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ROA AND MODELS 1) the difference between and performance in Logistics? Give some examples of related performance? The effectiveness in serving the market is given the right material, in the right quantities of the right quality, in the right place, at the right time and it brings to an increase of t...

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ROA AND LEE’S MODELS 1) What’s the difference between effectiveness- and efficiency-related performance in Logistics? Give some examples of effectiveness- related performance? The effectiveness in serving the market is given by the right material, in the right quantities of the right quality, in the right place, at the right time and it brings to an increase of the revenues The efficiency in leveraging resources is given by the right price of the products and it brings to a decrease of the revenues Examples of effectiveness-related performances are the order completeness, order accuracy, the product range. 2) What is the meaning and the use of the ROA model? The ROA model is a competitive tool and it is used to understand how logistics affects corporate profitability. By analysing each component of the ROA ratio we can understand how to improve the different sources of value, for example reducing logistic costs, increasing the revenues improving both customer service and using outsourcing, reducing the current assets like inventories and controlling the ‘cash to cash’ cycle time, reducing the investment in fixed assets with better logistics/supply chain planning and outsourcing logistic activities and managing the trade-offs between the different sources of value. More in depth, knowing that ROA=(REV-COST)/(WC+FC) Talking about costs, the logistic costs of the suppliers have implication on the cost of goods sold. We can reduce logistics cost thanks to activity optimisation, system optimisation (I can accept an increase in the cost of one activity if I’m reducing the total cost), and increasing the quality. In fact, a lot of logistics costs are about lack of internal and external quality. On the other side, Revenues are related to the customer service. Customer service indicators can be divided in 4 groups: time, fill rate-availability of products, accuracy, compound KPIs.

There is a point in the chart where there is the best impact in terms of profit, so the customer service optimal in terms of profit optimization (customer service affects both Revenues and Costs). Taking into account the denominator, the Working Capital is composed by inventories + account receivable – accounts payable. So, in order to reduce logistics costs, we can reduce inventories working on supply chain lead time and supply chain uncertainties, or reducing DSO increasing accuracy.

Talking about fixed capital, we’re referring to logistics infrastructures like warehouses, transportation means and information systems.

The most difficult thing is to understand the implication on all the elements concurrently, so the overall impact.

3) Provide some examples of different logistic strategies, their expected impact on ROA and their alignment with the corporate strategy? One of the main logistic strategy is the Lean Supply Chain strategy: it aims to maximize the “expected” ROA, creating both cost and value competitive advantage for example by eliminating non value adding activities, focusing on economies of scale, stock controlling and centralizing management, optimizing techniques and maximizing the capacity of distribution and production. Another logistic strategy is “Risk Hedging”, whose strategy aims to reduce risks ins supply disruption for example using a risk management orientation, keeping inventories of raw materials/components, occurring to back up suppliers, occurring to the resource sharing inside the SC in order to share the risk of supply interruption, and adopting ICT. The “Responsive” SC strategy aims to mitigate risks on the demand side for example using a mass customization approach, suitable to satisfy market specific demand, or postponing strategies, keeping extra capacity, shorting lead times or reducing the time-to-market. The “Agile” SC aims to reduce risks on both the supply and the demand side combining “Risk Hedging” and “Responsive” SC strategies, for example sharing inventory and other capacity between partners, shorting lead times and TTM, increasing the SC visibility and collaboration and looking for alternative suppliers. In this way it reduces the negative variance of standard deviation of ROA and it helps to be more flexible (agile). Logistics strategies may be also classified in time-based strategies, asset productivity strategies, technology-based strategies, relationship based strategies. Time based strategies focus on cycle time reduction, time-reduction logistic initiatives, and pull approach. Asset productivity strategies focus on inventory reduction, equipment utilization and third party/contract logistic services. Technology based strategies focus on eCommerce B2B, Automatic identification projects and automation of warehousing and materials handling. Last but not least the Relationship based strategies focus on the integration of SC processes and collaboration. WHAREHOUSES 1) What is the role of warehouses in a distribution network? What are the main processes and activities in a warehouse? And in a transit point? The role of a WH can be: - Storage: to keep the inventories - Flow Management: to transform the flows In distributions centres\depots\WH both the functions are carried out. In transit points only the Flow management is carried out. In the WH the activities are: Receiving, Put away, Storage, Picking, Shipping.

