Prof. Dr.

Klaus-Michael Fortmann

Slides for the course

Fundamentals of Logistics

Fachhochschule Gelsenkirchen Fachbereich Wirtschaft Standort Gelsenkirchen

Special thanks for my colleagues Mrs. Dipl. Kauffrau Angela Kallweit and Miss Dipl.Betr.wirt. Angela Bttner, who helped me developing parts of the german version!

halotit.ppt

Fundamentals of Logistics

2 Weekly Semester Hour Lecturer: Prof. Dr. Klaus-Michael Fortmann

Aim of unit and content: Logistics is the process of planning, implementing, and controlling the efficient, cost-effective of raw materials, in-process inventory, finished goods, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. The objectives of this course are to provide the student with: the basic-terms, concepts and principles of logistics, the information, how components of logistics interrelate and interface with other functions of the firm, the traditional logistics functions such as customer service, transportation, warehousing, and inventory management, analytical tools for solving logistics problems and the most important key data (key performance indicators KPI) which are used to ensure the efficiency and effectiveness of logistics processes. Method: A combination of lecture, class discussions, logistics-videos and excursions to firms.
Literature: Schulte, Christof: Logistik, Mnchen, 1999 ; Fortmann/Kallweit: Logistik, Stuttgart 2000 Douglas M. Lambert, James R. Stock, Lisa M. Ellram, Fundamentals of Logistics Management, Boston etc. 1998, ISBN 0-07-115752-2; Richard J. Tersine, Principals of Inventory and Materials Management, London 1994, ISBN 0-13-126484-2

" Fundamentals of Logistics " - Definition of Terms -

Definition of Logistics
Logistics define the integrated planning, realising, usage and control of all kinds of transport processes, the storage of goods and the corresponding information processes within companies and between companies.

Information Order flow

Requirements planning

Production planning

Purchase order quantity planning

Purchase order

I = Information

Materials flow

Client

Warehouse

Production

Warehouse

Supplier

T = Transport

" Fundamentals of Logistics " - Definition of Terms -

Definition of Logistics: Explanations A system contains subsystems. An integrated system is characterized by the fact, that the subsystems are connected by adapted interfaces (physically, by information technology or both). With reference to logistics this means: Entire system = company logistics Subsystems: procurement logistics, in-house logistics resp. production logistics, distribution logistics, reverse logistics Integrated planning: Logistics must be planned in context to all subsystems, i.e. all interfaces shall work well together. Realisation: building of logistic facilities (warehouses, materials flow systems), organisation of logistic processes, design and programming of logistic ITSystems (PPC production planning and control system, MPC merchandise...); Materials flow: In a broader sense all processes of transportation are subject of logistic concepts, i.e. as well the transportation of men (train, ship, plane)

" Fundamentals of Logistics " - Definition of Terms Definition of Logistics: Explanations Relations between flow of information and materials flow: examples Opposite flow of information against the material flow Concurrent flow of information: reference manual, invoice, delivery order, consignment note (way bill), freight list Advance flow of information: lists of announced deliveries (package numbers) (Packstcknummern), order confirmation (or acknowledgement) Onward flow of information: invoice with separate mail

" Fundamentals of Logistics " - Definition of Terms -

Sphere of Influence Converting Industry/Manufacturing Industry of Logistics

Purchasing Selling Production Selling Purchasing

Primary Industry

Transforming

Cycle of Logistics

Storage

Commerce

Mining

Selling

Raw Materials
loingb06.ppt

Selling

Recycling

Collecting

Final Consumer

Recycling Industry

" Fundamentals of Logistics " - Definition of Terms -

Hints on the german law of closed loop materials economy (Kreislaufwirtschaftsgesetz KrWG)
Priority: Avoiding of waste is better than Recycling of waste is better than Elimination of waste Therefore the law says that in the year 2010 all rests of consumptiom must be returned into a closed loop of materials. The logistics in this context has a lot of tasks.

" Fundamentals of Logistics " - Aims Main Aim of Logistics: Optimisation the Efficiency of Logistics
Efficiency of Logistics = Output/Input Ratio of the Logistics System System Input:
Valued Factor Input Costs of Inventory Costs of Storage Costs of Handling Costs of Control Costs of System Costs of Transp.

Logistics System:
Logistics of Company Personnel and Equipment in the Areas Procurement Logist. Production Logistics Distribution Logist. Reverse Logistics

System Output:
The 6 "R" of Logistics Right Product Right Place Right Quantity Right Time Right Quality Right Costs

loingb01a.ppt Source: Associated with: H.-Chr.Pfohl, Marketing Logistik, Berlin Heidelberg 1972p.28;H.-Chr.Pfohl, Logistikssysteme, Berlin Heidelberg 1996, p.19

" Fundamentals of Logistics " - Aims Components of Logistics Service

Delivery Time = Time between issue of order and availability for the client Delivery Reliability (on-time delivery performance) = Percentage of keeping the guaranteed delivery time Delivery Service Level = Percentage of articles directly deliverable from warehouse Quality of Delivery = Accuracy of delivery concerning type, quantity and quality of the delivered articles Flexibility of Delivery = Possibility of consideration of special wishes of the clients concerning delivery time or delivery quantity

loingz03.ppt

Source: Associated with Christof Schulte: Logistik, 2.Edition, Mnchen 1995, p. 6

" Fundamentals of Logistics " - Aims Alternative Strategies

Optimal Delivery Service
Costs

Postulated Delivery Service

Costs

Actual Target
Total Costs

Target Actual
Costs of Delivery Service Costs of Shortfalls
s st o C y er v i el D of

e ic v r Se

Delivery Service
Source: Associated with Christof Schulte: Logistik, 1995, p. 10. loingz01.ppt

100 %

Delivery Service

100 %

" Fundamentals of Logistics " - Aims -

Example of a statistic Evaluation of Delivery Reliability

Quantity of deliverd Orders within the first Quarter 120 100 80 60 40 20 0 -8 -6 -4 -2 0 2 4 6
Comparision between the guaranteed date and the real delivery date: Negative values indicate too-early-dates. Positive values point out on dates too late.
loingz05.ppt

8 10 12 14 Weeks of delay

" Fundamentals of Logistics " - Aims -

Important Types of Logistics Costs

Costs of Inventory = Interest rate of the bounded capital, insurance,

depreciation, loss by theft

Costs of Storage = Fix costs of the warehouse equipment, efforts for

transfer to and release from stock

Costs of Handling = Picking, Handling, Packing Costs of Tansport = Costs of internal and external transportation Costs of Control = Planning of production programm, production planning

and control, order processing, shop-floor scheduling ...

Costs of System = Planning, realisation and control of the material flow The costs of logistics can reach between 15 and 20 percent of the total costs, therefore they have considerable influence to the company profit!
loingz04.ppt Source: Associated with Christof Schulte: Logistik

" Fundamentals of Logistics " - Influencing Factors -

Selling Conditions and Requirements of the Market

The Boston Matrix
Market Growth high Question Marks Stars The Boston Matrix is a Classification of products for building norm strategies.

? ? ?
Cash Cows

low

Poor Dogs

low
Source: http://www.marketingteacher.com/Lessons/lesson_boston_%20matrix.htmGroup) loinge03.ppt

high

Market Share

" Fundamentals of Logistics " - Influencing Factors -

Selling Conditions and Requirements of the Market

Logistic Consequences: : Optimisation of: material flow, production and planning control systems, shop-floor scheduling, delivery service, customer service, purchasing management, distribution system, order processing

: Search for a suitable production location, increasing or decreasing of the distribution system, improvement of the delivery service, orientation of the logistics to special market segments : Hold up of the delivery and customer service, rationalise of logistics, rigorous realisation of inventory management and valuation policy : Stock minimisation, hold up of delivery service only in selected market segments, minimisation of distribution costs

Source: Associated with Christof Schulte: Logistik loinge02.ppt

" Fundamentals of Logistics " - Influencing Factors -

Influences of the Production Program

Consistency and type (Size, weight, sensibility, deterioration) of products, value Range of goods, variety of goods, frequency of selling Life cycle of products, changes in demand

Product

Logistics

Storage, packing, transport

Inventory, inventory turnover

demands on delivery service, warehouse locations

Source: Associated with Christof Schulte: Logistik loinge05.ppt

" Fundamentals of Logistics " - Company Organisation Structure -

Questions before fixing the Company Organisation Structure

y Which functions should be part of the logistics organisation ? y Level of centralisation resp. decentralisation? y What kind of organisation should be used within the logistics departement? y Amount of costs of the above mentioned logistic functions? y Desired delivery service? y Complexity of product structure and vertical range of manufacture? y Typology of operation: Production of individual orders or large-scale production? y Order-oriented manufacturing / anonymous market? y Structure of suppliers (Quantity, geographical distribution)? y Structure of customers (Quantity, geographical distribution)?

