SCMN 3720 Exam 2 Study Guide PDF

1. What are the four main areas of operations management in a distribution facility? - Process Management, Resource Management, Inventory Managment, Performance Management 2. What’s the definition and key aspects of Process Management in a distribution facility? - Process Managemen...

1. What are the four main areas of operations management in a distribution facility? - Process Management, Resource Management, Inventory Managment, Performance Management 2. What’s the definition and key aspects of Process Management in a distribution facility? - Process Management: ensures each process area has the space and resources needed to execute the defined process - Ensure product is in flowing area, identify opportunities for process improvement and additional efficiency, maintain and ensure safe working environment, ensure proper training of the workforce to ensure efficiency and inventory control, monitor and maintain MHE and product storage movement resources 3. What’s the definition of Resource Management in a distribution facility? - Resource Management: ensures the necessary workforce and MHE resources are available to support the forecasted volume and pick plan for a distribution facility 4. What are the four key types of planning in distribution facility Resource Management and their definitions? - 1. Workforce Planning: ensuring the operation has both permanent and temporary personnel needed to support the monthly forecasted volume for the organization - 2. Labor Planning: determining the necessary personnel by process area and by shift to fulfill daily order volume - 3. MHE Resource Planning: ensuring the required MHE is available for each shift and process area to support the planned order volume - 4. Pick/Wave Planning: the optimization of resources and prioritization of daily warehouse orders and tasks to ensure high levels of operational efficiency and on-time shipping. 5. What’s the definition of Inventory Management in a distribution facility? - Inventory Management: ensures the accuracy, allocation, and storage logic optimization of inventory within the facility 6. What are the four key areas of distribution facility Inventory Management and their definitions? - 1. Inventory Control: the audit of processes and storage locations for inventory accuracy. Includes reconciling system inventory data and identifying the root cause and corrective action for any discrepancies - 2. Cycle Counting: involves regularly auditing specific inventory locations for accurate quanitities of items. Most cycle counting strategies prioritze high demand items and locations daily and weekly but also ensure all storage locations are audited within a calendar year - 3. Inventory Allocation: ensures inventory is properly allocated and reserved to customer orders. - Set and maintain customer order priorities - Ensure FUFI by prioritizing order stock to prevent product expiration and ensure efficuent inventory rotation - Work with inventory planners to ensure high fill rates - 4. Inventory Storage logic optimization: continuously analyze storage and pick locations and methods of each item based on current demand. - ABC Analysis: perform ABC analysis on a regular basis to ensure current A items get placed in prime picking locations, while low-demand (C items) can be stored in less accessible areas. - SKU Slotting optimization: Update item slotting based on ABC analysis and current item packing dimensions 7. Why is Performance Management important and what three ways can it help distribution operations? - Performance Management: It’s critical to set KPIs to measure the success and needed improvements in a distribution operations - 3 Ways KPIs help distribution operations: - 1. Improve efficiency: KPIs can help businesses identify bottlenecks and optimize their processes - 2. Improve Customer satisfaction: KPIs can help businesses identify key areas that directly impact customer satisfaction - 3. Reduce Costs: KPIs can help business identify key areas that directly impact overall cost 8. What are the six key KPI measurement areas for a distribution facility and why do you need to measure each? - 1. Productivity: - Dock-to-stock cycle time: Time between the arrival of goods and when they are put away and available inventory - Lines received and put away per hour: Total lines received and put away divided by total hours - Lines picked and shipped per hour: Total lines picked and shipped divided by total hours - 2. Inventory Accuracy: - Accurate count by location: Total locations with correct quantities divided by total locations - 3. Workforce: - Part-time workforce to total workforce: Total number of part-time workforce divided by total workforce - Annual workforce turnover: Total number of workers separated divided by total workers - Percent cross trained: Total workers cross trained divided by total workers - 4. Service: - Order cycle time: Total days from order received to order delivered - Order fill rate: Orders filled divided by total orders - On-time delivery: Percent of orders delivered on time - On-time ready to ship: Percent of orders ready to