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  1. 1. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Enhanced Virtual Warehousing for Distribution Process in Intra-logistics FUNG SUI-HEI*, CHEUNG CHI-FAI, LEE WING-BUN, KWOK SIU- KEUNG Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong. E-mail: mikefsh@alumni.polyu.edu.hk Keywords Enhanced Virtual Warehousing, Intra-Logistics, Supply Chain Strategy, Distribution, Product Customization. Abstract Customers are demanding improved levels of service at the instant product availability in the retails. Companies struggle to fine tune their internal flow of products and information aimed to provide competitive customer service level. Intra-logistics is targeted to strengthen the networks with integrated supply chain for cost reduction. Decentralizing supply chain intelligence enables individual components easier to integrate into process synchronization. It facilitates the commercial development of vertical integration in each chain, such as distribution process. The horizontal integration could be achieved in term of logistics information transforming process. Enhanced virtual warehousing is introduced on the condition that distribution facilities are operated under intra-logistics. The product differentiation is performed at supply chain downstream closer to the customer after the order is revealed. The process of product customization is postponed to conduct in the distribution facility, along with time postponement in the conception of virtual warehousing. The retailers’ in-stock duration is improved as enhanced virtual warehousing drives the replenishment on a frequently basis instead of projected orders with longer lead times mainly based on forecast. The postponement of customization can be regarded as a logistics information strategy of enhancing virtual warehousing. Flow of inventory and demand data are increasingly needed to synchronize with aid of information technology. System here is a must to act as tool being in place to capture customer orders and transform it to supply chain plan as well as facility executive instruction to carry out fulfillment process. Flow through enhanced virtual warehousing, distribution and continuous replenishment techniques are being utilized to reduce product value-adding costs and reduce inventory levels, thus lowering distribution expenses. A precise understanding of logistics processes in other industries, combined with the particular requirements of the product and its customer, is probable to develop optimal enhanced virtual warehousing practice for other companies as well. Résumé La clientèle exige une amélioration du service rendu en ce qui concerne la disponibilité à tout moment des produits sur les lieux de vente. Les entreprises se battent pour adapter finement la circulation interne des produits et de l’information de façon à être compétitives pour offrir ce service. La logistique interne a pour objet de renforcer l’intégration de la supply chain afin de réduire les coûts. En décentralisant le fonctionnement de la supply chain, il est possible d’améliorer la synchronisation de chacun de ses maillons. Ceci facilite le développement commercial de chaînes intégrées verticalement, comme par exemple la distribution. L’intégration horizontale pourrait être réalisée par un processus de transformation de l’information logistique. L’entreposage virtuel peut être développé à la condition que des méthodes de distribution soient mises en œuvre dans la logistique interne. La différenciation du produit s’accomplit en aval de la supply chain, au plus près du client dès que ses instructions sont connues. La personnalisation du produit est déplacée vers P. 1 / 1
  2. 2. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics le processus de distribution en même temps que la configuration de l’entrepôt virtuel peut être différée. La durée d’immobilisation des stocks chez les détaillants est réduite, puisque l’amélioration de l’entreposage virtuel permet de les regarnir fréquemment au lieu d’avoir à passer des ordres au coup par coup sur la base de prévisions et avec des préavis plus longs. Le différé de la personnalisation du produit peut être vu comme une stratégie d’information logistique du développement de l’entreposage virtuel. Les données sur les stocks et sur la demande doivent de plus en plus être synchronisés avec l’aide des technologies de l’information. Une approche systémique se doit d’être appliquée pour recueillir les ordres des clients et pour les transformer en programme pour la supply chain, comme pour faciliter l’élaboration de directives pour en contrôler l’exécution. La circulation engendrée par l’entreposage virtuel comme les techniques de distribution et de réapprovisionnement en continu permettent de réduire les coûts et le niveau des stocks, et partant les dépenses de distribution. Afin de promouvoir de façon optimale l’entreposage virtuel dans d’autres types d’entreprises, il est nécessaire d’avoir une connaissance précise des processus logistiques de leur secteur d’appartenance, ainsi que des exigences particulières du produit et de la clientèle. 