Source: Associated with Christof Schulte: Logistik loinga02.ppt

" Fundamentals of Logistics " - Company Organisation Structure -

Staff-Line-Organisation
Board Staffs
Plant I Plant II

Logistics
Plant III Plant IV

Plant Logistics Research and Developement Production Management Sales

Plant Logistics Research and Developement Production Management Sales

Plant Logistics Research and Developement Production Management Sales

Plant Logistics Research and Developement Production Management Sales

Finance and Accounting

Source: Associated with Christof Schulte: Logistik loinga05.ppt

Finance and Accounting

Finance and Accounting

Finance and Accounting

" Fundamentals of Logistics " - Company Organisation Structure Grading within the Hierarchy
Definition of levels Executive board Area management Sector management Department Positioning of Logistics within the level of executive board is recommended, when the costs of logistics are relatively high and the flow of material and information is very complex.
Source: Associated with Christof Schulte: Logistik, 2.Edition, Mnchen 1995, p. 6 loinga07.ppt

Board

Area 1

Area 2

Sector 1

Sector 2

Sector1

Sector 2

Department 1 Department 2 Department 3 Department 4

Department 1 Department 2 Department 3 Department 4

Department 1 Department 2 Department 3 Department 4

Department 1 Department 2 Department 3 Department 4

" Fundamentals of Logistics " - Company Organisation Structure -

Effects of an integrated Organisation of Logistics Avoiding redundancies Higher transparency Reduction of logistic costs Reduction of stock Optimal use of central und decentral information
Source: Associated with Christof Schulte: Logistik loinga13.ppt

" Fundamentals of Logistics " - Process Organisation -

Processes within the company Thinking in processes Thinking restricted to area

Process 1 Process 2 Process 3

T R E N D
Order process Development Offer Order process

loingg02.ppt

" Fundamentals of Logistics " - Process Organisation -

Processes within the company Example of an order process within a small company
Order confirmation Order receipt processing
Procurement of long delivery time material

Client Order center Materials management Construction/ Work scheduling Production Finance and accounting Supplier

Order

Product

Invoice

Date check
Procurement of Remaining material

Confirm order Material provision Shipping

Construction

Production order

Production Preparing invoice

Purchase order

Purchase Delivery order

Time
loingg04.ppt

" Fundamentals of Logistics " - Process Organisation Flow of a logistical Organisation Process

Phases

Results

Decision about the Goal setting, project team, limitation of the area of investigation, project schedule, budget project As-Is analysis Recognition of the weaknesses Analysis of activities incl. related efforts, flow of information, inspection of documents etc. Duplication of work, overlap of competencies, laborious ways of information, missing information

Development of the Valued alternatives, plan of realisation by stages, To-Be concept job charts, job descriptions Introduction of the Trained employees, new process organisation, instrumental support of work, higher logistics new logistics performance organisation
Associated with Christof Schulte: Logistik, 2.Edition, Mnchen 1995, p. 341 loingg08.ppt

" Fundamentals of Logistics " - Process Organisation Explanation

Important are all results of the decision phase: The project team should be involved in the planning: this leads to a better motivation within the project work. A team coworker who planned his own tasks concerning the timeline and the project results will do all to reach his goals. The definition of the aims of project is essential because every decision within the daily routine depends on their contribution to the project success. Without target every way doesnt care. Without target every shot is a hit. The task designation of a project consists in doing all necessary works to reach the defined aims. Generally an aim is a status in the future which must be desirable, reachable and measurable . The project schedule should be differentiated and the phases as well as the activites must be briefly described and planned in the right order. Typically this is done in form of a critical path diagram with the corresponding Gantt-diagram.

" Fundamentals of Logistics " - Process Organisation Explanation

The area of investigation must be limited prototypically for reducing the project effort. The portability of the project results to the not considered areas must be ensured. The budget for the paper-phases must be defined exactly, whereas for the realisation phase it is enough to give a qualified estimation. At the end of the To-Be-concept it is also necessary to develop an exact investment calculation. Each phase will be terminated by a milestone i.e. there must be issued an interim report with interim results, deadline check and, if necessary, a new scheduling for the rest time of the project. One of the concept results consists in developing alternative proposals for solution and in comparing them by means of a value benefit analysis. It must be clear, which solution is preferred by the team. Otherwise it is possible that the project owner (that is the client of the project) opts for another solution because of special information which only he knows: that can be for example a planned corporate merger which leads to other criteria weights within the value benefit analysis.

" Fundamentals of Logistics " - Transport Systems Criteria for the Choice of the adapted Transport System
Requirements of market Material to be transported
in-house production

Auxiliary means of Transport

extern package

Transport System
extern (truck)

requirements for products

logistical requirements

bought-in part

intern mesh box pallet

Intern (fork lift)

loingtal.ppt

Source: Associated with Christof Schulte: Logistik

" Fundamentals of Logistics " - Transport Systems -

Functions of Auxiliary Means of Transport (AMT)

Intake and aggregation of the material to be tranported which leads to a faster handling Protection of the cargo against damage, theft etc. Manipulability: simple grabbing and deposition of the AMT Suitable for storage Information carrier (when the material to be transported it is not allowed or possible to be marked itself (glasses, fluids))

Source: Associated with Christof Schulte: Logistik loingt01.ppt

" Fundamentals of Logistics " - Transport Systems -

Examples of Auxiliary Means of Transport (AMT) )

pallet

mesh box pallet

work piece carrier

box
loingt02.ppt

ISO-Container

tank pallet

" Fundamentals of Logistics " - Transport Systems -

External Transport Systems

Judging the means of transportation by aspects of costs: Costs of freight Additional costs of transportation (customs, service fees) Costs of handling (loading/unloading; changing of the the transport system: multimodal transport) Additional costs of logistics (insurance, theft, depreciation) Cost effects outside of logistics (costs of shipping route optimisation within the IT-department; administration of depreciation when using own trucks; administration of truck personnel)
Source: Christof Schulte: Logistik, Mnchen 1999, p.135 (there Vogt and others) loingt07.ppt

" Fundamentals of Logistics " - Transport Systems -

External Transport Systems

Judging the means of transportation by performance characteristics: Transport time Transport frequence (how many times per day/week/month) Technical features (special technique for fluids, gases etc.) Connectivity to other transport systems Flexibility (changing of clients wishes) Start- and endpoint of the transport system (relation) Reliability (dependency of weather?) Additional service (feeding of animals; tracking/tracing; load/unload; publicity; control of temperature)
Source: Christof Schulte: Logistik, Mnchen 1999, p.135 (there Vogt and others) loingt08.ppt

" Fundamentals of Logistics " - Transport Systems Advantages and Disadvantages of the several carriers
Road Transport: plus: the only system which delivers directly to the customers minus: dependent on traffic and weather; cargo load max. 25 tons Rail Transport: plus: up to 1000 tons per train; independent from weather minus: rail terminal connection necessary, Costs for special wagons Inland Navigation: plus: 1000 3000 tons, on the Rhine up to 16.000 tons with combined ships, low freight costs minus: limited relations, dependent on water level and weather Maritime Navigation: plus: up to 100.000 tons, big shipping space minus: ports only at the North sea resp. Baltic sea, dependent on weather, seaworthy packaging necessary

Source: Christof Schulte: Logistik loingt10.ppt

" Fundamentals of Logistics " - Transport Systems Advantages and Disadvantages of the several carriers
Aircraft Transport: plus: high speed, no seaworthy packaging necessary minus: high freight costs, limitations at dangerous goods Combined Transport: plus: Usage of the advantages of all carrier types minus: time-consuming handling of cargo because of intermodal transport Pipeline Transport: plus: lowest costs, when permanently used minus: high investment, only cost-efficient when used over a long time Rocket Transport: plus: in space no other transport system usable minus: extreme high costs
sources: Christof Schulte: Logistik; Fortmann/Kallweit: Logistik loingt11.ppt

" Fundamentals of Logistics " - Transport Systems In-House Transport Systems

Points of influence Material to be transported Transportintensity Transport way Laws

Transport System Transport system

Aims

Optimal Usage

High Servicelevel

Flexibility

Transparency

sources: Christof Schulte: Logistik (dort Schulze/Weber) loingt12.ppt

= function of availability

" Fundamentals of Logistics " - Transport Systems -

The Technical Availability of a System depends on each Component

Given is the following conveyor track for transport of brown coal into a power plant. The availability of each component can be seen in the drawing. V3 = 98 % means, that the belt conveyor 3 is usable in 98 of 100 hours V2=95 % V3=98 %
a) Please calculate the availability of the whole system! b) Calculate the total availability for the following structur:

V1=97 %

V2=93 %
Solution: a) Vtotal = 0,97*0,95*0,98*100 %=90,307 % b) Vtotal= [1-(1-0,94)*(1-0,93)]*100=99,58%

