Introduction to Module

 Text Book
 Assessment
 Strategic Logistics Management by James Stock & Douglas Lambert, 4th
Edition
 Logistics
 Process of planning, implementing and control of the efficient
and effective flow and storage of goods and related
information from point or origin to point of use.

 The Art and Science of obtaining, producing and distributing

material and product in the proper place, proper time and in
proper quantities
History of Logistics
Types of Logistics
 Logistics Functions
 Transportation (Heart and Largest contributor to its Cost)
 Warehousing
 Order processing
 Inventory Management
 Packaging
 Facility Network Design
 Third and Fourth party Logistics
 Reverse Logistics
 Export Import Transaction
 Third and Fourth Party Logistics

 3PLs actually perform or manage one or more logistics

services. They have their own Assets
 4PLs take over the entire logistics functions of an organization
and coordinate the combination of divisions or subcontractors
necessary to perform the specific tasks involved. They do not
have their own Assets but they arrange Asset base (3PL)
providers for their customers
 Logistics Goals and Strategies
 Rapid response to changes such as new development in the
market or in particular customer’s need
 Minimum variance in matters such as delivery times
 Minimum inventory to keep expenses down
 Consolidation of movement
 High quality in logistics service as well as in products
 Life cycle support including repair, reuse, recycling or
disposal as well as product delivery
 Logistics Strategy
Effective logistics strategy depends upon the following tactics:
 Coordinating functions (Transportation management,
warehousing, packaging etc) to create maximum value for
customer
 Integrating the supply chain

 Substituting information for inventory

 Reducing supply chain partners to an effective minimum number

 Pooling risk
 Coordinating functions
 Communication
 Coordinated decision making
 Avoid negative impact of logistics decisions on to other
departments
 Integrating the supply chain
 Locate the right countries
 Develop an effective Export-Import strategy (Borders to cross,
borders to avoid)
 Select right warehouse location
 Select right transportation modes and carrier
 Select the right numbers of partners
 Develop state of the art information system
 Substituting information for inventory
 Use postponement centers
 Track inventory precisely
 Don’t wait in line with customs
 Mix shipment to match customer needs
 Reducing supply chain partners to an
effective minimum number
 Less Partners, less difficulty
 Less inventory
 Less cycle time
 Less operating cost

