Distribution Management Introduction to What do we mean by Logistics? • Logistics concerns itself with the movement of the physical flow which begins with the source of supply and ends at the point of consumption. • Logistics is also concerned with: • • • • • • • Plant and warehouse location Inventory levels Production scheduling Materials management Storage Customer order processing Inwards and outwards freight and • Distribution channels. History of warehouse In early writings, man was described as having stored excess food and kept animals for emergency surplus. • As civilization developed, local warehouses were introduced. Merchandise was stored in connection with shipping, trading, and manufacturing activities. • When transportation branched out from local to cross-country, warehouses became more than local storehouses. • The warehouses were located in the center of the city, usually close to the railroad depot and the wholesale market district. History of Warehouse As the demand for storage space increased and land value rose, multistory buildings were erected to provide more storage space on minimum amount of land. • Technology has created a highly specialized discipline that allows warehouses to store more per square meter, move stock faster and more accurately, and to know where everything is located. Discussion Connections Form groups randomly to think about the following questions: • Some people say warehouse is a evil because it is totally a cost-adding activity. Do you agree? Describe the roles of the refrigerator in your home. What is the implications for the understanding of the value of warehousing. Why have a warehouse? • Supply chain imbalances The supply chain connecting manufacturing with end consumers will never be so well coordinated that warehousing will be completely eliminated. How to increase the flexibility of warehouse operations through process design, system selection and justification, and layout configuration is what we will try to study in the whole course. Why have a warehouse? High speed – zero defect supply chains Supply chain integration will lead to reduced inventory holdings along supply pipeline. The accuracy and cycle time performance pressures in warehousing are immense. Warehouse in the Supply Chain Value adding warehousing Major Types: Raw materials and component warehouse Hold raw materials at or near the point of induction into a manufacturing or assembly process. Work in progress warehouse Hold partially completed assemblies and products at various points along an assembly or production line.
Finished goods Hold inventory used to balance and buffer the variation between production schedules and demand. Located near the point of manufacture Full pallets in and full pallets out Value adding warehousing Distribution warehouse and DC Accumulate and consolidate products from various points of manufacture within a single firm, or from several firms, for combined shipment to common customers. Located central to either the production locations or the customer base. Fulfillment warehouse and fulfillment center
Receive, pick and ship small orders for individual consumers. Value adding warehousing Local warehouse Distributed in the field in order to shorten transportation distances to permit rapid response to customer demand. Single items are picked, and the same item may be shipped to the customer every day. Value-added service warehouse Serve as the facility where key product customization activities are executed, including packaging,labeling, marking, pricing, and return processing. Value adding warehousing Generally, the value of warehousing lies in that having the right product in the right place at the right time. Thus, warehousing provides the time-and-place utility necessary for a company to prosper. Importance of Warehouse Costs • Warehousing is expensive • Between 2 and 5 % of the cost of sales • ROI emphasis puts pressure on warehouse costs • Customer service emphasis can increase costs • Challenge to increase service levels at the same time as reducing costs • Focus on Productivity Accuracy efficiency
Discussion Connections • Use some examples to explain the customer service in logistics area? • Why we need to emphasize it? • What will be the possible elements of distribution activity which affect customer service. Warehousing Environment • • • • • • • • E-commerce Supply chain development and partnering Globalisation Quick response Just in time Rising labour costs Increasing SKU population Increasing technology choices Warehouse Requirements • • • • • Execute more, smaller transactions Handle and store more items Provide more product & service customization Offer more value added services Process more returns Receive and ship more international orders Warehouse Limitations • Less time to process orders • Less margin for error – requirement for exacting accuracy levels • Difficulties in finding suitable staff • Warehouse management system (WMS) capability / fit to requirement problems, or justification for ROI The Bottom Line Warehouses / distribution centers play an increasingly important role in the success or failure of business enterprises. Warehouse master planning methodology Warehouse master planning methodology • Investigating warehouse operations through warehouse activity profiling and warehouse performance benchmarking. • Innovating, optimizing and simplifying warehouse operations in receiving and put-away, storage, order picking, shipping, and material flow. • Implementing new warehousing designs in computerizing warehouse operations, and humanizing warehouse operations. World Class Warehousing Profile – orders, item activity, process, customer • Benchmark – performance – practices – operating infrastructure • Innovate – streamlining – eliminating unnecessary activities – better ways of doing activities • Automate – computerize and mechanize • Humanize – involvement of warehouse peopletreat people the way you would like to be treated Warehouse Activities Warehousing Activities • Receiving Accurate and speedy receipt of all materials coming into the warehouse Order accuracy/quality confirmation Disbursing materials to storage or other destination – cross dock
Warehousing Activities • Pre-packaging Converting bulk receipts into smaller quantities Warehousing Activities • Put Away Placing products/packages/unit loads into storage It includes: Materials handling Product placement Location verification Warehousing Activities • Storage Physical containment of products until required Storage method depends on the size and quantity of the items in inventory and the handling characteristics of the product or its container. Warehousing Activities • Order Picking
Process of removing products from storage to meet a specific customer demand The essential basic warehouse function around which most warehouse designs are based High impact on customer satisfaction Warehousing Activities • Packaging and/or pricing Optional process after the picking process Normal where mail/ courier delivery is involved Involves protective packaging Prepricing at manufacturer or receipt into the warehouse inevitably leads to some repricing activity as price lists are changed while merchandise sits in inventory.
Warehousing Activities • Sortation Consolidation of the order into a total customer delivery Occurs where consolidation is not completed during the picking operation Warehousing Activities • Unitizing & Shipping Including the following tasks: Checking order for completeness Packaging into shipping containers/ unit loads Preparing shipping documents ,including packing lists, address labels, consignment notes and bills of lading Weighing to determine shipping charges Accumulating orders by outbound carrier Loading trucks or containers
Learning Objective Basing on the current situations in Chinese market to : Have an understanding of the role and function of warehousing & distribution in the total integrated logistics process Have a basic knowledge of the process of designing warehouse facilities Know the equipment options and their uses for storage and materials handling Be aware of the customer service implications and the customer order processing options. Learning objective
Understand the importance of standards & performance measurement, and the opportunities presented by distribution information and warehouse management systems. Appreciate the potential and importance of electronic data interchange and automatic identification to distribution operation Be aware of the importance of human relations management to warehousing & distribution and understand the process of selection, training, motivation and communication in the physical distribution environment.