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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".

Military logistics
In military logistics, experts manage how and when to move resources to the places they are needed. In military science, maintaining one's supply lines while disrupting those of the enemy is a crucial—some would say the most

logistics may have either internal focus(inbound logistics). Business logistics Logistics as a business concept evolved only in the 1950s. since an armed force without food. or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply chain management). The goal of logistic work is to manage the fruition of project life cycles. purchasing.crucial—element of military strategy. fuel and ammunition is defenseless. The Iraq war was a dramatic example of the importance of logistics. services and related information between the point of origin and the point of consumption in order to meet customers' requirements. implements and controls the efficient. supply chains and resultant efficiencies. transport. calling for experts in the field who are called Supply Chain Logisticians. In business. 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. Led by Lieutenant General William Pagonis. and the organizing and planning of these activities. have been largely attributed to logistical failure. materials and equipment over great distances. Logistics managers combine a general knowledge of each of these functions so that there is a coordination of . and the defeat of Rommel in World War II. The main functions of a logistics manager include Inventory Management. effective forward and reverse flow and storage of goods. Logistics Management Logistics Management is that part of the supply chain which plans. The defeat of the British in the American War of Independence. 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. warehousing. The historical leaders Hannibal Barca and Alexander the Great are considered to have been logistical geniuses. Logistics was successfully used for this movement. It had become very necessary for the US and its allies to move huge amounts of men.

a small computer and a digital radio in each truck. It would have a satellite navigation system. 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. Production logistics can be applied in existing as well as new plants. The digital radio service forwards the data to the central office of the trucking company.Commercial vehicle operation Commercial Vehicle Operations is an application of Intelligent Transportation Systems for trucks. which gives the opportunity to improve the production logistics system accordingly. Production logistics provides the means to achieve customer response and capital efficiency 1. In ancient Greek. The company tracks individual loads by using barcoded containers and pallets to track loads combined into a larger container. Manufacturing in an existing plant is a constantly changing process. In this way. A typical system would be purchased by the managers of a trucking company. One optimizes a steady flow of material through a network of transport links and storage nodes. 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. The issue is not the transportation itself. There are two fundamentally different forms of logistics. Every fifteen minutes the computer transmits where the truck has been. there were military officers with the title ‘Logistikas’ who were responsible for financial and supply distribution matters. the central office knows where its trucks are. . To minimize handling-expense.resources in an organization. but to streamline and control the flow through the value adding processes and eliminate non-value adding ones. Roman and Byzantine empires. Production logistics The term is used for describing logistic processes within an industry. A computer system in the central office manages the fleet in real time under control of a team of dispatchers. The other coordinates a sequence of resources to carry out some project. Machines are exchanged and new ones added.

The controlled routes allow a truck to avoid heavy traffic caused by rushhour. The system helps remind a driver to rest. on planned schedules. or is delayed. optimal-sized pallets are often constructed at distribution points to go to particular destinations. the drivers log into the system. dispatcher and driver collaborate on finding a good route. Components of CVO include: • • Fleet Administration Freight Administration . When these systems were first introduced.damage and waste of vehicle capacity. linear programming and minimum spanning tree logic to predict and improve arrival times. governments are providing digital notification when roadways are known to have reduced capacity. accidents or road-work. This allows a trucking company to deliver a true premium service at only slightly higher cost. and then poor ones are eliminated using linear programming. A well-managed intelligent transportation system provides drivers with huge amounts of help. viewing them as a way for management to spy on the driver. Load-tracking systems use queuing theory. Usually. or urgent loads that are likely to be late can be diverted to air freight. The best proprietary systems. the truck can be diverted to a better route. achieve better than 99. Rested drivers operate the truck more skillfully and safely. It gives them a view of their own load and the network of roadways. Increasingly. such as the one operated by FedEx. or that have overhead obstructions. If a truck gets off its route. or a method to move the load. A good system lets the computer. some drivers resisted them. The basic scheme is that hypothetical routes are constructed by combining road segments. The exact means of combining these are usually secret recipes deeply hidden in the software.999% on-time delivery. A good load-tracking system will help deliver more than 95% of its loads via truck. One special value is that the computer can automatically eliminate routes over roads that cannot take the weight of the truck.

United States domestic standard containers are generally 48-ft and 53-ft (rail and truck). 40-ft (12. the biggest manufacturer.6 m). ISO Container dimensions and payloads There are five common standard lengths.2 m). Containerization is also the term given to the process of determining the best carton. or sometimes teu). 48-ft (14. Most containers today are of the 40-ft (12. or approximately 38.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.500 in China. Two TEU are equivalent to one forty-foot equivalent .5 m³. 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.44 m (width) × 2. and 53-ft (16.2 m). and trucks.7 m) containers are also designated 2 TEU. 45-foot (13.59 m (height). planes. This is equivalent to 2 TEU. In metric units this is 6. Container capacity is measured in twenty-foot equivalent units (TEU.• • • • • • • • • • 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. 45-ft (13.7 m). railroad cars. These sell at about US$2.2 m) variety and are known as 40foot containers. 20-ft (6. box or pallet to be used to ship a single item or number of items.1 m).10 m (length) × 2.

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

. launched August 2006). 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. There are ships that can carry over 14. at some point. few initially foresaw the extent of the influence containerization would bring to the shipping industry. However. As of 2005. Most economic studies of containerization merely assumed that shipping companies would begin to replace older forms of transportation with containerization. Today. but did not predict that the process of containerization itself would have some influence on producers and the extent of trading. 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. containerization grew despite the unfavorable regulatory structure of the 1960s.500 TEU ("Emma Mærsk". Containerization has revolutionized cargo shipping. some 18 million total containers make over 200 million trips per year. 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). but did not anticipate that containerization might make it cheaper to import such goods from abroad. approximately 90% of non-bulk cargo worldwide moves by containers stacked on transport ships. It has even been predicted that. 26% of all containers originate from China.that present the best project for alternative use of these abandoned containers. In the 1950s. 396 m long. This so-called Malaccamax size constrains a ship to dimensions of 470 m in length and 60 m wide (1542 feet * 197 feet). In the United States. trucking and rail were deregulated in the 1970s and maritime rates were deregulated in 1984. at first.

Loss at sea of ISO Containers Containers occasionally fall from the ships that carry them. gradually forcing removable truck bodies or swap bodies into the standard sizes and shapes (though without the strength needed to be stacked). with automatic or semi-automatic equipment. on . Finland and Spain use broader gauges while other many countries in Africa and South America use narrower gauges on their networks. and changing completely the worldwide use of freight pallets that fit into ISO containers or into commercial vehicles. The majority of the rail networks in the world operate on a 1. Some of the largest global companies containerizing containers today are Patrick Global Shipping. The widespread use of ISO standard containers has driven modifications in other freight-moving standards. This has reduced the "falling off the truck" syndrome that long plagued the shipping industry. For instance. Use of the same basic sizes of containers across the globe has lessened the problems caused by incompatible rail gauge sizes in different countries.435 mm (4 ft 8½ in) gauge track known as standard gauge but many countries like Russia. LLC. Bowen Exports and Theiler & Sons Goods. 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.000 times each year.000 to 10. The use of container trains in all these countries makes trans-shipment between different gauge trains easier. Improved cargo security is also an important benefit of containerization.A converted container used as an office at a building site. something that occurs an estimated 2.

2 m) containers. Double-stack containerization Part of a United States double-stack container train loaded with 53 ft (16. This usually precludes operation of double-stacked wagons on lines with overhead electric wiring (exception: Betuweroute). A railroad car with a 20' tank container and a conventional 20' container. 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. along with thousands of bags of its cargo of tortilla chips. Freight from lost containers has provided oceanographers with unexpected opportunities to track global ocean currents. 2006. but if the rail line has been built with sufficient vertical clearance. It saved shippers money and now accounts for almost 70 percent of intermodal . a well car can accept a container and still leave enough clearance for another container on top. making them a shipping hazard that is difficult to detect.November 30. a container washed ashore on the Outer Banks of North Carolina. Containers lost at sea do not necessarily sink. but seldom float very high out of the water. Most flatcars cannot carry more than one standard 40 foot container.

