Li Choo's Group Question. When do you use Cross Docking?

First of all, i will highlight to you the main goals of cross docking

The main goals of Cross Docking are

• reduce costs
  
• improve customer services

Secondly, The process of Cross Docking.(Diagram taken from this link)

• The top right figure shows the supply chain not adopting Cross-Docking. The suppliers use less-than-truckload truckers direct to their customers.
• By using the cross-docking, the goods can be shipped by full truck loads after being sorted out in the cross-docking Distribution Centre, reducing inventory and transportation costs.

Lastly, What are some circumstances that cross-docking can be used in?

Manufacturing

For Example Toyota Motors use cross docking to consolidate their inbound shipment parts like the engine, car body etc. The parts are then sorted out and then ship out. It is a good supplement to Just In Time assembly, where there are no or minimal inventory and the lead time is short.

For more information about Toyota Motors and their cross docking activities you can click on this link.

Retail

Walmart, the oldest and noblest company who pioneered the cross docking example. By consolidating all the shipments from their retailers, they can reduce the sales cost by 2-3%. Walmart uses a hub and spoke arrangement, which i will explain later.

For more information visit this link.

Distribution

Cross-docking can be used to consolidate inbound products from different suppliers which can be delivered when the last inbound shipment is received.

Transportation

Cross-docking involves the consolidation of shipments from several suppliers (often in LTL batches) in order to achieve economies of scale.

__________________________

Hub and Spoke Arrangements

• The hub-and-spoke distribution paradigm (or model or network) is a system of connections arranged like a chariot wheel, in which all traffic moves along spokes connected to the hub at the center. The model is commonly used in industry, in particular in transport, telecommunications and freight, as well as in distriited computing. (resource link)
• The centralised hub will actually be the network host for all incoming and outbound transactions

Conditions for cross docking to be effective and efficient

• Very excellent trucking system(cross docking relies heavily on trucking)
  
• Good access to demand information along the supply chain
  
• Efficient Goods tracking technology and good material handling equipment

In Conclusion

• Cross Docking is versatile so long as your main objectives coincide with the conditions or else the cross docking will not serve its purpose in the distribution centre.
• It is important on when you use it and also how you actually utilise cross docking.
  

Best Regards,
CCM

Kai Lee's Group Question - With more examples, how do you think postponement can help firms to reduce costs?

How do you think postponement can help firms to reduce costs?


Hello Kai Lee's Group,


I will bring your focus to these 2 cost areas- Production and Inventory costs and how the 2 forms of postponement- Form and logistical will impact the costs.

Production- Form postponement






As mentioned earlier, form postponement is the deliberate action to delay the form of a product until when customer commitment is confirmed.


However, firms would want to "enjoy" the economies of scale from production by producing a generic product base in large batches and then storing it in a warehouse until required. This way, firm is able to enjoy costs saving in production.

When customer order is received, mass customization will take place to allow the generic product base to have a no. of end product options.


Refer to the above diagram for better understanding. Clothings manufacturer would stock generic product base (White color) and leave the dying part undone until customer order is received.

Conclusion:


Through postponement, firm is able to reduce the number of stock keeping units(Costs) while supporting the marketing effort and retaining mass production economies of scales. Once product is customized, it will be able to serve different customers' requirements.


Inventory- Form postponement

A Car manufacturer usually sub-contract the various sub assemblies of a car to various suppliers and storing them at their premises. Since a car is of too high value to store, it will only be assembled when a customer order is received. The car manufacturer will release purchase order to the various sub contractors and the sub-assemblies will be send to the plant for FINAL assembly of a car.

Conclusion

In this case, the car manufacturer is able to reduce the risks/costs of holding inventory and the capital can be used in other more profitable areas.

