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TABLE OF CONTENT
Sr.No 1 2 3 4 5 6 7 8 9 10 11
TOPICS Overwiew of logistics Logistics management Commercial vehicle operation Containerisation Cross docking Distrubution JIT Logistics Automation Logistics for different field Concept of SCM 3 PL
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.
Overwiew of Logistics
The word of logistics originates from the ancient Greek logos (λόγος), which means “ratio, word, calculation, reason, speech, oration”. Logistics as a concept is considered to evolve from the military's need to supply themselves as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, there were military officers with the title ‘Logistikas’ who were responsible for financial and supply distribution matters. 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".
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
Business logistics Logistics as a business concept evolved only in the 1950s. effective forward and reverse flow and storage of goods. The Iraq war was a dramatic example of the importance of logistics. The goal of logistic work is to manage the fruition of project life cycles. It had become very necessary for the US and its allies to move huge amounts of men. Logistics Management Logistics Management is that part of the supply chain which plans. In business. supply chains and resultant efficiencies. services and related information between the point of origin and the point of consumption in order to meet customers' requirements. since an armed force without food. Logistics was successfully used for this movement. Led by Lieutenant General William Pagonis. The defeat of the British in the American War of Independence. calling for experts in the field who are called Supply Chain Logisticians. The historical leaders Hannibal Barca and Alexander the Great are considered to have been logistical geniuses. warehousing. have been largely attributed to logistical failure. implements and controls the efficient. materials and equipment over great distances. fuel and ammunition is defenseless. transport. 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 main functions of a logistics manager include Inventory Management. logistics may have either internal focus(inbound logistics).crucial—element of military strategy. or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply chain management). and the defeat of Rommel in World War II. purchasing. and the organizing and planning of these activities. 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. Logistics managers combine a general knowledge of each of these functions so that there is a coordination of .
Manufacturing in an existing plant is a constantly changing process. Every fifteen minutes the computer transmits where the truck has been. Production logistics The term is used for describing logistic processes within an industry. 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.resources in an organization. A typical system would be purchased by the managers of a trucking company. It would have a satellite navigation system. Production logistics provides the means to achieve customer response and capital efficiency 1. To minimize handling-expense. Logistics as a concept is considered to evolve from the military's need to supply themselves as they moved from their base to a forward position. In ancient Greek. The digital radio service forwards the data to the central office of the trucking company. There are two fundamentally different forms of logistics. Roman and Byzantine empires. . The issue is not the transportation itself. Machines are exchanged and new ones added. there were military officers with the title ‘Logistikas’ who were responsible for financial and supply distribution matters. which gives the opportunity to improve the production logistics system accordingly. 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. a small computer and a digital radio in each truck. Production logistics can be applied in existing as well as new plants. The other coordinates a sequence of resources to carry out some project. In this way.Commercial vehicle operation Commercial Vehicle Operations is an application of Intelligent Transportation Systems for trucks. One optimizes a steady flow of material through a network of transport links and storage nodes. but to streamline and control the flow through the value adding processes and eliminate non-value adding ones. A computer system in the central office manages the fleet in real time under control of a team of dispatchers.
The best proprietary systems. If a truck gets off its route. governments are providing digital notification when roadways are known to have reduced capacity. some drivers resisted them. A well-managed intelligent transportation system provides drivers with huge amounts of help. The system helps remind a driver to rest.damage and waste of vehicle capacity. It gives them a view of their own load and the network of roadways. achieve better than 99. such as the one operated by FedEx. optimal-sized pallets are often constructed at distribution points to go to particular destinations. viewing them as a way for management to spy on the driver. the drivers log into the system. Increasingly. This allows a trucking company to deliver a true premium service at only slightly higher cost. When these systems were first introduced. Rested drivers operate the truck more skillfully and safely. the truck can be diverted to a better route. or urgent loads that are likely to be late can be diverted to air freight. linear programming and minimum spanning tree logic to predict and improve arrival times. dispatcher and driver collaborate on finding a good route. The basic scheme is that hypothetical routes are constructed by combining road segments. Usually. Load-tracking systems use queuing theory. or that have overhead obstructions.999% on-time delivery. The controlled routes allow a truck to avoid heavy traffic caused by rushhour. A good system lets the computer. One special value is that the computer can automatically eliminate routes over roads that cannot take the weight of the truck. accidents or road-work. and then poor ones are eliminated using linear programming. A good load-tracking system will help deliver more than 95% of its loads via truck. Components of CVO include: • • Fleet Administration Freight Administration . or a method to move the load. on planned schedules. The exact means of combining these are usually secret recipes deeply hidden in the software. or is delayed.
box or pallet to be used to ship a single item or number of items. and 53-ft (16. 48-ft (14. This is equivalent to 2 TEU. Container capacity is measured in twenty-foot equivalent units (TEU. 45-ft (13. 20-ft (6. and trucks.2 m).6 m).• • • • • • • • • • Electronic Clearance Commercial Vehicle Administrative Processes International Border Crossing Clearance Weigh-In-Motion (WIM) Roadside CVO Safety On-Board Safety Monitoring CVO Fleet Maintenance Hazardous Material Planning and Incident Response Freight In-Transit Monitoring Freight Terminal Management 2. railroad cars.CONTAINERIZATION Containerization is a system of intermodal freight transport cargo transport using standard ISO containers (known as Shipping Containers or Isotainers) that can be loaded and sealed intact onto container ships. These sell at about US$2. 40-ft (12.5 m³. Most containers today are of the 40-ft (12.1 m). 45-foot (13. planes. the biggest manufacturer. Containerization is also the term given to the process of determining the best carton.500 in China.59 m (height). or sometimes teu).44 m (width) × 2.10 m (length) × 2.7 m) containers are also designated 2 TEU. A twenty-foot equivalent unit is a measure of containerized cargo capacity equal to one standard 20 ft (length) × 8 ft (width) × 8 ft 6 in (height) container.2 m) variety and are known as 40foot containers. In metric units this is 6.2 m). ISO Container dimensions and payloads There are five common standard lengths.7 m). United States domestic standard containers are generally 48-ft and 53-ft (rail and truck). or approximately 38. 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 use of US measurements to describe container size (TEU, FEU) despite the fact the rest of the world uses the metric system reflects the fact that US shipping companies played a major part in the development of containers. The overwhelming need to have a standard size for containers, in order that they fit all ships, cranes, and trucks, and the length of time that the current container sizes have been in use, makes changing to an even metric size impractical. 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.
Shipping Container History
A container ship being loaded by a portainer crane in Copenhagen Harbour.
Twistlocks which capture and constrain containers. Forklifts designed to handle containers have similar devices.
A container freight train in the UK.
Containers produced a huge reduction in port handling costs, contributing significantly to lower freight charges and, in turn, boosting trade flows. Almost every manufactured product humans consume spends some time in a container. Containerization is an important element of the innovations in logistics that revolutionized freight handling in the 20th century. 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. The first vessels purpose-built to carry containers began operation in Denmark in 1951. Ships began carrying containers between Seattle and Alaska in 1951. The worlds first truly intermodal container system used purpose-built container ship the Clifford J. Rodgers built in Montreal in 1955 and owned by the White Pass and Yukon Route. Its first trip carried
600 containers between North Vancouver, British Columbia and Skagway, Alaska on November 26, 1955; in Skagway, the containers were unloaded to purpose-built railroad cars for transport north to the Yukon, in the first intermodal service using trucks, ships and railroad cars. Southbound containers were loaded by shippers in the Yukon, moved by truck, rail, ship and truck to their consignees, without opening. This first intermodal system operated from November 1955 for many years. The U.S. container shipping industry dates to 1956, when trucking entrepreneur Malcom McLean put 58 containers aboard a refitted tanker ship, the "Ideal-X," and sailed them from Newark to Houston. What was new about McLean's innovation was the idea of using large containers that were never opened in transit between shipper and consignee and that were transferable on an intermodal basis, among trucks, ships and railroad cars. McLean had initially favored the construction of "trailerships" - taking trailers from large trucks and stowing them in a ship’s cargo hold. This method of stowage, referred to as roll-on/roll-off, was not adopted because of the large waste in potential cargo space onboard the vessel, known as broken stowage. Instead, he modified his original concept into loading just the containers, not the chassis, onto the ships, hence the designation container ship or "box" ship.See also pantechnicon van and trolley and lift van. During the first twenty years of growth containerization meant using completely different, and incompatible, container sizes and corner fittings from one country to another. There were dozens of incompatible container systems in the U.S. alone. Among the biggest operators, the Matson Navigation Company had a fleet of 24-foot containers while Sea-Land Service, Inc used 35-foot containers. The standard sizes and fitting and reinforcement norms that exist now evolved out of a series of compromises between international shipping companies, European railroads, U.S. railroads, and U.S. trucking companies. The bulk of the discussions occurred in the late 1960s and the first draft of the resulting ISO standards were prepared for publication in 1970. 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
In the 1950s. at first. Most economic studies of containerization merely assumed that shipping companies would begin to replace older forms of transportation with containerization. containerization grew despite the unfavorable regulatory structure of the 1960s. launched August 2006). some 18 million total containers make over 200 million trips per year. . There are ships that can carry over 14. approximately 90% of non-bulk cargo worldwide moves by containers stacked on transport ships.500 TEU ("Emma Mærsk". But the United States' present fully integrated systems became possible only after the Interstate Commerce Commission's regulatory oversight was cut back (and later abolished in 1995). It has even been predicted that. 26% of all containers originate from China. but did not predict that the process of containerization itself would have some influence on producers and the extent of trading. few initially foresaw the extent of the influence containerization would bring to the shipping industry.that present the best project for alternative use of these abandoned containers. at some point. Today. However. As of 2005. This so-called Malaccamax size constrains a ship to dimensions of 470 m in length and 60 m wide (1542 feet * 197 feet). 396 m long. container ships will be constrained in size only by the Straits of Malacca—one of the world's busiest shipping lanes—linking the Indian Ocean to the Pacific Ocean. Containerization has revolutionized cargo shipping. trucking and rail were deregulated in the 1970s and maritime rates were deregulated in 1984. In the United States. but did not anticipate that containerization might make it cheaper to import such goods from abroad. Harvard University economist Benjamin Chinitz predicted that containerization would benefit New York by allowing it to ship industrial goods produced there more cheaply to the Southern United States than other areas.
