COURSE TITLE-

 
BASIC OF SUPPLY CHAIN MANAGEMENT
 
 
  
 

Course code – 26138

 Unit 2 – Logistics operations

Definition Inventory , Transportation

Infrastructure , Transportation , Operations ,
Warehousing , Packaging & Material Handling
 Inventory
Inventory decisions are high risk and high importance decisions from the
perspective of logistics operations.

Inventories represent aggregate of those items which are either held for sale in
the ordinary course of business or in the process of production for sale or are yet
to be utilised / consumed in the production of goods and services.

Inventories are the physical stocks of items that a manufacturing or service

organisation keeps in hand for efficient running of its office or manufacturing
activities.

Inventories consists of raw materials , component parts , tools , spares , supplies

and finish goods.

Inventory is the accounting of items, component parts and raw materials that a
company either uses in production or sells. 
A firm’s different functional areas may view inventory differently. For
instance-

i) Marketing wants high inventories over a broad range of products to allow

quick response to customer demands.

ii) Manufacturing wants high inventories to support long production runs and
also to ensure that there will not be any production stoppage due to non-
availability of raw materials and component parts. Also, manufacturing wants
to gain advantages of economies of scale by producing large batches of
products , so that the per unit fixed costs can be reduced .

iii) Finance generally prefers low inventories so as to increase inventory turn-

over ratio, reduce current assets and increase return-on-assests

iv) High inventory increases inventory carrying cost, warehousing costs,

packaging costs and material handling costs .
 Definition Inventory

Inventory , often called merchandise , refers to goods and materialas that a business holds
for sale to customers in the near future.

Example – If a newspaper vendor uses a vehicle to deliver newspapers to the customers ,

only the newspaper will be considered inventory . The vehicle will be treated as an asset.

Inventory refers to all the items, goods, merchandise, and materials held by a business for
selling in the market to earn a profit.

In terms of supply chain management inventory is normally used to refers to the sum total
of all goods and materials on hand.

Inventory: the stock of any item or resource used in an organization and can include: raw
materials, finished products, component parts, supplies, and work-in-process.
 Transportation Infrastructure

Transportation in a supply chain refers to the movement of products from one location to
another , which begins at the start of supply chain as materials make their way to warehouse
and continues all the way to the end user with customer’s order delivered at the door step .

Transportation is the movement of humans , animalas and goods from one location to
another.

Transport infrastructure consists of the fixed installations , including roads, railways , airways ,
waterways , canals , and pipelines and terminals such as airports , railway stations , bus
stations , warehouses , terminals may be used for both interchange of passengers and cargo
and for maintenance.

Transport Infrastructure Plays a role as a capital input into production and wealth generation.
Transportation Infrastructure is a necessary input into the production of transport services in turn , are necessary to allow for
the market exchange of final goods and inputs or for broader welfare benefits.

There are several main types of transport that we rely on, besides cars and roadways. They include railways, buses, airplanes,
ships, and the associated stations and airportswhere people and products start and end their travels.

Transport infrastructure is crucial to connect developing countries and help them to boost trade, growth and regional
integration. This is because cross-border or long-distance roads and railways as well as international ports and airports are
needed to move products and people around in a globalised world

Transport infrastructure is one of the most important factors for a country's progress. 
 Transportation

Transportation is the largest expenditure in logistics.

For movement of goods from the supplier to the buyer, transportation is the
most fundamental and important component of logistics. When an order is
placed, the transaction is not complete till the goods are physically moved to
the customer's place. The physical movement of goods is through various
transportation modes.

The common modes available are road carriers, railways, airways, ships,
pipelines, and ropeways. Depending on the customers requirements and the
availability of transportation infrastructure and its reach and cost, firms decide
on the mode with an optimum cost under the given product market
conditions.
 

Road Transport -A road is an identifiable route way or path between two or more places. This mode of transport helps to transfer
the goods from one place to another place by road through various methods like auto, buses, trucks, cargos, and other suitable
factors.
In road transport, the chances of an accident are very high and it is also very risky.

Railways Transportation - It is a means of transport in which the goods are transferred from one place to another place and as well
as transfers the passenger from one place to another destination. It is preferred due to high speed. Invariance to road transport,
where vehicles run on a flat road or surface, rail vehicles are directionally managed by the rail tracks on which they run.
Rail transport helps to provide administrative facilities to the government. The public servants and defense forces run their mobility
from the railways.