P. ISO Container types Various container types are available for different needs:[5] general purpose dry van for boxes. first January 2006 Company TEU capacity Market Share 18. cable drums. out of gauge cargo Platform or bolster for barrels and drums. heavy machinery Open side for loading oversize pallet Flushfolding flat-rack containers for heavy and bulky semi-finished goods. Moller-Maersk Group 1.665. crates.272 . 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.2% Number of ships 549 A. pallets. drums in standard. cartons. cases. machinery. in part due to the generous vertical clearances used by US railroads. out of gauge cargo.freight transport shipments in the United States. bales. sacks. 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.

6% 5.493 Lines American President Lines 331.794 322. CMA CGM Evergreen Marine Corporation Hapag-Lloyd 865. This may be planned by software modules in a warehouse management system.213 Other container systems Haus-zu-Haus (Germany) RACE (container) (Australia) Determining the best carton.326 302.A.5% 3. the term also applies to determining the right box and the best placement inside that box in order fulfillment.344 8.911 412.Mediterranean Shipping Company S.3% 299 256 153 140 111 99 145 118 105 China Shipping Container 346.890 507.8% 3. . This optimization software calculates the best spatial position of each item withing such constraints as stackability and crush resistance.6% 5.954 477.437 Hanjin-Senator COSCO NYK Line 328.5% 3.6% 3. box or pallet While the creation of the best container for shipping of newly created product is called "Containerization".2% 4.6% 3.

and stored until the outbound shipment is complete and ready to ship. with little or no storage in between. with minimal or no warehousing. In practice many "cross-docking" operations require large staging areas where inbound materials are sorted.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. Typical applications "Hub and spoke" arrangements. consolidated.3. If the staging takes hours or a day the operation is usually referred to as a "cross-dock" distribution center. This may be done to change type of conveyance. Factors influencing the use of cross-docks Customer and supplier geography -. where materials are brought in to one central location and then sorted for delivery to a variety of destinations Consolidation arrangements. In purest form this is done directly. where large shipments (e. or to sort material intended for different destinations. where a variety of smaller shipments are combined into one larger shipment for economy of transport Deconsolidation arrangements. Crossdocking is used to decrease inventory storage by streamlining the flow between the supplier and the manufacturer.particularly when a single corporate customer has many multiple branches or using points . railcar lots) are broken down into smaller lots for ease of delivery. If it takes several days or even weeks the operation is usually considered a warehouse.g. or to combine material from different origins.

Traditionally. After a product is manufactured it is typically shipped (and usually sold) to a distributor. and shipper Tracking of inventory in transit 6. DISTRIBUTION Distribution is one of the four aspects of marketing. distribution has been seen as dealing with logistics: how to get the product or service to the customer. and promotion. The other three parts of the marketing mix are product management. The distributor then sells the product to retailers or customers.Freight costs for the commodities being transported Cost of inventory in transit Complexity of loads Handling methods Logistics software integration between supplier(s). 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. pricing. selective or extensive? Who should control the channel (referred to as the channel captain)? . vendor. A distributor is the middleman between the manufacturer and retailer.

This process is known as the 'distribution chain' or the 'channel. Internet and telephone sales Agent. such as via mail order. 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.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. each passing the product down the chain to the next organization. who sells to retailers Retailer (also called dealer). for example.' Each of the elements in these chains will have their own specific needs. since both direct and indirect channels may be used. They may be just as important for moving a service from producer to consumer in certain sectors. along with those of the all-important end-user. Channels A number of alternate 'channels' of distribution may be available: Selling direct. who typically sells direct on behalf of the producer Distributor (also called wholesaler). before it finally reaches the consumer or end-user. may sell their services (typically rooms) directly or through . Hotels.

even for the simplest of Channel structure To the various `levels' of distribution. tour operators. There have also been some innovations in the distribution of services. Outlets such as estate agencies and building society offices are crowding out traditional grocers from major shopping areas. which they refer to as the `channel length'. In large markets (such as larger countries) a second level. say. tourist boards. the relationship between its members: 'Conventional or free-flow . . For example.. the 'one-level' channel. there has been an increase in franchising and in rental services the latter offering anything from televisions through tools. hotels and car rental services. that of direct contact with no intermediaries involved. centralized reservation systems. There has also been some evidence of service integration. The next level. Kotler defined the simplest level. In small markets (such as small countries) it is practical to reach the whole market using just one. Lancaster and Massingham also added another structural element. Channel members Distribution channels can thus have a number of levels. there has been a significant increase in retail outlets for the service sector. links now exist between airlines. particularly in the travel and tourism sectors. In addition. airlines.and zero-level channels. neighbourhood retailers. is now mainly used to extend distribution to the large number of small. a wholesaler for example. features just one intermediary. for industrial goods a distributor. channel with a range of `middle-men' passing the goods on to the end-user. For agents.This is the usual. with services linking together. as the 'zero-level' channel. etc. In Japan the chain of distribution is often complex and further levels are used. in consumer goods a retailer. widely recognized.

to optimize their contribution to their `customers' (the rest of the organization in general. Vertical marketing system (VMS) . In all of this. Indeed. 'internal' customers. To all intents and purposes. with the possible exception of the pricing mechanism itself. the lessons of the non-profit organizations. In theory at least. but just as practical. offer a very useful parallel. the sale of property or a specific civil engineering project. In . or each department's. as goods are transferred between separate parts of the organization at a `transfer price'. This does not share many characteristics with other channel transactions. this process can and should be viewed as a normal buyerseller relationship.In this form. in dealing with their clients.A temporary `channel' may be set up for one transaction. each one being unique. the elements of distribution are integrated. most consumer goods manufacturers could never justify the cost of selling direct to their consumers. and those parts of it which deal directly with them in particular). Channel Decisions Channel strategy Product (or service)<>Cost<>Consumer location Channel management The channel decision is very important. except by mail order. Less obvious. 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.Single transaction . there is a form of trade-off: the cost of using intermediaries to achieve wider distribution is supposedly lower. is the use of `marketing' by service and administrative departments. for example. In some parts of certain organizations this may in fact be formalized.

for example. their job is finished. Selective distribution . often several layers of them. 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 . most of the practical decisions are concerned with control of the consumer. the use of intermediaries (particularly at the agent and wholesaler level) can sometimes cost more than going direct.This is the normal pattern (in both consumer and industrial markets) where `suitable' resellers stock the product.practice. all the processes involved in that chain. Exclusive distribution . and particularly the brand leaders in consumer goods markets) price competition may be evident. into the beginning of the distribution chain.Only specially selected resellers (typically only one per geographical area) are allowed to sell the `product'. until the product or service arrives with the end-user. On the other hand. if the producer is large enough. his job should really be extended to managing. Yet that distribution chain is merely assuming a part of the supplier's responsibility. but large companies 'do' have the choice. many suppliers seem to assume that once their product has been sold into the channel. Motivating the owners and employees of the . Many of the theoretical arguments about channels therefore revolve around cost. and. if he has any aspirations to be market-oriented. The small company has no alternative but to use intermediaries. albeit very indirectly. However. Channel motivation It is difficult enough to motivate direct employees to provide the necessary sales and service support.Where the majority of resellers stock the `product' (with convenience products.

with agents. the furniture retailer. this being 'forward' integration.independent organizations in a distribution chain requires even greater effort. Vertical marketing This relatively recent development integrates the channel with the original supplier . this being 'backward' integration. and `administered marketing systems' where one (dominant) member of the distribution chain uses its position to co-ordinate the other members' activities. or a competition is offered to the distributors' sales personnel. 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. to tempt the owners in the channel to push the product rather than its competitors. 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 may arise because one member of the chain owns the other elements (often called `corporate systems integration'). wholesalers and retailers working in one unified system. This has traditionally been the form led by manufacturers.) 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). are trained to almost the same standard as the supplier's own staff. a supplier owning its own retail outlets. often led by a wholesale or retail co-operative. many organizations use a mix of different channels. so that they are tempted to push the product. in particular. where the agent's personnel. support as well as sales. There are many devices for achieving such motivation. Alternative approaches are `contractual systems'. MFI. . so will those of the distribution chain.producer. It is perhaps more likely that a retailer will own its own suppliers. In practice. owns Hygena which makes its kitchen and bedroom units. calling on the larger accounts. covering the smaller customers and prospects. they may complement a direct salesforce. (For example. of course. Perhaps the most usual is `bribery': the supplier offers a better margin.

. food distribution occurred with the policy of giving free bread to its citizens under the provision of a common good. and ports. LOGISTICS IN FOOD DISTRIBUTION Food distribution. 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 .because it is beyond the capacity of each individual organization alone.a joint marketing operation . famine. and the retailer at the other) 'control' over the distribution chain. and storage. Suppliers rarely excel in retail operations and. Other research indicates that vertical integration is a strategy which is best pursued at the mature stage of the market (or product). During some periods of Ancient Rome. There are three main components of food distribution: Transport infrastructure. retailers should focus on their sales outlets rather than on manufacturing facilities ( Marks & Spencer. In general. This removes one set of variables from the marketing equations. At earlier stages it can actually reduce profits. malnutrition or illness can occur. is a very important factor in public nutrition. in theory. rail transport. Where it breaks down. but does not own them). very deliberately provides considerable amounts of technical assistance to its suppliers. for example.The intention of vertical marketing is to give all those involved (and particularly the supplier at one end. Food handling technology and regulation. this is less likely to revolve around marketing synergy. airports. such as roads. It is arguable that it also diverts attention from the real business of the organization. such as refrigeration. warehousing. vehicles. a method of distributing (or transporting) food from one place to another.

Our approach is such that information can be created and reused in a structured manner all along the value creation chain. . time and quality Information Logistics consists of two words . Information is created throughout the entire product creation process. Information-ondemand services are a typical application area for information logistics. it is exactly logistics of information. 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. depending on the communication media and users' preferences. reduce throughput times and achieve a high degree of parallel processing. also an e-mail or even the ordinary mail you receive.Adequate source and supply logistics. but usually is text (syntax with a semantic meaning) and logistics which is the transportation of sth from point A to point B. This requires the use of an information model. based on demand and need. This information should be transformed in line with users' needs. as they have to fulfil user needs with respect to content. Information can mean a lot of things. an overall product tree and a graphic design concept. The goal of information logistics is to optimize the content and format of the information. The deployed system must meet these requirements optimally. Information logistics In general. in order to aid custom processing of it.information and logistics. In a simplified sense is a newsletter information logistics. location. technologies and applications for need-oriented information supply.

A related term is Kaizen which is an approach to productivity improvement literally meaning "continuous impr History of JIT . such as the presence or absence of a part on a shelf. New stock is ordered when stock reaches the re-order level. quality. Forecasted shifts in demand should be planned for around the Kanban until trends can be established to reset the appropriate Kanban level. However. that tell production processes to make the next part. The information and documentation creation process is made easier. This saves warehouse space and costs.The result is automated configuration of fully scalable information for a wide variety of target group perspectives (e. safer and more efficient. Kanban are usually simple visual signals. 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. JIT can lead to dramatic improvements in a manufacturing organization's return on investment. 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. and efficiency. When implemented correctly. If demand rises above the historical average planning duration demand. the firm could deplete inventory and cause customer service issues. 7. or Kanban . In recent years manufacturers have touted a trailing 13 week average as a better predictor than most forecastors could provide. by sector or area of application). To meet a 95% service rate a firm must carry about 2 standard deviations of demand in safety stock.g. The customer can simply navigate through the information.

identical subassemblies could be used in several models. using crowbars and wrenches. Over a period of several years. developed by Shigeo Shingo. this was thought to be a disadvantage because it reduced the economic lot size. Further. these were usually installed one at a time by a team of experts. given the cost of changing the production process over to another product. measurements were substituted for adjustments. The chief engineer at Toyota in the 1950s. These were adjusted by hand. die change times fell to about half an hour.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. Japanese corporations cannot afford large amounts of land to warehouse finished products and parts. It sometimes took as long as several days to install a large (multiton) die set and adjust it for acceptable quality.) The undesirable result was poor return on investment for a factory. The concept needed an effective freight management system (FMS). At the same time. quality of the . Before the 1950s. examined accounting assumptions and realized that another method was possible. Toyota was one of the first to apply flexible robotic systems for these tasks. With very simple fixtures. Toyota engineers redesigned car models for commonality of tooling for such production processes as paint-spraying and welding. Almost immediately. Some of the changes were as simple as standardizing the hole sizes used to hang parts on hooks. Ford's Today and Tomorrow (1926) describes one. The technique was subsequently adopted and publicised by Toyota Motor Corporation of Japan as part of its Toyota Production System (TPS). The number and types of fasteners were reduced in order to standardize assembly steps and tools. The factory could be made more flexible. Toyota implemented a strategy called Single Minute Exchange of Die (SMED). so that the line was down for several weeks. In some cases. 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. reducing the overhead costs of retooling and reducing the economic lot size to the available warehouse space. (An economic lot size is the number of identical products that should be produced. Taiichi Ohno.

what it says about the management within the company. statistics. the just-in-time inventory system is all about having “the right material. Carrying the process into parts-storage made it possible to store as little as one part in each assembly station. After SMED. These problems include backups at work centres. In the JIT inventory philosophy there are views with respect to how inventory is looked upon. industrial engineering. it has a whole philosophy that the company must follow. businesses are encouraged to eliminate inventory that doesn’t add value to the product. economic lot sizes fell to as little as one vehicle in some Toyota plants. as in-process inventory was built out . reducing the skill required for the change. Dies were changed in a ripple through the factory as a new product began flowing.” Effects Some of the results at Toyota were unexpected.stampings became controlled by a written recipe. 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. Secondly. Philosophy Just-in-time (JIT) inventory systems are not just a simple method that a company has to buy in to. The ideas in this philosophy come from many different disciplines including. lack of flexibility for employees and equipment. that was used as a signal to produce or order a replacement. and in the exact amount. apparently from nowhere. it sees inventory as a sign of sub par management as it is simply there to hide problems within the production system. at the right time. at the right place. A huge amount of cash appeared. Analysis showed that the remaining time was used to search for hand tools and move dies. In short. contrary to traditional thinking. When a part disappeared. Under the philosophy. Inventory is seen as incurring costs instead of adding value. and the main principle behind JIT. production management and behavioral science. and inadequate capacity among other things.

Many people in Toyota confidently predicted that the initiative would be abandoned for this reason. every part had to fit perfectly. line stops fell to a few per week. No inventory meant that a line could not operate from in-process inventory while a production problem was fixed. The result was a severe quality assurance crisis. The Just in Time philosophy was also applied to other segments of the supply chain in several types of industries. This improved customer satisfaction by providing vehicles usually within a day or two of the minimum economic shipping delay. (See Total Quality Management). Also. line stops had so little economic effect that Toyota installed an overhead pull-line. line stops occurred almost hourly. This dramatically improved the company's return on equity by eliminating a major source of risk. In the first week. In the commercial sector. the entire production line had to be slowed or even stopped. the company eliminated multiple suppliers. completely eliminating the risk they would not be sold. Toyota redesigned every part of its vehicles to eliminate or widen tolerances. This by itself generated tremendous enthusiasm in upper management. When a process problem or bad parts surfaced on the production line. the rate had fallen to a few line stops per day. But by the end of the first month. it meant eliminating one or all of the warehouses in the link between a factory and a retail establishment. Toyota had to test and train suppliers of parts in order to assure quality and delivery. while simultaneously implementing careful statistical controls.and sold. and a dramatic improvement in product quality. Eventually. that permitted any worker on the production line to order a line stop for a process or quality problem. many vehicles began to be built to order. Even with this. After six months. . Another surprising effect was that the response time of the factory fell to about a day. The result was a factory that became the envy of the industrialized world. In some cases. similar to a bus bell-pull. Since assemblers no longer had a choice of which part to use. and has since been widely emulated.