For instance. Improved cargo security is also an important benefit of containerization. Loss at sea of ISO Containers Containers occasionally fall from the ships that carry them. This has reduced the "falling off the truck" syndrome that long plagued the shipping industry. The cargo is not visible to the casual viewer and thus is less likely to be stolen and the doors of the containers are generally sealed so that tampering is more evident. The widespread use of ISO standard containers has driven modifications in other freight-moving standards. something that occurs an estimated 2. Bowen Exports and Theiler & Sons Goods. with automatic or semi-automatic equipment. Some of the largest global companies containerizing containers today are Patrick Global Shipping. The majority of the rail networks in the world operate on a 1.000 times each year. The use of container trains in all these countries makes trans-shipment between different gauge trains easier. and changing completely the worldwide use of freight pallets that fit into ISO containers or into commercial vehicles. on .000 to 10.A converted container used as an office at a building site.435 mm (4 ft 8½ in) gauge track known as standard gauge but many countries like Russia. gradually forcing removable truck bodies or swap bodies into the standard sizes and shapes (though without the strength needed to be stacked). LLC. Finland and Spain use broader gauges while other many countries in Africa and South America use narrower gauges on their networks. Use of the same basic sizes of containers across the globe has lessened the problems caused by incompatible rail gauge sizes in different countries.
2 m) containers. Most flatcars cannot carry more than one standard 40 foot container. 2006. but seldom float very high out of the water. Containers lost at sea do not necessarily sink. making them a shipping hazard that is difficult to detect. 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. This usually precludes operation of double-stacked wagons on lines with overhead electric wiring (exception: Betuweroute). Freight from lost containers has provided oceanographers with unexpected opportunities to track global ocean currents. but if the rail line has been built with sufficient vertical clearance.November 30. Double-stack containerization Part of a United States double-stack container train loaded with 53 ft (16. A railroad car with a 20' tank container and a conventional 20' container. It saved shippers money and now accounts for almost 70 percent of intermodal . a container washed ashore on the Outer Banks of North Carolina. along with thousands of bags of its cargo of tortilla chips. a well car can accept a container and still leave enough clearance for another container on top.
machinery.2% Number of ships 549 A.P. Moller-Maersk Group 1.272 . in part due to the generous vertical clearances used by US railroads. bales. first January 2006 Company TEU capacity Market Share 18. crates. out of gauge cargo Platform or bolster for barrels and drums.665.freight transport shipments in the United States. and processed timber Ventilated containers for organic products requiring ventilation Tank containers for bulk liquids and dangerous goods Rolling floor for difficult to handle cargo Biggest ISO container companies Top 10 container shipping companies in order of TEU capacity. heavy machinery Open side for loading oversize pallet Flushfolding flat-rack containers for heavy and bulky semi-finished goods. pallets. cable drums. sacks. cartons. cases. out of gauge cargo. high or half height High cube palletwide containers for europallet compatibility Temperature controlled from -25°c to +25°c reefer Open top bulktainers for bulk minerals. ISO Container types Various container types are available for different needs: general purpose dry van for boxes. drums in standard.
6% 5. This may be planned by software modules in a warehouse management system.8% 3.437 Hanjin-Senator COSCO NYK Line 328.3% 299 256 153 140 111 99 145 118 105 China Shipping Container 346.5% 3.A.6% 3.794 322.911 412.6% 3.213 Other container systems Haus-zu-Haus (Germany) RACE (container) (Australia) Determining the best carton.5% 3. the term also applies to determining the right box and the best placement inside that box in order fulfillment.493 Lines American President Lines 331. CMA CGM Evergreen Marine Corporation Hapag-Lloyd 865. . box or pallet While the creation of the best container for shipping of newly created product is called "Containerization". This optimization software calculates the best spatial position of each item withing such constraints as stackability and crush resistance.954 477.6% 5.890 507.344 8.326 302.Mediterranean Shipping Company S.2% 4.
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. In purest form this is done directly. or to sort material intended for different destinations.g. where large shipments (e. Crossdocking is used to decrease inventory storage by streamlining the flow between the supplier and the manufacturer. Factors influencing the use of cross-docks Customer and supplier geography -. or to combine material from different origins.3. and stored until the outbound shipment is complete and ready to ship. If it takes several days or even weeks the operation is usually considered a warehouse. where a variety of smaller shipments are combined into one larger shipment for economy of transport Deconsolidation arrangements.particularly when a single corporate customer has many multiple branches or using points . In practice many "cross-docking" operations require large staging areas where inbound materials are sorted. 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 Consolidation arrangements. consolidated. This may be done to change type of conveyance. with minimal or no warehousing. with little or no storage in between. If the staging takes hours or a day the operation is usually referred to as a "cross-dock" distribution center. railcar lots) are broken down into smaller lots for ease of delivery.
The distributor then sells the product to retailers or customers. After a product is manufactured it is typically shipped (and usually sold) to a distributor. A distributor is the middleman between the manufacturer and retailer. The other three parts of the marketing mix are product management. selective or extensive? Who should control the channel (referred to as the channel captain)? . Traditionally. vendor. DISTRIBUTION Distribution is one of the four aspects of marketing.Freight costs for the commodities being transported Cost of inventory in transit Complexity of loads Handling methods Logistics software integration between supplier(s). pricing. It must answer questions such as: Should the product be sold through a retailer? Should the product be distributed through wholesale? Should multi-level marketing channels be used? How long should the channel be (how many members)? Where should the product or service be available? When should the product or service be available? Should distribution be exclusive. and shipper Tracking of inventory in transit 6. and promotion. distribution has been seen as dealing with logistics: how to get the product or service to the customer.
which the producer must take into account. who sells to end customers Advertisement typically used for consumption goods Distribution channels may not be restricted to physical products alone. along with those of the all-important end-user. who sells to retailers Retailer (also called dealer).Should channel relationships be informal or contractual? Should channel members share advertising (referred to as co-op ads)? Should electronic methods of distribution be used? Are there physical distribution and logistical issues to deal with? What will it cost to keep an inventory of products on store shelves and in channel warehouses (referred to as filling the pipeline)? The distribution channel Frequently there may be a chain of intermediaries. such as via mail order. for example. They may be just as important for moving a service from producer to consumer in certain sectors. who typically sells direct on behalf of the producer Distributor (also called wholesaler). since both direct and indirect channels may be used. each passing the product down the chain to the next organization. may sell their services (typically rooms) directly or through . Channels A number of alternate 'channels' of distribution may be available: Selling direct. Internet and telephone sales Agent. This process is known as the 'distribution chain' or the 'channel.' Each of the elements in these chains will have their own specific needs. Hotels. before it finally reaches the consumer or end-user.
channel with a range of `middle-men' passing the goods on to the end-user. even for the simplest of Channel structure To the various `levels' of distribution. tourist boards.This is the usual. In small markets (such as small countries) it is practical to reach the whole market using just one. there has been a significant increase in retail outlets for the service sector. neighbourhood retailers. links now exist between airlines.travel agents. For example. there has been an increase in franchising and in rental services the latter offering anything from televisions through tools. tour operators. Lancaster and Massingham also added another structural element. airlines. as the 'zero-level' channel.. In Japan the chain of distribution is often complex and further levels are used. widely recognized. say. Channel members Distribution channels can thus have a number of levels. The next level. etc. In addition. Outlets such as estate agencies and building society offices are crowding out traditional grocers from major shopping areas. There has also been some evidence of service integration. There have also been some innovations in the distribution of services. for industrial goods a distributor. centralized reservation systems. For example.and zero-level channels. is now mainly used to extend distribution to the large number of small. in consumer goods a retailer. . that of direct contact with no intermediaries involved. the 'one-level' channel. In large markets (such as larger countries) a second level. hotels and car rental services. a wholesaler for example. features just one intermediary. particularly in the travel and tourism sectors. the relationship between its members: 'Conventional or free-flow . which they refer to as the `channel length'. Kotler defined the simplest level. with services linking together.
the lessons of the non-profit organizations. is the use of `marketing' by service and administrative departments.In this form. most consumer goods manufacturers could never justify the cost of selling direct to their consumers. except by mail order. Less obvious. In some parts of certain organizations this may in fact be formalized. in dealing with their clients. for example. and those parts of it which deal directly with them in particular). In all of this. offer a very useful parallel.Single transaction .A temporary `channel' may be set up for one transaction. there is a form of trade-off: the cost of using intermediaries to achieve wider distribution is supposedly lower. to optimize their contribution to their `customers' (the rest of the organization in general. this process can and should be viewed as a normal buyerseller relationship. as goods are transferred between separate parts of the organization at a `transfer price'. the elements of distribution are integrated. with the possible exception of the pricing mechanism itself. or each department's. the sale of property or a specific civil engineering project. Indeed. This does not share many characteristics with other channel transactions. To all intents and purposes. In . 'internal' customers. Vertical marketing system (VMS) . Channel Decisions Channel strategy Product (or service)<>Cost<>Consumer location Channel management The channel decision is very important. In theory at least. The internal market Many of the marketing principles and techniques which are applied to the external customers of an organization can be just as effectively applied to each subsidiary's. each one being unique. but just as practical.
