Das- Board
A blog containing discussion on contemporary business management areas including supply chain and strategic management.
Monday, November 6, 2017
Friday, October 27, 2017
7 Things You Should/Shouldn't Do While You're Looking For Work
LinkedIn
feed is surged with mid-level professionals looking for better
opportunities, some of them might have lost their job too. While I don't
have a job to offer, I will try to recall best practices of job hunting
based on my own and peers experience and feedback from recruitment
firms as well.
0. Remember the 50-50 rule: This post is for grads from tier1/2 engineering and MBA grads. If you are just average/above average guy, done well in career but nothing exceptional, then you can safely assume yourself as the median within your peers, 50 %of which doing better than you, rest 50% is behind you. So even if you on the verge of loosing your job or struggling for one for months, you may not the only one who is less fortunate and trying to get into top 50%. At the same time, people already in top 50% is struggling to hold their positions. Take the job hunting as a journey, keep patience and wait for the right opportunity
1.Keep your profile updated: refresh your profile at least once a week on all the sites, LinkedIn etc. Works well if you are not already a paid member, nothing wrong to take a paid membership; it keeps your profile refreshed; other benefits does not add much to your CV visibility
2.Number of calls hardly matters, quality of calls does: Don't get excited by the no. of calls you get from recruitment agencies, most of the calls are based on keyword matching and recruiter has hardly gone thru your CV. Even after the call, if they found you suitable, they will upload the CV to hiring companies portal, which might already have your details, and based on that you are automatically rejected. Seldom these recruiters has direct contact to hiring company's HR. They have daily target of making calls and source CV, sad but true
3. Recruitment agencies activity follow a cycle, generally June-August is the peak and almost nil in March-April. So if you are not getting calls during end/beginning of financial year, just keep your cool
4.Calls from hiring company HR/mails or LinkedIn messages from senior officials of hiring company has much more chance to finally have an interview, so you must handle the first ever conversation cautiously. You must try to convince why you are fit for the position. If you have quit your job and immediately available, telling that upfront will be mostly beneficial. When you are honest, you will sound confident.
5. Think before trying out something completely new to you: just because you are desperate to grab an opportunity, you might have started applying startups, boutique consulting firms or NGOs. I clearly state that I have no disregard to them. My only point is if you are from a regular 10-12 hrs MNC culture, it is very difficult to embrace more agile and uncertain environment of a small firm. Also many of new edge consulting and analytics firm actually does very mundane work; read Glassdoor or Indeed reviews carefully to get an insight. If possible, its better to wait longer for suitable opportunity. This waiting period can be turned as a earning period by providing training to corporate on your valuable skills. Plenty of training firms are in your city, explore please
6. Keep a tab on government hiring: various state governments keeps on hiring for special projects (eg CHIPS - Chattisgarh Govt) in medium term (3years) with very attractive package. Same is true for some central PSUs too. While cracking is tough, definitely worth to give a try.
7. Keep honing existing skills: adding a few random certifications will hardly help if it is not supported by domain expertise. New learning is always welcome, only if it add substantial value to convince hiring manager that you are an expert in the field where you have acquired knowledge recently. It is always better to incremental addition to existing skill set, if it is not completely obsolete.
I shared some thoughts, and will stop here. You are welcome to join the discussion and pour your thoughts as well ☺️Write to me for further elaboration!!
0. Remember the 50-50 rule: This post is for grads from tier1/2 engineering and MBA grads. If you are just average/above average guy, done well in career but nothing exceptional, then you can safely assume yourself as the median within your peers, 50 %of which doing better than you, rest 50% is behind you. So even if you on the verge of loosing your job or struggling for one for months, you may not the only one who is less fortunate and trying to get into top 50%. At the same time, people already in top 50% is struggling to hold their positions. Take the job hunting as a journey, keep patience and wait for the right opportunity
1.Keep your profile updated: refresh your profile at least once a week on all the sites, LinkedIn etc. Works well if you are not already a paid member, nothing wrong to take a paid membership; it keeps your profile refreshed; other benefits does not add much to your CV visibility
2.Number of calls hardly matters, quality of calls does: Don't get excited by the no. of calls you get from recruitment agencies, most of the calls are based on keyword matching and recruiter has hardly gone thru your CV. Even after the call, if they found you suitable, they will upload the CV to hiring companies portal, which might already have your details, and based on that you are automatically rejected. Seldom these recruiters has direct contact to hiring company's HR. They have daily target of making calls and source CV, sad but true
3. Recruitment agencies activity follow a cycle, generally June-August is the peak and almost nil in March-April. So if you are not getting calls during end/beginning of financial year, just keep your cool
4.Calls from hiring company HR/mails or LinkedIn messages from senior officials of hiring company has much more chance to finally have an interview, so you must handle the first ever conversation cautiously. You must try to convince why you are fit for the position. If you have quit your job and immediately available, telling that upfront will be mostly beneficial. When you are honest, you will sound confident.
