School of administration

International Business Department

• Subject: Procurement and International Physical Distribution
• Code: NI0278
• Semester: 2023 - 2
• Hours per week: 3
• Credits: 3
• Lecturer: Francisco Rios frioscas@eafit.edu.co
Oil Price forecast for September 2023.
In the beginning price at 86.81 Dollars. High price 88.84, low 85.85. The average for the month
87.26. The Oil Price forecast at the end of the month 87.53, change for September 0.8%.
Brent oil price forecast for October 2023.
In the beginning price at 87.53 Dollars. High price 89.58, low 86.94. The average for the month
88.08. The Oil Price forecast at the end of the month 88.26, change for October 0.8%.
Oil Price forecast for November 2023.
In the beginning price at 88.26 Dollars. High price 90.94, low 88.26. The average for the month
89.27. The Oil Price forecast at the end of the month 89.60, change for November 1.5%.
Brent oil price forecast for December 2023.
In the beginning price at 89.60 Dollars. High price 96.59, low 89.60. The average for the month
92.74. The Oil Price forecast at the end of the month 95.16, change for December 6.2%.
PRINCIPLES OF WAREHOUSING.
• Warehouses are crucial components of
most modern supply chains.
• Pay attention to: market volatility, product
range, lead times.
• Warehouses need to be designed and
operated in line with the specific
requirements of the supply chain as a
whole.
 TYPES OF WAREHOUSING
1. By the stage in the supply chain: materials, WIP, FIG.
2. By geographic área: serve the whole world, regional,
national, local.
3. By product type: Small parts, Frozen food,
perishables, hazardous goods.
4. By function: Inventory holding or sortation.
5. By ownership: Owned by the user.
6. By Company usage: dedicated or shared.
7. By área
8. By Height
9. By equipment: Manual or automated equipment.
 CONDITIONS AND REASONS FOR WAREHOUSING
CONDITIONS.
• The demand for the product is continual.
• The supply lead time is greater than the demand lead time.
REASONS FOR HOLDING INVENTORY
• To provide a buffer to smooth variations between supply and demand.
• To enable economies of long production runs in manufacturing.
• To provide a buffer between different manufacturing operations.
• To enable procurement savings through large purchases.
• To allow cost trade-offs with the transport system.
• To cover for seasonal fluctuations and peaks.
• To provide a wide range of different products, from different suppliers in one location.
• To cover for planned or breakdown production shutdowns.
 COMMON ROLES OF WAREHOUSING
• Inventory holding point: the holding of
substantial strategic inventory, critical parts.
• Consolidation centre: AMAZON
• Cross – dock centre: goods are transferred from
vehicles without being placed in storage.
• Sortation centre: Same as cross dock but for
parcel carrier depots.
• Assembly facility: Useful in postponing
production in order to minimize inventories.
• Trans-shipment point: small warehouses used
for sortation.
• Returned goods centre.
STRATEGIC ISSUES AFFECTING
WAREHOUSING
• Market / industry trends.
• Corporate objectives.
• Business plan.
• Supply chain strategies.
• Other related strategies.
• Customer service levels.
• External factors
 WAREHOUSE OPERATIONS
1. Receiving: Physical unloading of incoming
transport, checking and recording of
receipts.
2. Reserve storage: This área holds the bulk
of warehouse inventory in identifiable
locations.
3. Order picking: Goods are selected from
order picking stock in the required
quantities.
4. Sortation: For small sizes of order.
5. Collation and added value services:
Packing into dispatch, stretch, shrink,
wrapping, kitting, labelling.
6. Marshalling and dispatch: Goods are
marshalled to form vehicle loads and
dispatched.
 INVENTORY PLANNING AND
MANAGEMENT
• The inventory a Company
should hold is crucial to
meet customer
requirements.
• There is a large cost
associated with holding
inventory.
• We must look to balance
cost and service.
• https://www.youtube.co
m/watch?v=zERrqLFotSY
THE NEED TO HOLD STOCKS: Reasons
1. Keep down production costs.
2. To accomodate variations in demand.
3. To take account of varibale supply times.
4. Buying costs. (EOQ= Economic Order Quantity).
5. To take advantage of quantity discounts.
6. To account for seasonal fluctuations.
7. To allow for Price fluctuations/speculations.
8. To help the production and distribution operations
run more smoothly.
9. To provide customers with immediate service.
10. To minimize production delays caused by lack of
spare parts.
TYPES OF
STOCK-HOLDING/INVENTORY.
1. Raw materials, component and packaging
stocks: Used to feed into a production
process.
2. In process stocks: WIP = Work in progress.
3. Finished products: FGI = Finished goods
Inventory.
4. Pipeline Stocks: Held in the distribution
chain.
5. General stores: Mixture of products used
to support an operation.
6. Spare parts: Consumables and
Rotables(repairables).
TYPES OF
STOCK-HOLDING/INVENTORY: Major
classification
1. Working stock: Major element of stock.
2. Cycle stock
3. Safety stock: to cover the unpredictable.
4. Speculative stock: Bought forward.
5. Seasonal stock: Christmas demand peak.
 INVENTORY COSTS
1. Capital costs: The cost of the
physical stock.
2. Service cost: stock management
and insurance.
3. Storage cost: Space, handling,
warehousing.
4. Risk cost: Deterioration, damage,
obsolescence.
 INVENTORY REPLENISHMENT
SYSTEMS
• The aim of an effective inventory
replenishment system is to mantain a
suitable balance between the cost of holding
stock and the particular service
requirements for customers.
 Low stock level disadvantage: Customers
´orders cannot be immediately fulfilled.
High stock levels disadvantage: Capital is
tied up and might be better invested
elsewhere. Deterioration. Additional storage
space.
 INVENTORY REPLENISHMENT SYSTEMS