However. most of the practical decisions are concerned with control of the consumer. but large companies 'do' have the choice. his job should really be extended to managing. and particularly the brand leaders in consumer goods markets) price competition may be evident. for example. if the producer is large enough. their job is finished. Yet that distribution chain is merely assuming a part of the supplier's responsibility. Selective distribution . until the product or service arrives with the end-user. if he has any aspirations to be market-oriented.This is the normal pattern (in both consumer and industrial markets) where `suitable' resellers stock the product. and. all the processes involved in that chain.practice. The small company has no alternative but to use intermediaries. Channel motivation It is difficult enough to motivate direct employees to provide the necessary sales and service support. Exclusive distribution .Where the majority of resellers stock the `product' (with convenience products. Many of the theoretical arguments about channels therefore revolve around cost.Only specially selected resellers (typically only one per geographical area) are allowed to sell the `product'. This may involve a number of decisions on the part of the supplier: Channel membership Channel motivation Monitoring and managing channels Channel membership Intensive distribution . On the other hand. Motivating the owners and employees of the . many suppliers seem to assume that once their product has been sold into the channel. into the beginning of the distribution chain. albeit very indirectly. the use of intermediaries (particularly at the agent and wholesaler level) can sometimes cost more than going direct. often several layers of them.
or a competition is offered to the distributors' sales personnel. a supplier owning its own retail outlets.producer. Vertical marketing This relatively recent development integrates the channel with the original supplier . so will those of the distribution chain. 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.independent organizations in a distribution chain requires even greater effort. wholesalers and retailers working in one unified system. they may complement a direct salesforce. so that they are tempted to push the product. where the agent's personnel. this being 'forward' integration. This has traditionally been the form led by manufacturers. of course. with agents. This may arise because one member of the chain owns the other elements (often called `corporate systems integration'). In practice. MFI. Alternative approaches are `contractual systems'. There are many devices for achieving such motivation. support as well as sales. to tempt the owners in the channel to push the product rather than its competitors.) The integration can also be by franchise (such as that offered by McDonald's hamburgers and Benetton clothes) or simple cooperation (in the way that Marks & Spencer co-operates with its suppliers). (For example. often led by a wholesale or retail co-operative. calling on the larger accounts. Monitoring and managing channels In much the same way that the organization's own sales and distribution activities need to be monitored and managed. this being 'backward' integration. in particular. the furniture retailer. Perhaps the most usual is `bribery': the supplier offers a better margin. many organizations use a mix of different channels. . covering the smaller customers and prospects. owns Hygena which makes its kitchen and bedroom units. It is perhaps more likely that a retailer will own its own suppliers. are trained to almost the same standard as the supplier's own staff. and `administered marketing systems' where one (dominant) member of the distribution chain uses its position to co-ordinate the other members' activities.
very deliberately provides considerable amounts of technical assistance to its suppliers. and ports.a joint marketing operation . is a very important factor in public nutrition. airports. There are three main components of food distribution: Transport infrastructure. retailers should focus on their sales outlets rather than on manufacturing facilities ( Marks & Spencer. and the retailer at the other) 'control' over the distribution chain. Suppliers rarely excel in retail operations and. but does not own them). and storage. in theory.The intention of vertical marketing is to give all those involved (and particularly the supplier at one end. malnutrition or illness can occur. . vehicles. such as roads. LOGISTICS IN FOOD DISTRIBUTION Food distribution. Other research indicates that vertical integration is a strategy which is best pursued at the mature stage of the market (or product). a method of distributing (or transporting) food from one place to another. famine. Where it breaks down. for example. warehousing. such as refrigeration. 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 . It is arguable that it also diverts attention from the real business of the organization. rail transport. This removes one set of variables from the marketing equations. At earlier stages it can actually reduce profits. In general. food distribution occurred with the policy of giving free bread to its citizens under the provision of a common good. During some periods of Ancient Rome.because it is beyond the capacity of each individual organization alone. this is less likely to revolve around marketing synergy. Food handling technology and regulation.
it is exactly logistics of information. This requires the use of an information model. also an e-mail or even the ordinary mail you receive. as they have to fulfil user needs with respect to content. depending on the communication media and users' preferences. technologies and applications for need-oriented information supply. based on demand and need. This information should be transformed in line with users' needs. location. Information-ondemand services are a typical application area for information logistics. The goal of information logistics is to optimize the content and format of the information. reduce throughput times and achieve a high degree of parallel processing.Adequate source and supply logistics. an overall product tree and a graphic design concept. Information logistics is concerned with the supply of information to individuals and aims to optimize it by targeted delivery in accordance with requirements in such a way that the substantively correct and actually necessary information is available where and when it is needed. The field of information logistics aims at developing concepts. time and quality Information Logistics consists of two words . The deployed system must meet these requirements optimally. Information logistics In general. In a simplified sense is a newsletter information logistics. . Information can mean a lot of things. Our approach is such that information can be created and reused in a structured manner all along the value creation chain. in order to aid custom processing of it.information and logistics. Information is created throughout the entire product creation process. but usually is text (syntax with a semantic meaning) and logistics which is the transportation of sth from point A to point B.
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. The customer can simply navigate through the information. The information and documentation creation process is made easier. such as the presence or absence of a part on a shelf. quality. If demand rises above the historical average planning duration demand. that tell production processes to make the next part. safer and more efficient. New stock is ordered when stock reaches the re-order level. the firm could deplete inventory and cause customer service issues. JIT can lead to dramatic improvements in a manufacturing organization's return on investment. This saves warehouse space and costs. The process is driven by a series of signals. one drawback of the JIT system is that the re-order level is determined by historical demand.The result is automated configuration of fully scalable information for a wide variety of target group perspectives (e. However. JUST IN TIME CONCEPT Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. A related term is Kaizen which is an approach to productivity improvement literally meaning "continuous impr History of JIT . Kanban are usually simple visual signals. In recent years manufacturers have touted a trailing 13 week average as a better predictor than most forecastors could provide. or Kanban .g. When implemented correctly. by sector or area of application). 7. and efficiency.
examined accounting assumptions and realized that another method was possible. In some cases. these were usually installed one at a time by a team of experts. It sometimes took as long as several days to install a large (multiton) die set and adjust it for acceptable quality. Japanese corporations cannot afford large amounts of land to warehouse finished products and parts.) The undesirable result was poor return on investment for a factory. using crowbars and wrenches. Taiichi Ohno. Toyota implemented a strategy called Single Minute Exchange of Die (SMED).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. identical subassemblies could be used in several models. Almost immediately. Before the 1950s. Ford's Today and Tomorrow (1926) describes one. Some of the changes were as simple as standardizing the hole sizes used to hang parts on hooks. At the same time. this was thought to be a disadvantage because it reduced the economic lot size. die change times fell to about half an hour. Toyota was one of the first to apply flexible robotic systems for these tasks. The chief engineer at Toyota in the 1950s. developed by Shigeo Shingo. Toyota engineers then determined that the remaining critical bottleneck in the retooling process was the time required to change the stamping dies used for body parts. given the cost of changing the production process over to another product. measurements were substituted for adjustments. The number and types of fasteners were reduced in order to standardize assembly steps and tools. With very simple fixtures. The concept needed an effective freight management system (FMS). The technique was subsequently adopted and publicised by Toyota Motor Corporation of Japan as part of its Toyota Production System (TPS). Further. Toyota engineers redesigned car models for commonality of tooling for such production processes as paint-spraying and welding. (An economic lot size is the number of identical products that should be produced. Over a period of several years. quality of the . reducing the overhead costs of retooling and reducing the economic lot size to the available warehouse space. The factory could be made more flexible. so that the line was down for several weeks. These were adjusted by hand.
economic lot sizes fell to as little as one vehicle in some Toyota plants. When a part disappeared. businesses are encouraged to eliminate inventory that doesn’t add value to the product. After SMED. at the right time. Under the philosophy. industrial engineering. Analysis showed that the remaining time was used to search for hand tools and move dies. at the right place. In short.” Effects Some of the results at Toyota were unexpected. In the JIT inventory philosophy there are views with respect to how inventory is looked upon. statistics. as in-process inventory was built out . Inventory is seen as incurring costs instead of adding value. that was used as a signal to produce or order a replacement. lack of flexibility for employees and equipment. it has a whole philosophy that the company must follow. Secondly. and inadequate capacity among other things. contrary to traditional thinking. the just-in-time inventory system is all about having “the right material. production management and behavioral science. Procedural changes (such as moving the new die in place with the line in operation) and dedicated tool-racks reduced the die-change times to as little as 40 seconds. These problems include backups at work centres. it sees inventory as a sign of sub par management as it is simply there to hide problems within the production system. reducing the skill required for the change. and in the exact amount. The ideas in this philosophy come from many different disciplines including. Philosophy Just-in-time (JIT) inventory systems are not just a simple method that a company has to buy in to. what it says about the management within the company. A huge amount of cash appeared. Dies were changed in a ripple through the factory as a new product began flowing. Carrying the process into parts-storage made it possible to store as little as one part in each assembly station. apparently from nowhere.stampings became controlled by a written recipe. and the main principle behind JIT.