ship within the planned timeframe - 5. Space Utilization: - Average warehouse capacity used: Average amount of warehouse capacity used over a specific interval, such as a monthly or yearly window. - Peak warehouse capacity used: Highest level of warehouse space utilization over a given period - 6. Costs: - Cost per order: Total costs to fulfill order divided by total orders 1. What is a warehouse management system? - Warehouse Managment System (WMS): A system used to effectively manage warehosue business processes and direct warehouse activities, including receiving, putaway, picking, shipping, and inventory cycle counts. (CSCMP) 2. What four key items are optimized by a WMS and how are the optimized? - 1. People: Labor planning and optimization - 2. Equipment: MHE resource utilization and optimization - 3. Inventory: Real-time visibility into inventory - 4. Space: Facility layout and slotting optimization 2. What is included in each level of WMS capability? - Level 1: Basic WMS Capabilities: Scanner based, Receiving, Inventory storage location, Picking, Shipping - Level 2: Intelligent Capabilities: Level 1 capabilities + Directed Putaway, Picking strategies (wave, batch, zone, etc.), Inventory serial/date/lot control, Cycle counting - Level 3: Advanced Capabilities: Levels 1 & 2 capabilities + Kitting task, Labor planning, Yard management, Slotting and layout optimization, Operational analytics 4. What are the benefits of a WMS? - 1. Improved Operational Efficiency: WMS systems automate and streamline warehouse processes from inbound receipts to outbound deliveries – for improved efficiency and provide ability to scale to higher volumes. - 2. Real-Time Inventory Visibility: Using barcoding, RFID tagging, sensors, or other location tracking methods, a WMS system gives you real-time insight into your inventory as it moves into your warehouse, around it, and on to the next location. - 3. Improved Labor Management: A WMS can help you forecast labor needs, create schedules, optimize travel time within a warehouse, and assign the right task to the right employee based on skill level, proximity, and other factors. - 4. Optimized Facilities: A WMS system can determine the most effective use of warehouse space, from inventory placement to optimal travel paths. Some systems offer advanced simulations to create floor plans and place pallets, shelves, and equipment in the best locations to run at peak efficiency and save time and money. - 5. Increased Customer Satisfaction: With a WMS, customers enjoy improved order fulfillment, faster deliveries, and fewer inaccuracies – which increases their satisfaction and loyalty and improves company brand reputation 5. Which system did Gartner pick as the top WMS available? - Manhattan Associates 6. What two main factors are driving more innovation and automation in distribution facilities and what makes up each? - 1. Increasing Price of warehouse space: - Scarcity of available industrial land: As cities become more and more densely populated, the supply of available industrial property for the construction of distribution facilities continues to decrease. - Growing demand for warehouse space: As the volume of online retail sales as a percent of total retail sales continues to grow, the demand for warehouse space is forecasted to increase at a similar rate. Distribution facilities are becoming more important than retail store fronts to serve customer. - Increased demand for last-mile warehouses: Demand continues to increase for facilities that are very close to consumers and able to provide same day deliveries - 2. Increased Price of labor: - Fewer warehouse workers: Department of Labor numbers suggest that there are now multiple warehouse jobs per applicant. - The hourly rate for warehouse staff has seen a sharp rise, averaging nearly $17 per hour in 2024 compared to $16 in 2023, which itself was up from $15 the previous year 7. What are examples of automation in each operational area of a distribution facility? - Recieving/Shipping: - Autonomous Guided Vehicle (AGV), Robot to conveyor, Automatic loading and unloading systems - Pallet & Case Movement: - AGV, De-palletizer, Conveyor, Bin shuttle, Pallet shuttle - Storage: - Bin Carousel, Automated Storage & Retrieval Systems (AS/RS) stacker cranes - Picking: - Conveyor to picker, AGV, Picking robot 1. What is the definition of a Carrier? - Carrier: A company that transports goods via land, sea, or air 2. What is the definition of a Shipper? - Shipper: The party that tenders or ships the goods for transportation 3. What is the definition of a Consignee? - Consignee: The party to whom goods are shipped and delivered. The receiver of a freight shipment - The shipper’s customer but could aslo be an intermediary stop 4. What is the definition of a Commodity as it relates to shipping? - Commodity: Any physical item that is traded (shipped) in commerce - The product being shipped 5. What is the difference between and order and shipment? - Order: A request for goods or services such as a purchase order, sales order, work order, etc. - Shipment: an amount of goods sent together to a place - Typically, a shipment is an order or set of orders sent from a shipper to a consignee - Can represent something as small as a box or as large as a ship full of goods 6. What is a Bill of Lading and what does information does it include? - Bill of Lading (BOL): Transportation document that is the contract of carriage containing the terms and conditions between the shipper and carrier. - BOL provides shipper, carrier, consignee, tracking #, freight terms, order # shipped, commodity shipped - BOL typically does not include price - A Bill of Lading (BOL) will have: One tracking number, with one shipment, with one or more orders, with one or more commodities - Shipment #: the specific number associated with a shipment or BOL for delivery tracking purposes - Also called the tracking number or pro number (LTL) 7. What key factors determine the mode selected for a shipment? - Shipment Size/Weight, Required Transit Time (Speed), Product Characteristics, Cost 8. How do the costs and speeds of each mode compare? - Air freight: $$$$, 3-5 days - Truck: $$$, 3-5 days - Rail: $$, 5-15 days - Maritime (Ocean): $, 30-45+ days 9. How does each mode compare in ton-miles of freight in U.S.? - Highest → Truck > Rail > Pipeline > Water > Air ← Lowest 10.What are the price and service characteristics of each mode? - Air: - Access: Limited - Speed Transit Time: Very Fast - Reliability: Very Consitent - Capability: Limited - Truck: - Access: Very Accessible - Speed Transit Time: Relatively fast - Reliability: Fairly Consistent - Capability: Good - Rail: - Access: Limited - Speed Transit Time: Slow - Reliability: Low - Capability: Good - Ocean: - Access: Very Limited - Speed Transit Time: Very Slow - Reliability: Very Low - Capability: Limited 1. What were some of the key events in the history of motor carriers? - 1896: First motorized truck built - 1900: Mack Trucks founded to manufacture delivery trucks - 1903: International Brotherhood of Teamsters (IBT) formed to improve conditions and pay for drivers - 1914: Initial trailer concept for Ford Model T - 1914: During WWI “Liberty Truck”, a standardized heavy-duty truck was produced - 1935: Motor Carrier Act Passed: authorized Interstate Commerce Commision (ICC) to regulate trucking industry - 1956: Federal-Aid Highway Act of 1956: authorized construction of US Interstae Highway System - 1980: Motor Carrier Act deregulated industry: made for carriers to reduce rates - 1995: ICC Termination Act of 1995: lifted most remaining federal motor carrier restrictions 2. What % of the total freight tonnage does the motor carrier industry represent? - 70% 3. What are the advantages (service characteristics) the motor carrier industry has over other transportation modes? - Accessibility: Door-to-door services - Speed: Quick delivery short distance - Carrying Capacity: Limited compared to other modes but able to minimize inventory levels with frequent deliveries - Loss and Damage: Relatively damage-free 4. What are the top 2 commodities hauled by trucks by weight and by value? - Top truck commodities by Weight: Gravel - Top truck commodities by Value: Mixed Freight 5. What are the shipment size weight breaks between parcel, LTL and TL? - Parcel: < 150 lbs - LTL: 150 - 10,000 lbs - TL: 10,000 - 45,000 lbs 6. What is the difference between for-hire and private carriers? - For-Hire Common Carriers: - Provides services to the public - Charge a fee for the service - Private Carriers: - Provide a service to the company that owns or leased the vehicles - They are a cost budget center to the company 7. Who are the top 3 private carrier fleets in the US? - 1. PepsiCo - 2. Walmart - 3. Sysco Corp. 8. Who are the top 2 for-hire carriers in the US? - 1. UPS - 2. FedEX 9. What is a CDL and what are the requirements to have one? - Commercial Drivers License (CDL) - Requirements may vary from state to state, but you must pass a written test, a road test, and a physical exam 10. What is an owner-operator? - Owner Operator: a truck driver who owns or leases their own truck (and usually trailer) and operates as a small business 11. Describe the market characteristics of the TL segment. - For Hire Truckload (TL) Carriers: provide service to shippers who tender sufficient volume to meet the minimum weights required for a truckload shipment - Typically more than 12 pallets of freight - Shipments typically 10,000 - 45,000 lbs - TL - Monopolistic competition: a large number of relatively small firms with relative freedom of entry and exit due to limited capital requirement - TL sector has strong competition with private carriers 12. Describe the market characteristics of the LTL segment. - For Hire Less than Truckload (LTL) Carriers: provide service to shippers who tender shipments lower than the minimum truckload quantities - Typically, palletized freight 150 - 10,000 lbs total - LTL - Oligopolistic competition: A small number of relatively large firms with some degree of capital constraint for entry - LTL: Significant investment in a network of terminals - Special equipment carriers: larger investments in equipment and terminals than general freight - Large, national LTL