Category: University of Mumbai BMS Notes

Following are the two major functionality of Transportation

• Product movement
• Product storage

Product Movement

Whether the product is in the form of materials, components, assemblies, work-in-process, or finished goods, transportation is necessary to move it to the next stage of the manufacturing process or physically closer to the ultimate customer. A primary transportation function is product movement up and down the value chain. Transportation utilizes temporal, financial, and environmental resources, it is important that items be moved only when it truly enhances product value.

The major objective of transportation is to move product from an origin location to a prescribed destination while minimizing temporal, financial, and environmental resource costs. Loss and damage expenses must also be minimized. At the same time, the movement must take place in a manner that meets customer demands regarding delivery performance and shipment information availability.

Product Storage

A less common transportation function is temporary storage. Vehicles make rather expensive storage facilities. However, if the in-transit product requires storage but will be moved again shortly (e.g., in a few days), the cost of unloading and reloading the product in a warehouse may exceed the profitability. A second method to achieve temporary product storage is diversion. This occurs when an original shipment destination is changed while the delivery is in transit. Traditionally, the telephone was used to direct diversion strategies. Today, satellite communication between enterprise headquarters and vehicles more efficiently handles the information.

Principle of Transportations

Economy of scale

It refers to the characteristic that transportation cost per unit of weight decreases when the size of the shipment increases. For example, truckload (TL) shipments (i.e., shipments that utilize the entire vehicle’s capacity) cost less per pound than less-than-truckload (LTL) shipments (i.e., shipments that utilize a portion of vehicle capacity). It is also generally true that larger capacity transportation vehicles such as rail or water are less expensive per unit of weight than smaller capacity vehicles such as motor or air. Transportation economies of scale exist because fixed expenses associated with moving a load can be spread over the load’s weight. As such, a heavier load allows costs to be “spread out,” thereby decreasing costs per unit of weight. The fixed expenses include administrative costs of taking the transportation order, time to position the vehicle for loading or unloading, invoicing, and equipment cost. These costs are considered fixed because they do not vary with shipment volume.

Economy of distance

It refers to the characteristic that transportation cost per unit of distance decreases as distance increases. For example, a shipment of 800 miles will cost less than two shipments (of the same combined weight) of 400 miles. Transportation economy of distance is also referred to as the tapering principle since rates or charges taper with distance. The rationale for distance economies is similar to that for economies of scale. Specifically, the relatively fixed expense incurred to load and unload the vehicle must be spread over the variable expense per unit of distance. Longer distances allow the fixed expense to be spread over more miles, resulting in lower overall per mile charges.

The impact on growth of investment in transport infrastructure varies in the different stages of a country’s economic development. In low-income countries, investment in basic infrastructure provision can make a very large difference in access to education, jobs and services. As incomes rise, better transport services are needed to support the growth of business activities, exports and value creation, and the focus for infrastructure investment shifts to supporting these sectors of the economy. In more mature economies, priorities tend to shift towards addressing issues of congestion and bottlenecks in reasonably complete networks, the upgrade and maintenance of existing assets, and providing for technological innovation. Typically, the economic impact of transport infrastructure is more transformative at lower levels of development, and the incremental impact of new investment decreases at more advanced stages of development. Transport infrastructure plays a critical role in the transition from a middle- to high-income economy. Theoretical and empirical studies have underscored the positive relationship between high-quality infrastructure and economy-wide productivity. This relationship is underpinned by a number of economic mechanisms triggered by improvements in transport infrastructure, including the following:

• High-quality infrastructure is a precondition for the provision of efficient transport services for both freight and passenger movements, which in turn supports core economic activities and removes geographic barriers to competition.
• Well-functioning logistics systems facilitate trade through lowering access costs to international markets and by improving the competitiveness of domestic firms.
• Passenger transport connectivity enhances the productive capacity of the economy by widening and deepening labour markets and through agglomeration gains, facilitating industrial specialisation and enabling face-to-face interactions between businesses and specialised workers in high-value service sectors of the economy.
• Infrastructure can be an effective policy tool to address social and territorial imbalances by connecting rural and remote areas to larger centres of production and consumption, creating more economic opportunities for residents and reducing out-migration.

When new transportation infrastructure is built, companies take advantage of the new capacity by adjusting their logistics processes and supply chains to improve service and reduce costs. In the short term, they change purchasing and operations behavior. In the longer term, they make input substitutions and reconfigure production processes to take advantage of transportation system improvements. For example, new transportation connectors, gateways, and intermodal links allow shippers to source from more distant suppliers at a lower cost; to reduce transportation costs by forming “hub and spoke” networks that connect multiple distribution points through central operating hubs; and to reduce inventory by switching from bulk shipments to smaller, more frequent orders.

Here are some other ways shippers benefit from adjusting their supply chains in response to more efficient transportation systems:

Lower sourcing costs. Companies want to source from a more diverse base of lower-cost suppliers because it increases their margins. Often this involves offshore sourcing, a strategy that requires managing logistics and transportation over long distances. The lower transportation and logistics costs achieved through efficient freight flows can make it economically rewarding for companies to source from overseas suppliers. High transportation and logistics costs, caused in part by inadequate infrastructure (and the resulting congestion), can make it uneconomical for shippers to do so.

Lower transport costs and an efficient transportation network also help shippers source from fewer locations. Because it is more affordable to ship longer distances from each facility, they are able to reduce the number of plants they operate and thereby increase their return on assets.

Reduced fleet, warehousing, and inventory costs. Infrastructure improvements increase a transportation system’s capacity and reduce or eliminate congestion, thus improving the system’s reliability. This, in turn, reduces variability in transit times, making it possible to predict on-time performance with greater accuracy. As a result, shippers need fewer vehicles to maintain service levels on congested roadways and can downsize their fleets.

Improved reliability also allows shippers to consolidate warehouses that had been holding inventory to buffer against the congestion-related unreliability of inbound shipments. Moreover, when line-haul transportation flows freely (and therefore predictably), shippers can replace traditional warehouses with efficient cross-dock operations that keep inventory in transit instead of putting it in storage.

With better transit time visibility that is, information about where shipments and vehicles are located and when they will arrive at their destinations shippers can safely postpone final assembly or configuration. This production strategy allows them to not only decrease inventory but also increase customer satisfaction (and sales) by providing a broader product mix with shorter lead times.

