LOGISTICS

S A Salam
 Introduction
Definitions of logistics:
“planning, implementing, and controlling the physical flows of materials and finished goods from point of
origin to point of use to meet the customer’s need at a profit”.

Objectives of logistics

•Logistics helps in maintaining inventory at the lowest level, and

Reduction of inventory thus achieving the customer goal. This is done through small, but
frequent supplies

•selecting the proper mode of transport, consolidation of freight,

Economy of freight route planning, long distance shipments etc

•Proper planning of the transportation modes, with availability of

Reliability and consistency in delivery
inventory will ensure material required by the customer is
performance delivered on time

•By utilizing the latest technologies in processing information and

communication will improve the decision making, enabling the
Quicker and faster response enterprise to be flexible enough so that the firm can fulfill customer
requirements, in the shortest possible time frame.

•The use of proper logistical packaging, mechanized material

Minimum damage to products handling equipment, etc will reduce this damage.

The various functions of logistics

Order
Inventory Warehousing Packaging Transportation
Processing

Delivers value to the customer

Inbound Logistics Process Logistics Outbound Logistics

Logistical Value Proposition
Service Benefits
•The key strategic issue is how to outperform competitors in a cost-effective manner
•Availability:
•involves having inventory to consistently meet customer material or product requirement.
•Operational performance
•Consistency: firms typically focus on service consistency first
•Speed: Wants faster delivery
•flexibility: to accommodate unusual and unexpected customer requests.
•Malfunction is concerned with the probability of logistical performance involving failures
•Recovery Time: When such malfunctions occur, a firm's logistical competency can be measured
in terms of recovery time
•Service reliability
•To achieve service reliability, it is essential to identify and implement inventory availability and
operational performance measurements.

Cost Minimization

•identified the critical need for developing functional cost analysis and activity-based costing
capabilities

The typical enterprise seeks to develop and implement an overall logistical competency that satisfies customer
expectations at a realistic total cost expenditure. The appropriate combination will be different for different customers.
A well-designed logistical effort must have high customer response and capability while controlling operational
variance and minimizing inventory commitment. And, most of all, it must have relevancy to specific customers.

Logistical Operations

Thus, the process is viewed in terms of two interrelated flows: inventory and information.
Inventory Flow
From the initial purchase of a material or component, the logistics process adds value by moving inventory when and where
needed. The cost of each component and its movement becomes part of the value added process. it is useful to divide it into three
areas:
Market Distribution
The movement of finished product to customers is market distribution. They link manufacturers, wholesalers,
and retailers into supply chains to provide product availability. Market distribution attempts to service the desires of customers
and therefore must accommodate the uncertainty of consumer and industrial demand.
Manufacturing Support
The area of manufacturing support concentrates on managing work-in-process inventory as it flows between stages of
manufacturing. The primary logistical responsibility in manufacturing is to participate in formulating a master production
schedule and to arrange for its implementation by timely availability of materials, component parts, and work-in-process
inventory.
Procurement
Procurement is concerned with purchasing and arranging inbound movement of materials, parts, and/or finished inventory from
suppliers to manufacturing or assembly plants, warehouses, or retail stores.
Information Flow
Logistical information has two major components: planning/coordination and operations.
Planning/Coordination
The overall purpose of planning/coordination is to identify required operational information and to facilitate supply chain
integration via
strategic objectives: derived from marketing and financial goals. These initiatives detail the nature and location of
customers that supply chain operations seeks to match to the planned products and services.
Capacity constraints identify internal and external manufacturing and market distribution limitations
logistical requirements identify the specific work facilities, equipment, and labor forces required to support the
strategic plan
Inventory deployment The deployment plan details the timing of where inventory will be positioned to efficiently
move inventory through the supply chain. From an information perspective, deployment specifies the what, where, and
when for the logistics processes
manufacturing requirements determine planned schedules. The traditional deliverable is a statement of time-phased
inventory requirements that is used to drive Master Production Scheduling (MPS) and Manufacturing Requirements
Planning (MRP). In situations characterized by a high degree of responsiveness, Advance Planning Systems (APS) are
more commonly used to time-phase Manufacturing
Procurement requirements represent a time-sequenced schedule of material and components needed to support
manufacturing requirements
Forecasting utilizes historical data, current activity levels, and planning assumptions to predict future activity levels.
Logistical forecasting is generally concerned with relatively short-term predictions.
Operations
To satisfy supply chain requirements, logistics must receive, process, and ship inventory. Operational information is required in
six related areas:
Order processing: The primary activity of order management is accurate entry and qualification of customer orders
Order assignment identifies inventory and organizational responsibility to satisfy customer requirements.
Distribution operations The key to distribution operations is to store and handle specific inventory as little as
possible while still meeting customer order requirements
Inventory management to make sure that the overall logistical system has appropriate resources to perform as
planned.
Transportation and shipping it is important to consolidate orders so as to fully utilize transportation capacity. It is
also necessary to ensure that the required transportation equipment is available when needed
Procurement is concerned with the information necessary to complete purchase order preparation, modification, and
release while ensuring overall supplier compliance.

Logistical Operating Arrangements

All logistical arrangements have two common characteristics.
• First, they are designed to manage inventory.
• Second, the range of alternative logistics systems is based on available technology.
 Structure

Echelon Direct Flexible

Emergency

Routine

Echelon
• Echelon (traditional) is a linear flow from origin to destination through buffers or warehouses/distribution centres.
• Echelon systems utilize warehouses to create inventory assortments and achieve consolidation economies associated with
large-volume transportation shipments. Typical echelon systems utilize either break-bulk or consolidation warehouses.
• Inventories positioned in warehouses are available for rapid deployment to customer requirements

Break Bulk Warehouse Consolidation Warehouse

•receives large-volume shipments from a variety of •typically required by manufacturing firms that have
suppliers. plants at different geographical locations.
•Inventory is sorted and stored in anticipation of •Products manufactured at different plants are
future customer requirements. stored in a central warehouse facility to allow the
•Food distribution centers operated by major firm to ship full-line assortments to customers
grocery chains and wholesalers are examples

Direct
• Direct distribution typically uses premium transport combined with information technology to rapidly process
customer orders and achieve delivery performance
• average shipment size is typically large.
• The deployment of direct logistics is limited by high transportation cost and potential loss of control
• Examples of direct shipments are plant-to-customer truckload shipments, direct store delivery, and various
forms of direct to consumer fulfilment required to support catalogue and e-commerce shopping.

Flexible
Inventory strategies often position fast-moving products or materials in forward warehouses, while other, more risky or costly
items, are stocked at a central location for direct distribution to customers

automobile replacement parts logistics: As a general rule, the slower the part turnover is, the more
erratic the demand is, and therefore the greater the benefit is of centralized inventory. The slowest or least demanded parts may
only be stocked at one location that services customers throughout the entire world. Fast-moving parts that have more predictable
demand are stocked in forward warehouses close to dealers to facilitate fast delivery.
enterprise that sells machine parts to industrial firms: To offer superior service to customers
who experience machine failure and unexpected downtime, the firm stocks slow movers in all local warehouses. In contrast to the
automotive firm, high-demand, fast-turnover parts in this industry can be accurately forecasted due to routine preventative
maintenance. The least cost logistical methods for these fast movers are to ship direct from a centralized warehouse located
adjacent to the parts manufacturing plant

Logistical Synchronization
In an effort to facilitate logistical operations, supply chain participants must jointly plan and implement operations. Logistical
synchronization seeks to coordinate the flow of materials, products, and information between supply chain partners to reduce
duplication and unwanted redundancy to an absolute minimum.

Dwell time is the ratio of time inventory sits idle in comparison to the amount of time it is being productively moved to a
desired location in the supply chain.

Performance Cycle Structure

The performance cycle structure is the framework for implementation of integrated logistics across the supply chain.
Structure:
• must link all firms functioning in a supply chain.
• The operational locations that are linked by information and transportation are referred to as nodes.
• Inventory is stocked and flows through nodes, necessitating a variety of different types of materials handling and, when
necessary, storage. Inventory is measured in terms of the asset investment level allocated to support operations at a node
or while a product or material is in transit.
• The input to a performance cycle is demand, typically in the form of a work order.
• Supply chain output is the level of performance expected from the combined logistical operations that support a
particular arrangement

Procurement Performance Cycle

Manufacturing Performance Cycle
Distribution Performance Cycle
Logistics Landscape in India

Emerging Trends
 Customer Accommodation
Customer

intermediate Organizational
Consumer
customers End Users

Supply Chain Service Outputs

•amount of shopping time and effort that will be required on the part of
Spatial Convenience the customer.
•Product Available in large number of places

•the number of units to be purchased in each transaction.

•the supply chain that allows customers to purchase in small quantities
Lot Size normally experiences higher cost and therefore demands higher unit
prices from customers

•the amount of time the customer must wait between ordering and
receiving products
Waiting Time •the longer the waiting time required, the more inconvenient for the
customer. However, such supplychains generally incur lower costs

•different supply chains offer differing levels of variety and assortment to

Product Variety consumers and end users

Customer Service
In basic customer service programs, the focus is typically on the operational aspects of logistics and ensuring that the organization
is capable of providing the 7R

right
amount

right right
information product

7R
right right
price time

right right
condition place

A-P-T-P-C-P-I
Attributes of basic customer service
Availability Stockout Frequency:
the probability that a firm will not have inventory available to meet a customer order. The
aggregation of all stockouts across all products is an indicator product availability. it does
not consider that some products may be more critical in terms of availability than others

Fill rate
If a customer wants 100 units of an item and only 97 are available, the fill rate is 97
percent. fill rate performance can be evaluated for any combination of customers,
products, or business segments.

Orders Shipped Complete:

The most exacting measure of performance in product availability. Failure to provide even
one item on a customer's order results in that order being recorded as zero in terms of
complete shipment

Operational Speed:
Performance
elapsed time from when a customer orders until the product is delivered and is ready for
customer use.
Consistency:
measured by the number of times that actual cycles meet the time planned for
completion. the degree of variability translates directly into safety stock requirements.
Flexibility
involves a firm's ability to accommodate special situations and unusual or unexpected
customer requests
Malfunction Recovery:
Regardless of how fine-tuned a firm's logistical operations, malfunctions will occur.

Service Reliability attributes of reliability may mean that shipments arrive damagefree; invoices are correct
and error-free; shipments are made to the correct locations; and the exact amount of
product ordered is included in the shipment.

The Perfect Order

logistics and supply chain executives have begun to focus attention on zero-defect or six-sigma performance. It was realized that if
standards are established independently for customer service components, even if performance met standard on each independent
measure, a substantial number of customers may have order-related failures. total order cycle performance must be executed with
zero defects-availability and operational performance must be perfectly executed and all support activities must be completed
exactly as promised to the customer. One way of elevating logistics performance to at least near zero defects is to utilize a
combination of customer alliances, information technology, postponement strategies, inventory stocking strategies, premium
transportation, and selectivity programs to match logistical resources to core customer requirements.

Customer Satisfaction
The simplest and most widely accepted method of defining customer satisfaction is known as expectancy disconfirmation.
Simply stated, if a customer's expectations of a supplier's performance are met or exceeded, the customer will be satisfied.
Conversely, if perceived performance is less than what the customer expected, then the customer is dissatisfied. many
organizations have gone further by speaking in terms of delighting their customers through performance which exceeds
expectations.
Customer Expectations Related to Logistical Performance
•reliability refers to performance of all activities as promised by
Reliability the supplier. customers have expectations concerning damage,
documentation accuracy, etc.

•refers to customers' expectations of the willingness and ability of

Responsiveness:
supplier personnel to provide prompt scrvice.

Access: •ease of contact and approachability of the supplier

•proactively keeping customers informed. customers have

Communication expectations regarding suppliers' notification of status,
particularly if problems with delivery or availability arise

•communications from thc supplier are in factbelievable and

Credibility
honest

•customers' feelings of risk or of doubt in doing busincss with a

Security:
supplier.

Courtesy: •politeness, friendliness, and respect of contact personnel

Competency

•Customers have expectations regarding the physical appearance

Tangibles:
of facilities, equipment, and personnel.

