Total Pageviews

Followers

Search This Blog

Sunday 9 October 2011

BMS - Logistics set 5

Differences between Supply chain management and Logistics management.
1. Supply chain management is a broader concept whereas Logistics management is a
narrower concept.
2. The concept of Supply chain management is relatively new whereas the concept of
Logistics management is relatively old.
3. Supply chain management is an extension of Logistics management.
4. Logistics management is primarily concerned with optimizing flows within the
organization whilst supply chain management recognizes that internal integration
by itself is not sufficient.
5. Logistics is essentially a planning orientation and framework that seeks to
create a single plan for the flow of product and information through a business.
Supply chain management builds upon this framework and seeks to achieve linkage
and co-ordination between processes of the other entities in the pipeline, i.e.
suppliers and customers, and the organization itself.
6. The focus of Supply chain management is upon the management of relationships in
order to achieve a more profitable outcome for all parties in the chain where as
the focus of Logistics management is upon the management of resources within the
organization.Transportation Cost Elements
Following are the essential elements of transportation to be taken into account:
1. Transport Mode The most critical decision is the selection . of appropriate
mode of transport. This fixes two basic elements of distribution function:
a) Transit time or time lapse between production and sale;
b) Level of transportation costs.
There is an inverse relationship between transit time and transport cost . the
lower the transit time, the higher the transport cost. However, a decision that
takes into account only one cost factor cannot be justified. An evaluation of the
effect of transit time on other costs must also be considered. Unsold production
represents a high cost, and the longer the transit time, the higher the level of
unsold production.
2. Inventory Costs . A first class service to clients often requires immediate
delivery and, hence a higher level of inventory at the market centre. Economy, on
the other hand, calls for minimum inventory. The level of output held in stock is
dictated bya)
Transit time: If the time lapse between production and sale is longer, the
level of inventory becomes higher.
b) Sales pattern: If the pattern of sales is erratic, higher inventory levels are
caused.
c) Production pattern: If the production pattern is erratic, higher inventory
levels have to be maintained to prevent stock .outs.
Assuming that the sales and production patterns are largely fixed, the important
variable, which can influence stock, levels in transit time. As transit time is
reduced, the level of static stock can be reduced with accompanying stock
reduction.
3. Transit Capital . Capital can be released by changing the proportion of the
total output in transit. This can be done by adjusting the transit time. As
transit time is reduced, the quantity of goods in transit can be decreased with an
associated reduction in transit inventory costs. By realizing the capital cost of
transit inventory and goods in transit, capital commitments can be reduced, and
more capital can be available for other purposes.
4. Obsolescence - When a slow or erratic mode of transport is employed, a higher
level of inventory is necessary to ensure continuous, prompt delivery to the
customer. However, when designs change rapidly, obsolescence reduces the market
value of the products in store. Rapid advances in technology bring about swifter
technical obsolescence. Any goods in the pipeline realize a lower figure when new
models are introduced by a company or it.s competitors. Air distribution can
overcome this problem, and the effect of such obsolescence can be minimized.
5. Packaging . The nature of packaging of a product is often determined by the
mode of it.s transport. E.g. Because of the dry conditions of carriage, short
transit times and minimum handling, air cargo generally requires much less
packaging than other forms of long distance transport. Goods dispatched by air
may require only a dust cover or even no cover at all. In some cases, savings on
the packaging of sophisticated products may more than pay for the actual transport
charges. Less packaging may lead to other advantages too. These include lower
unpacking costs and lower chargeable weight for freight.
6. Insurance . Insurance risks are based on transit time as well as the
possibility of damages en route. With faster transit times, skillful handling,
substantial reduction in damage and greater security in transit, insurance
premiums tend to fall substantially.
7. Breakages Cost of breakages is an important factor . in any cost benefit
analysis. Because breakages may be indemnified by insurance companies, the true
cost of damage to cargos can easily be overlooked. In the first place, the
vulnerability of various products sent by different modes is reflected in the
insurance premium. To high premiums must be added the clerical work involved in
establishing claims, making replacements and the loss of customer.s goodwill. The
replacements themselves will be subject to the same hazards and premiums will
require further documentation.