carriers: significant capital investment for scale and geographic scope of operations 13. Who are the top 3 LTL and TL carriers in the US? - Top 3 LTL Carriers - 1. FedEx Freight - 2. XPO - 3. Old Dominion - Top 3 TL Carriers - 1. Knight-Swift - 2. Schneider - Landstar 14. What are the Federal weight limits on total gross vehicle weight? - 80,000 lbs 15. What are the different Motor Carrier Equipment Vehicles? - Line Haul - Used to haul freight long distances between cities - Usually a tractor-trailer combination of three or more axles - The cargo-carrying capacity of line-haul vehicles is determined by: - Size (length) - Federal/state maximum weight limits (typically 45,000 lbs in 53ft TL trailer) - City (Straight) - Used within a city to provide nimble pickup and delivery service - Smaller than line-haul vehicles and are single units 1. What drives transportation pricing across the modes? - The different service characteristics drive price across the modes 2. What service characteristic is the major driver of price across modes? - Speed 3. What primarily drives transportation pricing within the mode? - Capacity & Shipping Volume - 1. Capability (Supply) - Number of Drivers,. Tractors, Trailers/Containers, Cargo Ships, Cargo Aircraft - 2. Shipping Volume (Demand) - Driven by shipping demand 4. What are the two largest costs for carriers and private fleets? - Driver Wages & Fuel 5. What is an Operating Ratio and what are normal levels for LTL and TL? - Operating Ratio: is a measure of operating efficiency and a benchmark of financial viability - Measures the percent of operating expensed to operating revenue - An OR of 93 indicates that 93 cents of every operating revenue dollar is consumed by operating expenses, leaving 7 cents of every operating dollar to cover interest costs and return to owners - (Operating expenses / operating revenue) x 100 - LTL normal levels: between 93 and 96 - TL normal levels: high 80s to low 90s 6. What is differential pricing and what are the four types? - Differential pricing: can be done based on several methods of segregating the buyers into distinct groups. - 1. Time: seasonal - 2. Individual person: you don’t know what your peer pays - 3. Place: you don’t know what your peer in another city pays - 4. Commodity: you don’t know what your peer pays in another industry 7. What can shippers use as the most effective way to gather freight market intelligence to combat a carrier's use of differential pricing? - Shipper Consortiums - A subscription- based service where shippers participate by providing transaction-level data on a defined cadence, ranging from weekly to annually. - Shippers pay a fee and provide their own rates and costs, which are then added and shared anonymously with other members 8. What commodity classification factors are used to determine the rating of a specific commodity? - Product Density: directly impacts the use of carrier’s trailer CAPCITY and the cost per hundredweight - Stowability and Handling: reflects the cost the carrier will incur in securing and handling the product in the vehicle - Liability: Considers the value of the product and susceptibility to damage 9. What three things are custom contracted rates based on? - 1. Shipper’s Origin & Destinations - 2. Type of Product (Commodity) Shipped - 3. Volume Demand by Lane (Origin/Destination) 10. How is fuel typically handled in freight rates? - Fuel charges are usually an add-on to the contracted rated tied to a published Department of Energy (DOE) diesel fuel index 11. Describe some examples of custom contracted rates for TL & LTL. - TL custom contracted rates: - Truckload – Point-to-Point Flat Rate by lane (origin/destination) - Truckload Per-Mile Rates - Typically by lane (origin/destination) - LTL Custom contracted rates: - LTL rates could be a discount on published (CZAR LITE) tariff rates - LTL cost per pound – Typically by lane 12. What is a spot rate, when are they used, and how are they different than contracted rates? - Spot Rate: on-demand, transactional rates for a shipper to move freight right now (or with a very short lead time) from a specific origin and destination - They are one-time in nature and are the rates quoted to the shipper from the carrier or the broker. - Usually the freight being moved in the spot market is from shippers with inconsistent shipping patterns (i.e. lumpy, nonlinear or non-forecastable demand) or on inconsistent lanes - Contract Rates: set rates for a period of time (1-3 years) and make sense for both carriers and shippers when freight is consistent and travels on regular lanes - Contract rates are negotiated in a bidding process based on an estimated shipping volume for a period of time. - Contract rates are customized between a shipper and a carrier (or a broker) for a specific origin and destination 13. Why would a truckload rate be less expensive for the same distance traveling in the opposite direction between two markets? - Price for the same distant varies greatly because of the low backhaul demand. - On the backhaul, carriers are just hoping to cover costs because they typically go back empty with nothing 1. What