•Customers have expectations regarding suppliers' understanding

Knowing the Customer their uniqueness and supplier willingness to adapt to their specific
requirements.
Model of Customer Satisfaction

Gap 1: Knowledge Gap 2: Standards Gap 3: Performance

This gap reflects management's The standards gap exists when internal The performance gap is the difference
lack of knowledge or performance standards do not adequately or between standard and actual
understanding of customers. accurately reflect customer expectations. This is performance. If the standard is a fill
precisely the case in many organizations that rate of 98 percent, based on research
develop their basic service platform based on with customers regarding their
examination of internal operating capabilities or expectations, and the firm actually
on a superficial examination of competitive performs at 97 percent, a performance
service performance. gap exists.
Gap 4: Communications Gap 5: Perception Gap 6: Satisfaction/Quality
overcommitment, or promising "We're only as good as the last order." Thus, The existence of any one or more of
higher levels of performance although performance over a long time period has the above gaps leads to customer
than can actually be provided, is been very good, a late or incomplete or otherwise perception that performance is not as
a major cause of customer subpar delivery may result in a customer's good as expected
dissatisfaction expression of extreme dissatisfaction.
when one firm in the industry focuses on logistics as a core competency and provides higher performance levels, customers come
to expect other suppliers to follow.

Limitations:
1. mistake in the interpretation of satisfaction
2. satisfied customers are not necessarily loyal customers
3. firms frequently forget satisfaction lies in the expectations and perceptions of individual customers
 Market Distribution in the Supply Chain
A channel of distribution can be defined as a network of organizations and institutions that, in combination, perform all the
functions required to link producers with end customers to accomplish the marketing task.

Assortment Process
Concentration refers regrouping the products into
Concentration

breaking down a shipping the

Customization

Dispersion
Allocation(Breaking bulk)
an assortment of items for
to the collection of homogeneous group resale to uniquely meet a customized
large quantities of a of products into specific customer assortments to
product or of multiple smaller and smaller requirement.
customers when and
products so they can For example, warehouse
be sold as a group.
lot sizes to more stores such as Costco may
where specified
closely match desire a unique product
One purpose of customer pack, such as two boxes of
concentration is to requirements. cereal wrapped together.
reduce transportation Another retailer may require
special promotional displays,
cost. which may even combine
Eg: Consolidation products from two different
manufacturers
warehouse,
Wholesaler

the principle of minimum total transactions

Number of Transactions reduced to 9 from 18

Channel Separation
The ownership, or marketing,
channel consists of a network of
firms engaged in buying and
selling. It consists of
intermediaries such as agents,
industrial distributors, full and/or
limited function wholesalers,
sales representatives, and
retailers, all of which are
involved in negotiating,
contracting, and administering
sales on a continuing basis.

The physical, or logistics,

channel represents a network of
organizations involved with
achieving inventory movement
and positioning. The work of
logistics involves transportation,
warehousing, storage, handling,
order processing, and an
increasing array of value-added
services concerned with achieving time, space, lot-size, and assortment requirements.

Market Distribution Strategy Development

Wholesalers

Manufacturers Retailers

Channel
Participants

Distribution Structure
As a general rule, as end-customer requirements ,for these outputs increase, the more likely it is that the required
distribution structure will include intermediaries..
Market Coverage
market coverage is most directly related to locational convenience for customers. Three basic market coverage alternatives exist

Intensive Distribution
•placement of a product in as many outlets or locations as possible
•products that consumers purchase frequently and with minimal shopping effort
•locational convenience a key purchase requirement
•Eg: soft drinks, candy, newspapers, gasoline

Selective Distribution
•more limited number of outlets within a specific geographic area
•customers' willingness to spend time and effort to obtain the product.

Exclusive Distribution
•placement of a brand in only one outlet in each geographic area
•end users are willing to expend considerable shopping effort and locational convenience is of little concern to them
•a firm wants to project an image of high quality or high levels of reseller support are required
•Rolex watches

Channel Design Process

Two tools of significant assistance are channel mapping and a matrix approach to the design process
Channel Mapping
A channel map essentially is a flow diagram of the channels utilized by a specific firm. It is developed through careful research
within an organization and discussions with numerous executives regarding how to go to market

Developing a channel map should begin with clear delineation of the market
segments being served

The mapping process then proceeds backward from the markets being served to
identify the different types of channel participants capable of serving their
market distribution requirements.

It should also include specification of the volume of activity related to each link
in the map.

Each link should also be examined for specific functions and activities performed
by the channel participants and what are the economic characteristics of the
transactions. For example, what are prices, expenses, and margins associated
with each link in the map?

Matrix Approach
Extending Channel Separation
Table 4-2 shows a matrix for design of the selling channel for a hypothetical firm. Across the top, specific activities of the sales task are
individually specified: generating sales prospects, qualifying those prospects, presale negotiation, closing the sale. and providing post
sales service. The rows of the matrix consist of alternative means, some internal and some external, of performing each of the necessary
activities

Relating Activities to Participants

After customers have been qualified, large lot-size customers are assigned to the direct sales force for negotiation and closing the
sale. Small lot-size customers are assigned to distributors for those tasks. Post sales service is accomplished for certain service
activities by telemarketing. Other activities may require direct sales or distributor participation.

Channel Relationships
Dependency provides a useful framework for understanding the types of behavioral relationships observed in distribution. Three
channel classifications are identified ranging from least to most open expression of dependence: (1) single-transaction channels,
(2) conventional channels, and (3) relational collaborative arrangements (RCAs). Each form of channel involvement reflects a
different degree of commitment by its participants.

Transactional
Single-Transaction Channels Conventional Channels

•exchange will be a one-time event •loose arrangements or affiliations of firms that buy and
•Eg: real estate sales sell products on an as-needed basis, without concern for
•In some situations, special transportation and materials future or repeat business.
handling equipment are required to accommodate size •The prime determinant of the timing and extent of
and weight of the products involved. transactions is selling price
•If a firm deals primarily with single transactions, logistics •They have little or no loyalty to each other and little
performance is critical and typically represents a motivation to cooperatively improve the efficiency of
significant cost of overall operations. the supply chain.
•The typical transaction is adversarial in that the
negotiation is price-dominated, creating an us-against-
them posture
•sheer transaction volume
•virtue of cooperation are sacrificed in favor of
maintaining autonomy

Relational Collaborative Arrangements

• each channel member must be willing to perform specific duties.
• The overall relationship of an RCA is typically orchestrated by a firm that is acknowledged as the leader. The
leader is most often the dominant firm in the channel in terms of market share, size, or technical skills
E-Commerce Impacts on Market Distribution
• One significant advantage is locational convenience.
• A second advantage arises from the assortment that can be offered to consumers from this format. Unconstrained by
physical limitations of store space, the e-tailer can offer for sale a complete assortment of product that cannot be matched
by any bricks and mortar store.
• A third advantage offered is information

• The most important disadvantages for the consumer shopping via e-tailing are waiting time, the inability to physically
browse, handle, or try the merchandise, and concerns related to security.

Given the widespread availability and the low cost associated with the marketing transactions via the Internet, many have
projected that the future will be an era of role redefinition and shifting of marketing functions back to the originators of products
and services. In short, they predict an era of widespread channel disintermediation whereby traditional marketing channels will
no longer be necessary to close the gaps between producers and consumers.

The major challenge lies in the logistics process and efficient order fulfilment to satisfy consumer requirements. While e-
commerce can significantly reduce marketing transaction costs related to generating and processing orders, it significantly impacts
the economics related to physically picking, packing, and transporting those orders. several alternative strategies for managing and
accomplishing logistics exist for business-to-consumer e-commerce.''
Some firms may accomplish fulfilment through a network of delivery centres in numerous markets where inventory is held in
anticipation of customer orders. An alternative logistics strategy requires customer pickup at central locations, rather than home
delivery. This approach has been called the buy here/pick up there strategy.
Another strategy may be to outsource the entire fulfilment process to partners who are specialists in physical fulfilment, especially
third-party logistics firms that can consolidate operations for multiple sellers, provide flexibility in accommodating growth.
Pricing and Logistics
A major trend in price strategy has been to debundle the price of products and materials so that services such as transportation,
which were traditionally included in price, are now identified as separate items. Pricing practices have a direct impact on the
timing and stability of logistical operations.

Pricing

F.O.B. Delivered
Pricing Pricing

F.O.B. Multiple- Base-Point

F.O.B. origin Single-Zone
destination Zone Pricing

Free On Board or Freight On Board

F.O.B. origin F.O.B. destination
•seller indicates the price at point of origin and agrees to •title does not pass to the buyer until delivery is
tender a shipment for transportation loading, but completed. Under such circumstances, the seller
assumes no further responsibility. The buyer selects arranges for transportation and the charges are
the mode of transportation, chooses a carrier, pays added to the sales invoice.
transportation charges, and takes risk of in-transit loss
and/or damage

• Phantom freight occurs when a buyer pays transportation costs greater than those actually incurred to move
the shipment.
• Freight absorption occurs when a seller pays all or a portion of the actual transportation cost and does not recover
the full expenditure from the buyer
Delivered Pricing

Single-Zone Multiple-Zone Base-Point

•buyers pay a single price regardless of •different prices for specific geographic •final delivered price is determined by
where they are located. areas. the product's list price plus
•typically used when transportation •The underlying idea is that logistics cost transportation cost from a designated
costs are a relatively small percentage differentials can be more fairly base point, usually the manufacturing
of selling price assigned when two or more zones- location
•main advantage to the seller is the high typically based on distance •This designated point is used for
degree of control over logistics computing the delivered price whether
•For the buyer, the advantage of or not the shipment actually originates
simplicity from the base location
•The United States Postal Service uses a
single-zone pricing policy throughout
the United States for first-class letters
and parcel post

Menu Pricing: a Platform Service Price The first step in menu pricing is to establish the basic service
pricing program must platform to be offered to all customers and an appropriate price reflecting the costs
be established to related to providing that service level. The platform service price is expected to be paid by
accurately and all customers, whether or not they require the service combination as specified.
equitably charge
customers for the
products and services
that they demand.

Value-Added Service Costs

The second aspect of menu pricing involves specifying charges for compliance to customer
required additional activities. From the example above, an upcharge would be imposed for
customized unit loading requested by a customer, such as layering products on the slip
sheet in a specific order. A separate upcharge would be established for multiple stop-offs
on the delivery, and a third upcharge would be established for delivery on pallets rather
than slip sheets

Efficiency Incentives
The third step in a comprehensive menu pricing program is the establishment of efficiency
incentives. The incentives provide a mechanism for sharing the benefits of such cost-
reducing efforts. For example, a discount or allowance might be given to encourage
ordering EDI, another incentive offered to receivers who guarantee truck unloading in 2
hours or less, and a third incentive for using CHEP pallets

The Quality Imperative

Performance Reliability Durability Conformance Features Aesthetics Serviceability

Life Cycle Costs. The final aspect of lowest TCO includes numerous elements known as life cycle costs. The total cost of
materials, items, or other inputs extends beyond the purchase price and elements of value-added service to include the lifetime
costs of such items.

The logistics interface with procurement and manufacturing, as well as with engineering and marketing, can be greatly enhanced
by incorporating a concept known as Design For Logistics into the early phases of product development. How a product is
designed and design of the components and materials themselves can have a significant impact on this process. In particular,
product packaging and transportation requirements need to be incorporated into the design process
The most common manufacturing strategies are make-to-plan (MTP), make-toorder (MTO), and assemble-to-order
(ATO). It is also common to refer to MTP as make-to-stock (MTS). As a general rule, MTP strategies are characteristic of
industries exploiting economy of scale that results from long production runs. Significant finished goods inventory is typically
manufactured in anticipation of future customer requirements. The logistical requirement to support MTP is warehousing capacity
to store finished product and to facilitate product assortment for specific customers. When flexible manufacturing is introduced to
speed up switchover, the inventory lots produced are typically smaller in quantity. However, warehouses are still required for
temporary storage and to facilitate product assortment. In contrast, MTO manufacturing strategies seek to manufacture to
customer specification. While MTO may not be as limited as the traditional job shop, exact quantities and configurations are
produced in relatively small quantities. Logistical capacity may be required for temporary storage and to achieve outbound
transportation consolidation, but most product produced in a MTO environment is shipped direct to customers. In ATO situations,
base products and components are manufactured in anticipation of future customer orders; however, the products are not fully
assembled or customized until a customer's order is received. Such final assembly reflects implementation of the principle of
manufacturing or form postponement. the need for logistical capacity is critical in ATO operations. In fact, an increasing amount
of ATO product finalization is being performed in distribution warehouses. The attractiveness of an ATO manufacturing strategy
is that it has the potential to combine some facets of economy of scale typical of MTP with a degree of MTO flexibility. FulI
implementation of an AT0 strategy requires that warehouse operations be integrated in the process to perform customizing and
assembly operations.