Therefore, only that mode of transport must be selected which substantially
reduces real damage in transit. This calls for a selection of the routes which are
more direct and which avoid transshipment. Handling equipment must also be more
sophisticated. Containers can be used by shippers for door-to-door transportation,
thereby avoiding all handling of goods by the carrier.
8. Pilferage . Many expensive administrative problems associated with breakages
also apply to pilferage. This problem is reduced for example, when door-to-door
containers are used, a fact which is again reflected in lower insurance rates.
9. Deterioration . In many surface cargos, deterioration may be avoided only by
complicated and expensive packing to counteract mechanical shock, exposure to
weather or unfavorable temperature etc. Some cannot be stored at all, except at
great expense, and others deteriorate slowly.
Deterioration can be costly in terms of packing, stock losses and expensive
conditioning in store. It can only shut the door on many distant markets. A high
speed of transport and the frequency of services can overcome many of these
problems.
10. Transport Costs . Transport can be divided into 3 phases:
(i) Delivery to docks, airport or railway station.
(ii) Transport from one terminal to another.
(iii) Delivery from the terminal to the consignee.s place.
In the cost-benefit analysis of the turnaround time of a company.s delivery and
collection vehicles, their man hour costs can be significant. Some customers may
find this item to be more costly than the cost of the major journey.
Transport Elements:
Whether the movement of material and equipment is by rail, sea, air or road,
adequate facilities for their free flow to and from the factory must be ensured.
The factors which affect progress at the construction stage, and production and
dispatches after commission, have been discussed in the following paragraphs:
1) Terminal Facilities:
Terminal facilities are usually grudgingly provided. One reason for this is that
any delay or any in convenience caused to truck operators is not a loss to the
project. It is treated as a loss to the carrier. In some cases, this may be true.
However, this usual incidence of stoppage or regulation of the production process
can be minimized, if not eliminated.
Often extreme stinginess is expressed in planning for these facilities, which
include storage space, and loading and unloading arrangements in a suitable area.
If the storage space is not adequate or if the traffic is exceptionally heavy,
production suffers inevitably. Since transport requirements of each project are
different and depend on its location, physical availability of infrastructure,
etc, it is not advisable to prescribe one uniform scale of terminal facilities.
They must be worked out for an individual project on the basis of its own specific
requirements.
Storage, loading and unloading facilities, good quality roads, which are usable
throughout the whole year, and suitably, designed yard for railway wagons have to
be planned as a part of terminal facilities. It is also essential to pay special
attention to the maintenance of loading and unloading equipment, the design,
location, length, height and other features of loading and unloading platforms,
etc., and the maintenance of circulating area and roads where heavy vehicles ply.
The overall savings in transport rates would more than justify the expenditure
incurred on the provision of additional facilities. This ahs not been recognized
by the planners of individual projects.
For rail movement, not only sufficient number of loading lines, but also
sufficient number of marshalling, examination and holding lines must be planned
for. These lines must be suitably connected with one another to ensure smooth
shunting operations. The configuration of lines (yard designs) is more important
than the number of lines in the yard, for the requirements of prime mover
(shunting engines) can also be cut down by a suitable design of yard.
2) Vehicles:
An important feature of movement of finished products of major projects is the
type of vehicle used for movement. The vehicle dimensions, capacity. Type and its
special characteristics, if any, have to be examined with the reference to the
quality and quantity of goods to b moved. In case of sea transport---- the size,
speed and the type of ship, in case of road movement---- capacity, moving
dimensions and speed of the trucks and in case of rail movement---- the capacity,
type and general availability of wagons must be closely examined.
Planned movement on any section must be taken into account utilisation of the
existing sectional capacity, the expected general growth in traffic on the
section, and the possible future identifiable streams of new traffic. If movement
on a saturated section is inevitable, line capacity of the section must be
increased.
3) Prime Movers:
The motive power utilized for the internal handling of vehicles and transportation
to destinations is another important component of the total movement system. In
the case of rail movement, locomotives required for the shunting and marshalling
of wagons within the plant must be of such weight, horsepower and performance
characteristics as will match the specific tasks of shunting and reception and
