Beruflich Dokumente
Kultur Dokumente
Sr.No TOPICS
1 Overwiew of logistics
2 Logistics management
3 Commercial vehicle
operation
4 Containerisation
5 Cross docking
6 Distrubution
7 JIT
8 Logistics Automation
9 Logistics for different field
10 Concept of SCM
11 3 PL
Logistics
Logistics is the art and science of managing and controlling the flow of
goods, energy, information and other resources like products, services, and
people, from the source of production to the marketplace. It is difficult to
accomplish any marketing or manufacturing without logistical support. It
involves the integration of information, transportation, inventory,
warehousing, material handling, and packaging. The operating responsibility
of logistics is the geographical repositioning of raw materials, work in
process, and finished inventories where required at the lowest cost possible.
1. Overwiew of Logistics
The word of logistics originates from the ancient Greek logos (λόγος), which
means “ratio, word, calculation, reason, speech, oration”.
The Oxford English dictionary defines logistics as: “The branch of military
science having to do with procuring, maintaining and transporting material,
personnel and facilities.”Another dictionary definition is: "The time related
positioning of resources." As such, logistics is commonly seen as a branch of
engineering which creates "people systems" rather than "machine systems".
Military logistics
In military logistics, experts manage how and when to move resources to the
places they are needed. In military science, maintaining one's supply lines
while disrupting those of the enemy is a crucial—some would say the most
crucial—element of military strategy, since an armed force without food,
fuel and ammunition is defenseless.
The Iraq war was a dramatic example of the importance of logistics. It had
become very necessary for the US and its allies to move huge amounts of
men, materials and equipment over great distances. Led by Lieutenant
General William Pagonis, Logistics was successfully used for this
movement. The defeat of the British in the American War of Independence,
and the defeat of Rommel in World War II, have been largely attributed to
logistical failure. The historical leaders Hannibal Barca and Alexander the
Great are considered to have been logistical geniuses.
2. Logistics Management
Logistics Management is that part of the supply chain which plans,
implements and controls the efficient, effective forward and reverse flow
and storage of goods, services and related information between the point of
origin and the point of consumption in order to meet customers'
requirements.
Business logistics
Logistics as a business concept evolved only in the 1950s. This was mainly
due to the increasing complexity of supplying one's business with materials
and shipping out products in an increasingly globalized supply chain, calling
for experts in the field who are called Supply Chain Logisticians. This can
be defined as having the right item in the right quantity at the right time for
the right price and is the science of process and incorporates all industry
sectors. The goal of logistic work is to manage the fruition of project life
cycles, supply chains and resultant efficiencies.
Production logistics
The term is used for describing logistic processes within an industry. The
purpose of production logistics is to ensure that each machine and
workstation is being fed with the right product in the right quantity and
quality at the right point in time.
The issue is not the transportation itself, but to streamline and control the
flow through the value adding processes and eliminate non-value adding
ones. Production logistics can be applied in existing as well as new plants.
Manufacturing in an existing plant is a constantly changing process.
Machines are exchanged and new ones added, which gives the opportunity
to improve the production logistics system accordingly. Production logistics
provides the means to achieve customer response and capital efficiency
In this way, the central office knows where its trucks are. The company
tracks individual loads by using barcoded containers and pallets to track
loads combined into a larger container. To minimize handling-expense,
damage and waste of vehicle capacity, optimal-sized pallets are often
constructed at distribution points to go to particular destinations.
A good load-tracking system will help deliver more than 95% of its loads via
truck, on planned schedules. If a truck gets off its route, or is delayed, the
truck can be diverted to a better route, or urgent loads that are likely to be
late can be diverted to air freight. This allows a trucking company to deliver
a true premium service at only slightly higher cost. The best proprietary
systems, such as the one operated by FedEx, achieve better than 99.999%
on-time delivery.
The controlled routes allow a truck to avoid heavy traffic caused by rush-
hour, accidents or road-work. Increasingly, governments are providing
digital notification when roadways are known to have reduced capacity.
Usually, the drivers log into the system. The system helps remind a driver to
rest. Rested drivers operate the truck more skillfully and safely.
When these systems were first introduced, some drivers resisted them,
viewing them as a way for management to spy on the driver.
4.CONTAINERIZATION
Most containers today are of the 40-ft (12.2 m) variety and are known as 40-
foot containers. This is equivalent to 2 TEU. 45-foot (13.7 m) containers are
also designated 2 TEU. Two TEU are equivalent to one forty-foot equivalent
unit (FEU). High cube containers have a height of 9 ft 6 in (2.9 m), while
half-height containers, used for heavy loads, have a height of 4 ft 3 in (1.3
m). When converting containers to TEUs, the height of the containers
typically is not considered.
The maximum gross mass for a 20-ft dry cargo container is 24,000 kg, and
for a 40-ft, (inc. the 2.87 m (9 ft 5 in) high cube container), it is 30,480 kg.
Allowing for the tare mass of the container, the maximum payload mass is
there reduced to approx. 21,600 kg for 20-ft, and 26,500 kg for 40-ft
containers.