V1=94 %

" Fundamentals of Logistics " - Transport Systems -

Series connection

V1 = 0,97 FM 1

V2 = 0,99 FM 2

Vtotal = 0,9603

Vtotal = V1 x V2, e.g. conveyor FM1 and FM2 must be both in function at the same time (so-called and-relation, mathematically: multiplication) Parallelconnection V1 = 0,97
FM1 for example belt conveyor or fork lift FM2 for example belt conveyor or fork lift

Failure probability A = 1 V A1 = 1 - V1, A2 = 1 V2 Atotal = A1 x A2, e.g. FM1 and FM2 must both be in malfunction at the same time Vtotal = 1 - Atotal = 1 - (A1 x A2) = 1 - (1 - V1) x (1 - V2) Tip: For every parallel way i must be applicated a bracket-expression of the Type (1 Vi)

Vtotal = 0,9997

V2 = 0,99

" Fundamentals of Logistics " - Transport Systems -

Examples for the Total Availability of Transport Networks

The Total Availability must be developed successivly from the Partial Availabilities considering the rules for Series resp. Parallel Connection.
V12 = V1 x V2 V1 V2
V123 V12 V1 V2 V4 V1234

V3

V5

V3

Vtotal = 1 (1-V12)(1-V3)

V12345 == Vges V V
12345

total

" Fundamentals of Logistics " - Transport Systems Structure of In-House Transport Systems
Conveyors for In-House Transports
Discontinuous conveyor

Continuous conveyor

Cranes

Stacker cranes

Floor conveyors

Elevators

Without rails
fork lift
sources: Christof Schulte: Logistik (dort Schulze/Weber) loingt14.ppt

Rail bounded
locomotive wagons

Track bounded
AGVS automated guided vehicle system

" Fundamentals of Logistics " - Transport Systems -

In-House Transport Sytems: Examples for Continuous Conveyors

Roller conveyor Belt Conveyor Platform Conveyor

Tilt Tray Sorter

Paternoster conveyor

Circular Conveyor

Source: Jnemann: Materialflu und Logistics loingt22.ppt

" Fundamentals of Logistics " - Transport Systems -

Computer controlled In-House Transport System

Production Computer for Transport Control
Convey Instructions
Manufacturing FERTIGUNG

In-House Transport systems

Transport orders Feedback

MONTAGE Assembling

sources: Christof Schulte: Logistik (dort Schulze/Weber) loingt21.ppt

" Fundamentals of Logistics " - Storage Systems -

Chapter Outline

Storage Systems
Outline Selection Criteria for the suitable Storage System Warehouse Functions and Types of Warehouses Stock accounting and Warehouse Control Centralisation Level of Warehouses External or Internal Warehousing

Source: Christof Schulte: Logistik loinglue.ppt

" Fundamentals of Logistics " - Storage Systems Selection Criteria for the suitable Storage System
Stock Goods Warehouse Utility
Very SmPa Small Box

Small Parts
Box

Parts
Box Pallet

Long Good Cassette

Storage System
Drawer-style Cabinet

Shelving

Pallet Rack

Cantilever Racking

loinglal.ppt Source: Associated with: Zeitschrift Materialflu: Lagerplanung (Sonderpublikation), Verlag Moderne Industrie

" Fundamentals of Logistics " - Storage Systems -

Warehouse Functions
The basic task of a warehouse consists of the economic coordination of different dimensioned good flows

Compensation Function: concerning time and quantity Security Function: risk compensation against production malfunction, delay of supply, variation in requirements Assortment Function: help with building assortments Speculation Function: absorb expected increase in prices Refinement Function: maturing processes, drying processes

loingl-1.ppt Source: Christof Schulte: Logistik, 2.Edition, Mnchen 1995, p. 91 (dort: Kupsch)

" Fundamentals of Logistics " - Storage Systems -

Kinds of Warehouses classified

Kinds of Warehouses
Phase of added Value Process Level of Centralisation Sortation Number of possible Consumers

Inbound Storage

Centrale Storage

Material oriented Storage Consumption oriented Storage

General Storage

Intermediate Storage

Peripheral Storage

Provision Storage

Outbound Storage

Area for Small Parts Storage

loingl-2.ppt Source: Christof Schulte: Logistik, 2.Edition, Mnchen 1995, p. 90

" Fundamentals of Logistics " - Storage Systems -

Kinds of Warehouses classified

Kinds of Warehouses
Weather Protection Location Administration

Warehousing within Buildings Storage outside

External Storage Internal Storage

Self Administration External Administration

loingl-3.ppt Source: Christof Schulte: Logistik 2.Edition, Mnchen 1995, p. 90

" Fundamentals of Logistics " - Storage Systems -

Types of Warehouses
Types of Storage

Racks

Floor Storage

Shelving

Pallet Rack

Flat Goods Rack

Special Rack

Block Storage Line Storage

fixed

movable

fixed

movable

Flat Rack High Rack Gravity Flow Rack

Mobile Rack Rotating Rack

Flat Rack High Rack Drive-in Rack

Mobile Rack Rotating Rack

horizontal Drive-through Rack vertical Gravity Flow Rack

loingl-4.ppt Source: Christof Schulte: Logistik, 2.Edition, Mnchen 1995, p. 91

" Fundamentals of Logistics " - Storage Systems -

Examples: Floor Storage without Storage Device, Line Order

Advantages: Flexibility Low Investment Overview Low Staff Barely technical Faults Disadvantages: No Possibility of Automation Storage Location Order necessary Low Use of Room Low Number of Articles Impact Pressure downstairs Fifo only by means of Rearrangement
Source: Zeitschrift Materialflu: Sonderdruck Lagerplanung loingl01.ppt

" Fundamentals of Logistics " - Storage Systems Examples: Storage in Pallet Racks
Advantages: Direct Access to all Articles Automation possible Free Storage Allocation High Order Picking Performance Fifo-Principle possible High Use of Room Adaptable to new Tasks Low Staff Disadvantages: High Investment High Turnover necessary for being economic Standardised Load Units necess. Security Conditions, given by the Authorities (dep. of Hight)) High-Level Organisation necc. when using Random Storage Vulnerable to technical Faults when automated

Source: Zeitschrift Materialflu: Sonderdruck Lagerplanung loingl04.ppt

" Fundamentals of Logistics " - Storage Systems -

Examples: Storage in Pallet Racks

Using Fork Lift Using Stacker Cranes

loingl05.ppt

" Fundamentals of Logistics " - Storage Systems -

Examples: Storage of long Goods Cantilever Racks

Advantages: Changeable into a Shelving Expandability Adaptable to the Assortment Picking with Stacker Crane poss. Low Investment Good Use of Room Direct Access to each Article Possibility for Automation Disadvantages: Autom. only when using Cassettes Partially only LiFo Floor Conveyors necessary Risk of Accident

Source: Zeitschrift Materialflu: Sonderdruck Lagerplanung loingl06.ppt

" Fundamentals of Logistics " - Storage Systems -

Examples: Storage of long Goods Cantilever Racks

" Fundamentals of Logistics " - Storage Systems Examples: Storage in Miniload Warehouse
Advantages: Goods-protection against theft and pollution Highest Automation Level poss. Ergonomic Goods to Man Principle Good Organisation because of Electronic Data Processing No Inventory Standardised Load Units No Weight Limits Adaptation to Assortment Disadvantages: Limited Dimension Variance Vulnerable to technical Faults because of Usage of Computers High Investment

Source: Zeitschrift Materialflu: Sonderdruck Lagerplanung loingl07.ppt

" Fundamentals of Logistics " - Storage Systems Examples: Storage in Mobile Rack
Advantages: Good Use of Room Good Use of Area Lock-ability FiFo Possibility for Semi-Automation Disadvantages: No Possibility for Full-Automation Low Turnover No direct Access High Costs of Maintenance High Investment Low Order Picking Performance Stable Ground necessary Limitation for Expansion
Source: Zeitschrift Materialflu: Sonderdruck Lagerplanung loingl09.ppt

" Fundamentals of Logistics " - Storage Systems Examples: Storage in Gravity Flow Rack
Advantages: Good Use of Room High Performance Good Use of Area FiFo Possibility for Automation IT-Organisation Expandable Disadvantages: Risk of Accident High Requirements to Tolerances Run down depends on Weight Impact Pressure in Front Drive-against Crash Security of Loads necessary High Investment Only single Material Channels High Costs of Maintenance

Source: Zeitschrift Materialflu: Sonderdruck Lagerplanung loingl10.ppt

" Fundamentals of Logistics " - Storage Systems -

Examples: Storage in horizontal Rotating Rack

Advantages: Good Use of Room Depth Ergonomic Goods to Man Principle Free Choice of Storage Allocation FiFo Possibility of Automation Parallel Serving of more than one Rotating Rack Disadvantages: Serial Order Picking Limited Payload Low Flexibility against variable Turnover Performance Payload/Rack Weight unfavourable Long Access Time High Investment Expansion limited High Costs of Maintenance