Increased revenue. Perhaps the biggest albeit indirect supply chain benefit of a transportation infrastructure project is the potential enhancement of revenues through the adoption of new business models. Shippers can take the savings they realize as a result of infrastructure improvements and reinvest in more competitive pricing. Infrastructure improvements can also help companies reach a broader market, facilitating increased sales. Alternatively, they may decide to offer higher service levels (shorter order-to-delivery lead times) instead of, or in addition to, pocketing the savings.

It is not easy to quantify the relationship between infrastructure investment and increased revenues for shippers. There is no question, however, that such investments improve supply chain efficiency. When one considers that some of the most successful companies are those that use their supply chains as competitive weapons Zara, Wal-Mart, Dell Computer, and Amazon.com are just some that come to mind it seems likely that investing in transportation infrastructure will provide economic benefits, including sales growth, for the companies using that infrastructure.

Quantifying the benefits

Now that we have a sense of the types of supply chain benefits that can result from infrastructure improvements, we can quantify the impact of some of those benefits.

When the consulting and research firms Boston Strategies International (then Boston Logistics Group), Cambridge Systematics, and the Economic Development Research Group collaborated on a comprehensive economic study, Guide to Quantifying the Economic Impacts of Federal Investments in Large-Scale Freight Transportation Projects, for the United States Department of Transportation in 2006, they concluded that the supply chain benefits of an infrastructure investment that reduces direct transport costs by 10 percent has the potential to reduce a company’s operating cost by an additional 0.5 percent. This estimate was based on a sample of a wide variety of industries.

Since that report was published, however, a number of significant changes have pushed transportation and logistics costs even higher. We estimate that increases in the price of fuel have raised U.S. companies’ transportation costs from roughly 5 percent to about 6 percent of their total expenditures. Meanwhile, safety stocks increased from 20 percent to 25 percent of inventory as a result of more offshoring, which made it necessary for companies to carry more buffer stock. However, labor-cost inflation in China has cut into the savings that drew companies to source there. In our estimation, the cumulative effects of these and other relevant changes have increased the potential supply chain benefit of the scenario described above to 1.0 percent of operating costs. Note that this savings does not account for the additional revenue that can be derived from improved transportation infrastructure by allowing shippers and carriers to increase service levels, convert cost savings into price reductions, and build ondemand supply chains.

This revised estimate by type of infrastructure improvement and its resulting supply chain benefits. In this analysis, the hypothetical infrastructure investment reduced transportation costs by 10 percent. If a company responded to this improvement by optimizing its supply chain (through such steps as switching to more distant but lower-cost suppliers, consolidating plants, using cheaper transportation modes, and reducing shipment size), we believe that it could see an additional 0.5-percent reduction in operating costs. This estimation is based on Boston Strategies International’s strategic sourcing survey of 182 companies in 13 service and product industries, its analyses of low-cost country sourcing economics, and a major consumer goods company’s actual experience with plant consolidation. A transportation infrastructure investment that reduced transportation costs by a higher or lower percentage would yield higher or lower benefits.

Furthermore, if that infrastructure improvement increased capacity by 10 percent, we believe that the resulting fleet and warehouse rationalization and reduction in safety stock would amount to a 0.1-percent reduction in operating cost. This estimate is based on Boston Strategies’ analysis of the inventory of 29 companies in six different types of supply chains and inventory and fleet benchmarks from its analyses of four companies’ logistics networks; data from published sources such as CSCMP’s annual State of Logistics study; and fleet data collected by the American Trucking Associations.

Finally, if that infrastructure improvement increased in-transit visibility by 10 percent, and the company takes advantage of this to implement postponement, it will be able to reduce operating costs by at least 0.2 percent. This reduction in operating costs is based on reductions in stockouts experienced at retailers such as Wal-Mart and consumer packagedgoods suppliers such as Procter & Gamble.

While the aforementioned examples are from the United States, the same principles apply to major economies worldwide, especially large countries and economic areas where shippers can take advantage of hub-and-spoke infrastructure to design more economically efficient supply chains.

Why are supply chain benefits ignored?

Despite these demonstrated benefits, government transportation officials and their consultants rarely account for short-term and longterm supply chain effects in their financial evaluations of freight transportation investments. There are two main reasons why this is so.

First, whereas the infrastructure priority following World War II was to construct highways, today’s freight movements are substantially different. Typically, freight travel involves longer distances than passenger travel, and thus it involves more governmental jurisdictions in infrastructure decisions.

Furthermore, private sector stakeholders own many key rail and marine assets, and these companies do not have standard procedures for participating in the public funding and authorization process. In addition, many freight movements today are multimodal, and infrastructure decisions for this type of traffic require deeper transportation experience and more complex analytics than had ever been needed for passenger traffic infrastructure.

Second, decision makers don’t always have the time to consider every aspect of every potential infrastructure project, especially the smaller ones. Evaluations are complicated because there are many types of costs, benefits, and impacts involved. For example, there are at least eight major types of potential consequences of infrastructure projects:

• Environmental impacts
• Safety and security benefits
• Public operating and capital expense benefits
• Direct user or carrier benefits
• Direct shipper benefits (which include access to terminals and possibly more efficient modes of transportation that could save time and cost)
• Economic impact (jobs, industry and market growth)
• Supply chain benefits
• International economic benefits (through support of international trade)

The main purpose of packaging are to hold its contents securely to prevent leakage and breakage, to protect the foods from different hazard like germs, heat, moisture loss or moisture pick up, etc. To protect the contents while distribution, etc. For all types of packaging, there are different types of packages.

The different types of packages can be classified into two groups:

Retail containers: These containers protect food or the content from different damages and at the same time they advertise the product for retail sale. For example, glass bottles, sachets, over wraps, plastic bottles, metal cans, etc. They can be used for home storage also.

Shipping containers: These containers contain and protect food and other items during distribution and transport or any other marketing function. For example, sacks, stretch, or shrink wrapped containers, corrugated fire board cartons, drums, barrels, crates, and foil bags.

Industrial packaging materials are different from the traditional packaging materials. In addition to material, attractive design also preferred. Packaging comes in many different forms, based on technical requirements throughout the supply chain, as well as marketing needs (like brand identity or consumer information) and other criteria.

