Logistics management

Capacity planning

Waqas Khan

11 IN 96

Figure 1. The basic Supply Chain model

A supply chain is basically a group of independent organizations connected together through the products and services that they separately and/or jointly add value on in order to deliver them to the end consumer.

It is very much an extended concept of an organization which adds value to its products or services and delivers them to its customers.

But

what is the benefit of understanding the value adding from the supply chain perspective?

Why managing supply chain is becoming necessary and important to today’s business success?

These are some of the fundamental questions that must be first addressed before discussing the “how to” questions.

Why Supply Chain Management ??????

The need of supply chain management has been identified as follows:

• Improve operations

• Increasing levels of outsourcing

• Increasing transportation costs

• Competitive pressures

• Increasing globalization

• Increasing importance of e-commerce

• Manage inventories

NEED FOR SUPPLY CHAIN MANAGEMENT

Logistics is defined by the Council of Supply Chain Management Professionals (CSCMP) as

“the process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements”.

This definition includes inbound, outbound, internal, and external movements.

LOGISTICS MANAGEMENT

Logistics has gained importance due to the following trends :-

• Raise in transportation cost.

• Production efficiency is reaching a peak

• Fundamental change in inventory philosophy

• Product line proliferated

• Computer technology

• Increased use or computers

• Increased public concern of products Growth of several new, large retail chains or mass merchandise with large demands & very sophisticated logistics services, by pass traditional channel & distribution.

• Reduction in economic regulation

• Growing power of retailers

• Globalization

Further more Logistics has gained importance in the international marketing with the following reasons:

1. Transform in the customers attitude towards the total cost approach rather than direct

cost approach .

2. Technological advancement in the fields of information processing and communication.

3. Technological development in transportation and material handling.

4. Companies are centralizing production to gain economies of scale.

5. Most of the MNC organizations are restructuring their production facilities on a global

basis.

6. In many industries, the value added by manufacturing is declining as the cost of

materials and distribution climbs.

7. High volume data processing and transmission is revolutionizing logistics control

systems.

8. With the advancement of new technologies, managers can now update sales and

inventory planning faster and more frequently, and factories can respond with more

flexibility to volatile market conditions.

9. Product life cycles are contracting. Companies that have gone all out to slash costs by

turning to large scale batch production regularly find themselves saddled with obsolete

stocks and are unable to keep pace with competitors’ new-product introductions.

10. Product lines are proliferating. More and more product line variety is needed to

satisfy the growing range of customer tastes and requirements, and stock levels in both

field and factory inevitably rise.

11. The balance of power in distribution chain is shifting from the manufacturers to the

trader.

• Traffic and Transportation

• Warehousing and Storage

• Industrial Packaging

• Materials Handling

• Inventory Control

• Order Fulfillment

• Parts and Service Support

Typical Logistics Manager Activities

• Demand Forecasting

• Production Planning

• Purchasing

• Customer Service Levels

• Site Location Analysis

• Return Goods Handling

• Salvage and Scrap Disposal

How can the warehouse capacity for finished goods be managed efficiently, especially if the end-customers’ demand fluctuates and is dependent on different factors?

How can transportation capacities in different transport modes with fluctuating demand and short lead-times be managed efficiently?

Capacity has already been defined in general terms as the

“the potential of an economic or technical entity – of any type, size and structure – within a period of time ”

It can be separated into quantitative and qualitative capacity.

This definition can also be transferred into the area of logistics where there are many entities with restrictive capacities which must be considered in the logistics planning and operations to meet not only the company objectives but also the customer’s requirements.

Logistics includes mainly the processes of warehousing and transportation as well as the related flow of information. As a consequence the following types of capacity can be defined:

Storage capacity Handling capacity Transportation capacity Information capacity

CAPACITY

Warehouse capacity is defined as the maximum number of loading units (pallets, boxes, cartons, etc) a warehouse can process. It is called homogeneous warehouse capacity, if all storage yards are designed in the same way, which includes dimensions, bearing capacity, security, etc.

Handling capacity includes sorting and placing into and removing from stock, as well as loading and unloading from the transport. It connects the internal and external flow of goods as well as the different means of transportation and warehousing. Handling capacity is therefore the total operating performance within a defined period of time.