Inventory-Logistical Postponement

Logistical postponement is the deliberate delay of forward movement of goods is until when customer demand is confirmed. A DC will usually pool the demand of the various retail store before dispatching the goods. By aggregating/Pooling the demand together, the retailer will be able to reduce its total inventory due to lower variability in aggregated demand. (Business statistics)

Conclusion:

The firm is able to reduce the risk/cost of the forward deployment of inventory. The resources can like wise be invested in other more profitable resources.

Production-Logistical Postponement

Full line inventory is built and stocked at one or a few strategic warehouse. The forward movement of inventory is delayed until when customer demand is confirmed.

Conclusion:

Under the concept of geographical postponement, the risk of forward movement inventory is eliminated while manufacturing still enjoys economies of scales.

Best regards,
DCMwarriors

Overview of Value-Adding roles

Introductory video

Value Chain Model

The value chain is a series of activities that add value to a product. As you can see from the model, inbound and outbound logistics play a part in adding value to a product. Example: Transportation and warehousing

Definition of value adding

Value adding are activities that either reduce cost or increase revenue of a firm or both.


What is value adding from a warehouse's perspective?

Warehousing plays a strategic role of attaining the logistics goals of shorter cycle times, lower inventories, lower costs and better customer service. To meet customer demand for lower prices, logistics managers examine warehouse process for productivity and cost improvements. All these are value adding from a warehouse's perspective.

The true value of warehouse is to have the right product at the right place and cost in the right time .


What are some value added roles of warehousing and distribution operation centre? (Explaining in this order)

• Product and supply mixing
• Transportation Consolidation/Break Bulking
• Contingency Protection
• Smoothing
• Service
• Product assembly/ Postponement
• Kitting/Pre-assembly
• Crossdocking/Transloading
• Specialty packaging
• Private Labeling (Private branding)

Overview of the 5 primary roles of warehousing/Distribution centre.

There are 5 primary roles that any warehouses would exist to provide:

Product/supply mixing: Most retailers sell more than one kind of products, therefore it is necessary for warehouse to breakbulk the inbound goods to various required assortments. In fact, mixing also takes place in a retail store, imagine yourself in a supermarket, you would probably choose a few items for checkout.

Transportation Consolidation and Break Bulking: Have you ever shared a cab with a friend who is on the way before? Is it cheaper than an individual ride? A warehouse would like wise be the same, by consolidating or pooling materials from various sources into a single shipment, a firm can enjoy significant cost-savings in transportation costs. If a firm is serving multiple markets and when volume shipment arrives, it is necessary to break bulk and redistribute it the the various market.

Contingency Protection: Cash on hand is an example of contingency protection to meet any unexpected expenses in our daily life. A warehouse would also functions this way to have extra inventory stored on hand so that a retailer/customer will have a lower chance of stock out situation.

Smoothing: If you have been going lectures consistently, exam would be a very smooth process. However, if you are one who does not go consistently, then extra work like asking about would have to be carried out during the exam process. A warehouse would hold inventory to meet the variation in demand so that the production system can operates in a constant manner. A warehouse that feeds materials into the production would also be constant.

Service: The warehouse is use to serve a specific market or rather to support any marketing activities. Example Spot stocking to maximize sales during promotional period.

Value Adding Roles - Product and Supply Mixing

What is product mixing?




Product mixing for customer order means mixing products from multiple supplier/production facilities to shipment to a single customer. Example: meeting customer's order.

Supply mixing for manufacturing activities means mixing required materials or sub assemblies from multiple suppliers to shipment to a plant. Example: meeting production order

Crossdocking has the same effect as mixing and typically serves as "distribution mixing centre" . Example: no storage involve, receive-sort-ship action

The basic benefit of mixing is to reconfigure transportation as it flows rom origin to destination. This usually results in significant transportation costs.

Mixing activities are carried out at distribution level (Distribution Centre).


