You are on page 1of 10

Special Issue on: "Challenging Research Issues in Logistics Management

Guest Editors: Dr. S. Arunachalam, University of East London, UK Dr. P. Asokan, National Institute of Technology, India Dr. T. Sasikumar, Lord Jegannath College of Engineering and Technology, India Companies today face numerous transportation challenges, including rising fuel costs, new regulatory mandates and global operations with higher levels of lead time variability. Customers have increasing demands for transportation performance, higher on-time delivery performance and reduced damage-in-transit. They expect transportation providers to be flexible and quickly adapt to order changes. Add to all of this an increased need for global freight visibility and control, and companies are scrambling to find the right solution to quickly address these challenges. Transportation and logistics management accomplishes this by supporting processes including carrier contract negotiations, transportation network modelling, shipment order handling, freight planning, order execution and monitoring, and freight financial settlement. Logistics is the system of managing and regulating the movement of goods, services, information and other resources from supplier to final user. The main objective of logistics is to co-ordinate these activities in a way that meets customer requirements at minimum cost. It involves the integration of information, transportation, warehousing, inventory, material handling and packaging. The field of logistics has now come to be considered as an immensely complicated responsibility. It is a normal part of the progress in the study of any business discipline for research simultaneously to become more rigorous and more applicable to practitioners, hence the decision to publish a special issue devoted to the topic.

Home > Strategy > Top 10 logistics challenges for 2012 (and beyond)

By Clifford F. High fuel costs and further regulation of engine emissions and carbon footprints. supply chain costs increasing. The economy. Although this is down slightly from 2011 levels. but the end result will be higher transportation costs. They are as follows: 1.STRATEGY December 19. I've put together a list of 10 developments that supply chain executives should keep a close eye on over the next 12 months. Some increases have already been taken or announced. it is still 25 percent higher than it was in 2010. Many truckers sold off equipment during the downturn. managers will be challenged throughout 2012. and no doubt beyond.73 per gallon in 2012. Here's what to watch for. 2011 COLUMN | FASTLANE Top 10 logistics challenges for 2012 (and beyond) The economy may be on the mend. Capacity. First and foremost has to be the economy. 3. and resources decreasing. diesel fuel will average $3. Despite rising rates. The price of diesel. 2. and continuing battles over driver hours-of-service regulations and safety initiatives like CSA 2010 could exacerbate the problem. will result in higher truck rates. Rising truck rates. it appears to me that at best we are in a very slow recovery. Lynch • Email • Print • ShareThis • Reprints • 3 Comments What issues bear watching in 2012? Once again. We will see upward and downward fluctuations. With unemployment fluctuating between 8 and 10 percent. Look for more in 2012. as well as possible driver shortages. . the threat of capacity shortages remains. According to Department of Energy forecasts. but the logistics/supply chain community will still face challenges throughout the year. Although the recession was declared officially over in June 2009. 4.

5. where large ships will be unloaded and their loads dispatched on smaller vessels to various U. but the hope is that each state will be given the option to increase weight limits on its own portion of the interstate highway system.000 pounds from 80. carriers and more. where tests have been under way. 10. but the idea of guaranteeing that every package and every container is safe boggles the mind.) The Senate recently approved higher limits for Vermont and Maine. Increased truck weight limits. but the government and carriers will likely scramble to do so every time one develops. We can expect action on infrastructure. or the environment. ports. carriers. third-parties. 6. Efforts to tighten security in the supply chain will continue. In spite of the need to move swiftly on some of these issues. 7. Ocean shipping. and Congress is in seemingly hopeless turmoil and conflict over jobs. The infrastructure continues to deteriorate. Logistics is responsible for the movement of products from your vendors right through to the delivery at your customer's door.000 pounds for vehicles equipped with six axles. but they will pay off in the long run. safety. 9. Security. It will be impossible to plug every leak.S. and transport goods in environmentally responsible ways. customers. The election. but the extra axle would enable the vehicle to handle the additional weight without any negative effects on highway infrastructure. spending. such as . and other important supply chain initiatives to be delayed until after the November election. look for continued expansion and retrofitting at Gulf and East Coast ports in order to accommodate the new post-Panamax ships. fuel costs. With the Panama Canal expansion proceeding on time and on budget. Congress will almost certainly place the election agenda ahead of that of the supply chain. and service providers to store. Truck size would not be affected. The green movement. Many shippers and carriers back an initiative that would increase truck weight limits on certain roads to 97. 8. there is strong evidence that just the opposite would be true. including moves through manufacturing facilities. and other issues that are all tangled up with infrastructure. I can't imagine this getting a lot better within the next year. rather than the usual five. Infrastructure. Logistics is a process which interfaces and interacts with the entire company and with external companies. We can expect to see continuing efforts by shippers. Many industry observers believe we will also see port expansion in the Caribbean. the new Keystone XL pipeline project. warehouses. handle. vendors. These will not always be the least expensive methods in terms of capital outlay. (In fact.

