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Coyle 9e ch 11 rev.ppt
1.
Chapter 11 DISTRIBUTION: Managing Fulfillment Operations
2.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. After reading this chapter, you should be able to do the following: Learning Objectives ● Study the strategic value-adding role distribution plays in the supply chain. ● Appreciate the tradeoffs between distribution and other supply chain functions. ● Understand the analytical framework for distribution planning decisions. ● Evaluate fulfillment strategies and distribution methods. 2
3.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Study the primary fulfillment processes and support functions in distribution center (DC) operations. ● Apply productivity and quality metrics to fulfillment performance analysis. ● Appreciate how information technology supports distribution operations. ● Study the objectives, principles, and equipment for materials-handling 3 Learning Objectives, continued
4.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Balance supply and demand. ● Protect against uncertainty. ● Allow quantity purchase discounts. ● Support production requirements. ● Promote transportation economies. The Role of Distribution Operations in SCM
5.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Distribution Facility Functionality • Acquisition • Storage (accumulation) • Assortment • Allocation • Disbursement ● Distribution Tradeoff decisions • Inventory cost at DC vs. transportation cost • Inventory level vs. customer service level • Space vs. equipment vs. people 5 The Role of Distribution Operations in SCM, continued
6.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 11.1 The DC’s Accumulation Role 6 Source: Brian J. Gibson, Ph.D.
7.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 11.2 DC’s Mixing (Assortation) Capability 7 Source: Brian J. Gibson, Ph.D.
8.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Table 11.1 Value Adding Role of Distribution Operations 8 Source: Brian J. Gibson, Ph.D.
9.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 11.3 Functional Tradeoffs 9 Source: Brian J. Gibson, Ph.D.
10.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 11.4 Strategic Distribution Decisions 10 Source: Brian J. Gibson, Ph.D.
11.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Capability requirements • Product characteristics e.g., product value, durability, temperature sensitivity, obsolescence, and volume must drive the design of the distribution process. • Two options for product flow: ○ Direct shipment of goods from the manufacturer to retailer from the retailer to consumer ○ Movement of goods through distribution facilities to customers • Must analyze the inventory, transportation, and service trade offs before choosing between direct shipping and the use of distribution facilities. Distribution Planning and Strategy
12.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Network Design Issues • Inventory positioning ○ Inventory is in a single location ○ Inventory is in multiple locations • The number and locations of distribution facilities within the supply chain, based on factors below: ○ Transportation costs ○ Cost of lost sales ○ Warehousing costs ○ Inventory costs • DC ownership (owned or contract?) ○ Internal facilities owned by the organization ○ External warehousing (owned by a third party; a traditional approach) ○ Contract warehousing (a customized version of external warehousing) 12 Distribution Planning and Strategy, continued
13.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Facility Considerations • the size of warehouse operation • Products to be warehoused in the facility • Warehouse layout. ○ Space for load and unload ○ An area for rework and returns ○ Space for other and miscellaneous requirements (such as sortation and packaging) ○ Office space for administrative and clerical activities 13 Distribution Planning and Strategy, continued
14.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 11.6 Distribution Cost Tradeoffs 14 Source: Edward J. Bardi, Ph.D.
15.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 11.7 Distribution Cost Comparison 15 Source: Edward J. Bardi, Ph.D.
16.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Table 11.2 Factors Affecting Distribution Facility Ownership 16 Source: Brian J. Gibson, Ph.D.
17.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Table 11.3 Facility Layout Principles 17 Source: Brian J. Gibson, Ph.D.
18.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Product-Handling Functions • Receiving – transferring goods into facility • Put away – moving goods into storage locations • Order picking – selecting goods for customers • Replenishment – moving product from storage locations to picking slots • Shipping – loading goods for delivery ● Support Functions • Inventory control • Safety, maintenance, and sanitation • Security • Performance analysis • Information technology Distribution Execution
19.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 11.8 Primary DC Processes 19 Source: Brian J. Gibson, Ph.D.
20.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Table 11.4 Best Practices in Order Picking 20 Source: Adapted from The Journey to Warehousing Excellence, (Tompkins Associates) Section 2
21.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Measures of Customer Service • Order accuracy and order completeness ○ Customers want to receive the exact products and quantities that they ordered, not substitute items, incorrectly shipped items, or wrong quantities ○ Timeliness is a critical component of customer service ○ Perfect order index (POI) Delivered to the right place at the right time in defect-free condition with the correct documentation, pricing, and invoicing Distribution Metrics
22.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Internal Measures • Distribution cost efficiency • Aggregate cost efficiency ○ Total distribution spending versus goal or budget • Asset utilization • Resource productivity ○ Distribution costs averaging nearly 10 percent of a sales dollar • Resource efficiency 22 Distribution Metrics, continued
23.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Table 11.5 DC Metrics and Benchmarks 23 Source: Manrodt, Tillman, and Vitasek, “A Bright Side to Dark Times”, DC Velocity (April 2010) 42-44
24.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Warehouse Management Systems • Software control system that improves product movement and storage operations • Value-added capabilities ○ Generate performance reports ○ Support paperless processes ○ Enable integration of materials handling equipment ○ Picking systems ○ Sorting systems ○ Leverage wireless communication Distribution Technology
25.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Automatic Identification Tools • Technologies helping machines identify objects. ○ Magnetic strips and readers ○ Barcodes and scanners ○ Mobile computers & wireless local area networks (LAN) ○ RFID and transponders 25 Distribution Technology, continued
26.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Summary ● Distribution operations perform inventory handling, storage, and processing activities to create time and place utility for the supply chain. ● A variety of supply chain challenges—balancing supply and demand, protecting against uncertainty, and promoting transportation economies, among others—can be addressed by distribution facilities. ● Four primary functions that are carried out by traditional distribution facilities: (1) accumulation, (2) sortation, (3) allocation, and (4) assortment. ● Distribution operations are taking on value-adding roles—assembly, kitting, product postponement, sequencing, etc.—to complement their basic functionality and to support evolving supply chain needs. 26
27.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Tradeoffs must be made between space, equipment, and people—the primary resources available to distribution managers. ● It is critical to match distribution processes to the items being handled to protect product integrity, promote customer service and satisfaction, and provide greater control of the inventory. ● Distribution network design issues involve centralization/decentralization of inventory, the number and location of facilities, and facility ownership. ● Effective facility planning—operational size, layout, and product placement—positively impacts labor productivity and response time. 27 Summary, continued
28.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Distribution execution involves five primary processes related to the handling and storage of product: (1) receiving, (2) put-away, (3) order picking, (4) replenishment, and (5) shipping. ● Fulfillment support functions provide coordination between key processes and across the supply chain, protect the organization’s inventory investment, and improve working conditions within the facility. ● Distribution KPIs address asset utilization, labor productivity, and cost efficiency of the operation, as well as customer service quality issues and the ultimate goal of perfect order fulfillment. 28 Summary, continued
29.
©2013 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Warehouse management systems software solutions improve product movement and storage operations through efficient management of information and completion of distribution tasks. ● Barcodes and RFID are the automatic identification tools of choice in distribution to help track, locate, and move product quickly—with near-perfect accuracy rates to their consumers. 29 Summary, continued
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