Inventory Accuracy

Supply Chain Strategy

Chapter 8: Warehouse Operations

Edward Frazelle
Georgia Tech
US 2002
Cycle Inventory Counting
Physical Inventory Count (PIC)
It is a wall-to-wall counting involving all the business stocks: raw material, work-in-
process, and finished goods. It is meant to find out the differences in quantity and
location between inventory records and physical inventory. Usually, it is performed once
a year, because it is a resource-intensive task and it is required to stop operations. Its
importance for operations lies on the fact that it allows to recover high record accuracy.

PIC Process (Planning and Execution)

1. Check with Quality Dept. for the counting process approved in the company.
2. The preparing process should start, at least, three months in advance.
3. Present the timeline to stakeholders, involving the count of every warehouse.
4. Set the date by agreeing especially with finance, sales, production, and purchasing.
Consider pending purchase/production orders and customer orders
5. Get the warehouse cleaned and sorted (5s) and the resources ready to go.
6. Identify the people in charge of the counting: warehouse manager, leaders, counters.
(their training should be thorough)
7. Prepare the required stationery: pens, control cards and worksheets.
8. Schedule the people and the route. What items are going to count? By zone?
9. Ensure all the movements have been recorded.
10. Meetings: reminder, training, notice of starting.
11. At the date and place agreed, the counting team meets the warehouse manager,
delivering the authorization to undertake the counting.
12. Security teams enforces the surveillance in the warehouse, check blind spots and
CCTV records.
13. The counting is performed by two-people teams, one counting on the control cards
and another writing down on the worksheets: counter, date and hour, item code,
quantity found, location code.
14. All the worksheets are handed over to the inventory control person. The team leader
would like to request the worksheets throughout the day, every hour or three hours
checking variances before it is finished.
15. The team leader collects and enters the counting data and matching the actual
information against the recorded data. When variance is identified, there’s a need for
a second count with the leading team (team leader and warehouse manager) present
and supporting the finding.
16. Prepare the final report: facts and figures, shortage and surplus, misplaced items, the
IRA value,
17. Results: and the most likely tracing path around which the error could be generated,
root-cause analysis (how much time after?)
18. un informe que determine las causas de las variaciones. Deberá tener en cuenta los
criterios que se detallan a continuación : Sobrantes de Inventario.- Determinar su
Inventory Accuracy
Inventory Record Accuracy

Roger Brooks and Roger Wilson

John Wiley & Sons
US 2007
Introduction
Inventory remains an important part of the manufacturing, distribution,
and retail infrastructure. Managing this critical resources starts with
creating and maintaining accurate inventory records. However,
inventory and record accuracy are usually overlooked and only become
important when they’re not working properly.
Frequently, companies don’t understand the purpose of inventory and
how to track it. It is perceived just as something “out there” in
manufacturing, distribution, and in stores – a necessary evil.
What are inventory records?
Inventory records are hard copy or electronic documents that reflect
how much and what kind of inventories a company has on hand, on
order, or committed to work-in-process.
Inventory levels are continually altered by purchases, allocations, and
sales.

But the fact remains: supply chain needs inventory. The notion of “zero
inventory” will never be achieved as long as products required to be
made, distributed, and sold. Even in the best cases of lean
manufacturing some inventory exists. You must have inventory to do
business. More isn’t always better nor is less. But knowing how much
you have and need to run your business is the best.

Knowing what you have is what this book is about.

Chapter 1. The Company Bank

For most companies, inventory is their greatest short-term asset. Yet
few threat it that way. American manufacturing companies find more
than half of their inventories inaccurate. A company that carries USD 15
million in inventory may easily be off in its accounting by half a million.

For some reason, executives track currency closely, but as soon as that
currency is converted into materials, parts, or products, their interest or
ability to account for them breaks down.

Inaccuracy doesn’t allow a company to really know the state of its

inventory assets. Without that knowledge, its ability to schedule and The vanishing best-seller
deliver what its customers want is significantly impaired, which A manager of a major NY book publisher was stunned by the reprint notice on his desk. It implied that he was almost out of
stock on one of the firm’s best-selling books. Can’t be, he thought. The monthly sales report indicated 65.000 copies still in the
translates into different costs, reducing profits and negatively impacting
warehouse.
operations.
Always check this balance: Inbound + Storage = Sales
Firms that do not maintain accurate records pay a price: large buffer
stocks, production interruptions, excess cost for rush orders, wasted
management time.
Supply Chain Map
Distribution Analysis Performance (PARCS)
Function and Performance Diagnostic Model the operations dynamics and develop the
system to measure the performance accordingly,
1. Data Collection specifically, how time and productivity impact on costs
2. Analysis and Insights
3. Scenarios and Proposal
4. Project Outline: Activities, Cost, and Time

Function Strategy Tactic Operation

Inventory
Planning
Distribution
Network
Transportati
on (Inbound)
Warehousing • Review on-going optimization projects • Identify cost drivers and develop the operating budget • Order cycle time
Optimization
• Analyze cost-reduction targets • Monitor budget compliance • Picking time
• Analyze the WH OPEX
• Determine the customer volume variance. Did Picking
we lose sales volume? How much does it • ABC analysis to assess the current locat
worth? Is such decrease due to WH issues? • ABC analysis to assess the design of the

Transportati • Identify the right service level • Lead Time Compliance • OTIF Delivery
• Identify the right outbound transportation cost • Delivery points Rate
on • % Perfect Orders
(Outbound)

1. Understand your operation

• Resources: Capacity and Utilization
• Current situation: operation issues and on-going projects
2. Assess the customer satisfaction
• Identify main customers and SLAs
3. Identify your bottlenecks