1. Periodic review or Fixed interval

System.
 INVENTORY REPLENISHMENT SYSTEMS

2. Fixed point or Continous

reorder system.
THE ECONOMIC ORDER QUANTITY
METHOD: EOQ.
• The EOQ is an attempt to
estimate the best order
quantity by balancing the
conflicting costs of holding
stock and of placing
replenishment orders.
• The larger the order quantity,
the longer will be the average
time in stock and the greater
will be the storage costs.
THE ECONOMIC ORDER QUANTITY
METHOD: EOQ.
THE ECONOMIC ORDER QUANTITY METHOD: EOQ.
 DEMAND FORECASTING: Approaches.
1. Judgemental methods:
Subjective assessments based on
the opinions of expers. (New
products or when historic data is
limited)
2. Causal methods: Demand
depends on factors that controls
the Company, the competitors or
external.
3. Projective Methods: Use historic
demand data to identify trends.
 DEMAND FORECASTING: Key steps
1. Plan: Indentify and use the most appropriate
factors and methods of forecasting.
2. Check: Take care to review the base data for
accuracy and anomalies.
3. Categorize: Use different forecasting methods
for different products.
4. Metrics: Use statistical techniques.
5. Control: Monitor and control because
changes occur regularly (fashion,
obsolescence).
 INVENTORY AND THE SUPPLY CHAIN
PROBLEMS WITH INVENTORY
PLANNING:
1. Demand is not as
predictable as it used to
be.
2. Lead times are not
constant.
3. Costs can be variable.
4. Production capacity is
variable.
TYPES OF DEMAND

• Independent demand: The demand of 1 particular product is not related to

demand for any other product. (Computers)
• Dependent demand: The demand of 1 particular product is directly related to
another product. (Power leads, cables, mouse).
• Push system: Inventory replenishment is used to anticípate future demand
requirements.
• Pull System: The actual demand for a product is used to pull the product
through the system.
THE LEAD TIME GAP
• Logistics lead time: Total time it
takes to complete the
manufacture supply of a
product.
• Customer´s order cycle time:
Limited period of time
customers wait for an order to
be delivered.
• Lead time gap: Difference
between logistics lead time and
customer´s order cycle time.
THE END