In the TP: Receiving, Sorting of Transport Units or Picking and Consolidation of Transport Units, Shipping. 2) What are the main performance indicators to control the warehousing process? - Design parameters SC= number of unit loads locations TC= Input capacity, output capacity, throughput capacity -

Descriptive parameters AUR= number of PLs I can store per each square meter CUR= number of PLs I can store in 1 m3 Selectivity= number of directly accessible items\ total number of items stored Saturation coefficient of SC: number of PLs stored\SC

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Cost indicators  Storage costs of: Building and Facility services Racks  Annual costs related to general facility costs  Handling costs: Labour costs Equipment Energy consumption

3) What are the main performance differences between a single-deep pallet rack and a drive-in system? A single seep pallet rack leads to a higher selectivity (=1) but lower AUR than Drive-in system. 4) What could be the relative “weight” of the functional areas within the warehouse of an electrical equipment manufacturer? The functional areas are Receiving, Storage, Picking and Shipping. In this case the most important are Storage and Shipping. What in a pharmaceutical’s wholesaler distribution centre? In this case, the most important areas are Storage and Shipping. 5) Assume you are a cement manufacturer. Which storage system would you take into account for the temporary storage of the cement bags on pallet loads that come out of the plant? Block Stacking because the product is stackable, and I don’t have problem related to the obsolescence. In the end, the Block Stacking solution doesn’t require investments which is good in our case because it’s a temporary storage case. TRADITIONAL WH 1) What are the main warehouse management policies? There are 2 main management policies: 1. Management of operative cycles (storing\retrieving): single command cycle vs. dual command cycle 2. Criteria to allocate the UL to the locations of the storage system: criteria to decide where to put the UL vs. space subdivision criteria 2) What is the Access Index (AI)? How can it be calculated? What is its purpose?

The access index is the ratio b\w the number of retrieves of an item in a certain period and the number of locations dedicated to that item in the same period. It is useful to understand which the most likely items are in order to put them closer to the I\O point 3) In which situations would you suggest a class-based storage policy? Make an example When we have many items with high AI. 4) Detail the main phases of the design of the storage system within a warehouse 1. Identification of the design parameters (SC, TC) 2. Layout design 3. TC assessment 5) How the decoupling of the storage and retrieving activities during a day can influence the needs of trucks capacity? If I decouple the 2 activities on average, I need more time to carried out these activities than a dual command cycle. So, to have the same TC, I need more trucks. AUTOMATED WH 1) Which are the main differences - in terms of technical features between the traditional and the automated warehouses? The automated WHs have: - Longer and higher racks - Narrower aisle - Served by AS\RS machines, so the performances are better (those machines can move horizontally and vertically at the same time, so they are faster) but more expensive - Higher requirements in terms of construction accuracy - An automatic I\O - No human intervention is required - One machine (or less) per each aisle 2) Why do we translate the coordinates of the racks from spatial to temporal? SL/sh; SH/sv 3) Which are the main advantages of the dual command cycles with respect to the single command cycles? The main advantage is that the dual command cycle is more efficient than the single one because it transports 2 ULs per cycle and on average the time needed for the dcc is lower than twice the time for a scc How would you improve the dual command cycle performances? -MTB: This approach aims at choosing the location where retrieve that is the closest the the location where I’ve stored -NCZ: This approach aims at choosing the location where retrieve that doesn’t add cost, so the variable times are equal: T(I->P) = T(I->B)+ T(B->P) 4) Try to explain why the design of the storage area in an automated warehouse affects both the Storage and the Throughput capacity When you design the automated WH, you get the NA, NL and NC  SC= 2*NC*NA*NL*NPB Once you have defined the NA, the number of machines is defined because NA= n of machines (this impacts the TC). PICKING SYSTEMS 1) Why is the picking process key to distribution systems performance? Because it has an: Impact on Warehouse Costs: Picking/Order Assembly usually accounts for more than 50% of the Warehousing Costs - High complexity: handling of fragmented unit loads