4. Develop optimization projects

Strategy: Operation:
1. Future Plans (Expansion and Growth) 1. Products
• Introduction of new products • Weight and volume by SKU
• Expected demand (volumes, locations, and time) • Regulations (storage and transport conditions)
• New business units and services (Increased complexity of the WH operation) • Unit load configuration (pallet, layers, cases, eaches)
• On-going Optimization Projects (Objectives and Status) 2. Supply Process
2. Route-to-market Structure • Location of vendors and production plants
• Distribution Channels • Supply variability in volume and time
• Main customers by channel • Inbound transportation costs
• Service Policy: products, replenishment frequency, lead times, fill rate. 3. WH Process
3. How many supply chains exist in your company? • Performance Indicators and System
4. How are the terms “logistics”, “supply chain”, and “distribution” used in your • Activity Profiling
company? • Min: Picking Travel Time/Distance
5. Who is in charge of the warehousing strategy for your company? • Max: Slot Height Utilization
• Order Processing (Waving and Picking)
• Storage and Retrieval Flows
• Outbound scheduling (MPS when feeding production and DRP when replenishing for
inventory planning, or Delivery Planning when fulfilling sales orders)
• Picking, Assembling, Shipping (Cross-Docking)
4. Demand Process
• Delivery Points
• Customer Performance Indicators
5. Facilities
• Is it a warehouse, a distribution center, a fulfillment center, or a local depot?
• Dimensions (total area m2 and pallet positions)
• Utility services (consumptions and cost)
• MHE (type of equipment, % utilization)
• Storage Equipment (type of rack, weight capacity, rack levels, number of slots)
• Layout: Zoning, Aisles Width
6. Operating Budget
• OPEX Analysis
• Budgeting Process
• Budget Breakdown and Variation
• Past-projects or on-going capital investment and ROI
• Reverse Logistics (closed-loop supply chains)
Warehouse

Warehousing is a critical part of the supply chain

 2. What are your customer requirements? Not all the customers
want or can afford the same level of service. Response times, Distribution Center Fulfillment: Identify what includes the
putaway and picking density, and special packaging are the service agreed with the customer. Are
most frequent factors. those requirements being fulfilled?
Interleaving: Does the WH planning take advantage
Customer Service Polic
of mixing the putaway and picking moves? Or do they
have separate schedules for receiving and shipping? and Cost-to-Serve
Touch Analysis
Supply Analysis
Customers
(Purchase or Manufacturing)
[B1] Supply [A1] Customer 2
% of supplier orders
1. Who’s got the control of scheduling 1. How does the WH receive the customer
received damage-free
receipts? SNP, P&P, WH? orders? When and by whom?
and with correct
2. How is the WH aware of the incoming 2. What is the service level agreed? DP
V1 documentation
shipments? ASN? Receiving (response time) 1
appointments? 3. What are the fulfillment priorities? If
3. How docks are assigned for truck capacity exceeded
unloading? Do they consider the load 4. Orders:
destination to reduce processing time? • Customer
Inbound Storage positions, picking replenishment • Type of customer Outbound DP
V2
Transportatio or cross-docking? • DLV point Transportatio 2
4. Indicator: OTIF Receipts, Receiving • DLV date or time window
n Time Can you allow narrow aisles and one-way flow in order • Item and QTY n
[B2] Putaway and Storage
1.
to increase pallet positions while avoiding Order Fill Rate
Does the WH zoning save space for
incoming goods of congestion?
each class? DP
V3 [A2] Shipment 3
Dock-to-Stock cycle • Distribution Plan
time • Transit time
• Fleet size/availability
• Departure time.
[3] Fulfillment • What’s the receiving time agreed
1. What time does transportation need the2hrs)
orders DP
V4 with the customer? (1hr, 4
ready to ship •at?Indicator: OTIF Delivery
2. Schedule picking and shipping operations
3. What should the number of orders be processed per
day in your facility? By shift, by customer, by
Inventory Count
channel, by worker, by team or zone.
Accuracy (by location)
4. Does the picker routing consider the load
configuration, by weight and volume to
Average/Peak Storage maximize the picking device
Orderpayload?
Picking Accuracy
Capacity Used OTIF Shipping

Efficient Labor. Workforce Profile: Identify the skills of each people,

Which task do they perform the best in? Do we need
more cross-trained people?
Introduction
Supply Chain Strategy
Chapter 8: Warehouse Operations

Edward Frazelle
Georgia Tech
US 2002
Why warehousing when there are many initiatives aimed at eliminating
the warehouse?
The warehouse plays a vital role in the success, or failure, of the business.
They just have had to adapt their function.

 The plight of the warehouse manager

Under the influence of: The warehouse needs to:

• E-commerce • Execute more, smaller transactions
• Supply chain • Store and handle more items
collaboration • Provide more product and service
• Globalization customization
• Quick response • Offer more value-added services
• Just-in-time • Process more returns

While being constrained by:

• The time to process an order
• Less margin for error
• The availability of skilled personnel
• The availability of WMS capability

This is the plight of the warehouse manager. The warehouse is asked to do

so much and at the same time being constrained by resources. Never before
has it been so critical for the warehouse to work effectively.
 
Warehousing is the last of the five logistics activities to be optimized.
The warehouse serves all the other four logistics areas; i.e. the warehouse
must be designed to meet the requirements of the other four areas by:
1. meeting the customer service policy requirements
2. storing the stock required by inventory planning
3. receiving the quantities set in the supply planning
4. providing the orders scheduled by the transportation planning.
 
Good logistics planning may eliminate the need for warehousing or suggest
a 3PL service provider to take over.
The Role of the
Warehouse
Supply Chain Strategy
Chapter 8: Warehouse Operations

Edward Frazelle
Georgia Tech
US 2002
In the distribution network, the warehouse may play one or more of the
following roles:
1. Warehouse. The warehouse holds inventory used to balance and buffer
the variation between production schedules and demand volume.
• Raw Material. Holds materials at or near the point of entry into
the manufacturing process.
• Work-in-process. Holds sub-assemblies and products at various
points along the production line.
• Finished goods. The warehouse is located near the
manufacturing point and is often characterized by the flow of full
pallets in and out. This type of warehouse may have demand
ranging from monthly to quarterly stock replenishment to the
next level of distribution.
2. Distribution center. Accumulate and consolidate products from various
manufacturing points within a single firm or from several firms for
combined shipment to common customers. It is usually located central
to either the production locations or the customer base. The product
flow goes by full pallets or cases in and full cases or broken-case
quantity out. The facility typically responds to regular weekly or monthly
orders.
3. Fulfillment center. This facility processes small orders with faster
response times.
4. Local depots. Located in the field to shorten transportation distances,
they facilitate the small drop size and rapid response distribution
required by fulfillment centers

When feasible, two or more roles should be combined in the same

warehousing operation. Current changes in the availability and cost of
transportation make that possible for many products.
Warehouse Planning
Supply Chain Strategy
Chapter 8: Warehouse Operations

Edward Frazelle
Georgia Tech
US 2002
This chapter describes the principle of warehousing that yield world-class warehousing
operations. The principles follow the next warehouse planning methodology.
Warehousing Process
The warehousing operation has a fundamental set of activities.
 