Packaging is very essential to every and to any type of industry. Whether you’re in the food business, clothes manufacturing or you’re in the technology industry, packaging is crucial.  It protects the product from any potential damage that will deem the product useless.  Thus a good packaging system is a must.  

Having a high-quality taping machine and a case erector will definitely aid in achieving the very essence of packaging that is to secure the product and to keep its original state or how it was after production. Packaging will only vary in every industry depending on how the product will be marketed. Different industries will definitely use different types of packaging but the objective will still remain constant. As most businessmen would always say packaging can be the difference in successfully shipping a product to the market in one piece or in pieces. Listed below are different types of packaging:

Paper & Board

Paper is widely used because it is low cost, holds its shape, and is easily decorated. Commercially-available paper is predominantly made from cellulose fibre from pulped wood, but can also be made from other sources such as cotton, straw, sisal and hemp. All are recyclable.

Paper and board are usually measured by weight or caliper. Material weighing less than 250 grams per square metre (gsm) is referred to as paper, and material at about 250 gsm is referred to as paperboard.

The fibres of machine-made paper run parallel to the length of the machine that produced it.  This machine or grain direction affects performance:

• Paper tears easiest along the fibres
• Folding is easiest along the fibres
• Fold endurance is greatest across the fibres
• Stiffness is greatest when flexed across the fibres

Paper can also be laminated to increase strength or provide barrier properties. The materials used can be gloss or matt finished or embossed. Other materials can be laminated onto paperboard e.g. foil or plastics.

Packaging produced using paper and board includes cartons, labels, leaflets, tubes, corrugated cases, rigid boxes and pulp packs.

Glass

Commercially-available glass is made from silica, sodium carbonate and calcium carbonate. Other compounds can be added to give colour, sparkle or heat shock resistance.

Glass is a popular and useful packaging material because it is:

• Inert
• Sterilisable
• Barrier to moisture and gas
• Pressure resistant to a degree
• Can be moulded into a variety of shapes
• Transparent making the product visible
• Glass is also highly recyclable

The most obvious drawback is fragility and the danger of broken glass. The transparency of glass can be a problem where the product is degraded by light.

Glass can be directly decorated but is most commonly labelled.

Metal

The metals used in packaging are predominantly tin-plate or aluminium and are used to make food and drink cans, aerosol cans, tubes, drums and slip or hinged lid DrumsDrumsboxes for gift sets and selections of confectionery or biscuits. All packs are recyclable.

Tin-plate is tin-plated steel and the most common material used in food cans.  Steel can also be used un-plated or with coatings.

Aluminium is used for drinks cans, closures, trays, tubs and tubes. As foil it can be used in multi-laminate constructions or as a blister pack or container seal.

Metal can be exploited to produce the following packaging characteristics:

• Strong and rigid
• Barrier to gas and moisture
• Pressure resistant
• Temperature and pressure resistant / tolerant
• Corrosion resistance via coatings
• Sterilisable
• Directly decorated or labelled

The limitations of metal packaging are in weight and shapes achievable, especially when compared to plastics.

Plastics

This is the most common packaging material and, at the same time, one of the most difficult to dispose of. The factors common to all plastics are that they are light, strong cheap to manufacture. It is for these reasons that they are used so much, as an alternative to cardboard glass packaging materials.

Plastics can be used as single materials or in combination. Their properties vary considerably but usually include:

• Lightweight
• Easily mouldable into almost limitless shapes
• Can produce rigid containers or flexible films
• Can be impact resistant
• Directly decorated or labelled
• Heat sealable

The relative disadvantages of plastics are typically polymer specific and the correct choice of polymer can to a practical degree mitigate the weakness.  Factors to consider are:

• No plastic provides absolute gas and moisture barrier
• Plastics melt at temperatures ranging from 650°C to 2,300°C
• Chemical resistance varies
• Additives in plastics can contaminate some products.

Common plastic polymers used in packaging:

• Polyethylene (PE)
  Low Density (LDPE): used for flexible tubes, film and some bottles. It has a low melting point and as a film relatively poor oxygen and moisture barrier.
  High Density (HDPE): widely used for bottles and tubs. Higher melting point but not ovenable. Reasonably wide chemical resistance which can be enhanced by fluorination. Not a sufficient gas barrier for carbonated drinks.
  Linear Low Density (LLDPE) Predominantly used as a film or as a sealing layer on multi-laminate materials for bottle seals, sachets, pouches, bags. Available in expanded form for wads.
• Polypropylene (PP)
  Widely used for closures for its ability to form a hinge which resists cracking and splitting.  Also used for dispensers, actuators, bottles, jars, cartons, trays and as film on its own or within laminations e.g. crisp bags or pouches. Available in expanded form for tubs and trays.
  Typically has higher melting point than PE so although still not “ovenable” it is better suited to hot fill products.  Resistant to a relatively wide range of chemicals.
• Polyethylene terephthalate (PET)
  Widely used for stretch blown bottles containing drinks, toiletries and food, it has excellent clarity. Also used for jars, tubes and trays. By far the best gas and moisture barrier of any packaging plastic used for containers it is ideal for carbonated beverages.  Its heat resistance makes it suitable for ovenable trays for ready meals.
• Polyvinyl chloride (PVC)
  Not widely used even though only has a third of its content is derived from oil. It still has a strong presence in vacuum formings used for inserts, clam packs and blister packs, due to its good production line performance. PVC films have excellent stretch and cling properties for hand wrapping fresh produce.
• Polyvinylidene chloride (PVDC)
  While normally only used in multi-layer films, PVDC has exceptional moisture and gas barrier properties.  Many pharmaceutical products could not be packed in blister strips without using PVDC as a layer in the blister film.
• Polystyrene (PS)
  Mainly seen in its expanded form as protective mouldings for fragile products. Also available as moulded toiletries/cosmetics containers (compacts), some bottles, jars and cups.  It has good chemical resistance and excellent clarity although it can be coloured.
• Laminates and Co-extrusions
  Laminates and co-extrusions are designed to benefit from the properties of two or more materials. Technically laminates are two materials bonded together and co-extrusions are multiple polymers extruded together from molten to form a single piece material.
  The following laminates are used widely from sachets through to form-fill-seal cartons such as Tetrapaks:
• Paper (or board) / Polythene (PE)
  Typically the paper or board gives rigidity and an easily decorated surface while the polythene gives heat-sealability and liquid containment. (But not a barrier in the true sense because water vapour can pass through PE.)
• Paper or PET / Aluminium foil / Polythene
  Again the polythene provides heat-sealability while the aluminium foil provides barrier properties, with the paper or PET on the outer surface allowing for decoration.  PET in particular gives a high gloss finish.
• PET/PE-EVOH (ethyl vinyl alcohol)-PE
  As above but for a clear high barrier laminate EVOH is used in place of foil.