line stops occurred almost hourly. Many people in Toyota confidently predicted that the initiative would be abandoned for this reason. many vehicles began to be built to order. and has since been widely emulated. This by itself generated tremendous enthusiasm in upper management. In the first week. But by the end of the first month. every part had to fit perfectly. the rate had fallen to a few line stops per day. In some cases. the company eliminated multiple suppliers. Even with this. completely eliminating the risk they would not be sold. The result was a severe quality assurance crisis. the entire production line had to be slowed or even stopped. After six months. . Another surprising effect was that the response time of the factory fell to about a day. Also. This improved customer satisfaction by providing vehicles usually within a day or two of the minimum economic shipping delay. This dramatically improved the company's return on equity by eliminating a major source of risk. similar to a bus bell-pull. while simultaneously implementing careful statistical controls. The result was a factory that became the envy of the industrialized world. The Just in Time philosophy was also applied to other segments of the supply chain in several types of industries. Since assemblers no longer had a choice of which part to use. No inventory meant that a line could not operate from in-process inventory while a production problem was fixed. Toyota had to test and train suppliers of parts in order to assure quality and delivery. Toyota redesigned every part of its vehicles to eliminate or widen tolerances. and a dramatic improvement in product quality. (See Total Quality Management). it meant eliminating one or all of the warehouses in the link between a factory and a retail establishment. line stops fell to a few per week. Eventually. In the commercial sector. that permitted any worker on the production line to order a line stop for a process or quality problem. When a process problem or bad parts surfaced on the production line.and sold. line stops had so little economic effect that Toyota installed an overhead pull-line.
Supplies continue around the clock keeping workers productive and businesses focused on turnover. The main benefits of JIT are listed below. Having employees focused on specific areas of the system will allow them to process goods faster instead of having them vulnerable to fatigue from doing too many jobs at once and simplifies the tasks at hand. If there is no demand for a product at the time. 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. the Just-In-Time Inventory System (JIT) can have many benefits resulting from it. Set up times are significantly reduced in the warehouse. Having management focused on meeting . 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. Better consistency of scheduling and consistency of employee work hours. Employees who possess multiple skills are utilized more efficiently.Benefits As most companies use an inventory system best suited for their company. Having a trusting supplier relationship means that you can rely on goods being there when you need them in order to satisfy the company and keep the company name in good standing with the public. No company wants a break in their inventory system that would create a shortage of supplies while not having inventory sit on shelves. This can save the company money by not having to pay workers for a job not completed or could have them focus on other jobs around the warehouse that would not necessarily be done on a normal day. Increased emphasis on supplier relationships. workers don’t have to be working. The flows of goods from warehouse to shelves are improved.
. this was seen as a feature rather than a bug by Ohno. it would ultimately be desirable to introduce flow and JIT all the way back through the supply stream. lowering inventory forced each shop to improve its own quality or cause a holdup in the next downstream area. With shipments coming in sometimes several times per day. Once the barriers were exposed.deadlines will make employees work hard to meet the company goals to see benefits in terms of job satisfaction. In part. there was an exception to this rule that put the entire company at risk by the 1997 Aisin fire. for example. price-based relationships with competing suppliers. since one of the main barriers was rework. However. Toyota is especially susceptible to an interruption in the flow. 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. an ear of corn cannot be grown and delivered to order . since Toyota also makes a point of maintaining high quality relations with its entire supplier network. As noted in Liker (2003). The same is true of most raw materials. However. Within a raw material stream As noted by Liker (2003) and Womack and Jones (2003). Toyota is careful to use two suppliers for most assemblies. which must be discovered and/or grown through natural processes that require time and must account for natural variability in weather and discovery. promotion or even higher pay. Just In Time is a means to improving performance of the system. For that reason. Thus. With present technology. a strong. they could be removed. not an end. several suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation. long-term relationship with a few suppliers is preferred to short-term. 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. none of them followed this logically all the way back through the processes to the raw materials.
following Waddel and Bodek (2005). further reducing output. and more significantly.017 thousand bbls in 1997. including opportunity costs. Goldratt. 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. it hasn't been drastically reduced as JIT practitioners would prefer. and here (1996)). JIT students and even oil & gas industry analysts question whether JIT as it has been developed by Ohno. this ROI-based thinking conforms more to Brown-style accounting and Sloan management. Companies routinely shut down facilities for reasons other than the application of JIT. During the 2005 hurricane season.000 bbls. resulting in the loss of 20% of the US domestic refinery output. stocks never fell below 194. here (1996). . the industry is susceptible to supply shocks. Rita subsequently shut down refineries in Texas. which cause spikes in prices and subsequently reduction in domestic manufacturing output. JIT has never subscribed to such considerations directly. 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. not production capacity. the annual average stocks of gasoline have fallen by only 8. the plant may be economically inefficient. As a result.986 (Energy Information Administration data).2% growth.331 to 222. and a large number of oil production and transfer facilities. Stocks fluctuate seasonally by as much as 20.903 bbls to 208. Similar arguments were made in earlier crises. From 1975 to 1990 to 2005.5% to 1. The effects of hurricanes Katrina and Rita are given as an example: in 2005.5% from 228. and others is used by the petroleum industry. JIT calls for a reduction in inventory capacity. Katrina caused the shutdown of 9 refineries in Louisiana and 6 more in Mississippi. The GDP figures for the third and fourth quarters showed a slowdown from 3. while the low for the period 1990 to 2006 was 187. One of those reasons may be economic rationalization: when the benefits of operating no longer outweigh the costs.Oil It has been frequently charged that the oil industry has been influenced by JIT (see here (2004).000 thousand bbls. Further. This shows that while industry storage capacity has decreased in the last 30 years.
the annual number of orders placed is D / Q. K. The second cost is the cost of placing orders. Also. In the follow-up editorial. TC consists of two components. which arrives instantly. as shown in a pair of articles in the Oil & Gas Journal. but the changes in inventories in the oil industry exhibit none of those tendencies.e. We assume that demand is constant and that the company runs down the stock to zero and then places an order. JIT does not seem to have been a goal of the industry.Finally. they confirmed that "It also happens not to be accurate. Let: K = the incremental cost of placing an order kc = the annual cost of carrying one unit of inventory D = annual demand in units Q = optimal order size in units TC = total cost over the year We want to know Q. They find that a large part of the shift came about because of the availability of short-haul crudes from Latin America. the authors point out that JIT would require a significant change in the supplier/refiner relationship. assuming constant usage) is Q / 2. the average inventory times the carrying cost per unit. the annual number of orders. In Waguespack and Cantor (1996). which is given by Q * kc / 2. the Oil & Gas Journal claimed that "casually adopting popular business terminology that doesn't apply" had provided a "rhetorical bogey" to industry critics. Thus total annual cost is . Specifically. The first is the cost of carrying inventory. i. Hence the average stock held (the average of zero and Q." Theory Consider a (highly) simplified mathematical model of the ordering process. D / Q. Confessing that they had been as guilty as other media sources. times the cost per order. the relationships remain cost-driven among many competing suppliers rather than qualitybased among a select few long-term relationships. given by D * K / Q.
with broader tasks undertaken by supply chain management systems and enterprise resource planning systems. Both of these are usually modelled by normal distributions. but it is not appropriate if K is not small. In practice JIT works well for many businesses. in particular.. 8. giving which is known as the Economic Order Quantity or EOQ formula. .LOGISTICS AUTOMATION Logistics automation is the application of computer software and / or automated machinery to improve the efficiency of logistics operations. We differentiate TC with respect to Q and set it equal to 0 to find the Q for minimum total cost. means that additional 'safety stocks' need to be held if a stockout is to be rendered very unlikely. Typically this refers to operations within a warehouse or distribution center. 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 key Japanese breakthrough was to reduce K to a very low level and to resupply frequently instead of holding excess stocks. The delay in delivery.
packaging. Many also have in-built barcode scanners to allow identification of containers. and allowing far high storage densities and better space utilisation than alternatives. e. Conveyors: automated conveyors allow the input of containers in one area of the warehouse. comissioning and order picking. Typically used to distribute high volumes of small cartons to a large set of locations. or increasingly.g. Sortation systems: similar to conveyors but typically have higher capacity and can divert containers more quickly. .Logistics automation systems can powerfully complement the facilities provided by these higher level computer systems. Industrial Robots: four to six axis industrial robots. Typically all of these will automatically identify and track containers based upon barcodes. The focus on an individual node within a wider logistics network allows systems to be highly tailored to the requirements of that node. allowing many levels of stock to be stacked vertically. depalletizing. palletizing robots. The container will later appear at the selected destination. 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. Typically cranes serve a rack of locations. 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. are used for palletizing. and either through hard coded rules or data input allow destination selection.
g. wholesalers). such as identification of incoming deliveries / stock and scheduling order fulfilment. mail order).g. and where to retrieve them when requested. assignment of stock to outgoing trailers. such as where to store incoming containers. and automated cranes into an automatically assigned storage location. chain stores). or other companies (e. whether individual buyers (e. the automation system is able to immediately locate goods and retrieve them to a pickface location. Business Control software: provides higher level functionality.g.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. Benefits of logistics automation A typical warehouse or distribution center will receive stock of a variety of products from suppliers and store these until the receipt of orders from customers. Operational control software: provides low-level decision making. A logistics automation system may provide the following: Automated goods in processes: Incoming goods can be marked with barcodes and the automation system notified of the expected stock. . On arrival. Automated Goods Retrieval for Orders: On receipt of orders. sortation systems. Automated despatch processing: Combining knowledge of all orders placed at the warehouse the automation system can assign picked goods into despatch units and then into outbound loads. and taken via conveyors. Sortation systems and conveyors can then move these onto the outgoing trailers. the goods can be scanned and thereby identified. retail branches (e.