1. Receiving are the activities involved in the orderly receipt of materials, providing the
assurance that the quantity and quality of materials are as ordered, disbursing materials to
storage or other areas (cross-docking or picking replenishment)
2. Pre-packaging (optional)
3. Putaway is the activity of placing the products into the storage area. It includes material
handling, slot allocation, and product placement
4. Storage is the physical containment of merchandise while it is awaiting demand. The
storage method depends on the size and quantity of the items in inventory and the
handling characteristics of the product or its container. And frequency?
5. Picking is the process of removing items from storage to meet a specific demand. It is the
basic service a warehouse provides for customers and is the function around which most
warehouse designs are based.
6. Packaging (optional)
7. Sortation
8. Shipping may include checking orders for completeness, preparing shipping
documentation, weighing shipments to determine freight costs, determining load
configuration (own fleet) or accumulating orders by carrier.
Warehouse Activity Profiling
The warehouse activity profiling is made up of a variety of ordering In this example, we’re trying to figure
behavior distributions that are helpful for plotting the warehouse out if it makes sense to zone the
operating strategy. warehouse by these three item-families.

1. Order Activity Profile If the orders are mixed, the items tend
• Order mix distribution to appear together on customer orders,
• Family mix distribution so when building the pallet the picker
• Handling unit distribution (full/partial pallet and routing needs to consider starting with
full/broken case) the heavier items below. If that is the
• Order increment distribution case, zoning the warehouse in that way
• Lines per order distribution would add travel time required to travel
• Cube per order distribution across those zones or to pass the pallet
• Lines and cube per order distribution from one zone to the next.
2. Item Activity Profile
• Item-popularity distribution If the orders are pure, that means
• Cube-movement/volume distribution orders can be completed out of just one
• Popularity-volume distribution item family, then zoning the warehouse
• Order completion distribution along these lines (processing cells) will
improve efficiency.

Order Activity Profile

Family Mix Distribution
In many cases, the warehouse operating strategy is dictated by the
order mix – the extent to which orders require items from multiple
families of items. If the orders are pure, they tend to have just one
of the families of items on them. Hence, the order mix is an early
indicator that the warehouse requires zoning, on the basis that it
will lead to better productivity and customer service.
The next family mix distribution comes from a wholesaler of fine
paper, copy/laser paper, and envelopes.
In the figure, 75% of the orders can be completed out of a single item-family, suggesting that zoning the warehouse by
item family will yield good productivity, customer service, and storage density performance.
To determine the family or zoning, assess the combinations of products-locations that are requested jointly, but also
consider the picking sequence (heavy items first)
How much will cost decrease and productivity increase by?
Assess the current v. future performance; i.e. reduction in picking time, hence in the order cycle time and how much
cost savings yield the new zoning.

 Family Merchandise Carton (D) Carton (W)

Category A Flat Stock 30 x 24 x 9 in. 80 lb.
Category B Cut Stock 24 x 10 x 10 in. 20 lb.
Category C Envelopes and labels Extremely small Lightweight
Full/Partial Pallet Mix Distribution Full/Broken Case Mix Distribution
With this distribution, we try to determine if we need With this distribution, we try to determine if we need
separate areas for pallet picking and case picking. separate areas for full and broken case picking.

In some warehouses, pallet and case picking are performed

out of the same item location, aisle, and/or area of the
warehouse. But generally, it is recommended to establish
separate areas for pallet and case picking, replenishing a
case picking area from a pallet reserve/picking area.

In the figure, the distribution indicates that only a small

Should we zone the warehouse based on case/pallet
picking (unit-load)? Absolutely, in the figure, 80% of the
orders can be completed from either case quantities (50%)
or full pallets (30%). Otherwise, we would require more time
and resources merging mixed orders
portion of the orders require a mixed fulfillment (20%).
Hence, to create separate areas for full and broken case
picking will yield two order completion zones with very little
mixing between them.
Order Increment Distribution
The objective is to determine the portion of a unit load, in
this case a pallet, requested on a customer order.

The picking planning should classify the orders in the WMS,

as pallet pick order, case pick order, or mixed order. For
mixed orders, the WMS should consider for pick routing for
pallet and case picking and get them sorted by individual
orders.
Maintenance
Time-Driven Activity-Based Costing
Robert S. Kaplan and Steven R. Anderson
[Accounting]
Harvard Business Review
November 2004
Electric Forklifts
El montacargas electrico ofrece un ahorro considerable frente a uno de combustion.

Battery
La batería, por lo general, constituye el 30% del valor de un equipo nuevo. La batería
permite trabajar con un buen funcionamiento durante mas de 6000 horas o
alrededor de 5 años con un apropiado mantenimiento de acuerdo al instructivo del
fabricante.

El objetivo es maximizar su rendimiento:

1. Planear los períodos de carga en función de su trabajo.
• It will reduce the forklift downtime.
2. No utilizar el equipo cuando la batería tenga menos del 20% de carga.
• La descarga total causa daños en la batería y los components eléctricos
3. No cargar la batería durante períodos breves (descanso laboral)
• No es recommendable cargar la batería durante descansos breves (carga
ocasional). La duración de vida de la batería depende de los ciclos de
carga, es preferable dejar reposar y enfriar la batería.
4. Revisar el nivel de agua
• El agua es esencial para el funcionamiento y duración de la batería.. En los
ciclos de agua dentro de la batería el agua se desasocia en oxigeno e
hidrogeno. El hidrogeno se asocia a las placas negativas y el oxigeno en
las placas positivas. Si las placas quedan expuestas al aire cuando el nivel
del agua baja, estas se secan y se vuelven frágil, causando daños
permanentes a estas. Por eso es importante añadir agua destilada de
forma periódica cada 5 – 10 cargas. El derramar agua por superar el limite
de llenando causa daños permanentes.
5. Evitar los ciclos de carga rápidos.
• La carga rápida puede acortar los tiempos de carga en 10-20%. Sin
embargo, el calor intenso puede reducir la duración de la batería, en
diferente medida, de plomo, de níquel y litio.
6. Revisar la sulfatación de la batería.
• Sucede cuando cristales de color blanco de acido sulfúrico se adhiere a las
placas de plomo, lo que impediría la recarga, mantenga la carga y se
suministre. Este problema puede deberse al exceso de agua y suele
producirse lugares cálidos.
7. Proteger cargador para evitar deterioro o daño con el paso
• Eso es proteja su cargador en un lugar donde no se deteriore o se pueda
Activity-Based Costing
Time-Driven Activity-Based Costing
Robert S. Kaplan and Steven R. Anderson
[Accounting]
Harvard Business Review
November 2004
Time-Driven Activity-Based Costing
Activity-based costing looks like a great way to manage a company’s limited resources.