Elaborated explaination:



Product mixing

In a typical mixing operation, truck loads of products are shipped from origin to the mixing warehouse. These inbound transportations are planned to minimise transportation cost. Example: Transportation Consolidation

Upon arrival at mixing warehouse, inbound shipments are breakbulk and sorted into the combination desired by each customer. During the mixing process, inbound goods can be combined with others regularly stocked at a warehouse.

Warehouse that perform mixing operations often result in reducing overall product storage in a logistical system while achieving customer required assortments and optimizing transportation costs.

A mixing warehouse for multiple product line can lead to more efficient order fulfillment. (From Tan-Oh-Wee DCM textbook)


Example:

A product line usually turns out into thousands of "different" products, if color, size, design and other factors are included. A shoes manufacturer produce shoes of different colors, sizes and designs. A retailer(customer) often want a product line mixture. Example: 200 pairs of red color track shoes for each size and 100 pairs of blue color sprinting shoes for each size. The shoes manufacturer may have production plant in several locations with each specializing in producing a specific product. By having a mixing warehouse, these plants supply the products to the warehouse and the warehouse will perform the necessary order fulfillment.

Supply mixing

The objective of supply mixing is to support manufacturing operations. Products and components are supplied to a mixing warehouse located in close proximity to the manufacturing plant, when requested by the plant, necessary sortation will be carried out and ship to the plant directly. It is a popular strategy to support manufacturing firms with JIT(Just-In-Time) and MRP( Materials Requirement Planning) system.

Toyota Motors example:

Toyota Motors uses JIT and lean approaches for its production system. Components and sub assemblies required to make a car will be stored in suppliers premises and delivered to a mixing warehouse near toyota's plant when requested. Kanban also means demand scheduling will trigger a request to suppliers to bring in the necessary materials required to build a car. The materials arrived at the mixing warehouse which will be sorted and ship to the plant in a JIT manner.

The following example illustrate how warehouse can support JIT operations. In addition, it has the ability to keep goods at the point of origin as long as possible until when requested. This means that Toyota can have a low investment in inventory until when needed.


2-3 usefulness of this topic to the Distribution Centre

• Multiple product line usually lead to efficient order fulfillment.
• It is able to fulfill customer's specific assortment at the lowest possible cost through transportation consolidation.
• The DC can support JIT/MRP system of a firm

2-3 Constraints of this topic to the Distribution Centre

• High precision required for successful mixing is highly dependent on information technology.
• Cross docking can be very fast paced and requires good management within the DC and external parties (3PL, Vendors or Plant). The status of shipment should be trackable to enable the DC manager to plan the resources required for cross docking before the shipment arrives.

Value Adding Roles- Transportation Consolidation/Break-bulking

Inbound logistics system

What is transportation consolidation?

From figure 1.1, warehouse consolidate all incoming goods from different suppliers' Less than Truck-load(LTL) and ship a Full Truck load (FTL) to a plant. The warehouse is the consolidating and in-transit mixing point.

Elaborated Explaination:

Companies may not always ship in Full Truck Load(FTL) due to variability involved. FTL enables the companies to spread their transportation costs over high volume , in short, it is called transportation economies of scale. As a result of FTL, the transportation costs/unit will be lowered.

Vise versa for Less than Truck Load (LTL), it is more costly to ship goods long distance. Therefore, by moving the LTL amounts relatively short distances to or from a warehouse, warehousing can allow consolidated shipments into a larger shipment(FTL) resulting in transportation savings. Hence, the inbound logistics system would consolidate different suppliers' LTL and ship a volume shipment to the companies' plant.

Besides significant transportation savings, the warehouse can perform supply mixing to support manufacturing activities by sorting and consolidating required materials as when required.

Example of Dell computers:

Dell kept minimal inventory level by having most sub-assemblies stored at their vendor's vicinity.

When a customer's order is received, production schedule and required materials for production information are passed down to the Dell's production plant and vendors respectively. Vendors are to ship the required materials within 45mins to a Distribution centre(Near Dell's Plant). The required materials from different sources of LTL is consolidated into FTL to ship directly to dell's production plant within an hour.

