12. What are the six major steps that are recommended for a logistics network design process?

Figure identifies six major steps associated with the process of Logistics Network Design.

Step 1: Define the Logistics Network design Process

• Form a design team

  • Establish design parameters and objectives

  • Establish availability of resources and potential involvement of 3PLs.

Step 2: Perform a Logistics Audit

• Forces a comprehensive perspective

• Develops essential information

Step 3: Examine the Logistics Network Alternatives

• Use modeling to provide additional insights

• Develop preliminary designs

• Test model for sensitivity to key variables

Step 4: Conduct a Facility Location Analysis

• Analyze attributes of candidate sites

• Apply screening to reduce alternative sites

Step 5: Make Decisions regarding Network and Facility Location

• Evaluate sites for consistency with design criteria.

• Confirm types of change needed

Step 6: Develop an Implementation Plan

• Plan serves as a road map in moving from current system to the desired logistics network.

• Firm must commit funds to implement the changes recommended by the re-engineering process.

13. Describe the four main scenarios which occur in the event of a stockout?

A stockout occurs when desired quantities of finished goods are nto available when or where a customer needs them. When a seller is unable to satisfy demand with available inventory, one of four possible events may occur:

(1) the buyer waits until the product is available;

(2) the buyer back-orders the product;

(3) the seller loses current revenue;

(4) the seller loses a buyer and future revenue.

From the perspective of most organizations, these four outcomes are ranked from best to worst in terms of desirability and cost impact. Theoretically, scenario 1 (customer waits) should cost nothing; this situation is more likely to occur where product substitutability is very low. Scenario 2 would increase the seller’s variable costs. Scenario 3 would result in the buyer cancelling a portion of or the entire order, thus negatively impacting the current revenue of the seller. Scenario 4 is the worst situation for the seller and the most difficult to calculate because it results in the loss of future revenue from the buyer.

14. Explain the productivity objective to be achieved through warehouse layout and design?

Warehouse layout and design

Productivity is the ratio of real output to real input. Effective warehouse layout and design is a way to improve a company’s productivity. It can cut down on the input (how much money we spend on managing a warehouse) and increase the output (how much stock is stored for example).

Principles of planning warehouse layout:

- The larger the item, the less you want to handle and move it. It’s all right to move smaller parts that require less labor, but if you have large items, you don’t want to have multiple handling of them.

- The shortest path, the shortest travel distance, thus the lowest labor and equipment to move things from one point to the other. That’s the reason for applying the basic concept: the fastest moving goods to be stored closest to the door because that limits the amount of time to take out and put away inventory and ship it back out again.

- Smallest space – the smaller the space that you can put the inventory into, by definition, the less the travel distance will be.

- Less handling – less labour – the less times you have to move an items – the less handling, the less labour, the less cost. But as soon as you start having less handling, less labour, less cost, you start having larger storage spaces and therefore you violated the previous rule which had to do with smaller space, shorter travel. So you have to balance between these multiple principles.

- Stock groupings – a number of items that are similar are put into a single area.

- Balancing activities – if you have multiple activities like shipping, picking, receiving, packing you need to balance the time requirements of each of those activities so that you reduce the amount of time spent on each activity. It’s common to have the division of labour in a warehouse when picking, packing, shipping are made by separate people. In this case there are fewer interruptions and less set up time but greater travel time in between the operations.