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.