But many managers who have tried to implement ABC in their organizations on any
significant scale have abandoned the attempt in the face of rising costs and employee
irritation. They should try again, because the new approach we lay out next sidesteps
the difficulties traditionally associated with large-scale ABC implementation by relying
on informed managerial estimates rather than on employee surveys. It also provides
managers with a more flexible cost model to capture the complexity of their operations.
The time and cost demands of creating and maintaining an ABC model on this scale is a
major barrier to widespread adoption at most companies. Since the systems that are put
in place are updated infrequently –because of the costs of reinterviewing and
resurveying- the model’s estimates of process, product, and customer costs soon
become inaccurate.

ABC made difficult

The roots of the problem with ABC lie in the way people traditionally construct ABC
models. To build a traditional ABC model, you would survey employees to estimate the
% of time they spend, or expect to spend, on the three activities, and then assign the
resource expenses according to the average % you get from the survey.

Assume you’re analyzing a customer service department that performs three activities:
processing orders, handling inquiries, and performing credit checks. The department’s
total expenses – the cost of personnel, management, IT, telecommunications, and other
fixed resources – amount to USD 560,000. The actual, or estimated, quarterly workload
in the three activities 49,000 orders, 1,400 inquiries, and 2,500 credit checks.

Doing ABC the traditional way

This is a traditional ABC analysis for a customer service department for its first quarter.
The % of time spent on activities is determined from employee surveys. Once activity
quantities are known or forecast, cost-driver rated are used to allocate the department’s
costs based on customer utilization of the department’s activities.

Activity % Time Assigned Activity Cost-Driver

Spent Cost Qty Rate
Process orders 70 392,000 49,000 $8 per order
Handle inquiries 10 56,000 1,400 $40 per inquiry
Perform credit checks 20 112,000 2,500 $44.80 per check
Total 100 560,000

This approach works well in the limited setting in which it was initially applied, typically a
single department, plant, or location. Difficulties arise, however, when you try to roll this
approach out on a large scale for use on an ongoing basis. In one large bank’s
brokerage operation, the ABC data-gathering process required 70,000 employees at
more than 100 facilities to submit monthly reports of their time allocation. The company
employed 14 people full-time just to manage the data collection, processing, and
reporting.
Cost-to-Serve
Cost-to-Serve: Reporting, Modeling, and Analysis
How its application can improve EBIT performance by
up to 20%

Rob O’Byrne
Logistics Bureau
Australia
Cost-to-Serve (CTS)
Cost-to-Serve is a process driven tool to calculate the profitability of a The Value of Understanding Cost-to-Serve (What for?)
A cost-to-serve analysis quantifies the value of negotiated and actual Cost-to-Serve Features
customer, based on actual activities and overhead costs incurred to • Allocate expenses directly to a product,
service that customer. It analyses how costs are consumed throughout service levels, enabling customer segmentation based on customer’s
customer, vendor and order.
the supply chain. It shows that each product and customer demands profitability, not just tenure and revenue volume.  • Drill-down to explore cost drivers to
different activities and has a different cost profile. It gives an   improve understanding of product and
integrated view of costs at each stage of the supply chain providing a The bottom line impact comes in one of two forms: customer profitability
fact-based view to unravel the complexity of multiple supply chains 1. Cost savings from service reductions and more efficient use of • Run what-if scenarios to analyze the
and channels to market. resources. effects of adjusting cost-to-serve
• Income Statement | Operating Expense – freight costs, COGS, elements.
Cost-to-serve determines the true costs associated with servicing by SG&A, etc.
analyzing your processing mix of customers, products, and vendors. • Balance Sheet | Assets – working capital (inventory), PPE, etc.
For each process mix performed, resources are consumed, adding 2. Revenue growth resulting from pricing increases—either as an
costs to products and customers accordingly. increase to single sale prices or in line-item surcharges, such as those
often associated with rush shipments.
The objective is to allocate and assess these costs to better
understand the true net profit contribution of eachCost-to-serve
supply chainanalysis
path. will provide insight into the profitability of products, customers and
routes to market. It generates a fact-based focus for decision-making for each customer,
including both service mix and operational changes. 

Sources Primary DCs Satellite DCs Customers

For all businesses, there are many paths through the supply chain
for their products and services. The costs related to each path vary
considerably, based on the costumer-product mix.

Cost-to-serve is understanding the total cost of servicing our

customers at a customer and product level, so that the business can
provide appropriate service levels to its customers to achieve
business goals. understanding what each individual client cost
relative to their location, order size, delivery frequency, and other
customized factors
 How profitable are your customer orders?
Cost-to-Serve Drivers
Identify your cost drivers!!! And potentiall for improvement
Cost-to-Serve is an extended application of activity-based costing.
ABC approach does not consider the customer and product
characteristics that can allocate costs in a different manner for
different paths. Inbound Outbound
Supply Warehouse Customer
Transport Transport
Companies struggle to identify the cost drivers and calculate the
cost-to serve with accuracy and consistency

Production or
Purchasing Cost

Around 30% of customer

orders left the warehouse
without being profitable,
that is before delivery
started.

t Drivers • Cost of stock • Storage cost •

ransport cost • Order processing cost •

naged fill rates or customer-specific inventory

xceptions (e.g., expedites), customer service
or other broad overhead costs across the
e customer set.