Source: Zeitschrift Materialflu: Sonderdruck Lagerplanung loingl11.ppt

" Fundamentals of Logistics " - Storage Systems Examples: Pick an Pass by Means of a Rotating Rack

loinbk09.ppt Source: Praxishandbuch fr den MaWi-Leiter, Augsburg 1995, Teil 10, Kap. 3.2.2., Seite 6

" Fundamentals of Logistics " - Storage Systems Examples: Remote Picking with a Rotating Rack System

loinbk10.ppt Source: Praxishandbuch fr den MaWi-Leiter, Augsburg 1995, Teil 10, Kap. 3.2.2., Seite 6

" Fundamentals of Logistics " - Storage Systems Stock Accounting and Warehouse Control
Functions: Optimisation of the sequence of Storing and Retrieval from Storage Allocation of Storage Orders to empty Bins Allocation of Retrieval Orders to Load Units Instigation and Control of carry commands for the Stacker Cranes Smooth Identification and Control of Storing and Retrieval of Storage Devices Storage Slot Status Database (occupied/available) Real-Time Update of the Quantities of all inbounded resp. Outbounded Articles
Source: Christof Schulte: Logistik loingl12.ppt

" Fundamentals of Logistics " - Storage Systems -

Central Warehouse: Mainly used in small and medium-sized Enterprises

Advantages of central Storage versus decentral Storage: Stock lower than the Sum of decentral Stock Minimum Stock lower than the Sum of minimum Stock decentral Lower Capital Lockup Better Use of Room Higher Turnover: Therefore lower Perishableness Personnel Placement more economic Use of Storage Devices more efficient

Source: Oeldorf/Olfert: Materialwirtschaft loingl15.ppt

" Fundamentals of Logistics " - Storage Systems -

Decentral Warehouses: Necessary...

when a Factory must be supplied directly as Buffer Storage within the Production when the short-term supply is very important for the customers when the direct Contact to the Clients is Part of the Business

loingl16.ppt

" Fundamentals of Logistics " - Storage Systems Decentral Stock versus Central Stock
Warehouse 1 Stock Article A: 300 pieces Warehouse 2 Stock Article A: 400 pieces Warehouse 3 Stock Article A: 500 pieces Re1200 Pieces - 707 Pieces = 493 Pieces is equivalent to 41 % Reduction of Stock, when centralized

Central Warehouse
Stock Article A: 3002+4002+5002

General Conditions: Optimal Disposition of Stock and further Supplies Same Turnover decentral and central Same Assortment decentral and central

storage

= 707 Pieces

Additional correction factor, when more technical performance is installed in the central warehouse than in the decentral locations: 0,7 bis 0,8 (that means for example: 0,7x707 pieces)

Sources: Gudehus, Tim: Logistik 1, p. 308, Berlin, Heidelberg, New York, 2000 , there: Maister, D.H.,(1976), Centralisation of Inventories and the Square Root Law, International Journal of Physical Distribution, Vol. 6, No.3, p.126 ff. lohdgt35a.ppt

" Fundamentals of Logistics " - Storage Systems Criteria for the Decision: Own-Storage or Warehousing by a Logistical Service Provider (LSP)
Needs for Investment for Facilities or/and Equipment Grade of Dependency on external Personnel Current Operating Costs Requirement of Personnel and Know how of Experts Peaks of Workload and Variation of Capacity Requirements Warehousing by a LSP often takes place within the Procurement Logistics and the Distribution Logistics. Production Warehouses normally are administrated autonomously.
Source: Christof Schulte: Logistik loingl17.ppt

 Procurement Logistics "

Procurement Logistics =

All logistical activities within the area of procurement

loinbtitle.ppt

 Procurement Logistics "

Aims and Tasks of Procurement Logistics

y Favourable Purchase Price y Supply Security y Flexibility of Delivery y High Quality y Low Costs of Freight Optimal Disposition of Quantities Early Requirements Identification Responsible Integrating of Suppliers High Disposition Quality Adapted Selection of Suppliers Fixing of Quality Standards Short ways from the Supplier to the Factory Optimisation of the Costs of Freight Costs-favourable Place and Equipment Optimisation of Storage Processes Clear Stock Policy Short Delivery Cycles Accurate Supervisory of Stock

y Low Costs of Storage y Low Stock

loinbg05.ppt

 Procurement Logistics "

Value Benefit Analysis for Suppliers
Suppliers Criteria Product Quality Price Delivery Time Fulfillment of Contract Delivery Date Reliability Quantity Reliability
Sum Rank

Weight 1....5 5 2 4 1 4 2

Supplier Miller Points 1...5 3 5 4 2 2 1 PxG 15 10 16 2 8 2 53 III.

Supplier Mayor Supplier Smitt Points 1...5 4 4 2 3 3 5 PxG 20 8 8 3 12 10 61 II. Points 1...5 5 2 1 5 5 3 PxG 25 4 4 5 20 6 64 I.

loinbs05.ppt

 Procurement Logistics "

Alternative Procurement Concepts Global Sourcing

World wide
loinbd01.ppt

Modular Sourcing
Purchase of Components instead of Parts

Multiple or Single Sourcing

A Lot of or only one Supplier(s)

 Procurement Logistics "

Traditional versus Modular Sourcing
Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6 Supplier 2

P R O D U C E R

Supplier 1 Supplier 3 Sup.4 Suppl.5 Sup.6

System Supplier

P R O D U C E R

Source: Ch.Schulte: Logistik 2. Edition, Mnchen 1995, p.149 loinbd03.ppt

 Procurement Logistics "

Moving Period Planning for each Finished Product

Responsible: Responsible: Sales Department! Department! Sales

Forecast: 12 Months

Edition 11/05 Edition 12/05 Edition 01/06

loinbd05.ppt

10

11

12

01

02

10/06

Plan Act. Diff. Plan Plan

11

Plan
12

Plan
01 02

Plan

11/06

Plan Act. Diff. Plan

Plan Plan
12 01 02

Plan
12/06

Plan Act. Diff.

Plan

Plan

Plan

 Procurement Logistics

Moving Period Planning

The MPP leads to the in-time procurement

Finished Product X Y
Y

11 1000

12

01/98 ... ... ...

900 1300

3000 2500 4000

IHPT 1) = 1Month

2A 2B

3Q
IHPT = 1Month

5C

Purch.Prod.

9 -

10 6.000

11

...

Procurement Program
loinbd06.ppt

A B C

5.000 ...

18.000 15.000 24.000 ... 45.000 37.500 60.000 ...

1)

IHPT= In-House Production Time

Procurement Logistics

Just-In-Time-Concept
y Coordination of the Production Control Systems with the Assembly Control Systems y Timely Delivery of Parts as late as possible y No or (at most) small Buffers y Small Lots, high Delivery Frequency Assembly Control

Production Control

Because of the Complexity of the JIT-Process this is only economic with A-X-Parts 1)
1)
loinbd17.ppt

A=high value, X=constant requirement

Procurement Logistics
Information and Material Flow at JIT
Information Flow

Production Control

Production Control
In-House Products Material Flow

Assembly Control

Supplier

Own

Production FERTIGUNG

Production FERTIGUNG

Assembly MONTAGE

Material Flow Material Flow

Purchase Products

While processing JIT the Assembly pulls the Material

loinbd18.ppt

 Production Logistics "

Production Logistics =
All logistical activities corresponding to the production process

loinbtitle.ppt

Production Logistics

Definitions: Linking of Work Stations

Fixed linked
Occupancy time: equal Work piece sequence: equal Without buffer Material move: tact dependent

Loose linked
approximate equal equal buffer tact independent

Flexible linked
variable variable buffer, collecting, distributing tact independent

lointm04.ppt Source: REFA MLBO: Planung und Gestaltung komplexer Produktionssysteme

Production Logistics

Calculation of the Buffer Capacity between two loose linked Working Places

n = tv1, tv2 = te

quantity of work pieces to be buffered maximum possible time without working at each station (reasons: the worker has to go to toilet or is outside for smoking) = working tact in minutes per piece (always the same) Example: tv1=10min, tv2=14min, te=4 min/piece n=(10min+14min)/(4min/piece)=6pieces

lointm04.ppt Source: REFA MLBO: Planung und Gestaltung komplexer Produktionssysteme

Production Logistics
Transport Matrix and Sankey-Diagramm1
Raw material storage Finished goods stor.

Goods receipt
Waste, cuttings
100

To

Material Flow in Tons per Month

2

Assembling

Production

Forwarding

Raw material st.

