Presented by: (PUMBA, PUNE) Rahul S.

Thorat -0346 Subin Geo Mathews-0359 Romi Rawal -0165

CASE
Akash Ispat Engineering Company Limited  10 years Old Engineering Establishment  Medium Sized Company  Sales Turnover of Rs. 700 Cr.

JIT has been implemented Led to conflicts between the purchase, production and the traffic department Inventory carrying costs reduced by 45% Transportation costs increased by 25%

Problems Faced :
Customer complaints due to failure to deliver Increase in transportation costs by 25% due to higher frequency of delivery and no full load transportation Need for more speedier mode of transportation which increases transportation costs Overtime

(Contd.)
Increase Demand Non

in competition decreasing due to economic slump

availability of the materials in time

KEY CONCEPT
Third Party Logistics(3PL):
Businesses that provide one or many of the following logistics services:
Transportation Management Public/Contract Warehousing Distribution Management Freight Consolidation

Types of 3PL providers:

y Transportation based-

Services extend beyond transportation to offer a comprehensive set of logistics offerings.

y Warehouse/distribution based-

Many have former warehouse and/or distribution experience.

y Forwarder based-

Very independent middlemen with forwarder roles. Non-asset owners that provide a wide range of logistics services.

y Financial based-

Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory.
y Information based-

Significant growth and development in this category of Internet-based, business-tobusiness, electronic markets for transportation and logistics services.

Advantages of 3PL: Save time No investment in

Buying trucks Training Development

Helps in expanding to new markets Narrow your focus Reach more customers effectively Increase profitability

Disadvantages of 3PL:
o Loss of control o Impact on in-house workforce o More distance from clients i.e. a loss of personal

touch

Difference between 3PL and a Transportation provider:

Transportation provider gets product from point A to point B Just one function of logistics 3PL provider assists in multiple functions

Solution I :

SOLUTION
A-B-C PARETO ANALYSIS
CLASS - A
LOW (15 20%) HIGH (70-80%) DAILY LOW SMALL

CLASS - B
MEDIUM (30-40%) MODERATE (15-20%) DAILY MEDIUM MODERATE

CLASS - C
VERY HIGH (50-60%) LOW (5-10%) 2-4 Times / Year LARGE LARGE

VOLUME COST FREQUENCY OF SHIPMENT LOT SIZE SIZE OF SAFETY STOCK

 

Apply Partial / Modified JIT Can be used by Purchase Dept. in Collaboration with Traffic Control Dept.

 

Use JIT for parts of Class A & B only Order parts of Class C -2 to 4 times a year ( Due to low Inventory Holding Cost)

E.g. HP Company, Greeley Division

CLASS - A CLASS - B CLASS - C

VOLUME

3%

3%

94 %

COST

88 %

4%

8%

FREQUENCY OF SHIPMENT

DAILY

DAILY

2-4 /YEAR

Solution II: THIRD PARTY LOGISTICS (3PL) A. Transactional Outsourcing (Short Term):  Based on transactions  No long term contracts  No bonding between the 3PL and the outsourcing company.

B. Strategic Outsourcing (Long Term) :

Based on long-term relationships with

successful outcomes
 3PL companies become partners in

supply chain management

 Establish transactional transparency

Solution III: STRATEGIC PARTNERING WITH VENDOR THROUGH VMI

Vendor Managed Inventory (VMI) : VMI is essentially an integrated approach whereby the inventory at the downstream is monitored and managed by the upstream (e.g. vendor/supplier).

 Upstream

demand visibility is improved to

reduce the impact of demand fluctuations

As a part of logistical customer service strategy

Point-to-point information on real demand

Advantages of VMI :

Lower inventory investments. Better scheduling and planning Lower Inventory Stock outs Closer customer ties and preferred status

REFERENCES


Logistics and Supply Chain Management - Martin Christopher

Just In Time Manufacturing - M G Korgaonker

Quad E- Awan University Research Journal of Engg. Science & Technology, Volume 1 No. 1, January-June 2000

http://sreevidya.wordpress.com/2007/10/31/3pl-itsadvantages/