Outbound Logistics system

What is break bulking?

From Fig 1.2, the warehouse receives single large shipment(FTL) from various plants, break bulk and ship in Less than Truckload(LTL) to the market. Outbound consolidation made the central facility from number of manufacturing locations. The warehouse is a break-bulking facility.

Elaborated Explaination:

With the availability of a break-bulking facility for the outbound logistics system, companies can enjoy significant savings in freight costs, through consolidated shipments into the facility. The shipments are often broken down into smaller shipments(LTL) and arranged for local delivery or to ultimate customers.

The break-bulking facility allows retailers to keep low inventory level due to shorter lead time as the origin of distribution is nearer. The retailers are also able to enjoy lower transportation costs. Therefore the existence of the warehouse helps reduce the total cost of the supply chain.

Example of Keppel logistics Singapore:

Large Container loads received at keppel logistics depot are transported to their own distribution centre where they break bulk and sort to smaller shipments required by the market.

2 – 3 usefulness of this topic in the distribution centre

• The DC can perform Supply mixing/Manufacturing support operations by consolidating incoming goods into single shipment for plant.


• Savings in transportation/Freight costs for both inbound and outbound logistics due to consolidation and breakbulking operation.
  

2 – 3 constraints of this topic in the distribution centre

• Requires good coordination with third party logistics/ Freight forwarders(external).


• Requires good transportation management to maximise effectiveness and efficiency.
  

Value Adding Roles - Contingency Protection

What is Contingency Protection?

Warehousing exists as a protection against contingencies such as transportation delays, vendor stockouts, or strikes. With contingency protection in hand, a firm will not suffer heavy loss in revenue or incur high costs.


Elaborated explaination:

For example, when a vendor experience stock out situation, the buyer's company may be in potential danger of costly production line down which can delay the production of finished goods. However, if there is contingency planning, a buyer will often order buffer stock on top of what is required(buffer stock), the buffer stock will then be stored in a physical supply warehouse. Production can still carry on even when vendor experience stock out situation as raw materials can be pulled in from warehouse.





Contingencies also occur with physical distribution warehouses- for example, goods damage in transit can affect inventory levels and order fulfillment.



Singapore General Rice Importer Association example:


In year 2007, there was a global rice shortage as Philippines, China and other rice growing countries were suffering from prolonged drought situation. Rice prices shot up by 10% in Singapore due to speculation. Singapore General Rice Importer Association stepped in and announced that there is no need to do so as their warehouses would stock enough rice that will last at least 3 months without supply.

The following example is what warehousing functions, contingency protection. Singapore retailers (Supermarkets) did not suffer any loss of sales/revenue from the global rice shortage.






2 – 3 usefulness of this topic in the distribution centre

• From the supply side, ensure no production line down which could be very costly as resources will be left idling.



• From the distribution side, sales will not be affected even if contingency occurs. Example : 2007 global rice shortage.

2 – 3 Contraints of this topic in the distribution centre

• Having buffer stock to counter contingencies may be good, however, it is constrainted by the nature of the industry. "time sensitive" or "high value" products may be too risky to store.



• It can be a conflict for firms adopting "lean" methodology. The DC must be able to meet demand with lean inventory.

Value Adding Roles- Smoothing

How Warehousing add value through operation smoothing?

For educational purpose, we assume that demand is seasonal. From figure 6.1, firm is continually producing an amount equal to the average demand over a time span. That means that materials are fed at a constant rate from the warehouse to the plant. This will usually results in a smooth level of operation that avoids the costs of changing production levels. Example: Set-up cost, hiring and training cost, overtime etc.

Elaborated explaination:

From figure 6.1,when demand is lower than production level, inventory builds up. When demand is higher than production level, inventory depletes. Warehousing of stocks allow the firm to buffer against variability in demand while not incurring additional capacity costs. Lesser changes to production also means production is able to gain economies of scales. Warehousing also ensure a constant supply of raw materials leading to lower stock out situation.