dispatch of wagons. In case of road movement, suitable design and layout of
conveyors and mechanical loaders can reduce the drudgery of manual labour and make
pre-despatch and post-receipt handling operations more efficient.
4) Routes And Sectional Capacity:
Another important aspect of transport planning is the routes for streams of
traffic, viz., roadways, railways, waterways and airways. The routes or pathways
must have adequate capacities. Generally speaking, because of lack of
understanding of the transportation subject, executives take it for granted that
capacity of routes is unlimited.
A very important but invisible component of movement activity is sectional
capacity, which is dependant on permissible sectional speed and other
characteristics of a section. In turn, sectional speed depends on the geometrics
of the road (track, sea route, road surface, carriage way, gradients and curves,
etc.).
Over a section of railways or roadways between two stations A and B, only a
limited number of wagons, trucks or vehicles can be pushed through, depending on
the availability of terminal facilities to handle these vehicles, the facilities
to enable vehicles to move on the section, and availability of sufficient number
of vehicles. Unless sufficient capacity is developed on each of the different
routes to move the vehicles, the additional number of vehicles provided would not
necessarily lead to higher levels of transport availability. On the contrary,
movement may become more sluggish.
5) Transit Time:
The relative locations of a plant and the customers or suppliers determine largely
the transit time for raw materials, spare parts and finished products. Transit
time generally never receives adequate attention in the panning of major projects.
There is a general impression that, if need be, transit time can be drastically
cut at any time by air-lifting a consignment. Apart from the fact that the neglect
of transportation planning leads to an overall higher cost of transportation, in
practice, reduction in transit time actually achieved may not justify the heavy
cost of air transport. Rough estimates of transit time from unreliable sources are
generally utilized for planning movements of goods. Although more detailed
information sources may be readily available. It is essential therefore, that
executives understand clearly the difference between:
(a) Normal transit time under normal conditions;
(b) Normal transit time under abnormal conditions;
(c) Optimal transit time;
(d) Most optimistic transit time
(e) Most pessimistic transit time; and
(f) Desirable transit time.
Because the importance of transit time is not adequately recognized,
it is not realistically provided for. Major projects suffer from the heavy delays
even before the commencement of construction because of the non-availability of
construction equipment and machinery in time. The existing bottlenecks in the
fields of transportation are almost always ignored. Construction schedules,
inventories, warehousing facilities, order processing or production schedules,
etc., are generally planned without the recognition of the inevitable delays that
flow from these bottlenecks.
6) Weigh Bridge:
Another usually neglected aspect of industrial transportation activity is the
factory weigh bridge. Weigh bridges ion factories are generally inaccurate, if not
actually out of order. It is seldom appreciated that the losses continuously
occurring on this single piece of factory equipment and general inefficiency,
which results from its ineffective and inefficient management, can be easily
avoided by proper advance planning. Executives ignore the usual traffic jams at
factory gates slow down receipts and dispatches, which, in turn, indirectly affect
output. The relative advantages of various types of weigh bridges must be properly
appreciated by executives, and a weigh bridge which will handle the anticipated
volume of traffic expeditiously must be selected.
7) Distribution pattern
The pattern of movement of the finished produced by road or rail must be planned
properly. For example, when the requirements of the number of rail wagons are to
be worked out, it is not sufficient to take the average lead or distance for the
whole country for calculating fleet requirements. it is also not sufficient to use
the figure of the existing average lead of general goods ,or even that pertaining
to a specific commodity.
However, when it comes to actually transport, because of imprecise pre-planning,
the manufacturer wants the commodity carrier to transport goods to anywhere and
everywhere n the country. This presents a problem. The manufacturer provides
information to the common carrier about the quantity o goods to b \e marketed. But
detailed information must be supplied to the carrier so that the carrier can plan
the movement in entirety.
8) Nature of product
Another aspect, which is often disregarded by project managements as well as
common carrier, is the variability arising out of the specialized nature of
products to be moved. The generally low level of sophistication in transport
planning in the country had made it difficult for the planners to appreciate the
fact that transport capacity is influenced by the nature of goods, their packing
and other specialized requirements, such as special handling equipment.etc.