5. Think before trying out something completely new to you: just because you are desperate to grab an opportunity, you might have started applying startups, boutique consulting firms or NGOs. I clearly state that I have no disregard to them. My only point is if you are from a regular 10-12 hrs MNC culture, it is very difficult to embrace more agile and uncertain environment of a small firm. Also many of new edge consulting and analytics firm actually does very mundane work; read Glassdoor or Indeed reviews carefully to get an insight. If possible, its better to wait longer for suitable opportunity. This waiting period can be turned as a earning period by providing training to corporate on your valuable skills. Plenty of training firms are in your city, explore please
6. Keep a tab on government hiring: various state governments keeps on hiring for special projects (eg CHIPS - Chattisgarh Govt) in medium term (3years) with very attractive package. Same is true for some central PSUs too. While cracking is tough, definitely worth to give a try.
7. Keep honing existing skills: adding a few random certifications will hardly help if it is not supported by domain expertise. New learning is always welcome, only if it add substantial value to convince hiring manager that you are an expert in the field where you have acquired knowledge recently. It is always better to incremental addition to existing skill set, if it is not completely obsolete.
I shared some thoughts, and will stop here. You are welcome to join the discussion and pour your thoughts as well ☺️Write to me for further elaboration!!
Wednesday, June 10, 2015
Rise of Reverse Logistics
Introduction:
Reverse logistics is the backward flow of previously
shipped products or parts from the point of distribution or consumption to
upwards the supply chain for possible recycling, energy harvesting or disposal.
Though it is fairly a new concept, it is gaining increasing importance in today’s
business organization, not only as a sustainable practice but also as a profit
center. Strategic decision factors associated with reverse logistics are investment
in building and operating the chain, overall quality, customer service,
environmental and legal concerns, whereas operational factors are cost-benefit
analysis, picking- transportation and warehousing, re-manufacturing,
reprocessing, packaging etc.
Reverse
logistics evolution:
Reverse
Logistics, in early days was mostly focused on convenience in terms of simplified
return process and customer satisfaction. In case of retail business, the
companies that did not support the process found themselves at a strategic
disadvantage to those that did, and were eventually forced to support the same.
Eventually they started seeking the same concessions from manufacturers and
distribution channels. Manufacturers and distributors, in turn began to
put effort on planning and consolidating freight for return products to reduce
expenses related to fuel and labor. Cost comparison done over various
alternatives e.g. centralized versus localized warehousing, collaborative
transportation management, outsourcing of logistics activities and deployment
of information technology. Later, manufacturers began to consolidate depot
warranty repair operations inside the same facility to maximize the utilization
of parts, labor, warehouse and materials. Electronics and computer products
have shorter product life cycle. Reverse logistics activities are mostly
dedicated to recover and reuse materials e.g. lead, copper, aluminum gold,
plastics and glass contained within E-waste (includes computers, televisions,
cell phones, audio equipment and batteries). The activities are also dictated
by compliance and regulations like RoHS, WEEE and controls on Lead and Mercury
based materials. Performing those
activities is not only financially rewarding, but in the case of hazardous
materials, it is conforming to the legislation. In service industry, uniqueness
and responsiveness are the key factor. Designing reverse supply chain elements
in terms of gathering the data that pertains to customer call centers, extended
warranty services, spare parts, resale value, parts procurement costs and
impending returns often requires extensive collaboration, integration and data
exchange within and among organizations. Nevertheless, organizations which
carefully crafted these elements will enjoy the competitive advantages of
improved bottom line and precision management.
