Fundamentals of Logistics PDF

Prof. Dr.
Klaus-Michael Fortmann
Slides for the course
Fundamentals of Logistics
Fachhochschule Gelsenkirchen
Fachbereich Wirtschaft
Standort Gelsenkirchen
Special thanks for my colleagues Mrs. Dipl. Kauffrau Angela Kallweit and Miss
Dipl.Betr.wirt. Angela Büttner, who helped me developing parts of the german version!
halotit.ppt
Fundamentals of Logistics
2 Weekly Semester Hour

Lecturer: Prof. Dr. Klaus-Michael Fortmann
Aim of unit and content:
Logistics is the process of planning, implementing, and controlling the efficient, cost-effective of
raw materials, in-process inventory, finished goods, and related information from the point of
origin to the point of consumption for the purpose of conforming to customer requirements. The
objectives of this course are to provide the student with:
• the basic-terms, concepts and principles of logistics,
• the information, how components of logistics interrelate and interface with other
functions of the firm,
• the traditional logistics functions such as customer service, transportation, warehousing, and
inventory management,
• analytical tools for solving logistics problems and
• the most important key data (key performance indicators KPI) which are used to ensure the
efficiency and effectiveness of logistics processes.
Method:
A combination of lecture, class discussions, logistics-videos and excursions to firms.
Literature:
Schulte, Christof: Logistik, München, 1999 ; Fortmann/Kallweit: Logistik, Stuttgart 2000
Douglas M. Lambert, James R. Stock, Lisa M. Ellram, Fundamentals of Logistics Management, Boston etc.
1998, ISBN 0-07-115752-2; Richard J. Tersine, Principals of Inventory and Materials Management, London
1994, ISBN 0-13-126484-2
" Fundamentals of Logistics "
- Definition of Terms -
Definition of Logistics
Logistics define the integrated planning, realising, usage and control of

• all kinds of transport processes,
• the storage of goods and
• the corresponding information processes
within companies and between companies.
Require- Purchase
Produc- Purchase
Information Order I ments I tion I order
I
quantity order
flow planning planning planning
I = Information
Materials
Client Ware- Produc- Ware- Supplier
flow T house
T tion T house
T
T = Transport
Definition of Logistics: Explanations
A system contains subsystems. An integrated system is characterized by the

fact, that the subsystems are connected by adapted interfaces (physically, by
information technology or both). With reference to logistics this means: Entire
system = company logistics
Subsystems: procurement logistics, in-house logistics resp. production
logistics, distribution logistics, reverse logistics
Integrated planning: Logistics must be planned in context to all subsystems,
i.e. all interfaces shall work well together.
Realisation: building of logistic facilities (warehouses, materials flow systems),
organisation of logistic processes, design and programming of logistic IT-
Systems (PPC production planning and control system, MPC merchandise...);
Materials flow: In a broader sense all processes of transportation are subject
of logistic concepts, i.e. as well the transportation of men (train, ship, plane)
Definition of Logistics: Explanations

Relations between flow of information and
materials flow: examples
Opposite flow of information against the material

flow
Concurrent flow of information: reference manual,

invoice, delivery order, consignment note (way
bill), freight list
Advance flow of information:

lists of announced deliveries (package numbers)
(Packstücknummern), order confirmation (or
acknowledgement)
Onward flow of information: invoice with separate

mail
Sphere of Influence Converting Industry/Manufacturing Industry

of Logistics
Purcha- Produc-
sing Selling
tion
Selling Purcha-
sing
Primary Trans- Cycle of Storage Commerce

Industry forming Logistics
Selling
Mining
Raw Final
Materials Selling Recycling Collecting
Consumer
Recycling Industry
loingb06.ppt
Hints on the german law of closed loop materials economy

(Kreislaufwirtschaftsgesetz KrWG)
Priority:
• Avoiding of waste is better than
• Recycling of waste is better than
• Elimination of waste
Therefore the law says that in the year 2010 all

rests of consumptiom must be returned into a
closed loop of materials.
The logistics in this context has a lot of tasks.
- Aims -
Main Aim of Logistics: Optimisation the Efficiency of Logistics
Efficiency of Logistics = Output/Input Ratio of the Logistics System
System Input: Logistics System: System Output:

Valued Logistics of The 6 "R" of
Factor Input Company Logistics
Personnel and Equip- • Right Product

• Costs of Inventory
ment in the Areas • Right Place
• Costs of Storage
• Costs of Handling • Procurement Logist. • Right Quantity
• Costs of Control • Production Logistics • Right Time
• Costs of System • Distribution Logist. • Right Quality
• Costs of Transp. • Reverse Logistics • Right Costs
loingb01a.ppt Source: Associated with: H.-Chr.Pfohl, Marketing Logistik, Berlin Heidelberg 1972p.28;H.-Chr.Pfohl, Logistikssysteme, Berlin Heidelberg 1996, p.19
- Aims -
Components of Logistics Service
Delivery Time = Time between issue of order and availability for

the client
Delivery Reliability (on-time delivery performance) = Percentage
of keeping the guaranteed delivery time
Delivery Service Level = Percentage of articles directly deliverable
from warehouse
Quality of Delivery = Accuracy of delivery concerning type,
quantity and quality of the delivered articles
Flexibility of Delivery = Possibility of consideration of special wishes

of the clients concerning delivery time or delivery quantity
loingz03.ppt Source: Associated with Christof Schulte: Logistik, 2.Edition, München 1995, p. 6
- Aims -
Alternative Strategies
Optimal Delivery Service Postulated Delivery Service
Costs Costs
Actual
Total
Target Costs
e
Target vic
r
Se
Actual er
y
i v
Del
of
s
Costs of Delivery
Costs of
ost
Shortfalls C
Service
Delivery Service 100 % Delivery Service 100 %
Source: Associated with Christof Schulte: Logistik, 1995, p. 10.

loingz01.ppt
- Aims -
Example of a statistic Evaluation of Delivery Reliability

Quantity of deliverd Orders within the first Quarter
120
100
80
60
40
20
0
-8 -6 -4 -2 0 2 4 6 8 10 12 14
Weeks of delay
Comparision between the guaranteed date
and the real delivery date: Negative values indicate too-early-dates.
Positive values point out on dates too late.
loingz05.ppt
- Aims -
Important Types of Logistics Costs

Costs of Inventory = Interest rate of the bounded capital, insurance,
depreciation, loss by theft
Costs of Storage = Fix costs of the warehouse equipment, efforts for
transfer to and release from stock
Costs of Handling = Picking, Handling, Packing
Costs of Tansport = Costs of internal and external transportation
Costs of Control = Planning of production programm, production planning

and control, order processing, shop-floor scheduling ...
Costs of System = Planning, realisation and control of the material flow
The costs of logistics can reach between 15 and 20 percent of the total costs,
therefore they have considerable influence to the company profit!
loingz04.ppt Source: Associated with Christof Schulte: Logistik
- Influencing Factors -
Selling Conditions and Requirements of the Market

The Boston Matrix
Market
Growth Question Stars
The Boston Matrix is a
high
Marks
??? Classification of
products for building
norm strategies.
Poor Cash Cows
Dogs
low
low high
Market Share
Source: http://www.marketingteacher.com/Lessons/lesson_boston_%20matrix.htmGroup)
loinge03.ppt
Selling Conditions and Requirements of the Market
Logistic Consequences:
: Optimisation of: material flow, production and planning control systems,

shop-floor scheduling, delivery service, customer service, purchasing
management, distribution system, order processing
? : Search for a suitable production location, increasing or decreasing of the

distribution system, improvement of the delivery service, orientation of
the logistics to special market segments
: Hold up of the delivery and customer service, rationalise of logistics,
rigorous realisation of inventory management and valuation policy
: Stock minimisation, hold up of delivery service only in selected market
segments, minimisation of distribution costs
Source: Associated with Christof Schulte: Logistik

loinge02.ppt
Influences of the Production Program

Consistency and
type (Size, weight, Range of goods, Life cycle of
sensibility, variety of goods, products,
Product deterioration) of frequency of changes in
products, value selling demand
Storage, demands on
Inventory,
Logistics packing, delivery service,
inventory
transport warehouse
turnover
locations

loinge05.ppt
- Company Organisation Structure -
Questions before fixing the Company Organisation Structure
y Which functions should be part of the logistics organisation ?

y Level of centralisation resp. decentralisation?
y What kind of organisation should be used within the
logistics departement?
y Amount of costs of the above mentioned logistic functions?
y Desired delivery service?
y Complexity of product structure and vertical range of manufacture?
y Typology of operation: Production of individual orders
or large-scale production?
y Order-oriented manufacturing / anonymous market?
y Structure of suppliers (Quantity, geographical distribution)?
y Structure of customers (Quantity, geographical distribution)?