Comparing to figure 6.2, production level varies with demand. This means that when demand is low, capacity like machineries will be left idling, incurring capacity idle costs. When demand is low, firms may fire off production staff and when demand is high, firms will hire more production staff. This hiring and firing approach can be very costly.

In conclusion, warehousing is able to add value to a firm through smoothing operations leading to lower costs of production. The utilisation of warehousing depends on management objectives set, such as low inventories, efficient plant operation, good customer service, and good labor relations.

Example: Christmas tree manufacturer normally utilise production leveling as demand matching is costly to adopt.

2 – 3 usefulness of this topic in the distribution centre

• A constant rate of production means order to suppliers is also constant leading to lower variability in orders. (<--result of inventory)
• Production costs can be lowered with the use of inventory. (<-- uses of inventory)

2 – 3 Constraints of this topic in the distribution centre

• Level of activities at DC can be constrainted by management objective. E.g. Low inventories level.
• Savings in operations should offset increasing warehousing costs which can sometimes be hard to quantify.

Value Adding Roles - Service

What is Service?

Warehouses can provide services that enhance a firm's revenue growth. It is important to have goods available when demanded by customers. This will lead to customer satisfaction and enhance future sales.

The rational of having a warehouse to service a market is that sales improvements will be able to offset additional cost of operating the warehouse.

Example:

From the example figure 3.1, establishing a warehouse to service a specific market may increase cost but also increase market sales and revenue. Warehouse can provide service as a result of value-adding services, Spot-stocking and full line stocking/Assortment .


Elaborated Explaination:

Value added services are any work that creates a greater value for customers. It typically change the physical features of products so they are presented in a customized manner. From the 1st post, we have listed a list of value added services.
(Note: We will be explaining in-dept for each value adding services. Therefore, we will leave off this part.)

Spot-stocking is usually performed to support customer accomodation and seasonal products. Example: Agricultural, Winter, Summer products. Instead of maintaining inventory of seasonal products the whole year round, or shipping directly from the manufacturing plant to retail stores/customers, responsiveness can be improved through temporary storage positioning in strategic markets during peak selling period (Winter clothings during winter period). In addition, significant savings in warehousing and transportation costs could be achieved for the manufacturer/cilent.

Under this concept, selected inventory is positioned in a local warehouse to fulfill customer orders during critical sales period. Utilising warehouse facilities allow inventories to be placed near key customers to ensure that sales will be maximised.

Example: During chinese new year period, manufacturer of pineapple tarts usually spot stock near local retail stores. After chinese new year period, such spot stocking would be reduced or eliminated.


Assortment/Full line stocking creates assortments representing multiple products from different maufacturers. Example: World of sports's warehouse would store different sporting products from different suppliers so that customers can be offered assortment.


What is the difference between spot stocking and full line stocking? Full line stocking warehouse is more restricted to a few locations and operates year round. It improve service by reducing the no. of suppliers that a customer must logistically deal with. The asssortments also make it economical larger shipments possible.


2 – 3 usefulness of this topic in the distribution centre

• Increase market sales, revenue and gross margin. The DC is a profit centre rather than costs centre.
• Ensure lowest logistical costs for customers through combined assortment.

2 – 3 Constraint of this topic in the distribution centre

• It is difficult to quantify service return on investment due to difficulty in measurement.
• The warehouse must have the expertise to provide the type of services demanded by customers.

Value Adding Roles- Postponement

What is Postponement?

Postponement is a deliberate action to delay final manufacturing or distribution of a product until receipt of a customer order. This will reduce the incidence of wrong manufacturing or incorrect inventory deployment. Postponement strategies and practices serve to reduce the antipatory risk in a supply chain. There are two types of postponement both utilizing warehouse/ Distribution centre. (1) manufacturing, or form postponement; and geographic, or logistics postponement.