Even here. Liquid products have logistics characteristics that distinguish them from discrete products. 9. LIQUID LOGISTICS Liquid Logistics is a special category of logistics that relates to liquid products.LOGISTICS FOR DIFFERENT FIELDS. which simply use cranes to store and retrieve identified cases or pallets. Smaller systems may only be required to handle part of the process. with human input required only for a few tasks. assistance can be provided with equipment such as pick-to-light units. and is utilized extensively in the "Supply Chain for Liquids" discipline. Standard logistics techniques are generally used for discrete or unit products.A complete warehouse automation system can drastically reduce the workforce required to run a facility. 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 The level of a liquid as it has settled in a tank may be used to automatically and continuously know the quantity of liquid in the tank Liquids provide indications through changes in their characteristics that may be sensed and translated into measures of the quality of the liquid . such as picking units of product from a bulk packed case. Examples include automated storage and retrieval systems. typically into a highbay storage system which would be unfeasible to access using fork-lift trucks or any other means.
REVERSE LOGISTICS Reverse logistics is the logistics process of removing new or used products from their initial point in a supply chain. medical logistics providers are adopting supply chain management theories. move. medical and surgical supplies. medical devices and equipment. and other products needed to support doctors. nurses. medical logistics is unique in that it seeks to optimize effectiveness rather than efficiency. process.Many security and safety risks are significantly reduced or eliminated utilizing liquid logistics techniques Liquids may in some cases be “processed” well downstream from the original production facility and thus offer the opportunity for improved efficiencies throughout the supply stream together with more flexibility as to the nature of the product at the point of final usage. or use liquid products. over stocked inventory. such as returns from consumers. or outdated merchandise and redistributing them using disposition management rules that will result in maximized value at . MEDICAL LOGISTICS Medical logistics is the logistics of pharmaceuticals. Medical logistics functions comprise an important part of the health care system: after staff costs. When properly planned for and handled these points of differentiation may lead to business advantages for companies that produce. To drive costs out of the health-care sector. medical supplies are the single most expensive component of health care. Because its final customers are responsible for the lives and health of their patients. Each of these points represents a differentiation of liquid logistics from logistics techniques used for discrete items. and other health and dental care providers.
The collection of the flawed clothes from the various stores and reselling them at the Second Sales shop is an example of reverse logistics. field service and many others. recycling assets. recycling. 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. "reverse logistics" is all activity associated with a product/service after the point of sale. An example of Reverse Logistics: T-Shirts. or a combination that will yield maximum value for the assets in question. reverse fulfillment. warehousing. Simply. returning goods to the original manufacturer for reimbursement. thus saving money. It often requires the development of a transportation mode that is compatible with existing forward logistic system. repair. . selling goods on a secondary market. 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. which are often sold at second sales where those with minor flaws like improper logo print of the manufacturer or unnoticeable stitching flaws are exhibited to be sold at discounted prices. the ultimate goal to optimize or make more efficient aftermarket activity. Disposition can include returning assets into inventory pools or warehouses for storage. refurbishment. A reverse logistics operation is considerably different from forward logistics. e-waste. Types of activity common with reverse logistics includes: logistics. after market call center support.the end of the items original useful life.
In essence. Supply chain management is also a category of software products. The term supply chain management was coined by consultant Keith Oliver. which can be suppliers. Supply Chain Management integrates supply and demand management within and across companies. and finished goods from point-of-origin to point-ofconsumption. it also includes coordination and collaboration with channel partners. conversion. and customers.CONCEPT OF SUPPLY CHAIN MANAGEMENT Supply chain management (SCM) is the process of planning. of strategy consulting firm Booz Allen Hamilton in 1982. Importantly.10. and logistics management activities. Some experts distinguish supply chain management and logistics. procurement. third-party service providers. and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. With SCEM possible scenarios can be created and solutions can be planned. . while others consider the terms to be interchangeable. The definition one America professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing. intermediaries. implementing. Supply chain management spans all movement and storage of raw materials. Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. workin-process inventory.
Supply chain management problems Supply chain management must address the following problems: Distribution Network Configuration: Number and location of suppliers. Cross docking. The flow is bidirectional. thus improving inventory visibility and improving inventory velocity. third party logistics. distribution centers. forecasts. inventory and transportation etc. The purpose of supply chain management is to improve trust and collaboration among supply chain partners. . Distribution Strategy: Centralized versus decentralized. Inventory Management: Quantity and location of inventory including raw materials. production facilities. Less control and more supply chain partners led to the creation of supply chain management concepts. while reducing management control of daily logistics operations. they have reduced their ownership of raw materials sources and distribution channels. work-in-process and finished goods. The effect has been to increase the number of companies involved in satisfying consumer demand. As corporations strive to focus on core competencies and become more flexible. These functions are increasingly being outsourced to other corporations that can perform the activities better or more cost effectively. direct shipment. including demand signals. 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. pull or push strategies. Supply chain execution is managing and coordinating the movement of materials information and funds across the supply chain. warehouses and customers. Information: Integrate systems and processes through the supply chain to share valuable information.
Product design coordination. location. tactical. and contracting. distributors. to support supply chain operations. and third-party logistics. including the number. routes. Transportation strategy. including frequency. including contracting. so that new and existing products can be optimally integrated into the supply chain. SCOR is a supply chain management model promoted by the Supply-Chain Management Council. Inventory decisions. and quality of inventory. location. scheduling. creating communication channels for critical information and operational improvements such as cross docking. and operational levels of activities. Strategic partnership with suppliers. There to make and what to make or buy decisions Align overall organizational strategy with supply strategy Tactical Sourcing contracts and other purchasing decisions. and planning process definition. direct shipping. . Strategic Strategic network optimization. including quantity. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Production decisions.Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. and size of warehouses. and customers. distribution centers and facilities. locations. load management Information Technology infrastructure. Supply chain activities can be grouped into strategic.
in collaboration with all suppliers. Production operations. or networks. Outbound operations. including all nodes in the supply chain. Supply Chain Management Organizations increasingly find that they must rely on effective supply chains. accounting for all constraints in the supply chain.Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. this concept of business relationships extends beyond traditional . including all suppliers. manufacturing facilities. including transportation from suppliers and receiving inventory. Inbound operations.In Peter Drucker's (1998) management's new paradigms. Milestone payments Operational Daily production and distribution planning. including the consumption of materials and flow of finished goods. including all fulfillment activities and transportation to customers. Performance tracking of all activities. Order promising. Demand planning and forecasting. Sourcing planning. distribution centers. Production scheduling for each manufacturing facility in the supply chain (minute by minute). to successfully compete in the global market and networked economy. including current inventory and forecast demand. coordinating the demand forecast of all customers and sharing the forecast with all suppliers. and other customers.
However. particularly the dramatic fall in information communication costs. First. following the earlier "Just-In-Time". companies in a supply network concentrate on the inputs and outputs of the processes. and "Next Generation Manufacturing System". has led to changes in coordination among the members of the supply chain network (Coase. outsourcing and information technology have enabled many organizations such as Dell and Hewlett Packard. Many researchers have recognized these kinds of supply network structure as a new organization form. such a structure can be defined as "a group of semi-independent organizations. globalization. 1979). Global Production Network". "Extended Enterprise". joint ventures. strategic alliances and business partnerships were found to be significant success factors. 2001). From a system's point of view. there have been few changes in business environment that have contributed to the development of supply chain networks. the choice of internal management control structure is known to impact local firm performance (Mintzberg. with little concern for the internal management working of other individual players. a paramount component of transaction costs. This inter-organizational supply network can be acknowledged as a new form of organization. 2004). Traditionally. as an outcome of globalization and proliferation of multi-national companies. It is not clear what kind of performance impacts different supply network structures could have on firms. with the complicated interactions among the players. to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott.enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. Therefore. 1998). . the network structure fits neither "market" nor "hierarchy" categories (Powell. Second. 1993). using terms such as "Keiretsu". In the 21st century. each with their capabilities. and little is known about the coordination conditions and trade-offs that may exist among the players. In general. which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans. technological changes. During the past decades. "Virtual Corporation". a complex network structure can be decomposed into individual component firms (Zhang and Dilts. 1990). "Lean Management" and "Agile Manufacturing" practices.