loinga02.ppt
Staff-Line-Organisation
Board
Staffs Logistics
Plant I Plant II Plant III Plant IV
Plant Plant Plant Plant

Logistics Logistics Logistics Logistics
Research and Research and Research and Research and

Developement Developement Developement Developement
Production Production Production Production

Management Management Management Management
Sales Sales Sales Sales
Finance and Finance and Finance and Finance and

Accounting Accounting Accounting Accounting

loinga05.ppt
Grading within the Hierarchy

Definition of levels
• Executive board Board
• Area management Area 1 Area 2
• Sector management Sector 1 Sector 2 Sector1 Sector 2
• Department Department 1 Department 1 Department 1 Department 1
Department 2 Department 2 Department 2 Department 2

Positioning of Logistics within the
level of executive board is Department 3 Department 3 Department 3 Department 3
recommended, when the costs of
Department 4 Department 4 Department 4 Department 4
logistics are relatively high and the
flow of material and information is
very complex.
Source: Associated with Christof Schulte: Logistik, 2.Edition, München 1995, p. 6
loinga07.ppt
Effects of an integrated Organisation of Logistics
• Avoiding redundancies
• Higher transparency
• Reduction of logistic costs
• Reduction of stock
• Optimal use of central und decentral information

loinga13.ppt
- Process Organisation -
Processes within the company
Thinking in processes
Thinking restricted to area
Process 1 Process 2 Process 3
T
R
E
N
D
Develop- Offer Order
Order process ment process
loingg02.ppt
Processes within the company
Example of an order process within a small company
Order
Order Product Invoice
Client confirmation
Order receipt Date Confirm

Order center processing check order
Procurement of
Materials long delivery
Procurement of
Remaining
Material
Shipping
provision
management time material material
Construction/ Construction
Work scheduling
Production
Production order
Production
Finance and Preparing

invoice
accounting
Purchase Purchase
Supplier order order
Delivery
Time
loingg04.ppt
Flow of a logistical Organisation Process
Phases Results
Decision about the Goal setting, project team, limitation of the area of
project investigation, project schedule, budget
As-Is analysis Analysis of activities incl. related efforts, flow of

information, inspection of documents etc.
Recognition of the Duplication of work, overlap of competencies,

weaknesses laborious ways of information, missing information
Development of the Valued alternatives, plan of realisation by stages,
To-Be concept job charts, job descriptions
Introduction of the Trained employees, new process organisation,
new logistics instrumental support of work, higher logistics
organisation performance
Associated with Christof Schulte: Logistik, 2.Edition, München 1995, p. 341

loingg08.ppt
Explanation
Important are all results of the decision phase: The project team should be
involved in the planning: this leads to a better motivation within the project
work. A team coworker who planned his own tasks concerning the timeline
and the project results will do all to reach his goals.
The definition of the aims of project is essential because every decision
within the daily routine depends on their contribution to the project success.
„Without target every way doesn‘t care“. „Without target every shot is a hit“.
The task designation of a project consists in doing all necessary works to
reach the defined aims.
Generally an aim is a status in the future which must be desirable,
reachable and measurable .
The project schedule should be differentiated and the phases as well as the
activites must be briefly described and planned in the right order.
Typically this is done in form of a critical path diagram with the
corresponding Gantt-diagram.
Explanation
The area of investigation must be limited prototypically for reducing the
project effort. The portability of the project results to the not considered
areas must be ensured.
The budget for the „paper-phases“ must be defined exactly, whereas for
the realisation phase it is enough to give a qualified estimation.
At the end of the To-Be-concept it is also necessary to develop an exact
investment calculation. Each phase will be terminated by a milestone i.e.
there must be issued an interim report with interim results, deadline check
and, if necessary, a new scheduling for the rest time of the project.
One of the concept results consists in developing alternative proposals for
solution and in comparing them by means of a value benefit analysis. It
must be clear, which solution is preferred by the team. Otherwise it is
possible that the project owner (that is the „client“ of the project) opts for
another solution because of special information which only he knows: that
can be for example a planned corporate merger which leads to other
criteria weights within the value benefit analysis.
- Transport Systems -
Criteria for the Choice of the adapted Transport System

Material to be Auxiliary
Requirements Transport
transported means of
of market System
Transport
in-house extern extern (truck)
production package
require-
ments for
products
intern Intern (fork lift)

bought-in part
logistical mesh box pallet
require-
ments
loingtal.ppt Source: Associated with Christof Schulte: Logistik

Functions of Auxiliary Means of Transport (AMT)
• Intake and aggregation of the material to be tranported which

leads to a faster handling
• Protection of the cargo against damage, theft etc.
• Manipulability: simple grabbing and deposition of the AMT
• Suitable for storage
• Information carrier (when the material to be transported
it is not allowed or possible to be marked itself (glasses, fluids))

loingt01.ppt
Examples of Auxiliary Means of Transport (AMT) )
pallet mesh box pallet work piece carrier
box ISO-Container tank pallet
loingt02.ppt
External Transport Systems

Judging the means of transportation by aspects of costs:
• Costs of freight
• Additional costs of transportation (customs, service fees)
• Costs of handling (loading/unloading; changing of the
the transport system: multimodal transport)
• Additional costs of logistics (insurance, theft, depreciation)
• Cost effects outside of logistics (costs of shipping route
optimisation within the IT-department; administration of
depreciation when using own trucks; administration
of truck personnel)
Source: Christof Schulte: Logistik, München 1999, p.135 (there Vogt and others)
loingt07.ppt
External Transport Systems
Judging the means of transportation by performance characteristics:

• Transport time
• Transport frequence (how many times per day/week/month)
• Technical features (special technique for fluids, gases etc.)
• Connectivity to other transport systems
• Flexibility (changing of clients wishes)
• Start- and endpoint of the transport system (relation)
• Reliability (dependency of weather?)
• Additional service (feeding of animals; tracking/tracing;
load/unload; publicity; control of temperature)
Source: Christof Schulte: Logistik, München 1999, p.135 (there Vogt and others)
loingt08.ppt
Advantages and Disadvantages of the several carriers

Road Transport:
plus: the only system which delivers directly to the customers
minus: dependent on traffic and weather; cargo load max. 25 tons
Rail Transport:
plus: up to 1000 tons per train; independent from weather
minus: rail terminal connection necessary, Costs for special wagons
Inland Navigation:
plus: 1000 – 3000 tons, on the Rhine up to 16.000 tons with combined ships,
low freight costs
minus: limited relations, dependent on water level and weather
Maritime Navigation:
plus: up to 100.000 tons, big shipping space
minus: ports only at the North sea resp. Baltic sea, dependent on weather,
Source: Christof Schulte: Logistik
loingt10.ppt seaworthy packaging necessary
Advantages and Disadvantages of the several carriers

Aircraft Transport:
plus: high speed, no seaworthy packaging necessary
minus: high freight costs, limitations at dangerous goods
Combined Transport:
plus: Usage of the advantages of all carrier types
minus: time-consuming handling of cargo because of intermodal transport
Pipeline Transport:
plus: lowest costs, when permanently used
minus: high investment, only cost-efficient when used over a long time
Rocket Transport:
plus: in space no other transport system usable
minus: extreme high costs
sources: Christof Schulte: Logistik; Fortmann/Kallweit: Logistik

loingt11.ppt
In-House Transport Systems

Material
to be Transport- Transport
Points of Laws
transported intensity way
influence
Transport System
Transport
system
High
Aims Optimal Flexibi- Transpa-
Service-
Usage lity rency
level
sources: Christof Schulte: Logistik (dort Schulze/Weber)
loingt12.ppt = function of availability
The Technical Availability of a System depends on each Component

Given is the following conveyor track for transport of brown coal into a power plant.
The availability of each component can be seen in the drawing.
V3 = 98 % means, that
the belt conveyor 3 is
usable in 98 of 100
V1=97 % hours
V2=95 %
V3=98 %
a) Please calculate the availability of the whole system!
b) Calculate the total availability for the following structur:
V2=93 %
Solution:
a) Vtotal = 0,97*0,95*0,98*100 %=90,307 %
b) Vtotal= [1-(1-0,94)*(1-0,93)]*100=99,58%
V1=94 %
„Series V1 = 0,97 V2 = 0,99 Vtotal = 0,9603

connection“
FM 1 FM 2
Vtotal = V1 x V2, e.g. conveyor FM1 and FM2 must be both in function at
the same time (so-called „and“-relation, mathematically: multiplication)
„Parallel- Failure probability A = 1 – V