How warehousing facilitates postponement strategies? (Elaborated Explaination)

Manufacturing Postponement

A buy situation
From the above diagram, generic sub-assemblies/standard or base product purchased from supplier are usually stored in a warehouse near the production plant and will only be pulled in when a customer commitment is received.

A make situation

A firm will manufactures a standard or base product in sufficient quantities to realize economies of scales through mass production while deferring finalizating of features, until customer committment is received. This generic base will be stored in a warehouse.

The operative goal of manufacturing postponement is to maintain products in a neutral or noncommitted status as long as possible. Through postponement, firm is able to reduce the number of stock keeping units(Costs) while supporting the marketing effort and retaining mass production economies of scales. Once product is customized, it will be able to serve different customers' requirements.

Activities like labelling, kitting and pre-assembly are often conducted at distribution centre level.

United Colours of Benetton example:

The clothings manufacturer mass produce clothes in white colour and then only dye/customize them until customer's order had been received.

Logistics Postponement

Full line inventory is built and stocked at one or a few strategic warehouse. The forward movement/deployment of inventory is delayed at the latest possible point in the supply chain until customer orders are received. Under the concept of geographical postponement, the risk of forward movement inventory is eliminated while manufacturing still enjoys economies of scales.

Example: The distribution centre would aggregate the demand from various Wal-Mart retail store leading to lower deviation in demand, often called risk pooling. Proctor and Gamble will deliver their products to Wal-mart distribution centres as requested. This will lead to minimal inventory investment for Wal-mart while meeting customer's committment.

2 – 3 usefulness of this topic in the distribution centre

• Reduce uncertainty in demand and investment in inventory.
• Able to provide mass customization services to suit different cilent needs.
• Improved customer service.

2 – 3 contraints of this topic in the distribution centre

• Man power at the distribution centre must be able to multi task and skilled to handle the various aspect of customization services requested by cilent.
• Logistical performance is heavily dependent on the DC. Once customers' order is received, most work are carried out there, from assembly/kitting/labelling to order fulfillment. Therefore, operations in the DC must be managed well by experience managers.

Value Adding Roles - Kitting/Pre-assembly

What is kitting/Pre-assembly ?

Kitting is the addition of items such as accessories and batteries into the product pack. Pre-assembly is the completion of finished merchandise from component parts, or the pre-programming of products.


What are some services associated with kitting?

• Materials and Order Management
• Component Kit Build
• Assembly Line Operations
• Packing
• Shrink-Wrapping
• Blister Packs

Why is kitting so effective in value adding?

By providing them with these extra bonuses(usually with no extra charge), it will boost the customer's satisfaction with the company providing the kitting service. For sub assembly part customers, kitting increases manufactoring efficiency by the supply chain company delivering parts in a format that minimizes time searching for the parts. Some of these value added services such as packing and shrink wrapping are basic manufactoring functions that are done in the customer's warehouse. Outsourcing these basic functions will reduce labor costs of the manufactoring firm and more time can be freed up to perform other manufactoring functions. Kitting also allows easier handling of the sub-assembled parts as compared to a large bulky product.


Here are some examples of kitting/pre-assembly services





Kitting operations where smaller parts are bundled together and can be assembled again by a kit




Workers kitting sub-assembled products

Elaborated Explaination
For example:




A company has decided to manufacture life size Transformers(TM) robots and sell them to selected retail outlets
It manufactures and then ships it to a distribution centre for it to shipped to the selected outlets.
The size of this product is bigger than a Airbus A380.

So HOW does the distribution centre make it easier for the products to be shipped?

