Logistics Planning

Let’s learn more about Logistics Planning. The goal of logistics planning is to ensure logistics services are extended to your company or clients at sufficient service levels at the lowest or most efficient cost. By extension, logistic planning service is a particular type of logistics management often offered by third party logistics companies (3PLs) and consultants. It involves ensuring that your business plan remains viable by arranging an intersection of all of your logistical needs, as well as creating a comprehensive plan that the logistics manager can follow in practice.

These logistical needs involve making sure all of your resources are:

Of acceptable quality to produce the final products you intend,
In the correct quantities, neither too much nor too little, to avoid both supply price fluctuation and excessive storage costs,
Sourced appropriately, both in terms of reliability, transparency, and risk to public opinion,
At the right place, where they can be used by your business,
At the right time, allowing a leaner, low-storage model while avoiding delays and shortages,
And at the right price, in terms of the most effective and efficient pricing, which is not always the lowest.

Logistics planning services are engaged to make sure that your processes and facilities are appropriate, and sufficient in all ways to meet foreseeable future needs of organisation, management, coordination supply and control. It is an attempt to ‘future proof’ the logistics function of your business in unsteady and volatile times.

Older logistical planning methodologies separated external logistics – that is, the physical distribution of finished products, and internal logistics – the goods, materials, labour and other resources needed to produce our products. Modern planning methodologies prefer to combine these artificial distinctions into ‘total supply chain’ logistics. In the end, your supply chain passes through your business, linking all of your suppliers (and all of their suppliers) to your customers. Only by appreciating and mapping the whole of this massively interconnected ‘supply web’ can a logistics planning service ensure steady, predictable flow through for your logistics functions, and produce a logistic plan that will see you through shifts in supply, demand and public opinion smoothly.

Tools and Techniques

There are a number of different tools and techniques that can be used to help with logistics process redesign. These range from ones that provide assistance with the initial categorization of key process objectives to those that offer a detailed assessment of the processes themselves and thus can be used to identify opportunities for improvement.

Pareto analysis – Sometimes known as the 80/20 rule, this is a crucial method used in logistics for identifying the major elements of any business or operation. By identifying these main elements it is possible to ensure that, for analytical purposes, any assessment is based specifically on the key aspects and is not taken up with the peripheral detail.

It is possible to identify a limited number of key elements that are representative of the main business and to concentrate any major analysis on this important 20 per cent. Another useful result of Pareto analysis is to identify the items (customers, products or whatever) that make up the final 50 per cent of the ‘tail’ of the curve. These are oft en uneconomic to the company and should be considered for rationalization or elimination.

Customer service studies – A customer service study should be used as the basis for identifying key service requirements on which to design suitable logistics processes.

Relationship mapping – This is used at an early stage of logistics process design to identify the main departments within a company (or across the broader supply chain if this is possible) that are specifically involved in a particular process.

Process charts – These can be represented in a variety of different guises, whether by straightforward flowcharts or by a matrix. The flowchart approach can be based on traditional flowcharting techniques. This is useful because standard shapes are used to represent different types of activity (storage, movement, action, etc), and the importance of flows can be highlighted in terms of the number of movements along a flow. The matrix chart provides a more systematic way of representation and can be beneficial where time is to be represented.

Value/time analysis – This type of analysis can be used to identify where in a process value is actually added to the product. The aim is to highlight, and subsequently eliminate, those parts of the operation that provide a cost but add no value. Traditionally, for most manufactured products, value is added when a process changes the nature of the product (such as production, which alters the physical attributes, or transport, which alters the physical location). Value is not added, but waste occurs through the passing of time, when the product is stored (as work-in-progress or as finished goods stock in a depot).

Time-based process mapping – This is a method of identifying and eliminating wasted time in a process. The idea is to understand and record a process in detail and to be able to identify what is active or useful time and what is wasted time. The output from such an exercise is the opportunity to engineer the wasted time out of the process so that service is improved and cost is reduced through a reduction in the overall time taken to complete the process.

Developing a Logistics Plan

Companies have two philosophical approaches in developing a plan for their distribution centers – biased and unbiased. The biased approach refers to using a supplier that represents specific equipment or systems. With this approach, the solution is based on the resources available to that supplier, and can result in a solution that may not maximize available universal resources.

Developing an efficient and effective unbiased logistics plan involves developing what Saenz calls “best-practice solutions” and defining detailed future planning requirements. “The result of this approach is a future distribution center logistics plan that considers the full facility expansion capability on your available site, which maximizes your space, equipment, and labor resources.” The unbiased approach is available through consulting firms that do not have exclusive alliances with suppliers. Regardless of the approach used by a company, developing a logistics plan is a critical first step to design and build an efficient distribution center.

Planning for Growth

The first step in planning is understanding and analyzing operational data to build a foundation for a solution. Once a foundation is established, business growth factors are applied to the current operational requirement to project future requirements. A critical step in this process is to establish the planning phases. “Typically, each phase has a five-year planning horizon. That way, when your business grows after five years, you have a plan that allows you to efficiently expand,” Saenz explains.

A typical distribution center solution starts with the reserve storage area, and includes an order picking area, dock area, returns area, material handling design, office space, battery changing area, and maintenance area. According to Saenz, the reserve storage and order picking areas are the critical spaces for future growth, but focus must be placed on all areas to ensure an efficient design that supports the required growth.

Reserve Storage Area

The reserve storage area should be designed based on specific future requirements. To select the most effective storage equipment, an inventory profile is performed to define the unit loads per SKU to be stored in inventory.

The stock keeping unit (SKU) is an inventory item at a particular geographic location. For example, a shirt in six colors and five sizes would represent 30 different SKUs. A product stocked at the plant and at six different distribution centers would represent seven SKUs.

Inventory profiling is used to define the location openings required to maximize the cubic feet of storage volume. The movement of inventory is calculated to determine if automation is required, the type of material handling equipment, and if it supports the slotting of SKUs.

“Understanding the characteristics of the stored SKU, such as the load dimensions, weight, and special handling considerations, is essential to designing an effective storage system,” Saenz says. The consideration of first-in/first-out (FIFO) and last-in/first-out (LIFO) selection requirements should be addressed.

The decision between fixed and random storage methods impacts how products are kept in the storage area. The fixed storage method assigns a SKU to a specific location. In a random storage method, any empty location in that SKU’s zone is available for storage. The random storage method is typically preferred, because it provides a higher utilization of empty locations.

Forward Picking Area

“The order picking area is the heart of most distribution center logistics plans,” says Saenz. Products flow into and from the picking area to satisfy customer orders. Typically, a product’s reserve storage location is the first option for picking orders. A breakdown of the customer order history into SKU line velocity and SKU cubic velocity profiles is required to define the best pick area solution. In addition, the customer order file is used to define the pick types, including piece, case, or pallet.

Material Handling Equipment

The application of industrial vehicles and conveyor systems is part of the overall logistics planning concept. The product load length, width, height, and the SKU throughput requirements determine the selection of material handling equipment. When comparing the use of conveyors to industrial trucks, the following conditions support the use of conveyors: