Setting up of outsourcing
objectives, participation of key personnel of critical departments, IT,
finance, marketing, production, field staff, HR and Supply Chain dept

Third Party Logistics – TPL/3PL – Evaluation factors

Measuring and Evaluating Performance
Metrics of evaluations (key ones)
• Transportation
• on-time shipment (%)
• on time delivery (%)
• transportation cost per mile (INR, USD,…)
• Warehousing
• Percentage orders shipped in exact quantity against shipping order
• Per unit cost of Warehousing
• Cost of Warehouse including the overheads
• Number of cases handled per hour per employee
• Picking accuracy – (% of line errors)
• Order fulfillment %
• Item Fulfillment %
• Inventory accuracy
• Loss and damage
• Cost
• Service Costs
• Cost reductions – Q to Q
Measuring and Evaluating Performance
Metrics of evaluations (key ones) – contd..
• Quality
• Reports – ability of reporting
• Process improvement (adherence to joint initiatives)
• Availability
• Customer Satisfaction
• Handling routing
Other non quantifiable metrics

• Flexibility
• Support of top management
• Investment in infrastructure
• Investment in Information systems
• Financial Stability

Fourth Party Logistics – 4PL
• Coined by Accenture Consulting in mid 90’s
• Exhaustive survey – CSI – 3PL costs were way above expectations
• balance of risk-reward model – reward balance tilt towards 3PLs –
risk borne by organization – fee based outsourcing – inflated ops cost
• To model a more dynamic relation …. Defined as:

•“An integrator that assembles the capabilities , technology and
resources of its own organization and other organizations to design,
build and run comprehensive supply chain solutions”
• For firm to be 4PL – exhaustive skills in investing and maintaining

the infrastructure and resources that makes it manager of multiple
4PL service providers crucial to client organization
• Misconstrued by many as … 3PL + service …. Started offering value

added services – assembling, picking, …. Market as 4PL

Change Leader
• supply Chain visionary
Fourth Party Logistics – 4PL • Multiple customer relationship
• Deal shaper and maker
• Supply Chain re-engineers
Architect/ • Project Management
Integrator • Service, systems & info integrator
• Continuous innovation
Decision Makers
• Experienced logisticians
Control Room
• Optimization engines, decision support
(intelligence) • Neutral positioning
• Manage multiple 3PLs
4PL • Continuous improvement
Supply chain Information
Infomediary • IT sys integration, infrastructure prov.
• Real time data tracking
•Convert data to information
•Provide info to point of need & tech
Resource supp
Assets
Providers • Transportation asset provider
• Warehouse, property facilities
• Manufacturing – outsourcing
• Procurement service
•Co-packing service
Technology component
…………..not the only one, but key component for
disseminating information for being responsive to changes
GPS Technology
Space Segment
• use of 24 satellites – 11K nautical miles above
• any moment receive signals from 6 satellites
• precise timing of 3 nanoseconds … real time transmission
Ground Control Stations
• consists of unmanned monitor station located around the world, master
ground control and four large ground stations transmitting signals to
satellites
GPS Receivers
• Handheld , mounted on vehicles.
• detect, decode and process GPS signals
Technology component
GIS Technology
• computerized system for capturing position of an object
• then processing, enhancing, querying, analyzing and storing it with
spatially referenced data.
• this information can be visualized later
• this can be stored with any other layer of data – combine with customer
profile data for a particular area – customer demographics
Key components
• hardware and software
• hardware – data input device, printing device
• if data not in digital form, use of remote sensing devices – use of satellites
and airplanes
• Software – data acquisition, data processing, analytical and data
presentation modules

End of topic
Sales Distribution & Supply Chain

Management 79

Sales Distribution &amp; SCM - Class 6

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Logistics Management

Sales Distribution & Supply Chain Management 1

Logistics Management Sales Distribution & Supply Chain Management 3

Logistics Management Sales Distribution & Supply Chain Management 5

Logistics Management Sales Distribution & Supply Chain Management 8

Distribution decisions have significant implications on:

Logistics Management Sales Distribution & Supply Chain Management 10

Distribution channels can include one or more intermediaries option:

Logistics Management Sales Distribution & Supply Chain Management 11

Reactive Inventory System

Fair share Allocation

Logistics Management Sales Distribution & Supply Chain Management 12

• DRP is defined as a planning approach that considers multiple distribution stages

• it is the logical extension of MRP system (Manufacturing Requirements Planning)

• MPS defines weekly/ daily production plan and machine schedules

• Based on MPS, MRP coordinates purchase and arrival of materials and

Logistics Management Sales Distribution & Supply Chain Management 13

Co-ordinates once finished goods Controls inventory till

• DRP – Process that co-ordinates inventory levels, plans the inventory

Logistics Management Sales Distribution & Supply Chain Management 14

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• Hub and Spoke model

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Reduce costs due to:

Two basic forms of Cross Docking

Logistics Management Sales Distribution & Supply Chain Management 18

Cross docking – developing a phase where nothing moves through a warehouse

Logistics Management Sales Distribution & Supply Chain Management 20

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Suppliers Retail Stores

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•Multiple shipments bound for a specific region, pool distribution simple,

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Supplier Transportation Stores Transportation

Manuf. Process 2 Transportation Manuf. Process 1

Transportation Warehouse Transportation

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Logistics Management Sales Distribution & Supply Chain Management 30

Shipper Carrier Consignee

Shipper can take the role of Carrier as well

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Five basic modes:

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Three primary documents:

Three primary documents:

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Study – improper management of operating assets

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Logistics Management Sales Distribution & Supply Chain Management 47

Intermodal transport refers to the journey that involves two or

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Sales Distribution & SCM - Class 6

Sales Distribution & SCM - Class 6