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Principles of Supply

Chain Management
MODULE 8: LOGISTICS AND
DISTRIBUTION

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Logistics and Distribution in


the Supply Chain
Its not just about Delivery
The aim of Logistics and Distribution is
to get products to their destination
accurately, with a high level of customer
service and at minimum cost.

Its not just about


manufacturers
Logistics and distribution is
relevant to manufacturers, retailers,
service providers and many other
industry sectors
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This may be influenced as much by


how the supply chain is planned, how
and where components are sourced and
products made, as it is about how they
are delivered.
Some supply chains require the
planning of return processes in addition
to outbound delivery e.g. return of
packing materials, damaged goods,
product recalls, etc.
2

Distribution strategy
components
A logistics and distribution strategy typically includes six key, interrelated
aspects.
These are used as a structure for the rest of this section of training material
Outsourced
vs. In-House
Logistics

tio
u
ib ork
r
s t tw
i
D Ne n
n sig
De

Warehouse
Design and
Technology

le
p
u

Channel
Selection

co t
e
D in
Po

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Transportati
on
Managemen
t
&
3
Technology

Aspect 1: Distribution
network design
The flow of goods from manufacturer to end customer is dependent on the
nature of both the goods and the customer..
For example

Other
manufacturer
s

Retailers
Distribution
Centre
Manufacturin
g sites

Consumer
Retail Store

Manufacturer
s
Distribution
Centres
Business
customer

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The need for distribution


centers (DCs)

Manufacturers use DCs to


allow quick, local response to
customers needs
represent the company in new
markets
customize products in regional
markets
consolidate shipments and reduce
transport costs
Strategy varies depending on the
cost of manufacture relative to the
cost of storage
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Retailers use DCs to


consolidate products from many
suppliers before delivering to
stores
avoid suppliers delivering directly
to their stores
gain control of their up-stream
supply chain
Strategy varies depending on the
rate of sale relative to the cost of
storage and distribution

Tools to develop a
distribution network model

Example of other Network


Modelling Software vendors:
Insight
Paragon
iLog
Logic tools
Scientific Logistics
Arena
i2

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Aspect 2: Decoupling points


C

#
1

#
2

= 7 SKUs

B
Cartridge
Handles

Cartridges

Packaging

= 12 SKUs

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Decoupling practices
(a) Form Postponement

Make

Store

(b) Location Postponement

Label/Pack

Make

Distributed Customer
inventory
order

Make

Distributed Customer
inventory
order

Order receipt

Make

Label/Pack

Store

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Principles
of Supply Chain Management:

Aspect 3: Warehouse design


and technology
Receiving
Manual movement
Automated bulk storage
Picking to totes on a
conveyor system

Manual picking in a
chilled facility
Automated sortation

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Using RFID to track goods


1

Plant

Producer adds an
RFID tag to
individual products

Retailer DC

Items are loaded


into tagged cases
and pallets

A reader above the


shipping door
reads each pallet,
case and item

Pallets of product arrive at a DC


and the items are automatically
received and uploaded to the
WMS. The product is picked and
shipped with increased
accuracy and throughput, and
reduced labor expense.
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Delivery arrives at the retail store,


is automatically received and
inventory is updated. Readers
ensure that product movement is
tracked
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The warehousing process


Transportation
management

Order management
Cross Docking

Flow-Through
Put-away

Picking
Traditional

Manual or with
conveyors /
sortation
equipment

Receiving

Pick face
replenishme
nt

Storage

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Staging /
Shipping

Post
manufacturi
ng services

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Warehouse layout

DISTRIBUTION CENTER
O
U
T
B
O
U
N
D

S
H
I
P
P
I
N
G

FLOOR/
BULK

CROSS

DOCK

External Movements Conveyors


Putaway

B
R
E
A
K
P
A
C
K

B
R
E
A
K
P
A
C
K

C
A
S
E

C
A
S
E

F
L
O
W

F
L
O
W

RECEIVING

INBOUND

Picking
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Performance measures and


operational issues
Performance
measures
Shipping accuracy
On-time shipments
Operating cost
Customer complaints
Inventory level and
accuracy
Cycle count accuracy
Complete orders
shipped
Turnaround time

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Issues
Security
Transaction recording
Authorization control