Scrap
72 4

From
Goods receipt Raw material storage Production Assembling Finished goods storage Waste, cuttings Sum

Sum

Production
52 20 8

Waste-

100 72 20 52 4 10 16 65 8 3 91 2 102 76 72 91 11 91 9 9

100 102 76 72 91 11
10

Assembling
65 16 3

Cut tings

Finished goods storage

91 Scrap

Forwarding

lointf30.ppt Sources: Chr.Schulte: Logistik (there: Kettner, Aggteleky, Nestler)

1) H.R.Sankey (1853-1921), Irish engineer

Production Logistics

The Transportation Work depends on the Allocation of the Machines

Distances between the locations of the production facilities Tons per month between the Production machines
To From

Variations of allocation of the production machines to the production facilities

B
80 m

60 m

A 2 70 3 40 50 V1 V2 V3 1 3 2

B 2 1 3

C 3 2 1

1 100 m 2

Transportation work fo the alternatives:

Variant 1: Variant 2: Variant 3:

70 t x 80 m + 40 t x 100 m + 50 t x 60 m = 12.600 tm 70 t x 60 m + 40 t x 80 m + 50 t x 100 m = 12.400 tm 70 t x 100 m + 40 t x 60 m + 50 t x 80 m = 13.400 tm

optimal

lointm42.ppt Source: Fortmann/Kallweit: Logistics, Stuttgart 2000, p. 82

Production Logistics

Aims when using Production Planning and Control Systems (PPC)

High delivery reliability High and continuous utilization of capacities Short throughput time (also called lead time) Low warehouse inventory Low workshop inventory High delivery service level High information service level High flexibility Low procurement costs High material availability Increase of planning security
Sources: Chr.Schulte: Logistik, there: Brankamp, Ellinger/Wildemann, Hammer et al.) loinmf01.ppt

Production Logistics
Moving Period Planning

Pl anni ng

Functions of PPCSystems

Client orders

Forecast

Stochast. Planning Production programm for finished products = Primary requirement with the items: article number, lots, delivery date Bills of material

Available stock

Computer aided net requirement planning for in-house products and bought-in parts

Lot Optimisation

Working plans

Production program (in-house products)

Procurementprogram (bought-in parts) Procurement

Cont r ol

Workshop Scheduling

Production

Provision of material IHP Productioncontrol BIP

Goods receipt

Assembly

loinmf02.ppt

Source: Fortmann/Kallweit: Logistics, Stuttgart 2000, p.89

Finished products

Production Logistics
Deterministic Requirements Planning: Based on Bills of Material
The deterministic requirements planning normally is used with highvalue parts (A-,B-Parts) and is based on orders (resp. expected orders) Finished product structure of E1
E1

Single-level BOM
E1 G1
Quantity Name Quantity

G2
Name Quantity

Name
1 G1 2 T1 1 G2 1 T3

4 T1

1 T2

2 G1

1 T1

1 T4

G1 T1 G2 T3

1 2 1 1

T1 T2

4 1

G1 T1 T4

2 1 1

4 T1

1 T2

Source: Associated with Oeldorf/Olfert: Materialwirtschaft loinmf12.ppt

Production Logistics
Two Ways of Presentation of Structure BOM
Finished product structure of E1 Listing of the Structure BOM for E1 E1
E1

Level Name

Quantity

1 G1

2 T1

1 G2

1 T3

4 T1

1 T2

2 G1

1 T1

1 T4

4 T1

1 T2

1 .2 .2 1 1 .2 ..3 ..3 .2 .2 1

G1 T1 T2 T1 G2 G1 T1 T2 T1 T4 T3

1 4 1 2 1 2 4 1 1 1 1

Source: Associated with Oeldorf/Olfert: Materialwirtschaft loinmf13.ppt

Production Logistics
Stochastic Requirements Planning: Types of Models for Consumption The stochastic requirements planning normally is used with lowervalue parts (C-Parts) and is based on the consumption in the past.

Consumption

Consumption

Consumption

Consumption

Time Pure constantmodel

Time Pure trendmodel

Time Season- trendmodel

Time

Season- constantmodel

Source: Associated with Oeldorf/Olfert: Materialwirtschaft; REFA: Planung und Steuerung, Teil 2 loinmf18.ppt

Production Logistics
Stochastic Requirements Planning: Forecast Methods
Moving average value = Average consumption over x past periods; at the beginning of each new period the oldest one is cancelled; suitable for the pure constant model Weighted moving average value: Each period-consumption corresponds with weight factors: the oldest one receive the lowest weight; suitable for the pure constant model Regression analysis = Used for the forecast with trend-type function; linear case: y=a+bt ; non-linear: polynomal of n-th order Exponential smoothing: Most important stochastic method; the new forecast is built from the old one to which is added the with weighted difference between the old actual value and the old forecast value; suitable for the pure constant model; with the exponential smooting of second order it is possible to take into account trend functions of the past-consumption values For season models are suitable mathematic combinations of the above models.
Source: Associated with Oeldorf/Olfert: Materialwirtschaft loinmf20.ppt

Production Logistics
Stochastic Requirements Planning: Exponential Smoothing

Consumption
Effective copnsumption

big small

V(11) T(11)

V(12) T(12)

V(13) T(13)

V(14)

Time
FC Act. FC Act. FC Act. FC

Week 11

Week 12

Week 13

Week 14

Vt+1 = Vt + (Tt-Vt) Vt+1: old forecast t = 0,1 ... 0,3 Tt : actual requirement
of the old period : smoothing factor
Source: Associated with Oeldorf/Olfert: Materialwirtschaft; Kernler: PPS der 3. Generation loinmf21.ppt

V : new forecast

Advantage: Low calculating amount: Only the data of the month before are necessary (the total past is involved in the values of the earlier months).; Influence of the newest values is stronger than the effect of elder ones.

Production Logistics
Calculation of Material-Availability in the Future by means of a Simulation of the Function Stock over Time, dependent on Events

Stock

Planned incoming of material 1)

Incoming of material as an effect of computer- planned orders (net requirements planning program)

Startstock

Time Planned outgoing of material 2)

1)

Possible reasons: - purchase orders - production orders

Day of evaluation
loinmf24.ppt

2)

Possible reasons: - material needed for production orders - material needed for sales

Production Logistics
The Order Point System as a function of a PPC System
Stock of a definite material
Ideal Model
Top stock T=3S

Order

Order point

O=2S Order quantity 2 S

Safety stock S = S Delivery time

Delivery dates

Time
Source: Associated with Oeldorf/Olfert: Materialwirtschaft loinbd08.ppt

Production Logistics
Optimal Order Quantity Formula, developped by ANDLER :
J: annual requirement of bought-in material F: fixed costs of the purchase process for one orderline E: delivered price per piece TWER: Costs of all storage activities

Optimal Order Quantity = (pieces)

200 x J x F E x TWER [%]

Similarly is valid for in-house-products: Economic Lot Quantity (pieces) 200 x J x SC = MC x TWER [%]

J: annual requirement of in-house material SC: costs of the set-up process at the production machine: once per lot MC: manufacturing costs for the considered in-house part TWER: Costs of all storage activities

loinmf26.ppt Source: Chr.Schulte

Production Logistics
Graphical Interpretation of the ANDLER Formula

Costs per Year in

Minimum of Total Costs

ts cos l a t To

o sts o C Purch a proce sing ss co sts

to fs

g ra

in e(

cl.

t) es r e i nt

Assumptions for the Validity: - Exact knowledge of the requirement per year - regular consumption - price independent of the lot quantity - no corresponding parts - exact knowledge of costs

Optimal Order Quantity

loinmf28.ppt Source: Chr.Schulte: Logistik

Order quantity Requirement per year

Production Logistics
Functions of PPC
The calculation of the purchase order date within the requirements planning is based on the lead time offset along the structure of the bill of material (BOM) plus the delivery time.
Total throughput time 17 working days = 4 calendar Final assembly 4 days weeks 3 10 25 Delivery time 25 days Pre-assembly 3 days Delivery time 25 working days = 5 cal.weeks Manufacture of components 10 days Conclusion: The material must Purchasing be ordered 9 calendar weeks bevore the delivery date of the final product.

loinmf29.ppt

Production Logistics
Functions of PPC
Scheduling: Calculation of the start dates and finish dates of each operation without involvement of capacity restrictions

Finish OP1 B Start T

Start Finish

OP2 T
Start Finish

OP3 B
Start Finish

B=Time buffer T=Transit time

OP3 OP2 OP1

Finish=Start Time
OP2 OP1

Finish

Start

Basic dates from the requirements planning

loinmf30.ppt

Production Logistics
Functions of PPC
Variants of Scheduling
Forward scheduling
Capacity

Backward scheduling
Capacity

Combined scheduling
Capacity

Time

Time

S=today T F

Time

S=Start date F=Finish date

T=Target date S=Start date

Beginning with T, the start date lies in the past: Changing to Forward scheduling

loinmf31.ppt Source: Associated with REFA MLBO Planung und Steuerung Part 3

Production Logistics
Functions of PPC
Possibilities of reduction of the throughput time (TPT)
Actual operation sequence Shortening of Transit time Parallelising
Transit time

TPT Total TPT TPT TPT

Shortening of Individual TPT Overlapping

TPT The combination of all actions leads to the biggest effect.