Wood

Mostly used for pallets and crates (heavy duty products). Some lidded or hinged boxes are produced e.g. cigars, gifts, tea, cheese. High value spirits use wood and a few caps incorporate wood.

Bamboo

Bamboo is emerging as a packaging material. The illustration shows bamboo cushions for cradling Dell netbooks and laptops.

Warehouses usually perform the following functions:

(i) Procurement:

Procurement is the very first step in warehousing. Under this step, goods are received, unloaded and moved to pre-receipt inspection point and for accounting purpose.

(ii) Sorting:

Sorting is a step in which items are received in bulk are sorted out item-wise for its better storage and easy identification. Heavy and big sized items are kept separate.

(iii) Breaking (dividing):

Under breaking, items received in bulk are broken down into smaller portions and packed separately to cater the requirements of various retail outlets and customers.

(iv) Storage:

After sorting and dividing, items are stored with proper identification and location so as to take them out as and when required. Bin location cards are used for this purpose. Big retailers also use computers and merchandise based software packages to locate, identify and maintain accounting of the items.

(v) Making items available for consignment/shipment:

In warehouses, goods are stored for short period, as per the orders from retail outlets or customers, goods are dispatched to the destinations.

(vi) Material handling:

Material handling is a part of physical distribution system consisting of proper handling equipments used for loading, unloading, lifting and moving goods from one place to another.

(vii) Display:

In order to promote sales, some warehouses display products.

(viii) Inventory control:

It includes procuring goods and keeping proper records of the goods. Warehouses are also responsible for inspection, maintenance and accounting of goods to avoid them from theft and unforeseen mishaps. Proper accounting results in avoiding large fluctuations in inventory levels.

(ix) Processing:

Certain goods are not to be consumed in the form they are produced. It requires processing to make them consumable. For instance, fruits are ripened, timber is seasoned, wheat is crushed, paddy is polished and juices are filtered etc. Some warehouses also perform these activities as per the demand from the owners.

(x) Grading and branding:

Some warehouses perform the functions of grading and branding of goods on the behalf of the producers, wholesalers or the importer of goods. Besides usual activities, some warehouses provide mixing, blending and packaging assistance for the convenience of handling and sale.

(xi) Transportation:

In few cases, warehouses provide transportation facility to big depositors. It collects goods from the factories and sends these goods to the place of delivery on the request of the depositors.

Types of Warehouses

Private Warehouses:

The private warehouses are owned and operated by big manufacturers and merchants to fulfill their own storage needs. The goods manufactured or purchased by the owner of the warehouses have a limited value or utility as businessmen in general cannot make use of them because of the heavy investment required in the construction of a warehouse, some big business firms which need large storage capacity on a regular basis and who can afford money, construct and maintain their private warehouses. A big manufacturer or wholesaler may have a network of his own warehouses in different parts of the country.

Public Warehouses:

A public warehouse is a specialised business establishment that provides storage facilities to the general public for a certain charge. It may be owned and operated by an individual or a cooperative society. It has to work under a license from the government in accordance with the prescribed rules and regulations.

Public warehouses are very important in the marketing of agricultural products and therefore the government is encouraging the establishment of public warehouses in the cooperative sector. A public warehouse is also known as duty-paid warehouse.

Public warehouses are very useful to the business community. Most of the business enterprises cannot afford to maintain their own warehouses due to huge capital Investment. In many cases the storage facilities required by a business enterprise do not warrant the maintenance of a private warehouse. Such enterprises can meet their storage needs easily and economically by making use of the public warehouses, without heavy investment.

Public warehouses provide storage facilities to small manufacturers and traders at low cost. These warehouses are well constructed and guarded round the clock to ensure safe custody of goods. Public warehouses are generally located near the junctions of railways, highways and waterways.

They provide, therefore, excellent facilities for the easy receipt, despatch, loading and unloading of goods. They also use mechanical devices for the handling of heavy and bulky goods. A public warehouse enables a businessman to serve his customers quickly and economically by carrying regional stocks near the important trading centres or markets of two countries.

Public warehouses provide facilities for the inspection of goods by prospective buyers. They also permit packaging, grading and grading of goods. The public warehouses receipts are good collateral securities for borrowings.

Bonded Warehouses:

Bonded warehouses are licensed by the government to accept imported goods for storage until the payment of custom duty. They are located near the ports. These warehouses are either operated by the government or work under the control of custom authorities.

The warehouse is required to give an undertaking or ‘Bond’ that it will not allow the goods to be removed without the consent of the custom authorities. The goods are held in bond and cannot be withdrawn without paying the custom duty. The goods stored in bonded warehouses cannot be interfered by the owner without the permission of customs authorities. Hence the name bonded warehouse.

Bonded warehouses are very helpful to importers and exporters. If an importer is unable or unwilling to pay customs duty immediately after the arrival of goods he can store the goods in a bonded warehouse. He can withdraw the goods in installments by paying the customs duty proportionately.

In case he wishes to export the goods, he need not pay customs duty. Moreover, a bonded warehouse provides all services which are provided by public warehouses. Goods lying in a bonded warehouse can be packaged, graded and branded for the purpose of sale.

Co-operative Warehouses:

As the very name implies, these warehouses are owned, managed and controlled by co-operative societies. These societies provide storage facilities on the most economical rates to their members only. The basic purpose to run such warehouses is not to earn profit but to help their members.

Distribution Centres:

This type of storage facility usually has large space, which enables fast movement of large quantities of stores for short period. While, on the other hand, conventional warehouses hold goods for long time, say 2 months or 1 year.

