FoundationalKnowledge:

For Frontline Workers

Chapter 1:Global Supply Chain Logistics

Chapter 2:The LogisticsEnvironment

Chapter 3:Material Handling

Equipment

Chapter 4:Safety

Principles

Chapter 5:Safe Material Handling& Equipment Operation

--- ------Chapter 6:

Quality ControlPrinciples

Chapter 7:Work

Communication

Chapter 8:Teamwork & Good Workplace

Conduct to Solve Problems

Chapter 9:Using

Computers

CLA: Foundational Knowledge: Chapter 1 - Global Supply Chain Logistics I Page 13

( OVERVIEW OF CHAPTERThe purpose of this chapter is to provide anintroduction to the world of logistics and the globalsupply chain and the role of a frontline materialhandling worker. Supply chain logistics is theprocess of getting products from one location toanother. This chapter explains the roles of variousparticipants in the supply chain and how theywork together to get products from one locationto another.

OBJECTIVES

When you have completed this chapter, you wif{be able to do these things.

o Describe the principal elements of the globalsupply chain logistics life cycle

o Describe the roles and responsibilities withthe supply chain

o List the five modes of transportation

o Explain how material handling affectsa company's viability and profitability

o Define basic principles of cost effectivenessthroughout the supply chain

Did You Know?Global Supply Chain

Logistics has a huge impact on thedomestic and global economy. Logisticsfacilitates market exchanges, providesa major source of employment and is amajor purchaser of assets and materials.In the process of these activities,organizations in the United States spendnearly $800 billion on logistics eachyear-up from $678 billion in 1990.That is nearly three times the combinedannual revenues of General Motors, IBM,and Proctor & Gamble! Worldwide, morethan $1.4 trillion is spent annually onlogistics and the amount will grow withthe continued expansion of the globalmarketplace.

Source: "Careers in Logistics", Council ofLogistics Management, www.clm1.org

Elements of Global Supply ChainLogistics Life Cycle

Global supply chain logistics is the lifeblood of theworld economy. It is the process of material, informa-tion and money flowing from the source of supply tothe consumer. This process occurs within companies,between companies and between nations. This bookfocuses on the physical flow of material within theglobal supply chain. To better understand this complexprocess we begin with some basic definitions.

Supply ChainIn terms of materials, "the supply chain is a networkof connected facilities, transportation lanes andinformation systems. This network procures rawmaterials, transforms them into intermediate andfinished products and distributes them to customersthrough a physical distribution system.

The facilities within a supply chain network include:

• Raw Material Providers - Mines and farms thatextract the raw materials needed to producea product.'

• Production Facilities - Sites that convert rawmaterials into manufactured products. Those sitesrange from small shops making a few products andparts to large factories assembling many parts intofinished products .

• Warehouses and Distribution Centers - Placeswhere materials are stored for future use or throughwhich materials are passed on to transporters.There are some differences between warehousesand distribution centers. Warehouses usually focusmore on storage and inventory. Distribution centersfocus more on the movement of finished goods toa transport vehicle. However, these facilities

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increasingly perform similar functions, so for thepurpose of this course the terms will be usedinterchangeably .

• Transportation - Material transporters who delivermaterials to manufacturers, retailers and consumersthrough various modes.

Supply Chain LogisticsLogistics is the link between facilities within thesupply chain. As stated by one expert, "To borrowa sports analogy, logistics is the game played withinthe supply chain arena."

In the broadest sense, supply chain logistics involvesthe efficient, effective forward and reverse flow andstorage of goods, services and related informationbetween the point of origin and the point of consump-tion in order to meet customer requirements.

Material handling logistics, the focus of this book,is "the movement, storage, control and protectionof materials and products throughout the processof their manufacture, distribution, consumption anddisposal"."

Global Supply Chain LogisticsGlobal logistics is the process of moving materialsand information across international boundarieswithin a global network of connected facilities andtransportation modes.

Supply Chain Logistics Life CycleOne way to look at the flow of materials is to picturea product moving through the global supply chainlogistics process from the beginning to the end ofthat product's life.

The force driving a product through its life cycle is thecustomer. "Customer demand is the fountainhead forall logistics activities." 4 Customers:

• Pay for the initial product• Pay for the handling of that product as it flows toeach facility in the supply chain

• Are the ultimate consumers of the product

As Figure 1.1 illustrates, the life cycle of materialflowing through the supply chain is an integrated,interconnected process. Each facility adds its ownvalue, but many of the tasks involved in physicallyhandling the product as it moves through the logisticsprocess are similar. This is why much of theinformation contained in this book can be appliedto whatever tasks are performed in different facilitieswithin the global logistics supply chain.

Another reason to think in terms of material flow as alife cycle is the new trend towards extending productlife. Due to environmental concerns, materials areincreasingly recycled, reused or recovered after theiruse by a consumer. 5

j

1i1

Manufacturing/Production

-CLA: Foundational Knowledge: Chapter 1 - Global Supply Chain Logistics I Page 15 j

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k~·./qsterine and the global supply ch~i~L::~_~~~ '7.. •• ?~ - - -~_-:.:-~iY ~~' ~-L .•~ ..: _ _.7 ¥;~::

Even a product as simple mouthwash has a

supply chain that spans the globe. Consider

the following process used to manufacture and

sell Listerine mouthwash to consumers in the

United States

Australian farmers grow eucalyptus, harvest

the leaves and send them to a processing

company to extract the oil.

The eucalyptus oil is then sold to distributors

and on to one of Johnson and Johnson's

manufacturing plants in Texas.

Natural gas is drilled in Saudi Arabia.

Union Carbide buys liquid gas and processes

it into alcohol, which is shipped to the

manufacturing plant in Texas.

Farmers in the U.S. Midwest harvest corn.

The corn is processed to make Sorbitol

which both sweetens and adds bulk to the

mouthwash.

Sorbitol is sent to the manufacturing plant

in Texas.

The manufacturing plant collects all of these

ingredients and produces the Listerine.

• The mouthwash is packed and sent

to wholesale distributors or directly to

retail outlets.

Source: "Listerine website: www.listerine.com. 2008;Kalakota, R. and Robinson, M. (1999) e-Business,roadmap for success, Addison Wesley, Reading, MA

InventoryProduction, warehousing and distribution facilitieswithin the supply chain all contain controlledquantities of materials called inventories. Thesefacilities typically hold inventory in one or moreof the following forms:"

• Raw materials inventory consisting of materialsready for use in production

• Work-in-Process (WIP) inventory including all thematerials currently being processed

• Finished goods inventory of finished productsready for storage or shipment

• In-transit inventory including products that are inthe process of being transported from a supplierto a customer

For the most part, this text will discuss inventory asit is controlled through the production facility and asit moves through the rest of the supply chain as afinished product.

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Roles and Responsibilities withinSupply Chain Logistics

The previous depiction of the global supply chainlogistics life cycle simplifies the complex tasks thatare carried out at each stage of material handlingand movement. To better understand those tasks, itis important to look at the specific roles and responsi-bilities of each participant in supply chain logistics.

Customer InteractionThe customer drives the supply chain logisticsprocess. A customer can also be a supplier toanother customer, so the total chain can have anynumber of supplier/customer relationships. Customersmust specify any special needs including:

• Material handling requirements• Due dates• Negotiated terms and conditions• Acceptance of product substitutions or back orders

Material handlers in the supply chain must beresponsive to the customer. They:

• Offer the best value to the customer in termsof cost, quality and delivery

• Control inventory according to the customer's need

• Ensure inventory is available according tocustomer specifications

• Monitor customer satisfaction

The customer isthe driver of the

supply chain

CLA: Foundational Knowledge: Chapter 1 - Global Supply Chain Logistics I Page 17

SupplyIn logistics, supply is the process of sourcing andbuilding product inventory to established targets basedon customer needs. The logistics of supply include:

• Identifying and contracting with suppliers of materials• Working with and integrating multiple sources• Processing purchase orders• Verifying timely arrival at the distribution center orwarehouse/

Warehouses and Distribution Centers"The roles and responsibilities of warehouses anddistribution centers are to minimize the cost of labor,space and equipment, while meeting the timing,shipping and accuracy requirements of the customer."