V1 = 0,97
connection“ A1 = 1 - V1, A2 = 1 – V2
FM1 for example Atotal = A1 x A2, e.g. FM1 and FM2
belt conveyor or must both be in malfunction at the
fork lift
same time
FM2 for example Vtotal = 1 - Atotal = 1 - (A1 x A2)
belt conveyor or
fork lift = 1 - (1 - V1) x (1 - V2)
V2 = 0,99 Tip: For every parallel way i must be
Vtotal = 0,9997 applicated a bracket-expression of the
Type (1 – Vi)
Examples for the Total Availability of Transport Networks
The Total Availability must be developed successivly from the Partial

Availabilities considering the rules for Series resp. Parallel Connection.
V12 = V1 x V2 V1234
V1 V2
V123
V12
V1 V2 V4
V3
V5
V3
Vtotal = 1 – (1-V12)(1-V3) V
V12345 == V
Vges
12345 total
Structure of In-House Transport Systems
Conveyors for In-House Transports
Continuous Discontinuous
conveyor conveyor
Cranes Stacker cranes Floor Elevators

conveyors
Without Rail Track

rails bounded bounded
fork lift locomotive AGVS automated guided

wagons vehicle system
loingt14.ppt
In-House Transport Sytems: Examples for Continuous Conveyors

Roller conveyor Belt Conveyor Platform Conveyor
Tilt Tray Sorter Paternoster conveyor Circular Conveyor
Source: Jünemann: Materialfluß und Logistics

loingt22.ppt
Computer controlled In-House Transport System
Production Computer In-House

for Transport Transport systems
Control
Convey
Instruc-
tions
Manufacturing
FERTIGUNG Trans-
port or-
ders
Feedback
MONTAGE
Assembling

loingt21.ppt
- Storage Systems -
Chapter Outline
Storage Systems
Outline
Selection Criteria Warehouse Functions Stock accounting Centralisation Level External or

for the suitable and Types of and Warehouse of Warehouses Internal Warehousing
Storage System Warehouses Control

loinglue.ppt
- Storage Systems -
Selection Criteria for the suitable Storage System
Stock Goods Very SmPa Small Parts Parts Long Good
Warehouse Small Box Box Box Pallet Cassette

Utility
Storage
System
Drawer-style Shelving Pallet Cantilever
Cabinet Rack Racking
loinglal.ppt Source: Associated with: Zeitschrift Materialfluß: Lagerplanung (Sonderpublikation), Verlag Moderne Industrie
- Storage Systems -
Warehouse Functions
„The basic task of a warehouse consists of the economic
coordination of different dimensioned good flows“
Compensation Function: concerning time and quantity

Security Function: risk compensation against production malfunction,
delay of supply, variation in requirements
Assortment Function: help with building assortments
Speculation Function: absorb expected increase in prices
Refinement Function: maturing processes, drying processes
loingl-1.ppt Source: Christof Schulte: Logistik, 2.Edition, München 1995, p. 91 (dort: Kupsch)
- Storage Systems -
Kinds of Warehouses classified

Kinds of
Warehouses
Phase of Level of Sortation Number of

added Value Centralisation possible
Process Consumers
Inbound Centrale Material General

Storage Storage oriented Storage
Storage
Intermediate Peripheral Consumption Provision

Storage Storage oriented Storage
Storage
Outbound Area for

Storage Small Parts
Storage
loingl-2.ppt Source: Christof Schulte: Logistik, 2.Edition, München 1995, p. 90

- Storage Systems -
Kinds of Warehouses classified
Kinds of
Warehouses
Weather Location Administration

Protection
Warehousing External Self

within Buildings Storage Administration
Storage Internal External

outside Storage Administration
loingl-3.ppt Source: Christof Schulte: Logistik 2.Edition, München 1995, p. 90

- Storage Systems -
Types of Warehouses
Types of
Storage
Racks Floor Storage
Shelving Pallet Rack Flat Goods Rack Special Rack Block Storage
Line Storage
fixed movable fixed movable
Flat Rack Mobile Rack Flat Rack Mobile Rack
High Rack Rotating Rack High Rack Rotating Rack
Gravity Flow Rack Drive-in Rack

horizontal
Drive-through Rack
vertical
Gravity Flow Rack
loingl-4.ppt Source: Christof Schulte: Logistik, 2.Edition, München 1995, p. 91

- Storage Systems -
Examples: Floor Storage without Storage Device, Line Order
Advantages:
• Flexibility
• Low Investment
• Overview
• Low Staff
• Barely technical Faults
Disadvantages:
• No Possibility of Automation
• Storage Location Order necessary
• Low Use of Room
• Low Number of Articles
• Impact Pressure downstairs
• Fifo only by means of
Rearrangement
Source: Zeitschrift Materialfluß: Sonderdruck Lagerplanung
loingl01.ppt
- Storage Systems -
Examples: Storage in Pallet Racks Advantages:

• Direct Access to all Articles
• Automation possible
• Free Storage Allocation
• High Order Picking Performance
• Fifo-Principle possible
• High Use of Room
• Adaptable to new Tasks
• Low Staff
Disadvantages:
• High Investment
• High Turnover necessary
for being economic
• Standardised Load Units necess.
• Security Conditions, given by
the Authorities (dep. of Hight))
• High-Level Organisation necc.
when using Random Storage
• Vulnerable to technical Faults
loingl04.ppt
when automated
- Storage Systems -
Examples: Storage in Pallet Racks

Using Fork Lift Using Stacker Cranes
loingl05.ppt
- Storage Systems -
Examples: Storage of long Goods Cantilever Racks

Advantages:
• Changeable into a Shelving
• Expandability
• Adaptable to the Assortment
• Picking with Stacker Crane poss.
• Low Investment
• Good Use of Room
• Direct Access to each Article
• Possibility for Automation
Disadvantages:
• Autom. only when using Cassettes
• Partially only LiFo
• Floor Conveyors necessary
• Risk of Accident

loingl06.ppt
- Storage Systems -
Examples: Storage of long Goods Cantilever Racks

- Storage Systems -
Examples: Storage in Miniload Warehouse

Advantages:
• Goods-protection against
theft and pollution
• Highest Automation Level poss.
• Ergonomic „Goods to Man“
Principle
• Good Organisation because of
Electronic Data Processing
• No Inventory
• Standardised Load Units
• No Weight Limits
• Adaptation to Assortment
Disadvantages:
• Limited Dimension Variance
• Vulnerable to technical Faults
because of Usage of Computers
• High Investment
loingl07.ppt
- Storage Systems -
Examples: Storage in Mobile Rack

Advantages:
• Good Use of Area
• Lock-ability
• FiFo
• Possibility for Semi-Automation
Disadvantages:
• No Possibility for Full-Automation
• Low Turnover
• No direct Access
• High Costs of Maintenance
• High Investment
• Low Order Picking Performance
• Stable Ground necessary
• Limitation for Expansion

loingl09.ppt
- Storage Systems -
Examples: Storage in Gravity Flow Rack

Advantages:
• High Performance
• Good Use of Area
• FiFo
• Possibility for Automation
• IT-Organisation
• Expandable
Disadvantages:
• Risk of Accident
• High Requirements to Tolerances
• Run down depends on Weight
• Impact Pressure in Front
• Drive-against Crash
• Security of Loads necessary
• High Investment
• Only single Material Channels
loingl10.ppt • High Costs of Maintenance
- Storage Systems -
Examples: Storage in Advantages:

• Good Use of Room Depth
horizontal Rotating Rack
• Ergonomic „Goods to Man“
Principle
• Free Choice of Storage Allocation
• FiFo
• Possibility of Automation
• Parallel Serving of more than one
Rotating Rack
Disadvantages:
• Serial Order Picking
• Limited Payload
• Low Flexibility against variable
Turnover Performance
• Payload/Rack Weight unfavourable
• Long Access Time
• High Investment
• Expansion limited
Source: Zeitschrift Materialfluß: Sonderdruck Lagerplanung • High Costs of Maintenance
loingl11.ppt
- Storage Systems -
Examples: Pick an Pass by Means of a Rotating Rack
loinbk09.ppt
Source: Praxishandbuch für den MaWi-Leiter, Augsburg 1995, Teil 10, Kap. 3.2.2., Seite 6
- Storage Systems -
Examples: Remote Picking with a Rotating Rack System
loinbk10.ppt
Source: Praxishandbuch für den MaWi-Leiter, Augsburg 1995, Teil 10, Kap. 3.2.2., Seite 6
- Storage Systems -
Stock Accounting and Warehouse Control
Functions:
• Optimisation of the sequence of Storing and Retrieval from
Storage
• Allocation of Storage Orders to empty Bins
• Allocation of Retrieval Orders to Load Units
• Instigation and Control of carry commands for the Stacker Cranes
• Smooth Identification and Control of Storing and Retrieval of
Storage Devices
• Storage Slot Status Database (occupied/available)
• Real-Time Update of the Quantities of all inbounded resp.
Outbounded Articles
loingl12.ppt
- Storage Systems -
Central Warehouse:
Mainly used in small and medium-sized Enterprises
Advantages of central Storage versus decentral Storage:

• Stock lower than the Sum of decentral Stock
• Minimum Stock lower than the Sum of minimum Stock decentral
• Lower Capital Lockup
• Better Use of Room
• Higher Turnover: Therefore lower Perishableness
• Personnel Placement more economic
• Use of Storage Devices more efficient
Source: Oeldorf/Olfert: Materialwirtschaft

loingl15.ppt
- Storage Systems -
Decentral Warehouses: Necessary...
• when a Factory must be supplied directly

• as Buffer Storage within the Production
• when the short-term supply is very important for the customers
• when the direct Contact to the Clients is Part of the Business
loingl16.ppt
- Storage Systems -
Decentral Stock versus Central Stock

Warehouse 1
Stock 1200 Pieces - 707 Pieces = 493 Pieces is equivalent
Article A: to 41 % Reduction of Stock, when centralized
300 pieces
Central Warehouse General Conditions:
Re-
Warehouse 2 • Optimal Disposition of
Stock Stock Article A: Stock and further Supplies
• Same Turnover decentral
Article A: and central
400 pieces 3002+4002+5002 • Same Assortment
storage decentral and central
= 707 Pieces
Warehouse 3
Stock
Additional correction factor, when more technical
Article A: performance is installed in the central warehouse than in
500 pieces the decentral locations:
0,7 bis 0,8 (that means for example: 0,7x707 pieces)
Sources: Gudehus, Tim: Logistik 1, p. 308, Berlin, Heidelberg, New York, 2000 , there: Maister, D.H.,(1976), Centralisation of Inventories and the „Square Root Law“, International Journal of
Physical Distribution, Vol. 6, No.3, p.126 ff.
lohdgt35a.ppt
- Storage Systems -
Criteria for the Decision: Own-Storage

or Warehousing by a Logistical Service Provider (LSP)
• Needs for Investment for Facilities or/and Equipment

• Grade of Dependency on external Personnel
• Current Operating Costs
• Requirement of Personnel and Know how of Experts
• Peaks of Workload and Variation of Capacity Requirements
Warehousing by a LSP often takes place within the

Procurement Logistics and the Distribution Logistics.
Production Warehouses normally are administrated
autonomously.
loingl17.ppt
„ Procurement Logistics "
Procurement Logistics =
All logistical activities within the area of procurement
loinbtitle.ppt
Aims and Tasks of Procurement Logistics
y Favourable Purchase Price • Optimal Disposition of Quantities

• Early Requirements Identification
y Supply Security • Responsible Integrating of Suppliers
• High Disposition Quality
y Flexibility of Delivery • Adapted Selection of Suppliers
y High Quality • Fixing of Quality Standards
y Low Costs of Freight • Short ways from the Supplier to
the Factory
• Optimisation of the Costs of Freight
y Low Costs of Storage • Costs-favourable Place and Equipment
• Optimisation of Storage Processes
• Clear Stock Policy
y Low Stock • Short Delivery Cycles
loinbg05.ppt
• Accurate Supervisory of Stock
Value Benefit Analysis for Suppliers
Suppliers Weight Supplier Miller Supplier Mayor Supplier Smitt

Points Points Points
Criteria 1....5 PxG PxG PxG
1...5 1...5 1...5
Product Quality 5 3 15 4 20 5 25
Price 2 5 10 4 8 2 4
Delivery Time 4 4 16 2 8 1 4
Fulfillment of Contract 1 2 2 3 3 5 5
Delivery Date Reliability 4 2 8 3 12 5 20
Quantity Reliability 2 1 2 5 10 3 6
Sum 53 61 64
loinbs05.ppt Rank III. II. I.
Alternative Procurement Concepts
Multiple
Global Modular
or Single
Sourcing Sourcing
Sourcing
“World wide” “Purchase of “A Lot of or only
Components one Supplier(s)”
instead of Parts”
loinbd01.ppt
Traditional versus Modular Sourcing
Supplier 1 Supplier 2
P P
Supplier 2 Supplier 1
R R
Supplier 3
O Supplier 3
O
D D
Supplier 4 U Sup.4 U
C C
Supplier 5 E Suppl.5 System E
R Supplier R
Supplier 6 Sup.6
Source: Ch.Schulte: Logistik 2. Edition, München 1995, p.149

loinbd03.ppt
Moving Period Planning Responsible:

Responsible:
for each Finished Product Sales Department!
Sales Department!
Forecast: 12 Months
10 11 12 01 02 10/06
Edition
11/05 Plan Act. Diff. Plan Plan Plan Plan Plan
11 12 01 02 11/06
Edition
12/05 Plan Act. Diff. Plan Plan Plan Plan
Edition 12 01 02 12/06
01/06 Plan Act. Diff. Plan Plan Plan
loinbd05.ppt
„ Procurement Logistics“
Finished Product 11 12 01/98 ...

Moving Period X 1000 900 1300 ...
Planning
Y 3000 2500 4000 ...
Y
The MPP leads to the IHPT 1) = 1Month
in-time procurement 2A 3Q
IHPT = 1Month
2B 5C
Purch.Prod. 9 10 11 ...
Procurement A - 6.000 5.000 ...
Program B 18.000 15.000 24.000 ...
loinbd06.ppt 1) IHPT= In-House Production Time

C 45.000 37.500 60.000 ...
„Procurement Logistics“
Just-In-Time-Concept
y Coordination of the Production Control Systems Assembly

with the Assembly Control Systems Control
y Timely Delivery of Parts „as late as possible“
y No or (at most) small Buffers
y Small Lots, high Delivery Frequency Production
Control
Because of the Complexity of the JIT-Process this is only

economic with A-X-Parts 1)
1) A=high value, X=constant requirement

loinbd17.ppt
„Procurement Logistics“
Information and Material Flow at JIT

Information Flow
Production Production Assembly

Control Control Control
In-House
Products
Supplier Own
Material Flow
FERTIGUNG
Production FERTIGUNG
Production Assembly
MONTAGE
Purchase
Material
MaterialFlow
Flow Products
While processing JIT the Assembly “pulls” the Material

loinbd18.ppt
„ Production Logistics "
Production Logistics =
All logistical activities corresponding

to the production process
loinbtitle.ppt
„Production Logistics“
Definitions: Linking of Work Stations
Fixed linked Loose linked Flexible linked
Occupancy time: equal approximate equal variable
Work piece sequence: equal equal variable

Without buffer buffer buffer, collecting, distributing
Material move: tact dependent tact independent tact independent
lointm04.ppt Source:
REFA MLBO: Planung und
Gestaltung komplexer
Produktionssysteme
Calculation of the Buffer Capacity between

two loose linked Working Places
n = quantity of work pieces to be buffered

tv1, tv2 = maximum possible time without working at each station
(reasons: the worker has to go to toilet or is outside for smoking)
te = working tact in minutes per piece (always the same)
Example: tv1=10min, tv2=14min, te=4 min/piece

lointm04.ppt Source:
n=(10min+14min)/(4min/piece)=6pieces
REFA MLBO: Planung und
Gestaltung komplexer
Produktionssysteme
Transport Matrix and Sankey-Diagramm1
Finished goods stor.

Raw material storage
Goods receipt Material Flow in
Tons per Month
Waste, cuttings
100
To
2
Assembling Raw material st.
Forwarding
Production
72 4
Scrap
From
Sum
Production Waste-
Goods receipt 100 100 52 8
20
Raw material storage 72 20 10 102
Assembling Cut -
Production 52 16 8 76 tings
65
10
Assembling 4 65 3 72 16 3
Finished goods storage 91 91
Finished goods storage 9
Waste, cuttings 2 9 11 91
Scrap
Sum 102 76 72 91 11 91 9
Forwarding
lointf30.ppt Sources: Chr.Schulte: Logistik (there: Kettner, Aggteleky, Nestler) 1) H.R.Sankey (1853-1921), Irish engineer
The Transportation Work depends on the Allocation of the Machines
Distances between the Tons per month Variations of allocation

between the of the production machines
locations of the production facilities
Production machines to the production facilities
A B C
B 60 m C To
2 3
From V1 1 2 3
1 70 40 V2 3 1 2
80 m 50
2 V3 2 3 1
100 m
Transportation work fo the alternatives:

A Variant 1: 70 t x 80 m + 40 t x 100 m + 50 t x 60 m = 12.600 tm
optimal
Variant 2: 70 t x 60 m + 40 t x 80 m + 50 t x 100 m = 12.400 tm
Variant 3: 70 t x 100 m + 40 t x 60 m + 50 t x 80 m = 13.400 tm
lointm42.ppt Source: Fortmann/Kallweit: Logistics, Stuttgart 2000, p. 82

