Fleets Managemnt in Supply Chain ManagementM Unit V 2024.pptx

Fleets Managemnt

1. SUPPLY CHAIN MANAGEMNT Dr.J.Deepak K umar Assistant Professor – Department of B. C om -BPS Sri Ramakrishna C ollege of Arts & Science UNIT V

2. Dr.J.Deepak kumar The term ‘ logistics ’ has been attributed various sources, ranging from the French word logistique ( loger means to lodge) to the Greek word ‘ Logos ’, meaning reason or speech. Whatever be the etymology, the earliest usage of the word had most probably been part of military science. Logistics has long been defined as the part of military operations dealing with procurement, maintenance and transportation of people, animals, material and facilities. It involves managing three essential flows – Material flow, Cash Flow and Information flow – in the best possible manner 5 basic principles of Supply Chain are – PLAN, SOURCE, MAKE, DELIVER and RETURN. Logistics relates to the DELIVER part of SCM.

3. Dr.J.Deepak kumar LOGISTICS FLEET - MEANING, DEFINITION AND BENEFITS Logistics Fleet Management comprises of all activities for efficient management of different types of vehicles involved in transportation and movement of goods within the supply chain. This term covers all types of vehicles including: heavy transport (Trucks, Tractor trailers, Container / bulk trailers etc.), light transport (Cargo vans, light cargo carriers, commercial cars) mobility & utility vehicles (fork lift trucks, loading cranes, tractors, motorbikes, generator vans etc.) The entire logistics and transport operations is usually underpinned by Fleet Management due to the key role it plays in maintaining and managing the vehicular assets of an organization. Fleet Management includes the following: 1. Inbound Logistic : Movement of procured raw materials within plant as a manufactured finish product. 2. Outbound Logistic : Movement of finished product from plant storage to the Warehouses. It is then passed to the customer for the final invoicing.

4. Dr.J.Deepak kumar ACTIVITIES OF FLEET MANAGEMENT Various activities within the ambit of Fleet Management are: Vehicle financing Vehicle maintenance Vehicle telematics (tracking and diagnostics) Driver management Speed management Fuel management Health and safety management

5. Dr.J.Deepak kumar NEED IDENTIFICATION FLEET MANAGEMENT The specific fleet requirement of any business is dependent upon the type, urgency, scale and location of operations. The transportation needs of a taxi-cab aggregator will vary greatly from that of a global mining organization, a steel manufacturer will require very different logistics equipment compared to a fashion retailer or a food processing company. Usually, vehicle selection criteria are guided by the following factors: Purpose of the vehicle Location or terrain of operations Fuel type and availability Range or distance of operations Cost of procurement vs rentals Local availability of dealers and Service Centres (including spare part availability) Economies of scale – bulk purchase of vehicles

6. Dr.J.Deepak kumar Reduce Risk & Cost: Reduces overall risk of ownership, maintenance etc. of vehicles Reduces operational costs and increase efficiency Reduces downtime which would impact productivity and cost Improve Operations Efficiency & Employee Satisfaction: Generates well-thought-out route planning thereby helping save precious time. Improved quality & Consistency of service in movement of goods Improve Employee Satisfaction: Increases employee productivity Maximize Driver Safety and Satisfaction Improve Customer Satisfaction Improves customer service and Customer Satisfaction levels. Retain Customers Increase Profitability BENEFITS OF LOGISTIC FLEET

7. Dr.J.Deepak kumar TYPES OF FLEET IN GOODS TRANSPORTATION Mode of Transportation Mode of transport is a term used to distinguish substantially different means of conveyance. The different modes of transport are air, water, and land transport, which includes rail, road and off-road transport.

8. Dr.J.Deepak kumar TYPES OF FLEET IN GOODS TRANSPORTATION Modes of Transportation: Truck Load : One of the most common mode of transportation across the globe. LTL – Less than truckload (LTL ) refers to usage of Trucks for the movement of small packages or parcels. This mode of transport is more expensive per parcel since it does not occupy all the available space in the Truck. FTL – Full truckload (FTL) carriers normally move goods which occupy the total capacity of trucks or Shipping Containers by weight or volume. If there is mode is less expensive than LTL, however, it requires one to hire a full truck. Railways : This is a preferred mode for bulk movement of materials over land. Waterways : This includes both marine (sea) transport as well as inland waterways (river / lake). Marine – This is commercially the most economical and preferred way to transport both bulk as well as containerized material over large distances using the sea route. Small and large marine vessels, oil tankers etc. are used in this mode. Inland Waterways – Smaller boats and barges are used to transport smaller parcels of material across rivers and lakes. Airways : This is the most expensive and hence uncommon mode used very judiciously for quick transportation of very small or light parcels. International Commercial Terms: The International Commercial Terms (also known as Incoterms ), a registered trademark of the International Chamber of Commerce, are the global standard terms of trade for sale of goods. Since 1936, the International Chamber of Commerce (ICC) has been maintaining, developing and publishing these Incoterms. They serve as standard guidelines for international trade, especially related to import and export . The Incoterms essentially assign ownership of various documentation and costs involved in International trade between the Buyer and the Seller of the goods.

9. Dr.J.Deepak kumar WAREHOUSE MANAGEMENT Warehouse Management focuses on the proper utilization of space. There are activities like material alignment, racking and handling. A warehouse management system (WMS) is an important software or system used for efficient warehouse operations including receipt and storage of goods, issue of goods for dispatch and delivery to final customer. Implementing a WMS (Warehouse Management System) will mean that companies can reduce staffing levels in two ways. In addition to the above-mentioned cost savings, implementing a Warehouse Management System (WMS) also facilitates on-time and accurate provision of goods to customers, due to increased efficiency and effectiveness of operations. System / data-based Resource Optimization – Optimize staffing levels for normal operations, with the provision of augmenting temporary staff to handle peak seasonal demand. Equipment Requirement Optimization – A reduction in the staffing levels usually brings about a reduction in overall equipment requirement to run the same operation. This, in turn, reduces costs like Annual maintenance, new equipment-purchase costs etc.

10. Dr.J.Deepak kumar KEY FUNCTIONS OF A WAREHOUSE 3. Pick Product: Raw materials picking Work in process picking Finished goods picking 4. Inventory Management Quality Check Cycle Count Material Returns MIS and Reporting 5. Ship Product Transport Scheduling Cross Docking Dispatch Documentation 2. Storage of Product: Quality inspection Put away (store when product is not in use) Location and lot control Cross dock 1. Receive Product: Different Materials from Suppliers – Raw Materials, Packaging Material etc. Finished goods from manufacturers, and other sources. Customer Rejects and Returns

11. Dr.J.Deepak kumar BENEFITS OF WAREHOUSE Reduces the space availability. It will reduce the delivery time for company as well as customer. Dynamic Reporting – Advance warning messages related to inventory level issues. Automatic, algorithm-based stock rotation and picking routines lead to reduced space requirements and more effective use of available resources and facilities. Receiving goods Proper utilization of space using shelf storage It also helps in protecting the goods from loss or damage due to natural calamities. Picking and shipping on time WMS system will help to reduce efforts to find any materials Dispatching goods with utmost efficiency. Effective warehouse management utilizes technology like: handheld scanners, computer software, Label printers, RFID tags and readers.

12. Dr.J.Deepak kumar WAREHOUSE MANAGEMENT

13. Dr.J.Deepak kumar WAREHOUSE MANAGEMENT The diagram shows the information flow through the Warehousing and Logistics activity. At each step of the Physical movement, the system triggers a notification seeking appropriate information for the current and subsequent steps. This helps to keep the physical flow aligned with the systemic flow in the WMS.

14. Dr.J.Deepak kumar WAREHOUSE MANAGEMENT

15. Dr.J.Deepak kumar WAREHOUSE MANAGEMENT

16. Dr.J.Deepak kumar WAREHOUSE MANAGEMENT

17. Dr.J.Deepak kumar OPERATIONAL CHALLENGES IN LOGISTICS FLEET & WAREHOUSE MANAGEMENT Various operational challenges faced in Logistics, Fleet and Warehouse Management are: 2. Warehouse: • Improper alignment of materials. • Space utilization is not doing properly. • Demand fluctuation for seasonal product • Unavailability of proper goods movement vehicles. • Increasing in labor cost. 1. Logistics & Fleet Management: • Increase in Transportation Spend • Poor planning and controlling mechanism • Losing track of shipments and their status • Unavailability of skilled workers. • Improper Inventory management.