Efforts to ship cargo in containers date to the 19th century. By the 1920s,
railroads on several continents were carrying containers that could be
transferred to trucks or ships, but these containers were invariably small by
today's standards. From 1926 to 1947, the Chicago North Shore and
Milwaukee Railway carried motor carrier vehicles and shippers' vehicles
loaded on flatcars between Milwaukee, Wisconsin and Chicago, Illinois.
Beginning in 1929, Seatrain Lines carried railroad boxcars on its sea vessels
to transport goods between New York and Cuba. In the mid-1930s, the
Chicago Great Western Railway and then the New Haven Railroad began
"piggy-back" service (transporting highway freight trailers on flatcars)
limited to their own railroads. By 1953, the CB&Q, the Chicago and Eastern
Illinois and the Southern Pacific railroads had joined the innovation. Most
cars were surplus flatcars equipped with new decks. By 1955, an additional
25 railroads had begun some form of piggy-back trailer service.
A social cost arises as a result of the high cost of trasporting the empty
containers back to the original shipping point by agents. This cost, often
greater than that of containers themselves, results in large areas in ports and
warehouses to be occupied by empty containers left when at the destination.
In 2004 in the US this has ironically generated a contest addressed to those
that present the best project for alternative use of these abandoned
containers.
Use of the same basic sizes of containers across the globe has lessened the
problems caused by incompatible rail gauge sizes in different countries. The
majority of the rail networks in the world operate on a 1,435 mm (4 ft 8½ in)
gauge track known as standard gauge but many countries like Russia,
Finland and Spain use broader gauges while other many countries in Africa
and South America use narrower gauges on their networks. The use of
container trains in all these countries makes trans-shipment between
different gauge trains easier, with automatic or semi-automatic equipment.
Double-stack containerization
A railroad car with a 20' tank container and a conventional 20' container.
Most flatcars cannot carry more than one standard 40 foot container, but if the rail line
has been built with sufficient vertical clearance, a well car can accept a container and still
leave enough clearance for another container on top. This usually precludes operation of
double-stacked wagons on lines with overhead electric wiring (exception: Betuweroute).
Double stacking has been used in North America since American President Lines
introduced this "double stack" principle under the name of "Stacktrain" rail service in
1984. It saved shippers money and now accounts for almost 70 percent of intermodal
freight transport shipments in the United States, in part due to the generous vertical
clearances used by US railroads.
general purpose dry van for boxes, cartons, cases, sacks, bales, pallets, drums in standard,
high or half height
Flushfolding flat-rack containers for heavy and bulky semi-finished goods, out of gauge
cargo
Platform or bolster for barrels and drums, crates, cable drums, out of gauge cargo,
machinery, and processed timber
Evergreen Marine
477,911 5.2% 153
Corporation
While the creation of the best container for shipping of newly created
product is called "Containerization", the term also applies to determining the
right box and the best placement inside that box in order fulfillment. This
may be planned by software modules in a warehouse management system.
This optimization software calculates the best spatial position of each item
withing such constraints as stackability and crush resistance.
5.CROSS DOCKING
Cross-docking is a practice in logistics of unloading materials from an
incoming semi-trailer truck or rail car and loading these materials in
outbound trailers or rail cars, with little or no storage in between. This may
be done to change type of conveyance, or to sort material intended for
different destinations, or to combine material from different origins.
Typical applications
"Hub and spoke" arrangements, where materials are brought in to one
central location and then sorted for delivery to a variety of destinations
Complexity of loads
Handling methods
6. DISTRIBUTION
Distribution is one of the four aspects of marketing. A distributor is the
middleman between the manufacturer and retailer. After a product is
manufactured it is typically shipped (and usually sold) to a distributor. The
distributor then sells the product to retailers or customers.
The other three parts of the marketing mix are product management, pricing,
and promotion.
Traditionally, distribution has been seen as dealing with logistics: how to get
the product or service to the customer. It must answer questions such as:
Channels
A number of alternate 'channels' of distribution may be available:
Selling direct, such as via mail order, Internet and telephone sales
There have also been some innovations in the distribution of services. For
example, there has been an increase in franchising and in rental services -
the latter offering anything from televisions through tools. There has also
been some evidence of service integration, with services linking together,
particularly in the travel and tourism sectors. For example, links now exist
between airlines, hotels and car rental services. In addition, there has been a
significant increase in retail outlets for the service sector. Outlets such as
estate agencies and building society offices are crowding out traditional
grocers from major shopping areas..
Channel members
Distribution channels can thus have a number of levels. Kotler defined the
simplest level, that of direct contact with no intermediaries involved, as the
'zero-level' channel.
The next level, the 'one-level' channel, features just one intermediary; in
consumer goods a retailer, for industrial goods a distributor, say. In small
markets (such as small countries) it is practical to reach the whole market
using just one- and zero-level channels.
In Japan the chain of distribution is often complex and further levels are
used, even for the simplest of
Channel structure
To the various `levels' of distribution, which they refer to as the `channel
length', Lancaster and Massingham also added another structural element,
the relationship between its members:
Less obvious, but just as practical, is the use of `marketing' by service and
administrative departments; to optimize their contribution to their
`customers' (the rest of the organization in general, and those parts of it
which deal directly with them in particular). In all of this, the lessons of the
non-profit organizations, in dealing with their clients, offer a very useful
parallel.
