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Handouts of

Logistical Management
for A & B Classes

11/7/2012 1

Logistical Management




Ch. 6 : Information
1. Information functionality and principle 2. Information architecture 3. Application of new information technology 4. Electronic data interchange standards


Information on logistical management.

Logistic focus on efficient flow of goods through the distribution channels Accurate information is now more critical for effective logistic system design for 3 reason :

1. for customer ; order status, product availability, delivery schedule, and invoices. 2. The goal of reducing total supply chain inventory and man resource requirement. 3. Information increase flexibility with regard to how, when, and where resource s may be utilized.


Two Perspectives description on Logistics Information Systems :

1. LIS functions are discussed in terms of justification and benefits 2. The characters of LIS are description and illustration

Logistics information level functionality :

1. 2. 3. 4. Basic level : the transaction system Second level : Management control Third level : Decision analysis The final level : Strategic Planning


Information Functionality
Strategic Planning

1.Strategic alliance formulation 2. Development and refinement of capabilities and opportunities 3. Focus profitbased customer services analysis

Decision Analysis

Vehicle routing and scheduling Inventory level and management Network/ facility configuration Vertical integration vs third party / outsourcing Customer-service measurement Productivity measurement Quality Measurement

Management Control

Financial measurement : Cost Assess Management

Transaction Systems

Order entry Inventory assignment Order selection

Shipping Pricing and Invoicing Customer inquiry



System level justification

High risk Extensive option

Strategic planning

Competitive advantage

Analysis and evaluation Significant user expertise and training Effectiveness driven activity focus

Decision Analysis

Identification and evaluation of competitive alternatives

Management control Measurement of competitive capability and addition of potential improvement Competitive Qualification

Performance control systems Feedback for performance evaluation Proactive direction to user

High hardware and software systems costs Structure training for large number of users Efficiency driven activity focus


LIS usage, decision characteristic and justification



System level characteristics

Principles of Logistic Information

Readily and Consistently
Current status and Periodic activity No delay Quick management feddback Paper based or Computerize Decrease uncertainty Reduce inventory



Exception Based LIS

Highlight problem and management attetion and/or decision making


Capability to be flexible in order to meet the need system users and customers Right information in the right structure and sequence

Appropriate format

Logistic Information System Architecture

Strategic Plan

Capacity Plan

Logistics Plan

Manufacturing Plan

Procure ment Plan


Inventory deployment Inventory management

Order Management

Order Processing

Distribution operations

Transportation and shipping

Procure ment

Planning and coordination

Strategic Objectives

Capacity constraints
Logistic requirements Manufacturing requirement Procurement requirements
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Order Management : Entry point for customer order and
inquiries, allow entry and maintenance of customer order using communications. inventory and delivery replenishment order, ordinary or batch mode

Order Processing :Assigns or allocate available inventory and

Distributions Operations : To guide physical activities product

receipt, material movement etc.

Transportation and shipping : To plan, execute, and manage

transport and movement activities. Threes party : shipper, carrier, and consignee ( recipient) and release and to tracking vendor performance and compliance

Procurement : Manage purchase order preparations,modification,


Inventory Deployment and Management

Is the primary interface between planning/coordination and operations.Its role is to plan requirement and manage finished inventory from production until customer shipment. Decision include : where, when, and how much/many.

Logistics information system flow

The mayor system contains : (I) modules, (ii) data files, (iii) management and entry activities, (iv) reports, and (v) communication links
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Application of new technology

Electronic data interchange (EDI) Personal Computer (PC) Artificial Intelligent/Expert system Communication Bar code and scanning
Standard and Future



Table 6.6

Benefit of Automatic Identification Technologies

Shippers. Improve order preparation and processing; eliminate shipping error;

reduce labor time; improve record keeping; reduce physical inventory time

Carrier. Freight bill information integrity; Customer access to real time information; improved record keeping of customer shipment activities; shipment trace-ability; simplified container processing; monitor incompatible product in vehicles; reduce information transfer time. Warehousing. Improved order preparation, processing and shipment;provide accurate inventory control;customer access to real-time information;access considerations of information security;reduce labor cost; receiving accuracy. Wholesaler/retailers. Unit inventory precision;price accuracy at point of sale; improved register checkout productivity;reduce physical inventory time; increase system flexibility.
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Chapter 7


Forecasting is the prediction of demands by location, stock keeping unit (SKU), and time period for the purpose of planning logistics operations. To develop an integrated forecast process, logistics management must consider all possible sources if information and likely system users. Prior to determining a forecast process it is important to understanding : The nature of demand and The major forecast component. Forecast demand can be classified into :

Dependent or Independent


Chapter 7 Forecasting

Dependent demand is the demand that are relation

between the items,like tire required depend on the automotive assembly schedule.

Independent demand arise when the item is not related

to the demand for another items, for example demand for refrigerator is probably not related to the demand of milk.
Forecast component : Logistics required forecasted

quantity for planning and coordination. The forecast can be weekly, monthly figure for each SKU
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Forecast Model :
Where :

Ft = (Bt X St XT x CT x Pt) +I
Ft = forecast quantity for period t Bt = base level demand for period t St = seasonality factor for period t T = trend component, increase or decrease per time period Ct = cycle factor for period t Pt = promotional factor for period t I = irregular or random quantity



Forecast approach : 1. Top down approach

Plant distribution center
40 % 30 %
Field distr. Center B 3.000 units

20 %
Field distr. Center C 2.000 units

10 %

Field distr. Center A 4.000 units

Field distr. Center D 1.000 units

2. Bottom up approach
On the other hand the bottom up approach is decentralized since each distribution center forecast is developed independently
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Forecast process :
Forecast database Forecast Process Forecast Users
Finance Marketing Sales Production Logistics

Orders History Tacyics

Forecast administration
Forecast Technique
Forecast Support system

Fig 7.2 Effective forecast process

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Forecast Technique & Administration

Economic Order quantity ( EOQ ) Assumption : 1. Demand is Constant 2. Lead time constant 3. No Stock out 4. Order in batch or lot size 5. Specific cost structure 6. Single product - Items

Forecast administration :

Concern with individual roles and responsibilities. Specific questions: (1) who is responsible? (2) How is accuracy and measured? (3) How does affect Job?
(i) Do analyst understand the problem of logistics? (i) Knowledge about capabilities (ii) Knowledge about technique differences


Symbol :
D = Demand rate (unit) per year S = Cost per Order C = Unit Cost i = Carrying interest rate Q = Lot Size ( unit ) TC = Total of Ordering Cost plus Carrying Cost. Annual Ordering Cost : Ordering Cost Per Year = ( Cost per Order ) X ( Order per Year ) = SD/Q (1)



Annual Carrying Cost :

Carrying Cost per Year = (Annual Carrying Cost) X ( Unit Cost ) X ( Average inventory ) = iCQ/2 . (2)

Total Cost per Year = (1) + (2)

TC = SD/Q + ICQ/2
For calculate Minimum Cost we have to derive into TC



SD TC = ----Q SD ----Q2 Q

iC ----2

iC ----2 2SD ----------iC Q =

The Classic Wilson Economic Order Quantity Formula


2SD --------iC


Contoh :
Diketahui : D = 360 meter per year

S = $ 10 per order
C = $ 8 per meter I = 25 % Hitung : Q Jawab : Q = 2SD --------iC 2(10)(360) --------------------O,25(8) 3600



Q = 60



Q System :

When the stock reach to the order point R then a fixed quantity Q is order Continuous
R = Re-order Point R = m + s m = Demand rata2 per lead time s = safety stock Where s = Z X Z = Safety stock factor = Standard Deviation, during lead time

R = m + Z
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Contoh :
Rata2 Demand = 200 unit per day Lead time = 4 days Standard Deviasi Demand harian = 150 mwnit Level yang dibutuhkan = 95 % S = $ 20 per order i = 20 % per year C = $ 10 per unit (1) Annual average Demand = 250 X 200 =50000 unit

(2) Q =

2SD --------------iC

Q = --------------O,2 X10

Q = 1000 units



(3) Average Demand during lead time m = 4 X 200 = 800 units (4) Standard deviasi during lead time = 4 X 150 = 300 Units

(5) Level yang dibutuhkan = 95 %, dari tabel 18.1 Z = 1,65 R = m+ Z = 800 + 1,65 (3oo)



Periodic review system : P - System

Definisi : Stock direview setiap periode P Target Inventory T dikurangi stock posisi di ordered setiap review P-System berbeda dengan Q-System karena : Tidak ada re-order Point Tidak mempunyai EOQ, karena Q bervariasi sesuai demand Interval Order FIXED pada posisi quantity = P Rumusan : Dalam satuan waktu P=Q/D Q identik dengan EOQ, rumusan menjadi Q 1 P = ----- = ----D D

2SD ------iC

Demand harus memenuhi ( P + L ) Target Inventory = T T = m + s m = average demand u/waktu s safety stock s = Z Where : = Standard deviasi dalam waktu (P+L)

Contoh : Sama seperti contoh no.1 EOQ = 1000 = Q Daily Demand = 200 =D P = Q/D =1000/200 = 5 T = m + Z m = rata-2 demand selama (P+L) = 5 + 4 = 9 hari m = 9 X 200 = 1800 = 9 X 150 3 X 150 = 450 Maka T = 1800 + Z x 450 Z = 1,65 (table) T = 1800 + 1,65 X 450 = 2542
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