Driving factors
for the upsurge of interest in reverse logistics:
A) Harvesting valuable materials, mainly from
electronic products results in good amount of savings.
B) Ease of return and repair can be viewed as an
added value to customer.
C) Companies can enhance marketing efforts by
analyzing reasons for returns and conducting ongoing defect analysis. Learning
from this can be used to guide product design and engineering to prevent future
defects and returns.
D) As landfill fees increase, and options for
disposal of hazardous material decrease, legally disposing of non-salvageable
materials becomes more difficult.
E) Growing
concern for environment raises attention to the afterlife of commercial
products. Logistics managers of socially responsible organizations are putting
efforts to ensure that the discarded items which are not bio degradable can be
moved back to the supply chain for necessary actions. This also helps the brand
building of the organization as a responsible corporate citizen.
Reverse
logistics objectives:
Activities related to reverse logistics are designed
to serve the following objectives-
A) Reduced use of resources is considered as the most
responsible alternative. Measures are to be taken at the early phases of
product life cycle, starting from conceptualization and design so that most
efficient use of physical resources becomes possible. Design aspects should
also include the impacts on packaging, transportation, warehousing and product
handling.
B) Reuse of the product comes in the next level of
importance. Modular design sometimes facilitates reuse of parts of a product.
Timely and convenient up gradation can extend product life (most suitable
example is software up gradation which can be done without even a CD, through
internet). Rechargeable instruments and batteries can be used several times
before being discarded.
C) Recycling and recovering energy has an inseparable
relation with reusing. If a discarded product is broken down in parts, some of
them can be reused, others can be recycled. Recovering energy results in savings
for the community.
D) Physical components which cannot be utilized any
more must go to a landfill. The landfill should be responsible enough so that
it does not cause any impairment to environment.
Reverse
logistics considerations over product life cycle:
Various
aspects of reverse logistics should be built into product design phase like
possibility of reuse of the product or its components and efficient uses of
resources and energy. By making designs modular, the assembly and disassembly
times can be reduced which enhances remanufacturing. Standardization,
especially in terms of fasteners, interfaces and tools, always supports
remanufacture. Use of specialty components or tools may render remanufacture of
assemblies impossible and degrade serviceability if these specialty components
cannot be contained any more. Packaging and shipping factors are also to be
considered at the design phase, as well as the network of warehouses and
transportation is required to be in place. Network design is extremely important
for today’s supply chain spread across the globe. Highly efficient customer
services are required to accommodate returned products and customer concerns
during introduction of the product.
Reverse logistics events in maturity phase are generally fulfills day to
day operational activities like handling returns, repackaging and inspection.
In the decline phase, final return and disposal needs to be documented and
preparation should be taken for legal and/or environmental concerns, especially
applicable for hazardous material.
Operating factors of a reverse logistics chain is
somewhat different than the forward one. Forecasting is difficult because
returns are more disruptive in nature- both in numbers and in quality; pricing
is mostly subjective, as well as allocation of costs; speed and increased
visibility may not be prioritized. In short, processes involved in reverse
logistics are more complicated compared to forward logistics processes.
Financial
aspects of reverse logistics:
Paying attention while designing reverse supply chain
and deploying contract management can results in a sustainable profit for the
organization. Maintenance contracts, extended warranties not only generate cash
but also create lifetime customers. Increased revenues can be realized from
"secondary" sales and from reducing discounting levels by offering
fresh stock in place of unsold or slow-selling stock. Remanufactured products,
especially in heavy engineering industry are finding lucrative market. In some
cases, fees charged for recycling products (e.g. motor oil) are far more than
the costs involved in taking back products. Investments in reverse chain may
result in development of greener technologies which will conserve resources for
future generation and will create new types of job. Costs that should be
considered are- warranty costs, fluctuating freight costs due to small scale
shipments and special handling expenses. Economics of scale benefits may not be
achieved as extra transportation legs would be added to cover specific
locations for returns and repairing/recycling.