These warehouses basically by nature, serve as points in the distribution system at which goods are procured from different suppliers and quickly transferred to various customers. These centers provide computerized control, which make movement of goods quick, fast and reliable.

In order to minimize delivery time, these storage facilities are found close to transportation centers. In some cases, distribution centers handle the goods for less than a day period such as in case of fast foods or perishable products. Most of the goods enter in the early morning (dawn time) and is transferred/distributed by the evening time.

Once it has been determined to use a warehouse, the next step is designing it. Whether the warehouse is a small manual operation or a large automated facility, the following three principles are relevant:

• Design criteria
• Handling technology
• Storage plan

Design Criteria

Warehouse design criteria address physical facility characteristics and product movement. Three factors to be considered in the design process are:
The number of stories in the facility: 

• The ideal warehouse design is limited to a single story so that product does not have to be moved up and down. 
• The use of elevators to move product from one floor to the next requires time and energy. 
• The elevator is also often a bottleneck in product flow since many material handlers are usually competing for a limited number of elevators. 
• While it is not always possible, particularly in central business districts where land is restricted or expensive, warehouses should be limited to a single story.

Height utilization:

• Regardless of facility size, the design should maximize the usage of the available cubic space by allowing for the greatest use of height on each floor. 
• Most warehouses have 20- to 30-foot ceilings (1 foot = 12 inch; 1 inch = 2.54 cm), although modern automated and high-rise facilities can effectively use ceiling heights up to 100 feet. 
• Through the use of racking or other hardware, it should be possible to store products up to the building’s ceiling. 
• Maximum effective warehouse height is limited by the safe lifting capabilities of material-handling equipment, such as forklifts.

Product flow:

• Warehouse design should also allow for straight product flow through the facility whether items are stored or not. 
• In general, this means that product should be received at one end of the building, stored in the middle, and then shipped from the other end. 
• Straight-line product flow minimizes congestion and confusion.

Handling technology

The second principle focuses on the effectiveness and efficiency of material-handling technology.  The elements of this principle concern, i.e.:

Movement continuity: 

• Movement continuity means that it is better for a material handler or piece of handling equipment to make a longer move than to have a number of handlers make numerous, individual, short segments of the same move. 
• Exchanging the product between handlers or moving it from one piece of equipment to another wastes time and increases the potential for damage. 
• Thus, as a general rule, fewer longer movements in the warehouse are preferred.

Movement scale economies:

• Movement scale economies imply that all warehouse activities should handle or move the largest quantities possible. 
• Instead of moving individual cases, warehouse activities should be designed to move groups of cases such as pallets or containers. 
• This grouping or batching might mean that multiple products or orders must be moved or selected at the same time. 
• While this might increase the complexity of an individual’s activities since multiple products or orders must be considered, the principle reduces the number of activities and the resulting cost.

Storage Plan

According to the third principle, a warehouse design should consider product characteristics, particularly those pertaining to volume, weight, and storage. Product volume is the major concern when defining a warehouse storage plan. High-volume sales or throughput product should be stored in a location that minimizes the distance it is moved, such as near primary aisles and in low storage racks. Such a location minimizes travel distance and the need for extended lifting. Conversely, low-volume product can be assigned locations that are distant from primary aisles or higher up in storage racks. 

Similarly, the plan should include a specific strategy for products dependent on weight and storage characteristics. Relatively heavy items should be assigned to locations low to the ground to minimize the effort and risk of heavy lifting. Bulky or low-density products require extensive storage volume, so open floor space or high-level racks can be used for them. On the other hand, smaller items may require storage shelves or drawers. The integrated storage plan must consider and address the specific characteristics of each product.

1. Benchmarking

A program to set up internal benchmarks will reduce your cost per order or hold the cost in line as volumes increase. Translate these down to department and individual work standards. Contact us if we can help you with an independent internal benchmarking study.

2. Manage the labor force

Labor is the largest controllable expense item in your distribution center. Successful practices to improve performance can lower your labor cost.

3. Hiring, retention and attrition (turnover)

Labor is your first or second largest expense after outbound freight in the fulfillment center. Review the reasons attrition is so high and work to close the gap. Review your hiring, retention and training practices. How well are you able to staff for the peaks?

4. Reduce handling and touches

The fewer touches of product, the less cost of shipping an order. An effective warehouse cost reduction strategy is to streamline the operation and apply industry best practices in order to reduce the handling and cost of fulfilling an order.

5. Slotting

Effective slotting practices can lower your costs for picking, replenishment, and putaway warehouse labor.

6. Team building

Successful organizations take team building seriously. Take your organization to a new level and improve productivity.

7. Picking options

How can you use best practices to improve picking productivity?

8. Use what you have more productively

This is a mantra in fulfillment today. Our operational assessments will help you get more productivity from your layout, space/product storage utilization and staff. By not caring for the basics of fulfillment, you are adding costs to the warehouse operation. Increasing current capacity and utilizing that capacity more effectively are key objectives. We believe that getting as much productivity as possible out of the existing layout, processes and systems will help you reduce warehouse costs.

9. Performance reporting

The old adage of, “You can’t improve what you don’t measure” is certainly true. An effective measurement and reporting process can improve performance and lower costs.

10. Packing options

How can industry best practices help you improve performance and reduce costs of one of the most labor intensive functions in the warehouse?

11. Freight management

Controlling inbound and outbound freight can make the difference between a profit and loss for your business. Learn more about freight cost reduction.

12. Use proper levels of qa

Are you “over inspecting” activities to the point of diminishing returns and spending money that does not result in a return on the investment?

13. Receiving practices and cross docking

Cross docking is an effective practice to reduce handling and costs while improving customer service and shipping costs.

14. Process returns more efficiently

Returns cost more than orders to process. Untimely processing of customer credits, refunds and exchanges can damage customer service. Our assessments look at use of staff, people, space and systems to improve productivity.

15. Workforce software

Many companies are still using Excel for their staffing software. Excel cannot save you as much money year over year as a good workforce program. Team up with your Contact Center to share a scheduling system. It will pay for itself quickly. If you have one, understand how to use it to its maximum.

16. Outsourcing option

There are practical and cost effective reasons to outsource part or all of your business. It may be to deal with a peak, new product categories or when fulfillment is not a company core competency.