Aims when using Production Planning and Control Systems (PPC)
• High delivery reliability

• High and continuous utilization of capacities
• Short throughput time (also called lead time)
• Low warehouse inventory
• Low workshop inventory
• High delivery service level
• High information service level
• High flexibility
• Low procurement costs
• High material availability
• Increase of planning security
Sources: Chr.Schulte: Logistik, there: Brankamp, Ellinger/Wildemann, Hammer et al.)

loinmf01.ppt
Moving
Period
Planning
Client orders Forecast
Functions Stochast.
of Planning
Production programm for finished products =
PPC- Primary requirement with the items: article number,
lots, delivery date
Pl anni ng
Systems
Bills of
material
Computer aided net require-
Available ment planning for in-house
stock
products and bought-in parts Lot
Optimi-
sation
Production pro- Procurement-

Working gram (in-house program
plans
products) (bought-in parts)
Work- Procurement
shop Production
Cont r ol
Schedu-
ling
Provision of
material Goods receipt
IHP BIP
Pro-
duction- Assembly
control
Finished products
loinmf02.ppt Source: Fortmann/Kallweit: Logistics, Stuttgart 2000, p.89
Deterministic Requirements Planning: Based on Bills of Material
The deterministic requirements planning normally is used with high-

value parts (A-,B-Parts) and is based on orders (resp. expected orders)
Finished product structure of E1 Single-level BOM
E1 E1 G1 G2
Name Quantity Name Quantity Name Quantity
1 G1 2 T1 1 G2 1 T3
G1 1 T1 4 G1 2
T1 2 T2 1 T1 1
4 T1 1 T2 2 G1 1 T1 1 T4 G2 1 T4 1
T3 1
4 T1 1 T2
Source: Associated with Oeldorf/Olfert: Materialwirtschaft

loinmf12.ppt
Two Ways of Presentation of Structure BOM
Finished product structure of E1 Listing of the Structure BOM for E1
E1
E1
Level Name Quantity
1 G1 1
1 G1 2 T1 1 G2 1 T3 .2 T1 4
.2 T2 1
1 T1 2
4 T1 1 T2 2 G1 1 T1 1 T4
1 G2 1
.2 G1 2
..3 T1 4
4 T1 1 T2
..3 T2 1
.2 T1 1
.2 T4 1
1 T3 1
loinmf13.ppt
Stochastic Requirements Planning: Types of Models for Consumption
The stochastic requirements planning normally is used with lower-

value parts (C-Parts) and is based on the consumption in the past.
Consumption Consumption Consumption Consumption
Time Time Time Time

Pure constant- Season- constant- Pure trend- Season- trend-
model model model model
Source: Associated with Oeldorf/Olfert: Materialwirtschaft; REFA: Planung und Steuerung, Teil 2
loinmf18.ppt
Stochastic Requirements Planning: Forecast Methods

Moving average value = Average consumption over x past periods; at the
beginning of each new period the oldest one is cancelled;
suitable for the pure constant model
Weighted moving average value: Each period-consumption corresponds with
weight factors: the oldest one receive the lowest weight; suitable for the
pure constant model
Regression analysis = Used for the forecast with trend-type function;
linear case: y=a+bt ; non-linear: polynomal of n-th order
Exponential smoothing: Most important stochastic method; the new forecast is
built from the old one to which is added the with α weighted difference
between the old actual value and the old forecast value;
suitable for the pure constant model; with the exponential smooting
of second order it is possible to take into account trend functions of
the past-consumption values
For season models are suitable mathematic combinations of the above models.
loinmf20.ppt
Stochastic Requirements Planning: Exponential Smoothing
Consumption
α
Δ α Δ α Effective copnsumption
α big
α small
V(11) T(11) V(12) T(12) V(13) T(13) V(14)
Time
FC Act. FC Act. FC Act. FC Advantage:

Low calculating amount: Only
Week 11 Week 12 Week 13 Week 14
the data of the month before
V : new forecast are necessary (the total past
Vt+1 = Vt + α(Tt-Vt) Vt+1: old forecast
is involved in the values of
α = 0,1 ... 0,3
t
Tt : actual requirement the earlier months).; Influence
of the old period of the newest values is stronger
α : smoothing factor than the effect of elder ones.
Source: Associated with Oeldorf/Olfert: Materialwirtschaft; Kernler: PPS der 3. Generation
loinmf21.ppt
Calculation of Material-Availability in the Future by means of a Simu-

lation of the Function „Stock over Time“, dependent on Events
Stock Planned incoming of material 1)

Incoming of material as an effect
of computer- planned orders (net
requirements planning program)
Start-
stock
Time
1) Possible reasons:
Planned outgoing of material 2)
- purchase orders
- production orders
2) Possible reasons:
Day of
evaluation - material needed for production orders
- material needed for sales
loinmf24.ppt
The Order Point System as a function of a PPC System

Stock of a definite material Ideal Model
Top stock T=3S
Order
Order point O=2S
Order quantity 2 S
Safety stock S = S
Delivery
time
Delivery dates
Time

loinbd08.ppt
Optimal Order Quantity Formula, developped by ANDLER :
200 x J x F J: annual requirement of bought-in

Optimal material
Order Quantity = E x TWER [%] F: fixed costs of the purchase process
(pieces) for one orderline
E: delivered price per piece
TWER: Costs of all storage activities
J: annual requirement of in-house

Similarly is valid for in-house-products:
material
SC: costs of the set-up process at the
production machine: once per lot
Economic 200 x J x SC
MC: manufacturing costs for the
Lot Quantity = considered in-house part
MC x TWER [%]
(pieces) TWER: Costs of all storage activities
loinmf26.ppt Source: Chr.Schulte

Graphical Interpretation of the ANDLER Formula
Costs per
Year in € Assumptions for the Validity:
- Exact knowledge of the
requirement per year
Minimum of
ts
- regular consumption
Total Costs
l cos
Tot a t) - price independent of the lot
r es
e
i nt
in cl. quantity
e(
to
ra
g - no corresponding parts
fs
sts
o - exact knowledge of costs
Co
Purch
a
proce sing
ss co
sts
Order quantity
Optimal Order Requirement
Quantity per year
loinmf28.ppt Source: Chr.Schulte: Logistik
Functions of PPC
The calculation of the purchase order date within the requirements

planning is based on the lead time offset along the structure of the bill
of material (BOM) plus the delivery time.
Total throughput time

4 17 working days = 4 calendar
Final assembly 4 days weeks
3
Pre-assembly 3 days Delivery time
10 25 working days = 5 cal.weeks
Manufacture of
25 components 10 days Conclusion: The material must
be ordered 9 calendar weeks
Purchasing bevore the delivery date of the
Delivery time 25 days final product.
loinmf29.ppt
Functions of PPC
Scheduling: Calculation of the start dates and finish dates of each
operation without involvement of capacity restrictions
Finish
B=Time buffer
OP1 OP2 OP3 T=Transit time
OP3
OP2
OP1
B T B Finish=Start
T
Time OP2
Start Start Start OP1
Finish Finish Finish Finish
Start Start
Basic dates from the

requirements planning
loinmf30.ppt
Functions of PPC
Variants of Scheduling
Forward scheduling Backward scheduling Combined scheduling
Capacity Capacity Capacity
Time Time Time

S F S T S=today T F
T=Target date Beginning with T,

S=Start date
the start date lies in the
F=Finish date S=Start date past: Changing to
Forward scheduling
loinmf31.ppt Source: Associated with REFA MLBO Planung und Steuerung Part 3
Functions of PPC
Possibilities of reduction of the throughput time (TPT)
Transit time
Actual operation
sequence TPT
Total TPT
Shortening of
Transit time TPT
Parallelising TPT
Shortening of TPT
Individual TPT
The combination of all
actions leads to the
TPT biggest effect.
Overlapping
loinmf32.ppt
Functions of PPC
Order control by means of order completion confirmation (feedback):
Order-related data:
Start and finish dates of all operations, produced quantities, scrap,
missed deadlines, processing times
Individual-related data:
Performed working hours, attendance time, illness time
Machine-related data:
Output (as percentage of input), work load, amount of time for: set-up,
production, idle and hold-up
Material-related data:
Inventory and consumption of material; quality defects; deviation of
planned consumption; availability of the needed material
Important: Realtime Feedback
loinmf45.ppt Source: Chr.Schulte: Logistik

Functions of PPC
Masterdata are the base of an operative PPC System
Material- Material type: in-house part or bought-in part; in-house production

time rsp. replenishment lead time; lot-sizing procedure; consump-
masterdata
tion history; requirements indicator (determin. or stoch.)
Base of: requirements planning, basic date building, BOM
Bills of material Description of all building blocks and structures; base of require-
ments planning, basic date building (lead time offset), in-house
production orders rsp. procurement of bought-in parts
Data of work Capacity in man hours and machine hours per day:
stations Basic information for the capacity load, base of working plans
(work center)
Working plans Operation sequences; standard times per OP: personal time,
machine time, setup time: Base of continuous scheduling
(routing)
loinmf46.ppt
Functions of PPC
Transaction data within a PPC-System
Independent Article number, quantity, date
requirements
Article number, quantity, planning type, storage location