18. Dr.J.Deepak kumar Technology Intervention in Logistics Fleet and Warehouse Management There are various best practices which are followed to overcome the challenges which occur during the process. Some key examples are given below: Technology such as Barcode and Radio Frequency Identification (RFID) is used to tag goods in Warehouses, thereby helping in tracking and retrieving them quickly when required. RFID Gates are used for automatic system update where large number of goods are involved. Pick to Light and Put to Light systems are used in warehouses which helps operator to find the place and material, Labor Management systems to optimize labor cost by better Workforce Planning. Warehouse Management using system-controlled Robots. Using of Drones for Physical Inventory identification and count as well as to transport light materials. GPS tracking system implemented for real-time tracking of vehicular movements. Advanced Analytics and Predictive Modeling used to optimize Warehouse shelf space, cubic space utilization and optimal loading of transportation vehicles.

19. Dr.J.Deepak kumar INVENTORY MANAGEMENT Inventory Management refers to the “science of defining the shape and position of stocked goods” Inventory is required to be held across the value chain – different locations within a unit, at different units of a supply chain – to ensure effective and optimal operations. Inventory Management is a complex process where we need supervise and optimize the non-capitalized assets and stocks. This requires keeping each record of new as well as return materials at various levels – manufacture, warehouse etc. Inventory is maintained at various stages during the entire Manufacturing and Fulfilment cycle due to certain basic reasons: 2. Demand Variation – There are significant variations in demand due to seasonality or other causes leading to uncertainty of supply. Stocking accurately is one way to effectively mitigate this risk. 1. Lead Time Variation – Manufacturing or Procurement lead times are highly variable and difficult to predict accurately. This requires stocking of critical material in correct quantities to ensure continued service levels.

20. Dr.J.Deepak kumar INVENTORY MANAGEMENT 4. Right Opportunity – Many products experience seasonal peaks in demand leading to manufacturers stocking such products in advance to gain maximum revenue during the peak period. Similarly, some products need to be aged / cured before they are ready for consumption. 3. Economies of Scale – It tends to be cheaper to procure, manufacture and transport materials in bulk. This indirectly leads to build up of inventory. Functions of Inventory To meet anticipated or future demand of customer. Ensure smooth production requirements or for non-stop production of finished materials. To protect manufacturing process from stock out situation. To protect against price increases of material due to various seasonal and economic reasons. To take advantage of quantity discounts. Which mean that by buying material in large quantity purchase will get good discount on price. This will help companies to reduce cost of material purchase and increase profits.

21. Dr.J.Deepak kumar INVENTORY MANAGEMENT Benefits of Inventory: Proper Inventory Management system can provide a good business growth – Proper balancing of Inventory Reduced Over Stock and Under Stock (Stock out) situation Faster Customer Delivery Reduction of Inventory carrying cost Improved overall Planning Accuracy Over production will be controlled

22. Dr.J.Deepak kumar INVENTORY MANAGEMENT Inventory can also be segregated based on the types of demand. Each Demand type creates inventory of related types of goods: Independent demand: Is a demand for finished goods which is ready to sell to end customer (e.g. A demand of a computer or consumer durable goods). Dependent demand : Is a demand for component of finished product, (e.g. A Demand of a raw and packing material for making a chemical or demand for types, machine, and engine for making a car). Type of Inventory There are mainly 8 type of Inventory maintained by a company – Raw Material Inventory WIP (Work in Progress) Semi-finished Inventory Finished Goods Inventory Spare / Replacement Parts, Tools & Supplies Stock Keeping Unit (SKU). Goods in Transit inventory (GIT) Apart from these major types, Inventory can be further classified under the below heads – Buffer / Safety Stock : This refers to controlled amount of extra stock maintained to minimize the risk of Stockouts due to uncertain supply-demand balance. Reorder Point Stock : This is the minimum stock level which triggers a replenishment requirement for a particular item. Pipeline Inventory : Inventory that has already left the factory but not yet reached the customer – either in Logistics movement or in Distribution. Decoupling Inventory : This is a type of inventory made famous by the Theory Of Constraints. It refers to stock held between machines in a process, so that no machine runs out of input stock. Anticipation Inventory : Stock which is built to meet known seasonal / periodic demand spikes. Examples include specific decorations during major festivals, ice creams in summer etc.