17. Finding the right level of automation and systems

ROI analysis could put automation into your planning for cost improvement. The wrong material handling equipment can be creating hidden lost time and inefficient product flow, impacting cost and customer service.

18. Warehouse management/bar code systems

This should include reviewing how bar coding throughout the warehouse, conveyance, material handling and warehouse management systems can improve productivity, increase service levels and reduce costs. See more Warehouse Management Systems Implementation Strategies.

19. Inventory management in the warehouse

Effective inventory management is the single most important tool to improve customer service and reduce cost of operation. See more Inventory Management Cost Savings Strategies.

20. Replenishment practices

Effective replenishment is the basis of successful order fulfillment. Inefficient replenishment will cost huge dollars and negatively impact customer service.

The success of a sales manager is a direct reflection of the performance of his sales team. For a sales manager to succeed in his career, words like ‘me’ and ‘I’ do not work. Being the fulcrum of the team, the sales manager must take on the role of a nurturer to build talent and skill of his team members. Poor sales managers can reduce the overall efficiency of their teams, while efficient ones ensure their teams work optimally and earn significantly more.

When sales managers act as coaches and nurturers to their teams:

• They help each team member reach their individual goals, while simultaneously fostering a team culture.
• They know how to leverage talent by placing their team members in the right positions.
• They are able to recruit and hire the best talent for the job.

Here are some important tips to help you become an efficient and effective sales manager in order to drive better team performance and ultimately, bottom-line growth of the organization.

1. In the initial period of taking charge, it is best to observe the way the team operates to gain an understanding of the people and the sales process. By observing how the sales team carries out its tasks, you can identify where things could improve and how to communicate or approach the team members.
2. As a sales manager, enabling your people to get what they want is a good way to get what you want from them. So, it is best to discuss with each one of them and learn about their goals and dreams. Planning for individual goals can help the team work as a single unit in achieving a common sales target.
3. Once you have made observations about your team and have discussed their individual goals, identify the one most important change that needs to be implemented right away to improve efficiency of the sales process. It also reinstates the belief the team has in you and your ability to get things done effectively. Continue to implement impactful changes, one at a time.
4. To be a successful sales manager, one needs a mentor for encouragement and to make the right sale moves. A senior and experienced member in the same field would be a good choice to talk to, share ideas, and overcome work challenges.

Improve Sales Efficiency and Sales Effectiveness

Step 1: Identify the right sales process

First comes improving effectiveness. As Albert Einstein says, we can’t keep doing the same thing over and over again and expect different results each time. Tamara Schenk asserts, “It cannot be emphasized often enough that questioning the current state is a fundamental sales leadership approach to developing high-performance sales teams”.

To improve effectiveness, sales leaders need to outline a consistent sales process and then set sales objectives around those activities or related to specific sales goals. Companies that follow a defined workflow are 33% more likely to be high performers.

Step 2: Give sales reps the proper training

Less than 45% of companies have a formal sales training process. However, continuous training can yield up to 50% higher net sales per sales rep. As a sales leader, you may know what needs to be done, but your sales team may not know how to execute. The fact that 87% of training content is forgotten within weeks just reinforces the need for ongoing coaching and training.

Tools such as sales playbooks allow sales leaders to provide their teams with just-in-time coaching and best practices to ensure they have what they need to further the deal. Information such as talk tracks, training materials, kill sheets, and persona-based selling tips can be instantly accessible to reps for any given sales situation.

Step 3: Optimize these activities

After identifying which processes are effective, you can work on improving efficiency by optimizing those activities. According to a 2015 study from Aberdeen, investing in sales analytics and forecasting solutions is directly correlated to better sales and business-wide performance results. Organizations that use sales analytics increase team quota attainment 4x faster than non-users. Best-in-class sales leaders are open to ongoing analysis, learning, and adjustment. It’s important to use KPIs and metrics to determine what works, what doesn’t work, and areas for improvement in terms of factors such as speed, accuracy, and quality. Consider metrics such as call rate, win rate, sales cycle length, pipeline conversion rates, and average number of touches until conversion. Use dashboards to visualize trends and gain valuable insights into sales rep activity.

A modern selling strategy requires modern sales tools, such as sales enablement technology. A sales enablement platform such as Seismic aims to align marketing and sales processes and goals and then arm sales teams with the tools and content to improve sales execution and drive revenue. Sales enablement, by nature, empowers and enables sales reps to work more efficiently. And remember, a more efficient and effective sales team means more revenue is being generated.

It’s not unusual for a builder to look to his own sales staff when he needs to hire a sales manager. While it might be tempting to give the position to his top producer, that’s probably not the best person for the job. The customer-focused skills that make a person a great closer are quite different from the ones needed to keep a staff inspired, educated, and prepared to sell. While sales associates need to master the sales process, build rapport and trust with buyers, and be relentless at prospecting and follow-up, sales managers need to be able to set the proper goals for their teams and give them the tools to achieve those goals.

A sales manager plays a key role in the success of the sales team, setting the tone and culture of the organization. Competence in achieving exceptional results through leadership makes an effective sales manager.

A good sales manager can only prevail through learned and applied skills being able to manage a team by getting all the individuals together to form a cohesive unit and focus on making successful deals is an art itself, especially amongst the tough competition. However, there are practices which can help sales managers not only manage but lead in the right direction.

1. Being strategic: Setting goals and expectations

To be an effective sales manager you need to deliver a form of strategic perspective. Managers need to be clear about the direction the team should be taking and be specific about what is expected. This means knowing what your team goals are on an individual and personal level and how you can personally and collectively work towards the team’s strategic goals.

Being honest and realistic about goals and expectations from the outset means each team member knows what they are accountable for and when, including the rewards for meeting expectations and ramifications for not. To be effective the goals need to follow SMART criteria, i.e. Specific-Measurable-Attainable-Realistic-Timely. The manager should help the team develop a plan so that they can stay focused and achieve their goals.

2. Ability to train and coach

Sales managers are experts on the company’s products and processes and so should be able to pass on that knowledge to the team. Hence, paving the way for salespeople who are confident in solving problems and making decisions.

Ongoing coaching demonstrates commitment. Adaptive coaching which provides valuable and focused one-to-one support takes into account each individual salesperson’s needs. It illustrates the sales manager’s understanding of the diversity of selling techniques which lead to success.