Cost-to-Serve Outcomes
• Identification of low margin customers
• Identification of low margin products
Cost-to-Serve (CTS) Process
Determine a customer’s actual value to your business. Cost-to-Serve is a powerful analytics methodology that gives
If you don’t understand their value to your business, you’ll miss out on
opportunities for innovation, operational efficiency, segmentation, and pricing companies tremendous insight into their process, customer,
shifts that can improve profitability. 
employee and product profitability. Without it, it is hard to
The real value of knowing your cost to serve a given customer is to identify pinpoint where you are making money and losing money.
opportunities to increase or recover profit, rather than cut losses. In other words,
how you can transform unprofitable customers into profitable ones, rather than How to Calculate Cost to Serve
cutting them off. There are different methods used to determine cost-to-
This is also more consistent with the statistic that it is up to ten times less serve. The most common and least complex method is to
expensive to sell to an existing customer than to go out and find a new one.
estimate average cost for each process then multiple that
Customers have their own expectations about the service they receive from their cost by the transaction volume. The average is usually
suppliers. They may be just as happy with a lower level of service, meaning that
you are losing profit by unnecessarily over-serving them. Conversely, they may determined by an estimated labor standard, ie it takes 5
expect higher levels, but understand that this must also be paid for, over and
above standard pricing.
minutes to perform this process per cost unit. So if there
are 12 units, the cost is 1 hour of labor plus the pro rata
Knowing your CTS per product and per customer also lets you better control
different commercial strategies. You may decide that if you make an overall profit allocation of fixed costs. This is usually accomplished with
from a customer, then you’ll accept some unprofitable sales as part of the mix.
Knowing your CTS will let you make the initial adjustments so that globally your
spreadsheets analysis of an output from the ERP system.
Your sales price minus your production cost is your overall profit or margin; at
business relationship with that customer is profitable. If profits start to decline As well, there are some commercially available packages
before allowing for further expenses, each item of it potentially reducing your
afterwards, your CTS data can offer valuable information about what changed
and how to get back on track. It can of course also be used to make an already that betterprofit.
systematize this approach. This method can be
Promotional discounts
profitable relationship even more profitable!
For example, a CTS analysis may show you that customers ordering directly from
effective, but it
Efficient is highly
order terms dependent upon both the
you at your factory also generate lower costs in transport and inventory costs, but accuracy and consistency of the time estimates which from
Sales organisation costs
Marketing costs
as a distributor you may lose a customer when dealing directly between them.
our experience
Ordering is andhighly variable based on employee
cash collection
Storage
If you don’t know your cost-to-serve, you are losing margin unnecessarily.
Failing to identify low margin products, services and customers, will hamper your
performancePickingand volume.
and packing
ability to improve business profitability Easy Metrics takes
Outbound a different approach by integrating with
transportation
Customer-specific services
all of the workflow
Returns managementtransactional data in a company. This
data tells Key
us facts:
the time spent on every transaction by every
employeeFact
Individual customers can be assessed for overall profitability and the results collectively plotted for1. each customer,
Around 20% of customer product, equipment
orders made negative type
profit margins.
Fact 2. 5-10% of the product range make no contribution at all.
Cost-to-Serve Analysis
Cost-to-serve enables the company to negotiate terms with major customers, to test
alternative distribution modes/services, improve process performance and pricing
methodology. Identify all the costs involved in the process. And how to allocate those costs
to the different functions.
We should be abl to spread the activity costs over the customer-product mix
1. Find at what point in the process the margin (gross margin – logistics CTS) is negative or How would you allocate the cost of the physical storage? Usually is based on
non-existent. m2, but as there are several types of storage equipment you might want to do
2. You want to look at is the profitability of the customer orders. it based on m3. high bays (10-30m high) are far more efficient than a
3. Breakdown profitability from different perspectives: customer, item family, channel, selective racking system (4-12m)
vendor, or season. What are the cost at receiving? The physical space m3, labor, MHE, system
4. CTS Insights: capability, unit-load handling complexity (cubic meter of product). For
• For example, 30% of all the orders left the warehouse with zero or negative picking, you can allocate costs based on orders picked, actual picks, or
margin, so identify the causes and encourage the behavior to change ordering number of hits. You might consider if we’re picking pallets, cases, or eaches.
(less frequent, bigger orders, etc.) and share the benefits with your customers by CTS modeling can be done first on a subset of costs that already make a large
contribution to overall profitability, such as logistics costs. As CTS data collection
offering discounts or promotions.
and modeling capabilities develop within your organisation, you can then extend to
• What to do about the non-profitable orders? What is the profile (or what do they an end-to-end supply chain model as desired.
have in common?) of such orders? Small size, frequent orders, customer,
product? And what is the profile of profitable orders? Just to know how to Identify how customer orders have changed through time. If new negotiations
change the purchasing behavior of the customers. So you can reduce your costs, occur, how much does it cost if the customer change the size or frequency of the
without upsetting the customer or increasing the sales price appropriately. order? Pallets for cases, weekly instead of monthly, etc. Accounts that repeatedly
• You always are gonna have non-profitable orders, it’s very hard not to, but his changed orders, especially orders of high dollar value, were charged
should be around 5% you should try to minimize it. correspondingly more to compensate for the negative effect on the company’s
• Are the highest revenue customers the most profitable ones? profitability. The immediate benefit to the company was estimated at $5 million in
• By realizing and utilizing the real costs for very single customer, your company additional profit.
can adjust operational and financial factors that will directly impact your
Step 1: Agree on objectives
profitability. This, however, does require a level of accuracy and granularity that Determine the activity objectives to keep the CTS process on track.
most systems are unable to handle, since it requires data capture and analysis at Ensure all stakeholders understand the objectives
the transaction level. 
• you can
Customer reprice
Order No. your services
Line (item)accordingly
Regionor invest in process improvements
Channel Item and
Inbound WH
Step cost Outboun
2: Map out the processLogistics
activities Sales Gross
optimization to reduce costs of those unprofitable services dimensi cost It is a great opportunity
d cost to review
CTS the process map
Value and to ensure that the workers
margin
are actually performing those activities.
ons
Year1 Gather
Allocate the fixed andanvariable
operative team
Many companies think they know what their operations entail, but activity
cost to each of the order lines
mapping can often be enlightening.
Year2 depending onDefine
the volume,
the scopethe
of the analysis, that is, the part of the process flow to be mapped
handling requirements
YearN Breakdown this Forprocess
the CTS analysis,
into your activity mapping does not have to drill down to the finite
activities so you can allocate with processes. In a warehouse for example, activities might be
details of your logistics
described and studied as per the following examples:
more detail;e.g. WH > Receive,
Store, Pick, Ship
 Logistics Dimensions

Issues Poor fleet utilisation High cost to serve ‘upcountry’

(UPC) High cost to serve small customers High cost to
serve small orders
Receiving and Putaway Optimization requires to take workload
When you look at any system, the higher the complexity, the out of the warehouse operation.
lower the performance. There are a lot of factors that contribute
to complexity and can affect the performance variables. Touch Analysis
(The number of handling transactions)
System’s What’s the fewest number of steps I can
Principle take?
Performance: (PARCS)
Performance
• Productivity The objective is to find out the flows
• Accuracy (orders-items-suppliers-customers) that
• Response Time are good candidates for direct shipping,
• Costs cross-docking, direct putaway, and WH Handling Steps
• Safety and Security traditional WH flow.
Receivin
Putaway Storage Picking Shipping
Complexity Flow Paths g

• Zero (Direct Shipping) Shipping dock (vendor) >> Receiving dock (customer)
Factors that contribute to complexity: You skip the whole WH process
• The number of SKUs What kind of products can you ship directly?
• The number of DCs A-Items High-volume SKUs and one-line item orders. So the order needs no
• The number of carriers merging with or waiting for other items
• The number of handling transactions What kind of suppliers do you need?
Reliable vendors (in-full delivery) and carriers (on-time delivery)

Receiving >>> Shipping

• Two (Cross-Docking) High-velocity items and one-line item orders or preconfigured orders
DCs transfers and long-haul transport.