.
 Transportation
Transportation Functionality
Transportation enterprises provide two major services: product movement and product storage.
Product Movement
basic value provided by transportation is to move inventory to the next stage of the business process. It uses Time Resources,
Financial Resources and Environmental Resources
Product Storage
• Transport vehicles can also be used for product storage at shipment origin or destination, but they are
comparatively expensive
• Another form of temporary product storage is diversion. Diversion occurs when a shipment destination is
changed while product is in transit
• Warehouses are the most widely used storage

Transport Principles
Economy of scale Economy of distance
•EoS in transportation is the cost per unit of weight •refers to decreased transportation cost per unit of
decrease as the size of a shipment increases. weight as distance increases. Transportation
Transportation economies of scale exist because economy of distance is often referred to as the
fixed cost associated with moving a load is tapering principle. The rationale for distance
allocated over the increased weight. Fixed costs economies is similar to economies of scale.
include administration related to scheduling, cost Specifically, longer distances allow fixed cost to be
of equipment, time to position vehicles for loading spread over more miles, resulting in lower per mile
or unloading, and invoicing charges

Transport Participants
Shipper and Government Internet
Consignee Government traditionally share real time information with
regulated carriers by customers and suppliers. Information
restricting markets they exchange operating over the Internet
could service and regulating provides carriers the opportunity to
Public prices they could charge aggregate their purchasing and identify
The public opportunities across a wide range of
indirectly creates potential vendors
transportation
demand by
purchasing goods Transport Participants
Carrier Agents
a business that performs a transportation service. desires to maximize its revenue for movement while minimizing
associated costs. the carrier seeks to coordinate pickup and delivery times in an effort to group or consolidate many
different shippers' freight into movements that achieve economy of scale and distance

Transportation Structure

Rail Road Air Water Pipeline

A ton-mile is a standard measure of freight activity that combines weight and distance
Line-haul cost is the expense to move railcars or trucks between cities.

Availability
refers to the ability of a mode to Dependability
Speed service any given pair of locations.
refers to potential variance from
Highway carriers have the
refers to elapsed movement time expected or published delivery
greatest availability since they can
schedules
drive directly to origin and
destination points.

frequency,
Capability
which relates to the quantity of
is the ability of a mode to handle
scheduled movements. Pipelines,
any transport requirement, such
again because of their continuous
as load size. Water transport is the
service between two points, lead
most capable.
all modes in frequency

Transportation Service
Traditional Carriers
The most basic carrier type is a transportation firm that provides service utilizing only one of the five basic transport
modes. such specialization creates difficulties for a shipper who desires intermodal transport solutions because it
requires negotiation and business planning with multiple carriers. Airlines are an example of a single-mode carrier for
both freight and passenger service that traditionally limit service from airport to airport
Package Service
It was difficult for common carriers to provide reasonably priced small-shipment service due to overhead cost
associated with terminal and linehaul operations. This overhead forced motor carriers to charge a minimum charge.
Packages are regularly transported using the line-haul services of rail, motor, and air. Package service provides both
regular and premium services

Intermodal Transportation
Intermodal transportation combines two or more modes to take advantage of the inherent economies of each and thus
provide an integrated service at lower total cost. Technically, coordinated or intermodal transportation could be
arranged among all basic modes. Descriptive jargon-piggyback, fishyback, trainship, and airtruck-- have become
standard transportation terms

Piggyback/TOFC/COFC
trailer (TOFC) on a flatcar
container (COFC) on a flatcar.
Containers are typically 8 feet wide, 8 feet high, 20 or 40 feet long, and do not have highway wheels. Trailers,
on the other hand, are of similar width and height but can be as long as 53 feet and have highway wheels. As
the name implies, a trailer or container is placed on a railroad flatcar for some portion of the intercity line-haul
and pulled by a truck at origin and destination

Containerships
Fishyback, trainship, and containerships are examples of the oldest form of intermodal transport. They utilize
waterways, which are one of the least expensive modes for linehaul movement. The fishyback, trainship and
containership concept loads a truck trailer, railcar, or container onto a barge or ship for the line-haul move

Land Bridge
A variant of this intermodal option is the land bridge concept that moves containers in a combination of sea
and rail transport. The land bridge is commonly used for containers moving between Europe and the Pacific
Rim to reduce the time and expense of all-water transport

Coordinated Air-Truck
Another form of intermodal transport combines air and truck. Air-truck is commonly used to provide premium
package services, such as those offered by UPS and FedEx.

Nonoperating Intermediaries
The overall transportation industry also includes several business types that do not own or operate equipment.
Nonoperating intermediaries economically justify their function by offering shippers lower rates for movement
between two locations than would be possible by direct shipment via common carrier. Because of peculiarities in the
common-carrier rate structure, such as minimum freight charges, surcharges, and less-than-volume rates, conditions
exist whereby nonoperating intermediaries can facilitate savings for shippers

Freight Forwarders
Freight forwarders are for-profit businesses that consolidate small shipments from various customers into
bulk shipment and then utilize a common surface or air carrier for transport. At destination, the freight
forwarder splits the bulk shipment into the original smaller shipments. Local delivery may or may not be
arranged by the forwarder. The main advantage of the forwarder is a lower rate per hundredweight
obtained from large shipment and, in most cases, faster transport of small shipments

Shipper Association/Cooperatives and Agents

Shipper associations are voluntary non-profit entities where members, operating in a specific industry,
collaborate to gain economies related to small-shipment purchases. The association requires a group of
shippers to establish an administrative office or arrange an agent at the location of frequent merchandise
purchase. The agent arranges for individual purchases to be delivered to a local facility
 Brokers
Brokers are intermediaries who coordinate transportation arrangements for shippers, consignees, and caniers.
They also arrange shipments for exempt carriers and owner operators. Brokers typically operate on a
commission basis
Roll On/Roll Off Ferries (RORO)
A lorry is loaded at the manufacturer’s workstation driven on to a ship and then driven off at the end of the voyage
directly to the consignee, using the ship as the moving bridge.
LASH (Lighters Aboard a Ship)
LASH barges are loaded at Inland River and shallow ports. Then, the barges are towed to ocean port’s fleeting areas to
meet the LASH mother vessel. On arrival, the mother vessel’s crane lifts LASH barges onto the ships. The same
crane lifts outbound barges, which are placed in the water, and then towed, to their final destination. LASH cargo does
not require transhipment, as the movement from origin to destination with a single bill of loading.

Transportation Economic Drivers

Distance Volume Density

•directly contributes to variable •transport cost per unit of •Transport charges are
expense weight decreases as load commonly quoted as amount
•the cost curve increases at a volume increases per hundredweight (CWT).
decreasing rate as a function of •This relationship is limited by •vehicles are constrained more
distance. This characteristic is the size of the transportation by cubic capacity than by
known as the tapering principle vehicle. Once the vehicle is full, weight.
the relationship begins again for •higher density products are
each additional vehicle typically assessed lower
transport costs per unit of
weight

Stowability Handling Liability

•Stowability refers to how product •Special handling equipment may be •Carriers must either have insurance
case dimensions fit into required to load and unload trucks, to protect against possible claims
transportation equipment railcars, or ships. or accept financial responsibility for
•while steel blocks and rods may damage.
have the same physical density, •Shippers can reduce their risk, and
rods are more difficult to stow than ultimately transportation cost, by
blocks due to their length and improved packaging or reducing
shape susceptibility to loss or damage.
•since large numbers of items may
be nested in shipments whereas
they may be difficult to stow in
small quantities.

A transport lane refers to movements between origin and destination points. Since transportation vehicles and drivers
must return to their origin, either they must find a back-haul load or the vehicle is returned or deadheaded empty. the
ideal situation is to achieve two-way or balanced movement where volume is equal in both directions. However, this is
rarely the case due to demand imbalances
Cost Structure
Variable costs Fixed costs Joint costs Common costs

•includes direct carrier •include vehicles, •when a carrier elects to •terminal or management
cost associated with terminals, rights-of-way, haul a truckload from expenses, are
movement of each load information systems, and point A to point B, there characterized as
•cost components include support equipment is an implicit decision to overhead. These are
labor, fuel, and incur a joint cost for the often allocated to a
maintenance back-haul from point B shipper according to a
to point A. Either the level of activity like the
joint cost must be number of shipments or
covered by the original delivery appointments
shipper from A to B or a handled
back-haul shipper must
be found

Pricing Strategies
Cost-of-Service
•canier establishes a rate based on the cost of providing the service plus a profit margin.
•most commonly used as a pricing approach for low-value goods or in highly competitive situations

Value-of-Service
•charges a price based on value as perceived by the shipper rather than the carrier's cost of actually providing the service
•for high-value goods or when limited competition exists
•1000 pounds of electronics equipment as more critical or valuable than 1000 pounds of coal

Combination Pricing
•intermediate level between the cost-of-service minimum and the value-of-service maximum

Net-Rate Prices

Class Rates
The rate is listed on pricing sheets or on computer files known as tariffs. 'The term class rate evolved from the fact
that all products transported by common carriers are classified for pricing purposes
Determination of common carrier class rates is a two-step process.
The first step is the classification or grouping of the product being transported.
• The particular class that a given product or commodity receives is its rating, which is used to determine the
freight rate.
• Products are also assigned classifications on the basis of the quantity shipped. Less-than-truckload (LTL)
shipments of identical products will have higher ratings than carload (CL) or truckload (TL) shipments.
• Products are also assigned different ratings on the basis of packaging.
The second step is the determination of the precise rate or price based on the classification of the product and the
origin/destination points of the shipment.
Commodity Rates
When a large quantity of a product moves between two locations on a regular basis, it is common practice for carriers
to publish a commodity rate. Commodity rates are special or specific rates published without regard to classification.
The terms and conditions of a commodity rate are usually indicated in a contract between the carrier and shipper.
Commodity rates are usually published on a point-to-point basis and apply only on specified products

Exception Rates
Exception rates, or exceptions to the classification, are special rates published to provide shippers lower rates than the
prevailing class rate.
an aggregate tender rate is utilized when a shipper agrees to provide multiple shipments to a carrier in exchange for a
discount or exception from the prevailing class rate. The primary objective is to reduce canier cost by permitting
multiple shipment pickup during one stop at a shipper's facility or to reduce the rate for the shipper because of the
carrier's decreased operations or marketing expenses
A limited service rate is utilized when a shipper agrees to perform selected services typically performed by the
carrier, such as trailer loading, in exchange for a discount. A common example is a shipper load and count rate
Freight-All-Kind Rates.
Under FAK rates, a mixture of different products is transported under a generic rating. Rather than determine the
classification and applicable rate of each product, an average rate is applied for the total shipment. In essence, FAK
rates are line-haul rates since they replace class, exception, or commodity rates
When a commodity If more than one Proportional rates Combination rates are

Combination Rate
Proportional Rate
Single Line Rate

Joint Rate
moves under the tariff carrier is involved in offer special price similar to proportional
of a single carrier, it is the freight movement, incentives to utilize a rates in that a shipper
referred to as a local a joint rate may be published tariff that may combine two or
rate or single-line rate. applicable. applies to only part of more rates when no
the desired route. single-line or joint rate
exists between an
origin and a
destination

Diversion consists of changing the destination of a shipment prior to its arrival at the original destination.