Channel Decisions
Channel strategy
Channel management
The channel decision is very important. In theory at least, there is a form of
trade-off: the cost of using intermediaries to achieve wider distribution is
supposedly lower. Indeed, most consumer goods manufacturers could never
justify the cost of selling direct to their consumers, except by mail order. In
practice, if the producer is large enough, the use of intermediaries
(particularly at the agent and wholesaler level) can sometimes cost more
than going direct.
However, many suppliers seem to assume that once their product has been
sold into the channel, into the beginning of the distribution chain, their job is
finished. Yet that distribution chain is merely assuming a part of the
supplier's responsibility; and, if he has any aspirations to be market-oriented,
his job should really be extended to managing, albeit very indirectly, all the
processes involved in that chain, until the product or service arrives with the
end-user. This may involve a number of decisions on the part of the supplier:
Channel membership
Channel motivation
Channel membership
Intensive distribution - Where the majority of resellers stock the `product'
(with convenience products, for example, and particularly the brand leaders
in consumer goods markets) price competition may be evident.
Selective distribution - This is the normal pattern (in both consumer and
industrial markets) where `suitable' resellers stock the product.
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary
sales and service support. Motivating the owners and employees of the
independent organizations in a distribution chain requires even greater effort.
There are many devices for achieving such motivation. Perhaps the most
usual is `bribery': the supplier offers a better margin, to tempt the owners in
the channel to push the product rather than its competitors; or a competition
is offered to the distributors' sales personnel, so that they are tempted to push
the product. At the other end of the spectrum is the almost symbiotic
relationship that the all too rare supplier in the computer field develops with
its agents; where the agent's personnel, support as well as sales, are trained
to almost the same standard as the supplier's own staff.
Vertical marketing
This relatively recent development integrates the channel with the original
supplier - producer, wholesalers and retailers working in one unified system.
This may arise because one member of the chain owns the other elements
(often called `corporate systems integration'); a supplier owning its own
retail outlets, this being 'forward' integration. It is perhaps more likely that a
retailer will own its own suppliers, this being 'backward' integration. (For
example, MFI, the furniture retailer, owns Hygena which makes its kitchen
and bedroom units.) The integration can also be by franchise (such as that
offered by McDonald's hamburgers and Benetton clothes) or simple co-
operation (in the way that Marks & Spencer co-operates with its suppliers).
Horizontal marketing
A rather less frequent example of new approaches to channels is where two
or more non-competing organizations agree on a joint venture - a joint
marketing operation - because it is beyond the capacity of each individual
organization alone. In general, this is less likely to revolve around marketing
synergy.
Information logistics
New stock is ordered when stock reaches the re-order level. This saves
warehouse space and costs. However, one drawback of the JIT system is that
the re-order level is determined by historical demand. If demand rises above
the historical average planning duration demand, the firm could deplete
inventory and cause customer service issues. To meet a 95% service rate a
firm must carry about 2 standard deviations of demand in safety stock.
Forecasted shifts in demand should be planned for around the Kanban until
trends can be established to reset the appropriate Kanban level. In recent
years manufacturers have touted a trailing 13 week average as a better
predictor than most forecastors could provide.
History of JIT
The technique was first used by the Ford Motor Company This describes the
concept of "dock to factory floor" in which incoming materials are not even
stored or warehoused before going into production. The concept needed an
effective freight management system (FMS); Ford's Today and Tomorrow
(1926) describes one.
Over a period of several years, Toyota engineers redesigned car models for
commonality of tooling for such production processes as paint-spraying and
welding. Toyota was one of the first to apply flexible robotic systems for
these tasks. Some of the changes were as simple as standardizing the hole
sizes used to hang parts on hooks. The number and types of fasteners were
reduced in order to standardize assembly steps and tools. In some cases,
identical subassemblies could be used in several models.
After SMED, economic lot sizes fell to as little as one vehicle in some
Toyota plants.
Philosophy
Just-in-time (JIT) inventory systems are not just a simple method that a
company has to buy in to; it has a whole philosophy that the company must
follow. The ideas in this philosophy come from many different disciplines
including; statistics, industrial engineering, production management and
behavioral science. In the JIT inventory philosophy there are views with
respect to how inventory is looked upon, what it says about the management
within the company, and the main principle behind JIT.
In short, the just-in-time inventory system is all about having “the right
material, at the right time, at the right place, and in the exact amount.”
Effects
Some of the results at Toyota were unexpected. A huge amount of cash
appeared, apparently from nowhere, as in-process inventory was built out
and sold. This by itself generated tremendous enthusiasm in upper
management.
Another surprising effect was that the response time of the factory fell to
about a day. This improved customer satisfaction by providing vehicles
usually within a day or two of the minimum economic shipping delay.
