Slide 1Step backLogistics as a Source of competitive advantageSome other key issues from articlesStepping forwardSlide 6SortingSlide 8Slide 9Slide 10How goods actually move (modes)Motor carrierRailAirWaterPipelinesMixed modeMixed mode continuedMixed modes have lead to the rise of 3PLLooking aheadWarehousesThere are a wide range of warehousing issuesBasic purposes of warehouses: storageBasic purposes of warehouses: movementBasic purposes of warehouses: information transferLogistics = informationTypes of info in a supply chainKey point on InformationMore informationInformation sharingLogistics conclusionsLogistics 1Logistics•The basics–transportation–modes–mixed mode and containers•A step up–materials handling and warehousing •True SCMLogistics 2Step back•So far we have examined:–trust–what we do internally–some of the processes related to managing our suppliers of materials and information•Logistics is then managing these flows of goods and information. Not only the inbound side (from our suppliers) but the outbound side (to our customers)–Note we have already covered information flows in detailLogistics 3Logistics as a Source of competitive advantage•“…Pedal…”– 2.2 million plus employees just in transportation•“Logistics Wiz”• “Delivering the goods” –Globalization is not possible without changes in logistics–North American companies need to expand globally to grow •UPS, Fed-EX and Yellow are logistics providers- doing this well is their competitive advantage–So what are they doing?Logistics 4Some other key issues from articles•US cost of logistics – this is a bit sketchy but over 700 billion in 2004•The US transportation system is at capacity ! Mixed modes and containers change shipping tremendously•Move to 3rd parties•Faster ships and cargo lifters - these are very expensive bets with serious financing behind them- whyLogistics 5Stepping forward•Some people look at inbound logistics separately from outbound logistics. –This often leads to treating purchasing as a cost center–This assumes that managing the flows is significantly different. What is contained in the flows may differ greatly but the flows themselves are similar •Transportation - usually defined as movement of goods. Is a foundation of logistics so we will build off of basic transportationLogistics 6Physical functions of logistics•All of the following are done to provide time and place All of the following are done to provide time and place utility.utility.•Sorting out: Physically separating a homogeneous subgroup from a heterogeneous population of items –( e.g. grading, separating by sizes, or other physical characteristics)•lumber / paper / beef•Accumulating: Combining homogeneous stocks of products or materials into larger quantities•Allocating (breaking bulk): Dividing up stocks of homogeneous items into smaller quantities–break truckloads or carload shipments into smaller local shipments•Assorting: Mixing heterogeneous items into assortments needed by customers and end usersLogistics 7SortingGradeAGradeBGradeCGradeDProduction processSorting processLogistics 8AccumulatingSupplierSupplierSupplierSupplierWarehouse PlantVolumeShipmentLogistics 9Allocating (breaking bulk)PlantPlantPlantWarehouseVolumeShipmentWarehouseRetailersRetailersRetailersRetailersRetailersRetailersLogistics 10AssortingPlant 1Products A&BPlant 2Products B&CPlant 3Products D&EPlant 4Products F&GWarehouseCustomer XA B CCustomer YB C F GA B C D ECustomer RCustomer ZA GLogistics 11How goods actually move (modes)•There are five basic modes of transportation–Motor - basically trucks–Air - planes–Water - boats/ barges and the like–Rail–Pipeline•Intermodal (mixed mode) transportation is a major issue as wellLogistics 12Motor carrier•Trucks carry more freight than any other mode of transport in the United States (by $ (Rail carries more tons))–Trucks are very flexible•can go almost anyplace in the country–note quality of our road network – Economist article•can easily be rerouted – new technology•can carry a wide range of stuff•are generally very reliable and fairly fast•costs tend to be low –Potential problems are limited•can not move really big stuff•gets expensive when moving large volumes of commodities•need a road•fuel cost fluctuations can cause serious problems – Fed Ex and Brown get greenLogistics 13Rail•Was near death 20 years ago–slow–limited access–damage–inflexible schedules–unwillingness to invest in rolling stock•Has started to come back–still cheaper than trucks for long hauls (usually over 750 miles but getting loser to 500)–much cheaper to move very large quantities of commodities–has changed dramatically•schedule and equipment flexibility–piggy back / mixed modesLogistics 14Air•Fast, flexible, access to many places (can cross water which is often a benefit)•Expensive !•So air is usually used for high value goods–high dollar to weight ratio–high cost for being late–etc.•Becoming more and more common as competition drives prices down•Post 9/11 there are some serious air cargo issuesLogistics 15Water•If a waterway goes where you need to go nothing is cheaper•Obviously access is a problem•Speed is another problem•So water is usually used for high volume / low relative value items where time is not an issue•However, ocean going transport has reduced delivery time•Recent issues – ports are jammed and securityLogistics 16Pipelines•Often overlooked, but if you are moving a liquid or gas product (or slurry) a pipeline is:–Movement of Wine at King’s Estate–fast and reliable –inexpensive–automated•Downsides are limited but:–must be in the proper form–access is limitedLogistics 17Mixed mode •The container has significantly changed transportation–containers are 8 foot high, 8 foot wide metal boxes than range in length from 20 feet to 53 feet–a good can be loaded into a container at a plant in Corvallis, taken by truck to a rail terminal in Eugene, placed on a train that goes to Los Angles, placed on a boat to Japan, unloaded from the boat and placed on a truck to be delivered to the customer.•never unloaded•time to change modes of transport is minimal –Why does this matter so much ?Logistics 18Mixed mode continued•Containers, piggy back and other innovations have enabled mixed mode transport which makes transportation a