The key supply chain processes stated by Lambert (2004) are: Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management One could suggest other key critical supply business processes combining these processes stated by Lambert such as: . However. Supply chain business process integration involves collaborative work between buyers and suppliers. joint product development. Shared information between supply chain partners can only be fully leveraged through process integration. management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business.Supply Chain Business Process Integration Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become appropriate. which in turn assist to achieve the best product flows. in many companies. and attempts to satisfy this demand. communicates with several distributors and retailers. common systems and shared information. responding to customer demand. Marketing. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows.
sourcing should be managed on a global basis. such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. where both parties benefit. supply sourcing. and reduction times in the design cycle and product development is achieved. hedging. This requires performing resource planning. . The desired outcome is a win-win relationship. order placement. b) Procurement process Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. Activities related to obtaining products and materials from outside suppliers. supply continuity. negotiation. the purchasing function develops rapid communication systems. storage and handling and quality assurance. and research to new sources or programmes. Also.Customer service Management Procurement Product development and Commercialization Manufacturing flow management/support Physical Distribution Outsourcing/ Partnerships Performance Measurement a) Customer service management process Customer service provides the source of customer information. Also. includes the responsibility to coordinate with suppliers in scheduling. inbound transportation. In firms where operations extend globally. It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations.
managers of the product development and commercialization process must: coordinate with customer relationship management to identify customerarticulated needs. customers and suppliers must be united into the product development process. Also. and the availability of the product/service is a vital part of each channel participant's marketing effort. inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. transportation. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. It is also through the physical distribution process that the time and space of customer service become an . meaning improved responsiveness and efficiency of demand to customers. d) Manufacturing flow management process The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. handling. select materials and suppliers in conjunction with procurement. thus to reduce time to market. Manufacturing processes must be flexible to respond to market changes. changes in the manufacturing flow process lead to shorter cycle times. the customer is the final destination of a marketing channel. and develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. and must accommodate mass customization. In physical distribution. the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. such as work-in-process storage. e) Physical Distribution This concerns movement of a finished product/service to customers. scheduling and supporting manufacturing operations. As product life cycles shorten. According to Lambert and Cooper (2000).c) Product development and commercialization Here. and time phasing of components. Activities related to planning.
retailers). 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.integral part of marketing. f) Outsourcing/Partnerships This is not just outsourcing the procurement of materials and components. This movement has been particularly evident in logistics where the provision of transport. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. g) Performance Measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage. According to experts internal measures are generally collected and analyzed by the firm including Cost Customer Service Productivity measures Asset measurement. to manage and control this network of partners and suppliers requires a blend of both central and local involvement. wholesalers. By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance.g. links manufacturers. 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.T. warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Hence. but also outsourcing of services that traditionally have been provided inhouse. Also. logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. thus it links a marketing channel with its customers (e. and . A.
of components added to the link (Ellram and Cooper. Components of Supply Chain Management are 1. ranging from low to high. Postponement 3. 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. Standardisation 2. External performance measurement is examined through customer perception measures and "best practice" benchmarking.Quality. The level of integration and management of a business process link is a function of the number and level. and SCM suggests various possible components that must receive managerial attention when managing supply relationships. and 2) Best practice benchmarking. Consequently. Houlihan. 1985). Lambert and Cooper (2000) identified the following components which are: Planning and control Work structure Organization structure Product flow facility structure Information flow facility structure Management methods Power and leadership structure . buyer-supplier relationships. and includes 1) Customer perception measurement. 1990. Customisation Supply Chain Management Components Integration The management components of SCM The SCM management components are the third element of the four-square circulation framework.
profit margins. that is what supply chain components should be viewed as primary or secondary. which are supporting the primary ones. p. and secondary level components such as market share. Consequently.g. and which are the fundamental branches of the secondary level components. thus including secondary level components. and returns to stakeholders. Lambert and Cooper's framework of supply chain components. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement (Bowersox and Closs. and secondary level components such as benchmarking and order fulfillment. and how should these components be structured in order to have a more comprehensive supply chain structure and to examine the supply chain as an integrative one . A secondary level participant (specialized). that will support the primary level channel participants. 93). 1996). does not lead us to the conclusion about what are the primary or secondary (specialized) level supply chain components ( see Bowersox and Closs. the "branches" of the previous identified supply chain business processes. that is what kind of relationship the components may have that are related with suppliers and customers accordingly. a more careful examination of the existing literature will lead us to a more comprehensive structure of what should be the key critical supply chain components. A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects financial risk. third level channel participants and components may be included. For Customer Service Management: Includes the primary level component of customer relationship management. 1996). 1996.Risk and reward structure Culture and attitude However. thus including primary level components (Bowersox and Closs. For Physical Distribution. is a business that participates in channel relationships by performing essential services for primary participants. customer satisfaction. For Product Development and Commercialization: Includes the primary level component of Product Data Management (PDM). Also. Manufacturing support and Procurement: Includes the primary level component of Enterprise Resource Planning .
and Asset management could be concerned as well. and b)operational requirements. operations. and Alfredsson (2003) describe four categories of 3PL providers: Standard 3PL provider: this is the most basic form of a 3PL provider. manufacturing capabilities. manufacturing planning. 11. which are a) planning and Coordination flows. personnel management. Types of 3PL providers Hertz. They would perform activities such as. 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. in accordance with these secondary level components total cost analysis (TCA). with secondary level components such as warehouse management. which is correlated with the information flow facility structure within the organization. Secondary level components may include four types of measurement such as: variation. information flow facility structure is regarded by two important requirements.(ERP). In general. and postponement (order management). customer profitability analysis (CPA). and logistics (secondary level components).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. direction. and . For Performance Measurement: This includes the primary level component of logistics performance measurement. decision and policy measurements. More specifically. warehousing. material management. pick and pack. 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.
cross-docking. 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. Service developer: this type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing. but will perform extensive and detailed tasks for them. the 3PL function is not their main activity. The customer developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities.distribution (business) – the most basic functions of logistics. or aircraft. specific packaging. or providing a unique security system. and customer service in a way that complements its customers' preexisting physical assets. These providers will have few customers. routing. this type of provider must show its customers a benefit in financial and operational terms by leveraging exceptional expertise and ability in the areas of operations. The 3PL provider improves the logistics dramatically. and auditing. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. CASE STUDY India Logistics Industry: $125 Billion Goldmine (DATAMONITOR REPORT) . The customer base for this type of 3PL provider is typically quite small. Non Asset-based Logistics Providers This 3PL performs duties such as quoting. but doesn't need to own warehousing facilities. booking. For a majority of these firms. 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. but do not develop a new service. negotiations. vehicles. To be useful. These are often leased on terms equalling those of the 3PL contract minimising liability to capital expenditure.
" predicts high double-digit growth rates for both outsourced and contract logistics in India. Logistics analyst. However. "India Logistics Outlook 2007. India will have to work on such systemic inefficiencies. Data monitor and author of the study. strong foreign direct investment inflows (FDI) in automotive. Delhi. "Strong growth enablers exist in India today in the form of over $300 billion worth of infrastructure investments." However. Bangalore. With increased geographical distribution of incomes in India. compared to less than 10% of GDP in almost the entire Western Europe and North America. Consumer markets to lead growth in outsourced logistics 3PL/outsourced logistics is the outsourcing of a company's logistics operations to a specialized firm. the Indian logistics industry is at an inflection point. say Praveen Ojha. The Data monitor report. the companies are only following with new distribution outlets. the increased competition across industry verticals is forcing firms to focus on . electronics. Chennai and Hyderabad. which provides multiple tactical logistics services for use by customers as opposed to the respective company having a business unit in-house to oversee its supply chain and transportation of goods. rather than being pre-emptive. and is expected to reach a market size of over $125 billion in year 2010. capital goods. as a result of the under-developed trade and logistics infrastructure. the logistics cost of the Indian economy is over 13% of GDP. judging by independent market analyst Data monitor’s latest research. in order to attract and retain long-term real investments. and development of organized retail and agri-processing industries". the consumer markets are extending beyond the five metros of Mumbai. and telecom will lead to increased market opportunities for providers of 3PL in India." added Praveen Ojha.India's third-party logistics (3PL) market is all set to experience a period of explosive organic growth. retail. As such. phased introduction of value-added-tax (VAT). "As leading manufacturers realign their global portfolios of manufacturing locations. "In addition. With India's gross domestic profit (GDP) growing at over 9% per year and the manufacturing sector enjoying double digit growth rates.