TPT

loinmf32.ppt

Production Logistics
Functions of PPC
Order control by means of order completion confirmation (feedback): Order-related data: Start and finish dates of all operations, produced quantities, scrap, missed deadlines, processing times Individual-related data: Performed working hours, attendance time, illness time Machine-related data: Output (as percentage of input), work load, amount of time for: set-up, production, idle and hold-up Material-related data: Inventory and consumption of material; quality defects; deviation of planned consumption; availability of the needed material

Important: Realtime Feedback

loinmf45.ppt Source: Chr.Schulte: Logistik

Production Logistics
Functions of PPC
Masterdata are the base of an operative PPC System Materialmasterdata
Material type: in-house part or bought-in part; in-house production time rsp. replenishment lead time; lot-sizing procedure; consumption history; requirements indicator (determin. or stoch.) Base of: requirements planning, basic date building, BOM Description of all building blocks and structures; base of requirements planning, basic date building (lead time offset), in-house production orders rsp. procurement of bought-in parts Capacity in man hours and machine hours per day: Basic information for the capacity load, base of working plans Operation sequences; standard times per OP: personal time, machine time, setup time: Base of continuous scheduling

Bills of material

Data of work stations (work center) Working plans (routing)

loinmf46.ppt

Production Logistics
Functions of PPC
Transaction data within a PPC-System
Independent requirements Stock Planned orders, dependent requirements Production orders Reservations Purchase orders
loinmf47.ppt

Article number, quantity, date Article number, quantity, planning type, storage location number of the material requirements planning group Article number, quantity, basic dates, pegged requirements

PO-No., article number of the parts to be produced, quantity, date, PO-routing, PO-BOM Article number, quantity, date, connection to PO or CO Purchase order no., art. no., quantity, date, vendor, conditions

Production Logistics
Functions of PPC The basic data construction of a PPC-System needs a special sequence
1. Building and storage of material master data 2. Building and storage of the master BOM by means of a combination of articles 3. Building and storage of work units 4. Building and storage of working plans by means of combination of work units via operation sequences 5. Building and storage of supplier master data 6. Capture an input of the actual stock 7. Input of the independent requirements on the level of finished goods 8. Requirements planning: building of planning orders and purchase order proposals 9. Convert of the planned orders into production orders 10. Convert of the purchase order proposals into purchase orders

loinmf48.ppt

 Distribution Logistics "

Distribution Logistics =
All logistical activities corresponding to the distribution process

 Distribution Logistics "

Definition:
The distribution logistics represents the connection between the production process (industry) rsp. the merchandise provision (commerce) and the client site. It contains all warehousing- and transport-processes of goods to be delivered to the consumers incl. the corresponding activities of information, directing and controlling.

Aim of the Distribution Logistics:

The main aim is the provision of the right goods to the right date in the right quantity and in the right quality, optimising the ratio between the wished delivery performance and the associated costs. Main Activities of the Distribution Logistics: The main activities of the distribution logistics are directed at: - the choice of the right locations of the distribution warehouses, - the warehousing itself, - the order processing, - the order picking, - the packaging, - the goods issue, - the load securing and - the transport
loind02.ppt Source: Ch. Schulte: Logistik, 2. Edition, Mnchen 1995, page 275

 Distribution Logistics "

Alternative Distribution Structures
Factory Warehouses: They are used for storing the finished goods at the producer site, realising the quantity compensation between production and transport. Central Warehouses: They contain the full assortment of a company (evtl. from several factories), realising the time- and quantitycompensation between the production site and the sales site. Regional Warehouse: Realises the regional presence; the location near the clients makes it possible to transport big quantities over long distances (producerregional warehouse) Distribution center: In big distribution regions a division into distribution areas is useful. Activities in distribution centers are order picking and shipping route optimisation.
lohddb04.ppt / Sources: Weber; Kummer: Logistikmanagement, p. 156 and Krampe; Lucke: Grundlagen der Logistik, p. 267ff.

3-level 3-level 2-level 1-level distribution distribution distribution distribution with factory with central with central with central warehouses warehouses warehouses warehouses factory WareHouses central warehouses regional warehouses distribution centers clients

 Distribution Logistics "

Costs as function of Decentralisation

Costs
Costs of transport and warehousing

Model for calculating the optimal number of warehouses within the horizontal distribution structure

Costs of warehousing

Freight for receiving goods Freight for sending goods

Number of warehouses
lohddb07.ppt Source: Tietz, B.: Handelsbetriebslehre, 1993, p. 797

Centralisation

Decentralisation

 Distribution Logistics "

Points of Influence while defining the Number of Warehouse-Levels within the vertical Distribution-Structure
The decision for an adapted number of warehouses depends on the aims of the company, for example a wishable delivery time. Costs are caused by: Number and size of the warehouses Transhipment and Handling Costs for transport between the warehouses Costs of distribution to the clients Capital lockup (stock) With a low number of clients and/or big delivery quantities a centralisation is possible.

Source: Chr. Schulte: Logistik, 2. Edition, Mnchen 1995, Page 279 loinds10.ppt

Example for forecasting the storage area demand

Sales 2004
. /. Sales by thirdparty deals 2004 = Stock sales 2004 As-is areaproductivity

Sales 2017
. /. Sales by thirdparty deals 2017 = Stock sales 2017 To-be areaproductivity

Forecast

Distribution Logistics

Warehousearea 2004

Clearing difference 1)

Required area 2017

Additional Requirement for Warehouse capacity 2004 to 2017 Locations for and types of warehouses
lohddb15.ppt Source: Tietz, B.: Handelsbetriebslehre, 1993, p. 799

1) e.g. by means of an assortement clearing and/or removing of slow-moving items

 Distribution Logistics "

Calculation of the Warehouse Size, based on planned Sales
To-be sales per day: 100 T Average value per pallet: 500 200 pallets per day
500

Assumptions: working time: 8 h per day, 300 days p.a., 50 weeks p.a. 500 500 500 400 different articles, for each a pallet place 500 200 500 500 500 Pallets delivery time: 2 weeks daily Investment price per pallet place Sales p.a.=300100 T=30 Mio in a warehouse: 600 Sales per week=30 Mio /50=600 T Sales per article per week=600 T/400=1.500 Ideal Model Stock of a definite material corresponding with 1.500 /500 =3 pallets Top stock T=3S Safety stock=6 pallets (for 2 weeks in Ideal Model) Average stock=12 pallets per article Order Total # of pallets: 12400=4.800 pallets Order point O = 2 S capital lockup=4.800500 =2,4 Mio Order quantity 2 S Inventory turnover = 30 Mio/2,4 Mio=12,5 Safety stock S = S Warehouse invest=4.800600=2,9 Mio Delivery Warehouse performance time Delivery dates =200 pallets/8h=25 double cycles per hour Time

500 500

500

100 T daily

 Distribution Logistics "

Global Aims while planning a Distribution System To ensure a unified, customer-oriented service at the POS Minimising the costs of the total supply chain through all distribution levels Strategies for reaching the Aims Realisation of a networked traffic organisation Shorten the stream of goods (commodity flow): With big and often needed supply quantities use of regional centers (receiving of goods from the suppliers and forwarding to the outlets); with small and rare needed supply quantities use of central warehouses and delivery directly to the outlets Area-wide networking of information Through shipment with the same packaging and identification
lohddb03.ppt Source: Schmidt, Klaus Jrgen: Logistik, 1993, p. 194

 Distribution Logistics "

Influencual Factors while planning Distribution Systems
Delivery service (primary goal: reaching a defined logistics service level) Demand variation (changing of the market requirement: casual, due to economic situation, seasonal fluctuation) Customer related criteria (quantity demanded, required assortment, special needs, geografical allocation of the customers) Properties of the transport goods (types, quantities, volumes, tolerances, sensitivities) Infrastructure (networking of goods traffic, energy and communication) Environmental impact (ecolocical and social burden for cities and communities like emission of noise and harmful substances, damages and victims caused by traffic accidents, area requirement and traffic conditions, social consequences for the urban development) Costs (for stream of goods, i.e. costs for transport, warehousing, capital lockup and information flow)
lohddb09.ppt Source: Krampe, H.; Lucke, H.-J.: Grundlagen der Logistik, 1993, p. 269f.

