Design for Logistics- suppliers

Presented by:- Group 4 BY- Barun kumar VVSBS

Design for logistics

It is a series of concepts in the field of supply chain management involving product and design approaches that help to control logistics costs and increase customer service levels. These concepts were introduced by Professor Hau Lee of Stanford University.

Design For Logistics

Product and process design key cost drivers of product cost Design for Manufacturing used design to decrease manufacturing costs Major supply chain costs include transportation costs, inventory costs, distribution costs

Activities in the Logistics Channel

Activities that are considered to be logistics related include, but are not limited to: Customer service Demand forecasting Facility location decision Industrial packaging Inventory management (cost of carrying/holding, cost of ordering, and cost of being out of stock) Materials handling Order management Parts and service support Production scheduling Procurement Returned products Salvage and scrap disposal Transportation management Warehousing management

Design for Logistics uses product design to address logistics costs Key Concepts of Design for Logistics 1. Economic packaging and transportation 2. Concurrent/Parallel Processing 3. Postponement

Economic Packaging & Transportation

Design products for efficient packaging & storage, pack more compactly Example: IKEA traditional furniture sales by make-to-order process IKEA display all items in large warehouse-like space products are manufactured in a small number of factories, packed compactly & efficiently in kits & shipped to stores all over the world large no. of stores enjoy economies of scale

Economic Packaging & Transportation

Retailers prefer compact & stackable products to fully utilize their shelf space & increase revenue per square foot Ship goods in bulk & complete final packaging at the warehouse or even at retailer Final packaging of some goods can be delayed until the goods are actually sold, eg. flour, candies Design packaging for cross-docking repackaging operation

Concurrent & Parallel Processing

Parallel concurrent processing allows you to distribute concurrent managers across multiple nodes in a cluster, massively parallel, or homogeneous networked environment. Instead of operating concurrent processing on a single node while other nodes are idle, you can spread concurrent processing across all available nodes, fully utilizing hardware resources.

Benefits of Parallel Concurrent Processing

Parallel concurrent processing provides Oracle Applications users with the following benefits: High performance--the ability to run concurrent processes on multiple nodes to improve concurrent processing throughput. Fault Tolerance--the ability to continue running concurrent

processes on available nodes even when one or more nodes fails. Adaptability--the ability to integrate with platform-specific batch queue and load-balancing systems to maximize concurrent processing performance on a particular platform. Single Point of Control--the ability to administer concurrent managers running on multiple nodes from any node in a cluster, massively parallel, or homogeneous networked environment.

Postponement
Postponement is a concept in supply chain management where the manufacturer produces a generic product, which can be modified at the later stages before the final transport to the customer.

Postponement
Using the fact that aggregate demand information is always more accurate than disaggregate data Postponement techniques (delayed product differentiation) -manufacture a generic or family product which can later be differentiated into specific end products Need to redesign products for postponement

Design for logistic supplier

MARKETING CHANNEL
Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. The main actors in the marketing channel: manufacturers, wholesalers, and retailers. Each of them assumes an ownership of the inventory of goods: Ownership channel (movement of the title to the good) Negotiation channel (buy and sell agreements are reached) Financing channel (handles payments for goods) Promotions channel (promoting a new or existing product) Logistics channel (handles the physical flow of product)

The Logistics Channel:

Sorting function rearranging the assortment of products as they flow through the channels toward the customer. It has four steps which take place between the manufacturer and the customer (performed by wholesaler, retailer, or specialist intermediaries): 1. - Sorting out sorting a heterogeneous supply of products into stocks that are homogeneous 2. - Accumulating bringing together similar stocks from different sources 3. - Allocation breaking a homogeneous supply into smaller lots 4. - Assorting building up assortments of goods for resale, usually to retail customers Facilitators or channel intermediaries are people who take part in the communication process between wholesalers and other actors. One example might be translators.

Case: HEWLETT PACKARD

BECKGROUND
A computer & peripheral products manufacturer founded in 1939 with headquarters in Palo Alto Established Vancouver Division in WA in 1979 to manufacture Deskjet printer In 1981, the Division adopted JIT approach to reduce manufacturing cycle time from 12 week to 1 week hours & inventory from 3.5 months to0.9 months

Desk-jet Supply Chain

Desk-jet printers manufactured in Vancouver are sent to distribution centres in US, Europe and Asia.

Desk-jet Supply Chain

Localization of printers - each country has specific requirement on power cord, transformer, and language manual. Finished products, consisting of printers destined for different countries, are sorted into 3 groups 1 week factory cycle time 1 day to transport to US DC & 4-5 weeks to transport to European & Far East DCs by ocean Resellers want to keep low inventory while providing a high availability level Sources of uncertainties: incoming materials, internal process & demand Management decide to use make-to-stock mode to operate DC to provide high product availability

Distribution
DC performance measures primary- line item fill rate & order fill rate (multiple line items) secondary - inventory level &distribution cost per shipment dollar DC function as warehouse & support distribution process but not manufacturing, no MRP Require 7 weeks worth of inventories (safety stock) to meet 98% service level (LIFR).

Inventory & Service Crisis

Vancouver Division has done a good job in reducing uncertainties from incoming materials internal process but got stuck with how to improve forecast accuracy Due to forecasting errors, in Europe DC, inventory of models keep piling up while the others stockout A team has formed to find solutions to the crisis & to revamp safety stock system Problem of fixing holding cost rate & service level

The Manufacturing Environment

Rapid Changes New products rapidly introduced Short, unknown product life cycles High Variety of Products Long Production Lead Times Increasing storage and transportation costs Difficult to forecast demand

HP Case Analysis
HP Europe DC Recall that long delivery lead time of 4-5 weeks, high inventory levels & inventory imbalance localization done in Vancouver Problems significant uncertainty, too many localization options, long lead times

HP Case Analysis
Recommendations Reduce lead time by air freight - too expensive Setup a manufacturing plant in Europe volume does not justify Keep more inventory at Europe DC- just magnify the existing inventory problem Revamp forecasting system - difficult because of the uncertainties