Stock number of the material requirements planning group
Planned orders,
dependent Article number, quantity, basic dates, pegged requirements
requirements
Production PO-No., article number of the parts to be produced,

orders quantity, date, PO-routing, PO-BOM
Reservations Article number, quantity, date, connection to PO or CO

Purchase
orders Purchase order no., art. no., quantity, date, vendor, conditions
loinmf47.ppt
Functions of PPC
The basic data construction of a PPC-System needs

a special sequence
1. Building and storage of material master data

2. Building and storage of the master BOM by means of a combination of articles
3. Building and storage of work units
4. Building and storage of working plans by means of combination of work units
via operation sequences
5. Building and storage of supplier master data
6. Capture an input of the actual stock
7. Input of the independent requirements on the level of finished goods
8. Requirements planning: building of planning orders and purchase order proposals
9. Convert of the planned orders into production orders
10. Convert of the purchase order proposals into purchase orders
loinmf48.ppt
„ Distribution Logistics "
Distribution Logistics =
All logistical activities corresponding

to the distribution process
Definition:
The distribution logistics represents the connection between the production process
(industry) rsp. the merchandise provision (commerce) and the client site.
It contains all warehousing- and transport-processes of goods to be delivered to the
consumers incl. the corresponding activities of information, directing and controlling.
Aim of the Distribution Logistics:

The main aim is the provision of the right goods to the right date in the right quantity
and in the right quality, optimising the ratio between the wished delivery performance
and the associated costs.
Main Activities of the Distribution Logistics:

The main activities of the distribution logistics are directed at:
- the choice of the right locations of the distribution warehouses,
- the warehousing itself, - the order processing,
- the order picking, - the packaging,
- the goods issue, - the load securing and
- the transport
loindü02.ppt Source: Ch. Schulte: Logistik, 2. Edition, München 1995, page 275
Alternative Distribution Structures

Factory Warehouses:
They are used for storing the finished 3-level 3-level 2-level 1-level
goods at the producer site, realising the distribution distribution distribution distribution
quantity compensation between with factory with central with central with central
production and transport. warehouses warehouses warehouses warehouses
Central Warehouses: factory
They contain the full assortment of a Ware-
company (evtl. from several factories), Houses
realising the time- and quantity-
compensation between the production central
site and the sales site. ware-
Regional Warehouse: houses
Realises the regional presence; the
regional
location near the clients makes it possible ware-
to transport big quantities over long houses
distances (producerÆregional warehouse)
Distribution center: distribu-
In big distribution regions a division into tion
distribution areas is useful. Activities in centers
distribution centers are order picking and
shipping route optimisation.
clients
lohddb04.ppt / Sources: Weber; Kummer: Logistikmanagement, p. 156 and
Krampe; Lucke: Grundlagen der Logistik, p. 267ff.
Costs as function of Decentralisation

Costs Costs of transport
and warehousing
Model for
calculating the
optimal
number of Costs of warehousing
warehouses
within the
horizontal Freight for
distribution receiving goods
structure Freight for sending goods
Number of warehouses
lohddb07.ppt
Centralisation Decentralisation
Source: Tietz, B.: Handelsbetriebslehre, 1993, p. 797
Points of Influence while defining the Number of

Warehouse-Levels within the vertical Distribution-Structure
The decision for an adapted number of warehouses depends on the aims
of the company, for example a wishable delivery time.
Costs are caused by:

• Number and size of the warehouses
• Transhipment and Handling
• Costs for transport between the warehouses
• Costs of distribution to the clients
• Capital lockup (stock)
With a low number of clients and/or big delivery quantities

a centralisation is possible.
Source: Chr. Schulte: Logistik, 2. Edition, München 1995, Page 279

loinds10.ppt
Example for forecasting the storage area demand
Sales 2004 Sales 2017
. /. . /.
Sales by third- Sales by third-
party deals Forecast
party deals
“Distribution Logistics“
2004 2017
= Stock sales = Stock sales

2004 2017
As-is To-be
area- area-
produc- - produc-
tivity tivity
Warehouse- Clearing - Required

area 2004 difference 1) area 2017
Additional Require-
ment for Ware-
house capacity
2004 to 2017 1)
e.g. by means of an
Locations for and assortement clearing
types of warehouses and/or removing of
slow-moving items
lohddb15.ppt Source: Tietz, B.: Handelsbetriebslehre, 1993, p. 799

Calculation of the Warehouse Size, based on planned Sales

To-be sales per day: 100 T€
Average value per pallet: 500 € Æ 200 pallets per day 500 500
€ 500 € 100 T€
500 daily
Assumptions: € €
• working time: 8 h per day, 300 days p.a., 50 weeks p.a. 500 500
• 400 different articles, for each a pallet place 500 500
200
500 500 500 Pallets
• Ø delivery time: 2 weeks € € €
daily
• Investment price per pallet place
in a warehouse: 600 € Sales p.a.=300•100 T€=30 Mio€
Sales per week=30 Mio €/50=600 T€
Stock of a definite material Ideal Model Sales per article per week=600 T€/400=1.500 €
corresponding with 1.500 €/500 €=3 pallets
Top stock T=3S
Safety stock=6 pallets (for 2 weeks in „Ideal Model“)
Average stock=12 pallets per article
Order
Order point O = 2 S Total # of pallets: 12•400=4.800 pallets
Order quantity 2 S
Ø capital lockup=4.800•500 €=2,4 Mio€
Inventory turnover = 30 Mio€/2,4 Mio€=12,5
Safety stock S = S
Warehouse invest=4.800•600€=2,9 Mio€
Delivery
time
Warehouse performance
Delivery dates
Time =200 pallets/8h=25 double cycles per hour
Global Aims while planning a Distribution System

• To ensure a unified, customer-oriented service at the POS
• Minimising the costs of the total supply chain through all distribution levels
Strategies for reaching the Aims

• Realisation of a networked traffic organisation
• Shorten the stream of goods (commodity flow): With big and often needed
supply quantities Öuse of regional centers (receiving of goods from
the suppliers and forwarding to the outlets); with small and rare needed
supply quantities Öuse of central warehouses and delivery directly to the
outlets
• Area-wide networking of information
• Through shipment with the same packaging and identification
lohddb03.ppt
Source: Schmidt, Klaus Jürgen: Logistik, 1993, p. 194
Influencual Factors while planning Distribution Systems

• Delivery service (primary goal: reaching a defined logistics service level)
• Demand variation (changing of the market requirement: casual, due to
economic situation, seasonal fluctuation)
• Customer related criteria (quantity demanded, required assortment, special
needs, geografical allocation of the customers)
• Properties of the transport goods (types, quantities, volumes, tolerances,
sensitivities)
• Infrastructure (networking of goods traffic, energy and communication)
• Environmental impact (ecolocical and social burden for cities and
communities like emission of noise and harmful substances, damages and
victims caused by traffic accidents, area requirement and traffic conditions,
social consequences for the urban development)
• Costs (for stream of goods, i.e. costs for transport, warehousing, capital
lockup and information flow)
lohddb09.ppt
Source: Krampe, H.; Lucke, H.-J.: Grundlagen der Logistik, 1993, p. 269f.
Contract Warehouse and Consignment Warehouse

Contract Warehouse Consignment Warehouse
Idea Third party storage place, near The warehouse areas are provided by
the buyer the buyer
Main focus of Changing the property of the Amount of warehouse costs =

negotiations products to the buyer controversial article of a contract
Advantages Costs don‘t lead to negotiation Planning scope for suppliers, stock
problems because normally transparency for buyers, changing of
rented rooms are used property as well as invoicing at the point
of withdrawal
Dis- Marginal transparency for the
advantages buyer; the supplier is not Not suitable for many clients and/or
allowed to deliver bigger unimportant clients
quantities whenever he wants
lohddb14.ppt
Source: partially: Wildemann, H.: Das Just in Time-Konzept, p.165
“For the Succes in Retail there are three

