provide in formation about transportation, warehousing and inventory decisions. helps in gaining basic knowledge on these topics.

1.  Submitted By:
Vivek Kumar (98)
Yogesh (99)
Zeba Khan (100)
Rasmi (704)
Shivani (705)

3. “The process of moving an item
from point A to point B”.
“Safe, efficient, reliable and
sustainable movement of persons
and goods over time and space”

4.  The operation of transportation determines
the efficiency of moving products.
 The progress in techniques and
management principles improves the moving
load, delivery speed, service quality,
operation costs, the usages of facilities and
energy saving.
 Transportation takes a crucial part in the
Logistics Operations.

5.  Without well-developed transportation
systems, logistics could not bring its
advantages into full play.
 A well operated logistics systems could
increase both the competitiveness of the
government and enterprises.
 Transportation system is the most important
economic activity among the components of
business logistics systems.

6.  Product Movement
 Product Storage

7.  Temporal:
Product is locked up during transit, hence
inaccessible.
 Financial:
Administration costs, salaries, Maintenance
costs expended.
 Environmental:
Fuel costs are high (creates air pollution,
congestion, Noise pollution)

8.  When unloading and loading is
more expensive then storage
When storage space is limited
(situation when inventory levels
are high)

9.  Rail Transportation
 Road Transportation
 Water Transportation
 Air transportation+

10.  Rail Transport :
Advantages
 It is convenient mode of transport for travelling long
distances.
 It’s operation is less affected by adverse weather
condition like rains, fog etc.
Disadvantages
 It is not available in remote part of the country.
 It involves heavy losses of life as well as goods in case
of accident.

11.  Road Transport:
Advantages
 It is relatively cheaper mode of transportation as
compared to other modes.
 It is flexible mode of transportation as loading and
uploading is possible at any destination
Disadvantages
 Due to limited carrying capacity, road transport is not
economical for long distance transportation of goods.

12.  Water Transport:
Advantages
 It promotes international trades.
 The cost of maintaining and constructing routes is very
low most of them are naturally made
Disadvantages
 It is a slow moving mode of transport so it is not suitable
for perishable goods.
 It is adversely affected by weather conditions.

13.  Air Transport:
Advantages
 It is fastest mode of transport.
 It is the most convenient mode of transport during
natural calamities
Disadvantages
 It is relatively more expensive mode of transport.
 It isn't suitable for short distance travel.

14.  Financing
 Congestion
 Infrastructure
 Safety
 Population
 Increased truck weights

15.  Transportation contributes the highest cost
among the related elements in logistics
systems, the improvement of transport
efficiency could change the overall
performance of a logistics systems.
 Transportation plays an important role in
logistics system and its activities appear in
various sections of logistics processes.

17.  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.
 Creates time utility by bridging the time gap
between production and consumption of
goods

18.  Term “Warehousing” is referred as
transportation at zero miles per hour
 Warehousing provides time and place utility for
raw materials, industrial goods, and finished
products, allowing firms to use customer
service as a dynamic value-adding competitive
tool.

19.  The warehouse is where the supply chain holds
or stores goods.
 Functions of warehousing include
› Transportation consolidation
› Product mixing
› Docking
› Service
› Protection against contingencies

20. • Provide timely customer service.
• Keep track of items so they can be found readily &
correctly.
• Minimize the total physical effort & thus the cost of
moving goods into & out of storage.
• Provide communication links with customers

21.  Benefits of Warehouse Management
› Provide a place to store & protect inventory
› Reduce transportation costs
› Improve customer service levels
 Complexity of warehouse operation depends on the
number of SKUs handled & the number of orders
received & filled.
 Most activity in a warehouse is material handling.

22.  Receive goods
 Identify the goods
 Dispatch goods to storage
 Hold goods
• Pick goods
• Marshal shipment
• Dispatch shipment
• Operate an information
system

23. • Accepts goods from
‒ Outside transportation or attached factory &
accepts responsibility
• Check the goods against an order & the bill of
loading
• Check the quantities
• Check for damage & fill out damage reports if
necessary
• Inspect goods if required
Receive goods

24. ‒ items are identified with the appropriate stock-
keeping unit (SKU) number (part number) &
the quantity received recorded
Identify the goods
Dispatch goods to storage
‒ goods are sorted & put away
Hold goods
‒ goods are kept in storage & under proper
protection until needed

