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Principles of Distribution and Logistics

© 2012 APICS Instructor Guide Version 1.0 ii

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Table of Contents

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______________________________________________________________________________________ Instructor Guide Version 1.0 © 2012 APICS iii

Brief Table of Contents

Session 1 Operations Management Foundations

Session 2 Introduction to Distribution and Logistics

Session 3 Channel Network Design

Session 4 Inventory Management

Session 5 Distribution Requirements Planning (DRP)

Session 6 Mid–Term Examination

Session 7 Warehouse Management

Session 8 Packaging and Materials Handling

Session 9 Transportation Management

Session 10 Transportation Operations

Session 11 Final Exam




© 2012 APICS Instructor Guide Version 1.0 iv

Table of Contents

Session 1: Operations Management Foundations Principles of Operations Management Overview............................................... 1-3

Principles of Manufacturing Management Overview.......................................... 1-5

Operations Management Foundations Overview…………................................. 1-7

Session Learning Objectives………………………..………................................. 1-9

Why Study Operations Management?………………………..……….................. 1-11

Why is Operations Management So Important?................................................. 1-13

Operations Management Definition................................................................... 1-21

What Do Operations Managers Do?................................................................... 1-25

Operations Management and the Organization.................................................. 1-27

Operations Management and the Supply Chain………...................................... 1-29

Operations Management and Competitive Advantage...................................... 1-35

Trends in Operations Management................................................................... 1-39

Career Opportunities.......................................................................................... 1-41

Distribution and Logistics Concepts Self-Assessment....................................... 1-45

Distribution and Logistics Terms Check............................................................. 1-47 Bill of Distribution Exercise……………………………...…................................... 1-49 Distribution and Logistics Organizational Structure Exercise............................. 1-51 Review, Terms, Discussion Questions, Exercises………................................... 1-53 Terms Check…………........................................................................................ 1-55 Performance Check – Answers and Test Documents.…................................... 1-58 Discussion Questions………….…...................................................................... 1-61 Suggested Additional Readings…...................................................................... 1-65



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______________________________________________________________________________________ Instructor Guide Version 1.0 © 2012 APICS v

Session 2: Introduction to Distribution and Logistics

Introduction to Distribution and Logistics Overview……….………..................... 2-3 Session Learning Objectives.............................................................................. 2-5 Defining Distribution Management….................................................................. 2-7 What is the Supply and Distribution Channel?……..……................................... 2-9

The Need for Distribution Channels...………...................................................... 2-11 Reducing Channel Transaction Complexity....................................................... 2-13 Channel Intermediaries…………………….......................................................... 2-17 Role of the Distribution Function……................................................................. 2-21 Defining Logistics Management......................................................................... 2-27 Logistics Management Functions....................................................................... 2-29 Logistics Operations…….................................................................................... 2-31 Reverse Logistics and Motivating Factors.......................................................... 2-33 Reverse Logistics Hierarchy and Benefits.......................................................... 2-35 Logistics Strategy……………………..…............................................................. 2-37 Guidelines for Logistics Strategy………............................................................. 2-39 Logistics and Supply Chain Management.......................................................... 2-41 Review, Terms, Discussion Questions, Exercises………................................... 2-43 Terms Check…………........................................................................................ 2-45 Performance Check – Answers and Test Documents.…................................... 2-49 Discussion Questions………….…...................................................................... 2-53 Case Study……………………...…...................................................................... 2-57 Suggested Additional Readings…...................................................................... 2-61




© 2012 APICS Instructor Guide Version 1.0 vi

Session 3: Channel Network Design Channel Network Design Overview……........................................................ 3-3 Session Learning Objectives.............................................................................. 3-5 Channel Network Design Fundamentals............................................................ 3-7 Reasons for Supply and Distribution Channels.................................................. 3-9 Critical Design Considerations………..……………………………………………. 3-13 Channel Design Factors…………………............................................................ 3-15 Level of Channel Dependency…….……........................................................... 3-17 Channel Design – Manufacturing Method…….................................................. 3-19 Channel Configuration Attribute Matrix.……...................................................... 3-21 Producer Storage with Direct Delivery............................................................... 3-27 Producer Storage with Drop Ship……............................................................... 3-29 Producer with Extended Channel Network......................................................... 3-31 Aggregator with Extended Channel Network...................................................... 3-33 Aggregator with e-Business Network.…………..………..................................... 3-35 Framework for Channel Network Design…………………..…………...…………. 3-39 Micro Decisions Influencing Channel Design..................................................... 3-41 Factor-Rating Method………………………………………................................... 3-43 Center of Gravity Method………........................................................................ 3-45 Channel Demand and Capacity………………………...…................................... 3-47 Review, Terms, Discussion Questions, Exercises………................................... 3-49 Terms Check…………........................................................................................ 3-51 Performance Check – Answers and Test Documents.…................................... 3-56 Discussion Questions………….…...................................................................... 3-59 Case Study……………………...…...................................................................... 3-63 Suggested Additional Readings…...................................................................... 3-67