Since assemblers no longer had a choice of which part to use, every part had
to fit perfectly. The result was a severe quality assurance crisis, and a
dramatic improvement in product quality. Eventually, Toyota redesigned
every part of its vehicles to eliminate or widen tolerances, while
simultaneously implementing careful statistical controls. (See Total Quality
Management). Toyota had to test and train suppliers of parts in order to
assure quality and delivery. In some cases, the company eliminated multiple
suppliers.
When a process problem or bad parts surfaced on the production line, the
entire production line had to be slowed or even stopped. No inventory meant
that a line could not operate from in-process inventory while a production
problem was fixed. Many people in Toyota confidently predicted that the
initiative would be abandoned for this reason. In the first week, line stops
occurred almost hourly. But by the end of the first month, the rate had fallen
to a few line stops per day. After six months, line stops had so little
economic effect that Toyota installed an overhead pull-line, similar to a bus
bell-pull, that permitted any worker on the production line to order a line
stop for a process or quality problem. Even with this, line stops fell to a few
per week.
The result was a factory that became the envy of the industrialized world,
and has since been widely emulated.
The Just in Time philosophy was also applied to other segments of the
supply chain in several types of industries. In the commercial sector, it
meant eliminating one or all of the warehouses in the link between a factory
and a retail establishment.
Benefits
As most companies use an inventory system best suited for their company,
the Just-In-Time Inventory System (JIT) can have many benefits resulting
from it. The main benefits of JIT are listed below.
Set up times are significantly reduced in the warehouse. Cutting down the
set up time to be more productive will allow the company to improve their
bottom line to look more efficient and focus time spent on other areas that
may need improvement.
Employees who possess multiple skills are utilized more efficiently. Having
employees trained to work on different parts of the inventory cycle system
will allow companies to use workers in situations where they are needed
when there is a shortage of workers and a high demand for a particular
product.
Problems
Within a JIT System
The major problem with Just In Time operation is that it leaves the supplier
and downstream consumers open to supply shocks. In part, this was seen as
a feature rather than a bug by Ohno, who used the analogy of lowering the
level of water in a river in order to expose the rocks to explain how
removing inventory showed where flow of production was interrupted. Once
the barriers were exposed, they could be removed; since one of the main
barriers was rework, lowering inventory forced each shop to improve its
own quality or cause a holdup in the next downstream area. Just In Time is a
means to improving performance of the system, not an end.
As noted by Liker (2003) and Womack and Jones (2003), it would ultimately
be desirable to introduce flow and JIT all the way back through the supply
stream. However, none of them followed this logically all the way back
through the processes to the raw materials. With present technology, for
example, an ear of corn cannot be grown and delivered to order . The same
is true of most raw materials, which must be discovered and/or grown
through natural processes that require time and must account for natural
variability in weather and discovery.
Oil
It has been frequently charged that the oil industry has been influenced by
JIT (see here (2004), here (1996), and here (1996)). The argument is
presented as follows:
The number of refineries in the United States has fallen from 279 in 1975 to
205 in 1990 and further to 149 in 2004. As a result, the industry is
susceptible to supply shocks, which cause spikes in prices and subsequently
reduction in domestic manufacturing output. The effects of hurricanes
Katrina and Rita are given as an example: in 2005, Katrina caused the
shutdown of 9 refineries in Louisiana and 6 more in Mississippi, and a large
number of oil production and transfer facilities, resulting in the loss of 20%
of the US domestic refinery output. Rita subsequently shut down refineries
in Texas, further reducing output. The GDP figures for the third and fourth
quarters showed a slowdown from 3.5% to 1.2% growth. Similar arguments
were made in earlier crises.
Beside the obvious point that prices went up because of the reduction in
supply and not for anything to do with the practice of JIT, JIT students and
even oil & gas industry analysts question whether JIT as it has been
developed by Ohno, Goldratt, and others is used by the petroleum industry.
Companies routinely shut down facilities for reasons other than the
application of JIT. One of those reasons may be economic rationalization:
when the benefits of operating no longer outweigh the costs, including
opportunity costs, the plant may be economically inefficient. JIT has never
subscribed to such considerations directly; following Waddel and Bodek
(2005), this ROI-based thinking conforms more to Brown-style accounting
and Sloan management. Further, and more significantly, JIT calls for a
reduction in inventory capacity, not production capacity. From 1975 to 1990
to 2005, the annual average stocks of gasoline have fallen by only 8.5%
from 228,331 to 222,903 bbls to 208,986 (Energy Information
Administration data). Stocks fluctuate seasonally by as much as 20,000 bbls.
During the 2005 hurricane season, stocks never fell below 194,000 thousand
bbls, while the low for the period 1990 to 2006 was 187,017 thousand bbls
in 1997. This shows that while industry storage capacity has decreased in the
last 30 years, it hasn't been drastically reduced as JIT practitioners would
prefer.
Finally, as shown in a pair of articles in the Oil & Gas Journal, JIT does not
seem to have been a goal of the industry. In Waguespack and Cantor (1996),
the authors point out that JIT would require a significant change in the
supplier/refiner relationship, but the changes in inventories in the oil
industry exhibit none of those tendencies. Specifically, the relationships
remain cost-driven among many competing suppliers rather than quality-
based among a select few long-term relationships. They find that a large part
of the shift came about because of the availability of short-haul crudes from
Latin America. In the follow-up editorial, the Oil & Gas Journal claimed that
"casually adopting popular business terminology that doesn't apply" had
provided a "rhetorical bogey" to industry critics. Confessing that they had
been as guilty as other media sources, they confirmed that "It also happens
not to be accurate."