Providing guidance, regular and constructive feedback is a difficult skill to master but important in building sales staff confidence.

3. Manage sales performance

Keeping a close eye on sales processes with a focus on what is driving sales outcomes makes effective sales management. Measuring sales team performance via metrics and indicators helps sales managers target improvements in quality as well as quantity. They are better able to anticipate any opportunities or uncertainty and resolve in good time. Even a small positive development in communications, such as an agreement to follow up on a lead or submitting a proposal, can encourage a successful outcome.

Providing frequent and regular feedback on team members’ performance is beneficial to both the manager and salesperson. Constructive feedback reinforces the manager’s engaging role with the team and contributes to their development.

4. Communicate regularly

Communication is a fundamental function of a manager. Strong communication fosters a dynamic exchange of feedback, suggestions and ideas with each salesperson understanding the role they play and the processes and tools they will use. It demonstrates how managers encourage creativity and help the team grow and learn, becoming a united team.

5. Manage by leading

The ability to lead is also a quality of an effective sales manager. Influential in an individual salesperson’s ability to reach or exceed their quotas, sales managers have the ability to nurture a sales culture focused on targets and high performance. Continuously looking for ongoing improvements through incremental steps and a streamlined sales process, they motivate and build confidence in the team.

6. Encourage development

As sales managers strive to be better leaders, they advocate the importance of maintaining commitments and targets. In order to allow the sales team’s performance to improve, time needs to be allocated to courses and training opportunities to build salespeople’s skills and enable them to grow professionally.

At the same time, managers also need to improve their own performance through personal development. They should also be willing to put in the extra work required to progress.

7. Recruit quality talent

As well as focusing on improving sales team performance, sales managers are also responsible for talent acquisition identifying, recruiting, developing and retaining the best sales people available. This means assessing skills critical to the role and attributes that closely align with the organisation.

A competitive nature is a key characteristic of a good salesperson and searching for one who has the natural ability to sell is important.

Consistency is vital and understanding sales management is the first step towards becoming an effective sales manager. Commitment to proficiency in the above will lead to a more productive and profitable team culture. Being able to maintain these practices will promote continued growth.

The history of salesmanship is as old as human civilization. Paul Hermann described Bronze Age’s travelling salesperson’s sample case. The salespeople used a wooden box, 26 inches long, containing, in specifically hollowed compartments, axe, sword blades, buttons, etc.

The salespeople in the past were not held in high esteem by the society. The Roman meaning of the word salesperson is ‘cheater’, and Mercury, the god of cunning and barter, was regarded as the patron deity of merchants and traders. The business and trade of buying and selling goods flourished over centuries and centred only on some specific cities of the world. India was a great destination for traders and resellers in the medieval age for spices, carpets, jewellery, etc.

Many diverse races and religions entered our country with the travelling salespeople. Even the erstwhile colonial rulers of India, the British, came to India for the purpose of expanding their business and trade, though subsequently they satisfied their political interest. They ruled this country to protect their own business interests.

The first salespeople in the US were the yankee peddlers who carried clothing, spices, and household articles from one part of the country to another part. In India they are called pheriwallahs. These pheriwallahs move from village to village and sell sarees, dress materials, and spices mostly in the rural markets of India, because rural housewives have lesser mobility than urban housewives. These people move from the manufacturing bases of the country to different consumption centres in India.

The pack peddlers in India traded with the tribal Indians and exchanged knives, beads, and ornaments for furs, spices, salt, and handicrafts. These people were viewed as shrewd, unprincipled tricksters who would not think twice before practicing product and price manipulations for higher benefits. They sold coloured sugar water as medicine and cheated people for smaller gains. In the beginning of the nineteenth century, these peddlers started using horse-driven carts and wagons, and started stocking heavier goods.

They started storing goods such as furniture, weapons, ammunitions, food items, and grains. Some of these wagon peddlers settled down in villages, and opened stores and trading posts. The community of Baniyas or the trading caste in India has its origin in these settlers and store owners. The big retailers travelled to the nearest cities to replenish their stocks and bought goods to resell in their localities.

Wholesalers and manufacturers hired greeters and drummers who would seek out and invite retailers to visit the display of the owner. The drummers would meet the passengers from incoming trains and ship with great fanfare to beat their competitors. In the next phase, the drummers started visiting the customer’s place of business.

There were fewer than 1,000 travel­ling salespeople before 1860 in the US who were basically credit investigators and took orders for goods. Their numbers increased as the pace and reach of industrial .revolution spread across continents.

The techniques of modern sales management and selling techniques were refined by John Henry Patterson, widely known as the father of modern sales management. He ran the National Cash Registry. He asked his best salespeople to demonstrate their sales techniques to other salespeople. The best sales approach was printed in a sales primer and distributed to all the other salespeople to follow.

This is how the canned sales approach began. In addition to this, Mr Patterson assigned to his salespeople exclusive territories and sales quotas in order to stretch their efforts. He arranged frequent sales meetings that served the double purpose of training and socialization.

He also sent regular sales information on techniques of selling. Thomas J. Watson was trained by Mr Patterson who later founded International Business Machines (IBM). Patterson was the pathfinder who showed the strategy and skill required to transform a sales force into an effective workforce for generating sales and profits.

Today, the process of sales management has undergone numerous changes in terms of strategy, practice, and technological adoption to achieve the desired sales goal. A salesperson is no longer an order taker or information provider; rather he is viewed as a consultant to the customers.

Due to non-personal form of business and increasing distances between the manufacturers and customers, sales organizations are now emphasizing more on quality consulting skills to solve the customers’ problems. The real sales activity now is in retaining customers rather than just closing the sales. This relational approach has changed the scope of sales management, and research has found that it costs five times more to register a new customer than to sell a product or service to an existing customer.

As a pan of sales function, the managerial challenge is to improve the productivity and efficiency level of the traditional sales force. But modern sales management is confronted with challenges that affect both productivity and efficiency of its selling approach. In response, newer and better selling techniques and approaches are being used, such as telemarketing, key account management, use of independent sales force, team selling, electronic data interchange (EDI), and application of technology to provide information and services to the customers.

