Optimizing Quality Management and Logistics Operations
Quality Management Essentials
Quality depends on the following elements:
- Materials: Use of quality raw materials.
- Machines: Appropriate machinery, not necessarily the most expensive or newest in the market.
- Methodology: Effective and consistent methods.
- Personnel: Skilled and trained staff.
- Organization: Robust structure, avoiding weak points.
Understanding Quality Costs
Quality costs include those generated by defects, inspections, and prevention efforts.
Costs of Identified Defective Products
These include:
- Article rejection
- Discounted sales
- Remaking articles
- Reparation costs
Costs of Unidentified Defective Products Sold to Customers
These lead to dangerous intangible costs, such as company image loss due to negative feedback.
Inspection Costs
These include all efforts dedicated to detecting article defects before they are delivered to the market.
Prevention Costs
These cover necessary maintenance to achieve minimum inspection requirements and minimize defects.
Core Logistics Principles
Logistics Objectives
The primary objectives of logistics are to:
- Achieve maximum customer service level.
- Ensure high product quality.
- Minimize possible costs.
- Be flexible in constantly changing markets.
Classification of Logistics Activities
Logistics activities can be classified into core and supporting activities.
Core Logistics Activities
These activities take place in every supply channel and are essential for the effective coordination and complementation of the logistics task. They include:
- Customer service
- Transportation
- Inventory management
- Information flows and order processing
Support Logistics Activities
These activities vary from company to company and may include:
- Warehousing
- Materials handling
- Purchasing
- Protective packing
- Information maintenance
Logistics Strategy Objectives
A logistics strategy typically has three main objectives:
- Cost Reduction: Associated with the movement and storage of goods.
- Capital Reduction: Minimizing investment in the logistics system.
- Service Improvement: Recognizing that revenues depend on the logistics service provided.
Levels of Logistics Trade-offs
Trade-offs in logistics can occur at various levels:
- Within distribution components.
- Between distribution components.
- Between company functions.
- Between the company and external organizations.
Logistics Design Strategy
A company needs to link its logistics or distribution plan directly with its corporate strategy.
Logistics Process Design Focus Areas
Logistics process design focuses on four major problem areas:
- Customer service level
- Facility location
- Inventory decisions
- Transportation decisions
Understanding Distribution Networks
Physical Distribution Networks
These networks describe the method and channels by which a product is physically transferred from its point of production to the point at which it is made available for the final customer.
Trading/Transactional Channels
These channels concern negotiation, buying and selling of products, and the transfer of ownership of goods as they are moved through various distribution systems.
Key Players in Distribution
The key players in distribution networks are:
- Manufacturer: Possesses purchasing power.
- Wholesaler: Acts as an intermediary in distribution chains; their strength is maximized when retailers place small orders.
- Retailer: The final link in the supply chain, with direct communication with the customer.
Types of Terminals in Logistics
Terminals in logistics can be categorized as follows:
- Independent Terminal: A single terminal serves the whole service area. Collection and distribution take place at this terminal station.
- Single-Level Multiple Terminal Stations: Several terminal stations exist in a connected network. Each terminal station serves a local service area.
- Hierarchical Multiple Terminal Station: Involves several different types of stations. This model typically has higher installation and operating costs but can lead to lower transportation costs.