Water Transportation- It involves the movement of goods through oceans and sea. In water transport, the weights of goods are
very large in comparison to other means of transports. It plays a very crucial role in the development of exports and imports of
goods in the different parts of the world.
Air Transportation- The distinct advantage of air transport is speed and
suitability. It is very useful for less working goods with a high value of the
price. It is the fastest means of transportation. But the cost of operation very
high according to other modes.

Pipelines Transportation- Pipelines transportation is used for sending the

liquids and gases from one place to another place. Through this means of
transport, we can also send chemicals, biofuels, and natural gases.
 Operations
Logistics operations is an essential part of supply chain and refers to the
process of moving finished goods, starting from the manufacturer and moving
to the end user.

Logistic operations system activities in an organisation are simply described as

the management of material flow and distribution of products to customers.

Logistics operations are made up of a series of processes that work together

to optimize the supply chain from delivering goods from the manufacturer to
the seller , all the way to last-mile delivery.

Operations and logistics is the flow of goods , information and money

throughout an organisation and encompasses aspect of finance, marketing
and accounting.
Logistics operations system activities in an organization are simply described
as the management of material flow and distribution of products to
customers. More so, these activities comprise but not limited to:
transportation, distribution planning, inventory and warehousing and order
processing.

Logistic operations is the science of moving goods from one place to another
by road , rail , sea,air etc involving minimum transit time and at most
economical cost.
The field of operations and logistics focuses on making sure that the right
amount and quality of materials and goods are produced and delivered to the
correct recipients according to schedule. The work involves production and
service operations, with operations and logistics workers responsible for
managing the supply chain, from purchasing raw materials to the production
cycle to end delivery. In business operations, operations and logistics
managers implement and manage systems for “efficient deployment of
personnel, physical facilities, in-process inventories, finished goods, and
related information or services.”

Operations is also known as supply chain management. The Council of Supply

Chain Management Professionals defines supply chain management as the
planning and management of all activities for sourcing and procurement,
conversion, and logistics management activities. This type of work also entails
coordinating and collaborating with suppliers, intermediaries, third-party
service providers, and customers. In addition to manufacturing operations,
supply chain management coordinates the business processes and activities
across marketing, sales, product design, finance, and information technology. 
 Warehousing

“warehousing” is the storage of goods until they are needed. The goal of warehouse operations is to satisfy customers' needs and requirements
while utilizing space, equipment, and labor effectively. The goods must be accessible and protected.

Warehousing incorporates many different aspects of logistics operations. A warehouse has traditionally been viewed as a place to hold or store
inventory. However , in contemporary logistical system , warehouse functionality is more properly viewed as mixing and modifying inventory to
meet customer’s requirement. Storage of products is ideally held to a minimum.

Warehousing refers to the activities involving storage of goods on a large-scale in a systematic and orderly manner and making them available
conveniently when needed. Means holding or preserving goods in huge quantities from the time of their purchase or production till their actual use
or sale.
The Warehousing function is concerned with physical handling of raw
materials and component parts until they are used in production process. The
warehouse is a point in the logistic system where a firms store or holds raw
materials, semi-finished goods for varying period of time.

Holding goods in a warehouse causes stoppage or interruptions to the flow of

goods, which in turn adds cost to the products. But while adding to the cost ,
warehousing can add more value than cost to a product. The warehouse
serves several value-adding roles in logistics system.

When warehouses are required in a logistical system, a firm can either

operate its own warehouse or obtain the services of a public warehouse,
public warehouses offer storage service for a fee to the public.

The choice of a warehouse is an important decision because other than

storing inventory , many other activities essential to the overall logistical
process are performed while products are stored in warehouses. Example of
such activities are sorting , sequencing , order selection and product
modification and assembly.
Warehouse management involves many basic warehousing decisions such as
ownership,number,size,stocking and location i.e. what type of organization ,
how many , what size , what products and where.

The criterion of total cost is used to make the decisions. For example,
customer service can be improved by having many warehouses because
products are located closer to the customers, but the warehousing , inventory
and possibly transportation cost would be higher. The total cost will be the
determining factor.

The decision regarding whether to own a warehouse or hire warehousing

space in a public warehouse impacts a firm’s facility investment as well its
warehousing costs.

When a company decides to have its own warehouse the question of “ what
size of warehouse “ arises as it involves investment in fixed assets. A private
warehouse , once designed and built , is fixed and cannot be modified
without considerable expense.
Also , a company which decides to have its own warehouse of particular capacity
is faced with the question of how to layout the interior of the warehouse , for
example aisle space, shelving , material handling equipment etc.

Finally , warehouse management involves inventory decisions as to what products

in what quantities will be stored in which warehouses.

Warehousing decisions require close attention, because improving efficiency and

productivity is a major focus in warehousing operation.
The warehouse is where the supply chain holds or stores goods.

OBJECTIVE OF EFFICIENT WAREHOUSE OPERATIONS -

1. Provide timely customer service.

2.Keep track of items so they can be found readily & correctly.

3.Minimize the total physical effort & thus the cost of moving goods into &
out of storage.

4. Provide communication links with customers.

Types of Warehouses -

1. Private Warehouse – A Private warehouse is typically operated by the firms

owning the product. A private warehouse is a warehouse that is privately
owned by wholesalers, distributors, or manufacturers. Owned by private
entities to store their own products or equipment.
2. Public Warehouse-These warehouses are owned by government and semi government bodies and are made
available to private firms to store goods on payment of rent. The public warehouses are usually set up to help small
traders who are not in position to have their own warehouses due to financial constraints.

3. Co-operative Warehouses – owned by a co-operative where private firms can rent space for storage .

4. Distribution Centers – Distribution centers receive shipments of goods and move them fast A & B
 Packaging

Packaging is typically viewed as being either consumer, on marketing, or industrial , focused on logistics.
Packaging is a coordinated system of preparing goods for safe, secure, efficient and effective handling, transport, distribution, storage, retailing,
consumption and recovery, reuse or disposal combined with maximizing consumer value, sales and hence profit.

Packaging is the wrapping of a packaged good to protect the environment or the packaged good itself, for portioning for production/use and also for
transport, storage and marketing. The packaging consists of packaging material and packaging aids which in turn enable packaging, sealing and
preparation for dispatch. Packaging is the result of a packaging process, which begins with the design of the packaging and, viewed holistically, forms
a packaging system.

Packaging is a coordinated system of preparing goods for safe, secure, efficient and effective handling, transport, distribution, storage, retailing,
consumption and recovery, reuse or disposal combined with maximizing consumer value, sales and hence profit. Poor packaging can contribute to
higher handling costs and product damages could affect future sales.
Product packaging has a major role in logistics management. The size and
protection afforded by the package affect the type of material handling equipment
used and the level of product damage incurred.

Packaging is very important for effective damage protection , not only in the
warehouse but also during transportation. Also poor packaging can contribute to
higher handling costs and product damages could affect future sales.

Packaging is becoming important issue with the current environmental concerns

about recycling and the reuse of packaging.

Benefits of efficient and effective packaging include :

A) Savings in transportation costs due to lighter packaging.

B) Reduced damage due to more protective packaging which further reduces
requirement of special handling.
C) Better utilization of warehousing and transportation space because of careful
planning of size and volume of packaging.
Packaging is an important function, enclosing materials and products for distribution and movement. 

Packaging is the science, art and technology of enclosing or protecting products/ materials for distribution, storage, sale, and use. Packaging is typically viewed towards consumer
with marketing focus, and for industrial purpose with logistics focus. Packaging refers to a container in which the product reaches the end user and is a part of the presentation of
the product that stays right till the customer takes it from the retail store.

Packaging aims at:

Product identification
Product Protection
Product Promotion
Product Information
Product Communication

For example, food packaging is done to ensure protection of food products from outside influences and damage, provide information to the consumers on its ingredients,
nutritional information, cost, expiry date etc.
The functions of packaging are to:
a) Attract buyers’ attention.
b) Protect goods inside the packaging.
c) Give description of contents.
d) Explain the benefits of the goods inside.
e) Provide warranty, warnings, and consumer information.
f) Indicate value, price, and uses.

