Questions and Answers
What is the largest category of spending within logistics costs in the U.S. today?
Which of the following are key warehouse activities?
What must a company determine before developing its fulfillment model?
How does total landed costs impact a company's market reach?
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What are the two main components of logistic activities?
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Which aspect primarily revolutionized inventory management?
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What are the key cost trade-offs with packaging?
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What is meant by economies of scale in logistics?
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What is the goal of a distribution facility's overall layout?
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What does slotting determine in warehouse management?
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Why are aisle widths important in warehouse design?
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What are the benefits of proper product slotting?
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What are the 3 steps to finalizing the detail facility design?
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What defines a perfect order fulfillment?
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How is average inventory determined?
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What do high inventory turns indicate about a company?
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What primarily distinguishes a distribution center from a warehouse?
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Which of the following is a key function of a distribution center?
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How does the postponement strategy impact inventory management?
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Which product storage method is typically the most cost-effective but provides less storage density?
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What determines the choice of material handling equipment (MHE) in a facility?
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What is the primary reason for using sophisticated product storage systems?
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Which method is least likely to be used for products that require temperature control?
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What primarily influences the design of a distribution facility?
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Study Notes
The Role of Logistics in Supply Chains
- Supply Chain Management (SCM) encompasses the oversight of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer.
- Logistics refers to the planning, implementation, and control of the efficient movement and storage of goods, services, and related information.
- Logistics ensures that the right product reaches the right place at the right time, in the right condition, and at the right cost.
- The Seven Rights of Logistics include: right product, right quantity, right condition, right place, right time, right cost, and right customer.
- The term "Logistics" traces its origins to the Greek word "logistiki," representing the art of calculation, primarily associated with the movement of troops.
- Logistics is essential for efficient supply chains, impacting customer satisfaction, cost reduction, and operational effectiveness.
- In the U.S., logistics costs account for about 8-10% of GDP, which is comparatively lower than several developed nations.
- Transportation costs represent the largest category of logistics spending in the U.S. today.
- Logistics costs in the U.S. are trending upwards due to increases in fuel prices, labor costs, and demand fluctuations, influencing overall supply chain strategies.
- Logistics roles include inventory management, order fulfillment, transportation management, and customer service support.
- Economies of scale refer to the cost advantages companies gain as they increase production; larger volumes typically reduce per-unit costs.
- Total landed costs include all costs associated with bringing a product to market, including production, transportation, customs, and tariffs.
- Total landed costs directly affect a company’s ability to expand market reach by influencing pricing and competitiveness.
Logistics Activities & Fulfillment Models
- The two main components of logistics activities are transportation management and warehouse management.
- Key warehouse activities include:
- Storage of Inventory: Holding products until needed for sale or distribution.
- Inventory Management: Tracking inventory levels, orders, and deliveries to avoid stockouts and overstock.
- Material Handling: Movement of goods within the warehouse, using equipment like forklifts and conveyor belts.
- Packaging: Designing and creating packages that protect products during transport and appeal to consumers.
- Value Added Activities: Additional services such as assembly, labeling, and customization that enhance product value.
- Returns Management: Handling of returned products, from reverse logistics to restocking.
- Transportation: Movement of goods between locations, crucial for meeting delivery timelines.
- Transportation in logistics involves selecting the right mode of transport (e.g., truck, rail, air) for efficiency and cost-effectiveness.
- Cost trade-offs between inventory and transportation involve balancing storage costs with timely deliveries; too much inventory increases holding costs, while frequent shipments can raise transport costs.
- The introduction of the barcode revolutionized inventory management by increasing accuracy and speeding up tracking processes.
- Cost trade-offs with packaging include balancing materials and design costs against the potential for damage during transport.
- E-commerce retail has a return rate of about 20-30%, significantly impacting logistics strategies.
- The order fulfillment process encompasses receiving, processing, picking, packing, and shipping customer orders.
- Before developing a fulfillment model, a company must determine the type of products it sells and its customer service strategy.
- The four key drivers in determining a company's fulfillment model are customer needs, service levels, operational costs, and inventory management.
- Various fulfillment models include direct shipping, drop shipping, and multiple distribution centers, each having unique characteristics based on inventory handling and delivery speed.
- Starting a company's Logistics Network Model analysis requires determining the service level required and the geographical areas served.
- Key cost trade-offs in determining a network model involve inventory costs, transportation costs, service levels, and facility operating costs.
Distribution Facilities
- The goal of a distribution facility is to efficiently manage the storage and movement of goods to ensure timely delivery to customers.
- Since 1950, distribution facilities have transformed significantly, emphasizing automation, inventory management technology, and efficiency enhancements.
- Different types of distribution facilities include warehouses, distribution centers, fulfillment centers, cross-docking facilities, and manufacturing plants.