• Avoid staging, saving space and people

(Direct Putaway)

• Twelve (Traditional)
Next is the warehouse layout to be considered here.
(One-block Layout)
• The items are stored in pallet racks
• Picking is carried out from the lowest level
• The storage locations (bays) are of identical
size, each can accommodate a single pallet
• The racks are located in a number of parallel,
straight aisles which run perpendicular to the
front end of the picking area
• The aisles are of equal length and width
(rectangular layout)
• Changing from one picking aisle to another is
possible by means of two cross aisles, one at
the front and one at the rear of the warehouse.
• The input/output point (also called dock)
defines a location where pickers enter the
picking area, afterwards returns to in order to
deposit the picked items. It will be assumed
that the I/O point is located in the middle of
the front end of the warehouse.

Order Picking Process

The basis of the actual picking process is provided by a set of customer orders, each one consisting of a number of order
lines. An order line represents a product, identified by an article number and the corresponding quantity requested by the
customer. The set of customer orders is assumed to be fixed and known in advance (off-line problem).

Usually, the customer orders won’t be processed one by one. Instead, the set of customer orders is rearranged into a set of
picking orders. A picking order may consist of a subset of the positions from a customer order, but it also may comprise several
complete customer orders or contain subsets of positions from several customer orders.

The actual picking process starts when the picker receives the picking order, at the I/O point, to which information has been
added about the locations where the items are stored and the sequence according to which locations are to be visited.
In order to pick the requested items, the order picker collects a device such as a small picking truck or a roll cage. Then goes to
the storage locations (pick location) and retrieves the products in the necessary quantities. The items are packed on the picking
device, which facilitates transportation of the picked items, but also enables to collect items at several storage locations before
returning to the I/O point.
It is assumed that the aisles are wide enough to allow for overtaking and two-way travel. Items can be picked from both sides of
an aisle in a single move such that the horizontal distance between the racks in an aisle can be neglected. These characteristics
define a standard order-picking warehouse to which we will refer to unless otherwise stated.
Picking Planning A routing policy is a principle for the design of picking tours through the warehouse.
The planning issues have to be addressed on two levels, on the level of policies  
and on the level of operations. Individual routing means that for each picking order it has to be decided in which sequence the various pick locations are
to be visited (picker routing problem). In practice, frequently standardized routing is applied. The picking tour that
They are related to three main components: corresponds to a particular picking order is then developed on the basis of a simple routing strategy.
1. The assignment of items to storage locations (storage location allocation)
2. The transformation of customer orders into picking orders (order batching) The most commonly-known strategies are
3. The routing of pickers through the warehouse (picker routing) the so-called traversal, return, largest-gap
and composite strategies. They have in
common that only pick-location aisles are
In general, policies can be looked upon as basic principles according to which visited, i.e. aisles which contain at least one
processes are organized. They define the framework for subsequent operational pick location. Here, the strategies will be
decisions. introduced for one-block layouts only.

The black-marked bays indicate a set of pick

A storage location policy determines how storage locations are allocated to
locations, i.e. locations of items, which have
products.
to be picked according to a given picking
• In dedicated storage all products are stored at fixed locations. Each article can order
be found in the same location for a relatively long period of time. Within this  
framework it has to be decided where the various item types should be stored The traversal strategy, also called S-shape
(item location problem). strategy, generates a tour in which each
• Randomized storage is a storage policy in which an incoming pallet is pick-location aisle is traversed completely
assigned to one of the currently available, empty locations. Over time, the same (with the exception of the last one, if an odd
article will be found in different locations. number of pick-location aisles has to be
visited).
The picker starts at the I/O point, goes to
Tradeoff:
the left-most pick-location aisle containing
Order Picking Efficiency vs Storage Space Utilization pick locations, then proceeds to the next
Usually dedicated storage allows the picker become familiar with the item pick-location aisle, which is traversed from
locations but random storage provides better space utilization. the rear to the front, until the last item has
How do you calculate the space wasted due to dedicated storage? And assess been picked, from which location the picker
the tradeoff between storage cost and picking accuracy? returns to the I/O point.

The order consolidation policy is the principle according to which customer
orders are rearranged into picking orders. In single order picking each customer
order is directly taken as a picking order. Alternatively, when the order size is small
in relation to the capacity of the transportation device, order batching may be
applied. In this case, several customer orders are combined into a batch, i.e. a
single picking order, which is retrieved by a single picker.
How a given set of customer orders should be combined into smaller subsets each
of which representing a picking order (order batching problem)?
When the return strategy is applied, the order picker enters and leaves all pick-location aisles from the same cross aisle
(i.e. usually from the front cross aisle). The picker traverses each pick-location aisle up the farthest pick location and
returns from there to the cross aisle.
According to the largest-gap strategy, return trips into pick-location aisles can be performed from both the front and
the rear cross aisle. At which location the picker has to turn back in a pick-location aisle is determined by the largest gap.
A gap represents a separation between the locations of two adjacent items to be picked in a picking aisle, or between the
location of the first pick in a picking aisle and the front cross aisle, or between the location of the last pick in a picking
aisle and the rear cross aisle.
The picker takes a return trip from both the front and the rear cross aisle if the largest gap is between two adjacent picks.
Otherwise, a return trip from either the front or the rear cross aisle is used. In each case, the largest gap of a pick-location
Picking Planning Goals
The target for the picking process is the minimization of the total time necessary to
process/pick a given set of customer orders (total picking time)
 
The reduction of the total picking time corresponds to an increased speed of the picking
activities, resulting in shorter delivery times. This, in turn, will improve the customer service.
Furthermore, reducing the total processing time leads to a smaller demand of man-power
(order pickers). In the short run, labour costs related to overtime, seasonal or part-time staff
can be reduced. In the long run, the necessary number of permanent staff may also decrease.
 