Reduce partners by considering long term impact in mind. Good

example could be the impact of Dell direct model now
 Pooling Risk
 Pooling risk in a method of reducing stockouts by consolidating
stock in centralized warehouses.
 An unexpectedly large order from the customer will be small in
relation to the total supply available in centralized warehouse.
Transportation
 It is true that Mega Warehouses, Powerful Computers,
Database Programs, GPS and electronic communications
networks have contributed much to logistics but the bulk of
the logistics budget is still in Transport.
 Transportation Objectives and Issues
 Product movement with efficient use of time
 Efficient use of Money
◦ Vehicle Costs
◦ Driver/operator Costs
◦ Vehicle Operating Costs
◦ General and Administrative Costs
◦ Insurance and Security Costs
 Minimum Harm to the Environment
◦ Carbon footprint
◦ Pollution
 Temporary Storage
◦ Short term vehicle storage
◦ Crowded Facility
 Transportation Decision makers
 The shippers who selects the means of transportation
 The recipient (Consignee) of the Transport
 The Carrier of the Goods
 The government that regulates the market in the interest of the
market participants, including especially the public
 The Public
 Shipper and recipient
 Both want the products, parts or raw material etc leave on
time and arrive on time at the lowest consistent cost without
loss, damage or theft.
Carrier
 Carrier looks to receive highest possible net revenue consistent
with getting or keeping repeat business.
 Carrier may be less flexible about scheduling than shipper and
the recipient would like.
 Government
 Licensing carriers
 Building infrastructure
 Tax relief
 Finance for infrastructure (Roads, highways)
 Create competition
 In some countries like UK and Germany government own
carriers and tightly control markets
 Public
 Public want frequent transport with less or no charges but they
need to tradeoffs such as accepting more trucks, more buses
and more airplanes flying low over urban areas.
 In Europe and Asia, public transportation plays a greater role
in ordinary commuting than it does in United States.
 Heavy Public transport create congestion
 Public refused the Government proposal of putting charges on
vehicles in Town Centres in UK.
 Major Modes of Transportation
 Rail Transport
 Motor Carriers
 Water Transport
 Pipeline Transport
 Air Transport
 Rail Transport
 Measured in term of ton-miles per year
 Rail transport was far more dominant than present in US but
its importance has grown in Asia in past few years
 Following are the reasons cited for the
increase in Rail transport in Asia:
 Several Asian countries are major exporters of mineral
resources, and rail transport is crucial to the logistics
 12 of the 30 landlocked countries of World are in Asia with the
nearest port several thousands of miles away.
 Distance linking the main origin and destination justify the
economies of rail transport
 Rail is recognized as an environmentally friendly and safe
mode of transport
Landlocked Countries
 Capabilities of Rail Transport
 Relatively low rate structure about one tenth the cost per mile
of truck transport.
 Trains have an advantage over other modes of travel in bad
weather conditions.
 Safe for moving hazardous material.
 Market Conditions
 Rail transport business is overall declined
 Fixed cost is high but variable cost is low.
 Very expensive to built new tracks and the difficulty of
available land
 Limitations
 Less flexibility in comparison with trucks, like direct
delivery to retail stores.
 Less speed as freight carrier
 Not ideal for JIT and Lean manufacturing
 Frequency of departure is less than trucks
 Motor Transport
 As rail transport declined, motor carrier expanded
 Has become essential to the world’s supply chains.
 Do not provide roads or highways but pay a fee to government
as license, gasoline and other taxes and tolls for use of roads.
 Capabilities of Motor Transport
 Able to carry small shipment of high value item travelling a
short distance.
 High accessibility
 Most freight arrive at retail stores are by trucks
 Ideal for door to door delivery
 Faster than trains
 Market Conditions of Motor Transport
 Highly competitive market
 Trucking services are easily available by private carriers,
contract carriers and common carriers.

Trucking Industry Segments

 Truck load (TL)
 Less than Truck load (LTL)
 Limitations of Motor Carrier
 Low fixed cost but high variable cost
 More labour intensive than its competition
 Lower profits margin due to increase competition
 Riding long hours in the cab can still be hard on the drivers/
operators
 Water Transport
 Very important for Domestic and International Trade
 Inland waterways
 Lakes
 Oceans
 Capabilities of Water Transport
 Can handle huge loads
 Can manage up to 21000 containers (20 TEU)
 Most inexpensive mode for high-bulk, low-value products
 According to study conducted by “American Waterway
Operators” one gallon of fuel move 1 ton of cargo 514 miles
by inland barge, 202 miles by Train and only 59 miles by
Truck

Note: 1 metric ton = 1000 kg

Barge is a flat-bottomed boat, built mainly for river and canal.
Normally use for transporting heavy goods
 World Largest Ship

 The newest container ship in the fleet of the Chinese shipping

firm Orient Overseas Container Line, popularly known as
OOCL, stands first in the list of world’s biggest container
ships. This 400 meters -long Ultra Large Container Vessel
(ULCV) has a carrying capacity of 21,413 Containers (TEU).

