TOOLS AND TECHNIQUES
There are a number of different tools and techniques that
can be used to help with logistics process redesign. These range from ones that
provide assistance with the initial categorization of key process objectives to
those that offer a detailed assessment of the processes themselves and thus can
be used to identify opportunities for improvement. Some of these techniques
have been adopted in manufacturing under the umbrella known as 'Six Sigma' (see
Chapter 10). Some of the main alternatives are:
• Pareto analysis. Sometimes known as the 80/20 rule, this
is a crucial method used in logistics for identifying the major elements of any
business or operation. By identifying these main elements it is possible to
ensure that, for analytical purposes, any assessment is based specifically on
the key aspects and is not taken up with the peripheral detail.
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In this example, which is common to most companies, 20 per
cent of the product lines or SKUs (stock keeping units) are responsible for 80
per cent of the sales in value of the company's products. This type of
relationship holds true for many relationships in logistics and distribution –
the most important customers, the most important suppliers, etc. Thus, it is possible
to identify a limited number of key elements that are representative of the
main business and to concentrate any major analysis on this important 20 per
cent. Another useful result of Pareto analysis is to identify the items
(customers, products or whatever) that make up the final 50 per cent of the
'tail' of the curve. These are often uneconomic to the company and should be
considered for rationalization or elimination.
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'A' class products represent 20 per cent of the range of
products, but account for 80 per cent of sales, 'B' class products represent 30
per cent of the range of products, but account for 15 per cent of sales, and
'C' class products represent 50 per cent of the range of products, but account
for just 5 per cent of sales.
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• Market or customer segmentation. One of the main
objectives of the design of suitable logistics processes is to ensure that they
are 'customer-facing' and to align them in such a way that all customers' needs
are met. Clearly, not all customers are the same and therefore not all customer
requirements are the same. It is important to be able to identify different
types of customers and different types of market and to adopt the appropriate
service requirements to take account of these differences.
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• Customer service studies. a customer service study should
be used as the basis for identifying key service requirements on which to
design suitable logistics processes.
• Relationship mapping. This is used at an early stage of
logistics process design to identify the main departments within a company (or
across the broader supply chain if this is possible) that are specifically
involved in a particular process. As well as identifying these key departments,
so that they can be brought into the design process, this will help to pinpoint
the major relationships and will highlight the complexity within any particular
process, thus indicating its need for redesign.
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• Process charts. These can be represented in a variety of
different guises, whether by straightforward flowcharts or by a matrix. The
flowchart approach can be based on traditional flowcharting techniques. This is
useful because standard shapes are used to represent different types of
activity (storage, movement, action, etc), and the importance of flows can be
highlighted in terms of the number of movements along a flow. The matrix chart
provides a more systematic way of representation and can be beneficial where
time is to be represented.
• Value/time analysis. This type of analysis can be used to
identify where in a process value is actually added to the product. The aim is
to highlight those parts of the operation that provide a cost but add no value.
Traditionally, for most manufactured products, value is added when a process
changes the nature of the product (such as production, which alters the
physical attributes, or transport, which alters the physical location).
•Time-based process mapping. This is another method of
identifying and eliminating wasted time in a process. The idea is to understand
and record a process in detail and to be able to identify what is active or
useful time and what is wasted time. The output from such an exercise is the opportunity
to engineer the wasted time out of the process so that service is improved and
cost is reduced through a reduction in the overall time taken to complete the
process.
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THE ROLE OF
DISTRIBUTION CENTRES AND WAREHOUSES
There are a number of reasons why DCs and warehouses are
required. These vary in importance depending on the nature of a company's
business. In general, the main reasons are:
•To hold the inventory that is produced from long production
runs. Long production runs reduce production costs by minimizing the time spent
for machine set-up and changeover, enabling 'lean' manufacturing.
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•To hold inventory and decouple demand requirements from
production capabilities.This helps to smooth the flow of products in the supply
chain and assists in operational efficiency, enabling an 'agile' response to
customer demands.Note that many supply chains have strategic inventory located
at several different points, whereas this buffer only needs to be held at what
is known as the decoupling point: the point at which discrete product orders
are received.
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•To hold inventory to enable large seasonal demands to be
catered for more economically. To hold inventory to help provide good customer
service. To enable cost trade-offs with the transport system by allowing full
vehicle loads to be used. To facilitate order assembly
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it should be noted that there are a number of different
types of DC, each of which might be considered in the planning of a suitable
physical distribution structure. These might include:
•finished goods DCs/warehouses — these hold the stock from
factories;
•distribution centres, which might be central, regional
(RDC), national (NDC) or local DCs— all of these will hold stock to a greater
or lesser extent;
•trans-shipment sites or stockless, transit or cross-docking
DCs — by and large,these do not hold stock, but act as intermediate points in
the distributionoperation for the transfer of goods and picked orders to
customers;
•seasonal stock-holding sites;
•overflow sites.
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