Page 88 - DCAP302_ENTERPRISE_RESOURCE_PLANNING

Enterprise Resource Planning

notes Transportation

Transportation usually represents the bulk of distribution cost. It is usually easy to calculate
because it can be related directly to weight or numbers of units. Costs must be carefully controlled
through the mode of transport selected amongst alternatives, and these must be constantly
reviewed.

The patterns of retailing that have developed, and the pressure caused by low stock holding
and short lead times, have made road transport indispensable. When the volume of goods being
transported reaches a certain level some companies purchase their own vehicles, rather than
using the services of haulage contractors. However, some large retail chains have now entrusted
all their warehousing and transport to specialist logistics companies.
For some types of goods, transport by rail still has advantages. When lead-time is a less critical
element of marketing effort, or when lowering transport costs is a major objective, this mode of
transport becomes viable. Similarly, when goods are hazardous or bulky in relation to value, and
produced in large volumes then rail transport is advantageous. Rail transport is also suitable
for light goods that require speedy delivery (e.g. letter and parcel post). Except where goods are
highly perishable or valuable in relation to their weight, air transport is not usually an attractive
transport alternative. For long-distance overseas routes air transport is popular. Here, it has
the advantage of quick delivery compared to sea transport, and without the cost of bulky and
expensive packaging needed for sea transportation, as well as higher insurance costs.

The chosen transportation mode should adequately protect goods from damage in transit (a factor
just mentioned makes air freight popular over longer routes as less packaging is needed than
for long sea voyages). Not only do damaged goods erode profits, but frequent claims increase
insurance premiums and inconvenience to customers, endangering future business.

4.9 make-to-stock

With this strategy of manufacturing, company manufactures the products and keeps in stock
or inventory before it receives the orders. Then customers could directly purchase the products
from the inventory at a retail outlet or at the factory or at any of its distribution centers.

4.10 erp for make-to-order

Manufacturers are measured by their ability to responding quickly to the customer’s changing
needs and services. To compete with this, one has to choose multi mode manufacturing
applications. Traditionally, two fundamental ways for the quick response to customers orders
are: MTO and MTS. The response of this two to the customer’s demand could be as follows:

figure 4.1: customer’s orders with traditional approach

Enterprises
Supplier MTO / MTS Customer

82 LoveLy professionaL university