1. Introduction Companies who are the market leaders continually focus on increasing market share or at least maintain existing segment by eliminating new incomers while increasing worldwide competition. The reality is that end customers are increasingly demanding and will not wait for next stock replenishment while an item is sold out at retailing point (Blackwell 2001). They want products to be ready for immediate sale, otherwise, competitors’ products will be chosen as replacement. This will deadly damage the market share of a company that owns her brand name in a highly competitive global market (Zikmund 2003). Excellence in distribution operations can have a profound effect on a company’s performance, but to achieve this goal companies need to look beyond traditional approaches to the distribution facility. 2. Initiation of Intra-logistics in Distribution Facility Today, the distribution facility is fully linked into the supply chain. Its roles and responsibilities are changing at a rapid pace. It is not only a warehouse in which to store inventory. Intra-logistics (Loettner 2005) is the term used to describe the parties responsible for enhancing work-in-progress (WIP) flow within enterprises. It is defined as including suppliers dispatching, material handling, warehouse equipment, logistics system and services. Logistics processes are increasingly interlinked with other processes, which enable intra-logistics to become a driver for integration throughout the entire supply chain. Bowersox and Closs (1996) concurred that integration has to be both vertical and horizontal in order to exploit its full economic potential lied behind for cost reduction. Distribution is preferred as an initial implementation point of intra-logistics among the logistics process, as distribution centers (Mikko and Alarisku 2003) serve a supply chain strategic role as a transfer point of both inventory from WIP to finished products as well as information from customer orders to production volume. Under intra-logistics, this transformation is being achieved through a combination of measures (Loettner 2005) as supply, post-manufacturing like assembly, packaging, and distribution into a single distribution facility. A single one can be integrated to serve multiple roles and mange a variety of value adding operations, not limited to distribution. P. 2 / 2
  3. 3. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Intra-logistics Production Distribution Customers Suppliers Distribution Facility Warehouse Figure 1 Close interrelations between production, warehouse, and distribution is an opportunity to integrate into distribution facility under intra-logistics. In order to meet the demands of customers for optimum service, distribution center will take on different roles within its respective distribution networks. However, low operation cost has to be considered in the supply chain strategy. More value-adding service provided in the facility brings higher cost than conventional distribution center. Servicing multiple supply chains (Salvador et al. 2004) of different manufacturers is a solution to share the facilities operation cost. The usage of distribution facility infrastructure can be maximized and be shared this cost by various clients. Appropriate location of facility can achieve rising customer satisfaction through logistics service quality and on-schedule deliveries with less expenditure on transportation cost (Bradley 1998). If the regional distribution facility is located at high outlay country, it may result in additional handling costs and excessive inventory carrying costs. However, if the facility is set up in low costs but far away from major demanders in the region, it then results in high stock delivery costs and excessive inventory levels. Similar business situation can be commonly observed in most worldwide companies (Outi 2000). The model of enhanced virtual warehousing is thus identified as proper distribution method incorporating with intra-logistics. Great flexibility on inventory is benefited by enhanced virtual warehousing, along with much closer synchronization between the flow of stock and the transfer of data (Aminoff 2002) in the distribution facility under intra-logistics. 3. Distribution Model of Enhanced Virtual Warehousing 3.1. Conventional Distribution Conventionally, a network with several distribution centers serve wholesalers and retailers in its geographic territories. The stock movement is towards development of a supply chain network like a tree branches which supports outlying downstream demanders. Each conventional distribution centers takes on the role of a breaking bulk hub whereby finished products are doled out to the retailers (Gattorna and Walters 1996). The distributors individually take care of own ordering and inventory control, who are solely suffered from bullwhip effect (Lambert 1998) and abrupt change in demand. Lavish high stock level is resulted from the uncertainty at their end. P. 3 / 3
