What is Pareto Analysis and How it is Applied in Six Sigma Projects
What is the Pareto Principle ? The Pareto Principle was an observation of a famous Italian economist named Vilfredo Pareto. He was trying to analyze the distribution of income amongst the population of Italy. That is when he observed that 80% of the income generated went to 20% of the population. He then began observing […]
Selecting the Correct Hypothesis Test
Hypothesis testing is a very detailed subject. Understanding how to correctly conduct these tests is beyond the scope of this manual or the Six Sigma methodology itself. However, since the Six Sigma project team is expected to be applying these tests to uncover facts and these facts will then be used to base decisions on, […]
Components of Commercial Value Chain
Introduction The concept of the value chain was introduced by Michael Porter. The concept helps categories’ activities undertaken by enterprise to deliver a successful product to a customer. The concept since its introduction in 1980s has become a forefront in developing strategies around customer delight and commercial success. The value chain is series of activities […]
IT-Governance and Why it is Important
Introduction: What is IT governance and why it is important? It is not enough for corporations to have IT systems and expect them to deliver strategic value to them. Instead, there needs to be a mechanism in place to regulate, monitor, and govern the value creation efforts of the IT systems. This governance mechanism of […]
Different types of Data and its Importance
Data can be described as the backbone of any six sigma project. This is because the whole idea of six sigma and operations is to use statistics to manage operations in the factory workshop. Hence, for a six sigma team to understand the types of data and when and how to use them is of […]
3PL Logistics Service Providers are many in the market. There are players from Multi National background, regional players, local companies and individually managed business organizations.
Warehousing business, on the other hand, can flow through warehouses, consolidation and merging centers, finished goods stocking points, forward locations, raw material warehouses, JIT/VMI operations, Bonded warehouses, in plant warehouses, etc. depending upon the business requirement.
In this section of the article, we proposed to cover pricing mechanism aspects of a small warehouse like a consolidation center or finished goods flow through warehouse that need not be dedicated to the buyer alone and can be a shared facility.
Normally the bigger operations involving inventory management etc. are considered stand alone facilities and costing is worked out for the entire project, and this part of discussion is not covered under the scope of this article.
Normally in the Finished goods supply chain or raw material supply chains, there would be a need for a warehouse facility en route to the plant or the markets. These warehouses can be consolidation centers or merging centers in case of finished goods where different components of the order or finished goods are brought in from various locations, merged and dispatched to the next leg of the network. In case of raw material supplies, there can be a consolidation center at a country level where all shipments from several buyers are consolidated and shipped out as a container load.
Such kinds of warehousing requirements may not call for dedicated facilities. Normally the 3PL service provider who manages the freight will have warehouses that are used as shared or common facilities. In few cases public warehouses are also used by the buyers as the case may be.
General cargo warehouses or shared facilities and public warehouses are warehouses that house cargo of various clients. Depending upon the clients requirements, materials can be stored per day, week or month, etc. Inventory held of each customer may not be very high.
Storage and space options provided by the 3PL in such cases can vary with the client’s nature of the business. In a country consolidation center, where multiple shipments are stored and consolidated, the buyer may contract a fixed space on square foot basis with specified number of locations.
In another case of a merging center, the buyer may not contract fixed space and pay on transaction basis.
Public warehouses normally rent out space in terms of per pallet storage.
Even in Fixed Fee model, there are many variations in pricing models.
Normally in transactional pricing model, the buyer’s requirement will be minimum and does not call for any specific or dedicated investments. The 3PL provider normally uses his general or public facility and recovers his total cost of investment and operations on the volume or transactions.
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