Logistics & Scm Essay
Logistics & Scm
1. Materials Requirement Planning
Material Requirements Planning (MRP) is a computer-based production planning and inventorycontrol system. MRP is concerned with both production scheduling and inventory control. It isa material control system that attempts to keep adequate inventory levels to assure that requiredmaterials are available when needed. MRP is applicable in situations of multiple items with complexbills of materials. MRP is not useful for job shops or for continuous processes that are tightly linked. The major objectives of an MRP system are to simultaneously: 1. Ensure the availability of materials, components, and products for planned production and for customer delivery 2. Maintain the lowest possible level of inventory,
3. Plan manufacturing activities, delivery schedules, and purchasing activities. MRP is especially suited to manufacturing settings where the demand of many of the componentsand subassemblies depend on the demands of items that face external demands. Demand for enditems are independent. In contrast, demand for components used to manufacture end items dependon the demands for the end items. The distinctions between independent and dependent demandsare important in classifying inventory items and in developing systems to manage items within eachdemand classiﬁcation. MRP systems were developed to cope better with dependent demand items.The three major inputs of an MRP system are the master production schedule, the productstructure records, and the inventory status records. Without these basic inputs the MRP systemcannot function.
MRP is especially suited to manufacturing settings where the demand of many of the components and subassemblies depend on the demands of items that face external demands. Demand for enditems are independent. In contrast, demand for components used to manufacture end items dependon the demands for the end items. The distinctions between independent and dependent demandsare important in classifying inventory items and in developing systems to manage items within eachdemand classiﬁcation. MRP systems were developed to cope better with dependent demand items.
The three major inputs of an MRP system are the master production schedule, the product structure records, and the inventory status records. Without these basic inputs the MRP systemcannot function.The demand for end items is scheduled over a number of time periods and recorded on a masterproduction schedule (MPS). The master production schedule expresses how much of each item iswanted and when it is wanted. The MPS is developed from forecasts and ﬁrm customer orders forend items, safety stock requirements, and internal orders.
MRP takes the master schedule for enditems and translates it into individual time-phased component requirements. The product structure records, also known as bill of material records (BOM), contain information on every item or assembly required to produce end items. Information on each item, such as part number, description, quantity per assembly, next higher assembly, lead times, andquantity per end item, must be available.
The inventory status records contain the status of all items in inventory, including on handinventory and scheduled receipts. These records must be kept up to date, with each receipt, disbursement, or withdrawal documented to maintain record integrity.MRP will determine from the master production schedule and the product structure records thegross component requirements; the gross component requirements will be reduced by the availableinventory as indicated in the inventory status records.
2. JIT Purchasing
JIT purchasing refers to the technique of eliminating waste during the purchasing phase with the help of the mutual understanding with good suppliers. The major elements of JIT purchasing include locating, choosing and then developing mutual relations with the suppliers the number of the suppliers should be limited and both the buyer and the supplier should possess mutual dependence, having long term contracts which results in reduction of the lead time, aiming at finding solutions to the problems by involving participation of the supplier at an earlier stage during the decision making process.
JIT purchasing is more applicable and helpful in the flow production than the batch production and is also not very suitable for the low cost ‘C’ class bought out items. JIT cannot work properly in those organizations, where there is no proper involvement of the people. JIT purchasing aims at the following –
1. Elimination of the waste or at least minimization of the waste during the purchase process.
2.Elimination of the waste at the supplier’s end.
3. Elimination of the purchased inventory.
Just in time manufacturing process makes sure the seamless integration of manufacturing floor. JIT manufacturing to really be effective purchasing patterns must also be aligned with this. So just in time purchasing is another essential component of just in time environment. It is very important to reduce wastes in the factory floor. But it is useless if your raw material stocks are high. In this case you will only be transferring the stocks from factory floor to the RM warehouse. In a traditional organization purchasing is done in larger volumes.
These stocks are stored and then used when required. There will be few deliveries in larger time intervals. But in just in time purchasing, the requirement for purchasing comes from manufacturing process. When they require raw materials, purchasing must be triggered and then purchasing will be taken place in smaller quantities and will have frequent deliveries.
To facilitate just in time purchasing, the supplier bases must be sorted. There should be a narrow, manageable and reliable supplier base. There should be convenient ways of communication between suppliers and purchasers. Paperwork must be minimized. In short suppliers must be treated as strategic partners of your business. This purchasing behavior will make sure the correct quantities of high quality supplies every time when there is a requirement. In fact the JIT purchasing gives the real value to JIT manufacturing process.
JIT and Purchasing
The most challenging area for most manufacturers in achieving JIT is the purchasing of raw materials and parts. This is important because an internal JIT system can only be operated successfully when the material being fed into it are of sufficient quality and delivered on time. Therefore, unless the quality and delivery of purchased material are not production issues, the purchasing function should begin to establish a JIT supplier base. In JITpurchasing several tactics are being used to achieve certain goals and objectives.
* Secure a steady flow of quality parts.
* Reduce the lead time required for ordering product.
* Reduce the amount of inventory in the supply and production pipe lines.
* Reduce the cost of purchased material.
* Improve purchasing efficiency.
* Improve quality and delivery performance of suppliers.
* Isolate factors that influence the cost of material.
* Remove unnecessary cost factors in the materials supply system.
* Regard suppliers as an extension of the internal manufacturing process and cultivate them as long term business partners.
* Establish long term purchasing and supply commitments.
* Improve communication with suppliers.
* Involve suppliers in early stages of new product planning.
* Use supplier expertise to improve design manufacturability and reduce product cost.
* Material purchased in a JIT system should meet three requirements:
* An acceptable level of quality,
* On time delivery schedule, and
* A reasonable cost.
Question No. 2.
Discuss the role of warehousing, Materials handling and packaging in logistics management Ans:
“Logistic is the process of planning, implementing and controlling the efficient, effective flow of goods storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements” Logistics exists to satisfy customer requirements by facilitating relevant manufacturing and marketing operation.
The main responsibility of logistic is the geographical positioning of raw materials, work in process and finished inventories at the lowest possible cost. Creating logistics value is costly. Logistics accounts for one of the highest costs of doing business. Logistics expenditure normally ranges from 5% to 35% of sales depending on the type of business. Thus logistics even though very important for any business success is expensive.
From the above definitions, we conclude that–
(1) Logistics management is the function of managing the total flow of materials which includes movement of raw materials from suppliers, in process within the firm, and movement of finished goods to the customer. (2) Logistics management covers both physical flow of products as well as information flow covering reports and documentation relating to goods movement. (3) Logistics management evolves procedures that meet customer service at the minimum cost. (4) Logistic management achieves cost reduction by speeding the flow of materials, work-in-progress and finished products.
Activities of the logistics functions
Logistics function consists of following sets of activities:
(1) Warehousing. Is concerned with management of space to hold inventories and it involves such problems as:
• Site selection.
• Space determination.
• Layout and design.
• Receipts and issues and storage.
(2) Materials handling is concerned with movement of product at the stocking point and it involves such decision as : • Smoothening of materials flow.
• Selection of materials handling equipment.
• Maintenance of materials handling equipment.
(3) Packaging is concerned with design of packing of the product that ensures damage free movement of the product and is conducive to efficient handling and storage.
Warehousing, materials handling and packaging. The choice and location of the warehouse should be with a view to get closer to the core customers. Materials handling within the warehouse should be planned to ensure safe and speedy receipt, movement, storage and packaging of customer’s requirements.
Some examples of the Logistics decisions taken by the Organizations-
A manufacturer of large molded plastic water tanks has transport costs as a significant portion of the product cost. The is due to the fact that the weight based capacity of the trucks are underutilized by the large volume tanks. In order to build a competitive edge by reducing the product cost attempts are being made to change the product design in which the lid is a separate piece.
It enables small size tanks to go into the large sized ones, resulting in the reduction of the transportation cost. Since at present the results of the research are uncertain, a location decision has been taken to manufacture the products in products in four regions regions rather then at one place.
A few cement manufacturers are modifying their production structure in response to the non-availability of covered railway wagons. Cement has been sent to the distribution centers in the granulated forms so that the open wagons can be used. Fine grinding is being done prior to the secondary distribution. Packaging decisions to whether cement should be transported in bulk or in a jute bag or HDPE bags are also under consideration.
A two wheeler manufacturer is re-examining its distribution network design as well as its warehouse location to ensure better response to satisfy customer requirements and lower total product cost by cost by optimizing on cost relating to primary distribution, secondary distribution, warehouse operations and sales tax.
A manufacturer of sponge iron in western India is deciding on a movement plan for both its incoming raw materials and outgoing finished products. The significant issues are the transportation mode choice, shipment size and stocking levels especially since water, rail and road are possible alternatives. The issues are more complicated since the port serving the plant is minor one with limitations of vessel draft and movement being inhibited during the monsoon. Possibilities of cost saving by coordinating inbound and outbound movement add another dimension to the problems.
Certain pharmaceuticals and chemical industries could examine their production planning with respect to their production batch size by considering the profile of orders from the dealers, thereby optimizing on set up costs, work-in-process inventory cost and finished goods inventory cost. In such industries choices can also be made regarding transportation of some products in liquid, paste or powder form. There are implications on transportation costs, conversion energy costs and packing costs. Warehousing, material handling, and packaging are an integral part of other logistics areas.
For example, merchandise typically needs to be warehoused at selected times during the logistics process. Transportation vehicles require material handling for efficient loading and unloading. Finally, the individual products are most efficiently handled when packaged together into shipping cartons or other types of containers. When warehouses are required in a logistical system, a firm can choose between obtaining the services of a specialist or operating its own facility. The decision is broader than simply selecting a facility to store inventory, since many activities essential to the overall logistical process are typically performed while products are warehoused. Examples of such activities are sorting, sequencing, order selection, transportation consolidation and, in some cases, product modification and assembly.
Within the warehouse, material handling is an important activity. Products must be received, moved, sorted, and assembled to meet customer order requirements. The direct labor and capital invested in material-handling equipment are a major part of total logistics cost. When performed in an inferior manner, material handling can result in substantial product damage. It stands to reason that the fewer times a product is handled, the less potential exists for product damage, and the overall efficiency of the warehouse is increased. A variety of mechanized and automated devices exist to assist in material handling.
In essence, each warehouse and its material-handling capability represent a mini system within the overall logistical process. To facilitate handling efficiency, products in the form of cans, bottles, or boxes are typically combined into larger units. The initial unit, the master carton, provides two important features. First of all, it serves to protect the product during the logistical process. Second, the master carton facilitates ease of handling by creating one large package rather than a multitude of small, individual products.
For efficient handling and transport, master cartons are typically consolidated into larger units. The most common units for master carton consolidation are pallets, slip sheets, and. various types of containers. When effectively integrated into an enterprise’s logistical operations, warehousing, material handling, and packaging facilitate the speed and overall ease of product flow throughout the logistical system. In fact, several firms have engineered devices to move, broad product assortments from manufacturing plants directly to retail stores without intermediate handling.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 19 February 2017
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