 Distribution Logistics "

Contract Warehouse and Consignment Warehouse

Contract Warehouse
Idea Third party storage place, near the buyer

Consignment Warehouse
The warehouse areas are provided by the buyer Amount of warehouse costs = controversial article of a contract Planning scope for suppliers, stock transparency for buyers, changing of property as well as invoicing at the point of withdrawal Not suitable for many clients and/or unimportant clients

Main focus of Changing the property of the negotiations products to the buyer Advantages Costs dont lead to negotiation problems because normally rented rooms are used Marginal transparency for the buyer; the supplier is not allowed to deliver bigger quantities whenever he wants

Disadvantages

lohddb14.ppt Source: partially: Wildemann, H.: Das Just in Time-Konzept, p.165

 Distribution Logistics "

For the Succes in Retail there are three Things important: First the Location, Secondly the Location and Thirdly the Location!

lohdds01.ppt Source: Bienert, L.M.:Standortmanagment,Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 3, there: Berekoven, L.: Erfolgreiches Einzelhandelsmarketing, Grundlagen und Entscheidungshilfen, Mnchen 1990, p.351

 Distribution Logistics "

Relevance of the Decision on a Location

Choosing of locations are fundamental decisions , which fix the externals marketing conditions (like structure of the competition, traffic connection at al.) and which also are bounded to long-term fixations of internal prameters like operating facilities, personnel or form of contract Opening new stores is inherently risky. There are significant monetary costs associated with opening a new outlet ( GHOSH & Mc LAFFERTY 1987, S.1 ). Large new stores can now cost many millions of pounds to develop, so the consequences of poor location decisions are extremely serious ( Mc GOLDRICK 1990 , S.183 ). Decisions on locations are not rapidly or only with extreme costs revisable; the rent-risk with supermarkets for example amounts from 1 to 15 Mio (depending on the size of the rental object) with a usual duration of the rent contract of 15 years (HEEGER 1991 , p.92 ).

lohdds02.ppt

Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 3-4

 Distribution Logistics "

Relevance of the Decision on a Location
The achievable sales, made by commercial enterprises, are determined by location conditions. Disadvantages of the location of an outlet lead quickly and directly to continuous economic consequences. Good locations are a bottle-neck ( MHLENBRUCH & NICKEL 1994, p.4, talk about entry barriers in form of slender locations) : The decreasing number of lucrative location-alternatives and therewith the increasing risc of poor location decisions point the value of careful location analyses out. Experience becomes a less reliable guide ( BREHENY 1988, p.41 ). In contrast to the other marketing parameters the location decision is barely imitable by other commercial enterprises. Location is the only marketing mix variable, that cannot be duplicated (GOLDEN & ZIMMERMANN 1980, p.119). Opening of new outlets rsp. the aquisition of existing (competition-) locations are the most effective single measures for realising the (necessary) growth. The pressure to invest in new outlets increases (BREHENY 1988, p.42).
lohdds03.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 3-4

 Distribution Logistics "

Location Dynamic
Changing of the number of outlets within the considered trading area (closing or new-opening of outlets) Quantitative and qualitative changing of existing outlets (especially concerning the size of the sales area, the design of the sales room and the assortment) Development of complete new types of outlets Changing of the infrastructure (e.g. traffic ways, available types of means of transportation, all types of building projects), urban development Changes in the populations structure (e.g. age structure, trends in earnings, level of education) Structural and stylish changes within the behaviour of the consumers Political-legal changes of location-relevant basic conditions
lohdds04.ppt Source: Bienert, L.M.:Standortmanagment,Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996 p. 25

 Distribution Logistics "

Location Dynamic
Traffic individual Demand external Competition environment ... Location complexity

2006

2005
ic m a n Dy

Outlet size Sales room design Marketing mix ...

lohdds05.ppt

Lo
individual internal Outlet conception

ion t ca

Living space Outlets Business park

Source: Bienert, L.M.:Standortmanagment,Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 26

 Distribution Logistics "

Location Rating by Global Analysis
Start-Infos for a case study:
Sector: Food retailer Inhabitants within the trading area : ITA = 10.000 (Source: e.g. national/ country/ regional statistics; marketing research institutes) Existing sales area within the trading area (alimentation): ESA = 2.500 m (Source: e.g. GFK, Nielsen, local companies/ authorities, own investigation) Average to-be area performance: TBAP = 4.500 EUR/m and year (Source: e.g. intercompany comparisions, information of associations) Average efforts for food: AEFA = 1050 EUR / Person (Source: e.g. GFK indicators of buying power, regional statistics)

lohdds13.ppt

Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 69

 Distribution Logistics "

Location Rating by Global Analysis

ITA x AEFA ESA = 4.200 EUR / m As-Is area performance

The ratio between the As-Is area performance and the To-be area performance results in the competition index; hereby are three constellations possible:

CI =

As-Is area performance To-be area performance

CI = 1 normal competition CI > 1 weak competition CI < 1 strong competition

The result here is: 4200 / 4500 = 0,93 ; i.e. the distribution area is slightly overstaffed. Opening a new outlet would tend to result into a risky situation, a cutthroat competition is probable.
lohdds14.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 70

 Distribution Logistics "

Phases of the Location Planning

Choice of a region MAKRO ANALYSIS

Regionpre-selection Trade area limitation

MIKRO ANALYSIS

punctual location analysis

lohdds20.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p.115

 Distribution Logistics "

Methods for the Limitation of the Trading Area
Time Distance Method

Retailer location Living building Lake Radii of trading areas

lohdds22.ppt Source: Bienert, L.M.:Standortmanagement,Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 127

 Distribution Logistics "

Methods of punktual Location Analysis

The potential of clients near the projected new outlet-location can be found out by means of interviewing actions. Contents of questions: domicile, buying practice

Location of outlet Domicile of clients

lohdds23.ppt Source: Bienert, L.M.:Standortmanagement,Methoden und Konzepte fr Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 141

 Distribution Logistics "

Methods of punktual Location Analyses: Value Benefit Analysis
Locations Criteria No. of parking places Transport connection No. of competitors Image of the comp. No. of consumers Buying power
Sum Ranking

Weight 1....5 5 2 4 1 4 2

Location A Punkte 0...5 3 5 4 2 2 1 PxG 15 10 16 2 8 2 53 III.

Location B Punkte 0...5 4 4 2 3 3 5 PxG 20 8 8 3 12 10 61 II.

Location C Punkte 0...5 5 2 1 5 5 3 PxG 25 4 4 5 20 6 64 I.

 Distribution Logistics "

Definition of Order Picking

Order Picking" is the combination of determined subsets (articles) from a provided total quantity (assortment), based on demand information. The following basic functions are necessary with order picking: Provision of demand information, Provision of groups of articles, Contolled withdraw of subsets from the total quantity, Planned walking to the withdrawal coordinates and picking action, Transfer of the subsets to the next process station and signalling the execution

lohddk02.ppt Source: Christof Schule: Logistik

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Order-picking warehouse with separated charging and picking

Charging system

Provisioning system

Picking system

lohddk01.ppt

Source: Rudolf Pieper: Auswahl und Bewertung von Kommissioniersystemenp. 8-9

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Variants of Order Picking
static provision central delivery dynamic provision de-central delivery

Man to Goods

Goods to Man

Source: Rodolf Pieper: Auswahl und Bewertung von Kommissioniersystemenp. 10-11 lohddk05.ppt

 Distribution Logistics "

Legend: Legend one zone: one order picking zone multi zones:many separated order picking zones Order picking systems serial: one picking order after the other parallel: picking order will be served in several zones one zone multi zones simultaneously single-level: customer-related order picking in one step serial parallel serial parallel multi-level: article-related rsp. storage-unit-related picking in the first step, then customer-related picking from the singlemultisinglesinglemultimultisinglemultiprovided quantities level level level level level level level level

Variants of Order Picking

Source: Krampe; Lucke: Grundlagen der Logistik, 1993, p. 241 lohddk06.ppt

 Distribution Logistics "

Example for serial and parallel single-level Order Picking
Picking Orders: Client A: 2 x 4711, 1 x 4812, 10 x 5014 and Client B: 3 x 4812, 2 x 4913 4711 order A order B 2 order A 3 order B
several sources lohddk08.ppt

4812 1 3 1

4913

5014 10

article in warehouse serial, orderrelated

10

parallel, orderrelated

 Distribution Logistics "

Example for parallel multi-level Order Picking Picking Orders: Client A: 2 x 4711, 1 x 4812, 10 x 5014 Client B: 3 x 4812, 2 x 4913 4711 all orders
2

2 x 4711; 4 x 4812; 2 x 4913; 10 x 5014 4913

2

4812
4

5014
10

article in warehouse

4711

11

4812 12 12

4913 13

5 5014

5 5014

1. level parallel

10

order A order B
3 2

2. level serial

several sources lohddk10.ppt

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Main Tasks of Goods Issue

The main tasks of goods issue are: Provision of the articles Identity- and quality control Printing of shipping instructions Combination and packaging of the parcels for each consignment Provision of the consignments Loading of the goods