If there is no demand for a product at the time. Supplies continue around the clock keeping workers productive and businesses focused on turnover. 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. Employees who possess multiple skills are utilized more efficiently. Better consistency of scheduling and consistency of employee work hours. 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. Having management focused on meeting . The flows of goods from warehouse to shelves are improved. workers don’t have to be working. The main benefits of JIT are listed below. 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. 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. 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. Set up times are significantly reduced in the warehouse. the Just-In-Time Inventory System (JIT) can have many benefits resulting from it.Benefits As most companies use an inventory system best suited for their company.

Within a raw material stream As noted by Liker (2003) and Womack and Jones (2003). Just In Time is a means to improving performance of the system. since Toyota also makes a point of maintaining high quality relations with its entire supplier network. which must be discovered and/or grown through natural processes that require time and must account for natural variability in weather and discovery. there was an exception to this rule that put the entire company at risk by the 1997 Aisin fire. Toyota is especially susceptible to an interruption in the flow. However. Once the barriers were exposed. for example. As noted in Liker (2003). it would ultimately be desirable to introduce flow and JIT all the way back through the supply stream.deadlines will make employees work hard to meet the company goals to see benefits in terms of job satisfaction. long-term relationship with a few suppliers is preferred to short-term. since one of the main barriers was rework. In part. Thus. The same is true of most raw materials. Toyota is careful to use two suppliers for most assemblies. price-based relationships with competing suppliers. several suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation. With shipments coming in sometimes several times per day. However. lowering inventory forced each shop to improve its own quality or cause a holdup in the next downstream area. . they could be removed. none of them followed this logically all the way back through the processes to the raw materials. a strong. 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. For that reason. promotion or even higher pay. With present technology. this was seen as a feature rather than a bug by Ohno. an ear of corn cannot be grown and delivered to order . not an end. 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.

Oil It has been frequently charged that the oil industry has been influenced by JIT (see here (2004). not production capacity.986 (Energy Information Administration data).000 bbls. further reducing output. During the 2005 hurricane season.5% from 228. it hasn't been drastically reduced as JIT practitioners would prefer. the plant may be economically inefficient. following Waddel and Bodek (2005). Katrina caused the shutdown of 9 refineries in Louisiana and 6 more in Mississippi.000 thousand bbls. . JIT calls for a reduction in inventory capacity. 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. the industry is susceptible to supply shocks. and others is used by the petroleum industry. Rita subsequently shut down refineries in Texas.903 bbls to 208.5% to 1. From 1975 to 1990 to 2005. As a result.017 thousand bbls in 1997. the annual average stocks of gasoline have fallen by only 8. stocks never fell below 194. Goldratt. including opportunity costs. This shows that while industry storage capacity has decreased in the last 30 years. One of those reasons may be economic rationalization: when the benefits of operating no longer outweigh the costs. Companies routinely shut down facilities for reasons other than the application of JIT. and a large number of oil production and transfer facilities. Similar arguments were made in earlier crises. The effects of hurricanes Katrina and Rita are given as an example: in 2005. 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. which cause spikes in prices and subsequently reduction in domestic manufacturing output. JIT has never subscribed to such considerations directly.331 to 222. Further. and more significantly. while the low for the period 1990 to 2006 was 187. this ROI-based thinking conforms more to Brown-style accounting and Sloan management. and here (1996)). JIT students and even oil & gas industry analysts question whether JIT as it has been developed by Ohno. Stocks fluctuate seasonally by as much as 20. resulting in the loss of 20% of the US domestic refinery output. here (1996).2% growth. The GDP figures for the third and fourth quarters showed a slowdown from 3.

i. but the changes in inventories in the oil industry exhibit none of those tendencies. Thus total annual cost is . The first is the cost of carrying inventory. In Waguespack and Cantor (1996). TC consists of two components. In the follow-up editorial. 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. Also." Theory Consider a (highly) simplified mathematical model of the ordering process. as shown in a pair of articles in the Oil & Gas Journal.e. The second cost is the cost of placing orders. the authors point out that JIT would require a significant change in the supplier/refiner relationship. which arrives instantly. Specifically. They find that a large part of the shift came about because of the availability of short-haul crudes from Latin America. the average inventory times the carrying cost per unit. JIT does not seem to have been a goal of the industry. Hence the average stock held (the average of zero and Q. which is given by Q * kc / 2. K. Confessing that they had been as guilty as other media sources. given by D * K / Q. assuming constant usage) is Q / 2.Finally. We assume that demand is constant and that the company runs down the stock to zero and then places an order. the annual number of orders placed is D / Q. D / Q. they confirmed that "It also happens not to be accurate. the relationships remain cost-driven among many competing suppliers rather than qualitybased among a select few long-term relationships. the Oil & Gas Journal claimed that "casually adopting popular business terminology that doesn't apply" had provided a "rhetorical bogey" to industry critics. the annual number of orders. times the cost per order.

In practice JIT works well for many businesses. with broader tasks undertaken by supply chain management systems and enterprise resource planning systems.LOGISTICS AUTOMATION Logistics automation is the application of computer software and / or automated machinery to improve the efficiency of logistics operations. but it is not appropriate if K is not small. The key Japanese breakthrough was to reduce K to a very low level and to resupply frequently instead of holding excess stocks. Typically this refers to operations within a warehouse or distribution center. giving which is known as the Economic Order Quantity or EOQ formula.. We differentiate TC with respect to Q and set it equal to 0 to find the Q for minimum total cost. 8. The theory above can be fairly easily adapted to take into account realistic features such as delays in delivery times and fluctuations in demand. in particular. The delay in delivery. Both of these are usually modelled by normal distributions. means that additional 'safety stocks' need to be held if a stockout is to be rendered very unlikely. .

depalletizing. and either through hard coded rules or data input allow destination selection. or increasingly. The container will later appear at the selected destination. . Conveyors: automated conveyors allow the input of containers in one area of the warehouse. comissioning and order picking.Logistics automation systems can powerfully complement the facilities provided by these higher level computer systems. 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. Industrial Robots: four to six axis industrial robots. Typically cranes serve a rack of locations. Typically used to distribute high volumes of small cartons to a large set of locations. packaging. allowing many levels of stock to be stacked vertically. e. The focus on an individual node within a wider logistics network allows systems to be highly tailored to the requirements of that node. 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. and allowing far high storage densities and better space utilisation than alternatives. Sortation systems: similar to conveyors but typically have higher capacity and can divert containers more quickly. Many also have in-built barcode scanners to allow identification of containers. palletizing robots. Typically all of these will automatically identify and track containers based upon barcodes.g. are used for palletizing.

retail branches (e. and taken via conveyors.g. such as where to store incoming containers. 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.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.g. such as identification of incoming deliveries / stock and scheduling order fulfilment. mail order). sortation systems. or other companies (e. Automated Goods Retrieval for Orders: On receipt of orders. On arrival. and automated cranes into an automatically assigned storage location. wholesalers). whether individual buyers (e. Operational control software: provides low-level decision making. 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. the automation system is able to immediately locate goods and retrieve them to a pickface location. chain stores). 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. . and where to retrieve them when requested.g. the goods can be scanned and thereby identified. assignment of stock to outgoing trailers. Sortation systems and conveyors can then move these onto the outgoing trailers. Business Control software: provides higher level functionality.

9. Even here. LIQUID LOGISTICS Liquid Logistics is a special category of logistics that relates to liquid products.A complete warehouse automation system can drastically reduce the workforce required to run a facility. Standard logistics techniques are generally used for discrete or unit products. typically into a highbay storage system which would be unfeasible to access using fork-lift trucks or any other means. 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 . Smaller systems may only be required to handle part of the process. assistance can be provided with equipment such as pick-to-light units. and is utilized extensively in the "Supply Chain for Liquids" discipline. Liquid products have logistics characteristics that distinguish them from discrete products. with human input required only for a few tasks.LOGISTICS FOR DIFFERENT FIELDS. Examples include automated storage and retrieval systems. such as picking units of product from a bulk packed case. which simply use cranes to store and retrieve identified cases or pallets.