 Constructed by the Samsung Heavy Industries, it measures

58.8 meters in breadth and 32.5 meters in depth.
 Market Conditions of Water Transport
 Quite stable market due to Globalization
 Maritime container volume is expected to grow

Limitations of Water Transport

 Limited accessibility
 Lack of speed
 If no direct access to port, then need of another mode
 Legal types of Carriers
 Private
 Common
 Contract
 Private Carriers
 Firm that owns or leases a fleet of vehicles to transport its own
products.
 Incur cost of ownership
 Free from economic regulations that apply to other types of
carriers
 Benefit is high control
 Draw back is inflexibility
 Common Carriers
 Common carrier perform bulk of shipping
 Offer services in both B2B and B2C
 May be licensed to carry all or only certain products.
 Generally specialize in both TL and LTL carriage.
 Contract Carriers
 Not required to offer services to general public
 But required government Authorization
 They enter into contracts with terms specific to customers
 Rates are normally lower than common carriers
 Provide customized services
 Logistics & Customer Service
 Customer service represents Logistics role in fulfilling
marketing objectives
 Customer service strategy in logistics must fulfil customer
requirements as well as – or better than competitors
 The fundamental attributes of basic customer service are
◦ Availability
◦ Operational performance
 Availability
 It is the capacity to have inventory when it is wanted by a
customer
 Availability is based on three performance measures
◦ Stockout Frequency
 Stockout frequency refers to the probability of inventory not being available to
meet customer demand
◦ Fill Rate
 Fill rate measures the impact of stockouts over time. Service performance is
not impacted until a customer needs a product. For example, if a customer
want 100 units of an item and only 89 are available, then fill rate is 89 percent
◦ Order Shipped Complete
 This measure views having 100 percent fulfilment of customer orders as the
standard of acceptable performance
 Operational Performance
Operational performance involves the time needed to deliver
customer order. It could be measured by four factors.
 Speed of Performance
◦ Elapsed time from when customer places an order until the product is
delivered and ready to use. Faster speed with high cost may be justified
by consumer if the value of speed has perceived benefits.
 Consistency
◦ It considers the number of times that cycles meet the amount of time
planned for completion. Consistency has direct impact on customers’
activities. For example, if consistency is low, customer must carry safety
stock.
 Warehousing
 House for Wares
 Works like a Hotel
Warehousing Activities
 Receive
 Put-away
 Store
 Packaging
 Move or Ship
 Cycle/Physical Counts
 Three Strategic Decisions about Warehousing
 Number of Warehouses
 Specific warehouse locations
 Whether or not to own the Warehouse
 Effect of adding Warehouse
 Improved Customer Service
 Transportation cost decreased
 Inventory cost increase
 Overhead cost increased (Equipment Duplication)
 Reduced cycle time
 Warehouse location
 Warehouse location Depends on many factors. Some of them
are as follows:
◦ Available Services
◦ Costs
◦ Regulatory Concerns (Environment)
◦ Work force availability
◦ Infrastructure
◦ Customers
◦ Suppliers
Example: Toyota decision to go to Canada from America
 Warehouse Ownership
 Private
 Public
 Contract
Warehouse Equipment and
Automation
AGVS
Automated Sorters
AS/RS
 Hand Pallet Trolley Stacker
Global Logistics and International
Business
 Global Logistics and International Business
 Increasing Day by Day
 IT playing important role
 International trade regulations
 Import-export participants
 Freight Forwarders
 Non-vessel operating common carriers(NVOCCs)
 Custom House brokers
 Export Management companies(EMCs)
 Export Trading companies (ETCs)
 Shipping Associations
 Export packing companies
 Freight Forwarders
 Firm that arranges transportation for commercial cargo.
 Middle man between carrier and shipper, often combine
smaller shipments to take advantage to bulk shipment.
 They are not carriers nor do they buy and resell space on
carriers.
 Freight forwarders are familiar with the procedures and
regulations for shipping products overseas. As an agent of the
exporter, a forwarder becomes the port representative for the
exporter
 Functions of Forwarders
 Quoting carrier rates
 Arranging or booking space
 Preparing and presenting documents
 Obtaining insurance
 Handling payments
 Tracing and expediting
 Non-vessel operating common carriers(NVOCCs)
 Buy space on carriers and resells it to shippers at a marked-up
price.
 Handle shipment travelling from port to the importers dock or
from an exporter’s dock to a port
They are different from forwarders in three ways
 NVOCCs actually buy and resell space on carriers while
forwarders do not.
 NVOCCs perform physical work of consolidating, loading and
unloading cargo. Forwarders do not provide labour
 NVOCCs can handle freight door to door in many cases
 Custom House brokers
 Assist importers by directing shipments through customs.
 They ensure all documentation required to pass customs is
complete and accurate.
 Pay all import duties under a power of attorney from importer
 Export Management Companies
 EMCs generally not an exporter itself but rather a consultant
to the exporters that hire it.