DIFFERENCE BETWEEN MRP AND DRP
MRPDRPGuiding factorGuided by production schedules
Guided by customer demandControl of the firmUnder control of the firm
Not under control of the firmDemand situationOperates in dependant demand
situationOperates in independent demand situationArea of operation and
coordinationCoordinates scheduling and integration of materials into finished
goodsCoordinates demand between outlets and supply sourcesStage of functioning
Controls inventory until manufacturing and assembly is complete.Controls and
coordinates inventory after manufacturing and assembly of finished goods
The figure below shows the areas of functioning of MRP and DRP. MRP plans the
procurement of raw materials as per their requirements, right from the first stage
till the final assembly.
After the goods have been manufactured, DRP plans the distribution of finished
goods from the plant warehouse to the wholesalers and retailers till it reaches
the customer.
The integrated model seeks to combine these two areas. Taking into consideration
the requirements of both MRP and DRP, it provides integrated planning.
DRP Benefits And Constraints
An inventory management system such as DRP offers a number of benefits for
management. The major organizational beneficiaries include marketing and
logistics.
The major marketing benefits are:
* Improved service levels that increase on time deliveries and decrease customer
complaints.
* Improved and more effective promotional and new product introduction plans.
* Improved ability to anticipate shortages so that marketing efforts are not
expended on products with low stock.
* Improved inventory coordination with other enterprise functions, since DRP
facilitates a common set of planning numbers.
* Enhanced ability to offer customers a coordinated inventory management service.
The major logistics benefits are:
* Reduced distribution center freight costs resulting from coordinated shipments.
* Reduced inventory levels, since DRP can accurately determine what product is
needed and when.
* Decreased warehouse space requirements because of inventory reductions.
* Reduced customer freight costs as a result of fewer back orders.
* Improved inventory viability and coordination between logistics and
manufacturing.
* Enhanced budgeting capitability, since DRP can effectively simulate inventory
and transportation requirements under multiple planning scenarios.
The constraints of DRP are:
* Inventory planning systems require accurate and coordinated forecasts for each
distribution center. The forecast is necessary to direct the flow of goods through
the distribution channel. To the extent that this level of forecast accuracy is
possible, inventory-planning systems operate well. However, this requires
forecasts for each distribution center and SKU as well as adequate lead-time to
allow product movement. However there are 3 potential sources for error exist. The
forecast itself may be wrong, it may have predicted demand at the wrong location,
or it may have been predicted demand at the wrong time.
* Inventory planning requires consistent and reliable performance cycles for
movement between the distribution centers. While variable performance cycles can
be accommodated through safety lead times, performance cycle uncertainty reduces
planning system effectiveness.
* Integrated planning is subject to system nervousness and frequent rescheduling,
because of production breakdowns and delivery delays. The system nervousness leads
to fluctuations in capacity utilization, rescheduling cost, and confusion in
deliveries. This is intensified by the volatile operating environment
characteristic of distribution. Uncertainties such as supply transportation
performance cycles and vendor delivery reliability can cause an extremely nervous
DRP system.
* DRP is not the universal solution for inventory management.

No comments:

Post a Comment