Because its final customers are responsible for the lives and health of their patients. medical logistics providers are adopting supply chain management theories. over stocked inventory. nurses. medical and surgical supplies. and other health and dental care providers. and other products needed to support doctors. or outdated merchandise and redistributing them using disposition management rules that will result in maximized value at . move. such as returns from consumers. To drive costs out of the health-care sector. medical devices and equipment. When properly planned for and handled these points of differentiation may lead to business advantages for companies that produce. medical logistics is unique in that it seeks to optimize effectiveness rather than efficiency. or use liquid products. process. MEDICAL LOGISTICS Medical logistics is the logistics of pharmaceuticals. medical supplies are the single most expensive component of health care. Medical logistics functions comprise an important part of the health care system: after staff costs. Each of these points represents a differentiation of liquid logistics from logistics techniques used for discrete items. REVERSE LOGISTICS Reverse logistics is the logistics process of removing new or used products from their initial point in a supply chain.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.

Simply.the end of the items original useful life. e-waste. warehousing. thus saving money. Types of activity common with reverse logistics includes: logistics. It often requires the development of a transportation mode that is compatible with existing forward logistic system. refurbishment. returning goods to the original manufacturer for reimbursement. reverse fulfillment. An example of Reverse Logistics: T-Shirts. repair. the ultimate goal to optimize or make more efficient aftermarket activity. Disposition can include returning assets into inventory pools or warehouses for storage. . recycling. selling goods on a secondary market. field service and many others. "reverse logistics" is all activity associated with a product/service after the point of sale. A reverse logistics operation is considerably different from forward logistics. recycling assets. 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. or a combination that will yield maximum value for the assets in question. The collection of the flawed clothes from the various stores and reselling them at the Second Sales shop is an example of reverse logistics. after market call center support. It requires packaging and storage systems that will ensure that most of the value still remaining in the used good is not lost due to careless handling. It 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.

implementing. procurement. which can be suppliers. Supply Chain Management integrates supply and demand management within and across companies. Importantly.CONCEPT OF SUPPLY CHAIN MANAGEMENT Supply chain management (SCM) is the process of planning. . third-party service providers. Some experts distinguish supply chain management and logistics. while others consider the terms to be interchangeable. and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management is also a category of software products. With SCEM possible scenarios can be created and solutions can be planned. conversion. intermediaries. and logistics management activities. it also includes coordination and collaboration with channel partners.10. The term supply chain management was coined by consultant Keith Oliver. and finished goods from point-of-origin to point-ofconsumption. workin-process inventory. Supply chain management spans all movement and storage of raw materials. of strategy consulting firm Booz Allen Hamilton in 1982. In essence. The definition one America professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing. and customers. 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.

third party logistics. Cross docking. . warehouses and customers. thus improving inventory visibility and improving inventory velocity. Supply chain execution is managing and coordinating the movement of materials information and funds across the supply chain. Less control and more supply chain partners led to the creation of supply chain management concepts. As corporations strive to focus on core competencies and become more flexible. work-in-process and finished goods. inventory and transportation etc. distribution centers. 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. forecasts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners. The flow is bidirectional. Information: Integrate systems and processes through the supply chain to share valuable information. they have reduced their ownership of raw materials sources and distribution channels. while reducing management control of daily logistics operations. including demand signals. direct shipment. production facilities. These functions are increasingly being outsourced to other corporations that can perform the activities better or more cost effectively.Supply chain management problems Supply chain management must address the following problems: Distribution Network Configuration: Number and location of suppliers. Inventory Management: Quantity and location of inventory including raw materials. The effect has been to increase the number of companies involved in satisfying consumer demand. Distribution Strategy: Centralized versus decentralized.

scheduling. location. location. creating communication channels for critical information and operational improvements such as cross docking. Product design coordination. routes. Strategic partnership with suppliers. and third-party logistics. Production decisions. Supply chain activities can be grouped into strategic. and customers.Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. including contracting. SCOR is a supply chain management model promoted by the Supply-Chain Management Council. including quantity. so that new and existing products can be optimally integrated into the supply chain. Transportation strategy. and quality of inventory. and operational levels of activities. including the number. Strategic Strategic network optimization. distributors. and size of warehouses. Inventory decisions. including frequency. locations. . and planning process definition. to support supply chain operations. load management Information Technology infrastructure. distribution centers and facilities. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). and contracting. direct shipping. There to make and what to make or buy decisions Align overall organizational strategy with supply strategy Tactical Sourcing contracts and other purchasing decisions. tactical.

Demand planning and forecasting. Performance tracking of all activities. Order promising. Outbound operations. distribution centers.In Peter Drucker's (1998) management's new paradigms. and other customers. Supply Chain Management Organizations increasingly find that they must rely on effective supply chains. including current inventory and forecast demand. including all suppliers. coordinating the demand forecast of all customers and sharing the forecast with all suppliers. accounting for all constraints in the supply chain. Milestone payments Operational Daily production and distribution planning. this concept of business relationships extends beyond traditional . including transportation from suppliers and receiving inventory.Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. or networks. in collaboration with all suppliers. Inbound operations. Sourcing planning. Production scheduling for each manufacturing facility in the supply chain (minute by minute). to successfully compete in the global market and networked economy. including the consumption of materials and flow of finished goods. including all fulfillment activities and transportation to customers. Production operations. including all nodes in the supply chain. manufacturing facilities.

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. technological changes. there have been few changes in business environment that have contributed to the development of supply chain networks. Second. with the complicated interactions among the players. following the earlier "Just-In-Time". In general. 1990). 1993). strategic alliances and business partnerships were found to be significant success factors. 2004). Traditionally. has led to changes in coordination among the members of the supply chain network (Coase. with little concern for the internal management working of other individual players. a complex network structure can be decomposed into individual component firms (Zhang and Dilts. a paramount component of transaction costs. and little is known about the coordination conditions and trade-offs that may exist among the players. globalization. From a system's point of view. as an outcome of globalization and proliferation of multi-national companies. outsourcing and information technology have enabled many organizations such as Dell and Hewlett Packard. 1998). which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans. using terms such as "Keiretsu". However. the network structure fits neither "market" nor "hierarchy" categories (Powell. Global Production Network". It is not clear what kind of performance impacts different supply network structures could have on firms. "Lean Management" and "Agile Manufacturing" practices. each with their capabilities. and "Next Generation Manufacturing System". . particularly the dramatic fall in information communication costs. 1979). companies in a supply network concentrate on the inputs and outputs of the processes. "Extended Enterprise". In the 21st century. First. joint ventures. Many researchers have recognized these kinds of supply network structure as a new organization form. During the past decades. such a structure can be defined as "a group of semi-independent organizations. 2001). This inter-organizational supply network can be acknowledged as a new form of organization. the choice of internal management control structure is known to impact local firm performance (Mintzberg. "Virtual Corporation".

Supply Chain Business Process Integration Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. However. in many companies. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows. communicates with several distributors and retailers. joint product development. which in turn assist to achieve the best product flows. Marketing. Supply chain business process integration involves collaborative work between buyers and suppliers. An example scenario: the purchasing department places orders as requirements become appropriate. management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. common systems and shared information. 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: . responding to customer demand. and attempts to satisfy this demand. Shared information between supply chain partners can only be fully leveraged through process integration.

hedging. order placement. the purchasing function develops rapid communication systems. supply continuity. In firms where operations extend globally. and reduction times in the design cycle and product development is achieved. The desired outcome is a win-win relationship. storage and handling and quality assurance. b) Procurement process Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. supply sourcing. 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. . inbound transportation. 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. Activities related to obtaining products and materials from outside suppliers. and research to new sources or programmes. includes the responsibility to coordinate with suppliers in scheduling. negotiation. Also. sourcing should be managed on a global basis. This requires performing resource planning. where both parties benefit.

the customer is the final destination of a marketing channel. In physical distribution. As product life cycles shorten. and time phasing of components. and develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. customers and suppliers must be united into the product development process. e) Physical Distribution This concerns movement of a finished product/service to customers. According to Lambert and Cooper (2000). inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. Activities related to planning. thus to reduce time to market. handling. Also. 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. and the availability of the product/service is a vital part of each channel participant's marketing effort. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes.c) Product development and commercialization Here. the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. d) Manufacturing flow management process The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. managers of the product development and commercialization process must: coordinate with customer relationship management to identify customerarticulated needs. scheduling and supporting manufacturing operations. and must accommodate mass customization. such as work-in-process storage. changes in the manufacturing flow process lead to shorter cycle times. select materials and suppliers in conjunction with procurement. Manufacturing processes must be flexible to respond to market changes. transportation.

