Fundamentals of Logistics

loingz04.ppt Source: Associated with Christof Schulte: LogistikImportant Types of Logistics Costs depreciation, loss by theft The costs of logistics can reach between 15 and 20 percent o

Slides for the course

Fachhochschule Gelsenkirchen

Fachbereich Wirtschaft Standort Gelsenkirchen

Fundamentals of Logistics

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

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, München, 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

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.

T

ments planning

Require- tion planning

Produc-Purchase order

Purchase order quantity planning

Supplier Ware-

house

tion

Produc- house

Ware-A system contains subsystems Ware-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

IT-Systems (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)

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) (Packstücknummern), order confirmation (or

Purcha-Cycle of Logistics

Raw

Materials

forming

Trans-Mining

Recycling Collecting

sing

Purcha-Storage

Selling

SellingSelling

• 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.

Hints on the german law of closed loop materials economy

(Kreislaufwirtschaftsgesetz KrWG)

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

Main Aim of Logistics: Optimisation the Efficiency of Logistics

• Procurement Logist.

• Production Logistics

• Distribution Logist.

• Reverse Logistics Personnel and Equip- ment in the Areas

loingz03.ppt Source: Associated with Christof Schulte: Logistik, 2.Edition, München 1995, p 6

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

Flexibility of Delivery = Possibility of consideration of special wishes

of the clients concerning delivery time or delivery quantity

Quality of Delivery = Accuracy of delivery concerning type,

quantity and quality of the delivered articles

Delivery Service Level = Percentage of articles directly deliverable

from warehouse

Source: Associated with Christof Schulte: Logistik, 1995, p 10.

loingz01.ppt

Costs of Delivery Service

Costs of Shortfalls

Target

Actual

Total Costs

Optimal Delivery Service

Alternative Strategies

Example of a statistic Evaluation of Delivery Reliability

Weeks of delay

Quantity of deliverd Orders within the first Quarter

Comparision between the guaranteed date

and the real delivery date: Negative values indicate too-early-dates

Positive values point out on dates too late.

0 20 40 60 80 100 120

loingz04.ppt Source: Associated with Christof Schulte: Logistik

Important Types of Logistics Costs

depreciation, loss by theft

The costs of logistics can reach between 15 and 20 percent of the total costs,

therefore they have considerable influence to the company profit!

and control, order processing, shop-floor scheduling

transfer to and release from stock

?

Question Marks

?

The Boston Matrix

The Boston Matrix is a Classification of

products for building norm strategies.

Source: Associated with Christof Schulte: Logistik

: 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

loinge05.ppt

Influences of the Production Program

Consistency and type (Size, weight, sensibility, deterioration) of products, value

Storage,packing,transport

Range of goods,variety of goods,frequency ofselling

Inventory,inventoryturnover

Life cycle ofproducts, changes indemand

demands on delivery service,warehouselocations

Product

Logistics

Influencing Factors

-Source: Associated with Christof Schulte: Logistik

loinga02.ppt

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)?

Company Organisation Structure

-Source: Associated with Christof Schulte: Logistik

loinga05.ppt

Plant Logistics

Research and Developement

Production Management Sales

Finance and Accounting

Plant I

Plant Logistics

Research and Developement

Production Management Sales

Finance and Accounting

Plant II

Plant Logistics

Research and Developement

Production Management Sales

Finance and Accounting

Plant III

Plant Logistics

Research and Developement

Production Management Sales

Finance and Accounting

Plant IV

Board

Staff-Line-Organisation

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

Sector 1

Department 1 Department 2 Department 3 Department 4

Sector 2 Area 1

Department 1 Department 2 Department 3 Department 4

Sector1

Department 1 Department 2 Department 3 Department 4

Sector 2 Area 2

Board

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

Company Organisation Structure

-Source: Associated with Christof Schulte: Logistik

Processes within the company

Thinking restricted to area

Order process

Process 1

Thinking in processes

ment

Develop-Offer Order

process

T R E N D

loingg02.ppt

Process 2 Process 3

Procurement of long delivery time material

Material provision Shipping

Production Production

order

Preparing invoice

Product Invoice

Date check

Procurement of Remaining material

Construction

Confirm order

Order confirmation

Purchase orderExample of an order process within a small company

loingg04.ppt

Processes within the company

Purchase order Delivery

Time

Flow of a logistical Organisation Process

Associated with Christof Schulte: Logistik, 2.Edition, München 1995, p 341

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 doesn‘t 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.

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

Explanation

Source: Associated with Christof Schulte: Logistik

Criteria for the Choice of the adapted Transport System

loingtal.ppt

Requirements

of market

Material to be transported

Auxiliary means of Transport

Transport System

mesh box pallet

in-house production

Source: Associated with Christof Schulte: Logistik

Functions of Auxiliary Means of Transport (AMT)

loingt01.ppt

• 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))

Examples of Auxiliary Means of Transport (AMT) )

loingt02.ppt

External Transport Systems

Source: Christof Schulte: Logistik, München 1999, p.135 (there Vogt and others)

loingt07.ppt

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, München 1999, p.135 (there Vogt and others)

loingt08.ppt

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)

External Transport Systems

Advantages and Disadvantages of the several carriers

Source: Christof Schulte: Logistik

loingt10.ppt

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

sources: Christof Schulte: Logistik; Fortmann/Kallweit: Logistik

loingt11.ppt

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

Advantages and Disadvantages of the several carriers

Rocket Transport:

plus: in space no other transport system usable

minus: extreme high costs

In-House Transport Systems

sources: Christof Schulte: Logistik (dort Schulze/Weber)

intensity

Transport-Transport

Optimal Usage

High Service- level

lity

Flexibi- rency

Transpa-= function of availability

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.

a) Please calculate the availability of the whole system!

b) Calculate the total availability for the following structur:

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 %

V2=93 %

V3 = 98 % means, thatthe belt conveyor 3 isusable in 98 of 100 hours

FM2for example belt conveyor or fork lift

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 theType (1 – Vi)

Examples for the Total Availability of Transport Networks

sources: Christof Schulte: Logistik (dort Schulze/Weber)

loingt14.ppt

Structure of In-House Transport Systems

Continuous conveyor

Cranes Stacker cranes

Without rails

Rail bounded

Track bounded

Floor conveyors

Elevators

Conveyors for In-House Transports

Discontinuous conveyor

AGVS automated guided vehicle system

locomotive wagons fork lift

In-House Transport Sytems: Examples for Continuous Conveyors

Source: Jünemann: Materialfluß und Logistics

loingt22.ppt

Roller conveyor Belt Conveyor Platform Conveyor

Tilt Tray Sorter Paternoster conveyor Circular Conveyor

Computer controlled In-House Transport System

sources: Christof Schulte: Logistik (dort Schulze/Weber)

loingt21.ppt

FERTIGUNG

MONTAGE

port or- ders

Trans-Convey Instruc- tions

Feedback

Computer for Transport Control

Transport systems

Manufacturing

Assembling

Stock accounting and Warehouse Control

Centralisation Level

of Warehouses

External or Internal Warehousing

Storage Systems

Outline

Selection Criteria for the suitable Storage System

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

Drawer-style Cabinet

Rack

Cantilever Racking