Transportation capacity is dependent on the dimensions of the cargo hold as well as the permitted loading capacity. Therefore the goods are measured in packaging units, loading units or in volume units (for bulk goods).

Information capacities can be defined in connection with this as the maximum performance, the information system is able to provide.Information logistics comprises the “capture, storage, processing and output of data which are necessary for the control and monitoring of the flow of materials and information in a transport and warehousing system.” It consists of components hardware and software.

Capacity requirements planning

The basis of capacity requirements is the generation of the production plan, which depends on customer demand

Capacity requirement / process = changeover time + process time x order

Because a work centre consists of manpower

and operating resources, capacity can be

determined by both factors due to their

interaction. On one hand the manpower can be

the restrictive capacity and therefore cause a

bottleneck. On the other hand the technical

resources can impact the output potential

Furthermore the complexity of the manufacturing can be dissimilar.

For example it can be differentiated between one-level and multi-level production. With one-level production the capacity supply is the capability of that one particular machine.

For multi-level production which contains multiple manufacturing processes, the capacity is restricted to that of the machine with the lowest output level.

Machine capacity on the other hand is determined by: Number of machines Degree of utilization Operation hours per time-period Number of operators per machine

Capacity of manpower is dependent on various factors: Number of staff per shift Average attendance rates Working hours per staff and period Average number of shifts per day

Basically, capacity can be specified as gross capacity, net capacity or effective capacity.

Gross capacity is the output quantity of a machine which operates non-stop in one shift. This calculation assumes the output is consistent and is not influenced by any interruptions. In practical experience the gross capacity amount is typically not achieved.

If breakdowns and interruptions are taken into account due to maintenance, team meetings, breaks, etc., it is called net capacity

Effective capacity is the term used, when the set up time for the machine is also included in the calculations

Adjustment of capacity supply

In case the adjustment of capacity demand is not sufficient for allocation, the capacitysupply has to be adapted. Generally there are three ways to adjust the capacitysupply:

Operation time adjustment Intensity adjustment Quantity adjustment

Capacity adjustment of storage space can be considered on both a long-term andshort-term basis

Capacity Planning And Adjustment In Transportation

Goods can generally be classified into different types: General cargo, bulk cargo, gas and liquids. These different types of goods require different specifications as to their means of transport.

Seasonal fluctuations must also be considered in planning the capacity supply. In thecourse of one year the availability of transport capacity fluctuates due to seasonalvariable demand in different industries. For consumable goods, for example, the peak season for transportation is the fourth quarter of the year, hence the demand in the first quarter of the year is usually lower

Capacity Adjustment

Capacity adjustment in transportation represents the balance of capacity requirementand capacity supply. On one hand, the distribution structure of the company can bemodified and therefore a better degree of capacity utilization can be accomplished

According to GÜNTHER and TEMPELMEIER capacity planning can be separated into aggregated overall planning (long-term basis) and capacity oriented productionprogram planning (short-term basis for a specific period of time) .

Its involves the detailed sequencing of operations and material in support of the aforementioned plan.

Its purpose is to provide properly sequenced work orders, under possibly more refined constraints than those considered in the plan (e.g., sequence dependent setups, maintenance schedules, more detailed machining constraints, additional operator restrictions)

Capacity Scheduling

Different techniques are used for capacity scheduling .

Material requirements planning (MRP) was developed in the 1960s to apply the computational power of computers to production and inventory management problems

The MRP planning procedure has three main inputs:

The master production schedule (MPS):-some other planning document that specifies how much of each end product is required in each time period t, over some specified planning horizon involving T periods

The bill of material (BOM):- which specifies the structure of each product in terms of the components, subassemblies, and assemblies that constitute it. This structure is usually represented graphically as a tree whose root node represents the complete product, leaf nodes purchased components or raw materials, and intermediate nodes subassemblies and assemblies.Inventory status: This is usually a database specifying the amount of each module on hand or on order. For parts that are on order, it will usually specify when the parts are expected to arrive.

Material requirements planning (MRP)

To BE Continued……..

Thank you !!!!!!!!!!!!!!!