As logistics competency becomes a more critical factor in creating and maintaining competitive advantage. Also. thus it links a marketing channel with its customers (e. Hence. and . f) Outsourcing/Partnerships This is not just outsourcing the procurement of materials and components. 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. A. warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance. wholesalers.T. but also outsourcing of services that traditionally have been provided inhouse. links manufacturers.integral part of marketing.g. 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. to manage and control this network of partners and suppliers requires a blend of both central and local involvement. 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. According to experts internal measures are generally collected and analyzed by the firm including Cost Customer Service Productivity measures Asset measurement. g) Performance Measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. retailers).

The level of integration and management of a business process link is a function of the number and level. 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 . Consequently. Postponement 3. adding more management components or increasing the level of each component can increase the level of integration of the business process link. of components added to the link (Ellram and Cooper. 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. buyer-supplier relationships. 1985). The literature on business process reengineering. External performance measurement is examined through customer perception measures and "best practice" benchmarking. and SCM suggests various possible components that must receive managerial attention when managing supply relationships.Quality. Components of Supply Chain Management are 1. and 2) Best practice benchmarking. Standardisation 2. and includes 1) Customer perception measurement. ranging from low to high. Houlihan.

does not lead us to the conclusion about what are the primary or secondary (specialized) level supply chain components ( see Bowersox and Closs. third level channel participants and components may be included. Consequently. Also. 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 . thus including secondary level components. customer satisfaction.Risk and reward structure Culture and attitude However. and which are the fundamental branches of the secondary level components. that is what supply chain components should be viewed as primary or secondary. and secondary level components such as benchmarking and order fulfillment. A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects financial risk.g. For Physical Distribution. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement (Bowersox and Closs. that will support the primary level channel participants. is a business that participates in channel relationships by performing essential services for primary participants. profit margins. p. and returns to stakeholders. For Product Development and Commercialization: Includes the primary level component of Product Data Management (PDM). thus including primary level components (Bowersox and Closs. Lambert and Cooper's framework of supply chain components. 1996). 1996). 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. Manufacturing support and Procurement: Includes the primary level component of Enterprise Resource Planning . which are supporting the primary ones. that is what kind of relationship the components may have that are related with suppliers and customers accordingly. 93). 1996. and secondary level components such as market share. the "branches" of the previous identified supply chain business processes. A secondary level participant (specialized). For Customer Service Management: Includes the primary level component of customer relationship management.

and Asset management could be concerned as well. They would perform activities such as. decision and policy measurements. and logistics (secondary level components). warehousing. More specifically. and Alfredsson (2003) describe four categories of 3PL providers: Standard 3PL provider: this is the most basic form of a 3PL provider. manufacturing planning. operations. information flow facility structure is regarded by two important requirements. pick and pack. 11. which is correlated with the information flow facility structure within the organization. Types of 3PL providers Hertz. which are a) planning and Coordination flows. For Performance Measurement: This includes the primary level component of logistics performance measurement. and postponement (order management). customer profitability analysis (CPA). and . in accordance with these secondary level components total cost analysis (TCA). material management. Secondary level components may include four types of measurement such as: variation. and b)operational requirements. direction. with secondary level components such as warehouse management. personnel management. 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. manufacturing capabilities.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. In general. 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.(ERP).

These providers will have few customers. and auditing. the 3PL function is not their main activity. vehicles. The 3PL provider improves the logistics dramatically. or providing a unique security system. or aircraft. but do not develop a new service. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. specific packaging. cross-docking. 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.distribution (business) – the most basic functions of logistics. routing. These are often leased on terms equalling those of the 3PL contract minimising liability to capital expenditure. 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. CASE STUDY India Logistics Industry: $125 Billion Goldmine (DATAMONITOR REPORT) . Service developer: this type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing. negotiations. To be useful. 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. The customer developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities. but doesn't need to own warehousing facilities. 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. but will perform extensive and detailed tasks for them. and customer service in a way that complements its customers' preexisting physical assets. For a majority of these firms. booking.

capital goods. 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. However. The Data monitor report. "In addition. India will have to work on such systemic inefficiencies." predicts high double-digit growth rates for both outsourced and contract logistics in India. and development of organized retail and agri-processing industries". Bangalore. As such." added Praveen Ojha. the Indian logistics industry is at an inflection point. Chennai and Hyderabad. retail.India's third-party logistics (3PL) market is all set to experience a period of explosive organic growth. With India's gross domestic profit (GDP) growing at over 9% per year and the manufacturing sector enjoying double digit growth rates. electronics. Delhi. and telecom will lead to increased market opportunities for providers of 3PL in India. Consumer markets to lead growth in outsourced logistics 3PL/outsourced logistics is the outsourcing of a company's logistics operations to a specialized firm. Data monitor and author of the study. and is expected to reach a market size of over $125 billion in year 2010." However. "As leading manufacturers realign their global portfolios of manufacturing locations. the logistics cost of the Indian economy is over 13% of GDP. "Strong growth enablers exist in India today in the form of over $300 billion worth of infrastructure investments. say Praveen Ojha. compared to less than 10% of GDP in almost the entire Western Europe and North America. Logistics analyst. rather than being pre-emptive. as a result of the under-developed trade and logistics infrastructure. strong foreign direct investment inflows (FDI) in automotive. in order to attract and retain long-term real investments. the companies are only following with new distribution outlets. phased introduction of value-added-tax (VAT). With increased geographical distribution of incomes in India. the increased competition across industry verticals is forcing firms to focus on . the consumer markets are extending beyond the five metros of Mumbai. judging by independent market analyst Data monitor’s latest research. "India Logistics Outlook 2007.

who cater to local cargo requirements. freight forwarders are moving towards owning assets in the form of Container Freight Stations (CFS). Infrastructure congestion: the key challenge According to Data monitor. Inland Container Depots (ICD) and container trains. The freight forwarding segment is also represented by thousands of small customs brokers and clearing & forwarding agents. Indian companies across verticals are now increasingly seeking and using the services of third-party logistics service providers (3PLs). the logistics industry's capital expenditure is progressively increasing to almost match its revenue growth. According to Data monitor. The fragmented industry structure: Opportunity for 3PL integrators The Indian logistics industry is characterized by dominance of a disorganized market. outsourced logistics. In order to reduce logistics costs and focus on core competencies. and logistics outsourcing is gaining further momentum with this. at just above one-quarter of the entire $90 billion Indian logistics market. is slated to grow at a compound annual growth rate (CAGR) of over 16% from 2007-10. ports and complex regulatory structures. 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. communication. Furthermore. Similarly. 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. . a strong indicator of both 3PLs desiring to become integrated service providers and the industry enjoying investmentdriven growth. As per the investment plans of the leading 3PLs in India. 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).product distribution. Realizing the potential in the contract logistics market. Trucking and courier companies are now leveraging their network to provide express distribution and warehousing. 3PLs are also increasing investments to become end-to-end integrated players.