Theory
Consider a (highly) simplified mathematical model of the ordering process.
Let:
We want to know Q.
We assume that demand is constant and that the company runs down the
stock to zero and then places an order, which arrives instantly. Hence the
average stock held (the average of zero and Q, assuming constant usage) is
Q / 2. Also, the annual number of orders placed is D / Q.
The key Japanese breakthrough was to reduce K to a very low level and to
resupply frequently instead of holding excess stocks.
In practice JIT works well for many businesses, but it is not appropriate if K
is not small.
The theory above can be fairly easily adapted to take into account realistic
features such as delays in delivery times and fluctuations in demand.
The delay in delivery, in particular, means that additional 'safety stocks' need
to be held if a stockout is to be rendered very unlikely.
8.LOGISTICS AUTOMATION
Logistics automation is the application of computer software and / or
automated machinery to improve the efficiency of logistics operations.
Typically this refers to operations within a warehouse or distribution center,
with broader tasks undertaken by supply chain management systems and
enterprise resource planning systems.
Logistics automation systems can powerfully complement the facilities
provided by these higher level computer systems. The focus on an individual
node within a wider logistics network allows systems to be highly tailored to
the requirements of that node.
Components
Logistics automation systems comprise a variety of hardware and software
components:
Fixed machinery
Automated cranes (also called automated storage and retrieval systems):
provide the ability to input and store a container of goods for later retrieval.
Typically cranes serve a rack of locations, allowing many levels of stock to
be stacked vertically, and allowing far high storage densities and better space
utilisation than alternatives.
Industrial Robots: four to six axis industrial robots, e.g. palletizing robots,
are used for palletizing, depalletizing, packaging, comissioning and order
picking.
Typically all of these will automatically identify and track containers based
upon barcodes, or increasingly, RFID tags
Mobile technology
Radio data terminals: these are hand held or truck mounted terminals
which connect wirelessly to logistics automation software and provide
instructions to operators moving throughout the warehouse. Many also have
in-built barcode scanners to allow identification of containers.
Software
Integration software: this provides overall control of the automation
machinery and for instance allows cranes to be connected up to conveyors
for seamless stock movements.
Standard logistics techniques are generally used for discrete or unit products.
Liquid products have logistics characteristics that distinguish them from
discrete products. Some of the major characteristics of liquid products that
impact their logistics handling are:
Liquids flowing from a higher level to a lower level provide the ability to
move the liquids without mechanical propulsion or manual intervention
Liquids’ adaptation to the shape of the container they are in provides a great
deal of flexibility in the design of storage systems and the use of “dead”
space for storage
MEDICAL LOGISTICS
Medical logistics is the logistics of pharmaceuticals, medical and surgical
supplies, medical devices and equipment, and other products needed to
support doctors, nurses, and other health and dental care providers.
Because its final customers are responsible for the lives and health of their
patients, medical logistics is unique in that it seeks to optimize effectiveness
rather than efficiency.
REVERSE LOGISTICS
Reverse logistics is the logistics process of removing new or used products
from their initial point in a supply chain, such as returns from consumers,
over stocked inventory, or outdated merchandise and redistributing them
using disposition management rules that will result in maximized value at
the end of the items original useful life. A reverse logistics operation is
considerably different from forward logistics. It must establish convenient
collection points to receive the used goods from the final customer or
remove assets from the supply chain so that more efficient use of inventory /
material overall can be achieved. It requires packaging and storage systems
that will ensure that most of the value still remaining in the used good is not
lost due to careless handling. It often requires the development of a
transportation mode that is compatible with existing forward logistic system.
Disposition can include returning assets into inventory pools or warehouses
for storage, returning goods to the original manufacturer for reimbursement,
selling goods on a secondary market, recycling assets, or a combination that
will yield maximum value for the assets in question.
Activities/Functions
Supply chain management is a cross-functional approach to managing the
movement of raw materials into an organization and the movement of
finished goods out of the organization toward the end-consumer. As
corporations strive to focus on core competencies and become more flexible,
they have reduced their ownership of raw materials sources and distribution
channels. These functions are increasingly being outsourced to other
corporations that can perform the activities better or more cost effectively.
The effect has been to increase the number of companies involved in
satisfying consumer demand, while reducing management control of daily
logistics operations. Less control and more supply chain partners led to the
creation of supply chain management concepts. The purpose of supply chain
management is to improve trust and collaboration among supply chain
partners, thus improving inventory visibility and improving inventory
velocity.
Several models have been proposed for understanding the activities required
to manage material movements across organizational and functional
boundaries. SCOR is a supply chain management model promoted by the
Supply-Chain Management Council. Another model is the SCM Model
proposed by the Global Supply Chain Forum (GSCF). Supply chain
activities can be grouped into strategic, tactical, and operational levels of
activities.