Inventory control
Sanitation
Code dating and rotation
High value control
Material handling and
storage

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Warehouse management
systems (WMS)
Businesss supply and demand planning systems

WMS functionality

Manhattan Associates
SAP
Catalyst

Put-away
Red Prairie
INFOR

Replenishment
Receiving

Sterling commerce

Picking

Yard
manageme
nt

Shipping
Traditional

Expanded

Note: INFOR acquired SSA Global, EXE and Provia. RedPrairie


acquired Marc Global, McHugh and LiS
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Appointme
nt
scheduling

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Aspect 4: Transportation
management & technology

Transportation is a massively fragmented industry


100,000s shippers, 250,000+ carriers

Two shippers buy two one-way shipments in opposite directions

The two carriers return routes are unplanned and under utilized

Road transport capacity moves empty nearly 1/2 of the time

$30Bn+ hidden inefficiency in the US alone

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Transportation management
overview
Todays transportation management processes offer companies the ability to
decrease transportation costs, increase shipment visibility, and improve
customer service with the following activities:
order and/or load consolidation
track and trace capability
management of carrier relationships
utilization of optimal rates (mode, carrier)
monitoring of carrier performance
control of inbound freight

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Logistics service provider


maturity profile
1

Carrier

Contract
Distribution

3PL Provide
Multiple
Services

4PL
Lead
Logistics
Provider

Virtual
Services
Provider

Little supply
chain
managemen
t awareness

Supply
chain
managemen
t impacts
SERVICE

Supply
chain
managemen
t impacts
BOTTOM
Competitive
LINE

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Supply
chain
managemen
t impacts
GROWTH

Advantage
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Supply
chain
managemen
t enables
NEW WAYS
OF
WORKING

Transportation management
systems
Businesss supply and demand planning systems
WMS
Oracle

SAP
JDA
KEWILL Systems

Shipment
Planning
Carrier
Assignment
Dispatch
Shipment
Monitoring &
Control

Freight Payment

Expanded
Traditional
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Carrier Management

Manhattan Associates

Freight Procurement

i2

Event Management

TMS

Descartes

Aspect 5: Channel selection

Air

Satellite

Pipeline

Copper

Rail
Phone

Truck

Fiber

Tanker
Computer
Networks
Water

Solids

Information and
Services

Liquids
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Mode selection criteria


Speed

Transportation cost

Inventory cost

Physical
capability

Reliability

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Security

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Track and
trace

Global Sourcing & Import


Logistics
Global sourcing and Logistics is the process of identifying, evaluating,
negotiating and configuring supply across multiple geographies to reduce costs,
maximise performance and mitigate risks
Landed cost = the true cost of acquiring goods from overseas and getting
them home!

Pro
duc
t
pla
Glo
nni
bal
ng
sou
and
rcin
dev
g
elo
pm
Global Sourcing
& Import Logistics
ent

Pur
cha
se
Imp
ord
ort
Cus
Fin
er
logi
tom
anc
ma
stic
s
e
nag
s
em
ent
Management
- The 6 Key Business Processes

A lack of Global Supply Chain automation and visibility is handcuffing companies with
longer lead times, bigger inventory buffers, budget overruns, and continued demandsupply imbalances.
Source: Aberdeen Group Global Supply Chain Benchmark Report, June 2006
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Aspect 6: Outsourced versus


in-house logistics
Outsourcing

In-House

Service

Labor

Financial

Equipment

Safety

Maintenance

Cost
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Service
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Overview Questions
Q1 v1
When is it most sensible to manufacture in only one location despite serving
many
countries with your products?
1. When the cost of raw materials are high compared to the retail price of the product
2. When the cost of manufacturing equipment is high compared to the cost of
transportation
3. When the products are lightweight but consume a lot of space

Q1 v2
What is Factory Gate Pricing?
1. The pricing of goods in their finished state without adding on the price of their
delivery
2. The marking of retail price on goods while they are being packaged
3. The cost of a factories perimeter fencing and access gates