Reverse
logistics challenges:
The handling of reverse logistics challenges is a
strategic capability and many firms are yet to exploit this capability in full
extent. Lack of an effective partnership between the retailer and manufacturer
causes conflicts while deciding on condition and value of the item and required
responsiveness, which in turn lengthen the time for processing returns. Lack of
information about the processes like authorization of return and involved costs
is also major source of problem. Sometimes management is unable to justify a
large investment in improving reverse logistics systems and capabilities. Some
organizations do not have specific strategy for handling returns and
non-salable items. Companies often focus on the cost side of reverse logistics rather
than on its revenue side. To be successful, however, the revenue side needs to
be managed aggressively too. Moreover, running a distribution system backward
is challenging – employees have difficulty making decisions when the decision
rules are not clearly stated and exceptions are often made. Because of this,
automation of paper intensive return processes is also not easy.
Future trends
and conclusion:
As many firms have only become aware of the importance
of reverse logistics relatively in recent times, it is expected in the future
they will pay considerable attention on it. To reduce the cost, firms will need
to focus on improving several aspects of their reverse logistics flows like better
entry point screening, partial returns credit, earlier disposition decisions, shorter
processing times and superior information management. Cross-industry consortia
are among viable options, where companies with a shared requirement for
recycling, but without a competitive clash of interests, pool their resources
so that they can cost-effectively handle reverse logistics activities. Implementing
a return merchandise authorization system can generate visibility in the
returns channel, by providing advance notification of incoming products, which
in turn can enable improved inbound control/scheduling and workforce planning. Guidance
and support from top management is vital to recognize strategic importance of
the process. It is also crucial to
integrate all the functional areas that affect, or can be affected by, returned
processes. Tighter linkages between the marketing and logistics functions will
ensure a smooth return process with prompt and correct credits for customers. By
aligning employees with reverse logistics processes ahead of time, companies
can achieve desired level of responsiveness while improving throughput
processing.
It is clear that, while sometimes derisively referred
to as junk; much value can be reclaimed cost-effectively from discarded
products. Though the efficient handling and disposition of returned product is
unlikely to be the primary reason upon which a firm competes, it can clearly
make a competitive difference. Gradually, the reverse logistics will be more
recognized as more than a cost minimization exercise; it will fit into a
company's strategy to be a cost leader or to better serve customers.
References:
1. The Hidden Value in Reverse Logistics by Diane A.
Mollenkopf and David J. Closs, Supply Chain Management Review July 1, 2005
2. Going Backwards: Reverse Logistics Trends and
Practices by Dr. Dale S. Rogers and Dr. Ronald S. Tibben-Lembke, 1998
3. The Future Direction of Supply Chain: Mastering
Reverse Logistics by Mark Elliott and Jonathan Wright
4. Building Competitive Operations planning and
Logistics, APICS 2009 Ed.
Tuesday, June 9, 2015
Order to Cash Process Simplified
Business process:
Pre-requisites:
- Products and their no.s in the inventory
- Re-order level of each items
- customer database with the credit ratings
Business process:
- The salesman captures the client with the product details and the quantity
- The corporate office checks the credit listing of the customer. If the customer is existing customer in the database then the order is accepted otherwise a credit checking mechanism department does the credit review of the customer and approves whether or not to accept the order.
- If the lead is accepted then an order is created in the system by converting the lead to order.
- The inventory is checked. If the quantity is available then the items are booked against that order. Otherwise purchasing department is intimated if quantity falls below the re-order level.
- The delivery challan is created and the order is shipped to the customer. There can be multiple delivery challan against the same order.
- The invoice is raised which will be either against one delivery order or can combine multiple delivery orders in one invoice.
- The payment is received against the invoice and it is marked as closed if the entire payment is made.
Actors:
- Salesman
- Corporate office
- Credit Ratings department
- Purchasing/production department
- Warehouse manager
- Accounts
Friday, June 29, 2012
Measuring Performance: The Balanced Scorecard Framework
Measuring Performance: The Balanced Scorecard Framework
Traditional way of measuring
corporate performance was mostly focused on generating value for its
stockholders. Little concerned about other stakeholders, corporate growth was
only indicated by raise in share price. But as organizations become more globally
dispersed, having complex supply chain distributed across continents and
working with culturally and geographically diversified customer as well as
employees, performance measurement is to be done with a holistic approach. Also
many organization provides public service (i.e. Health, education, political
institutions), where output cannot be assessed in financial terms. Balanced
Scorecard Framework provides perspectives on which the performance could be
measured as the organization works towards the common goal as set by its
leaders. Leaders set the target and help the organization to achieve that by
adopting desired leadership behavior. They ensure firms health in terms of
corporate governance and in terms fulfilling corporate social responsibility.
Balanced Scorecard Perspectives and Desired Leadership Behavior:
Perspective
|
Key Imperatives
|
Key Questions
|
Leader ‘s behavior
|
Financial
|
“Profitability”
“Return on Capital Employed”
|
To Satisfy our shareholder, what financial objectives must we accomplish
|
Task oriented
|
Customer
|
“Consumer Satisfaction”
“Market Share”
|
To achieve our financial goals, what customer needs, must we satisfy
|
Change oriented
|
Internal
Process
|
“Efficiency”
|
To satisfy our customers, what internal
business processes must we excel in
|
Task oriented
|
Learning & Growth
|
“Knowledge”
“Innovation”
|
To achieve & maintain our competitive
position, how must the organization the Organization learn & improve
|
Relation oriented
|
Leaders affect the multi-faceted
performance by executing the following:
They communicate the strategic
purpose of KPIs and scorecards to various stakeholders
They develop goals and measures
consistent with the corporate strategies
They plan, create schedules and
assign responsibilities.
Saturday, April 14, 2012
Role of MRP in Manufacturing Planning
Introduction
The fact that manufacturing continues to become a commodity within the value chain is indisputable. The greater the rate of manufacturing commoditization, the greater the focus on creating efficiencies that drive down product costs. From the world’s largest computer manufacturer to the world’s largest automotive manufacturer, companies that create value that are orders of magnitude greater than their competitors do so because they relentlessly focus on “leaning” their manufacturing operations without compromising their ability to adapt dynamically to the vicissitudes of their markets.
Managing an Environment of High Product Variety and Demand Variability
In the current business environment, demand rates constantly vary, and manufacturing operations need to be continuously rebalanced without destabilizing operations. Moreover, multiple products are frequently produced on the same line, and each of these operations could operate for different periods of time in a day
Given the current pressure on product margins, lean manufacturing principles provide an excellent framework for squeezing costs out of manufacturing. However indisputable maybe the benefits of lean manufacturing and Six Sigma, in today’s fast-moving, complex business environment, organisations must continually adapt. They must do so by handling large amounts of data and executing complex workflows while electronically communicating any exceptions simultaneously to multiple locations. In an environment like this, they need enabling software applications and a stable technology platform. Without IT, organizations cannot be a truly lean or six sigma enterprises. To create an adaptive manufacturing environment, firms must be able to access real-time information from the plant floor and the supply chain and then use this information to manage exceptions with enterprise resource planning (ERP) and supply chain management (SCM) applications such as MRP.
Material Requirements Planning (MRP)
MRP refers to the calculation of the quantity and timing of materials, parts, and components needed to create an end item.
MRP System
Based on a master schedule derived from a production plan, a MRP system creates schedules identifying the specific parts and materials required to produce end items, the exact numbers required, and the dates when orders for these materials should be released and be received or completed within the production cycle. We have been forced to planning for materials to be delivered when needed and not before, because of space requirements and associated storage costs for excess inventory.
Objectives of MRP
The main purpose of a basic MRP system are to control inventory levels, assign operating priorities for items, and plan capacity to load the production system. The theme of MRP is “getting the right material at the right place at right time in right quantity”.
The objectives of inventory management under MRP system are to improve customer service, to minimize inventory investment, and to maximize production operating efficiency. The philosophy of MRP is that materials should be expedited when their lack would delay the overall production schedule and de-expedited when the schedule falls behind and postpones their need.
Typically when an order is behind schedule, there will be a significant interest and effort to try to get it back on schedule. However the opposite is not always true. The result is a one-sided effort – late orders are hurried but early orders are not rescheduled for later. Aside from perhaps using scarce capacity, it is preferable not to have raw materials and ancillary items before the actual need since the inventories tie up finances, clutter up stockrooms, prevent design changes, and prevent the cancellation and delay of orders.
Benefits of MRP System
Other than the general benefits of better customer and inventory management, this system makes the firm have better response to market demands, with highly efficient and flexible production systems. Many firms that have converted to MRP system claim as much as a 40 percent reduction in inventory investment.