  4. 4. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Conventional Material Flows Stock WIP (a) FG (A) WIP (b) Stock FG (A) WIP (c) Stock FG (B) Stock Suppliers Manufacturer Distribution Center FG (C) Distributors Figure 2 The accumulated stock at downstream is costly to cross-dock among distribution facilities due to product customization and boundary of logistics information sharing. Inventory flow is simply downward to the customers, and no cross-docking is taken place among distribution facilities. Slow moving items at a point cannot be directly swapped to another one where is out of sales resulted in market share damage, as shown in figure 2. The accumulated stock is costly to inter-transfer among distributors, as it is already processed distribution requirements of product customization (Fung et al. 2004). It results in somewhere slow moving inventory is obsolescing at downstream of supply chains and be written off in the account book, while somewhere is out of stock causing shrinkage in market segment. 3.2. Virtual Warehousing To further discuss the previous situation, the customized products from each downstream distribution center can be consolidated into the large global facility. As no value is added on the finished products at this merge point, products are reserved at WIP status and be earmarked in a supply chain planning system based on allocation of production resource to the customer orders (Fung et al. 2004). The idea of postponement (Pagh et al. 1998) is introduced at this point to realign the manufacturing and distribution activities in a supply chain. Time postponement is about deferring the timing of the essential process in which the WIP items are converted to specific functionalities, features, or identities finished products (Bucklin 1965, Fung et al. 2004). The customization processes are taken place after some key demander information about specific needs or requirements is revealed. Just-in-time delivery is resulted from this practice to postpone assembly activities. It reduces risk and costs associated with inventory of finished products, and enables customer configurable products at last moment. WIP inventory on the final customer order are thus assembled for product customization at the global upstream facility and shuttled promptly to downstream distribution centers. P. 4 / 4
  5. 5. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Virtual Warehousing Stock WIP Virtual Stock Stock WIP Just in Time Stock Just in Time WIP Stock Suppliers Manufacturer Distribution Center Distributors Figure 3 The allocation of inventory is merged under virtual warehousing at the upstream of supply chain, where inventory is stocked in the status of WIP. From distributors’ point of view, they are sheltered from market change under centralized safety stock of finished products at the merge point. In fact, the merge point is preformed at the manufacturer, and further, is pushed backward to the suppliers of supply chain upstream. Also, the consolidated inventory is in the status of WIP instead of finished products (Fung et al. 2004). Thus, as illustrated in figure 3, warehousing at the distribution center is indeed “virtual” in the eyeshot of distributors. Most companies operate somewhat model in between build-to-stock and build-to-order. Manufacturer is simply build-to-stock that completes production prior to the placement of customer orders. The production plan is totally based on forecast inducing redundant inventory. The purely build-to-order one is suffering of excessive waiting time by the customer for the product (Kolisch 2001). Under virtual warehousing, the early processes in the supply chain are operated as per forecast and the WIP items are stocked, the remaining customization processes are only done at the last moment of shipment due date after receipt of the customer order (Lee and Billington 1994, Fung et al. 2004). Further postponement after order receipt can release buffer to absorb new abrupt order to higher customer service level, as illustrated in figure 4. Company owning worldwide brand name products, by virtual warehousing a large portion of its distribution volume, can decrease the costs of handling, labor and inventory levels. Efficiencies are gained at the centralized facility for customization of WIP inventory because of consolidation. The benefits of virtual warehousing include reduced impact on production stability due to demand order uncertainty. P. 5 / 5
  6. 6. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Postponement of Customization Timing under Virtual Warehousing Customization after order confirmation R/W WIP FG FG FG Suppliers Manufacturer Distributors Customers Build to Forecast Buffer Build to Order for Abrupt Orders Relative long replenishment time Figure 4 The customization processes are only done at the last moment of shipment due date after receipt of the customer order. 3.3. Enhanced Virtual Warehousing This model is a further step to enhance previous virtual warehousing, in term of improving customer service level. It specifically benefits to the worldwide consumer products aimed to rise up or maintain its market segment under highly competitive global market. Under enhanced virtual warehousing, the overall customer service level is improved with the replenishment activity closer the point of consumption. Not only the timing of product customization is postponed in the virtual warehousing, the customization process is also geographically postponed in the supply chain in this enhanced model. Postponement of Customization Processing under Enhanced Virtual Warehousing Customization after order confirmation R/W WIP WIP FG FG Suppliers Manufacturer Distributors Customers Build to Forecast Build to Order Supply Chain Information integrated by Intra-logistics Quick response to market Figure 5 The product differentiation is postponed to supply chain downstream closer to the customer after the order is revealed. Instead of having all the tasks processed at a central factory far away from customers, post-manufacturing process like product assembly and packaging can be taken place closer to the major retailing markets to shorten stock replenishment distance. To facilitate the geographical change of processing, enhanced virtual warehousing entails the upgrade of distribution facilities with the vertical and horizontal integration by intra-logistics. As long as hardware upgraded and logistics information availed in distribution centers, where can serve a supply chain strategic role as a transfer point of inventory from customizable WIP to finished products, as shown in figure 5. P. 6 / 6
  7. 7. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics The product differentiation leads to product variety occurring at the most efficient point of a supply chain and at the lowest total supply chain cost. For some specific processes not cost-effectively taken place in distribution facilities under intra-logistics, it does not economically justify delaying the point of product customization. To ease process postponement in this kind of product, fundamental change of product structure is likely required at the beginning of product design stage depending on its series characteristic. The product is called for design into simple differentiation at last process, rather than the product being assembly and test in complex unit with highly technical post- manufacturing work-on. The sub-process operations can be re-sequenced to look for opportunities of new decoupling point attaining the least machinery and time consuming product differentiation. Reconsidering the roles of the distribution facility by intra-logistics brings significant benefits to supply chain operation. Retail orders continue to come into the downstream distribution facility for fulfillment in the local region, rather than demands are only sent to sales office in the central. There is no longer restarting replenishment process again from the upstream of supply chain. The retailers’ in-stock duration is improved as enhanced virtual warehousing drives the replenishment on a frequently basis instead of projected orders with longer lead times mainly based on forecast. WIP are produced at a discounted volume from order forecast, excessive order amplified due to bullwhip effect is buffered by the stock distributed in the downstream facilities. Enhanced Virtual Warehousing Stock Stock WIP (a) WIP (A) FG (A) WIP (b) Stock Stock WIP (B) FG (A) WIP (c) Stock Stock WIP (C) FG (B) Stock Stock WIP (C) FG (C) Suppliers Manufacturer Distribution Facilities in Intra-logistics Figure 6 The retailers’ in-stock duration is improved, as enhanced virtual warehousing drives the replenishment on a shorter lead time and cross docking among distribution facilities. The inventory is cross-docked and shuttled among the downstream facilities on a regularly basis for the replenishment of stock. The slow moving stock on excessive order is enabled to swap to other downstream facilities where the local customers are in need. Under enhanced virtual warehousing, inventory at the downstream facilities, especially slow moving items, can be drastically reduced. The surplus stock in the regions can also P. 7 / 7
  8. 8. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics be repacked with existing stock as bundle product at distribution facility to avoid inventory obsolete. Customer service level is improved by expediting the value-adding and shuttling process, and reducing order lead time. However, individual purchasing volume form other facility in nearby region are mostly less than truckload quantities. Inbound freight cost should be considered case by case because of stock inventory shuttled among distribution facilities. Thus, the load in distribution facility can be broken down into pallet or carton quantities to maximize efficiency through economies of scale. Information technology and stock handling system is justified to upgrade the hardware in distribution facilities. It is not only in term of warehousing where simply stores inventory, but also facilitates the post-manufacturing processes of product customization upon demands are solid. The whole package of process, facility, equipment and systems are determined to support and enable execution of the enhanced virtual warehousing. 