- A warehouse primarily focuses on storage, while a distribution center emphasizes rapid processing and throughput of goods.
- The five primary functions of a distribution center are:
- Receiving goods and verifying against purchase orders.
- Storing inventory in an organized way for quick access.
- Picking items for orders based on customer requests.
- Packing selected items for shipment.
- Shipping products to customers or retail locations.
- Postponement as an inventory strategy involves delaying final product customization until orders are received, reducing inventory costs and risks.
- Examples of value-added activities include kitting, custom labeling, and repackaging for specific customer promotions.
- The type of storage facility used is determined by factors such as product types, order volumes, and service levels required.
- Products requiring temperature-controlled environments include pharmaceuticals, perishable food items, and certain chemicals.
Product Storage & Material Handling
- Companies use product storage systems to optimize space utilization, manage inventory flow, and improve order accuracy.
- The type of storage methods used in a Distribution Facility is influenced by product characteristics, volume, turnover rates, and handling requirements.
- Indoor dry goods product storage methods include shelving, pallet rack systems, bulk storage, and drive-in storage methods.
- The most common product storage method is pallet racking, which allows for efficient use of space and access to inventory.
- LIFO (Last In, First Out) and FIFO (First In, First Out) are order picking methods impacting inventory management; FIFO helps reduce spoilage for perishable goods.
- Product storage density is measured by the amount of inventory stored relative to the space utilized.
- The least expensive product storage method typically involves floor storage or bulk stacking with low density.
- The most expensive and highest storage density method is automated storage and retrieval systems (AS/RS).
- The order picking method impacts storage methods by influencing layout design, accessibility of products, and overall efficiency.
- Basic pallet storage and picking methods involve placing pallets directly on the warehouse floor or using a rack system.
- Material Handling Equipment (MHE) options include forklifts, pallet jacks, conveyor systems, and Automated Guided Vehicles (AGVs).
- The most common MHE is the forklift, widely used for moving heavy pallets and crates efficiently.
- Material handling equipment utilization depends on facility layout, product types, and volume of goods handled.
- CVS' focus on bulk items at a dedicated facility maximizes efficiencies in inventory turnover and reduces handling costs.
Facility Layout & Design Part 1
- The four steps to Distribution Facility Design include needs analysis, conceptual design, detailed design, and implementation.
- Key criteria in space requirements planning consist of throughput volume, inventory types, operational flow, and future scalability.
- The peak-to-average storage ratio is a measure of maximum storage potential compared to typical inventory levels, indicating efficiency.
- Planned occupancy is vital to ensure effective use of space, maximizing operational efficiency and minimizing wasted resources.
- Inventory turns reflect how often inventory is sold and replaced over a specific period; it is calculated as Cost of Goods Sold (COGS) divided by average inventory.
- A high inventory turn suggests efficient inventory management and sales performance, enabling lower holding costs.
- Average inventory is determined by taking the sum of inventory levels at specific intervals and dividing by the number of intervals.
- A standard pallet typically measures 48” x 40”, with variations for specific applications.
- Understanding SKU capacities on a standard full pallet helps optimize storage designs and improve order fulfillment efficiency.
- Advantages of newly built facilities include modern design and customization; disadvantages include higher initial costs. Repurposed facilities may have lower costs but can require significant upgrades.
- Current warehouse vacancy rates are trending down due to increased e-commerce demand, driving up competition for space.
Facility Layout & Design Part 2
- The overall layout goal of a distribution facility is to enhance productivity and minimize operating costs through efficient design.
- Facility layout principles include workflow optimization, flexibility, spatial efficiency, and safety, providing benefits like reduced travel time and improved resource utilization.
- Frazelle's Layout Methodology encompasses four steps: defining objectives, assessing existing conditions, developing layout options, and selecting the final design.
- Adjacency Optimization in facility design refers to arranging areas in a way that minimizes travel distances and enhances workflow.
- The three steps to finalizing detail facility design involve detailed planning, stakeholder approval, and implementation phases.
- Slotting is the process of strategically placing products in a warehouse based on factors like demand and size to improve picking efficiency.
- Slotting determines the optimal arrangement of products for quick access and reduced handling time during order fulfillment.
- Benefits of proper product slotting include increased picking efficiency, better inventory accuracy, and reduced labor costs.
- Aisle widths are crucial for operational efficiency, allowing sufficient space for equipment movement and quick access to products.
- Cost trade-offs in narrow aisle designs involve balancing space utilization with accessibility and equipment maneuverability.
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Description
Prepare for your SCMN 3720 Transportation Exam 1 with this comprehensive study guide. It covers essential topics like supply chain management, logistics principles, the significance of logistics in the supply chain, and associated costs. Review key concepts and terminology to excel in your exam.