1. The order is placed for the specific activity(Transformer ID:001 for kitting)
2. The components for the product is moved from the warehouse location to the specialist service area
3. The components are assembled and labelled
4. The packing, kitting, leaflet and rework is released and done
5. The components are stored and quarantined
6. The product is then dispatched
7. Finally, it is distributed and tracked

2 – 3 usefulness of this topic in the distribution centre

• Kitting operations can be postponed until when customer order is received. This results in lower anticipatory risks for firms. As a result inventory invest can be reduce while meeting customer committment.
  
• Manufacturing is able to gain efficiency by just concentrating making the product and any additional work such as kitting will be done at the DC.

• Able to drive more revenue than costs for the profit center DC.

2 – 3 Constraints of this topic in the distribution centre

• Kitting of items should be perform carefully. Any error can result in costly return or reject. Example: Batteries pack are almost "similar" among same product line, thus the specialist must kit in the correct item.
• Kitting might increase the operating cost if not properly implemented. Example: kitting items do not come in on time causing bottleneck or inefficent picking system for kitting items.
  

Value Adding Roles- Cross Docking

Introductory video of cross docking

What is Cross Docking?

Cross Docking is a practice in which materials are unloaded from an incoming semi-trailer truck or a rail cars, with little or no storage in between. This may be done to change type of conveyance, or to sort material intended for different destinations, or to combine material from different origins.

In purest form this is done directly, with minimal or no warehousing.In practice many "cross-docking" operations require large staging areas where inbound materials are sorted, consolidated, and stored until the outbound shipment is complete and ready to ship. If the staging takes hours or a day the operation is usually referred to as a "cross-dock" distribution center. If it takes several days or even weeks the operation is usually considered a warehouse. Walmart first explored this idea.

Another Diagram showing how crossdocking is done.

Illustration and Graphic Elaboration

The suppliers bring in the parts from the various manufactoring factilities

Here Cross Docking Activities are applied.

Take note that the goods may not necessarily be constantly moving all the time.

The subassemblies are then assembled, packed and sorted out

The Assembled Computers are then loaded into the trucks, which will then send it to the outlets.

2 – 3 usefulness of this topic in the distribution centre

• Reduced Handling and warehousing Costs at the DC and Shortened Lead time
  
• Retailers have the ability to streamline the supply chain from point of origin to point of sale through cross docking
• Reduced Inventory Level

2 – 3 Constraint of this topic in the distribution centre

• Difficult to coordinate due to complexity of managing Cross Docking.
• High precision required for successful mixing is highly dependent on information technology.

Value Adding Roles- Specialty Packaging

What is Packaging?

Packaging is a critical component in distribution centre management. It encloses and protects the products for distribution, storage, sales and even consumption. With packaging, the products can be delivered using full-truck load (FTL), hence reducing cost. Therefore, it affects both the efficiency and effectiveness of the logistical operations.

Elaborated Explaination:

The packaging of goods should meet the packaging functions so as to increase both efficiency and effectiveness. Some of these functions include:

1) Proactive function

- Good service includes ordered goods arriving to the warehouse from the manufacturing company in good condition.
- The packaging of the product should protect the product from damage or deterioration during the delivery and transfer

2) Warehouse function

- Packaging of goods should be stackable and meet the demands of the storage equipments such as the forklift in the warehouse.

3) Transportation function

- Packaging can facilitate the efficiency of transporting the goods from one place to another. Thus, the packaging size and form should optimize the use of transport space (FTL) with the lowest possible weight.

4) Handling function

- Combining goods into groups or boxes simplify deliveries. Form and size of packaging facilitates the use of forklifts, or storage and retrieval system.


5) Information function

- Packaging allows goods to be distinguished easily. Examples include colour, pictures and labels. Moreover, packaging of fragile or perishable goods requires special treatment like signs or symbols with explanations.

Furthermore, the packagings for goods are tested due to frequent handling and moving. Thus, tests are conducted for the packages against all possible situations. The tests include:
- Vibration
- Dropping
- Exposure to temperature and moisture
- Radioactive material for hazardous material through the use of a Geiger counter.