Reconsignment is a change in consignee prior to delivery. Both services are provided by railroads and motor
carriers for a specified charge

A split delivery is desired when portions of a shipment need to be delivered to different facilities. Under specified
tariff conditions, delivery can be extended to multiple destinations

Demurrage and Detention

Demurrage and detention are charges assessed for retaining freight cars or truck trailers beyond specified loading or
unloading time. The term demurrage is used by railroads for holding a railcar beyond 48 hours before unloading the
shipment. Motor carriers use the term detention to cover similar delays.
3PL
3PL 4PL 5PL
works with shipping companies to A fourth-party logistics provider is 5PL providers construct, organize,
manage logistics and distribution an independent, non-asset based and implement logistics solutions
services on behalf of another integrator who acts as the main point and technologies on behalf of
organization of contact for the customer in multiple clients. 5PLs are committed
determining and assembling to collaboration to achieve the
resources and technology from both minimum cost. Therefore, they will
its own organization as well as other aggregate 3PLs demands into bulk
3PLs to comprehensively run the volumes for more favorable rates
client’s supply chain. Often, over
time larger 3PLs evolve into a 4PL
provide
Common Functions offered by 3PL The main difference between 3PL The difference between 4PLs and
(third-party logistics) providers: and 4PL is the control and 5PLs is that fifth party logistics
Integrated operations accountability that the PL provider providers have an extensive focus on
Warehousing has over the customer’s supply e-business solutions
Transportation services chain. 4PLs provide the customer
Cross-docking with a higher level of consulting
Inventory management services regarding their supply chain
Packaging processes
Freight forwarding
The 1PL, or 1st party, is the manufacturer who must ship the freight. The 2PL is the asset-based carrier responsible for
the transport and storage of the freight. Numerous 2PLs may handle the freight between the point of origin at the
manufacturing facility and the point of final sale for consumption.
 operations management

Equipment Carrier Carrier Carrier Carrier

Load Planning Routing
Scheduling Administration Selection. Integration Evaluation

Core Carrier Strategy: The concept of a core camer is to build a working relationship with a small number of
transportation providers. The concentration of volume in a few core carriers seeks to establish a business relationship that
standardizes operational and administrative processes. A recent development is the use of integrated service providers (ISPs)
to establish and maintain business relationships with core carriers. In such situations, the ISP facilitates administration and
consolidates freight across a wide variety of shippers.

Bill of Lading:
The bill of lading is the basic document utilized in purchasing transport services. It serves as a receipt and
documents products and quantities shipped. The bill of lading specifies terms and conditions of carrier liability
and documents responsibilities for all possible causes of loss or damage except those defined as acts of God. In
addition to the uniform bill of lading, other commonly used types are ordernotified, export, and government.

The freight bill represents a carrier's method of charging for transportation services performed. It is developed using
information contained in the bill of lading. The freight bill may be either prepaid or collect
Design to Distribute

Amazon: A Hard 4PL Act to Follow

The best example of a 4PL model is Amazon.com.
The reason I say this is because Amazon does everything a 4PL provider should do: It stores products in its
warehouses, provides a website for ecommerce, picks and ships orders to consumers, and provides software assistance
for the transaction.
The reason Amazon is so popular with vendors is that it simplifies the selling process in the following ways:

• It has fulfilment centres where vendors can store their products

• Its website details its services to sellers in an easy-to-understand way
• It allows sellers to test its services and cancel at any time should they wish to
• Sellers can interact with the company at low cost and minimal effort.
At the height of the pandemic-linked supply chain disruptions, Amazon set the bar extremely high for other 4PL
providers, despite initially experiencing inventory shortages.

Amazon sellers with an IPI (Inventory Performance Index)

score below 500 will be subject to storage limits from August 16
until December 31.
Amazon has introduced ASIN (Amazon Standard Identification Number) -level quantity limits on products in FBA.
This means that once an ASIN has reached its quantity limit in FBA warehouses, Amazon will not allow any more of
that ASIN to be shipped to a warehouse to be sold via FBA. Basically Amazon’s algorithm will decide how many of
an item Amazon warehouses will store in regards to the popularity of each individual ASIN. Items with higher
expected sales will be allowed higher storage amounts at Amazon warehouses.
If you have “long-tail” items in stock, it’s best to try to sell those items or remove them ASAP. Amazon wants to be
sure that there is enough space to store and fulfill inventory leading up to Prime Day (early October 2020) and the
Holiday Selling Season (the week of Black Friday until Christmas). Amazon only wants faster selling inventory in
their warehouse. They announced a few years ago the IPI (Inventory Performance Index) score and told sellers they
had to have an IPI above 350 to unlock unlimited storage. This must have worked because the following year they
raised the minimum IPI threshold to be 400.
Amazon: To help you avoid storage fees for products that have not been selling and create room for more
productive inventory, we are offering a free removal fee promotion for a limited time. We will waive your fees for
any removal order submitted for inventory in our fulfillment centers.
the Top Influencing Factors of the IPI score:
1. Excess inventory
2. Sell-through
3. Stranded inventory
4. In-stock inventory
Amazon’s goal is for their FBA warehouses to be fulfillment centers, not long-term storage centers. The IPI score is
Amazon’s way of helping us see problem areas in our inventory and ways we can improve its performance

Covid 19 impact on Freight Transportation

Air Freight
At the beginning of this year, all expectations were for rates to remain flat, perhaps even making air freight a viable
alternative to ocean shipping for companies that wouldn’t ordinarily consider the option. The pandemic has changed
all that. Given that more than half of all the world’s air freight travels in the holds of passenger airliners, the loss of all
these flights has devastated capacity, demand has skyrocketed, and rates have soared.
In addition to pushing air freight prices up to record levels, the capacity drain, along with the direct impacts of
COVID-19, has prompted ground handlers in some regions to impose emergency support surcharges.

• Using passenger airliners to provide cargo-only services

• Adding more freighter flights on longer routes
• Decreasing the time that freighters spend on the ground
• Postponing maintenance (a worrying trend in terms of aviation safety)
• Bringing old equipment out of retirement

Ocean Freight Transportation Trends

In efforts to comply with IMO 2020, some ship operators are investing vast sums in converting vessels to alternative
fuels, such as liquefied natural gas (LNG), or installing scrubbers to remove sulphur emissions. Others are incurring
the additional operating expenses involved in using costly low-sulphur fuel.
It’s not unusual for ocean carriers to announce blank sailings (canceled voyages) to keep freight capacity in demand
and prevent sliding rates. However, this year, the Coronavirus pandemic has created havoc in the industry and resulted
in unprecedented curtailment levels.
Hence, on top of environmental surcharges, carriers are implementing general rate increases and applying other
extraordinary fees to recoup costs. Their measures include equipment imbalance and peak season surcharges, all of
which make it even more expensive for shippers to keep their supply chains moving.
Additional charges and service cancellations don’t only mean that shippers must pay more to move their ocean
freight—first, they have to find available space.
Some carriers are practicing slow steaming, and routing westbound vessels around the Cape of Good Hope, creating
longer transit times and less predictable delivery arrival dates.
Companies like Amazon and Walmart are actively planning to increase the use of robots in reaction to the
limitations created by social distancing. Moreover, pundits suggest that the pandemic will accelerate the pace of
digitization and automation.
Road Freight Transportation- Truck Platooning
Platooning is the joining of two or more trucks in convoy, linked together by automated support and connectivity
systems. The lead truck in the platoon is operated by a human driver, who has traditional levels of manual control over
the vehicle.

• Reduce fuel consumption and emissions, by minimizing air resistance for the trailing trucks
• Increase safety, as the support systems react much faster to change vehicle direction and speed
• Improve driver productivity, as the drivers of the trailing vehicles may be able to perform tasks other than
driving, such as administration and customer communication.

Rail Freight Transportation

It’s perhaps not surprising that shippers who might typically take advantage of ocean freight, are instead opting to
send their goods by train. After all, rail freight is considerably faster, especially given the transit times involved
with shipping around the southern tip of Africa, which, as mentioned, is currently the preferred route of many
maritime carriers for services from Asia to Europe.

COVID-19 Impact on Procurement

Companies reliant on components procured in China, especially those in the automotive and electronics sectors, will
really start feeling the effects of the crisis in March and beyond, analysts say. In its latest quarterly guidance, the US-
based technology giant warns that its iPhone supply will be “temporarily constrained” worldwide due to the outbreak
of the epidemic in China.

The Automotive Industry

The impact of the epidemic on the global auto industry is expected to be large since China ships around $35 billion
of parts annually. European automakers have been hit by a double Coronavirus whammy—a shortfall in components
from China and the enforced closure of an electronics factory in northern Italy, due to an outbreak of the disease there.

This is how some companies are coping with the shortfalls:

• Samsung is flying electronic components for its latest Galaxy smartphones from China to its factories in
Vietnam
• General Motors is airlifting supplies to its North American truck production
• Deere is using costly expedited shipping to avoid disruptions
• Most companies are scurrying around trying to find alternative procurement options until the crisis plays
itself out.

How to Adapt Your Business for Online Order Delivery

retailers stand a fair chance of making up for lost in-store sales by setting up a dynamic online ordering system. If
your brick-and-mortar outlets have been closed to consumers by a government-ordered lockdown, back rooms or even
sales floors can be transformed into temporary mini-distribution centres. The store entrance can serve as a
collection point for click and collect sales. Should you own or rent a warehouse, you will need to decide whether to
use it as your main distribution centre or to transfer goods from it to your temporary distribution centre(s)
If you already have a delivery operation in place, you may need to re-organise it to be able to cope with the extra
stresses placed on it by online ordering. If you currently operate an exclusively in-store sales model, it may be prudent
to sign up with a specialised last-mile 3PL provider.

Advanced dispatch technology’s role in last mile deliveries

It is also the most expensive and time-consuming leg of the journey, accounting for upwards of 53% of the total costs
of the delivery, according to Business Insider Intelligence. It is also about meeting the customer’s expectations. They
expect fast order Fulfilment. Focus has been placed on last mile logistics because in addition to the high cost, it is a
key differentiator for retailers.
Capgemini, a global leader in consulting and technology services, found that 73% of consumers believe that
receiving a delivery in a convenient time slot is more important than receiving it quickly. From a delivery
standpoint, this means creating a logistics infrastructure that can reliably deliver orders when buyers want them
delivered.
 Retailers are investing in many types of technology to compete. Among the top technology trends has been
investment in advanced routing and dispatching software.

Another challenge in last mile deliveries is a lack of drivers. In 2019, there was a shortage of 60,000 drivers across
multiple industries as an aging population takes its toll.This shortage is projected to grow to over 100,000 drivers by
2021, 160,000 by 2028.

Gig-Economy:
Even with an uptick in last mile drivers due to the boom of the “gig-economy,” retailers are struggling to meet delivery
demands. With this rise of the gig economy, many consumers are already familiar with the concept of crowdsourcing
local services through digital platforms like Lyft and Postmates. The freedom to make on-demand and scheduled
deliveries also ensures that customers are home at the time of delivery, if necessary — eliminating the need for a
second (or third) attempt.

Floating Fleet:
A floating fleet will increase efficiency as drivers are delivering on-demand during their dead hauling and down time.
While retailers are presented with more delivery options, couriers are able to supplement their contracts with on-
demand deliveries to greatly increase revenue.

When comparing different solutions, make sure to analyze each solution’s ability to provide integration, real-time
tracking automation/learning, customizability, route-optimization, delivery or service time windows, ability to manage
capacity, measurability, and longevity.

Expect drones, robots, and autonomous vehicles to play a significant role in the delivery of the future, depending on
where the customer resides. For example, drones are expected to dominate rural areas, and robots are already making
a splash in food deliveries in certain urban settings.

Technology solutions that can help up last mile delivery services game
• It automatically plans efficient routes so that drivers can make
Route Planning on-time deliveries. It quickly incorporates the last-minute
software changes in route plans and creates an updated optimal route
for the fleet

• It automatically sends real-time delivery notifications to both

Real-time fleet customers and fleet managers. Thus, it ensures that
tracking software transparency is maintained during all last-mile delivery
operations.