The domain of sales management has become multidisciplinary in which sales managers have to manage a diverse workforce and complex technologies. Sales managers have to perform duties such as recruiting, training, selecting, motivating, forecasting, controlling, and administering salespeople, while performing the primary responsibility of revenue generation for the firms.

They have to manage and satisfy multiple stakeholders, such as customers, suppliers, sales representatives, and top management with the objective of increasing sales and profitability. There are guiding principles and concepts in the field of sales and marketing that shape the destiny of sales managers and the domain of knowledge in sales management.

A sales department is the direct link between a company’s product or service and its customers. However, a well-trained sales department does more than making sales. Your sales staff builds relationships with your customers. Further, a quality salesperson helps identify a customer’s unique needs and makes sure that those needs are met. Since salespeople have direct contact with your customers on an ongoing basis, they become privy to personal information that helps make sales interactions smoother and friendlier. A highly trained sales professional tailors sales pitches to the individual customer and learns the ins and outs of their needs.

For example, say you own an office supply business. A customer calls your sales team and says that they need printer paper. The salesperson will ask what type of printer the business is using, how long it takes the office to go through a sheaf of paper and whether they need a higher-quality paper for any reason. A design firm printing work samples might need a higher quality paper than a nonprofit that is only looking to print handouts for meetings. Your salesperson ensures that the customer is getting what they need, in the right volume and at the right price.

Further, a sales department promotes the growth of your business as well as customer retention. A quality salesperson builds an ongoing, long-term relationship with your customers. The importance of personal relationships in business can’t be understated. A personal connection makes customers feel valued and encourages them to remain loyal to your company. Plus, a happy customer will recommend your brand to others.

Roles of a Sales Department

The responsibilities of a sales department are varied. Thus, a sales department is often split up into multiple roles, each with their unique functions:

1. Sales Development Representative

Also called business development representatives, a sales development representative is responsible for step one of the sales process: researching, identifying and contacting leads. This person is often a cold caller or the team member who makes the first contact with a prospective client. Once the customer lead has been identified as a “qualifying lead” (one likely to result in a sale), a sales development representative passes that lead to a higher-level sales representative.

2. Account Executive

The account executive is responsible for bringing in new business and making sales, filling the traditional salesperson role. This person must be a closer since the success of the deal ultimately falls on their shoulders. Account executives create presentations, run demonstrations, write proposals, identify any obstacles to the purchase process, negotiate terms with clients and finally, make the sale.

3. Sales Specialist

A sales specialist has in-depth knowledge of the product and the industry. This is the person you want handling complicated issues or difficult customer questions. A sales specialist is also adept at doing product demonstrations and client proposals. In a sales department, this specialist takes on any complex sales or advanced challenges that come up for the rest of the team.

4. Customer Success Representative

A customer success representative is responsible for following up and renewing sales with customers who have already made purchases. This role is crucial for customer retention and ensuring your business isn’t leaving money on the table. A customer success representative keeps your best customers happy and finds new ways to further the relationship, thus increasing your profits.

5. Sales Manager

The sales manager is the leader of the team, and responsible for making sure the team is meeting their responsibilities and hitting their goals. This person is charged with steering the ship as well as measuring and improving outcomes.

Sales Department Responsibilities

The responsibilities of a sales department vary depending on the business, and how large the team is. However, the first responsibility of a sales department is usually searching for and identifying prospective clients. The next responsibility of the sales department is reaching out to those potential clients and making contact, which is when the relationship-building begins in earnest. A sales representative will identify the needs of the client, and find out any relevant information for making a sale.

Next, the sales department is responsible for delivering presentations and proposals that will convert the customer. For example, say a prospective customer tells your sales representative that he is looking for a new office supplier, but what he needs that others don’t have is a selection of specialty inks. Your sales department now puts together a presentation for the customer that illustrates your wide ink selection. Usually, a team member will also put together a proposal for the business. This individualized courting of clients can help convert leads into long-term customers, so it’s important to get this part right.

If the prospective client is happy with the customer service of the sales staff and the bottom line of the proposal, it’s time to close the deal. Successfully closing sales is another responsibility of the sales staff: processing transactions and ensuring payments run smoothly. Finally, the sales department is responsible for managing customer relationships and keeping customers happy long-term. As previously noted, customer retention is crucial to business profitability, which often falls on the sales team as they continue to follow up with and meet the needs of customers. The sales department must maintain customer relationships and manage the satisfaction of all clients.

Objectives of a Sales Department

A sales department has several objectives, aside from just making sales. Since your sales department is often the link between your customers and the product or service your company offers, there are other necessary functions a sales department must meet:

1. Converting sales

Of course, a sales department’s main objective is to make sales. However, they must also do so efficiently and as inexpensively as possible. It is not enough to collect credit card information and process an order. A sales department is always concerned with improving its conversion rate. A conversion rate is the percentage of customers who complete a sale. So if your sales team speaks to 100 potential customers per day and 20 of those conversations result in a sale, then your team has a 20 percent conversion rate. A well-oiled sales department is always looking for ways to improve its conversion rate. A better conversion means the business spends less money converting each customer, resulting in higher profits.

2. Customer retention

Your sales team is responsible for retaining customers, a monumentally important task. It costs a business five- to-25 times more money to attract new customers than it does to keep existing customers. Research further shows that upping your customer retention rate by only 5 percent can result in increased profits of 25-to-95 percent for your business. It makes sense always to keep your customers happy. This is where your sales team comes in. As the direct point-of-contact for your business, your sales department is building valuable relationships with customers. A sales team that follows up with customers and makes sure they are happy with the product or service you are providing is crucial. Most customers who take their business elsewhere do so quietly, without informing anyone. So one objective of a sales staff is to make sure customers remain happy and continue to do business with your company.

3. Business growth

The sales department is one of the most critical sectors of business for growth. Through relationship-building and keeping customers happy, word-of-mouth recommendations increase. Plus, satisfied customers are usually willing to leave positive reviews for your company online. Reviews are critically important in doing business these days. Prospective clients want to see that you have made other customers happy, and are all too willing to go to your competitors if there is no evidence that you’re doing so. This is why your sales team can help you grow your business. Through outstanding customer service, your customers become loyal and sing your praises to others, bringing in new business. What’s more, a quality sales staff will always be searching for new client leads, further growing your business.