Things important:
First the Location,
Secondly the Location and
Thirdly the Location!”
lohdds01.ppt Source: Bienert, L.M.:Standortmanagment,Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 3,
there: Berekoven, L.: Erfolgreiches Einzelhandelsmarketing, Grundlagen und Entscheidungshilfen, München 1990, p.351
Relevance of the Decision on a Location
Choosing of locations are fundamental decisions , which fix the externals marketing
conditions (like structure of the competition, traffic connection at al.) and which also are
bounded to long-term fixations of internal prameters like operating facilities, personnel or
form of contract
“Opening new stores is inherently risky. There are significant monetary costs associated
with opening a new outlet” ( GHOSH & Mc LAFFERTY 1987, S.1 ). “Large new stores can
now cost many millions of pounds to develop, so the consequences of poor location
decisions are extremely serious” ( Mc GOLDRICK 1990 , S.183 ).
Decisions on locations are not rapidly or only with extreme costs revisable; the rent-risk with
supermarkets for example amounts from 1 to 15 Mio€ (depending on the size of the rental
object) with a usual duration of the rent contract of 15 years (HEEGER 1991 , p.92 ).
lohdds02.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 3-4
Relevance of the Decision on a Location
The achievable sales, made by commercial enterprises, are determined by location

conditions. Disadvantages of the location of an outlet lead quickly and directly to
continuous economic consequences.
Good locations are a bottle-neck ( MÖHLENBRUCH & NICKEL 1994, p.4, talk about
entry barriers in form of slender locations) : The decreasing number of “lucrative“
location-alternatives and therewith the increasing risc of poor location decisions point the
value of careful location analyses out.
“Experience becomes a less reliable guide” ( BREHENY 1988, p.41 ).
In contrast to the other marketing parameters the location decision is barely imitable by
other commercial enterprises. “ Location is the only marketing mix variable, that cannot
be duplicated” (GOLDEN & ZIMMERMANN 1980, p.119).
Opening of new outlets rsp. the aquisition of existing (competition-) locations are the
most effective single measures for realising the (necessary) growth. “The pressure to
invest in new outlets increases” (BREHENY 1988, p.42).
lohdds03.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 3-4
Location Dynamic
• Changing of the number of outlets within the considered trading area
(closing or new-opening of outlets)
• Quantitative and qualitative changing of existing outlets
(especially concerning the size of the sales area, the design of the sales
room and the assortment)
• Development of complete new types of outlets
• Changing of the infrastructure (e.g. traffic ways, available types of means
of transportation, all types of building projects), urban development
• Changes in the populations structure (e.g. age structure, trends in earnings,
level of education)
• Structural and “stylish” changes within the behaviour of the consumers
• Political-legal changes of location-relevant basic conditions
lohdds04.ppt Source: Bienert, L.M.:Standortmanagment,Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996 p. 25
Location Dynamic 2006

Traffic individual
Demand external
Competition environment
...
2005
Location
complexity ic
a m
n
Dy
tion
Outlet size ca
Lo
Sales room individual Living space
design internal Outlets
Marketing mix Outlet conception
Business park
...
lohdds05.ppt Source: Bienert, L.M.:Standortmanagment,Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 26
Location Rating by Global Analysis
Start-Infos for a case study:
Sector: Food retailer

Inhabitants within the trading area : ITA = 10.000
(Source: e.g. national/ country/ regional statistics; marketing research institutes)
Existing sales area within the trading area (alimentation): ESA = 2.500 m²
(Source: e.g. GFK, Nielsen, local companies/ authorities, own investigation)
Average to-be area performance: TBAP = 4.500 EUR/m² and year
(Source: e.g. intercompany comparisions, information of associations)
Average efforts for food: AEFA = 1050 EUR / Person
(Source: e.g. GFK – indicators of buying power, regional statistics)
lohdds13.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 69
Location Rating by Global Analysis
ITA x AEFA
ESA = 4.200 EUR / m² As-Is area performance
The ratio between the As-Is area performance and the To-be area performance results
in the competition index; hereby are three constellations possible:
As-Is area performance CI = 1 normal competition

CI = CI > 1 weak competition
To-be area performance
CI < 1 strong competition
The result here is: 4200 / 4500 = 0,93 ; i.e. the distribution area is slightly
„overstaffed“. Opening a new outlet would tend to result into a risky situation,
a cutthroat competition is probable.
lohdds14.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 70
Phases of the Location Planning
Choice of a
region MAKRO ANALYSIS
Region-
pre-selection
Trade area
limitation MIKRO ANALYSIS
punctual
location analysis
lohdds20.ppt Source: Bienert, L.M.: Standortmanagement, Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p.115
Methods for the Limitation of the Trading Area
Time Distance Method
Retailer location
Living building
Lake
Radii of trading areas
lohdds22.ppt Source: Bienert, L.M.:Standortmanagement,Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 127
Methods of punktual Location Analysis
The potential of clients near the projected new outlet-location can be

found out by means of interviewing actions.
Contents of questions: domicile, buying practice
Location
of outlet
Domicile of clients
lohdds23.ppt Source: Bienert, L.M.:Standortmanagement,Methoden und Konzepte für Handels- u. Dienstleistungsunternehmen, Gabler, Wiesbaden 1996, p. 141
Methods of punktual Location Analyses: Value Benefit Analysis
Locations Weight Location A Location B Location C

Punkte Punkte Punkte
Criteria 1....5 PxG PxG PxG
0...5 0...5 0...5
No. of parking places 5 3 15 4 20 5 25
Transport connection 2 5 10 4 8 2 4
No. of competitors 4 4 16 2 8 1 4
Image of the comp. 1 2 2 3 3 5 5
No. of consumers 4 2 8 3 12 5 20
Buying power 2 1 2 5 10 3 6
Sum 53 61 64
Ranking III. II. I.
Definition of Order Picking

„Order Picking" is the combination of determined subsets
(articles) from a provided total quantity (assortment), based on
demand information.
The following basic functions are necessary with order picking:
• Provision of demand information,

• Provision of groups of articles,
• Contolled withdraw of subsets from the total quantity,
• Planned walking to the withdrawal coordinates and picking action,
• Transfer of the subsets to the next process station and signalling the
execution
lohddk02.ppt
Source: Christof Schule: Logistik
Order-picking warehouse with separated charging and picking
Charging system Provisioning system Picking system
lohddk01.ppt Source: Rudolf Pieper: Auswahl und Bewertung von Kommissioniersystemenp. 8-9
Variants of Order Picking
static provision dynamic provision

central delivery de-central delivery
Man to Goods Goods to Man
Source: Rodolf Pieper: Auswahl und Bewertung von Kommissioniersystemenp. 10-11

lohddk05.ppt
Variants of Order Picking Legend:

Legend
one zone: one order picking zone
multi zones:many separated order
Order picking systems picking zones
serial: one picking order after
the other
parallel: picking order will be
one zone multi zones served in several zones
simultaneously
single-level: customer-related order
picking in one step
serial parallel serial parallel multi-level: article-related rsp.
storage-unit-related
picking in the first step,
then customer-related
single- multi- single- multi- single- single- multi-
picking from the
multi-
level level level level level level level level provided quantities
Source: Krampe; Lucke: Grundlagen der Logistik, 1993, p. 241
lohddk06.ppt
Example for serial and parallel single-level Order Picking

Picking Orders:
Client A: 2 x 4711, 1 x 4812, 10 x 5014 and Client B: 3 x 4812, 2 x 4913
4711 4812 4913 5014 article in

warehouse
2 1 10
order A
serial,
order B 3 2 order-
related
2 1 10
parallel,
order-
order A related
3 2
order B several sources

lohddk08.ppt
Example for parallel multi-level Order Picking

Picking Orders: Σ
Client A: 2 x 4711, 1 x 4812, 10 x 5014 2 x 4711; 4 x 4812;
Client B: 3 x 4812, 2 x 4913 2 x 4913; 10 x 5014
4711 4812 4913 5014 article in

2
warehouse
all 2 4 10
orders
1. level
11 4812 12 12 4 4
4711 4913 13 5
5 5014
5
5 5014 parallel
2 1 10
order A
2. level
3 2 serial
order B
several sources
lohddk10.ppt
Main Tasks of Goods Issue
The main tasks of goods issue are:

• Provision of the articles
• Identity- and quality control
• Printing of shipping instructions
• Combination and packaging of the parcels for each consignment
• Provision of the consignments
• Loading of the goods
Quelle: Chr. Schulte: Logistik, 2. Auflage, München 1995

loindw00.ppt
Material Flow Material- and Information Flow

Within the Goods Issue
Information Flow
Production Order Sales Department
Warehouse
Provision of goods Order Copy
Goods Issue
receipt
goods
Put down of the goods
Control of identity yes Printing of shipping

fulfilled ?
and quantity instructions
no
yes
fulfilled ? Failure report
no
Rejection
Combination of the Exceeding of
consignments delivery date
Complaint
Packaging of Delivery date
The goods Packing slips Finishing of shipping
instructions
Packaging of
consignments
Reshipment
Privision of Transport scheduling

consignments
Loading of goods Shipping advice
Customer
loindw01.ppt Souirce: Chr. Schulte: Logistik, 2. Edition, München 1995, page 295 (source there: ZVEI)
Goods Issue Posting
Posting data:
• Date • Interface to invoicing