• Logistics companies are now implementing contactless

Electronic Proof of delivery practices strictly. Electronic Proof of Delivery ensures
Delivery a quick, secure, and reliable way of delivering parcels, while
avoiding person-to-person contact with the customer

Parcel sorting • The parcel sorting solution has a geocoding engine that maps
solution the right addresses for corresponding route numbers
Building Excellence through Delivery

In February 2018, The Wall Street Journal

reported that Proctor & Gamble is
undertaking a multi-billion-dollar effort to
remake its network of factories,
warehouses and offices into a new model.
Once complete, P&G said its new supply
chain will enable 80% of U.S. production
to reach stores within 24 hours.

Boxing Clever’: Realizing the Benefits of Intelligent

Cartonization
COVID-19 has taken e-commerce fulfillment to the next level, as shelter-in-place orders and store closures beginning
in March had, by the end of June, driven an 18% year-on-year spike in non-store sales for the first half of 2020, to
more than $456 billion versus $387 billion for the first half of 2019.

Packaging optimization, or cartonization

has become a priority for volume parcel shippers of all kinds, but particularly in online retail. Time and materials are
baseline considerations: packaging decisions are often made quickly, on the fly, by the number, size, weight and shape
of items. Customers prefer receiving all items in an order together, in an appropriately sized box, but businesses aren’t
always able to accommodate them. While automated “box-on-demand” systems can build cartons of any size from
raw corrugated sheets, they’re often only cost-effective for larger, high-volume shippers

AI Navigates Complex Packing Incentives

DIM Pricing AI Based Cartonization Algorithms
 Dimensional weight (DIM) pricing, Paccurate(a Brooklyn, New York based developer of
implemented by FedEx and United Parcel Service in cartonization AI software algorithms) analyze the
2014 has now become a standard rating method for dimensions and weight of an item or items in an
other carriers seeking to “cube out their vehicles”. order, against negotiated rates and terms from one or
DIM pricing ended the rate tradeoff between weight multiple carriers based on client- established rules
and volume for smaller packages. It uses a “DIM and exceptions, to determine the optimal pack for the
factor” — a constant minimum weight per cubic foot item or order. Packing determinations can originate
of space — applied to package volume. it offers a at the order entry, or in the wave picking, packing or
price incentive to optimize carton size to improve shipping stage, and include a detailed 3D visualization
space utilization and stackability in the truck. of the recommended pack.

Ship From Store

It is said that retailers don’t have a consumer demand problem, they have a real estate problem. Compared to online
marketplaces, retailers have significant capital tied up in fixed assets (stores and fixtures). By investing in an
omnichannel shipping strategy and the right technology to help manage an expanded portfolio of carriers to ship
anywhere from anywhere, retailers can turn their real estate problem into an advantage
A ship-from store fulfilment strategy provides retailers with an opportunity to ship from inventory sources in closer
proximity to consumers, thereby reducing delivery times and shipping costs. Ship-from-store is an opportunity for
brick-and mortar retailers to reconfigure storefronts into mini-distribution centres, pickup locations, and return centres.
Despite the growing demand, retailers using a more traditional supply chain with centralized warehouses and
distribution centres will continue to find themselves playing catch-up to those incorporating an omnichannel shipping
approach. To support ship-from-store and same-day delivery services, multi-carrier management solutions not only
need to scale across thousands of store locations, they also need to support rating, labelling, and tracking across a
much broader network of local couriers, white-glove freight carriers, and crowdsourced delivery services
 Warehousing
For manufacturers, strategic warehousing offered a way to reduce holding or dwell time of materials and parts.
Warehousing became integral to Just-in-Time (JIT) and stockless production strategies. On the outbound side of
manufacturing, warehouses can be used to create product assortments for customer shipment

Economic Benefits
Consolidation and Break-Bulk
•In consolidation, the warehouse receives materials from a number of sources, which are combined into a
large single shipment
•A break-bulk operator receives a single large shipment and arranges for delivery to multiple destinations
•The benefits are the realization of the lowest possible freight rate, timely and controlled delivery, and
reduced congestion at a customer's receiving dock
Assortment
•Three types of assortments- cross-docking, mixing, and assembly
•combine inventory from multiple origins into an assortment for a specific customer
Postponement
•risk is minimized because customized packaging is not performed in anticipation of customer orders
•total inventory can be reduced by using inventory of the base product to support multiple customers' labeling
and package requirements
Stockpiling
•accommodate seasonal production or demand
•Stockpiling provides an inventory buffer, which allows production efficiencies within the constraints
Reverse Logistics
•product recall, reclamation, and disposal of overstock and damaged inventory is performed at warehouse

Service Benefits
Spot Stocking
•Utilizing warehouse facilities for spot stocking allows inventories to be placed in a variety of markets adjacent to
key customers just prior to a maximum period of seasonal sales
•responsiveness in peak selling periods can be enhanced through temporary inventory positioning
Full Line Stocking
•more often restricted to a few strategic locations and operates year-round
Production Support
•Production support warehouses stock inventory to support manufacturing operations.
Market Presence
•The underlying belief is that a local warehouse can respond faster to customer needs than can a more distant
warehouse

Warehouse Operations
Warehouse operations consist of break-bulk, storage, and assembly procedures. The objective is to efficiently receive
inventory, possibly store it until required by the market, assemble it into complete orders, and initiate movement to
customer.
 Receiving
Transfer
In-Storage
Handling
Handling Selection

Loading
Operation Shipping
Verification
Active Storage
Storage
Extended Storage

Handling
Movement continuity means that it is better for a material handler with a piece of handling equipment to perform
longer moves than to undertake a number of short handlings to accomplish the same overall move. Instead of moving
individual cases, handling procedures should be designed to move cases grouped on pallets, slipsheets, or containers.
Three primary handling activities are receiving, in-storage handling, and shipping.

Receiving
Merchandise and materials typically arrive at warehouses in large quantity shipments. The first handling activity is
unloading. Receiving is usually the unloading of a relatively high volume of similar product.
In-Storage Handling
In-storage handling consists of movements within the warehouse.
Transfer
Following receipt and movement to a staging location, product must be moved within the facility for storage or order
selection. There are at least two and sometimes three transfer movements in a typical warehouse .

storage order selection shipping

receiving area Shipping Dock
location or picking area staging area

Optional Movement required when unit

loads have to be broken down for order
selection. When products are large or bulky,
this intermediate movement is not necessary.

Selection
It is typical for one area of a warehouse to be designated as a selection or picking area to assemble orders. For each
order, the combination of products must be selected and packaged to meet specific customer order requirements. The
typical selection process is coordinated by a warehouse management system

Shipping
Shipping consists of order verification and transportation equipment loading.
transportation equipment loading
Shipping unit loads is becoming increasingly popular because considerable time can be saved in vehicle loading. A
unit load consists of unitized or palletized product. To facilitate this loading and subsequent unloading upon delivery,
many customers are requesting that suppliers provide mixed combinations of product within a unit. The alternative is
to floor stack cases in the transportation vehicle
Shipment content verification
Is typically required when product changes ownership.
Storage
• Product volume or velocity is the major factor driving warehouse layout. high-velocity products should be
positioned near doors, primary aisles, and at lower levels in storage racks. Such positioning minimizes
warehouse handling and reduces the need for frequent lifting.
• Relatively heavy items should be assigned storage locations low to the ground to minimize lifting
• Bulky or low-density product requires cubic space. Floor space along outside walls is ideal for such items
Active Storage
• Storage for basic inventory replenishment is referred to as active storage.
• The need for active storage is usually related to the capability to achieve transportation or handling economies
of scale
• materials handling processes and technologies need to focus on quick movement and flexibility with
relatively minimal consideration for extended and dense storage.
• The active storage concept includes flow-through distribution, which uses warehouses for consolidation and
assortment while maintaining minimal or no inventory in storage. Flowthrough distribution is most
appropriate for high-volume, fast-moving products where quantities are reasonably predictable.. it does
require that product be quickly unloaded, de-unitized, grouped and sequenced into customer assortments, and
reloaded into transportation equipment.

Extended Storage
• refers to inventory in excess of that required for normal replenishment of customer stocks. seasonal items,
require storage to await demand or to spread supply across time
• Extended storage uses materials handling processes and technologies that focus on maximum space
utilization with minimal need for quick access.
• Commodities such as grains, oil, and cardboard are often stored for speculative reasons.

Warehouse Ownership Classification

Private Public Contract
•operated by the firm owning the •public warehousing may be able to •combines characteristics of private
product achieved lower operating cost than and public operations
•The major benefits of private private facilities. •provide benefits of expertise,
warehousing are control, •Public warehousing offers flexibility, scalability, and
flexibility, cost flexibility concerning size and economies of scale by sharing
•the perceived cost benefit of number of warehouses management, labor, equipment,
private warehousing is potentially •a public warehouse serving both and information resources with
offset by a public warehouse's clients could arrange combined multiple clients
ability to gain economies of scale delivery, thus providing reduced •typically offer a range of logistical
based on leveraging the combined transportation cost services such as transportation
throughput of multiple clients management, inventory control,
order processing, customer
service.

A contract warehouse space is different from a public warehouse space in that you will get a guaranteed amount of
storage space in it every month. The company running the warehouse will not be able to give away the space you have
reserved, and you can choose to either fill it or leave it empty. Contract warehouses are ideal for companies with long-
term storage needs. They can also be used for tasks like pick and pack fulfilment and more. In public warehousing,
highly flexible whereas contract has high stability. Public warehouse's alternative is less costly than a contract
warehouse.
Public warehouses have traditionally been classified based on operational specialization such as (1) general merchandise, (2)
refrigerated, (3) special commodity, (4) bonded, and (5) household goods and furniture.

As a managerial guideline, a typical warehouse will be fully utilized between 75 and 85 percent of the time; so from 15 to 25
percent of the time, space needed to satisfy peak requirements will not be used. In such situations an attractive strategy may be the
use of private or contract warehouses to cover the 75 percent requirement while using public facilities to accommodate peak
demand.
Warehouse Planning
Site Selection
Drivers in site selection are service availability and cost. Land cost is the most important factor. must offer
adequate room for expansion. Necessary utilities must be available

Design
Three factors to be determined: number of floors to include in the facility, a cube utilization plan, and product flow. The ideal warehouse
design is a one-floor building. Warehouse design should maximize cubic utilization. should facilitate continuous straight product flow

Product-Mix Analysis
Another independent area of quantitative analysis is detailed study of products to be distributed through the
warehouse

Future Expansion

Building design should accommodate future expansion without seriously affecting ongoing operations

Sizing
projection of the total volume expected to move through the warehouse during a given period. allow 10 percent
additional space to account for increased volume

Materials Handling

materials handling system must be selected early in the warehouse development process

Warehouse Layout
Pallet Size
If pallets are utilized, an early step is to determine the appropriate size. whenever possible, a standard size pallet
should be used throughout a warehouse. The most common pallet sizes are 40 x 48 inches and 32 x 40 inches. In
general, the larger the pallet load, the lower the movement cost per pound or package over a given distance

pallet positioning
The most common practice in positioning pallets is 90 degree, or square, placement. Square placement means that the
pallet is positioned perpendicular to the aisle.
handling equipment
The path and tempo of product flow depend upon the materials handling system

Layout A Layout B

•square •rectangular.
•selection, or picking, area: Its primary purpose is to •A continuous towline is used for order selection.
minimize the distance order pickers must travel when •the compact selection area is replaced by order
assembling an order. selection directly from storage
•Within the selection area, products are positioned •orders are then selected directly from storage and
according to weight, bulk, and replenishment velocity to loaded onto carts
minimize outbound movement •it facilitates selection of all products at an equal speed
•The selection area is supported by a storage area. The and frequency and does not consider special needs of
selection area is replenished from storage as required high-velocity products

Slotting
variable Fixed

•also called dynamic slotting •assigns product to a permanent location in the

•allows the warehouse location to be changed warehouse
each time a new shipment arrives •As volume increases or decreases, the product
•efficient utilization of warehouse space. location may be reassigned
•personnel become familiar with the location of
specific product, making them more efficient

https://www.logisticsbureau.com/spotlight-on-the-10-most-common-pallet-racking-systems/