Most warehousing and distribution centers focus onfour basic functions. These are receiving, stocking,order processing and shipping. While each of theseareas may have many individual components, they arethe core of what makes up most distribution operations.

ReceivingReceiving is more than just the physical receipt ofmaterial. It also includes: identifying goods, inspectingfor correct quantity and quality using the bill of lading,filling out receiving reports with stock keeping units(SKUs) and quantities, and dispatching the items tothe correct location for storage or further distribution.Some, or all, of these activities may be automated.The receiving function is critical because it is thefirst step in a typical logistics operation. If errors aremade in receiving, many of them quite often continuethroughout the rest of the material handling chain.

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StockingStocking is assigning products to the properlocation within the warehouse or distributioncenter (e.g., rack, bulk or repack) or in somecases directly to a staging area for quick releaseand shipping. This latter process is sometimesreferred to as cross-docking which is becoming moreprevalent due to just-in-time inventory techniques.

Order ProcessingOrder processing is the practice of assemblingproducts from various locations for a specificcustomer order. It is the basic service a warehouseor distribution center provides for customers and isthe function around which most distribution centerdesigns are based."

Picking is the term associated with order processingand can include full case, repack and bulk or palletpicking. As the order is picked from various areas,it is sent to the shipping area for staging.

Packaging is often done in the repack area, if thereis one. Full case picks and bulk picks usually haveno packaging requirements. However, pallets andother containers are sometimes stretch wrappedfor continuity and product protection.

ShippingShipping methods are usually determined by thecustomer. They may include carrier selection,product labeling, palletization or floor loading,product segregation, pallet stretch wrapping, orother terms. Shipping can also include marking,weighing and preparing shipping documents suchas, packing slips, address labels and bills of lading.

Loading is the main function of the shippingdepartment. It requires skill and experience to loada trailer, so the product reaches the customer ingood condition. The loading or staging area is thelast chance to check the load before the customergets the product. For this reason, it is quite commonfor auditing of orders to be done at this point. Palletshipments normally consist of one item per pallet,but in some cases multiple items are combined ona single pallet.

Cross-docking. If goods are brought from elsewherein the supply chain (e.g., directly from manufacturersor from other warehouses) to fulfill a specificcustomer order, then they are likely to be cross-docked. This means that the goods are transferreddirectly from the incoming vehicle to the outgoingvehicle via goods-in and goods-out bays, withoutbeing placed into storage. This process is gainingwide acceptance due to inventory carrying cost andthe Just-in- Time philosophy of many companies.

To reduce inventory, distribution centers may serveas the final product assembly point. This involvesactivities such as assembly, testing, cutting andlabeling. They may also serve as a returned goodscenter. This is driven by both environmentallegislation and the growth of Internet shoppinq."

CLA: Foundational Knowledge: Chapter 1 - Global Supply Chain Logistics I Page 19

TransportationTransportation physically connects the sources ofsupply with customers. The role of transportation is to:

• Link all pick-up and deliver-to points

• Meet delivery times specified by the customer

• Deliver via the safest and most cost-effective means

• Dispatch and track vehicles

• Handle products within transportation vehiclesaccording to best practices for safety, security andefficiency

• Meet documentation requirements for state,national and international deliveries

• Handle products in accordance with environmentalrules and regulations

Within the supply chain, transportation lanes areused to move inventory between facilities along aparticular mode of transportation using a combinationof vehicles and containers." The carriers oftransportation can be divided into five basic modes:Truck, Air, Rail, Water and Pipeline.

Shared ResponsibilityA chain is only as strong as its weakest link.Supply chain logistics is the flow of materials withina network of connected facilities. Each link in thelogistics process is dependent on the others. Toensure a strong supply chain, each organization,at every stage in the process, must be aware of thisinterdependence. It is an important responsibility.Taken together, the work of individuals, beginningwith frontline material handlers, impacts on thesuccess or failure of companies within the entiresupply chain.

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