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______________________________________________________________________________________ Instructor Guide Version 1.0 © 2012 APICS vii

Session 4: Inventory Management Inventory Management Overview……............................................................... 4-3

Session Learning Objectives.............................................................................. 4-5

Inventory Definitions…………............................................................................. 4-7

Functions of inventory……..…………..……………............................................. 4-9

Strategic Inventory Management Process …..……...…..................................... 4-11

Characteristics of inventory in the Distribution Channel..................................... 4-13

Channel Inventory and Demand Flows……….................................................... 4-15

Inventory Replenishment Components……..…………....................................... 4-17

Ordering Techniques – When to Order……………............................................ 4-19

Order Point – Basic Model and Order Point Trigger........................................... 4-21

Order Point – Potential of Demand Variation and Safety Stock......................... 4-23

Calculating the Safety Stock……………............................................................. 4-25

Determining the Order Quantity.......................................................................... 4-31

Order and Inventory Carrying Cost Components.………………......................... 4-33

Determining the Optimal Order Quantity….………….…….…..…………………. 4-35

EOQ Calculation…………………….……………………………………………….. 4-37

Maximum and Minimum Ordering..................................................................... 4-39

Replenishment Planning Process...................................................................... 4-41 Review, Terms, Discussion Questions, Exercises………................................... 4-43 Terms Check…………........................................................................................ 4-45 Performance Check – Answers and Test Documents.…................................... 4-49 Discussion Questions………….…...................................................................... 4-53 Case Study……………………...…...................................................................... 4-57 Suggested Additional Readings…...................................................................... 4-65




© 2012 APICS Instructor Guide Version 1.0 viii

Session 5: Distribution Requirements Planning (DRP)

Distribution Requirements Planning (DRP) Overview……………………………. 5-3

Session Learning Objectives….…………........................................................... 5-5

Distribution Channel Dependencies………….................................................... 5-7

“Push” System Functions……………………………............................................ 5-9

“Push” System Allocation – Example…….......................................................... 5-11

“Pull” System Functions…....………................................................................... 5-13

What to Choose: Order Points or DRP?………….............................................. 5-15

Defining Distribution Requirements Planning (DRP).......................................... 5-17

Time Phasing – The Heart of DRP…..…………................................................. 5-19

Introduction to the DRP Grid……………………….............................................. 5-21

PAB and the DRP Grid……...…………….......................................................... 5-23

Net Requirements and the DRP Grid…….......................................................... 5-25

DRP Planned Order Generation……..……........................................................ 5-27

PAB and Net Requirements Recalculation……….……….................................. 5-29

DRP Grid Exercise……….....………………….……………………………………. 5-31

DRP and the Bill of Distribution………………………………………….…………. 5-33

DRP Planning Process…………………………….………………………………… 5-35

DRP Example……………………………………….………................................... 5-37 Review, Terms, Discussion Questions, Exercises………................................... 5-39 Terms Check…………........................................................................................ 5-41 Performance Check – Answers and Test Documents.…................................... 5-45 Discussion Questions………….…...................................................................... 5-49 Case Study……………………...…...................................................................... 5-53 Suggested Additional Readings…...................................................................... 5-57

Session 6: Mid-Term Exam



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______________________________________________________________________________________ Instructor Guide Version 1.0 © 2012 APICS ix

Session 7: Warehouse Management

Warehouse Management Overview....………………………............................... 7-3


Defining Warehouse Management…………………………………………………. 7-7

Warehouse Functions – Materials Handling………………………………………. 7-9

Product Storage………………………….............................................................. 7-11

Order Management……………………………..................................................... 7-13

Information Transfer………………….................................................................. 7-15

Types of Warehousing……………..…..……....................................................... 7-17

Basic Operations of Warehousing……………................................................... 7-25

Strategic Decision Components..………………………………………………….. 7-27

Use of Third-Party Logistics (3PL)……..…....................................................... 7-29

Warehouse Management Process..................................................................... 7-31

Importance of Warehouse Standards................................................................. 7-33

Receiving Flow………………………...……………………………………….…….. 7-37

Warehouse Stocking Functions………………………......................................... 7-39

Three P’s of inventory Control...……………………............................................ 7-37

Transaction Management……………………………..……………………………. 7-43

Order Picking Options……….……………………...………………………………. 7-45

Order Shipment Flow…………………………….…………………………………. 7-47

Warehouse Performance…………………………………..................................... 7-49 Review, Terms, Discussion Questions, Exercises………................................... 7-51 Terms Check…………........................................................................................ 7-53 Performance Check – Answers and Test Documents.…................................... 7-58 Discussion Questions………….…...................................................................... 7-61 Case Study……………………...…...................................................................... 7-65 Suggested Additional Readings…...................................................................... 7-69