4. Proof of Concept in Real Case The real case of company is practical business environment to prove the concept of a new model. Realistic logistics functions in an international company are a well testing laboratory for the implementation of enhanced virtual warehousing in supply chain. Schick Asia Limited is one of farsighted companies and has trail implemented virtual warehousing as a milestone for next enhancement. Schick is a worldwide prestigious manufacturer of shaving products, with its operations in geographically different locations. Its headquarters is located in United States with its regional office is in Hong Kong, a manufacturing plant in Mainland China, suppliers in different regions of Mainland China, customers and marketing affiliates all around the world. Schick is very keen on continually improving the logistics operations for systematic storing, accessing and disseminating inter-departmental and inter-enterprise data, information and knowledge across various functional units and business partners along the supply chain. The emphasis is placed on the use of information technology has shifted from office automation within an enterprise to inter-enterprise applications (Fung et al. 2004). The variety of localized versions of shaving product, coupled with increasing pressure for stock availability, had resulted in millions of dollars of finished product accumulated in the distribution centers. As the finished product is already customized to local package, it is cost inefficiency to repack the product swapping to other regions in need. Rework is even not practical to reuse the components of finished product. Expensive write-offs are often happened agonizingly at the end of product life cycle. Shipping by air freight can shorten lead time from manufacturer to customers, however, transportation cost is then significantly increased to damage the profits of Schick. To higher customer service level for shaving product consumers, Schick is required to provide accurate order fulfillment quicker than its competitors. The postponement of product customization is first introduced into its supply chain model as primary stride of virtual warehousing. Postponement releases time to carry out bundle product flexibly responding the competitors’ action in the market. And the inventory is consolidated as P. 8 / 8
  9. 9. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics WIP stage at the manufacturer. Safety stock amount in the WIP inventory is reduced due to the risk pooling. The razor module of shaver at WIP stage can be bulk shipped at much lower weight and smaller size. More items loaded on each carton and pallet is resulted to drop carrying cost and transportation cost. In order for Schick to fulfill its promise of satisfying customer demand, there must exists the correct match between the role of the supply chain operation to satisfy retailer needs, production capacity, and warehouse capability. The distribution function of warehouse is here induced its potential relationship between operational roles and facility types. Warehouses are called for acting more roles under intra-logistics. Depending on customer orders, regional distribution facilities are required to fulfill various roles in the supply chain. Not restricted to holding inventory, these sequentially include consolidating WIP, assembling products, bundling and packaging products, providing value-added services, fulfilling demand, as well as, reclaiming and reworking returns. Further strides from virtual warehousing can bring increased revenues to Schick via its supply chain distribution operations. It is proved that the right track to enhanced virtual warehousing can be obtainable of the achievements of greater logistics improvements, better information flow, shorter replenishment cycle times, and more flexible production capacity. Various manufacturers owning worldwide brand name, like Proctor & Gamble, Johnson & Johnson, are the most suitable corporate to share a common physical distribution network under intra-logistics. Distribution facility infrastructure as corporate assets can not only serve product series of a single company, but also provide a variety of value-adding functions, especially bundling product strategy, for different product characteristic by companies. Distribution facility vary depending on the role that the company is playing in terms of customer service level and functions provided under kinds of market competition. A broad view of the business environment factors is imperative to the success of intra- logistics process, including business strategy, customer service requirements, order demand profile, inventory policy, supply chain planning structure, and product series characteristics. 5. Modeling Tool of Enhanced Virtual Warehousing The ever-increasing capability of technology can act as an enabler of the operating supply chain strategy of enhanced virtual warehousing. The key is a system platform to share information freely and be in command of the distribution facility under intra-logistics. The platform enables the efficient flow of product from manufacturers through distribution centers to the retailers. Basing on the supply chain model of enhanced virtual warehousing, the system developing with these features and requirements would be named as Enhanced Virtual Warehouse System (En-VWS). The flow of inventory passing through the distribution operation is highly dependent on the integrated flow of information. Starting with forecast, demand planning, and actual customer order demand information, the intra-logistics will sense these demand signals and utilize data and information to fulfill customers’ requests. P. 9 / 9