if the destination is on the East Coast. customer service or whatever. Or. It must also move . it may require a mix of ocean and air modes to keep a smooth pipeline. carriers. especially if there are significant swings in volumes and requirements. But there is more. So the movement must be able to adjust and deal with the swings in business activity. similar to the multi-carrier approach but staying. to. You must know what orders are coming in and when they must be delivered. not just move. perhaps. logistics must deal with all of these. The movement may be extremely broad in geographical scope. a mix of MLB service and all-water. warehouses and customers. Rush ship an order. For effective logistics. This is required by your customers and. If it does not flow. there are five key issues-• Movement of product. trading off transit time and freight costs for sea freight service. Or a mix of fast-boat and slow-boat transit time ocean carriers. Products moves should complement the corporate strategy. It is more. between and among vendors. manufacturing sites. Forecasting may be the weak link in all corporate planning and execution. This is often the way that logistics is viewed in many companies. You must know what inventories are where and if critical action is required. and/or a multi-carrier and/or multi-level service program to keep the global supply chain moving smoothly. If the emphasis is on cost reduction. You must know where they are. The movement plan must be flexible. It is not shipping and receiving. It is not enough to move product and materials. Product must also flow. lower inventories. For vital for sound decision-making.repackagers or distributors. nor is it traffic or warehousing. then products must move in a way that is consistent with the emphasis. Everything must move. Raw materials and completed units can move between and among all regions of the world. • Movement of information. with the same steamship line. Instead there are imbalances in inventories with components and finished goods not being where they should be. Logistics must make work effectively. warehouses and customers. Expedite in a component. Information-timely and accurate-. While other departments in the company may focus on select geographical regions for sourcing. then there is not a supply pipeline. The information must flow between the company and its suppliers. manufacturing or sales. This may require a multi-mode. forwarders. by your company. in turn. from.

Hours may decided customer service. the more critical is time. Since logistics is a process which interacts with many other groups in the company. Back orders are not tolerated. material requirements planning. Yet time delays are not acceptable. transmit Advance Ship Notices. distribution requirements planning. and more. It must be able to receive orders via EDI. Investment in information technology is not an alternative anymore. with barcoding and scanning. Distance means time. your corporate culture. track inventories at various levels. and how well everyone works together in your company. warehouse labor. sales. It may not even be days. warehouses and customers. It is no longer months or weeks for lead times. public warehouse charges and other . it is fundamental that a corporate system be in place. production planning.internally among purchasing. faxes and phone calls. Each in turn takes technology. These satisfy the operations/reactive and the planning/anticipatory needs. If your company cannot properly respond. Systems should exist at the macro or corporate level and view. shipment tracking for example. The ability to respond to the dynamics of the global marketplace--changing forecasts. Time/service is a factor of competition. logistics. • Cost. Service is more than having to expedite a shipment. Raw materials and components must be ordered and arrive completely. and how to manage all these changes--must be done quickly. accurately and quickly. new product introductions. your company's position in the industry. And the more diverse the geographical scope of vendors. customer service. And doing this goes beyond Email. Movement of product and movement of information show their impact here. cross-docking. manufacturing. accommodate multiple warehouse and plant locations in both a single site and aggregated views. Cost is the key measure by which logistics effectiveness is often measured. marketing and accounting. competitiveness and value-added. your customers will look for those who can. manufacturing. Logistics is the link among all this. There must also be systems at the micro. Freight. It has to be dynamic for handling customer orders. it is a requirement for logistics and corporate effectiveness. new sourcing. • Time/service. Orders must be filled completely. such as eaches and cases. finance and sales forecasting. customer requirements. or logistics level and view. how well everyone in the global supply chain works together. customer requirements. Programs are needed for warehouse management. accurately and quickly.