Quelle: Chr. Schulte: Logistik, 2. Auflage, Mnchen 1995 loindw00.ppt

 Distribution Logistics "

Material Flow
Production Warehouse
Provision of goods

Material- and Information Flow Within the Goods Issue

Order

Information Flow
Sales Department
Order Copy

Goods Issue
goods receipt
Put down of the goods

Control of identity and quantity

fulfilled ?

yes

Printing of shipping instructions

no yes fulfilled ? no Rejection Combination of the consignments Exceeding of delivery date Complaint Failure report

Packaging of The goods Packaging of consignments Privision of consignments Loading of goods

Delivery date Packing slips

Finishing of shipping instructions

Reshipment

Transport scheduling

Shipping advice

Customer
loindw01.ppt Souirce: Chr. Schulte: Logistik, 2. Edition, Mnchen 1995, page 295 (source there: ZVEI)

 Distribution Logistics "

Goods Issue Posting

Posting data: Date Article number Quantity Order item / Project Stock transfer Store order item Interface to invoicing Interface to store settlement Interface to accounting Departure warehouse

The accounting will be supported using a posting type key: Herewith are connected logical plausibility checks to ensure the correct accounting procedure.

lohddw04.ppt

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Hub & Spoke-System

Hub Client Hub Spoke

Spoke

Client Client Client

Hub

Client

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Characteristics of Inland Navigation Vessels

The special suitability of barges as means of transport is the result of high performance and load capacity, save transport process and good suitability for dangerous goods, any time enough and available cargo hold, favourable prices, low ecological damage because of low energy consumption, reduction of road traffic. The possible disadvantages are the low speed (which is nevertheless taken into account), the sporadical dependency on the water level, the glaciation and the relative small waterway net.

lohdlt17.ppt Source: Wolfgang Oelfke:Gterverkehr-Spedition-Logistik, S. 226

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Lengths of Inland Traffic Types in Germany
Railway: 35.600 km Road: 231.581 - BAB 12.037 - Bundesstr.: 41.246 - Landstr.: 86.868 - Kreisstr.: 91.430 Inland waterway: 7.300 Pipelines (Oil): 2.966

Source: http://www.wsv.de/Schifffahrt/ Statistik/pdf/Wegelaenge_BRD.pdf dort:

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Proportion of Main Transport Systems as Part of all Transports in Germany

Source: http://www.wsv.de/Schifffahrt/ Statistik/Binnenschifffahrt/index.html

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Cargo Handling (Mio t) of Inland Ports

Source: http://www.wsv.de/Schifffahrt/ Statistik/Binnenschifffahrt/index.html

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Transported ton-kilometer on the inland waterways in Germany
total on the Rhine

Source: http://www.wsv.de/Schifffahrt/Statistik/Binnenschifffahrt/index.html

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Requirement of primary energy in liter diesel per 100 ton-kilometer

The best Protection of the Environment is done by the low Energy Consumption of Inland Navigation Vessels

Transport range for one ton with the same energy affort

Emission of CO2 of the different carrier types in gramm per ton-kilometer

Source: http://www.wsv.de/Schifffahrt/Statistik/Binnenschifffahrt/index.html

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A push tow1 on the Rhine can grow up to 16.000 tons

1)

Source: http://www.shortseashipping.de/de/ foto-galerie/fotos/Schubverband_in_Hamburg.JPG

or pushing unit (=Schubverband)

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Example of a push-tow with 6 barges and 1 motor ship

Source: http://stahlarbeiter-online.de/links.htm

Original: Die Verhaaven XIII im Sechserschubverband mit Erz

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AMS BARGE IS A KEY ELEMENT IN AN INNOVATIVE TRANSPORT CONCEPT OPERATING IN NETHERLANDS. PHOTOS OF AMS BARGE ARE COURTESY OF SHIPYARD BEGEJ.
Source: http://www.dpc-belgrade.co.yu/gallery.htm

 Distribution Logistics "

Source: http://www.dpc-belgrade.co.yu/gallery.htm

 Distribution Logistics "

Types of Business in the Maritime Navigation
With Types of Business the shipping companies indicate the kind of using the seagoing vessels for transportation of goods.

Types of Business Liner traffic

conventional containerother types: LASH-, Ro/Ro-, Ferry

Non-scheduled services
charterage contract (or consecutive route)

lohdlt18.ppt Source: Wolfgang Oelfke:Gterverkehr-Spedition-Logistik, S. 336

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Types of Seagoing Vessels

1. 2. 3. 4. 5.

Passenger liner Container ship General cargo vessel Ro/Ro ship Supertanker (Oil-tanker)

lohdlt20.ppt Source: Wolfgang Oelfke:Gterverkehr-Spedition-Logistik, S. 331

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Important Sea Port Cargo Handling (Mio t)

Source: http://www.wsv.de/Schifffahrt/Statistik/Binnenschifffahrt/index.html

Logistics Performance Measurement

Logistics Performance Measurement = part of logistics controlling by means of Key Performance Indicators (KPIs)

Logistics Performance Measurement

The most important KPIs within the Procurement Logistics
Purchase = performance total order value p.a. in EUR costs of the purchasing department p.a. in EUR

This KPI valuates the performance of the purchasing departement; it indicates, which order value was realised per 1 EUR costs of the purchasing department. It is difficult to manipulate this KPI. Example: 50:1 Costs per order item = costs of the purchasing department p.a. in EUR number of order item p.a.

This KPI is necessary for the ANDLER-formula Purchase success = sum of price deviations / sum of planned prices x 100 [%]

A negative value indicates a negotiation success because the paid prices were lower than the planned prices.
Sources: Chr.Schulte: Logistik; Praxishandbuch fr den Materialwirtschaftsleiter, WEKA-Fachverlag, Augsburg 1996; Abels et al.: Wie gut ist Ihre Logistik ?, Verlag TV Rheinl, Kln 94t

Logistics Performance Measurement

The most important KPIs for warehousing
Average stock = (start stock + 12 ultimo stocks) / 13

Warehouse ex- (WER) = total costs of warehousing p.a. pense ratio average stock (capital lockup)

x 100 [%]

The costs of warehousing do not contain the interest costs of the capital lockup. Total Totalwarehousing warehousing (TWER) expense expenseratio ratio

= WER + interest for capital lockup

This KPI is necessary for the ANDLER-formula; normal value range: 15 25 %

Sources: Chr.Schulte: Logistik; Praxishandbuch fr den Materialwirtschaftsleiter, WEKA-Fachverlag, Augsburg 1996; Abels et al.: Wie gut ist Ihre Logistik ?, Verlag TV Rheinl, Kln 94t

Logistics Performance Measurement

The most important KPIs for warehousing

Inventory turnover = warehouse sales p.a. (pieces rsp. value) / average stock (pieces rsp. value) The inventory turnover is one of the mostly used KPI. The average turnover over the full assortment must be built only via values! Range of inventory in months = 12 months / inventory turnover

The range of inventory tells us, how long the average stock meets the normal demand without replenishment. The average range must be built using the average turnover.

Sources: Chr.Schulte: Logistik; Praxishandbuch fr den Materialwirtschaftsleiter, WEKA-Fachverlag, Augsburg 1996; Abels et al.: Wie gut ist Ihre Logistik ?, Verlag TV Rheinl, Kln 94t

Logistics Performance Measurement

The most important KPIs for warehousing an logistics

directly delivered number of pieces of an article Delivery x 100 [%] = service level demand of the customer Average delivery service level: sales realised / wished sales * 100 [%]

Logistics cost rate = costs of logistics / sales

x 100 [%]

Costs of logistics = depend on the definition, what logistics is: planning of materials, purchasing, goods receipt, included quality control, warehousing, in-house transport, External transport, order picking, packaging, shipping, logistics-IT-system, order processing, production planning and control (PPC) etc.
Sources: Chr.Schulte: Logistik; Praxishandbuch fr den Materialwirtschaftsleiter, WEKA-Fachverlag, Augsburg 1996; Abels et al.: Wie gut ist Ihre Logistik ?, Verlag TV Rheinl, Kln 94t

Logistics Performance Measurement

The most important KPIs for warehousing an logistics
number of picked colli man hours

Pick-Rate =

[ pieces per hour ]

Delivery Time = time between issue of order and disposability for the client

Delivery reliability =

number of on-time delivered positions total number of delivery positions

x 100 [%]

Sources: Chr.Schulte: Logistik; Praxishandbuch fr den Materialwirtschaftsleiter, WEKA-Fachverlag, Augsburg 1996; Abels et al.: Wie gut ist Ihre Logistik ?, Verlag TV Rheinl, Kln 94t