• Article number • Interface to store settlement
• Quantity • Interface to accounting
• Order item / Project • Departure warehouse
• Stock transfer
• Store order item
The accounting will be supported using a posting type key:

Herewith are connected logical plausibility checks to ensure
the correct accounting procedure.
lohddw04.ppt
Hub & Spoke-System

Hub
Client
Hub Spoke
Spoke
Client Hub
Client
Client Client
Characteristics of Inland Navigation Vessels
The special suitability of barges as means of transport is the result of

• high performance and load capacity,
• save transport process and good suitability for dangerous goods,
• any time enough and available cargo hold,
• favourable prices,
• low ecological damage because of low energy consumption,
• reduction of road traffic.
The possible disadvantages are the low speed (which is nevertheless taken
into account), the sporadical dependency on the water level, the glaciation
and the relative small waterway net.
lohdlt17.ppt
Source: Wolfgang Oelfke:Güterverkehr-Spedition-Logistik, S. 226
„ Distribution
Logistics "
Lengths of
Inland Traffic Types
in Germany
Railway: 35.600 km
Road: 231.581
- BAB 12.037
- Bundesstr.: 41.246
- Landstr.: 86.868
- Kreisstr.: 91.430
Inland waterway: 7.300
Pipelines (Oil): 2.966
Source: http://www.wsv.de/Schifffahrt/
Statistik/pdf/Wegelaenge_BRD.pdf
dort:
Proportion of
Main Transport
Systems as
Part of all
Transports
in Germany
Statistik/Binnenschifffahrt/index.html
Cargo Handling (Mio t)

of Inland Ports
Statistik/Binnenschifffahrt/index.html
Transported ton-kilometer on the inland waterways in Germany

total on the Rhine
Source: http://www.wsv.de/Schifffahrt/Statistik/Binnenschifffahrt/index.html
Requirement of primary energy in

liter diesel per 100 ton-kilometer
The best Protection of the
Environment is done by the
low Energy Consumption of
Inland Navigation Vessels
Emission of CO2 of the different carrier

Transport range for one ton types in gramm per ton-kilometer
with the same energy affort
A push tow1
on the Rhine
can grow up
to 16.000 tons
1) or pushing unit
Source: http://www.shortseashipping.de/de/ (=Schubverband)
foto-galerie/fotos/Schubverband_in_Hamburg.JPG
Example of a push-tow with 6 barges and 1 motor ship
Source: http://stahlarbeiter-online.de/links.htm Original: “Die Verhaaven XIII im Sechserschubverband mit Erz”

AMS BARGE IS A KEY ELEMENT IN AN INNOVATIVE TRANSPORT

CONCEPT OPERATING IN NETHERLANDS. PHOTOS OF AMS BARGE
ARE COURTESY OF SHIPYARD BEGEJ.
Source: http://www.dpc-belgrade.co.yu/gallery.htm
Source: http://www.dpc-belgrade.co.yu/gallery.htm
Types of Business in the Maritime Navigation
With „Types of Business“ the shipping companies indicate the kind of using
the seagoing vessels for transportation of goods.
Types of Business
Liner traffic Non-scheduled services
conventional container- other types: charterage contract

LASH-, (or consecutive
Ro/Ro-, Ferry route)
lohdlt18.ppt
Types of Seagoing Vessels
1. Passenger liner
2. Container ship
3. General cargo vessel
4. Ro/Ro ship
5. Supertanker (Oil-tanker)
lohdlt20.ppt
Important Sea Port – Cargo Handling (Mio t)
„Logistics Performance Measurement“

= part of logistics controlling by means of
Key Performance Indicators (KPIs)
The most important KPIs within the Procurement Logistics

Purchase total order value p.a. in EUR
=
performance costs of the purchasing department p.a. in EUR
This KPI valuates the performance of the purchasing departement; it indicates, which
order value was realised per 1 EUR costs of the purchasing department. It is difficult
to manipulate this KPI. Example: 50:1
Costs per costs of the purchasing department p.a. in EUR

order item = number of order item p.a.
This KPI is necessary for the ANDLER-formula
Purchase
success = sum of price deviations / sum of planned prices x 100 [%]
A negative value indicates a negotiation success because the paid prices were
lower than the planned prices.
Sources: Chr.Schulte: Logistik; Praxishandbuch für den Materialwirtschaftsleiter, WEKA-Fachverlag, Augsburg 1996; Abels et al.: Wie gut ist Ihre Logistik ?, Verlag TÜV Rheinl, Köln ´94t
The most important KPIs for warehousing
Average stock = (start stock + 12 ultimo stocks) / 13
Warehouse ex- (WER) = total costs of warehousing p.a. x 100 [%]

pense ratio average stock (capital lockup)
The costs of warehousing do not contain the interest costs of the capital lockup.
Total
Totalwarehousing
warehousing (TWER) = WER + interest for capital lockup
expense
expenseratio
ratio
This KPI is necessary for the ANDLER-formula; normal value range: 15 – 25 %
The most important KPIs for warehousing
Inventory turnover = warehouse sales p.a. (pieces rsp. value) /

average stock (pieces rsp. value)
The inventory turnover is one of the mostly used KPI.

The average turnover over the full assortment must be built only via values!
Range of inventory in months = 12 months / inventory turnover
The range of inventory tells us, how long the average stock meets the normal
demand without replenishment. The average range must be built using the
average turnover.
The most important KPIs for warehousing an logistics
Delivery directly delivered number of pieces of an article

= x 100 [%]
service level demand of the customer
Average delivery service level: sales realised / wished sales * 100 [%]
Logistics cost rate = costs of logistics / sales x 100 [%]
Costs of logistics = depend on the definition, what logistics is: planning of materials,
purchasing, goods receipt, included quality control, warehousing, in-house transport,
External transport, order picking, packaging, shipping, logistics-IT-system, order
processing, production planning and control (PPC) etc.
The most important KPIs for warehousing an logistics
number of picked colli

Pick-Rate = [ pieces per hour ]
man hours
Delivery Time = time between issue of order and disposability for the client
Delivery number of on-time delivered positions

x 100 [%]
reliability = total number of delivery positions

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Prof. Dr.

Slides for the course

2 Weekly Semester Hour

Logistics define the integrated planning, realising, usage and control of

Definition of Logistics: Explanations

A system contains subsystems. An integrated system is characterized by the

Definition of Logistics: Explanations

Opposite flow of information against the material

Concurrent flow of information: reference manual,

Advance flow of information:

Onward flow of information: invoice with separate

Sphere of Influence Converting Industry/Manufacturing Industry

Primary Trans- Cycle of Storage Commerce

Hints on the german law of closed loop materials economy

• Avoiding of waste is better than

• Recycling of waste is better than

Therefore the law says that in the year 2010 all

Main Aim of Logistics: Optimisation the Efficiency of Logistics

Efficiency of Logistics = Output/Input Ratio of the Logistics System

System Input: Logistics System: System Output:

Personnel and Equip- • Right Product

Components of Logistics Service

Delivery Time = Time between issue of order and availability for

Flexibility of Delivery = Possibility of consideration of special wishes

Optimal Delivery Service Postulated Delivery Service

Delivery Service 100 % Delivery Service 100 %

Source: Associated with Christof Schulte: Logistik, 1995, p. 10.

Example of a statistic Evaluation of Delivery Reliability

Important Types of Logistics Costs

Costs of Tansport = Costs of internal and external transportation

Costs of Control = Planning of production programm, production planning

Selling Conditions and Requirements of the Market

Selling Conditions and Requirements of the Market

: Optimisation of: material flow, production and planning control systems,

? : Search for a suitable production location, increasing or decreasing of the

Source: Associated with Christof Schulte: Logistik

Influences of the Production Program

Source: Associated with Christof Schulte: Logistik

Questions before fixing the Company Organisation Structure

y Which functions should be part of the logistics organisation ?

Source: Associated with Christof Schulte: Logistik

Plant I Plant II Plant III Plant IV

Plant Plant Plant Plant

Research and Research and Research and Research and

Production Production Production Production

Sales Sales Sales Sales

Finance and Finance and Finance and Finance and

Source: Associated with Christof Schulte: Logistik

Grading within the Hierarchy

• Executive board Board

• Area management Area 1 Area 2

• Sector management Sector 1 Sector 2 Sector1 Sector 2

• Department Department 1 Department 1 Department 1 Department 1

Department 2 Department 2 Department 2 Department 2

Effects of an integrated Organisation of Logistics

• Reduction of logistic costs

• Optimal use of central und decentral information

Source: Associated with Christof Schulte: Logistik

Processes within the company

Processes within the company

Example of an order process within a small company

Order receipt Date Confirm

Finance and Preparing