In addition to these, the MRP system gives advance notice and hence so the managers can see the planned schedule before actual release of orders. It tells when to expedite as well as de-expedite; delay, cancel or change orders; and thus aids capacity planning.
MRP System Structure
The MRP portion of manufacturing activities most closely interacts with the master schedule, bill of materials file, inventory records file and the output reports.
The MRP system works as follows:
Orders for products are used to create a master production schedule, which states the number of items to be produced during specific time periods.
A Bill of Materials file identifies the specific materials that are used to make each item and the correct quantities of each.
The inventory records file contains data such as the number of units on hand and on order.
These three sources become the data sources for the MRP programme, which expands the production schedule into a detailed order scheduling plan for the entire production sequence.
The demand from the known customers and the forecasted demand are combined and form the input for the master production schedule. In addition to the demand for end products, customers also order specific parts and components either as spares, or for service and repair.
Working of the MRP Programme
The MRP programme operates on the inventory, master plan and the Bill of Materials data. It works in this way:
- A list of end items needed day-wise is specified by the Master Plan
- A description of the materials and parts needed to make each item is specified in BOM.
- The number of units of each item and material currently on hand is contained in the inventory records.
The MRP program computes the quantities of each item required. The number of units of each item required is then corrected for on-hand amounts, and the net requirement is ‘off-set’ or set back in time to allow for the lead time needed to obtain the material
Reports generated from a MRP system
Primary: Primary reports are the main or the normal reports used for inventory and production control. These reports consist of:
- Planned Orders to be released at a future time
- Order Release Notices to execute the planned orders
- Changes in Due Dates of open orders due to rescheduling
- Cancellations or Suspension of open orders due to cancellation or reduction of items on the Master Production Plan
- Inventory Status Data
Secondary: These are additional reports which are optional under the MRP system.
- Planning Reports to be used, for example, in forecasting inventory and specifying requirements over some future time horizon.
- Performance Reports for purposes of pointing out inactive items and determining the agreement between actual and programmed item lead times and between actual and programmed quantity usages and costs.
- Exception Reports that point out serious discrepancies, such as errors, out-of-range situations, late or overdue orders, excessive scrap or non-existent parts.
Concept of Closed Loop MRP
When the MRP system has information feedback from its module outputs, this is termed closed loop MRP. It is defined as:
A system built around MRP and also including the additional planning functions of Master Production Planning and Capacity Requirements Planning. Further once the planning phase is complete and the plans have been accepted as realistic and attainable, the execution functions come into play. The term ‘closed loop’ implies that not only is each of these elements included in the overall system but also that there is feedback from the execution functions so that the planning can be kept valid at all times.
Manufacturing Resource Planning (MRP II)
Manufacturing Resources Planning (MRP II) systematically relates the production system to purchasing, finance, and marketing as well as other business functions. It is the design of ordering and inventory system for dependent demand. The need for dependent demand items, such as materials, components, or subassemblies, occurs because of the demand for a “higher level” item of which they are a part.
Dependent demand implies that the process of determining how many items are needed and when they are needed is simply computed from the end product is designed and the production process it goes through.
The original MRP planned only materials. However as computer power grew and applications expanded, so did the breadth of MRP. Soon it considered resources as well as the materials and was called MRP II. A complete MRP program consists of 20 or so modules controlling the entire system from order entry through scheduling, inventory control, finance, accounting, and so on. MRP today impacts the entire system and includes just-in-time, kanban and computer integrated manufacturing (CIM).
MRP II plans and monitors all the resources of a manufacturing firm: manufacturing, marketing, finance, and engineering through a closed loop system. It has been designed to stimulate the manufacturing system and is generally conceived as being a total company-wide system.