  10. 10. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics In order to leverage distribution facility outlay under the intra-logistics, companies are advised to plan the distribution operating strategy and integrate enablers in the areas of process and technology to execute it. Technology enablers of the operation strategy include En-VWS and stock handling equipment technology like RFID. Fully implementing the supply chain model is comparatively essential to succeed the case, so technology enabler is actually a tool of the model to facilitate the implementation. The core of the modeling tool of enhancing virtual warehousing Enhanced Virtual Warehouse System (En-VWS) Distribution Facilities Commander Supply Product Profiles Analysis Chain Activities Customer Orders Analysis Database Intra-logistics Facility Capacity Analysis Inventory Level Analysis along supply chain Ground on Virtual Warehouse System (VWS) Figure 7 The core of modeling tool contains various elements grounded upon Virtual Warehouse System (VWS). The core of system typically involves development of a supply chain database with detailed analysis of the customer order, product profiles, intra-logistics facility capacity and inventory level along supply chain. The customer order analysis tells the volume and stock handling requirements to demand which distribution facility. The analysis includes delivery volume and frequency upon orders, number of product lines and quantity per order. Total delivery volumes in pallets, cartons, items are captured as one to investigate its peak to average ratios as well as seasonal delivery volume fluctuations. And the analysis of product profiles provides key characteristics of each stock keeping unit (SKU), which is similar to Product Data Management tools. It includes storage requirements, package data, product style and class. The facility capacity analysis shows the constraints of distribution network. It reflects the movement rate of individual items and product bundles, the bottleneck points, storage space and conditions being occupied to support requested delivery requirements. The last analysis of inventory level indicates the performance of a supply chain. It analyzes inventory turns, facility-on-hand stock levels, as well as average, quarter, peak inventory levels by SKU, by product series, by customers, and by regions. This database model is the basis to control the supply chain operation. 5.1. Elaboration on Virtual Warehouse System into an Enhanced Tool En-VWS should involve modeling all the critical parameters from previous mentioned supply chain database and determining the optical arrangement of facilities under intra- P. 10 / 10
  11. 11. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics logistics. It is aimed to reduce overall cost and optimize profit while satisfying service requirements from customers. Virtual warehouse system (VWS) is a foundation platform of En-VWS, which has been built and has been executing in Schick Asia Limited. VWS in Schick can serve for regional supply chain operations only, but excludes international distributing functions. Effective utilization of VWS will enable efficient management of the flow of inventory with aid of control and allocation of WIP. This system development based on virtual warehousing help to strengthen commerce communication links and can enhance decision making capabilities for company operation in the supply chain. On top of VWS, the enhanced tool ought to cater more scenarios of supply chain events happening in worldwide operation. The liaison with distribution facilities under intra- logistics would be a breakthrough of the enhanced tool over VWS in term of information flow between supply chains downstream. The en-VWS also has to facilitate the process postponement to the downstream, instead of time postponement of differentiation in the VWS. The four mentioned analysis of customer order, product profiles, intra-logistics facility capacity and inventory level are a must comprising in the enhanced tool, in which is helpful to assist decision making for inventory swapping among distribution centers. Figure 8 A snapshot from Virtual Warehouse System illustrates a inventory sorting platform for WIP distribution and planning based on customer orders, whish is a well- developed foundation for the enhanced tool. P. 11 / 11