Strategic
Strategic network optimization, including the number, location, and size of
warehouses, distribution centers and facilities.
Tactical
Sourcing contracts and other purchasing decisions.
Milestone payments
Operational
Daily production and distribution planning, including all nodes in the supply
chain.
In the 21st century, there have been few changes in business environment
that have contributed to the development of supply chain networks. First, as
an outcome of globalization and proliferation of multi-national companies,
joint ventures, strategic alliances and business partnerships were found to be
significant success factors, following the earlier "Just-In-Time", "Lean
Management" and "Agile Manufacturing" practices. Second, technological
changes, particularly the dramatic fall in information communication costs, a
paramount component of transaction costs, has led to changes in
coordination among the members of the supply chain network (Coase,
1998).
Demand management
Order fulfillment
Returns management
One could suggest other key critical supply business processes combining
these processes stated by Lambert such as:
Customer service Management
Procurement
Physical Distribution
Outsourcing/ Partnerships
Performance Measurement
b) Procurement process
Strategic plans are developed with suppliers to support the manufacturing
flow management process and development of new products. In firms where
operations extend globally, sourcing should be managed on a global basis.
The desired outcome is a win-win relationship, where both parties benefit,
and reduction times in the design cycle and product development is
achieved. Also, the purchasing function develops rapid communication
systems, such as electronic data interchange (EDI) and Internet linkages to
transfer possible requirements more rapidly. Activities related to obtaining
products and materials from outside suppliers. This requires performing
resource planning, supply sourcing, negotiation, order placement, inbound
transportation, storage and handling and quality assurance. Also, includes the
responsibility to coordinate with suppliers in scheduling, supply continuity,
hedging, and research to new sources or programmes.
c) Product development and commercialization
Here, customers and suppliers must be united into the product development
process, thus to reduce time to market. As product life cycles shorten, the
appropriate products must be developed and successfully launched in ever
shorter time-schedules to remain competitive. According to Lambert and
Cooper (2000), managers of the product development and commercialization
process must:
e) Physical Distribution
This concerns movement of a finished product/service to customers. In
physical distribution, the customer is the final destination of a marketing
channel, and the availability of the product/service is a vital part of each
channel participant's marketing effort. It is also through the physical
distribution process that the time and space of customer service become an
integral part of marketing, thus it links a marketing channel with its
customers (e.g. links manufacturers, wholesalers, retailers).
f) Outsourcing/Partnerships
This is not just outsourcing the procurement of materials and components,
but also outsourcing of services that traditionally have been provided in-
house. The logic of this trend is that the company will increasingly focus on
those activities in the value chain where it has a distinctive advantage and
everything else it will outsource. This movement has been particularly
evident in logistics where the provision of transport, warehousing and
inventory control is increasingly subcontracted to specialists or logistics
partners. Also, to manage and control this network of partners and suppliers
requires a blend of both central and local involvement. Hence, strategic
decisions need to be taken centrally with the monitoring and control of
supplier performance and day-to-day liaison with logistics partners being
best managed at a local level.
g) Performance Measurement
Experts found a strong relationship from the largest arcs of supplier and
customer integration to market share and profitability. By taking advantage
of supplier capabilities and emphasizing a long-term supply chain
perspective in customer relationships can be both correlated with firm
performance. As logistics competency becomes a more critical factor in
creating and maintaining competitive advantage, logistics measurement
becomes increasingly important because the difference between profitable
and unprofitable operations becomes more narrow. A.T. Kearney
Consultants (1985) noted that firms engaging in comprehensive performance
measurement realized improvements in overall productivity. According to
experts internal measures are generally collected and analyzed by the firm
including
Cost
Customer Service
Productivity measures
The SCM management components are the third element of the four-square
circulation framework. The level of integration and management of a
business process link is a function of the number and level, ranging from
low to high, of components added to the link (Ellram and Cooper, 1990;
Houlihan, 1985). Consequently, adding more management components or
increasing the level of each component can increase the level of integration
of the business process link. The literature on business process
reengineering, buyer-supplier relationships, and SCM suggests various
possible components that must receive managerial attention when managing
supply relationships. Lambert and Cooper (2000) identified the following
components which are:
Work structure
Organization structure
Management methods
11.CONCEPT OF 3PL
For Outsourcing: This includes the primary level component of
management methods and the company's cutting-edge strategy and its vital
strategic objectives that the company will identify and adopt for particular
strategic initiatives in key the areas of technology information, operations,
manufacturing capabilities, and logistics (secondary level components). A
third-party logistics provider (abbreviated 3PL) is a firm that provides
outsourced or "third party" logistics services to companies for part or
sometimes all of their supply chain management function. Third party
logistics providers typically specialize in integrated warehousing and
transportation services that can be scaled and customized to customer’s
needs based on market conditions and the demands and delivery service
requirements for their products and materials.
Standard 3PL provider: this is the most basic form of a 3PL provider. They
would perform activities such as, pick and pack, warehousing, and
distribution (business) – the most basic functions of logistics. For a majority
of these firms, the 3PL function is not their main activity.
