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Sem 5 Prep
← OperationsLogistics and supply chain

Formulas for this chapter

Value density

Value density = rupee value of the product / its weight

Choosing a transport mode. High value density favours air; low value density favours rail or water.

rupee value
Unit cost or price of the item
weight
Shipping weight of the item

Inventory created by a transport mode

In-transit (pipeline) stock = demand per period x transit periods Cycle stock = shipment size / 2 Total inventory = in-transit + cycle

Comparing two modes. A slower mode with bigger lots creates inventory on both counts.

transit periods
Transport plus customs time, in the same period as demand
shipment size
Lot size the mode imposes

Cost of a transport mode per period

Cost = total inventory x carrying cost per unit per period + demand per period x freight per unit Carrying per unit per week = annual % x unit cost / 52

The mode comparison itself. Convert the annual carrying rate to the period the demand is quoted in.

annual %
Inventory carrying cost as a fraction of item cost, e.g. 0.20
freight per unit
Quoted rate for that mode

RATER classification rule

Perceived < Minimum -> Negative Minimum <= Perceived <= Desired -> Satisfactory Perceived > Desired -> Positive

Scoring a service against the three baselines. Positive can also mean over-resourced.

Minimum
Lowest adequate service level
Desired
The highest level, what the customer hopes to receive
Perceived
The customer's perception of current service
Step 6 of 28
The real wordsTheory

The service-level agreement

SLAA contract between a service provider and the end user that defines the level of service expected from the provider.

Its contents, and this is a standard five-mark question:

  1. Purpose
  2. Services to be rendered
  3. Responsibilities of both parties
  4. Key performance indicators to be tracked
  5. Methodology for tracking the KPIs
  6. Non-fulfilment consequences

Client expectations split into operational performance (service support, delivery speed, flexibility, service recovery, track and trace, reliable performance) and service performance (professionalism, customer focus, proactive innovation, reliable capacity).

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