  12. 12. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Figure 9 A snapshot from Virtual Warehouse System illustrates WIP allocating suggestions for distribution decision with aid of supply chain events retrieval system. Most modules in VWS are worth considerable to be remained in the enhanced tool. As the snapshots shown in figure 8-9, VWS includes sophisticated sorting platform, automated storage and retrieval system, planning tool to support production material controlling hub for assembly and shipment of products (Fung et al. 2004). To facilitate customization postponement, VWS is fully aware of the state of available inventory, able to capture all the required data and capable of managing the planning knowledge. Provided that it is used effectively, it significantly contributes to support supply chain decision making and optimizing supply chain performance. VWS also consists of dynamically allocating earmark WIP to customer orders at the point of upstream facility into customizing production. All these features would be fundamental elements to be elaborated into the enhanced tool. Utilization of en-VWS will be a pioneering example of the distribution operation increasing revenue by the assurance of market segment through improved in-stock position as well as the reduction of order lead time by postponement. 6. Conclusion Applying a new supply chain perspective to current distribution operations reveals that the conventional material flow are obsolete to satisfy a worldwide brand name product series. Customers prefer improved levels of service at the instant product availability in the retailing points. Companies try to fine tune their internal flow of products and information aimed to provide competitive customer service level. Intra-logistics is proposed to initiate in these companies starting from distribution process, as logistics processes are increasingly interlinked with other fields such as marketing, retailing. The distribution process is exactly a transfer point in supply chain where inventory from WIP to finished products as well as information from customer orders to production volume. The integration under intra-logistics can utilize full economic potential of each supply chain. A single distribution facility is then able to be integrated as multiple roles serving various value adding operations, no longer limited to distribution. As post-manufacturing P. 12 / 12
  13. 13. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics is spread out along supply chains downstream, the precaution has to be taken preventing outcome quality degradation at distribution center. The distribution facility needs to represent the vital link in the supply chain that adds value to stock, from raw material to finished products. It is also essential to integrate the channels of supply chain information passing through distribution process, in which advanced planning and scheduling is likely to undertake integration for planning upgrade. Based on intra-logistics, the distribution facility of the future will continue to optimize various existing and new processes to enable execution of the supply chain strategy. To better overall customer service levels, the conception of enhanced virtual warehousing advocates locating replenishment point closer the place of consumption. It can facilitate the postponement of product customization in timing and processing. The geographical change of processing entails the upgrade of distribution facilities with the vertical and horizontal integration by intra-logistics. The inventory is transformed at distribution facilities from customizable WIP to finished product, but they do not process last steps of customization until the delivery order is confirmed. Fewer production processes at supply chain upstream are performed under forecast resulting in lower risk to bear obsolete inventory, more processes are performed on analysis about the exact specification of the customer orders. As overall inventory is mainly plugged at upstream of the supply chain, product released from the global facility just-in-time flows through distribution channels. The product does not go into conventional reserve storage locations, but rather dispatching products to the customer on final actual order at the last moment. The implementation of enhanced virtual warehousing is required the execution of proposed practice in processing as well as the aid of tool, En-VWS, to be in command of the distribution facilities under intra-logistics. The platform of En-VWS enables the efficient flow of product from manufacturers through distribution centers to the retailers. It enables the company users such as logistics controller, inventory planners, to freely share updated supply chain information for their decision making. Companies are advised to utilize more advanced information technology and inventory handling systems to streamline the flow of product pulled and value-added through the supply chain from source to retailer. Companies that invest distribution operations in innovative approaches can strongly influence their performance of reducing stock out, raising customer satisfaction, and increasing revenues due to secure global market segment. Acknowledgment The authors would like to express their sincere thanks to the Research Committee of the Hong Kong Polytechnic University, the Innovation and Technology Commission of the Hong Kong Special Administrative Region of the People’s Republic of China, and Schick Asia Ltd. for the financial support of the research work (Project code: UIT/046). Many thanks are also due to Craig JO, Masada LI for their business advice and helpful support of the research project. P. 13 / 13