25. Pick goods
‒ items required from stock must be selected
from storage & brought to a marshalling area
Marshal the shipment
‒ goods making up a single order are brought
together & checked for omissions or errors; order
records are updated

26. Dispatch the shipment
‒ orders are packaged, shipping documents are
prepared, & goods loaded on the vehicle
Operate an information system
‒ a record must be maintained for each item in
stock showing the quantity on hand, quantity
received, quantity issued, & location in the
warehouse

27. PRIVATE
WAREHOUSES
PUBLIC
WAREHOUSES
GOVERNMENT
WAREHUOSES
CO-
OPERATIVE
WAREHOUSES
BONDED
WAREHOUSES
DISRIBUTION
CENTERS OR
WAREHOUSES
EXPORT AND
IMPORT
CLIMATE –
CONTROLLED

28.  OPERATED by a company for shipping and storing its
own products
 OWNED AND MANAGED- manufacturers or traders
 CONSTRUCTION- Farmers near their fields,
Wholesalers and Retailers near their business
centre's and Manufacturers near their factories
 COMPANIES – Stable inventory levels and long run
expectations
 SUITABILITY- Firms that require special handling
and storage features and want to control design and
operation of the warehouse

29.  Provide storage and physical distribution services on
rental basis
 Used by SMALL FIRMS and LARGE FIRMS
 Organizes to provide storage facilities to traders,
manufacturers, agriculturists in return for a storage
charge
 Licensed by Govt.
 In India OWNED and OPERATED – Central
Warehousing Corporation and State Warehousing
Corporation
 SUITABILTY – seasonal production or low volume
storage needs, companies with inventories maintained
in many locations, firms entering new markets
 OWNER –stands as an agent of goods

30.  OWNED, MANAGED AND CONTROLLED -Central
or State Governments or public corporations or
local authorities
 EXAMPLES- Central Warehousing Corporation of
India, State Warehousing Corporation and Food
Corporation of India
 If customer cannot pay rent within specified time
authority can recover rent disposing of goods
4. CO-OPERATIVE WAREHOUSES
• Owned, Managed and Controlled – Co-operative
societies
• Facilities at most economical rates to members
• Located-Punjab, Karnataka, Maharashtra and
Andhra

31.  Licensed to accept imported goods for storage before payment of customs
duty
 Imported merchandise is stored and released only after payment of
appropriate taxes
 Cigarettes, Liquor, Other products are stored
 Owned and Operated – PORT TRUSTS
 Acts in two capacities viz LANDLORD and BAILEE OF GOODS
 As landlord provides storage facilities on rent
 As bailee of goods take reasonable care to handle and store goods as it
has lien on goods under care for charges of its services
 Owner can sell goods wholly or in part by endorsing a warrant
 Facilitate enterpot trade- importer need not pay the import duty

32.  Designed to move goods
 Large and highly automated
 Receive goods from various plants and suppliers,
take orders, fill them efficiently deliver to
customers quickly
 Located near the market owned or leased by
manufacturers
 Access to transport networks

33. 7. EXPORT AND IMPORT WAREHOUSES
 LOCATION –near ports where international
trade is undertaken
 Storage facilities for goods awaiting onward
movements
 Facilities- packaging , inspection, marking etc
8. CLIMATE-CONTROLLED WAREHOUSE
 Handle storage of many products including
need special handling conditions
 Freezers for frozen products, humidity
controlled environment for delicate products,
produce or flowers, etc

35.  Inventory is the raw materials, component
parts, work-in-process, or finished
products that are held at a location in the
supply chain.
 The objective of inventory management is to
strike a balance between inventory
investment and customer service.

36.  Lead time: time interval between ordering and
receiving the order
 Holding (carrying) costs: cost to carry an item in
inventory for a length of time, usually a year (heat,
light, rent, security, deterioration, spoilage, breakage,
depreciation, opportunity cost,…, etc.,)
 Ordering costs: costs of ordering and receiving
inventory (shipping cost, cost of preparing how much
is needed, preparing invoices, cost of inspecting
goods upon arrival for quality and quantity, moving
the goods to temporary storage)
 Shortage costs: costs when demand exceeds supply
(the opportunity cost of not making a sale, loss of
customer goodwill, late charges, the cost of lost of
production or downtime)

37.  Provide acceptable level of customer service
(on-time delivery)
 Allow cost-efficient operations
 Minimize inventory investment