- High labor intensity: picking is difficult to automate Impact on Customer Service - Order Assembly Time is a relevant part of the Order Cycle Time - Order Picking Accuracy is substantial to achieve Delivery Accuracy - Order Picking Flexibility is paramount to achieve Delivery Flexibility 2) What’s the difference (system configuration and performance) between picker-to-parts and parts-to-picker systems? Both are manual picking systems. In picker-to-parts system the main idea is that one picker carries out one mission in which he\she visited N points which depend on the #order lines. The configurations depend on the combination of storage + handling system. We can have horizontal bi-dimensional mission (ex.: Pallet rack+ order picker truck); vertical bi-dimensional mission (ex.: Manual picking + narrow-aisle turret truck) or tri-dimensional system (picking+ automatic S\R machines). The main issue is to reduce the travel time of the picker. This system requires more space because of the handling system but less investments. It’s slow because of human safety and people can be easily wrong (accuracy) but it’s flexible. In parts-to-picker, the pickers work in one or more picking stations. The handling system retrieves the items (detailed in the picking list) and it carries them in sequence to the picker which has to only pick the quantity required. The PL, unless it is finished, needs to be stored again. Now we do not have travel time but machine time, so we have an improvement in terms of picking productivity, but we need more machines. The configurations are: - For large size UL: automated WH+ picking bay - For small size UL: miniload AS\RS, vertical or horizontal carousel, automatic vertical storing system. This time the labour (better use of workforce) and space (storage WH is where I pick too) costs are strengths. But of course, we need more investments. Speed and accuracy improved too because now they depend on the machines. But the automation leads to a more rigid system because of the strong relationship between SC\TC. 3) Which are the main design parameters of a picking system? What is the Forwardreserve Problem about? What is the main choice, in a nutshell? The main design parameters are: - Picking Storage Capacity - Picking (Throughput) Capacity While for the storage function, the SC depends on an external factor, the inventory level, for the picking system, the SC is an internal decision and it is the result of the Forward\Reserve problem. We have to decide if we can carry out the picking activities in the whole WH or if we have to dedicate part of the stock to these activities. The are three dimensions of the Forward\Reserve problem. 1) If to dedicate part of the stock to the picking activities 2) To compute the Picking Stock Capacity by comparing the total costs (computed per S optimal, which is the one that minimize the sum of C picking and C replenish) and the total costs of the base line (= costs of picking) 3) To decide the Picking Stock Capacity per each item. This is the first decision that needs to be made. We can follow different approach: o Equal space: each item has the same portion of space (m3) o Equal time: each item has the same # of replenishments Ri (1/y) o Optimal policy: each item has different portion of space and # of replenishments. This approach aims at the minimization of the overall R. 4) What are the three basic management policies? What is the main goal of these policies? Batching policy: The basic decision is about the relationship between “warehouse orders” (= picking mission) and customer orders (=the final output of the process)

Routing policy: The basic decision is about the sequencing of picks in the warehouse order (or picking list) Location or storage policy: The basic decision is about the allocation of single items or classes of items (class-based storage) to the available picking locations. The idea is to dedicate the most easily accessible locations to the most frequently requested items (actually to the items having the highest access index as we will see), mainly in the picker-to-parts systems, and to locate in proximity items that are frequently requested in the same customer order (correlated storage), mainly in parts-to-picker systems 5) Which are the main components of the picking time? Set-up time, Travel time, Retrieval time 6) Which are expected to be the most relevant ones? The TT and it is also the most difficult to assess. 7) What does the travel time is affected by? How can I reduce it? It is affected by the travel distance (within aisles and across aisles) and the speed of the truck. A way to reduce it is by using a return+AI policies. 8) How does the batching policy impact the picking time? Which are its cons? The batching policy reduces the travel time and the retrieval time, but the cons is that we need one more activity, the sorting. 9) How does the Access Index based storage impact the picking time? Which are its cons? It allows to reduce travel time and retrieval time, but we have an operational complexity. 10) How do the routing policies impact the picking time? Which are the main alternatives we saw? It allows to reduce the travel time but it leads to a higher operational complexity. TRANSPORTATION MODES What are the main pro and cons of each transportation mode?  Road transportation:  Pro: - Door to door delivery - Limited risks of damage (goods are handled only at the beginning and at the end of the delivery) - Quick loading/unloading - Low transit time and good reliability (limited impact of weather condition) - High accessibility both in terms of roads/highway and in terms of supply (if the company can choose a for-hire solution) Cons: The main managerial issue is the minimization of the pick-ups, the minimization of local distribution distances through routing algorithms (the critical resource is time, the number of pickups and deliveries done in the time window). Usually, the handling fix times are more important than the travel time. Road transportation can be provided by service providers. Rail transportation Pro:

Low cost (cost per ton*km is pretty low), especially for long distances and large shipment quantities (high fixed vs low variable cost structure) Cons: Low accessibility: the loading/unloading points must be on the railroad (exceptionally large production or distribution facilities have rail sidings) Slow speed/high transit times and low reliability: mainly due to the high and variable handling times at the consolidation stations (unit trains are an exception)  Damage risk: variable depending on the type of service (unit train vs less than a car load) Usually, you transport things whose value density is low like raw materials. We use rail transportation when time performances are not critical, and the objective is to minimize costs in order not to overcome the value of the goods. The cost gap (between rail and road) increases for large shipments over long distances Rail carriers have higher fixed costs than road carriers (large investment in terminals and handling equipment) and these fixed costs have a lesser impact when spread over larger ton*km.  Water Transportation Pro:  This is the cheapest transportation mode. Cons: Very low accessibility: the loading/unloading must take place in sea-ports, thus requiring land positioning through other ground transportation modes (road or rail)  Low speed/high transit times, due to limited haul speed Acceptance reliability: the mail critical aspects are the dependability on weather conditions and the time variability of port handling operations  Air Transportation Pro:  Good reliability, even though transit times are affected by weather conditions. Cons:  Very expensive compared to the other transportation modes Low accessibility: the loading/unloading must take place in an airport, hence road transportation is usually needed to provide door-to-door service High speed/low transit times, mainly dependent on the speed of the airport-based handling

operations The maximum weight is around 50-100t and it’s very difficult to prepare the pallet loads. I use air transportation for long distances transportation of high-value products or when time is critical: - Emergency; - Perishable goods; - Short product lifecycle;

What is intermodal transportation? What are its main advantages? When piggyback intermodal transportation becomes interesting with the respect to road only? Intermodal transportation services refer to the use of two or more carriers of different modes in the movement of a shipment without changing the transport unit load, known as intermodal transportation unit (ITU).It requires intermodal terminals, i.e. dedicated facilities where the ITU are transferred from one mode to the other. It leverages the best features of each transportation mode, transforming some “labour intensive” activities into “capital intensive” activities. There are two main intermodal transportation modes: - road + rail, also known as piggyback - road + water, also known as fishyback In the Piggyback mode part of the route is made by truck, part by rail. Its main characteristics are the door-to-door service (like the road); low costs, higher than only-rail but usually lower than only-road especially for long distances; high transit times, mainly dependent on the railroad transit times and the handling times in the intermodal terminals, and usually low reliability; low damage risk, ITU are never “opened” during the transportation.

Assume you are a Fast Moving Consumer Goods manufacturer. Which types of transportation modes would you recommend considering for distribution in Europe? What would drive your choices?...