 The services of an EMC may include foreign market research,

marketing strategies, foreign distribution, managing and
training a foreign sales force, and arranging financial aid and
foreign language translation services.
 Export Management Companies
 They are experts in foreign trade and recognize the strongest
market for an individual product and the best sales strategy to
utilize in that market.
 The immediate access to foreign markets is an advantage of
using an EMC.
 Export Management Companies

 On the other hand, a disadvantage of an EMC is that the

manufacturer risks losing control over foreign sales. To avoid
such a situation, carefully select an EMC that can meet the
company's needs and maintain communication.
 Export Trading companies
 An ETC looks for companies making goods that it wants to
buy and resell in foreign market. ETC itself an exporter rather
than a consultant to an exporter.
 ETC accepts the title of the exported goods, whereas an EMC
does not.
 Another difference is that while most EMCs generally
specialize in exporting, ETC’s can export, import or do both.
 Shipping Associations
 Smaller exporters made shipping associations in an effort to
qualify for the discounts rate offered by carriers to large
shippers.

Export packing companies

 Export packing companies provide specialized packaging
services required for cargo that may have to undergo long
journeys and pass customs inspections in another country.
 Incoterms
 If buyer go to store and purchase LCD. But what happens, if
buyer drops LCD at the on the way at the automatic door and
it breaks?
◦ Is the store responsible for replacing it?
◦ Is the buyer out of luck?
◦ Should the store repair it for free under warranty agreement?
 Incoterms
 Short for International Commercial Terms were first defined
by the International Chamber of Commerce (ICC) in Paris to
help importers and exporters clarify such matters as the timing
of title transfer and responsibility for costs and insurance
during shipping.
 Incoterms
 For example, "F.O.B. (free on board) Karachi" would indicate
that you are responsible for getting the goods onto the
exporting vessel at the Port of Boston. Your customer is
responsible for the goods thereafter.
 On the other hand, "C.I.F. (cost, insurance & freight)
Rotterdam" would indicate that you are responsible for the
safe shipment of the goods, including insurance, to the Port of
Rotterdam.
 Landed Cost and Hidden Cost in Global Logistics
 Landed cost refers to the total price you pay for a resource
once it “lands” to your appointed facility. Landed cost might
include:
◦ Purchase price
◦ Import duty
◦ International freight
◦ Special packaging
◦ Fees and commissions
◦ Currency exchange
Infrastructure Considerations in Global
Expansions
Issue Consideration
Port facilities, Airports Specific details on the size and
quality of port facilities and
Airports
Highway Conditions Size and condition of roads as well
as size of highway system
Rail lines Availability of routes that will
minimize any delay in product
movement
 All the above factors are country specific, it is important to
understand these issues.

The outcomes are vastly different if the location is for example,

within European Union rather than in Asia or China.
 Global Logistics & Response Time
 There are number of reasons for longer and less consistent
response times in Global Logistics:
◦ Distance involved is much longer
◦ Substantial fraction of international freight moves by ocean, at a slower
speed.
◦ Additional documentation and arrangements that are usually required
 Order completeness
◦ Order completeness is much more important in global logistics due to
the higher costs of back orders and expedited shipments
Whether Logistics should be