Furthermore. Realizing the potential in the contract logistics market. Indian companies across verticals are now increasingly seeking and using the services of third-party logistics service providers (3PLs). and logistics outsourcing is gaining further momentum with this. In order to reduce logistics costs and focus on core competencies. is slated to grow at a compound annual growth rate (CAGR) of over 16% from 2007-10. Transporters with fleets smaller than five trucks account for over two-thirds of the total trucks owned and operated in India and make up 80% of revenues. Trucking and courier companies are now leveraging their network to provide express distribution and warehousing. The freight forwarding segment is also represented by thousands of small customs brokers and clearing & forwarding agents. As per the investment plans of the leading 3PLs in India. According to Data monitor. freight forwarders are moving towards owning assets in the form of Container Freight Stations (CFS). the logistics industry in India is currently hampered due to poor infrastructure such as roads (over 70 % of freight transportation in India is via roads). 3PLs are also increasing investments to become end-to-end integrated players. who cater to local cargo requirements. outsourced logistics. communication. The fragmented industry structure: Opportunity for 3PL integrators The Indian logistics industry is characterized by dominance of a disorganized market. the logistics industry's capital expenditure is progressively increasing to almost match its revenue growth. Similarly. 3PL service providers are expanding their basket of services as companies are now looking for more than just transportation of their products and raw materials. a strong indicator of both 3PLs desiring to become integrated service providers and the industry enjoying investmentdriven growth. ports and complex regulatory structures. Inland Container Depots (ICD) and container trains. . at just above one-quarter of the entire $90 billion Indian logistics market.product distribution. Infrastructure congestion: the key challenge According to Data monitor.
on an average a commercial vehicle in India runs at a speed of 20 miles per hour (mph) compared to over 60 mph in the mature logistics markets of Western Europe and the USA. In addition. Given the current thrust on infrastructure investments in India. both India's logistics industry and the 3PL sector of this market are set to witness explosive growth in the next five years. infrastructure investments by the government and 3PL capex plans. resulting in pre-berthing delays and longer ship turn-around time compared to even the East Asian counterparts like China and South Korea. Also. Praveen Ojha concluded: "With the collective economic interaction of growing per capita disposable incomes. the twelve major ports of India handle volumes higher than their full capacity. The agency provides supplies to the . but handle over 40% of the national road freight traffic. Phased introduction of VAT . fast growing manufacturing and organized retailing sectors. increasing external merchandise trade. is likely to enhance the efficiency of the logistics industry in India. the implementation of VAT is likely to boost the efficiency for these stakeholders by lowering transit times and the associated paper work.000 civilian and military personnel throughout the world. which is expected to replace a plethora of state and central government taxes. VAT. with about 22.The National Highways (NH) form only 2% of the entire road network in India." CASE STUDY DEFENCE LOGISTICS AGENCY The Defense Logistics Agency (DLA) is the largest agency in the United States Department of Defense. putting enormous pressure on the highway infrastructure.A supply chain boon 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.
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. including the quartermaster of the Marine Corps. 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 main offices of the Army and Navy for each commodity were collocated. and other commodities. The act created the Munitions Board. transferred the board’s functions to a new . Since its founding in 1961. During the war. Meanwhile. there were seven supply systems in the Army. clothing. the military services began to coordinate more extensively when it came to procurement. the Commission on the Organization of the Executive Branch of the Government (Hoover Commission). It has also provided crucial relief to victims of natural disasters and humanitarian aid to those in need. in 1949. Congress became disenchanted with the board. and in the Defense Cataloging and Standardization Act of 1952. 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. and 18 systems in the Navy. transportation. After the war. DLA has been an integral part of the nation's military defense. which began to reorganize these major supply categories into joint procurement agencies. It has been a full partner with the military services in helping to fuel the Cold War. the call grew louder for more complete coordination throughout the whole field of supply .including storage. In 1947.military services and supports their acquisition of weapons and other materiel. The Munitions Board was not as successful as hoped in eliminating duplication among the services in the supply area. and other aspects of supply. distribution. plus an Air Technical Service Command. a presidential commission headed by former President Herbert Hoover. particularly procurement of petroleum products. medical supplies.
The Eisenhower Reorganization Plan Number 6 (1953) abolished both this agency and the Munitions Board. the second Hoover Commission recommended centralizing management of common military logistics support and introducing uniform financial management practices. To avoid having Congress take the matter away from the military entirely. The Army managed food and clothing. 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. which threatened to impose a common supply service on the military services from the outside. the Korean War led to several investigations by Congress of military supply management. replacing them with a single executive. and the Air Force managed electronic items. The military services feared that such an agency would be less responsive to military requirements and jeopardize the success of military operations. Early History. Congress. the Secretary of Defense would formally appoint one of the three service secretaries as single manager for selected group of commodities or common service activities.Defense Supply Management Agency. For the first time. and industrial parts. Under a Defense directive approved by the Assistant Secretary of Defense for Supply and Logistics." meaning supplies that are not repairable or are consumed in normal use. Integrated management of supplies and services began in 1952 with the establishment of a joint Army-Navy-Air Force Support Center to control identification of supply items. the . however. all the military services bought. also called commodities were assigned to one military service to manage for all the services. In July 1955. 1941-1961 The pressure for consolidation continued. DoD reversed its position. the Navy managed medical supplies. petroleum. 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. In each category. an Assistant Secretary of Defense for Supply and Logistics. stored. The Defense Department and the services defined the materiel that would be managed on an integrated basis as "consumables. Meanwhile. remained concerned about the Hoover Commission’s indictment of waste and inefficiencies in the military services. and issued items using a common nomenclature. Consumable items.
and providing information on the item to the system’s users. or 20 percent. did not provide the uniform procedures that the Hoover Commission had recommended. and customers had to use as many sets of procedures as there were commodity managers. After much debate among the service chiefs and secretaries. on August 31.000. full of duplications and errors. he convened a panel of high ranking Defense officials. the first-generation of single managers were handling roughly 39. and directed them to study alternative plans for improving DOD-wide organization for integrated supply management. Yet. completed in 1956. 1961. 1961-1977 When Secretary of Defense Robert S.000 items by procedures with which the Services had become familiar. 1961. under . Each single manager operated under the procedures of its parent service. The single manager concept was the most significant advance toward integrated supply management within DoD or the military services since World War II. though successful. and their inventories by about $800 million. the single manager agencies reduced their item assignments by about 9. The Defense Cataloging and Standardization Act led to the creation of the first Federal Catalog. Secretary McNamara announced the establishment of a separate common supply and service agency known as the Defense Supply Agency (DSA). McNamara assumed office in the spring of 1961. was a rough draft. a task designated as "Project 100. or 30 percent.5 million items." On March 23. containing about 3. The federal catalog system provided an organized and systematic approach for describing an item of supply. Defense Supply Agency. Proposals were soon made to extend this concept to other commodities. assigning and recording a unique identifying number. 1961. The new agency was formally established on October 1. it was clear that the single manager concept." The committee’s report highlighted the principle weaknesses of the multiple single manager supply system. and to simplify the supply process by persuading the services to adopt the same standard items. but it effectively highlighted the areas where standardization was feasible and necessary. Secretary McNamara was convinced that the problem required some kind of an organizational arrangement to "manage the managers. The initial catalog.single manager was able to reduce his investment by centralizing wholesale stocks. Over a six-year period.
an energetic and experienced Army logistician who had served as Quartermaster General. a new activity.C. and Defense Logistics Services Center. and Defense Medical Supply Center were merged to form the Defense Personnel Support Center. Ohio. The Defense Industrial Plant Equipment Center.5 billion.the command of Lieutenant General Andrew T. On July 1. Columbus. New York. the Defense Utilization Program. and the Surplus Personal Property Disposal Program. Chicago. and managed 45 facilities. Defense General Supply Center. would administer the Federal Catalog Program.C. Washington. 1965. D.C. employed 16. A short time later.the Defense Industrial Supply Center in Philadelphia and the Defense Automotive Supply Center in Detroit. Officials estimated that the consolidation of these functions under DSA and subsequent unified operations would allow them to reduce the workforce by 3. the agency included 11 field organizations. McNamara. Washington. Defense Traffic Management Service.S. Defense Medical Supply Center. Ohio. Washington. (fomerly the Philadelphia Quartermster Depot). Dayton. The Defense Supply Agency was tested almost immediately with the Cuban missile crisis and the military buildup in Vietnam. Virginia. the Defense Standardization Program.. the Defense Subsistence Supply Center. made up primarily of civilians but with military from all the services. two additional single managers . When the agency formally began operations on January 1. was established under the agency in March 1963 to handle storage. rapidly pulled together a small staff and set up operations in the worn Munitions Building in Washington. D.came under DSA control. The agency.300 people and save more than $30 million each year. During the first six months. Illinois. Richmond. 1962. Michigan . Defense Petroleum Supply Center. Defense Clothing Supply Center. By late June 1963 the agency was managing over one million different items in nine supply centers with an estimated inventory of $2. By July 1. Philadelphia. and redistribution of idle equipment. Supporting U. Virginia. Defense Construction Supply Center. D. he moved his staff into more suitable facilities at Cameron Station in Alexandria. forces in . it controlled six commodity-type and two service-type single managers: Defense Clothing & Textile Supply Center. McNamara. as did the Defense Electronic Supply Center. The results far exceeded these expectations. repair. 1962. Defense Subsistence Supply Center.. D. Brooklyn.C.500 people.