Service developer: this type of 3PL provider will offer their customers
advanced value-added services such as: tracking and tracing, cross-docking,
specific packaging, or providing a unique security system. A solid IT
foundation and a focus on economies of scale and scope will enable this type
of 3PL provider to perform these types of tasks.
The customer adapter: this type of 3PL provider comes in at the request of
the customer and essentially takes over complete control of the company’s
logistics activities. The 3PL provider improves the logistics dramatically, but
do not develop a new service. The customer base for this type of 3PL
provider is typically quite small.
The customer developer: this is the highest level that a 3PL provider can
attain with respect to its processes and activities. This occurs when the 3PL
provider integrates itself with the customer and takes over their entire
logistics function. These providers will have few customers, but will
perform extensive and detailed tasks for them.
CASE STUDY
India Logistics Industry: $125 Billion Goldmine
(DATAMONITOR REPORT)
India's third-party logistics (3PL) market is all set to experience a period of
explosive organic growth, judging by independent market analyst Data
monitor’s latest research. The Data monitor report, "India Logistics Outlook
2007," predicts high double-digit growth rates for both outsourced and
contract logistics in India.
With India's gross domestic profit (GDP) growing at over 9% per year and
the manufacturing sector enjoying double digit growth rates, the Indian
logistics industry is at an inflection point, and is expected to reach a market
size of over $125 billion in year 2010.
"Strong growth enablers exist in India today in the form of over $300 billion
worth of infrastructure investments, phased introduction of value-added-tax
(VAT), and development of organized retail and agri-processing industries",
say Praveen Ojha, Logistics analyst, Data monitor and author of the study.
"In addition, strong foreign direct investment inflows (FDI) in automotive,
capital goods, electronics, retail, and telecom will lead to increased market
opportunities for providers of 3PL in India."
The amount of time spent in complying with inter state tax requirements and
at transport check points affects the cost and competitiveness of both 3PL
providers as well as their customers. VAT, which is expected to replace a
plethora of state and central government taxes, is likely to enhance the
efficiency of the logistics industry in India. Given the current thrust on
infrastructure investments in India, the implementation of VAT is likely to
boost the efficiency for these stakeholders by lowering transit times and the
associated paper work.
Praveen Ojha concluded: "With the collective economic interaction of growing per capita
disposable incomes, fast growing manufacturing and organized retailing sectors,
increasing external merchandise trade, infrastructure investments by the government and
3PL capex plans, both India's logistics industry and the 3PL sector of this market are set
to witness explosive growth in the next five years."
CASE STUDY
DEFENCE LOGISTICS AGENCY
The Defense Logistics Agency (DLA) is the largest agency in the United
States Department of Defense, with about 22,000 civilian and military
personnel throughout the world. The agency provides supplies to the military
services and supports their acquisition of weapons and other materiel.
Since its founding in 1961, DLA has been an integral part of the nation's
military defense. It has been a full partner with the military services in
helping to fuel the Cold War. It has also provided crucial relief to victims of
natural disasters and humanitarian aid to those in need.
History
Origins of DLA
The origins of the Defense Logistics Agency (DLA) date back to World War
II when America’s huge military buildup required the rapid procurement of
vast amounts of munitions and supplies. During the war, the military
services began to coordinate more extensively when it came to procurement,
particularly procurement of petroleum products, medical supplies, clothing,
and other commodities. The main offices of the Army and Navy for each
commodity were collocated. After the war, the call grew louder for more
complete coordination throughout the whole field of supply - including
storage, distribution, transportation, and other aspects of supply. In 1947,
there were seven supply systems in the Army, plus an Air Technical Service
Command, and 18 systems in the Navy, including the quartermaster of the
Marine Corps. Passage of the National Security Act of 1947 prompted new
efforts to eliminate duplication and overlap among the services in the supply
area and laid the foundation for the eventual creation of a single integrated
supply agency. The act created the Munitions Board, which began to
reorganize these major supply categories into joint procurement agencies.
Meanwhile, in 1949, the Commission on the Organization of the Executive
Branch of the Government (Hoover Commission), a presidential
commission headed by former President Herbert Hoover, recommended that
the National Security Act be specifically amended so as to strengthen the
authority of the Secretary of Defense so that he could integrate the
organization and procedures of the various phases of supply in the military
services.
The pressure for consolidation continued. In July 1955, the second Hoover
Commission recommended centralizing management of common military
logistics support and introducing uniform financial management practices. It
also recommended that a separate and completely civilian-managed agency
be created with the Defense Department to administer all military common
supply and service activities. The military services feared that such an
agency would be less responsive to military requirements and jeopardize the
success of military operations. Congress, however, remained concerned
about the Hoover Commission’s indictment of waste and inefficiencies in
the military services. To avoid having Congress take the matter away from
the military entirely, DoD reversed its position. The solution proposed and
approved by the Secretary of Defense was to appoint "single managers" for a
selected group of common supply and service activities.
