Operations Management 12 Distribution Challenges Logistics the movement of goods in a supply chain includes incoming shipments movement within a facility and outgoing shipments Third Party Logistics 3PL the outsourcing of logistics management o Potential Benefits take advantage of specialists knowledge their well developed information system and their ability to obtain more favorable shipping rates and enabling the company to focus more on its core business Reverse Logistics the backward flow of goods returned to the supply chain ex Defective unsold recycled o Closed Loop Supply Chain a manufacturer controls both the forward and reverse shipment of product o Gatekeeping screening returned goods to prevent incorrect acceptance of goods with the intent of reducing the cost of returns by screening returns at the point of entry into the system and refusing to accept goods that should not be returned or goods that are returned to the wrong destination are returned can involve product design quality assurance monitoring forecasts during promotional programs to avoid overestimating demand to minimize returns of unsold product Radio Frequency Identification RFID the use of tags that project o Avoidance finding ways to minimize the number of items that information via radio waves to track goods in the supply chain o The tag has an integrated circuit and an antenna that project information and other data to network connected RFID readers using radio waves o Provide unique identification enabling businesses to identify tack monitor or locate practically any object in the supply chain that is within range of a tag reader management improves quality control and enhances relationships with suppliers and customers o Eliminates the need for manual counting and bar code scanning of goods at receiving docks which eliminates errors and speeds up the process o Increases supply chain visibility improves inventory Traffic Management overseeing the shipment of incoming and outgoing goods includes handling schedules and decisions on shipping method and times taking into account costs of various alternatives government regulations the needs of the organization relative to quantities and timing and external factors such as potential shipping delays or disruptions Order Fulfillment the processes involved in responding to customer orders involves order processing billing inventory management warehousing packing shipping and delivery Engineer to Order ETO products are designed and built according to customer specifications o Frequently used for large scale construction projects custom homebuilding home remodeling and for products made in job shops o Fulfillment time can be relatively lengthy because of the nature of the project as well as the presence of other jobs ahead of the new one still fairly long Make to Order MTO a standard product design is used but product of the final product is linked to the final customer s specifications o Used by aircraft manufacturers o Fulfillment time is generally less that with ETO fulfillment but Assemble to Order ATO products are assembled to customer specifications from a stock of standard and modular components o Used by computer manufacturers such as Dell o Fulfillment times are fairly short often a week or less Make to Stock MTS production is based on a forecast and products are sold to the customer from finished goods stock o Used in department stores and supermarkets o Order Fulfillment is immediate o E Commerce the use of electronic technology to facilitate business transactions for shipping Variation of MTS where there is a lag in fulfillment to allow Transportation of the product cost Modes of Transportation Transportation to and from facilities can represent as much as 25 Total transportation cost in the US is over 10 of GDP The importance of transportation has grown with increasing globalization of supply chains growth in e commerce and the associated home delivery of products and rising fuel prices o Air o Truck o Rail o Water containers shipped via water rail truck combinations For global trade intermodal transportation is dominant with Distribution Strategies Direct Shipment items are shipped directly from suppliers to retail Warehousing Items are stocked in warehouses distribution Cross docking warehouses function as shipping coordination stores centers and are shipped to stores as required points rather than inventory storage points and items are transferred between trucks so outbound trucks to retailers have products from multiple suppliers o Choice of transportation modes o Number and location of warehouses o Extent to which orders are aggregated over time before shipping Operations Management 13 Location and Layout Planning Why Make Location Decisions Key Decisions New company Expand markets Accommodate growth in demand Reduce costs Depletion of resources Mergers and acquisitions Location Decisions Can impact capacity and flexibility Are long term commitments Can impact investment requirements operating costs and Poor location decisions can result in excessive transportation costs revenues and operations a shortage of qualified labor loss of competitive advantage inadequate supplies of raw materials Location Options Expansion Add new locations while retaining existing ones Shut down at one location and move to another Do nothing Process for Making Location Decisions Decide on the criteria Identify the important factors Develop location alternatives o Identify a country o Identify a general region o Identify a small number of community alternatives o Identify site alternatives Evaluate and make selection Supply Chain Considerations Determining the number and location of suppliers production Centralized distribution generally yields scale economies and tighter Decentralized distribution tends to be more responsive to local facilities warehouses and distribution centers control than decentralized distribution needs Factors when Selecting a Country Government Labor Resources Financial incentives Market potential Cultural differences Safety Regional Factors Location of raw materials o Necessity o Perish ability o Transportation Costs o Competitive strategy o Perish ability Location of markets Cost and availability of labor Taxes Climate Geographic Information System GIS a computer based tool for collecting storing retrieving and displaying demographic data on maps Community Considerations Taxes and environmental regulations Enticements o Tax abatements o