Exam Intralogistics Management: David Businelli N8841

Exam Intralogistics Management
David Businelli N8841
Self-assessment
April 2020
School of Logistics
Degree Programme in Logistics
1
Contents
1 Intralogistic Management.......................................................................................2
2 Economy Intralogistics............................................................................................2
3 Investments.............................................................................................................3
4 Outsourcing.............................................................................................................3
5 Leading people........................................................................................................4
6 Key performance indicators....................................................................................4
7 Cost calculating.......................................................................................................5
8 Safety management................................................................................................5
2
1 Intralogistics Management & Leading people

Most of the times the “impact” of the leadership in the company is not considered as
an important factor to be worried. Personnel management, directors’ relationship,
motivating staff members and dealing with daily problems should be considered to
achieve the goals and make the company successful. It may happen that even the
leaders themselves are not totally aware of their role position, that is why most of
the time leadership strategies are always postponed or not considered at all, because
it is thought that is not relevant for the company purpose. An outstanding manager
has to motivate the team giving clear objectives, give feedback to improve the way of
working and boost people to reach success. It is also important how to manage the
whole project considering the coordination of activities, budgeting and process
studying. For these causes it is useful to know how to use process charts and mind
maps to understand better how to manage the activities and make process more
smooth.
2 Economy Intralogistics
In order to support the decision making process of outsourcing intralogistics, a key
element is the understanding the economics especially the cost side of the service.
There are fundamentally 3 ways to estimate costs:
Profit & loss statement based method (costs are divided in direct cost and and
fixed/overhead costs). Basically are all the cost incurred in providing the service. It
requires a good accounting system and the possibility to “dedicate” cost to the
specific service. The difficulty is to calculate “shared” resources.
Process based method where cost factors (labour, depreciation of assets and
equipment re associated to each process step ( i.e warehousing: receiving, picking,
shipping,..). It allows comparison between internal costs and supplier proposal and
helps oursourcing decision.
Cost type method based on available benchmarks (i.e. % of inventory value)
All the above methods should enable the manager to estimate the total cost and
segment it by categories/products.
Cost drivers are estimated as follows:
Capital costs: the cost of holding the money into an asset (inventory, equipment
3
etc.).Usually calculated as a % of the capital (working+fixed) using for example the

company WACC (weighted average cost of capital) Investments
Labour: head count and total compensation (salaries+benefits+social security etc.)
correced by a productivity factor to take into account idle time, vacation, sick leave.
Other costs: forklift lease or depreceation, warehouse space, insurance. Once cost
drivers have been identified managers should choose a specific costing methodology:
Process costing: total cost/unit (usually cost per pallet) used when products are
indifferentiated.
Job Order: determining all the cost per unit (transportation, duties, handling etc.)
and multiply by the total order size. Used if products dimensions and weights are
quite diverse.
ABC: work is split into activities and costs are associated to each activity. Requires a
sofisticated industrial accounting system.
The methodology will drive the structure of the RFQ (request for quote) to be sent to
potential logistic service providers in order to be able to compare their costs with
company internal costs and develop the business case fpr outsourcing.
3 Investments
An important part is the evaluation of the convenience of the investment, i.e. when it
will break-even. In evaluating investments the amount is only one factor: sometimes
investments in cheaper solutions do not provide enough benefits/savings. One
method to compare investment is to measure redemption period, i.e. what is the
time to recover the money spent through savings produced. This requires to
calculate the investment cash flow (savings, operational and depreciation costs).
Depreciation costs take into account the fact that the investment loses value each
year. The most common methodology used to depreciate an asset is the straight line,
that is the depreciation amount is constant each year. The residual value is basically
how much money you can make it by reselling the asset at the end of the
depreciation. Another method to compare investments is ROI (return on investment)
that measures the annual benefits/savings as a % of the average investment (capital
invested – residual value)/2. An alternative option is lease vs. buy. Leasing requires
less capital (even though there is an upfront amount to be spent) and can be
4
extended to include other services (called operational leasing) like maintenance,