is the weight limit for a parcel shipment? - Parcel Shipment Weght: < 150 lbs 2. Outside of the USPS, which companies have historically been the top two parcel carriers in the US? - FedEX and UPS 3. What service was at the foundation of the growth of the parcel industry? - Charging a premium for guaranteed 1 day and 2 day delivery service - companies needed something they could depend on! 4. How are rates typically quoted by parcel carriers? - Weight of shipment (at 1lb increments) - Weight rounds up to next highest pound - Destination Zone 5. What are the typical transit services offered by the parcel carries? - Air Services: ($$$$) guaranteed on-time delivery service - Same day (very expensive) - 1 Day (Early AM, Mid-morning, End of day) - 2 Day (Early AM, End of Day) - 3 Day - Ground: ($$$) 3-5 day delivery service from origin - Parcel Post: ($) Not guaranteed 3-9 day service from origin. Given to USPS for final delivery 6. What weight increments are used in parcel rates and how are charges determined? - Weight Increments: 1 pound (1-5lbs) - The Higher zone number and weight, the higher the price 7. What type of charges are typically used by parcel carriers to recover margin? Give Examples. - Surcharges: Fuel Surcharge, Residential delivery surcharge, peak/pandemic surcharge, delivery area surcharge - extended zip codes, oversized/DIM charges for odd-sized or underweight cartons, Third-party billing fee - if your 3PL vendor ships on your account 8. What percentage of all retail sales is online? - Over 16% 9. How much is US parcel volume predicted to grow from 2019 to 2028? - Nearly double, 2X 10. Describe the recent growth of Amazon Logistics and its impact on the parcel industry. - Amazon now delivers more packages in the US than FedEx and UPS, Amazon Air has about 100 aircraft 11. What are regional parcel carriers and how are they different than UPS and FedEx? - Regional Parcel Carriers: have no national hub and spoke network – induction must be planned by shippers - Operate within a specific area such as city, state, or region 12. What are the current post-pandemic parcel carrier issues? - FedEX earrings fall as package shipments decline, UPS cut jobs ad wages rise and package volumes fall 13. What are the current post-pandemic parcel shipper issues? - Rates are historically high, Can UPS be trusted now after firing and limiting customer shipping volumes, FedEx and USPS on-time delivery has not been great 1. Describe the early history of the railroad industry. - 1797: Steam locomotive invented - 1827: 1st Railroad in North American chartered by merchants - 1830: 1st scheduled steam powered rail passenger service begins operation - 1831: U.S. mail is carried on the rail for the first time - 1851: First refrigerated rail car begins service - 1862: Pacific Railway Act: authorized transcontinental railroad - 1865: Golden Age begins: rail network grows - 1869: Transcontinental railroad complete - 1917: Government seized control of railroads for WWI - 1936: Intermodal is born, railroad moves truck trailers - 1970: 9 railroads file for bankruptcy - 1980: Staggers Rail Act: reduces ICC regulations - 1996: ICC is replaced by Surface Transportation Board 2. What was the impact of the 1980 Staggers Rail Act? - Rail rates have declined 3. What are the attributes that limit Rail’s market share? - 1. Limited Accessibility: Rail cannot pick up and deliver at any dock. Additional effort is required to use. - 2. Markets Served: Rail doesn’t serve every market - 3. Speed/Transit Time: transit times have not been dependable historically. (can vary +/- 3 to 5 days) 4. What central aspect around infrastructure is different for the rail industry compared to other modes? - Rail Requires private investment - Railroad owners invest one of the highest percentages of revenues (19%) to maintain and add capacity to their system, spending nearly $25 billion annually 5. How many Class I railroad companies are there today and what are the two largest? - Total Class 1 railroad companies: 6 - Largest Class 1 railroad companies: Union Pacific, BNSF 6. What % of total railroad revenue do the Class I railroads represent? - 19% 7. What type of commodities do RR’s primarily transport and what segment is currently the largest? - Coal (largest), grain, metallic ores, food products, sand, chemicals, paper, metal parts, etc. 8. How far can a single gallon of diesel take a ton of freight by rail? - 480 Miles 9. What type of economic structure best describes RR’s and why? - Differentiated Oligopoly - There are a small number of very large railroads - Few market areas are served by multiple railroads 10. What are the constraints and strengths of railroad freight? - Rail Strengths: - Very cost effective for longer distances - Large carrying capacity (few size or weight constraints) - Fuel efficient/environmentally friendly - Capable of handling almost any type of cargo - Railroads assume liability for loss & damage - Rail Constraints: - Fixed rights-of-way impede door-to-door service - Through service prone to delays in delivery 11. How many truckloads of freight can be hauled in one railcar? - 3 to 4