The Defense Cataloging and Standardization Act led to the creation of the
first Federal Catalog, completed in 1956. The federal catalog system
provided an organized and systematic approach for describing an item of
supply, assigning and recording a unique identifying number, and providing
information on the item to the system’s users. The initial catalog, containing
about 3.5 million items, was a rough draft, full of duplications and errors,
but it effectively highlighted the areas where standardization was feasible
and necessary.
After much debate among the service chiefs and secretaries, on August 31,
1961, Secretary McNamara announced the establishment of a separate
common supply and service agency known as the Defense Supply Agency
(DSA). The new agency was formally established on October 1, 1961, under
the command of Lieutenant General Andrew T. McNamara. McNamara, an
energetic and experienced Army logistician who had served as
Quartermaster General, rapidly pulled together a small staff and set up
operations in the worn Munitions Building in Washington, D.C. A short time
later, he moved his staff into more suitable facilities at Cameron Station in
Alexandria, Virginia.
During the first six months, two additional single managers - the Defense
Industrial Supply Center in Philadelphia and the Defense Automotive
Supply Center in Detroit, Michigan - came under DSA control, as did the
Defense Electronic Supply Center, Dayton, Ohio. By July 1, 1962, the
agency included 11 field organizations, employed 16,500 people, and
managed 45 facilities. The Defense Industrial Plant Equipment Center, a
new activity, was established under the agency in March 1963 to handle
storage, repair, and redistribution of idle equipment. By late June 1963 the
agency was managing over one million different items in nine supply centers
with an estimated inventory of $2.5 billion. On July 1, 1965, the Defense
Subsistence Supply Center, Defense Clothing Supply Center, and Defense
Medical Supply Center were merged to form the Defense Personnel Support
Center, Philadelphia.
The Defense Supply Agency was tested almost immediately with the Cuban
missile crisis and the military buildup in Vietnam. Supporting U.S. forces in
Vietnam was the most severe, extensive test of the supply system in the
young agency’s history. The agency launched an accelerated procurement
program to meet the extra demand created by the military buildup in
Southeast Asia. The agency’s supply centers responded in record time to
orders for everything from boots and lightweight tropical uniforms to food,
sandbags, construction materials, and petroleum products. Between 1965
and 1969 over 22 million short tons of dry cargo and over 14 million short
tons of bulk petroleum were transported to Vietnam. As a result of support to
the operations in Vietnam, DSA’s total procurement soared to $4 billion in
fiscal year 1966 and $6.2 billion in fiscal year 1967. Until the mid-1960s,
the demand for food was largely for non-perishables, both canned and
dehydrated. But in 1966, thousands of portable walk-in, refrigerated storage
boxes filled with perishable beef, eggs, fresh fruits and vegetables began
arriving in Vietnam, a logistics miracle.
During 1972 and 1973, the agency’s responsibilities extended overseas when
it assumed responsibility for defense overseas property disposal operations
and worldwide procurement, management, and distribution of coal and bulk
petroleum products (1972), and worldwide management of food items for
troop feeding and in support of commissaries (1973). One dramatic example
of the agency’s overseas support role was during the Middle East crisis in
October 1973 when it was called upon to deliver, on an urgent basis, a wide
range of vitally needed military equipment. Responsibilities for subsistence
management were expanded in 1976 and 1977 with improvements required
in the current wholesale management system and the assumption of major
responsibilities in the DOD Food Service Program. By 1977, the agency had
expanded from an agency that administered a handful of single manager
supply agencies to one that had a dominant role in logistics functions
throughout the Defense Department.
During the 1990s, the agency’s role in supporting military contingencies and
humanitarian assistance operations grew dramatically. Operation Desert
Shield began in August 1990 in response to an Iraqi invasion of Kuwait.
Soon after President George Bush announced the involvement of the U.S.
military, the agency was at the center of the effort to support the deployment
to the Middle East and later the war. In those first critical months, most of
the supplies transported to Saudi Arabia - from bread to boots, from nerve
gas antidote to jet fuel - came from DLA stock. During this operation and
the subsequent Operation Desert Storm, the agency provided the military
services with over $3 billion of food, clothing, textiles, medical supplies,
and weapons system repair parts in response to over 2 million requisitions.
The mission execution included providing supply support, contract
management, and technical and logistics services to all military services,
unified commands, and several allied nations. The quality of supply support
that DLA provided American combat forces during these operations earned
it the Joint Meritorious Service Award in 1991.
DLA support continued in the Middle East long after most U.S. forces had
redeployed. As part of Operation Provide Comfort, in April 1991 the agency
provided over $68 million of food, clothing, textiles, and medical supplies to
support a major land and air relief operation designed to aid refugees-mostly
Kurds in Iraq.
An even more dominant theme for the 1990s was the agency’s efforts to
reorganize so that it could support the war fighter more effectively and
efficiently. In August 1990, Defense Contract Management Regions Atlanta,
Boston, Chicago, Los Angeles, and Philadelphia were re-designated as
Defense Contract Management Districts South, Northeast, North Central,
West, and Mid Atlantic respectively. Defense Contract Management Regions
Cleveland, Dallas, New York, and St. Louis were disestablished. Defense
Contract Management Districts Mid Atlantic and North Central were
disestablished in May 1994.