38.  To meet anticipated demand
 To smooth production requirements
 To decouple operations
 To protect against stock-outs
 To take advantage of order cycles
 To help hedge against price increases
 To permit operations
 To take advantage of quantity discounts

39. To be effective, management must have the following:
 A system to keep track of inventory on hand and on
order
 A reliable forecast of demand
 Knowledge of lead times and its variability
 Reasonable estimates of:
› Inventory Holding (carrying) costs
› Ordering costs
› Shortage costs
 A classification system for inventory items

40.  Anticipation or seasonal inventory
 Safety stock: buffer demand fluctuations
 Lot-size or cycle stock: take advantage of
quantity discounts or purchasing efficiencies
 Pipeline or transportation inventory
 Speculative or hedge inventory protects against
some future event, e.g. labor strike
 Maintenance, repair, and operating (MRO)
inventories

41.  Periodic System
Physical count of items made at periodic intervals
 Perpetual (continual) Inventory System
System that keeps track
of removals from inventory
continuously, thus
monitoring
current levels of
each item.

42.  An important aspect of inventory management is that
items held in inventory are not of equal importance in
terms of dollar invested, profit potential, sales or
usage volume, or stockout penalties. For instance, a
producer of electrical equipment might have electric
generators, coils of wire, and miscellaneous nuts and
bolts among items carried in inventory. It would be
unrealistic to devote equal attention to each of these
items. Instead, a more reasonable approach would
allocate control efforts according to the relative
importance of various items in inventory. This
approach is called A-B-C classification approach

43. Classifying inventory according to some
measure of importance and allocating control
efforts accordingly.
A - very important
B – moderate important
C - least important

Annual
$ value
of items
A
B
C
High
Low
Few Many
Number of Items

45. The question of how much to order is frequently
determined by using an Economic Order
Quantity (EOQ) model. EOQ models identify the
optimal order quantity by minimizing the sum of
certain annual costs that vary with order size.
Three order size models are described:
 The basic economic order quantity model
 The economic production quantity model
 The quantity discount model

46. Assumptions of EOQ Model
1. Only one product is involved
2. Annual demand requirements are known
3. Demand is even throughout the year
4. Lead time does not vary
5. Each order is received in a single delivery
6. There are no quantity discounts

47.  The inventory cycle begins with receipt of an
order of Q units, which are withdrawn at a
constant rate over time. When the quantity on
hand is just sufficient to satisfy demand during
lead time, an order for Q units is submitted to
the supplier. Because it is assumed that both
the usage rate and lead time don’t vary, the
order will be received at the precise instant that
the inventory on hand falls to zero. Thus, orders
are timed to avoid both excess and stockouts
(i.e., running out of stock). The following figure
illustrate this idea.

48. Figure 11.2
Profile of Inventory Level Over Time
Quantity
on hand
Q
Receive
order
Place
order
Receive
order
Place
order
Receive
order
Lead time
Reorder
point
Usage
rate
Time

49.  Production done in batches or lots
 Capacity to produce a part exceeds the
part’s usage or demand rate
 Assumptions of EPQ are similar to EOQ
except orders are received incrementally
during production

50.  Only one item is involved
 Annual demand is known
 Usage rate is constant
 Usage occurs continually, but production occurs
periodically
 Production rate is constant
 Lead time does not vary
 No quantity discounts

51.  Quantity discounts are price reductions for large orders
offered to customers to induce them to buy in large
quantities. In this case the price per unit decreases as
order quantity increases.
 If the quantity discounts are offered, the buyer must
weigh the potential benefits of reduced purchase price
and fewer orders that will result from buying in large
quantities against the increase in carrying cost caused
by higher average inventories.
 The buyer’s goal with quantity discounts is to select the
order quantity that will minimize the total cost, where
the total cost is the sum of carrying cost, ordering cost,
and purchasing (i.e., product) cost.

52. Annual
carrying
cost
Purchasing
costTC = +
Q
2
H
D
Q
STC = +
+
Annual
ordering
cost
PD+
Where P is the unit price.
Recall that in the basic EOQ model, determination of order size
doesn’t involve the purchasing cost. The rationale for not
including unit price is that under the assumption of no quantity
discounts, price per unit is the same for all order size. The
inclusion of the unit price in the total cost computation in that
case would merely increase the total cost by the amount P times
the demand (D). See the following graph.