infrastructure investments by the government and 3PL capex plans. VAT. increasing external merchandise trade. which is expected to replace a plethora of state and central government taxes. Praveen Ojha concluded: "With the collective economic interaction of growing per capita disposable incomes. The agency provides supplies to the .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. but handle over 40% of the national road freight traffic.000 civilian and military personnel throughout the world.The National Highways (NH) form only 2% of the entire road network in India. putting enormous pressure on the highway infrastructure. is likely to enhance the efficiency of the logistics industry in India. resulting in pre-berthing delays and longer ship turn-around time compared to even the East Asian counterparts like China and South Korea. with about 22. both India's logistics industry and the 3PL sector of this market are set to witness explosive growth in the next five years. In addition. Given the current thrust on infrastructure investments in India. Phased introduction of VAT . the twelve major ports of India handle volumes higher than their full capacity. fast growing manufacturing and organized retailing sectors." CASE STUDY DEFENCE LOGISTICS AGENCY The Defense Logistics Agency (DLA) is the largest agency in the United States Department of Defense. 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. the implementation of VAT is likely to boost the efficiency for these stakeholders by lowering transit times and the associated paper work. Also.

particularly procurement of petroleum products. medical supplies. distribution. and 18 systems in the Navy. the military services began to coordinate more extensively when it came to procurement. The act created the Munitions Board. which began to reorganize these major supply categories into joint procurement agencies.including storage. 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. in 1949. 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. plus an Air Technical Service Command. DLA has been an integral part of the nation's military defense. In 1947. The main offices of the Army and Navy for each commodity were collocated. Meanwhile.military services and supports their acquisition of weapons and other materiel. Since its founding in 1961. It has been a full partner with the military services in helping to fuel the Cold War. the Commission on the Organization of the Executive Branch of the Government (Hoover Commission). transportation. and in the Defense Cataloging and Standardization Act of 1952. there were seven supply systems in the Army. Congress became disenchanted with the board. and other commodities. The Munitions Board was not as successful as hoped in eliminating duplication among the services in the supply area. It has also provided crucial relief to victims of natural disasters and humanitarian aid to those in need. a presidential commission headed by former President Herbert Hoover. During the war. and other aspects of supply. including the quartermaster of the Marine Corps. Passage of the National Security Act of 1947 prompted new efforts to eliminate duplication and overlap among the services in the supply area and laid the foundation for the eventual creation of a single integrated supply agency. the call grew louder for more complete coordination throughout the whole field of supply . transferred the board’s functions to a new . After the war. clothing.

For the first time. replacing them with a single executive. the . Congress. an Assistant Secretary of Defense for Supply and Logistics. Meanwhile." meaning supplies that are not repairable or are consumed in normal use. the Korean War led to several investigations by Congress of military supply management. all the military services bought. To avoid having Congress take the matter away from the military entirely. which threatened to impose a common supply service on the military services from the outside. and issued items using a common nomenclature. remained concerned about the Hoover Commission’s indictment of waste and inefficiencies in the military services. In each category. The Defense Department and the services defined the materiel that would be managed on an integrated basis as "consumables.Defense Supply Management Agency. petroleum. Consumable items. The military services feared that such an agency would be less responsive to military requirements and jeopardize the success of military operations. the Navy managed medical supplies. 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. Under a Defense directive approved by the Assistant Secretary of Defense for Supply and Logistics. also called commodities were assigned to one military service to manage for all the services. stored. however. 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. 1941-1961 The pressure for consolidation continued. and industrial parts. Early History. and the Air Force managed electronic items. It also recommended that a separate and completely civilian-managed agency be created with the Defense Department to administer all military common supply and service activities. the Secretary of Defense would formally appoint one of the three service secretaries as single manager for selected group of commodities or common service activities. In July 1955. The Army managed food and clothing. 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. DoD reversed its position.

under .000 items by procedures with which the Services had become familiar. the single manager agencies reduced their item assignments by about 9. the first-generation of single managers were handling roughly 39. did not provide the uniform procedures that the Hoover Commission had recommended. The federal catalog system provided an organized and systematic approach for describing an item of supply. 1961-1977 When Secretary of Defense Robert S. 1961. Secretary McNamara announced the establishment of a separate common supply and service agency known as the Defense Supply Agency (DSA). on August 31.5 million items. or 20 percent. it was clear that the single manager concept. he convened a panel of high ranking Defense officials. Proposals were soon made to extend this concept to other commodities. The initial catalog. or 30 percent. The new agency was formally established on October 1. 1961. Secretary McNamara was convinced that the problem required some kind of an organizational arrangement to "manage the managers. The Defense Cataloging and Standardization Act led to the creation of the first Federal Catalog. Each single manager operated under the procedures of its parent service. McNamara assumed office in the spring of 1961. a task designated as "Project 100. but it effectively highlighted the areas where standardization was feasible and necessary. Defense Supply Agency. containing about 3. full of duplications and errors. After much debate among the service chiefs and secretaries. and directed them to study alternative plans for improving DOD-wide organization for integrated supply management. Over a six-year period. The single manager concept was the most significant advance toward integrated supply management within DoD or the military services since World War II. and customers had to use as many sets of procedures as there were commodity managers.single manager was able to reduce his investment by centralizing wholesale stocks. and to simplify the supply process by persuading the services to adopt the same standard items.000. and providing information on the item to the system’s users. was a rough draft. completed in 1956." The committee’s report highlighted the principle weaknesses of the multiple single manager supply system. 1961. assigning and recording a unique identifying number." On March 23. and their inventories by about $800 million. though successful. Yet.

. Dayton. Defense Subsistence Supply Center. he moved his staff into more suitable facilities at Cameron Station in Alexandria. Defense Clothing Supply Center. Washington. Defense General Supply Center. as did the Defense Electronic Supply Center. and Defense Logistics Services Center. Officials estimated that the consolidation of these functions under DSA and subsequent unified operations would allow them to reduce the workforce by 3. Richmond. 1962. a new activity. rapidly pulled together a small staff and set up operations in the worn Munitions Building in Washington. the Defense Utilization Program. (fomerly the Philadelphia Quartermster Depot). Illinois. Columbus. The agency. 1962. repair. forces in .the Defense Industrial Supply Center in Philadelphia and the Defense Automotive Supply Center in Detroit. Brooklyn. Defense Petroleum Supply Center. McNamara. The results far exceeded these expectations. the Defense Standardization Program. an energetic and experienced Army logistician who had served as Quartermaster General. The Defense Industrial Plant Equipment Center. Washington. the agency included 11 field organizations. McNamara. Philadelphia. The Defense Supply Agency was tested almost immediately with the Cuban missile crisis and the military buildup in Vietnam. Ohio. Washington. D.came under DSA control..C. Virginia. D. D.S. On July 1. D. 1965.C. During the first six months. would administer the Federal Catalog Program. Ohio. By late June 1963 the agency was managing over one million different items in nine supply centers with an estimated inventory of $2. and the Surplus Personal Property Disposal Program. Chicago. two additional single managers . the Defense Subsistence Supply Center. A short time later. By July 1. made up primarily of civilians but with military from all the services.300 people and save more than $30 million each year.the command of Lieutenant General Andrew T. employed 16.C. and Defense Medical Supply Center were merged to form the Defense Personnel Support Center. and redistribution of idle equipment. New York.C. Defense Traffic Management Service. Defense Medical Supply Center. Michigan .5 billion. Supporting U. it controlled six commodity-type and two service-type single managers: Defense Clothing & Textile Supply Center. and managed 45 facilities. was established under the agency in March 1963 to handle storage. Defense Construction Supply Center. When the agency formally began operations on January 1.500 people. Virginia.

As the buildup continued in Southeast Asia.Vietnam was the most severe. The expanded contract administration mission significantly altered the shape of DSA. But in 1966. Tennessee. and petroleum products. As part of a streamlining effort.both those awarded by DSA and by the military services. the eleven DCAS regions were reduced to nine. construction materials. The agency’s supply centers responded in record time to orders for everything from boots and lightweight tropical uniforms to food. Yet. As a result of support to the operations in Vietnam. 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. DSA’s total procurement soared to $4 billion in fiscal year 1966 and $6. Until the mid-1960s. In 1965. and the Navy depot at Mechanicsburg. 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. completed the DSA depot network. on January 1. the services retained contract administration of state-of-the-art weapon systems. 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. California. and Ogden. thousands of portable walk-in. 1964. a logistics miracle. Officials established the Defense Contract Administration Services (DCAS) within DSA to manage the consolidated functions. the demand for food was largely for non-perishables. fresh fruits and vegetables began arriving in Vietnam. the agency acquired Army general depots at Columbus. the agency became responsible for administering most Defense contracts . The agency launched an accelerated procurement program to meet the extra demand created by the military buildup in Southeast Asia. on 1 January 1963. Pennsylvania. Ohio. eggs. Acquisition of Army depots at Memphis. refrigerated storage boxes filled with perishable beef. In addition to the depot mission. The following year. sandbags. Utah. and Tracy. The agency’s new contract administration mission gave it responsibility for the performance of most defense contractors. both canned and dehydrated. including some new weapon systems and their components. in 1975. extensive test of the supply system in the young agency’s history. officials reorganized the DCAS field .2 billion in fiscal year 1967.