By reducing the total picking time, you’re improving the performance and reducing the cost of
the system. Therefore, it is worthwhile to analyze what the components make up for the total
picking time and how these components can be influenced by the above-described decisions.
 
The time necessary to complete picking of a customer/picking order includes:
 The time needed at the I/O point for performing the necessary administrative (obtaining
and studying the pick list) and set-up tasks (e.g. collecting a picking cart or vehicle)
 The time for traveling from the I/O point to the first storage location, between the
storage locations, and back to the I/O point from the last storage location
 The time needed at each storage location for identifying the storage location and the
article, picking the required quantity, placing the items on the picking cart. or vehicle,
sorting them if necessary, and confirming the pick on the pick list.
 The time needed at the I/O point for performing the final administrative and other
closing tasks; unloading the picking cart or vehicle, sorting the collected items,
depositing the transportation device, and labelling and invoicing.
 
Most of these time elements are independent from the above-described decisions.
The exception is the time the order picker spends for traveling between the storage locations
and from and to the I/O point. Thus, the minimization of the total travel time, i.e. the time
necessary to collect all items of a given set of customer orders, can serve as a goal in
decisions, which have to be made on the policy and operations levels.
Furthermore, it is usually realistic to assume (Jarvis/McDowell, 1991, p. 94) that the total travel
time is a monotone increasing function of the total distance the order pickers have to cover in
order to collect all items of a set of customer orders (total travel distance). If the total travel
distance is reduced, then also both the total travel time and the total picking time will
decrease. Consequently, models and methods for decision problems on the policy and
operations level often include minimization of the total travel distance as an auxiliary goal.
 
Finally, it has to be noted that – as long as the set of customer orders is fixed – it also makes
sense to replace the goals introduced above by corresponding averages, i.e. to consider the
minimization of the average total picking time per order, the average total travel time per
order, or the average total travel distance (also: average tour length) per order instead.
Performance & Metrics
Warehouse Performance and Metrics
Edward Frazelle
Georgia Institute of Technology
Supply Chain and Logistics Institute
2014 US
Performance Metrics
Indicators allow to assess the system performance, but not all is only about
metrics, anybody can develop a set of metrics.
The goal is to create, implement and sustain a performance measurement
system that identifies the bottlenecks and underperforming areas in the
warehouse by modelling the systemic nature of the operation.
World-class warehouses usually set +95% fulfillment targets.
Map the process: Such system finds out how the indicators are interconnected to
each other (relations), especially how a change in productivity, accuracy, or time
affects cost indicators.
How to calculate the values the indicators should have, given cost and service
constraints? It is important to identify tradeoffs and what is the priority for
selection?
Once the targets are set, you can identify the breakdown of resources utilization,
and also assess variations through control charts of every indicator, investigating
the causes of such deviations.
Cost
1. Profitability = Warehousing Cost / Net Sales
2. Storage Cost = Warehousing Cost / Stored Units
3. WH Space Cost = Warehousing Cost / Total WH Area
• Warehousing cost includes Rent, Taxes, Depreciation, Insurance,
Labor, MHE, Racking, Maintenance, Utilities, Security.
Profitability Analysis.
• Improve the storage space utilization
• Reduce expired and obsolete inventory
• Reduce warehousing cost by increasing the throughput speed.
Productivity
1. Storage Capacity = Storage Space / Total WH Space
2. Space Utilization = % Occupancy / Storage Space
• 100% occupied WHs are not the most efficient. There’s a utilization value
range where productivity is at its best, usually around 85%
3. Picking Rate = Order Lines Picked per Hour / No. of Workers
• I recommend to standardized the difficulty of each order line to be picked,
and then weight this calculation
4. Inventory Turnover = shipped stock / stored stock (at the end of the period)
5. Processing Capacity
Accuracy
6. Inventory Accuracy = Actual Quantity / Recorded Quantity
7. Picking Accuracy = Orders with Picking Errors / Total Picked Orders
8. OTIF Shipping = Shipments loaded On-Time and In-Full / Total Shipments
• It is also called % of Perfect Orders
Time
9. Loading/Unloading Time
10. Dock-to-Stock Time
11. Storage Time.
• Assess storage times per SKU to reduce touches along the process using
practices like direct-to-store, cross-docking, and so on.
12. Picking Time
13. % On-time truck allocation.
14. Order Cycle Time = Picking Time + Sortation + Loading Time
• It includes the time from when the order is released to when is considered in
the picking schedule. But don’t consider the time when the truck is delayed.
Performance Issues
How do these issues impact on the operating cost and service level?
Performance Impact (%)
1. Multiple touches of goods
The more touches are in the WH process, and within your supply chain, the more expensive is 40
your operation. Mostly because of labor costs and take more time to complete the process. 35
30
Ideal = 4 times or less 25
Acceptable = 5-7 times
20
Most WH = 6-12 times
15
First, you can assess the tradeoff: Labor Costs v. Investment (Automation) 10
How automation can increase your capacity (output) but affecting your cost (input)? 5
0
Second, review the WH process and operation behavior, then identify the order that could be WH1 WH2 WH3 WH4
cross-docking, or direct-to-store.
Multiple touches of goods Multidirectional flow
2. Multidirectional flow Stock in the wrong place Inneficient Labor
Encourage one-way flow, if possible. People going in all directions during receiving, put-away, Racking and MHE poorly designed Traffic congestion
picking, and shipping can waste time, money, and be unsafe.

Review Layout and Process.

Flow analysis: How do the put-away and picking tours occur on a daily, weekly, and monthly
basis?
How much time does one-way flow add to the process?
Assess capacity improvement and cost reduction

3. Stock in the wrong place

It is recommended to define zoning by classifying stock movement

ABC Analysis

The objective is to optimize travel times for put-away and picking, which should be reduce
labor and MHE and increase the utilization of that reduced staff and equipment.

4. Stock locations are unclear

5. Inefficient labor
You can’t control staff ouput
6. Racking and MHE poorly designed
7. Loading/unloading process and traffic congestion
Warehousing Costs
Costs are usually divided into two main
categories: fixed and variable. Fixed costs
occur every day irrespective of any activity,
whereas variable costs are only incurred when
there is activity.