Example:

A product is required for delivery from a warehouse. An example is bottled-drinks. These bottled-drinks are stored in the warehouse in its plastic bottles. This is to protect the product from being contaminated or damaged during storing and handling.

Moreover, these bottled drinks are also packaged to give customers information on the bottled-drinks. This information includes the amount of calories the drink has and the company itself.

When there is a demand from customers, these bottled drinks are packed together in a carton box. The carton boxes are then loaded onto a pallet. This is known as unit load. The process is called unitization as it consolidates packages into larger packages into a single unit ready for shipment. Furthermore, the pallets are packed in such a way that it is protected from physical damage during transporting.

The pallets are loaded into a container through a process called containerization. Now, the goods are ready to be shipped to the different customers. One of the modes of transporting the products is by road.

To add on, the packaging can also affect the utilization of container use. Effective packaging can maximize the utilization of the container, hence lowering transportation costs. Packaging the goods to different customers’ needs reduces material handling, thus reducing the need to re-package.

2 – 3 usefulness of this topic in the distribution centre

• Effective packaging can result to major cost savings for transportation cost, hence reducing the selling price of the product to customers.
• Effective packaging protect products in the DC from environmental conditions reducing the chances of damaging the product.
• Packaging can facilitates logistical integration. E.g. packaging is customise for the customers so that when goods reach the hand of the customers, they do not have to do repackaging/rework.
• Facilitates unitisation which increase protection and reduce movement in the DC.
  

2 – 3 constraints of this topic in the distribution centre

• Packaging can be very costly, however, is a trade off for Transportation costs.
• Packaging for chemicals and odd shape products must be handle with attention to avoid unnecessary damage to warehouse personnels.

Value Adding Roles- Labeling

How labeling adds value in distribution centre management?

Nowadays, labeling is common in distribution centre management as it can process both inbound and outbound orders. Labeling provides clear information about the particular product. It also identifies the product for administration work and logistical functions such as storing and order picking. Furthermore, it also provides additional information like customer and manufacturer information in a readable form.

Elaborated explaination:

Labeling provides information of the product during transportation, handling and storing. Such information includes the quantity of goods, customer and destination information. Other than that, labeling can be a medium of communication for manufacturer such as advertizing, pricing and usage guidance. Usually, this information is stored using either bar-coding or radio frequency identification (RFID). RFID is an automatic identification method and is a new trend of storing data used by many companies. Below is an example how a barcode look like.

To add on, labeling can also act as a warning when handling the goods that are hazardous with care. This is because these materials are radioactive and can be dangerous to humans. This is seen in the picture above. Moreover, the label must also be securely bonded with the particular goods and withstand the storage conditions. Labeling usually ties with packaging. This is because labels are either stick or printed on packages of the product.

Labeling also allows the use of electronic data interchange (EDI). EDI enables the movement of data between distribution channels. EDI is able to reduce errors such as shipping and billing errors as it eliminates the need to re-enter the documents upon arrival. This will enhance customer service.

Labeling Example

A pallet filled with carton boxes, which is ready to be transported to customer, is labeled with a RFID tag. Upon checking out (marshaling), it passes through a RFID reader and is scanned immediately. This information containing the quantity of goods and customers’ information is stored in the company’s record for future reference. The shipped goods can be traced and acknowledged once the goods are received by the customers.

2-3 Usefulness of this topic to the Distribution Centre

• Provide real time tracking of goods within the DC or outside for customers. E.g. RFID tracking
• Private branding can be carried out after customer committment is received. E.g Cans are unlabelled initially, refer to the above diagram.
• Labelling can inform warehouse personnel of the nature of products. E.g. Chemical with hazordous symbol indicates careful handling.

2-3 Constraints of this topic to the Distribution Centre

• Private branding of products require the technical expertise and necessary equipments to accomplish.
• The Singapore Food Regulations require all prepacked food products for sale in Singapore to be labelled according to the requirements specified.