Q1 v3
Which is not a good reason for a retailer to hold inventory in their own DC?
1. So they can carry on selling products that the manufacturer no longer makes
2. To consolidate deliveries fro many suppliers before transporting goods to stores
3. To increase their control over the upstream supply chain
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Overview Questions
Q2 v1
When using a computer model to design a distribution network, which of these
is not true?
1. The results of the analysis are only as good as the accuracy of the input data
2. The system will calculate the cost of different network design scenarios but the
user must specify which scenarios to test
3. The system will tell you the optimum number of DCs to have, and where they
should be

Q2 v2
What is the main purpose of a decouple point?
1. To separate a distribution trailer from the truck which pulls it
2. To delay the point at which a product is customised for its final market
3. To increase then number of SKUs that must be held in a DC

Q2 v3
If your customer requires delivery very quickly after placing their order, which
of these will
work well?
1. Form postponement
2. Location postponement
3. Neither type of postponement
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Overview Questions
Q3 v1
Which of these is not a reason for a DC operator to wear a microphone and
earpiece?
1. To receive and confirm voice instructions from the warehouse management system
2. To receive instructions from his/her supervisor
3. So that both hands are free to handle goods

Q3 v2
Which best describes the circumstances under which a flow-through
arrangement be used
to avoid holding inventory in a DC?
1. When the total daily demand for each product is accurately known
2. When the supplier can be trusted to supply their goods reliably
3. When both of the above conditions are true

Q3 v3
What term is given to a DC operation in which goods are received in units that
have been
pre-picked for their end destination, and are consolidated in the DC so that
they can be
transported with other goods for the same destination?
1. Pick and pack
2. Flow-through Copyright 2016 Bristlecone

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Overview Questions
Q4 v1
What is the most common comparator between the operating costs of DCs?
1. Cost per case
2. Operating cost as a proportion of the value of goods being handles
3. The ratio of fixed to variable costs

Q4 v2
Which of these bits of information could you not typically get from a
warehouse
management system?
1. All the various DC locations in which a particular SKU is currently stored
2. The items that have been received from a supplier and the quantities that were
received
3. The value of goods stored in the DC

Q4 v3
Which acronym describes a company that manages and executes logistics and
distribution operations on behalf of its clients?
1. 4WD
2. 3PL
3. HGV
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Overview Questions
Q5 v1
Which of the following is true?
1. If you see a delivery truck on the road, it will nearly always be full
2. Air transport should always be used over long distances if the goods are suitable
3. Goods in transit tie up the businesss inventory and working capital

Q5 v2
Which is not a strong justification for using air transport for intercontinental
freight?
1. Because the goods are of high value compared to the transport cost
2. Because it reduces the need to complete manufacturing on time
3. Because the customers need is urgent and they are willing to pay for fast delivery

Q5 v3
Which of these is true?
1. Companies should manage their own distribution in order to maximise their control
2. Distribution should always be outsourced to a 3PL as they perform better
3. The outsourcing decision has many considerations and there is no single right
answer

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Thank You
Bristlecone
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San Jose, CA 95113
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www.bcone.com
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2016 Bristlecone Ltd. Bristlecone believes the information in this presentation is accurate as of the presentation date. The information is subject to change without
notice. Bristlecone acknowledges the proprietary rights of the trademarks and product names of all companies mentioned herein. All Rights Reserved.

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Primary Colors

R:253, G: 185,
B:19
C:0, M:30, Y:100,
K:0

R:0, G: 73, B:144


C:100, M:72, Y:0,
K:18

Secondary Colors

R:217, G: 164,
B:40
C:15, M:36, Y:100,
K:0

R:165, G: 50, B:45


C:24, M:92, Y:89,
K:18

R:250, G: 240,
B:100
C:5, M:20, Y:75,
K:0

R:220, G: 220,
B:205
C:13, M:09, Y:60,
K:19

R:218, G: 33, B:40


C:10, M:100, Y:100,
K:0

R:108, G: 108,
B:108
C:58, M:50, Y:49,
K:17

R:67, G: 166, B:91


C:75, M:11, Y:86,
K:0

R:105, G: 145,
B:205
C:60, M:36, Y:0,
K:0

R:157, G: 130,
B:87
C:36, M:43, Y:73,
K:10

R:104, G: 44, B:145


C:74, M:100, Y:0,
K:0

R:148, G: 186,
B:101
C:46, M:10, Y:78,
K:0

R:26, G: 138,
B:143
C:82, M:28, Y:43,
K:4

Tertiary Colors

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