Activity cost drivers and logistics costing

 Warehouse Operations
Any value is created in strategy and planning, until operation runs. Therefore, it is vital the Warehousing
process analysis to identify of the right tasks are performed in the right way by the right
resources (labor, and handling and storage equipment) Process
Each activity should be analyzed, looking for actual or potential underperformance.
Receiving
• Inbound Scheduling
• Yard and Dock
Management
• Shipment Unloading
• Quality Control
(Expiration Dates and
Regulatory
Compliance)
• Record the Incoming
Goods (Goods Posting)
Strategic Level:
• Yearly Demand Throughput
Tactical Level:
• Purchasing Scheduling
• Inventory Planning
• Reverse Logistics (Returns,
Recalls, and Rejections)
Operational Level:
• Advanced Shipping Notice
ASN
Data Analysis and
Performance Optimization
• Process Analysis and Metrics
System
• Labor and MHE Management
• Facilities Size and Location
• Layout and Flow Design
Put-away
• Identify Storage
Location (Slotting and
Zoning)
• Material Handling and
Storage Conditions.
• Update Inventory
Records
• Inventory Control
(Cycle and Physical
Count)
Shipping
• Outbound Scheduling
• Yard and Dock
Management
• Picking and Packing
• Added Value Services
(Kitting and Labelling)
• Shipment Loading
• Record the Outgoing
Goods (Goods Issue)
Replenishment Planning:
1. Supplier/Vendor
2. Hub/Regional
Warehouse
3. Hospital Warehouse
4. Medical Stations
 ASRS Benefits
• Reduced labor and MHE for put-away

Automated Storage and Retrieval System (ASRS) and retrieval tasks.

• Increased storage density and capacity.
• Improved operating accuracy.
• Reduced order processing time.
An ASRS consists of a computer-controlled system for
• Allow dynamic operations scheduling.
automatically placing and retrieving loads from defined
• Reduced labor safety risks.
locations.
How much improvement (%) can we
An ASRS is typically used when: expect from each benefit?
How to determine it?
• There is a high volume of units moved into and out of the
storage area.
• The storage density is important because of space
constraints.
• No value is added in the process (only storage and retrieval)
• Operating accuracy is critical (high rates of picking errors and
potential expensive damages)

The ASRS first originated in the 1960s, initially focusing on heavy

pallet loads, but nowadays they can be used with standard as
well as nonstandard loads. Standard loads simplify the handling
of an item request. It also helps audit the inventory accuracy
because contents are restricted to an individual standard load.

ASRS Operating Process

• The system maintains the inventory (1)
of stored and retrieved items.
• Retrieval (2) is accomplished by
specifying the item and quantity. The
system determines where, in the storage
area, the item can be retrieved from.
• To store (3) items, the pallet is placed at
an input station, and the system
determines a suitable location
• The system dynamically schedules the
operation (4) – conveyors and AGVs can
Pharmaceutical Regulation
Ley General de Salud
Reglamento de Insumos para la Salud
Reglamento de la Comision Federal para Proteccion contra Riesgos Sanitarios
Suplemento de la Farmacopea de los EUM
Cuadro Basico de Insumos del Sector Salud
NOM-241-SSA1-2012 Good Manufacturing Practices (Medical Devices)
NOM-059-SSA1-2015 Good Manufacturing Practices (Pharmaceuticals)

Chapter 1. Objetivo y Aplicación

Objective. Ensure the manufacturing process of human pharmaceutical products fulfills
the minimum quality requirements to be merchandised within the country.
Scope. These requirements are mandatory to any organization manufacturing or
importing human pharmaceutical products, including also quality control laboratories,
storage and distribution warehouses for pharmaceuticals and raw materials used for
manufacturing.

Definiciones:
• Acabado Sanitario. Es el revestimiento de las superficies interiores de las áreas para
evitar la acumulación de partículas y facilitar su limpieza.
• Acción Correctiva. Es la actividad planeada y ejecutada con el fin de eliminar la
causa de una desviación o no conformidad.
• Acción preventiva. Es la actividad planeada y ejecutada para prevenir la causa de
una desviación o no conformidad
• Acuerdo Técnico (de Calidad). Es el documento que detalla las condiciones de las
actividades o servicios prestados entre las partes, describiendo claramente las
obligaciones y responsabilidades
• Almacenamiento. Es la conservación de insumos, producto a granel y terminado en
áreas con condiciones establecidas.
• Acondicionamiento. Son las operaciones que llevan el producto a granel hacia su
presentación como producto terminado; i.e. el empaque primario es el que está en
contacto directo con el medicamento, mientras que el secundario incluye al
medicamento con su empaque primario.
• Aseguramiento de Calidad. Son las actividades planeadas y sistemáticas que
realiza la empresa para brindar la confianza de que el producto o servicio cumple
los requisitos de calidad especificados.
• Auditoría. Es el proceso sistemático, independiente y documentado para obtener
evidencias y evaluarlas para determinar el nivel de cumplimiento de los criterios de
calidad especificados.
• Buenas Practicas de Almacenamiento y Distribución.
Transportation
 Transportation Systems Analysis: Demand and Economics
Instructor(s) Readings
Prof. Moshe Ben-Akiva The course draws on three primary textbooks:
MIT 2008 1. Small, Kenneth; Verhoef, Erik. The Economics of Urban
Transportation. New York. Routledge. 2007
Course Description 2. Gomez-Ibanez, Jose; Tye, William; Winston, Clifford. Essays
in Transportation Economics and Policy: A Handbook in
This course discusses urban transportation issues, such as the
Honor of John R. Meyer. Washington DC. Brookings
importance of passenger waiting time.
Institution Press. 1999
3. Cascetta, Ennio. Transportation Systems Analysis:
The main objective of this course is to give broad insight into the Models and Applications. New York. Springer. 2009
different facets of transportation systems, while providing a solid
4. Meyer, Michael, and Eric Miller. Urban Transportation
introduction to transportation demand and cost analyses. The course
Planning. New York, NY: McGraw-Hill, 2000.
will not focus on a specific transportation mode but will use the various
modes – urban, freight, aviation, and intelligent transport systems – to
apply the theoretical and analytical concepts presented in the lectures
and readings.

Key topics:
• Transportation planning
• Capital investment
• Operations and maintenance
• Economic theories of the firm, the consumer and the market
• Demand models (travel and freight)
• Discrete choice analysis
• Cost models and production functions
• Pricing theory

Application to transportation systems:

• Congestion pricing
• Technological change
• Resource allocation
• Market structure and regulation
• Revenue forecasting