Centralize or Decentralize

?
 Factor affecting Global Logistics Strategies
 Long distances
 Rapid product introduction
 Competition
 Regulations
 The longer the supply chain, the more cooperation and
coordination is required between production, marketing,
purchasing and the logistics management group.
 Financial aspects of Global Logistics
 Working Capital Considerations
◦ International operations require larger amounts of working capital than
domestic operations
 Inventories
◦ Higher level of inventory often required to service international market
due to greater variability in transit times, port delays etc
 Investment in Facilities and Logistics Networks
◦ When management considers direct investment in facilities and logistics
networks, the capital budgeting aspects of international financials
planning become more important
 Global shipments require greater protection
 Global shipments require greater protection of the product than
domestic shipment
 Greater distances and multiple times handling increase
possibility of damage, delays and pilferage.
 In general, amount of loss or damages is higher in international
shipment than domestics
Containers Shipments
 Containers Shipments
 Container shipping is the main way to transport goods around
the world – it enables global trade.
 Everything from door handles, Strawberries, make-up and
computers, have seen the inside of a container. Without
container shipping connecting the world we would not have
the variety of goods we have today!
 Container shipping is different from conventional
shipping because it uses ‘containers’ of various sizes
10 foot (3.45 m), 20 foot (6.09 m), 40 foot (12.18 m)
and 60 foot (20.07 m) – to load, transport, and unload
goods.

 Before the invention of container shipping, goods

were unpacked and loaded onto the ships at the port,
taking up much more time, manpower and money.
Different Sizes of Container
10 feet
20 Feet
40 feet
 How can container ships keep
food fresh
 Special refrigerated containers exist that can control
temperatures, allowing everything from meat, fruit and
vegetables, to dairy products, chemicals and pharmaceuticals
to travel across the world.
 Advantages of Container Shipments
 Cost due to loss or damage are reduced because of the
protective nature of the container
 Labour cost reduced due to the increased use of automated
materials handling equipment.
 Advantages of Container Shipments
 Containers are easy to store and transported which result in
lower warehousing and transportation costs.
 Containers are able to serve temporary storage facilities at
ports and terminals where warehousing space may be limited
 Flat racks can be used for boats, vehicles, machinery
or industrial equipment.
 Open sides may be used for vegetables such as
onions and potatoes.
 Tank containers transport many types of liquids
such as chemicals and vegetable oil.
Other uses of Containers
Other uses of Containers
 Warehouse Management Systems (WMS)
System that manages all processes that a warehouse carries out.
It includes:
 Receiving

 Picking

 Shipping

 Location Allocation

 Batch Management

 Labor Management
 WMS Functions
 Receiving
◦ Automatically matches and routes PO’s with ASN’s or
traditional receipts
◦ Notifies staff of incoming ASN’s and make updates
 Inventory Control
◦ Track inventory levels, lead times, person and place of
movement
 Storage location management
◦ Creates and determine location by type, size and velocity
 Automated replenishment
◦ Automatically creates a shipment order when an internal or
external partner’s system signal the demand
 Shipping
◦ Includes shipping routes, documentation routing and ASN’s
 Web-based WMS
 Some vendors offer web-based WMS as a subscription service
with less setup time and risk than a traditional application.
 Web based EDI is used to receive information such as ASN’s
from vendors
 Web based WMS allow better visibility and control because
users can push data or they can pull data by Internet
 Transportation Management System
(TMS)
 Computerized system to manage the operation of
transportation systems. It include deciding on modes of
transportation, planning imports and exports, planning and
controlling fleet service activities, and load planning and
optimization
 TMS Functions
 Transportation network design
 Shipment planning
 Routing
◦ Private fleet management
◦ Carrier selection
 Load matching and optimization
 Freight rating
 Shipment tracking and settlement
 Any TMS package must be able to provide the following

 Visibility
 Centralized control over shipment planning
 Integration between transportation planning and order
fulfillment
 Execution control
 Automation
 Automatic Identification and data capture
(AIDC)
 RF wireless devices
 Terminals
 Voice picking
 Pick to light
 End of
Logistical Drama