What is production logistics and how can business optimize production logistics to meet changing demands in the market?
Production logistics is traditionally a linear and fairly predictable process. For years the manufacturers were the link between the raw material suppliers and the distribution. However, the current economic reality is forcing companies to adapt to tailor-made manufacturing processes with a material inventory that is as numerous as it is heterogeneous.
However,in more recent times, economic trends such as just-in-time, the internationalization of markets and the increasing demands of customers for fast delivery are driving the change in production logistics. In this article, we define the characteristics of increasingly complex production logistics and explain the best strategies for their optimization.
How to develop a distribution policy
What is production logistics?
The production logistics or internal logistics involves managing and optimizing warehouse processes and material movement in plants that are connected to a production center. In short, it includes all logistical processes that take place from purchasing raw materials to product creation.
Consideration of the production processes
To better understand how production logistics can be organized, let’s take a brief look at the two most common forms of production control :
Push principle: production for the warehouse
A manufacturing system designed according to the push principle can be used if the end product meets a broad demand and has standard features that do not include customer-specific adaptations . In this case, based on a given schedule, the factory prepares the articles in advance. These are then transferred directly to the warehouse and the sales department only sells the stock available in the warehouse.
This means that the articles are “pushed” or “pushed” from one planned task to the next. Such a plan can only work with high stocks and long delivery times. Or to put it another way: Push is necessary if the response time of the supply chain is longer than the delivery time accepted by the customer and therefore a stock must be created.
How to do cross docking in warehouse operation
Pull principle: production on request
Pull production causes less planning effort. Information and material flows run the other way around here: A production order is first triggered directly or indirectly by an incoming customer order, i.e. when required . With this method, even if there is no inventory of finished products, the company can still hold stocks of semi-finished products. These then shorten the delivery time after the customer has placed the order.
Although there are industries in which one or the other principle prevails, both can also coexist. For example: in the automotive sector; standard vehicles (push principle) or on request vehicles with customer-specific features (pull principle).
The relationship between production and logistics in industry
The task of production logistics is to reduce the lead time of production , ie the time from the creation of a work order to the completion of the product.
In order to shorten production times, many industrial companies choose local suppliers of materials and components . This trend has partially reversed the relocation of companies: According to Industry Week, manufacturing companies that have relocated to the United States increased by 38 percent in 2018.
Another crucial factor in production logistics is inventory management , which is essential for faster production. To do this, the warehouse must be able to effectively manage the two types of demand that affect production logistics: demand from end customers based on sales forecasts or orders requested by the factory (demand independent of the production process) and demand from the factory , which requests all of the raw materials required for the manufacture of the end product from the warehouse (demand dependent on the production process).
With this concept of factory demand, the manufacturing company can reliably calculate which raw materials the manufacturing company needs to manufacture the individual products. The methods of the bill of materials (BOM) and material requirement planning (MRP) should be mentioned here . The parts list refers to the inventory or the list of components that are required for the manufacture of products, while the MRP system is the computer software that determines which materials are required in what quantities to manufacture a particular product.
The coordination of the production and logistics areas includes managing these two types of demand (dependent on the production process and independent) and organizing the industrial warehouse accordingly . Storage facilities connected to production facilities can hold finished products, components and raw materials for the production process or parts and spare parts for after-sales service .
How to optimize the warehouse for industrial logistics
Based on the idea of lean logistics , a philosophy of lean production, effective production logistics are based on reducing those processes that do not add any added value to the product . Examples of this include internal transports, queues or waiting times between processes or excess inventory.
The aim is to offer a better service and to achieve a general reduction in costs . But how can this be achieved?
Customized automation of the production process
If warehouses are used for stocks coming directly from production, they must be prepared for the reception and transport of large quantities of goods, usually pallets. The automation of material transport is a common solution, if it is repetitive processes and heavy loads is. In addition, the space is optimized and the productivity of the system is improved by an enormous reduction in incidents in the handling of goods.
But there are also parts and spare parts stores for industrial logistics , the purpose of which is aimed at preparing orders for supplying production lines. Since these are usually very heterogeneous stocks and small loading units, one of the most common strategies is zoning the warehouse using the ABC method and automating the movement of materials with roller conveyors to connect the various areas .
Software for process management in production logistics
The WMS for production supplements the basic functions of warehouse management software with additional functions specifically designed to optimize the production area. These programs, which in a certain sense work as MRP systems, control and coordinate the relationship between customer needs and production-dependent demand.
Warehouse management systems have proven to be an important tool for getting a comprehensive view of inventory related to production tasks. An LVS specialized in production simplifies:
- The breakdown according to stock types : In production logistics, these can be raw materials, unfinished or semi-finished products or stocks of finished products.
- the display of stocks in real time : the software provides information about the current number and status of goods at any time.
- just-in-time production : this method would not be possible without automated warehouse management.
The need for integration into production logistics
The industry is currently in a flexible and diversified manufacturing landscape in which effective customer service depends on the right production logistics . Against this background, automation and the implementation of WMS, which are specialized in manufacturing processes, are two key strategies for optimizing production logistics.