spare parts etc. If the assets obsolescence is fast (for example computers, mobile
phones) it might be a good option to keep your asset updated. It might however turn
out to be expensive especially if compared with a long life asset ownership model.
The methodology to compare buy vs. lease is the TCO (total cost of ownership)
where all the cash flows are discounted at the WACC rate for a specific life span in
years. The most convenient option is the one the has the overall lowest TCO.
4 Outsourcing
One of the most common issues of “Decision making” is to choose between Make or
Buy products/services. As a decision both choices have its pros and cons. If the
company decides to make the product/service, it is not supposed to share
information with anyone (IP, patentability, TCO, ...). On the other hand, outsourcing
can increase the production capacity, propose new special skills and decrease
production costs. There are different kinds of outsourcing which can change
regarding the needs of the company (e.g. fully outsource, incountry o., LCO
countries). The main objective is to find the best supplier which can satisfy our
needs. To do this, it is needed a long process of qualification of suppliers, analysis,
meetings and etc. till the definitive selection and the contract making (buying
conditions, services and benefits). One of the focal points of this theme is the
“Supplier auditing” which makes possible to assure the best suppliers.
5 Key performance indicators

How can companies understand employees’ or machines’ performance? Keeping the
track of the performances is important for the company to understand how the
activities and the projects are going. Scorecards are visual, clear and informative
tools which help the managers/workers to have a quick look about the ongoing of
the work (e.g. if the productivity indicator is in the red zone, there should be some
problem in the production plant). Scorecards should show the target to achieve (99%
quality), the benchmark and several levels between the target and the bench mark
which indicates how well is the job done. Colors are very useful to make the
indicators more visual. There are different types of KPI’s which can consider different
topics: costs, production, sales, purchasing, economic & financial, etc.
5
It is very important that the KPI’s targets should be reachable, it is not smart to set a
very high goal.
6 Cost calculating
Many companies struggle to set the appropriate sales price for their products to be
profitable and forget to include a very important cost element, logistics costs. To
determine logistics center costs we need to break down the costs into different
elements which have been explained before, i.e. capital, labour (direct and indirect),
the depreciation of the warehouse building (if owned) or the rental fee, depreciation
of investments (like pallet racks, forklifts) and other costs (insurance, packaging etc.).
Once we have the total Distribution center Cost per year we need a driver to allocate
it to each product. We can use the yearly sales by product (pieces) and add the cost
to the product cost and calculate the suggested retail price by establishing a profit
margin.
7 Safety management
A normal working life is plenty of risks which should be considered and be aware of.
The first thing to do, to avoid any kind of accident, is to prevent any risk (the almost
accidents could turn to severe accidents if not considered). So, how can we prevent
the risk? First, we have to identify where/what is the risk and how often is
happening. Then we have to plan how to fix it and act. After that, it is crucial to keep
the situation under control, giving feedbacks and reports.
One of the most risky places of a company is the Warehouse. The main risk is the
movement of heavy weights, which should be done following the safety procedures
and constraints. The main causes of warehouse’s accidents are employee’s/
manager’s distractions or damaged resources (broken pallets, damaged footplate,
damaged frames, etc.). One of the most dangerous, which requires a high attention
on risk management, are warehousing of chemicals. Every product should have a CLP
label and a SDS that gives information about risk factors, how to store/handle it, etc.
There are EU directives (ATEX) and rules (REACH) which should be followed to
manage chemical products and to prevent environment pollution.
Safety is above all and managers should do whatever it is needed to make the
working place safe and secure. “Safety isn’t expensive, it’s priceless.”

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Exam Intralogistics Management

David Businelli N8841

1 Intralogistics Management & Leading people

etc.).Usually calculated as a % of the capital (working+fixed) using for example the

extended to include other services (called operational leasing) like maintenance,

5 Key performance indicators

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