When master cartons are grouped into larger units for handling, the combination is referred to
as containerization or unitization. beer, often sold at retail in units of 6, is normally packed in
master cartons containing 24 units. Standard master cartons could be more efficiently stacked,
resulting in less backroom congestion.
Racking System
System Features Aisle Inventory Utiliza When to use
tion
Selective Most common racking. 3- FIFO 90% low number of pallets per SKU
Unfettered access to any pallet 3.5m need to pick from pallets at lower
levels
Push commonly only two pallets 3.5 FILO 85% more pallets per SKU
Back deep greater storage density
Pallets are pushed back from full pallet storage
aisle by fork lift
Double Need a fork lift truck with 3-3.5 FILO 85% two pallets of the same SKU in
Deep extendable reach and camera each double deep slot
to assist the operator more pallets per SKU
Live Pallets are placed on gravity 3- FIFO 85% relatively fast rate
Pallet roll tracks and move from 3.5m high number of pallets per SKU
entry to exit via gravitational
pull
One lane per SKU
Drive in The fork lift drives down the 3.5 FILO 55% mix SKUs within each bay/lane of
lane of each racking bay to drive in racking
deposit or pick up pallets
emulates the operation of
block stacking
Narrow Order picking machines may 1.8- 90% high SKUs with relatively small
Aisle pick from pallets, but not at 2.2 quantities per SKU
the same time as turret trucks large amounts of goods
Mobile Mobile bases with wheels 3-3.5 90% high amount of storage, but with
Mobile racks move to allow modest movement of pallets
access to pallets
One aisle opens at a time
Satellite utilises a mobile shuttle 3.5 FIFO, 95% high volume of products moving
(Deep (remotely controlled) to move FILO through of each SKUs
Lane) the pallets through the racking One SKU per lane
10 to 40 pallets long per lane
High Needs dedicated building, 1.8-2 95% when land space is limited, and/or
Rise rack clad or free standing if there is a high volume of
(ASRS) products moving
IKEA, the Swedish retailer of unassembled furniture, emphasizes cube minimization to the point that it ships pillows
vacuum packed. IKEA uses a cube minimization packaging strategy to successfully
compete in the United States even though the company ships furniture from Sweden. Cube
minimization is most important for lightweight products such as assembled lawn furniture
that cubes out a transport vehicle before weight limits are reached

Rigid Containers. Rigid containers provide a device within which master cartons or loose products are unitized. The
airlines use rigid containerization both for freight and for passenger baggage

• Most industry associations recommend that a standardized pallet or slipsheet size be used as a unit load
platform. The Grocery Manufacturers of America have adopted the 40 x 48-inch pallet with four-way entry
and similar size slipsheets for food distribution.
• The beverage industry, on the other hand, has standardized on 32 x 36-inch pallets. Throughout industry, the
sizes most frequently used are 40 x 48, 32 x 40, and 32 x 36.
• It is common practice to first identify the dimension of most frequent entry by handling equipment. Generally,
the larger a platform, the more economical for materials handling. For instance, the 40 x 48-inch pallet
provides 768 more square inches per stacking tier than the 32 x 36-inch size. Assuming that master cartons
can be stacked as high as 10 tiers, the total added unitization space of the 40 x 48-inch pallet is 7680 square
inches. This is 60 percent larger than the 32 x 36-inch size. The final determination of size should be based
upon load, compatibility with the handling and transport equipment used

Pallet pools are third-party suppliers that maintain and lease high-quality pallets throughout the country
for a variable fee for a single cycle

Material Handling
Systems
• Lift Trucks
• Walkie-Rider Pallet Trucks
• Towlines
• Tow Tractor with Trailers
• Conveyors
• Carousels
• Automated Guided Vehicle
System

Live Racks
A device commonly used to reduce manual labor in warehouses is storage rack design in which product automatically
flows to the desired selection position. The typical live rack contains roller conveyors and is constructed for rear
loading. The rear of the rack is elevated higher than the front, causing a gravity flow forward. When canons or unit
loads are removed from the front, all other cartons or loads in that specific rack flow forward. Rear loading facilitates
first-in, first-out (FIFO) inventory management.
Automated Storage/Retrieval Systems (ASRS)
The four primary ASRS components include
1. storage racks
2. storage and retrieval equipment
3. input/output system
4. control system.
The rows of racks are separated by aisles ranging from 120 to over 800 feet in length. Primary storage and retrieval
activities occur within these aisles. A storage and retrieval crane travels up and down the aisle alternatively storing and
selecting product. A variety of storage and retrieval equipment is available. The initial function of the storage and
retrieval equipment is to reach the desired storage location rapidly. A second function is to deposit or retract
merchandise.
Radio Frequency Data Communications (RFDC)-controlled handling
equipment
The warehouse facility is essentially the same as any mechanized facility. The difference is that all lift truck
movements are directed and monitored by some combination of computer mounted on the lift truck, handheld
computer, or voice-activated communication. the WMS in conjunction with the operations control computer plans and
initiates all movements, communicates the requirements to the material handlers, and tracks the completion of all
tasks. Decision support systems analyze all movement requirements to assign equipment in such a way that direct
movement is maximized and deadhead movement is minimized.

Pick-to-Light Systems
Pick to light, a technology using a variation of a carousel system. A series of lights or a light tree in front of each pick
location indicates the number of items to pick from each location. In systems where an item is picked to fill multiple
orders, sortbars show the order selector how many of the selected items are needed in each carton to meet fulfillment
needs of individual orders. A variation of the pick-to-light system is put-to-light, where order selectors place product
in the lighted containers
3 Common Inventory Management ‘Sins’
Observe ABC Classification

Company Z has a total of 7,029 lines with a turnover of about $51 million. If you treated all the lines the same, your
turns would be lower because your fast-moving products that account for most of your revenue would not be getting
the priority they need. Another consequence is that your warehouse costs would go up and your availability would go
down. In our example. the availability of A-lines is 93 percent, of B-lines is 94 percent, and of C-lines is 93 percent.
So the Cs are getting the same amount of attention as the As. By discriminating between As, Bs, and Cs, we can
project forward and say that if the company does everything to treat the As preferentially they can get as much as 98
percent out of the A-lines. At the same time, we can project forward and say that Company Z can live on $6 million
worth of inventory instead of the $9 million that it is holding.

Forecast Demand
It is important to note that requirements planning is not the same as demand forecasting. You need to do forecasting as
well as supply chain planning. These days, more than ever, you need to be smarter and look at trends, seasonality, and
changes.

Have an Inventory Policy

An inventory policy is a document detailing the objectives, principles, rules, systems, and processes for cataloguing,
classifying, forecasting, planning, stocking, replenishing, purchasing, warehousing, returning, allocating, disposing of,
accounting for, monitoring, and reporting inventory. These are the more important aspects of an inventory policy:
1. Knowing how the ABCs are calculated and applied
2. Knowing the service level objective
3. Understanding which of the As, Bs, and Cs are going to be stocked; which are going to be indented (or
supplied to order); and which ones are going to be directly shipped.
4. Establishing which warehouse gets what.

Improve your Warehouse Productivity Through Product

Slotting
In effect, retail stores slot their products (understandably) in a way that is optimal for sales, not ergonomics. When you
walk into a supermarket you will invariably find that the fast-moving products—such as milk, and eggs, and bread—
are stocked at the back of the store.
Simply put, warehouse product slotting is about putting the right product in the right place so you can pick it in the
most efficient way. you put the fastest-moving products closest to the packing and dispatch area to minimise the
movement of warehouse staff
1. To start with, find out which products are picked the most and place them as close as possible to what we call
the centre of gravity of the warehouse, where dispatch is situated. You look at where the picker starts and
place it as close as possible to that point—that’s the golden zone
2. slow-moving products go up on the top shelves because it takes longer to get them, while faster-moving
products come down on the bottom shelves
you can make significant savings on labour costs in your warehouse by slotting products and putting them in the right
place.
Triadic Distribution Centres Making Triadic, Dyadic and
Monadic Sense of your Warehouse
Triadic Warehouse
• It’s a warehouse that is broken up into three sections. The Pareto Principle to stock management is applied to
warehouse layout and operations.
• Goods are received, stored, picked and packed according to their frequency of demand, (regardless of
inventory value)
• They are designed for optimal flow to minimise handling resources and labour.
• They feature fast pick, medium pick and slow picking zones.
• They are typically larger warehouses or rooms in warehouses, e.g. greater than 500 sqm, but smaller facilities
with many SKUs, may also employ triadic thinking
• For a larger more complex warehouse with lots of products and high volumes, stock optimisation and product
slotting software are helpful. With such tools, warehouse operators have every opportunity of moving their
facility along the Triadic Warehouse Continuum

Dyadic Warehouses
This is a warehouse, or room or zone within a warehouse, that is divided into two classes. It follows the Pareto
Principle of stock placement as alluded to previously. It could, for example, encompass grouping fast moving stock,
away from the rest, to allow for freer access to receiving and dispatch zones. Examples of Dyadic warehouses include
sub sections of larger facilities e.g. freezers, cool rooms, clean rooms, or dangerous goods stores, which are all distinct
storage entities.

Monadic Warehouses
This is a warehouse, compartment, or zone within a warehouse that has just one class of stock and no meaningful
reason for placing stock anywhere in particular. In these instances, the footprint may be so small that breaking stock
into dyadic or triadic locations is meaningless. However, applications of monadic warehouses can occur when there is
specific temperature, environmental or handling requirements which dictate a monadic environment.

Often automated sections of the warehouse are a virtual triadic oasis, within a larger facility, of triadic or non-triadic
design. This is because automated systems, such as goods to person, automatic storage and retrieval systems,
autonomous vehicles and robots have control systems which achieve triadic management of stock.
Robots In Distribution Centres
Robots

Industrial robotic
Mobile robot platforms: ASRS Gantry robots:
manipulators

typical robotic arms

automated guided featuring in-rack robots that run on
autonomous vehicles. ASRS, that can be applied to
vehicles (AGV) robots. overhead structures.
countless applications.

AGV:

1.Generally used for transport of goods within a set path or circuit. May be guided by rails, lasers and sensors.
These have been around for many years, but AGV technology has advanced and is far more affordable, reliable
and applicable to many types of mobile equipment.
Shuttle systems:

1.Used within racking systems to place and retrieve stock. The racking maybe serviced by automatic conveyors
or AGV, or manually by an operator.
Autonomous mobile robots:

1.These are free-path robots controlled to operate on the best put-away or picking path. Using sensors and
cameras, they can navigate around a DC where people are working. They are ideal for goods-to-person and
task-to-person applications.
Stacker cranes are used in automated storage and retrieval systems for pallet handling. Yes, they have been around
for many years, but they are a robot, nonetheless. They typically run on fixed-path rails systems.

Mini-load stacker cranes:

1.Related to the larger stacker cranes, mini-load cranes run on fixed rails installed within racking. They can
achieve high rates of replenishment and picking and are now able to pick cartons, object and eaches to totes or
conveyor belts.
Industrial robotic order picker:

1.Using conventional robots with articulated arms for picking and palletising/ depalletizing etc. has become
common place. In recent years, visualisation technology has enabled robots to see and pick stock in units. If the
robot does not have the right gripping device to pick items up, it merely changes to the right one, and continues
picking.
Warehouse Design
Outbound Logistics
if speedy delivery is a part of your service strategy (which is often the case in today’s on-demand environment), you
will either need to locate your warehouses close to customers, or close to the facilities of your preferred carriers. This
requirement, in turn, will influence decisions about the number of warehouses required, and their capacity.

Warehouse Functions
Aside from considering customer service aspects, such as lead times and supply chain velocity, you will also need to
think about anticipated throughput and more specifically, receiving, storage, and dispatch volumes, as well as the
types of processes that will be performed in your warehouse facilities.