23. Dr.J.Deepak kumar INVENTORY MANAGEMENT Key Inventory Management terms: Lead time : The time or interval between ordering and receiving the material under the same order. e.g. McDonalds restaurant has lead time of 4 minutes for delivery of burger to its customer once the order is given. Here 4 minutes is defined as lead time. Holding (carrying) costs : The cost of finance to carry goods or commodities in inventory for a length of time. It is the sum of various costs like working capital cost, storage cost etc. Ordering costs : Costs of ordering and receiving inventory. Normally it is the sum of cost like people and system cost, transportation cost etc. Shortage costs : Costs to company when demand exceeds supply. Normally cost like extra Logistics cost, Higher price for unplanned purchase of raw material or packing material etc. Inventory Management & Accounting Accounting practices, chief among them being Inventory accounting. High-level financial inventory has some basic formulas, which relate to the accounting period: 1. Cost of Initial Inventory (at period start) + Cost of Inventory Purchased during the period + Cost of Inventory Production during the period = Cost of Goods Available 2. Cost of Goods Available – Cost of Ending Inventory (at period end) = Cost of Goods Sold 3. Cost of Goods Sold / Average Inventory = Inventory Turns

24. Dr.J.Deepak kumar INVENTORY MANAGEMENT While each country has its own rules about Inventory Accounting, some concepts are common : FIFO (First-In First-Out): First item in should be sold first. Material with less shelf-life or high chance of obsolescence will be consider under this methodology. LIFO (Last-In First-Out): Last item should be sold first. This methodology is mainly used during price rise for a product. Material with less shelf-life is usually not considered under this methodology. Systematic Auditing : Proper audit should be taken place to match the physical quantity of materials along with system quantity. Accurate Forecasting : Accurate forecasting will provide correct production volume so that there should not be any over stock / under stock situation. Inventory carrying cost should not be high. Set Priority of materials : High priority material should be produced first and keep the front so that it will deliver to customer on time. Inventory Counting Systems: Periodic System – Physical verification or count of goods or commodities done at periodic intervals. e.g. Monthly, Quarterly or yearly. This is the traditional method of inventory counting. Perpetual Inventory System – A system which tracks additions or withdrawals of material from inventory on a continuous basis and makes sure that the inventory data is current. It is also known as running inventory count. Two-Bin System – Under this system, inventory is stored in two separate bins or containers, and the user triggers reorder of inventory when the first container is empty. It is most common followed in automotive assemble line, Electronic business etc. which follow a Just In Time inventory.* Universal Bar Code or RFID System – A system under which each item has a printed label (Barcode) or an RFID tag which has encrypted information about the item. A bar-code reader or RFID Reader is used to count the inventory, ensuring the most accurate inventory count.

25. Dr.J.Deepak kumar INVENTORY MANAGEMENT ABC Inventory Classification : The ABC classification of inventory is done according to the importance of inventory, and controls are allocated accordingly: A Items (Very Important) – 15-20% of Items that accounts for 75-80% of annual inventory value B Items (Important) - 30-40% of Items that accounts for 15% of annual inventory value C Items (Least Important) – 40-50% of Items that accounts for 10-15% of annual inventory value Just in Time (JIT) Manufacturing* – This is a key concept of the Toyota Production System (TPS). It is a strategy employed in LEAN operations to reduce inventory carrying cost by receiving goods only when they are required on the production line. The key benefits are – increase efficiency, decrease waste while saving overall inventory cost.

26. Dr.J.Deepak kumar INVENTORY MANAGEMENT Key Terms in Inventory management: Reorder Point – The stock level of a particular goods or item of inventory, at which a user or a firm needs to place an order or raise a demand for the fresh supply or replenishment. Safety Stock – This refers to extra stock maintained to manage or reduce the possibility of stock-outs (shortfall in raw material or finished goods) due to unpredictability in demand for finished goods or supply of materials. The rate of demand – Rate at which the frequent demand change happens Lead time – The time taken to receive material from the point of dispatch to point of consumption Fixed-Order-Interval-Model – Ordering Model under which Orders are placed at fixed time intervals. Mostly the Demand planning run happens at weekly, fortnightly or monthly basis. Single period model – The term single model for can be defined as an ordering of perishables and other items with limited or restricted useful shelf life. Mostly products with seasonal use are typical goods which are ordered under Single Period model.

27. Dr.J.Deepak kumar INVENTORY MANAGEMENT Inventory Carrying Cost Inventory carrying cost, or Holding Cost is the cost of holding inventory, warehouse rent, other utilities cost, leakage cost, insurance cost, opportunity cost etc. Inventory Carrying Cost comprises of 4 main components as given below: Total Inventory Carrying Cost includes depreciation, lost opportunity cost as well as warehousing costs. A business' inventory carrying costs are usually about 20% to 30% of its total inventory costs.