the Defense Department consolidated most of the contract administration activities of the military services to avoid duplication of effort and provide uniform procedures in administering contracts. on January 1. Tennessee. the demand for food was largely for non-perishables. officials reorganized the DCAS field . In 1965. refrigerated storage boxes filled with perishable beef. both canned and dehydrated. fresh fruits and vegetables began arriving in Vietnam. in 1975. 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. In addition to the depot mission. the services retained contract administration of state-of-the-art weapon systems. Yet. and the Navy depot at Mechanicsburg. sandbags. construction materials. 1964. The agency’s supply centers responded in record time to orders for everything from boots and lightweight tropical uniforms to food. The agency launched an accelerated procurement program to meet the extra demand created by the military buildup in Southeast Asia. the agency acquired Army general depots at Columbus. thousands of portable walk-in. The following year. The expanded contract administration mission significantly altered the shape of DSA. Ohio. and Tracy.both those awarded by DSA and by the military services. California.Vietnam was the most severe. completed the DSA depot network. the agency became responsible for administering most Defense contracts . and Ogden. As part of a streamlining effort. including some new weapon systems and their components. extensive test of the supply system in the young agency’s history. The agency that had begun operations three years earlier with more than 90 percent of its resources devoted to supply operations had evolved to one almost evenly divided between supply support and logistics services. on 1 January 1963. Officials established the Defense Contract Administration Services (DCAS) within DSA to manage the consolidated functions. and petroleum products. Until the mid-1960s. DSA’s total procurement soared to $4 billion in fiscal year 1966 and $6. Pennsylvania. the eleven DCAS regions were reduced to nine. a logistics miracle. But in 1966. eggs. As the buildup continued in Southeast Asia. Utah. As a result of support to the operations in Vietnam. Acquisition of Army depots at Memphis.2 billion in fiscal year 1967. The agency’s new contract administration mission gave it responsibility for the performance of most defense contractors.
and control of the Assistant Secretary of Defense for Manpower. the agency’s responsibilities extended overseas when it assumed responsibility for defense overseas property disposal operations and worldwide procurement. In response. a congressional report in 1972 recommended centralizing the disposal of DOD property for better accountability. on an urgent basis. officials changed the name of the Defense Supply Agency to the Defense Logistics Agency (DLA). DSA established the Defense Property Disposal Service (later renamed the Defense Reutilization and Marketing Service) in Battle Creek. The Defense Industrial Plant Equipment Center was . Major revisions included a change in reporting channels directed by the Secretary of Defense which placed the agency under the management. The next decade was a period of continued change and expanded missions. and worldwide management of food items for troop feeding and in support of commissaries (1973). 1972. During 1972 and 1973. direction. As the move to consolidate Defense contracting progressed. on January 1. Officials published a revised agency charter in June 1978. Michigan. 1977-1990 In recognition of 16 years of growth and greatly expanded responsibilities. as a primary-level field activity.structure to eliminate the intermediate command supervisory levels known as DCAS districts. and distribution of coal and bulk petroleum products (1972). 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. and Logistics. management. a wide range of vitally needed military equipment. on September 12. 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. 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. officials eliminated depot operations at the Defense Electronics Supply Center in 1979 and began stocking electronic material at depots closer to the using military activities. Defense Logistics Agency. By 1977. Reserve Affairs. As part of various organizational changes during this period. 1977.
especially from the Goldwater-Nichols Act. A Defense Management Review-directed study recommended the consolidation of DoD contract management." After the implementation of the Defense Management Review decisions. The report emphasized improving management efficiencies in the Defense Department by "cutting excess infrastructure. the Goldwater-Nichols Reorganization Act identified DLA as a combat support agency and required that the selection the DLA Director be approved by the Chairman of the Joint Chiefs of Staff. DLA assumed some of the military services’ responsibilities. Although DLA had received responsibility for administering most defense contracts in 1965. enhancement of materiel readiness and sustainability of the military services and the unified and specified commands). It helped the agency’s mission evolve from functional concerns (e. the agency established the Defense Contract Management . DOD directed that virtually all contract administration functions be consolidated within DLA. the military services had retained responsibility for administering most major weapons systems and overseas contracts. resulted from Secretary of Defense Richard Cheney’s Defense Management Review report to the President in July 1989. The 1980s brought other changes as well. In 1989. In response.g. Another major mission came in July 1988 when. 1990. eliminating redundant functions and initiating common business practices.phased out in the late 1980s when responsibility for managing the Defense Department’s reserve of industrial plant equipment was transferred to the Defense General Supply Center in Richmond. On February 6. such as inventory management and distribution functions. Virginia. The act also directed the Office of the Secretary of Defense to study the functions and organizational structure of DLA to determine the most effective and economical means of providing required services to its customers. contract administration) to operational concerns (e. On October 1. Further implementation of reorganization recommendations. inventory management. the agency assumed management of the nation’s stockpile of strategic materials from the General Services Administration. the military services were directed to transfer one million consumable items to DLA for management. 1986.g. Soon after. DLA established the Defense National Stockpile Center as a primary-level field activity. by presidential order.
Soon after President George Bush announced the involvement of the U. and medical supplies to support a major land and air relief operation designed to aid refugees-mostly Kurds in Iraq. Closer to home.came from DLA stock. clothing. In those first critical months. The military services retained responsibility for contracts covering shipbuilding and ammunition plants.000 contracts valued at $400 million) for managing the majority of weapons systems contracts was transferred to the Defense Contract Management Command. In December 1995.400 personnel and 100.S. In October 1994 DLA deployed an initial element to support operations in Haiti and established its first Contingency Support Team. clothing. military. DLA supported other contingency operations as well. the agency provided the military services with over $3 billion of food. forces had redeployed. the agency supported relief efforts after Hurricane Andrew in Florida (1991) and Hurricane Marilyn in the U. Operation Desert Shield began in August 1990 in response to an Iraqi invasion of Kuwait. In June. The mission execution included providing supply support. the agency was at the center of the effort to support the deployment to the Middle East and later the war. As part of Operation Provide Comfort. and technical and logistics services to all military services.S. Virgin Islands (1995). DLA support continued in the Middle East long after most U. and weapons system repair parts in response to over 2 million requisitions. During this operation and the subsequent Operation Desert Storm. most of the supplies transported to Saudi Arabia . absorbing its Defense Contract Administration Services into the new command. the agency’s role in supporting military contingencies and humanitarian assistance operations grew dramatically. contract management. medical supplies.S. . from nerve gas antidote to jet fuel . textiles.Command (DCMC). unified commands.S. and several allied nations. the first element of a DLA Contingency Support Team deployed to Hungary to coordinate the delivery of needed agency supplies and services to U.from bread to boots. The quality of supply support that DLA provided American combat forces during these operations earned it the Joint Meritorious Service Award in 1991. textiles. the services’ responsibility (5. Reorganizing for the 1990s During the 1990s. however. in April 1991 the agency provided over $68 million of food. military units deployed in Bosnia and other NATO forces.
7 million spare parts. they closed two of the five contract management districts and the Defense Electronics Supply Center. Throughout the 1990s the agency continued its effort to eliminate managerial and stockage duplication. two regional offices . which stored over 8. Defense Contract Management Districts Mid Atlantic and North Central were disestablished in May 1994. New Cumberland. and St. The Defense General Supply Center became the Defense Supply Center. and other consumable items worth $127 billion in 788 million square feet (73 km²) of storage. Defense Distribution Depot Oakland. Northeast.Defense Distribution Region East in New Cumberland. or closed several DLA primary-level field activities. officials merged. West. California. Specifically. managed a vast network of distribution depots within their respective geographic boundaries. Until September 1997. and the Tooele Facility. In August 1990. Louis were disestablished. The consolidation began in October 1990 and was completed March 16. The Base Realignment and Closure (BRAC) process. 1992. North Central. Pennsylvania. Defense Contract Management Regions Atlanta. Defense Distribution Depot Ogden. In response to BRAC 1993. Defense Contract Management Regions Cleveland. In April 1990 Secretary Cheney directed that all the distribution depots of the military services and DLA be consolidated into a single. Chicago.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. instituted in 1993. . New York. The Defense Distribution Depot Charleston. They later merged into the Defense Distribution Center. Dallas. As a result of BRAC 1993. and Mid Atlantic respectively. Boston. and Philadelphia were re-designated as Defense Contract Management Districts South. Los Angeles. realigned. unified materiel distribution system to reduce overhead and costs and designated DLA to manage it. in 1996 officials merged the former Defense Construction Supply Center Columbus and the former Defense Electronic Supply Center Dayton to form the Defense Supply Center Columbus. Richmond. and Defense Distribution Region West in Stockton. reducing overhead costs. Utah were disestablished. The system consisted of 30 depots at 32 sites with 62 storage locations. subsistence. significantly affected the way the agency organized for its contract administration and supply distribution missions.
In November 1995. Since its establishment in 1961. procured. would report directly to the Director.Meanwhile. Keller. The agency assumed a major logistics role previously performed by the military services. In late December 1997 and early January 1998. transferred to DLA. In 1996 the agency received a Joint Meritorious Service Award for saving DOD and the taxpayer $6. and other changes in the 1990s better positioned the agency to support the war fighter in the next century. rather than 42. the agency re-engineered its headquarters to form integrated business units for Supply Management. only 6 organizations. In March 1993. In 1995 the DLA headquarters and the Defense Fuel Supply Center (renamed Defense Energy Support Center in January 1998) moved from Cameron Station to Fort Belvoir. DLA headquarters underwent a major reorganization. and Contract Management.3 billion. and distributed DOD consumable items throughout the military services. the headquarters was again realigned. the agency has successfully standardized. managed. and the agency’s Defense Material Management Directorate became the Defense Logistics Support Command under Rear Admiral David P. renamed the Defense Automated Printing Service. The reorganization. thus eliminating much wasteful duplication. Virginia. Distribution. As a result. DLA launched a $1 billion project to replace the Defense Department’s cache of aging procurement programs with a DODwide standard automated procurement system that supported electronic commerce. Defense Printing Services. . In October 1996. move to electronic commerce.
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