Planning Individual Warehouse Design and Capacity

• What activities will take place in your warehouse?
• What are the characteristics of your products?
• Are your products subject to seasonality? Try to allow enough capacity for peak storage and throughput, while
avoiding too much overcapacity during the quieter months.
• If your warehouse will need to process many returns from customers, you may wish to allow for extra space
dedicated to their storage and processing.
FAST Framework

F A S T
•Flow •Accessibility •Space •Throughput

We are concerned with We need to know if we maximum should be We should consider

the controlled and can get to the required allocated to operational product category,
uninterrupted level of packaging unit. storage and stock processing handling
movement of materials, purposes, while giving up
characteristics,
the minimum of space
people and traffic with, dimensions hazard,
necessary for associated
if possible, no cross- bulk, fragility, security
functions such as offices,
flow clashes or areas of working areas, empty requirements and
high traffic or work pallets storage, a warehouse compatibility with
density. he aim here building can be of the other products. The
should be to situate the simplest and cheapest big velocity of the product
various warehouse box design. and it’s possible will consider the
activities so that each to build flexibility into the volume that’s moving
contributes to a smooth operation, by selecting the
through the warehouse
flow of operations with storage media that best
on each day.
meets the current stock
a minimum amount of
profile and then changing it
movement and
as the business evolves to
disruption meet future requirements.

Warehouse Design Rules of Thumb

• Ideal Land to Building ratio in lineal metres, 1.7:1–2:1
• Building aspect ratio, 1.7:1 – 2:1
• Ideal Warehouse Height at Springing Line 9.5-10.5 metres
• Pallet per Sq metre ratio 1 – 1.2 (with conventional storage racking)
• Truck turning space 30-40 metres
• Approx 20 to 25% of warehouse floor should be left for non storage operations e.g. receiving, dispatching
staging

Checklist of Warehouse Design Considerations

• Requirements and specifications for loading docks
• MHE battery charging/changing stations (location and provision for ventilation)
• Building support columns should be spaced/located in a way that allows for optimal layout of storage media
and aisles
• Number of warehouse doors/loading and unloading bays
• Location of offices and other non-storage space (canteen, restrooms, other)
• Ensure lighting will be adequate and ideally, environmentally friendly (LED, induction?), and low
maintenance
• Minimisation of obstacles or areas creating bottlenecks in warehouse flow
• Minimisation of travel-distances within the warehouse
• Fire prevention and firefighting equipment
• Adequate drainage should be designed into the warehouse site
• Low-maintenance warehouse roof design
• Heating, climate control, and insulation
• Radio frequency, LAN/WAN, or other communication/data-transfer infrastructure
• Storage areas for empty pallets
• Waste disposal solutions
• Security concerns, such as car-parking, checkpoints, location of cameras
• Future plans for automation, expansion and/or a change in storage requirements
Distribution Centre Design
I-shaped design
• Warehouses that receive at one end and dispatch
from the opposite end are flow-through or ‘I’ shaped
layouts.
• These are commonly used for high-volume
operations, or where complete separation of receiving and
dispatch operations is required.
• While I designs are widely used, these designs
required greater hardstand areas than the alternative ‘L’ or
‘U’ shape designs.

U-shaped design
• Receiving and dispatch operations that are adjacent, on
the same side of a warehouse are known as ‘U’ shape
designs.
• The majority of distribution centres are designed as U-
shaped. This is because they offer the best ratio of
building-to-land use and minimise the amount of
hardstand required for receiving and dispatch vehicle
movements.

L- Shaped Design
• ‘L’ shaped designed warehouses typically receive on one
side and dispatch on an adjacent side at 90 degrees from the receiving
side.
• Many cross-docking operations employ an L-shaped design,
along with organisations that receive goods in large trailers but
dispatch in smaller vehicles.
In some cases, modern distributions may include two or three of I, U
and L designs. Particularly where a number of methods to market are
required, e.g. direct to store deliveries, business to distributor,
business to consumer, and business to route.

Racking orientation
For conventional warehouses the most efficient method of operation occurs when racking runs in the same direction as
incoming materials. This allows forklift operators free access from receiving and to dispatch docks. Placing the
racking at 90 degrees to incoming materials is not recommend as funnelling and bottlenecks can occur, as forklifts are
forced to use central aisles to put-away and retrieve stock

Dock and loading bay design

Providing the right docks and loading bays in a distribution centre should be straightforward, but sadly it’s not, as
many warehouse operators can testify. Consider the variety of vehicles that may visit your warehouse, and the
numbers of each. E.g. pantechnicons, rigid vehicles, temperature controlled end-loading trailers and B-Doubles,
ground delivery side- or end-loaded vehicles, utilities, side-loaded trailers and B-Doubles and rigids, courier vans,
motor bikes and push bikes.
As a general rule, if a dock or loading bay is 75% utilised, you should provide an additional one.
Rule of Thumb
Amount of room
Usable land for Truck Sqm per pallet in a
Warehouse aspect planned for
buildings and turning/reversing conventional
ratio receiving and
hardstand space warehouse
dispatch
For semi-trailers’
movement, in and
for most warehouses,
most efficient from 20 to 25% of the
out of facility and Allow for 1.2 sqm
shape for available warehouse reversing into per pallet for
distribution 50% of the land floor space should be docks, allow 37 to conventional
allocated to receiving 40m. For B-
centre design is a space can be selective racking
and dispatching Doubles, allow 50
rectangle, ideally planned for operations. The to 55m. However, systems. Push up
at a ratio of buildings. balance of 75% is where B-Doubles to 1.4 for narrow
length = 1.7 x usable for storage drive through and aisle or double
width. equipment and deep systems.
picking systems.
do not reverse in,
37 to 40m is
sufficient.

The three most important factors to consider when choosing a location

for your distribution centre are:
• Access to infrastructure
• Most optimal service
• Overall cost
• Warehouse KPIs

Total labour costs as Warehouse costs as

Warehouse DIFOT On-time Dispatch Dispatch In-full percentage of total percentage of gross
facility costs sales

Cost per unit

throughput (pallets, Sales per cubic metre
tonnes, cases or any of warehouse space
other unit)
3PL Warehousing
Flexible Warehousing: Direct-to-Consumer E-Commerce
Traditional WMS designed for B2B B2C fulfillment

• Centralized control of fewer and larger • “endless aisle” of inventory-in-motion held

shipments; by others;
• more merchant inventory at rest; • “eaches” picking and packing;
• full case picking; • higher volumes of smaller orders;
• aggregated pickup and delivery; • multiple items per order;
• lower cost per mile with fewer stops on • higher costs for faster and free last-mile
truckload (TL) and less-than-truckload (LTL) parcel delivery
vehicles

The question for all retail supply-chain participants is whether the e-commerce omnichannel fulfillment model, with
its fast and free shipping and easy returns, is a sustainable model. Retailers, manufacturers, distributors, 3PLs and
independent warehouses will need to manage risk and time their investment decisions carefully.

Warehouse – in – Warehouse
A lower-risk solution gaining ground could be called “warehouse- in-a-warehouse. WinW is a software-enabled
approach designed to supplement existing B2B warehouse operations with B2C fulfillment capabilities. It is scalable
to handle incremental B2C pick-pack-parcel business in less than 10,000 square feet of space, but can eventually
replace an entire WMS in a much larger space if needed, without the integration costs associated with Tier 1 legacy
software providers.

• In the pick stage, WinW allows for wave picking of multiple orders by multiple workers covering set zones.
• Goods can be cross-docked from the larger warehouse for deconsolidation, replenishment and order
fulfillment.
• The system scans product barcodes to print carrier-compliant labels and packing instructions in real time as
the pick is completed.
• Packing configuration and cartonization are optimized to minimize risk and shipping costs, in accordance with
shipment terms and business rules governing the move.
• Actual versus expected weight and dimensions in the WMS are verified to ensure shipment accuracy and
order entry shipping cost estimates.
Increasing Slot Capacity and Picking Efficiency
Common Challenges

Larger picking footprint:

•As travel of the pick path increases due to additional racks to store increased products, so do labor costs, cycle times and
overtime potential. With labor accounting for more than 70 percent of a distribution centers operating costs, these are
not trivial increases.

Multiple pick zones/multiple pick vehicles:

•From very narrow aisle (VNA) picking of slow movers to end rider picking of floor level items, multiple vehicles used to
complete an order often result in a merge/consolidation process that increases total labor costs and reduces productivity

Split locations and undersized slots:

•With more items to slot, distribution centers commonly add slots by decreasing slot size, or by adding additional slots for
the same item in another area of the warehouse. While this solution may work for a limited time, it adds considerable
labor requirements due to more frequent replenishment of smaller slots and longer pick paths to reach the second
location

Reduced inventory in the pick slot:

•Cutting the available inventory in half increases the potential for stock “outages” or “short orders” which can negatively
impact customer service levels and future revenue
 Puma’s Newest DC
For a long time, Puma, founded in Germany in 1948, with annual sales of €4.64 billion
($5.25 billion), has been mostly in the wholesale business, with a 76%- 24% split
between wholesale and retail/direct sales. At present, e-commerce accounts for only 2%
of sales, but that’s where Puma sees promising opportunities for growth.

The Challenge
1. e-commerce brings highly unpredictable demand.
2. Another challenge is that order sizes are getting smaller and smaller, even if they’re officially “wholesale.”
3. wholesale orders include direct-to-consumer orders as well, which need to be processed at Puma's facilities.
4. Puma was struggling to deal with these online retailers and platforms because its distribution network in
Europe was organized by region and channel, while consumers, of course, are not.
In Europe, the company had a geographically decentralized network of D.C.s, with few automated systems, high
inventory levels, and — critically — separate D.C.s for B2B and B2C. Puma decided to build a greenfield D.C. in
Germany, totalling 1.173 million square feet, and capable of storing and picking 122,000 SKUs. The new facility can
handle 74.3 million pieces per year, with a peak capacity of 642,000 pieces per day for B2B orders, and 124,000
pieces for B2C.
They selected TGW Logistics Group, a global systems integrator and specialist in automated warehouse systems for
fashion and apparel, to figure out the best way forward and help reorganize their distribution network.
decision was made to consolidate into one omnichannel fulfillment facility

implemented a door-to-door solution in which all goods coming into the D.C.,
whether as multiple carton sizes, loose loaded in trailers, or as cartons on pallets,
are offloaded from trailers or de-palletized

then are automatically routed to storage in a shuttle system. The shuttle acts
both as a bulk storage system and the engine feeding the goods-to-person
picking workstations

The system then performs discrete order picking for direct, wholesale and retail,
allowing the flexibility to concurrently pick any combination of all order types. At
the Pick- Center One workstation, a worker can sustain a consistent rate of 600
picks per hour, with highest accuracy

After picking directly into order cartons, orders can be directly conveyed to a
value-added services station, if required, then to automated carton closing and
finally to shipping
 Operational Integration

Systems Concept and Analysis

The components of a logistics system are typically called functions. The logistical functions are order processing, inventory, transportation,
warehousing, materials handling and packaging, and facility network design.
Systems analysis, applied to logistics, seeks to quantify trade-offs between these five functions. The goal of systems analysis
methodology is to create a whole or integrated effort, which is greater than the sum of the individual parts or functions. Functional
excellence is defined in terms of contributions a function makes to the overall process as contrasted to isolated performance in a
specific area.
In systems analysis, attention is focused on the interaction between components. Each component contributes a specific
functionality essential to achieving system objectives.
Principles:
• First, the performance of the total system or process is of singular importance. Components are only important if they
enhance total system performance
• Second, individual components need not have best or optimum design. Emphasis is on the integrated relationship
between components that constitute the system.
• Third, a functional relationship, called trade off exists between components that serve to stimulate or hinder total system
performance.
• Finally, components linked together as an integrated system may produce end results greater than possible through
individual performance.

Logistical Integration Objectives

Responsiveness
•ability to satisfy customer requirements in a timely manner
•In a response-based system, inventory is not deployed until a customer commits.
•firm must have inventory availability and timely delivery once a customer order is received

Variance Reduction
•the elimination of system disruptions
•Common solutions are, Using buffer stock, use premium logistics services, information technology to maintain positive logistics
control

Inventory Reduction
•an integrated logistics system must control asset commitment and turn velocity.
•Asset commitment is the financial value of deployed inventory.
• Turn velocity reflects the rate at which inventory is replenished over time. High turn rates, coupled with desired inventory availability,
mean assets devoted to inventory are being efficiently and effectively utilized

Shipment Consolidation
•the larger a shipment and the longer the distance it is transported, the lower is the cost per unit.