Benefits of MRP II throughout entire ecosystem of an organization
Initially in organizations lacking a proper MRP system, there might be delays in placing orders with suppliers because of the need to churn out manual reports. This would result in delayed inventory shipments to shop floor, which would impact the production schedule. Now, automated action messages display changes in demand, forecasted requirements, and supplier forecasts. This allows the buyers and material managers to provide their suppliers with forecasts of what they need by week, by month, or at any level they want. Other related benefits are:
o Achieved productivity efficiency gains across the company, including supply chain integration, inventory control, automation of financial activities, and centralization of procurement
o Improved competitiveness and responsiveness through visibility of customer demand and inventory and through business intelligence reporting that provides insights for better decision making
Tuesday, December 6, 2011
3rd Party Logistics and Automotive Industry
Introduction:
Outsourcing of logistics function is a business dynamics of growing importance across manufacturing industries. Shorter response time for global supply uncertainties changed the traditional thought about logistics, it is no more a backroom function; rather its importance grew to a strategic boardroom function. In order to handle its logistics activities effectively and efficiently, an organization may consider the following options – in-house operation, creation of a logistics subsidiary or it can outsource the function and buy the service. Recently, there has been a growing interest in the 3rd option, i.e. outsourcing of logistics functions to third party logistics (3PL) service providers.
3PLs provide comprehensive logistics solutions to the automotive industry. These include inbound logistics, outbound logistics, warehousing and value added services like line feeding, high sub-assemblies and SCM consultation.
Automotive logistics:
Main line of services and solutions offered for the automotive industry by a 3PL service provider are:
- Inbound/Outbound/Interplant transportation
- Milk run collection & consolidation
- Warehousing , Inventory management & line feeding
- After market distribution
- International Logistics
Other optional services and solutions include:
- Global network management
- Lean warehousing, including vendor-managed inventory (VMI), subassembly and sequencing
- Lean logistics management
- Data gathering and maintenance
- Leveraged procurement
- Collaborative network engineering solutions
- Dynamic optimization and execution
- Real-time Web-based part-level track and trace
- Freight audit and payment
- Web-based dashboard reporting
- Parts distribution
- Supply chain design and optimization
- Full-service supply chain consulting
Customisation for the automobile industry
Receipt of goods, storage, order picking, sequencing, internal transportation and line feeding are included in the general service offered by a service provider to an automotive company. This customised service is referred as factory logistics. Container management and management of spare parts warehouses also significant as part of this special logistics.
Common terminologies in material supply activities for a automotive organization:
CKD – Completely knocked down: For CKDs, all parts are packed as a “Set” or “Vehicle Set” to manufacture a vehicle. This set is made up of the deliveries from the manufacturer and all suppliers.
PbP – Part-by-Part: The PbP process is primarily used to supply production factories with large parts volumes. The parts are brought together from the individual deliveries from manufacturers and suppliers, and delivered to the foreign production factories, with optimised loading equipment, in the cross-docking process.
SLCs – Supplier Logistics Centres: Operating SLCs for leading automobile manufacturers includes material planning, warehousing and handling services, quality controls, pre-assemblies and sequence-accurate line supply.
Optimised production batch sizes, reduction of storage requirements and drop of transport costs at the supplier’s end by grouping goods flows are the key advantages.
Comparison of various 3PL services pricing model across industry. (Source: Internet)
Model Type | Description |
Transactional Billing | Activity based cost model and is the most popular. The charges are constructed as follows: • unloading per FTL, • receipt & put away( by unit, pallet, carton) storage ( per pallet per week) • order assembly ( base fee plus per unit/line/pallet) • hourly rate to cover rework, etc. |
Cost Plus model | Mechanism involves estimating the total cost of running operations and profit as a Management Fee which is fixed as a percentage of the total cost |
Percentage of Sales Turnover or volume. | Floor price or minimum price covers the fixed cost expenses of the warehouse. The revenue earned by the 3PL varies with the sales revenue. The variable cost that has a major impact on the costing is labour. 3PL service providers manage this costing by employing minimum number of human resources and add on temporary labour when required |
There several disadvantages of outsourcing one of the key supporting activities.
Variation of the demand from line (production variation) is the root cause for the deviation of actual activities from the planned one; it also affects service providers plan and misplace of trust between two parties. Incapability of supplier to meet steep rise of demand of parts leads to difficulties to achieve desired level of inventory for 3PL. unplanned storage, scrap handling, reverse logistics activities result in duplication of work. Unpredictable vehicle arrival pattern leads to variation of resource-loading for logistics. More people are deployed to counter same time arrival of inbound vehicles. Need of skeleton worker become acute to avoid any kind of problem/line stoppage. These workers can be fully utilized only when there is a certain volume and multi-shift operations. Outsourcing also may lead to lack of ownership of the entire logistics operation of individual shops/ work-stations
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