Major revisions included a change in reporting channels directed by the Secretary of Defense which placed the agency under the management. as a primary-level field activity.structure to eliminate the intermediate command supervisory levels known as DCAS districts. 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. Michigan. the agency’s responsibilities extended overseas when it assumed responsibility for defense overseas property disposal operations and worldwide procurement. 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. DSA established the Defense Property Disposal Service (later renamed the Defense Reutilization and Marketing Service) in Battle Creek. Defense Logistics Agency. and Logistics. 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. As the move to consolidate Defense contracting progressed. As part of various organizational changes during this period. on January 1. a wide range of vitally needed military equipment. The next decade was a period of continued change and expanded missions. 1972. direction. In response. 1977-1990 In recognition of 16 years of growth and greatly expanded responsibilities. on an urgent basis. Officials published a revised agency charter in June 1978. 1977. 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. and control of the Assistant Secretary of Defense for Manpower. management. officials changed the name of the Defense Supply Agency to the Defense Logistics Agency (DLA). During 1972 and 1973. The Defense Industrial Plant Equipment Center was . By 1977. Reserve Affairs. and worldwide management of food items for troop feeding and in support of commissaries (1973). and distribution of coal and bulk petroleum products (1972). a congressional report in 1972 recommended centralizing the disposal of DOD property for better accountability.

A Defense Management Review-directed study recommended the consolidation of DoD contract management." After the implementation of the Defense Management Review decisions. especially from the Goldwater-Nichols Act. Although DLA had received responsibility for administering most defense contracts in 1965.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. 1990. Soon after. The 1980s brought other changes as well. Another major mission came in July 1988 when. the military services had retained responsibility for administering most major weapons systems and overseas contracts. In 1989. 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. the agency assumed management of the nation’s stockpile of strategic materials from the General Services Administration. enhancement of materiel readiness and sustainability of the military services and the unified and specified commands). the military services were directed to transfer one million consumable items to DLA for management. It helped the agency’s mission evolve from functional concerns (e. DLA established the Defense National Stockpile Center as a primary-level field activity. DLA assumed some of the military services’ responsibilities. inventory management. In response. On February 6. 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. Virginia. the agency established the Defense Contract Management .g.g. DOD directed that virtually all contract administration functions be consolidated within DLA. contract administration) to operational concerns (e. The report emphasized improving management efficiencies in the Defense Department by "cutting excess infrastructure. 1986. resulted from Secretary of Defense Richard Cheney’s Defense Management Review report to the President in July 1989. by presidential order. On October 1. Further implementation of reorganization recommendations. eliminating redundant functions and initiating common business practices. such as inventory management and distribution functions.

and weapons system repair parts in response to over 2 million requisitions.S. in April 1991 the agency provided over $68 million of food. Virgin Islands (1995). Reorganizing for the 1990s During the 1990s. the agency provided the military services with over $3 billion of food. The military services retained responsibility for contracts covering shipbuilding and ammunition plants. and medical supplies to support a major land and air relief operation designed to aid refugees-mostly Kurds in Iraq. however.from bread to boots. . contract management. In December 1995. the services’ responsibility (5.S.Command (DCMC). As part of Operation Provide Comfort. absorbing its Defense Contract Administration Services into the new command. In those first critical months. and technical and logistics services to all military services. Closer to home. forces had redeployed.S. the agency supported relief efforts after Hurricane Andrew in Florida (1991) and Hurricane Marilyn in the U. In October 1994 DLA deployed an initial element to support operations in Haiti and established its first Contingency Support Team. from nerve gas antidote to jet fuel . and several allied nations. military. Operation Desert Shield began in August 1990 in response to an Iraqi invasion of Kuwait.S.400 personnel and 100. unified commands. DLA support continued in the Middle East long after most U. During this operation and the subsequent Operation Desert Storm. most of the supplies transported to Saudi Arabia .came from DLA stock. In June. The mission execution included providing supply support. The quality of supply support that DLA provided American combat forces during these operations earned it the Joint Meritorious Service Award in 1991. medical supplies. textiles. clothing. DLA supported other contingency operations as well. textiles. Soon after President George Bush announced the involvement of the U. the first element of a DLA Contingency Support Team deployed to Hungary to coordinate the delivery of needed agency supplies and services to U. the agency’s role in supporting military contingencies and humanitarian assistance operations grew dramatically. clothing. the agency was at the center of the effort to support the deployment to the Middle East and later the war.000 contracts valued at $400 million) for managing the majority of weapons systems contracts was transferred to the Defense Contract Management Command. military units deployed in Bosnia and other NATO forces.

Los Angeles. The Base Realignment and Closure (BRAC) process. Until September 1997. two regional offices . Defense Distribution Depot Oakland. and Mid Atlantic respectively.7 million spare parts. unified materiel distribution system to reduce overhead and costs and designated DLA to manage it. and St. The system consisted of 30 depots at 32 sites with 62 storage locations. Utah were disestablished. As a result of BRAC 1993. The Defense Distribution Depot Charleston.Defense Distribution Region East in New Cumberland. Boston. and the Tooele Facility. managed a vast network of distribution depots within their respective geographic boundaries. Specifically. The consolidation began in October 1990 and was completed March 16. Richmond. reducing overhead costs. instituted in 1993. subsistence. Defense Distribution Depot Ogden. Defense Contract Management Regions Atlanta. and other consumable items worth $127 billion in 788 million square feet (73 km²) of storage. The Defense General Supply Center became the Defense Supply Center. Throughout the 1990s the agency continued its effort to eliminate managerial and stockage duplication. . they closed two of the five contract management districts and the Defense Electronics Supply Center. North Central. California. and Defense Distribution Region West in Stockton.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. Defense Contract Management Regions Cleveland. Chicago. In response to BRAC 1993. realigned. Northeast. Louis were disestablished. They later merged into the Defense Distribution Center. which stored over 8. 1992. or closed several DLA primary-level field activities. In April 1990 Secretary Cheney directed that all the distribution depots of the military services and DLA be consolidated into a single. In August 1990. New Cumberland. 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. Dallas. and Philadelphia were re-designated as Defense Contract Management Districts South. West. Defense Contract Management Districts Mid Atlantic and North Central were disestablished in May 1994. officials merged. New York. Pennsylvania. significantly affected the way the agency organized for its contract administration and supply distribution missions.

only 6 organizations. managed. The agency assumed a major logistics role previously performed by the military services. renamed the Defense Automated Printing Service. Virginia. Distribution. the agency re-engineered its headquarters to form integrated business units for Supply Management.Meanwhile. DLA headquarters underwent a major reorganization. transferred to DLA. and the agency’s Defense Material Management Directorate became the Defense Logistics Support Command under Rear Admiral David P. . would report directly to the Director.3 billion. In November 1995. and Contract Management. rather than 42. procured. In late December 1997 and early January 1998. and other changes in the 1990s better positioned the agency to support the war fighter in the next century. 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. Keller. In March 1993. thus eliminating much wasteful duplication. The reorganization. Defense Printing Services. move to electronic commerce. Since its establishment in 1961. the agency has successfully standardized. As a result. the headquarters was again realigned. In October 1996. 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. and distributed DOD consumable items throughout the military services. In 1996 the agency received a Joint Meritorious Service Award for saving DOD and the taxpayer $6.

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