  14. 14. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Reference AMINOFF, A. et al., 2002, Research on factors affecting warehousing efficiency. International Journal of Logistics Research and Applications, Vol.5, No.1, 45-57. BLACKWELL, R.D. et al., 2001, Consumer Behavior (Mason). BOWERSOX, D.J., and CLOSS, D.J., 1996, Logistical Management: The Integrated Supply Chain Management Process (McGraw-Hill). BRADLEY, P. et al., 1998, Merge-in-transit yields benefits. Logistics Management and Distribution Report, Vol.37, No.10, 30. BUCKLIN L.T., 1965, Postponement, speculation and the structure of distribution channels. Journal of Marketing Research, Vol.12, No.5, 26-31. FUNG S.H. et al., 2004, A knowledge-based virtual inventory system for inventory management in production planning. SCMIS’ 2004, Proceedings of the 2nd SCMIS Workshop, pp. 187-203. GATTORNA, J.L., and WALTERS, D.W., 1996, Managing the Supply Chain (Macmillan). KOLISCH R., 2001, Make-to-order Assembly Management (Berlin). LAMBERT, et al., 1998, Fundamentals of Logistics Management (McGraw-Hill). LEE, H.L., and BILLINGTON, C., 1994, Designing Products and Processes for Postponement (Kluwer Academic). LOETTNER, J., 2005, Intralogistics – new value chains through integration. Logistics & Transport Focus, Vol.7, No.1, 24-27. MIKKO, K., and ALARISKU, T., 2003, Increasing customer value and decreasing distribution costs with merge-in-transit. International Journal of Physical Distribution and Logistics Management, Vol.33, No.2, 132-148. OUTI, M., 2000, An activity based costing model for logistics operations of manufacturers and wholesalers. International Journal of Logistics Research and Applications, Vol.3, No.1, 53-65. PAGH, J.D. et al., 1998, Supply chain postponement and speculation strategies: how to choose the right strategy. Journal of Business Logistics, Vol.19, No.2, 13-33. SALVADOR, F. et al., 2004, Supply-chain configurations for mass customization. International Journal of Production Planning & Control, Vol.15, No.4, 381-397. ZIKMUND, W.G., 2003, Exploring Marketing Research (Cincinnati). Biography of the authors Mr. Fung Sui Hei is a Research Student of the Department of Industrial and Systems Engineering of The Hong Kong Polytechnic University. He is currently working in a Teaching Company Scheme co-organized by Schick Asia Limited, The Hong Kong Polytechnic University and The Innovation and Technology Commission of the Government of the HKSAR. He received his bachelor degree in manufacturing engineering at the same University. His research interests include logistics systems, supply chain management, product and knowledge engineering. P. 14 / 14
  15. 15. Enhanced Virtual Warehousing for Distribution Process in Intra-logistics Dr. Cheung Chi Fai is an Associate Professor in the Department of Industrial and Systems Engineering of The Hong Kong Polytechnic University and an Adjunct Professor of the Harbin Institute of Technology Shenzhen Graduate School. He is an active researcher with an emphasis on industry related and applied research. His research interests include Logistics Systems, E-business, Knowledge Management, Artificial Intelligence and Precision Engineering. His research results have been published in various international journals and conferences. Professor Lee Wing Bun is the Chair Professor and Head of the Department of Industrial and Systems Engineering of The Hong Kong Polytechnic University. He is also the Directors of the Microsoft Enterprise Systems Centre and the Advanced Manufacturing Technology Research Centre of The Hong Kong Polytechnic University. His research interests include manufacturing technology, ultra-precision machining, dispersed production systems and logistics engineering. Prof. Lee has published two research books, co-edited two books, and has more than 200 technical papers published in various fields of manufacturing engineering. He also acts as the editorial board member in a number of international journals. Dr. S.K. Kwok is a Project Fellow of Department of Industrial and Systems Engineering. He also in-charge of the Mobile Commerce Demonstration Unit of the Microsoft Enterprise Systems Centre (MESC). His research areas are in Artificial Intelligence, Industrial and Systems Engineering, Information and Communication Technologies (ICT) and Mobile Commerce. The research outcomes are presented in several international conferences and published in various international journals. P. 15 / 15