Quality
•objective is continuous quality improvement
•when product quality fails after customer delivery and replacement is necessary, logistical costs rapidly accumulate.

Life Cycle Support

•Firms that design efficient reverse logistics often are able to reclaim value by reducing the quantity of products that might otherwise
be scrapped or sold
Enterprise Integration
Internal Integration Barriers
Organization: Successful integration of processes, such as logistics, requires that managers look beyond their
organizational structure and achieve cross-functional coordination. The traditional managerial belief was that functional
excellence would automatically equate to superior performance. Popular terms to describe such function myopia are a sandbox or
silo mentality.

Measurement and Reward Systems: Traditional measurement and reward systems serve to make cross-functional
coordination Difficult. To facilitate internal process integration, new measures, increasingly called balanced scorecards, must be
developed.
Inventory Leverage: Keeping unnecessary inventory to safeguard from demand fluctuation, leveraging economy of
scale can increase overall cost.

Infocratic Structure: information is typically formatted in terms of functional accountability. This early practice in
formatting information has resulted in what is referred to as infocratic structure. The impact of infocratic structure is one of the
driving reasons why Enterprise Resource Systems (ERP) have great general management appeal

Knowledge Hoarding: A more serious situation occurs when managers fail or are unable to develop procedures and
systems for transferring cross-functional knowledge

The Great Divide

The great divide reflects an organizational condition wherein achieved integration is partial but not complete on an end-to-end
process basis. managers seem to achieve more successful integration with external business partners than they do with managers
and departments within their own firm. The most common situation is when a firm achieves only partial integration of
distribution/marketing on the outbound side of the enterprise and procurement/manufacturing on the inbound side.

Domestic Supply Chain Integration

Supply Chain Integrative Framework
• The product/service value flow represents the value-added movement of products and services from the raw material
source to the end customers
• The market acconlmodation flow provides a structure to achieve postsales service administration. Market
accommodation also involves information exchange concerning sales patterns and product usage essential for supply
chain planning. Examples are product customization requirements, point-of-sale (POS) data, end-customer consumption,
and warehouse releases.
• The information flow is bidirectional exchange of transactional data, inventory status, and strategic plans between supply
chain participants.
• Cash typically flows in the reverse direction of value-added activities
To achieve integration, functional value should be focused in terms of universal capabilities. A capability is the knowledge and
achievement level essential to developing integrated performance. Examples of capabilities include the ability to
(1) identify and accommodate the needs of specific customers;
(2) work with supply chain partners to achieve integrated operations;
(3) effectively share operating and planning information between supply chain partners;
(4) measure and understand overall supply chain performance; and
(5) share benefits and risks.

The fusing of capabilities results in universal competencies

The Operational Context

firms must be customer-focused, must achieve interorganizational coordination, and must excel in functional and process
performance. Competency in supplier integration results from performing the capabilities seamlessly in internal work processes.
Firms that desire to excel must blend their operating processes with those of supply partners to meet increasingly broad and
demanding customer expectations.
The Planning and Control Context
Operational excellence must be supported by integrated planning and measurement capabilities. This involves joining technology
across the supply chain to monitor, control, and facilitate overall supply chain performance. Planning and control integration
concern the design, application, and coordination of information to enhance purchasing, manufacturing, customer order fulfilment,
and resource planning.
The Behavioral Context
Successful implementation of supply chain strategy rests on the quality
of the basic business relationship between partners. In dealing with customers, suppliers, and service providers, firms must specify
roles, define guidelines, share information, share risk and gains, resolve conflict, and,
when necessary, be able to dissolve an unproductive arrangement.
 The Eight I's to Creating Successful We's
1. Individual Excellence. Both partners are strong and have something of value to contribute to the relationship.
Their motives for entering into the relationship are positive (to pursue future opportunities), not negative (to
mask weaknesses or escape a difficult situation).
2. Importance. The relationship fits major strategic objectives of the partners, so they want to make it work.
Partners have long-term goals in which the relationship plays a key role.
3. Interdependence. The partners need each other. They have complementary assets and skills. Neither can
accomplish its goals apart from the other.
4. Investment. The partners invest in each other (for example, through equity swaps, cross ownership, or mutual
board service) to demonstrate their respective stakes in the relationship and each other. They show tangible
signs of long-term commitment by devoting financial and other resources to the relationship.
5. Information. Communication is reasonably open. Partners share information required to make the
relationship work, including their objectives and goals, technical data, and knowledge of conflicts, trouble
spots, or changing situations.
6. Integration. The partners develop linkages and shared ways of operating so they can work together smoothly.
They build broad connections between many people at many organizational levels. Partners become both
teachers and learners.
7. Institutionalization. The relationship is given a formal status, with clear responsibilities and decision
processes. It extends beyond the particular people who formed it, and it cannot be broken on a whim.
8. Integrity. The partners behave toward each other in honourable ways that justify and enhance mutual trust.
They do not abuse the information they gain, nor do they undermine each other

Common Forms of International Logistics Documentation

 Logistics Examples
FMCG

BOLT Principle

The Future of Motor Freight

an increase in demand for domestic freight, more loads being rejected by carriers, and higher spot market rates.
We’re seeing hours-of-service changes, insurance costs going up, incidences going up
companies like Amazon continue to raise the bar for customer expectations in both the B2C and B2B landscapes. With
their e-commerce sales soaring—and brick-and-mortar sales either stagnating or declining—many companies have to
walk the tightrope between meeting consumer delivery demands without overspending on transportation.
more shippers are using transportation management systems (TMS), digital freight management (DFM) platforms, and
other advanced technology tools
DFM platforms like Convoy and Uber Freight, for instance, help streamline the truckload (TL) market by using
technology to match up shippers with available drivers. By automating the transportation management process, they
also give shippers access to real-time analytics that they can use to make good transportation decisions.
Using platforms like SemiCab and Lanehub [now part of Transplace, shippers are collaborating with their partners to
forecast capacity and gain better visibility over their supply chains.
GlobalTranz as one example of how a 3PL has transformed a portion of its full truckload (TL) business into a tech-
enabled platform. The company rolled out its GTZamp DFM solution in mid-2019
Up until two years ago, most companies have purchased a set amount of freight transportation via an annual bid
process, and then modified that contract as needed as their freight demands increased or decreased. That changed in
2018, when capacity crunches and driver shortages took hold of the industry. Fast-forward to 2020, and the annual bid
is once again proving useless as companies scramble to secure capacity at the right price and with the best possible
terms.

Improving Freight Costs

think about the rate structure, whether You might find it more economical
Recalibrate your
Define Your it is per ton, per pallet, per carton, and to use air for a portion of the route
Speed of
Freight Profile try to ascertain if it it’s the one most and ocean transport for the rest, or
Deliveries
suitable for your freight profile. vice versa.
If, for example, you have some really Use logistics software to determine
fragile products that have been ways to increase your full-
palletised, and it is so delicate that you truckload shipping frequency
Maximise
can’t put other pallets on top of it, Minimise LTL Look for carriers that offer load
Your Carrier
you’re going to be paying for two shipments consolidation
Capacity
pallets in that vehicle. You are paying Make your freight attractive to
for the volume of the vehicle that you freelance LTL carriers who
are occupying. generally offer better rates.
if you can manage it without affecting join forces with other shippers near
Consolidate customer service, try to hold on to your distribution centres to
Join forces with
Non-urgent non-urgent shipments and consolidate consolidate your freight with theirs.
Other Shippers
shipments them with other loads to optimise
truck or container space.
assess locations by their proximity to Some carriers offer lower rates
Site your
customers—the savings in during off-peak times, so if
Distribution Negotiate for off-
transportation kilometres could be possible schedule your freight
Centres peak time
significant. deliveries for late afternoon or
Smartly
early in the week.
Look beyond Local Carriers Choose the Right Perform an In-Depth Cost Analysis
Service
Reduce your Every bit of wood, matting, and other material you use to keep your cargo in position takes up
Dunnage space and adds weight—and increases your costs.
Logistics Questions
what is ASN (Advance Shipping Notice)?
•It is a notice that is sent to the customer about the detailed shipment information in advance of delivery. It may also
include carrier and shipment related information like time of shipment and expected time of arrival.

what is Anti-Dumping duty?

•Anti-dumping duty is an import duty levied in cases where imported goods are priced at less than the normal price in the
exporter’s domestic market and cause material loss to the domestic industry of the importing country.

What is deadweight tonnage?

•Deadweight tonnage is the difference between the laden and unladen weight of the ship. In other words, it is the weight
of everything that ship carries except the ship itself.

how to organize storage area for bulk items?

•Look storage place which has the facility of single, double or multiple depth locations
•• Bulk storage in vertical or straight direction: It is the most common method of organizing the container, it is organized
in a vertical direction piling the container over each other.
•• Bulk storage at angle: It is one of the solutions that can be applied in a situation when there is a limited place to
accommodate containers. But it is applicable in special cases only, depending upon what material it carries.

what is TEU?
•TEU stands for Twenty foot Equivalent Unit. It is a method of calculating vessel load or capacity, in units of containers
that are twenty feel long. For example, a 40ft long container measure 2TEUs.

What is the advice of shipment and advising bank?

•• Advice of shipment: It is a notice sent to a foreign buyer or local trader informing them that the shipment has
processed forward and carried information about packing, routing, etc. A copy of the invoice is often sent with it and if
recommended a copy of landing also attached along with that.
•• Advising Bank: Advising bank is a bank operating in the seller’s country, that handles letters of credit in behalf of a
foreign bank

what is affreightment?
•Affreightment is a contract between ship owner and merchant, where ship owner provides or rented the space in the
ship to the merchant for an agreed amount and for a specific period. In this contract, merchant is liable for the payment
whether or not the ship is ready for the shipmet

What does a bill of lading include?

A bill of lading includes following details
• Name and complete address of shippers and receivers
• Special account numbers or PO used between business for order tracking
• Instruction for the carrier for secure delivery
• Date of the shipment
• Number of shipping units
• Types of packaging that includes cartons, pallets, skids and drums
• Description about the shipped items (common name & material of manufacture)
• Declared value of the goods being shipped
• Note included if there is any hazardous substance in it
• Exact weight of the shipments –weight for each commodity is mentioned separately
• Freight classification of the items shipped, according to NMFC (National Motor freight classification)
what is freight class based on?
Freight class is based on four factors

Liability:
It includes liability to
Freight Stowability: Ease of handling:
Density: damage, breakability and
width and length based on Evaluation of the effort
Weight per cubic foot perishability, freight price
carrier mode rules required in transporting
per pound and
susceptibility of theft

Explain what is blanket way bill?

•A way bill which covers two or more consignment of freight is referred as blanket way bill.

Explain what is declared the value for carriage?

•Declared value for carriage is the value of the goods, declared by the shipper on the bill of lading, to
determine the limit of the carrier’s liability or a freight rate.
Explain what is export declaration?
•Export declaration is a government document that defines the goods to be supplied out of the country. This
declaration should be filed by exporter to the U.S government.
Explain what is documents against acceptance?
•A documents against acceptance are an arrangement or provision, where exporter instructs a bank to hand
over shipping and title documents to the importer only if the importer agrees the accompanying bill of
exchange or draft by signing it. This provision ensures that the buyer is legally bound to pay the full price to
the exporter for the shipments, before ownership is transferred.
•Document against payment: The document remains with bank and importers have to pay the exporter before
they release the documents. In this payment is immediate, and document is released quickly

what is consignment inventory?

•Consignment inventory is in the possession of the customer but still owned by the supplier. It means you will
pay the supplier only when their goods are sold.
Explain what is chargeback?
•When any shipment that does not meet the customers decided terms and conditions, a financial penalty is
charged against the supplier by customer. This charge is referred as charge back. For example, lack of proper
packaging or labelling.

what is bonded warehouse?

•Bonded warehouse is a dedicated portion of a facility where imported goods are stored before the customs
duties or taxes are being paid.
what is batch picking?
•The technique of transporting inventory which are grouped into small batches at one go is known as batch
picking.
Explain what is wave picking?
•Wave picking is a technique of assigning orders into groups and release them together, so as to allow several
activities to run parallel and complete the task