© 2012 APICS Instructor Guide Version 1.0 x

Session 8: Packaging and Materials Handling

Packaging and Materials Handling Overview…….………………….……………. 8-3

Session Learning Objectives.............................................................................. 8-5

Warehouse Design and Layout Objectives..…………........................................ 8-7

Warehouse Size and Capacity…….….……………............................................ 8-9

Basic Warehouse Layouts……....…………...….................................................. 8-11

Warehouse Layout Development……………...………….………………...……... 8-13

Warehouse Design and Layout Principles……...…...….…................................ 8-15

Principles of Materials Handling………....…..…….............................................. 8-17

Types of Storage Systems...…………..…...………............................................. 8-19

Large-Item or Large-Volume Storage………….................................................. 8-21

Small-Item or Low-Volume Product Storage…................................................... 8-25

Automated Storage Systems…………..…………………………………………… 8-27

Stocking Inventory in Warehouse Locations.……………………………………... 8-33

Dock Equipment………………....…………………………………………………... 8-37

Mobile Materials Handling Equipment………………………..……………………. 8-41

Role of Packaging…………….………………….………………………………….. 8-47

Unitization..…………………….…………………….............................................. 8-49

Unitization Principles and Examples………………………………………………. 8-51

Warehouse Automation – Key Drivers............................................................... 8-53

Warehouse Automation Components…...……................................................... 8-55

Warehouse Management System (WMS)…………………….…………….…….. 8-57

Review, Terms, Discussion Questions, Exercises………................................... 8-59 Terms Check…………........................................................................................ 8-61 Performance Check – Answers and Test Documents.…................................... 8-66 Discussion Questions………….…...................................................................... 8-69 Case Study……………………...…...................................................................... 8-73 Suggested Additional Readings…...................................................................... 8-77


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______________________________________________________________________________________ Instructor Guide Version 1.0 © 2012 APICS xi

Session 9: Transportation Management

Transportation Management Overview....………..…………............................... 9-3


Defining Transportation Management………………..……………………………. 9-7

Fundamental Principles of Transportation………………...………………………. 9-9

Principles of Transportation Operations............................................................. 9-11

Transportation Participants…………………….................................................... 9-17

Transportation Services – Load Transport......................................................... 9-19

Transportation Services – Product Storage……………..…..……....................... 9-21

Relationship of Transportation to Other Business Functions……………........... 9-23

Modes of Transportation..…………………………………………………………… 9-27

Types of Transportation Carriers……..….......................................................... 9-41

Third-Party Logistics (3PL) – Functions and Transportation............................. 9-45

Logistics Outsourcing Models……….................................................................. 9-47

Transportation Challenges………………………...………………………………... 9-49

Review, Terms, Discussion Questions, Exercises………................................... 9-51

Terms Check…………........................................................................................ 9-53

Performance Check – Answers and Test Documents.…................................... 9-58

Discussion Questions………….…...................................................................... 9-61

Case Study……………………...…...................................................................... 9-65

Suggested Additional Readings…...................................................................... 9-69




© 2012 APICS Instructor Guide Version 1.0 xii

Session 10: Lean Production Management

Transportation Operations Overview ……………………………………............... 10-3

Session Learning Objectives…………................................................................ 10-5

Transportation Operations Principles………………………….…………………... 10-7

Role of Transportation Administration…………………………............................ 10-9

Types of Transportation Risk……..…………..…………………………………….. 10-11

Transportation Management Process……………………………….…………….. 10-13

Transportation Cost…..…………………………………………………..………….. 10-15

Detailed Transportation Cost Components…………..…………………………… 10-19

Transportation Rates and Pricing…………..……………………………………… 10-23

Terms of Sale………………………………….……………………………………... 10-25

Transportation Mode Selection……................................................................... 10-27

Transportation Carrier Selection…………….……………………………………… 10-31

Transportation Routing and Scheduling…......................................................... 10-33

Documentation and Post-Shipment Processing…….......................................... 10-39

Transportation Performance Measurement….................................................... 10-41

Transportation Performance Scorecard….......................................................... 10-43

Transportation Management System………………..…………………………….. 10-45

Review, Terms, Discussion Questions, Exercises………................................... 10-47

Terms Check…………........................................................................................ 10-49

Performance Check – Answers and Test Documents.…................................... 10-54

Discussion Questions………….…...................................................................... 10-57

Case Study……………………...…...................................................................... 10-61

Suggested Additional Readings…...................................................................... 10-65

Session 11: Final Exam



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