Packaging is used as under to move materials throughout the various stages

of logistics management process:
a) Assembly: Protecting and holding components delivered in production
processes.
b) Automation: Automating systems require standardized trays or pans to
function.
c) Transportation: Aggregating and protecting loads as they move through
the supply chain.
d) Warehousing: Protecting products during storage.
e) Holding Order : Holding stored products prior to their delivery
Packaging has following benefits:

a) Containment. It facilitates containment of products before they can be moved from one
place to another. If the package breaks open, the item can be damaged or lost, or if it is a
hazardous material it can contribute to environmental pollution

b) Protection. It ensures protection of the product. The contents of the package must be
protected from damage or loss from outside environmental effects such as shock,
moisture, dust, insects, and contamination. This reduces the security risks of shipment.

c) Apportionment. Packaging needs proper apportionment or division of the product into

appropriate quantities

d) Unitization. Primary packages can be unitized into secondary packages which can then be
unitized into a stretch wrapped pallet, and ultimately into a container loaded with
several pallets. This reduces the number of times a product must be handled.

e) Convenience. Packaging allows products to be used conveniently, that is with little wasted
effort by customers

.
 f) Communication. Packages and labels communicate how to use, transport, recycle, or dispose of
the package or product.

g) Marketing. The packaging and labels can be used by marketers to encourage potential buyers to
purchase the product. Package design is an important and constantly evolving feature.

h) Sustainability. It facilitates sustainability. Returnable and reusable packaging can be used

repeatedly before it is recycled; some materials are engineered to be of biodegradable material.

There are usually three levels of packaging required in a distribution system. First is a primary
package that holds the product. Next, for small packages, a shipping container such as a corrugated
box is needed. There is a third level of packaging where several primary or secondary packages are
assembled into a unit load. Typical applications include holding and protecting bulk materials, cases,
loads or individual items for shipping and receiving, organizing products in static or automated
storage systems, and acting as a receptacle to hold picked items for a discrete order
Package Design :

Good package design is influenced by

i) Standardization
ii) Pricing
iii) Product or package adaptability
iv) Level of protection
v) Handling ability
vi) Product pack ability
vii) reusability

There are many important interfaces between packaging and other logistical
activities such as transportation , inventory , warehousing and information
system. Also factors such as channel of distribution and institutional
requirement influence the design of product packages.

Packaging , warehouse handling systems and warehousing operations are

interrelated within the firm’s logistics system and hence must be managed
effectively using an excellent information system.
 Material Handling
Material handling is concerned with the movement of material/goods within the storage space, and goods into and out of
each facility. It is movement of right material to the right place, in right time, and in right condition. It includes the movement,
storage, control, and protection of materials, products, and packaged goods throughout the process of manufacturing,
distribution, and disposal.

Material handling improves efficiency by making the logistics system respond quickly and effectively to plant and customer
requirements. For efficient movement of goods into the warehouse, locating stock, accurately filling orders, and rapidly
preparing orders for shipment to customers.

Logistics is the process of material movement from one point to another. Material handling is involved at every stage of
logistics process.
 Essentially, material handling is process that includes short-distance
movement inside the scope of a building, or between the transportation
vehicle and the building. It uses various types of equipment such as manual,
automated, and semi-automated. In addition, the material handling process
involves the movement, protection, storage, and control of materials. This
handling process occurs in manufacturing shop floors, warehousing,
distribution, and even in material disposal. This is why material handling is an
important process in every facility.

Material Handling Types -

There are two main types of material handling that operators and company
owners need to know. And here they are:

1. Manual Handling

2. Automated Handling.
1. Manual Handling - This type of handling is where workers use their hands in moving individual containers. They lift, lower, fill, empty, or carry the
containers when transporting them. However, this can be hazardous for workers since it exposes them to physical activities where they can be injured. In
most cases, workers suffer from sprains and strains in their lower back, upper limbs, and shoulders. Fortunately, there have been ergonomic
developments made to reduce the risks in the manual handling of containers.
So, manual material handling carts refer to handling solutions that are operated and moved manually. These carts are generally equipped with wheels
and handlebars for moving and steering the cart. They are the most commonly used carts and can be found in every industry.

2. Automated Handling - Equipment is used in reducing or replacing manual handling of materials when economically and technically feasible. In fact,
many of the material handling machines available today are semi-automated due to human operator needs such as driving, unloading, or loading
containers that are challenging and expensive to automate.