such as freight and warehousing. and it may not be the service you need. Effectiveness requires that each relevant element of the organization do its part. can suboptimize the effectiveness of the logistics group and of the company in satisfying its customers. Warehouses in other countries will invoice in origin currencies. Each silo segments and collects different parts of the vendor purchase/manufacturing/sales activity and stores it. The organization chart. Currency conversion and dynamics can create unfavorable or favorable cost variances which have nothing to do with logistics performance. There is no item in the P&L or balance sheet for Time/Service. The highest price does not mean the best service. . As you define your service against your costs or costs against service.items on the P&L. This creates an anti-process effect. The traditional organization with its boxes and defined responsibilities is a collection of functional silos. Air freight is quoted in the currency of the origin country. However there is a problem with doing this. There were designed when the Model A was being built and are not adequate in today's competitive business world. global logistics process. or seem to. containment. there is no ready mechanism which really makes proper recognition in costs for time/service or for adjustments in any part of the company plan. Ocean terminal and other accessorial origin charges are also in origin country currency. Cost control. which is the driver of a company's logistics efforts. a balance sheet item. They make discreet cost buckets in a weak attempt to measure a dynamic. Nor does the lowest price necessarily meet your needs. Logistics cost measurement is a shortcoming in the present accounting systems. Or inventory. and management is important for corporate profitability. • Integration--within your company. Logistics is a process. Then you have to make sure that the cost can be managed. Hence there is no process. However. a fragmenting of the process. Cost has a relation to service. Otherwise costs can go out of control. But the company must be careful. They go hand in hand. Fiscal stewardship is a duty of all managers. Minimizing the cost of the various logistics elements. There is no doubt about how important costs are. In addition there may be other issues such as currency conversion and fluctuations. Integration--bringing it all together-within your company is vital. between you and your customers and between you and your vendors. There is a compartmentalization. the give and take develops into your operating costs and budgets.

What to Expect When Logistics Problems Surface | Article Outsourcing Center. That is functional silos. A face-to-face discussion with him about his requirements and how you will meet them is important. Integration with customers is important. must understand what you are doing and why. time/service. Conclusion. This is a competitive advantage. movement of information. Partnerships and alliances can be developed or enhanced. cost and integration. Effective logistics revolves around five key issues--movement of product. Staff Writer | April 1. This shows how much you value him and want to work with him. It is not enough to a company to tear apart the written requirements and hand them to various departments. You and everyone in your company must be working and satisfy your customers. 1999 | no comments . including your carriers and warehouses. including its customers. It interacts with almost every group within the company and with many companies outside the company. You must share your logistics vision and plan with them. Your vendors. That is not integration.In addition to internal integration. you must bring together and work with the external players. Logistics is a process which runs from the vendor's door through to the customer's. What does he need? How does he need it? Why does he need it? When does he need it? The more you know about your customer and his needs. the more valued of a supplier you are to him. Each of this is critical to the success of logistics and to creating value-added to the company and improving competiveness. Meeting with key customers is very good. You should review written customer requirements with everyone in the logistics department and with everyone in the company. This sharing and understanding will better enable them to cooperate with and assist you. They may be able to offer ideas and gainsharing to further improve the logistics effectiveness and the key issues with it.

“There is not one software product that can handle all the complexities of an entire warehouse. 1995. As investors waited almost a year and a half for the glitches to be worked out they swam in a sea of red ink that was swallowing them up at the tune of $1. Even if the product is lost or damaged during fortuitous circumstances like an explosion or a train derailment. Raysman notes that there are no legal restrictions on the penalties that can be accessed to vendors for service levels not reached. which is not unique to logistics. counters and claim areas of over 20 airlines. Raysman says that service levels in logistics outsourcing involve loss and damage issues. These types of contracts usually state that once the product is handed off to the logistics supplier the responsibility of losses or damages remains with the supplier until the product is dropped off at its final destination. So the penalties can be whatever the sides agree upon. Raysman says that it often has to do with interface issues. it often passes like the wind as system bugs infiltrate the systems and cause nightmarish delays. it is still the supplier’s liability. But a system of 5. There are certain laws in place. But even if this is agreed upon and the logistics outsourcer accepts the replacement value. and the interface between these esoteric programs can cause difficulties.When technology is handed from a customer to a third-party logistics provider it can often handcuff a company in the beginning. weight programs and packaging programs. mentions the Denver International Airport debacle as a prime example of what can happen. the customer pays in the end because the outsourcer buys insurance and passes the cost of that onto the customer. but the parties are committed by a contract that overrides existing laws on penalties. “There are a list of programs including inventory programs. Though not on this scale. the airport sat empty for 16 months after construction was completed. And often even if there is a promised installation deadline.” It is often a challenge to get these systems implemented and it can be quite frustrating for the customer who has to wait it out. Slated for an opening in October 1993. 100 computers and 56 bar code scanners was not working properly. Attorney Richard Raysman of Brown Raysman Millstein Felder and Steiner in New York. 400 radio receivers. “And if unexpected delays go on for three or six or nine months before a warehouse can actually be put into use. It was touted as an airport twice as big as Manhattan and a marvel of modern engineering. which has nothing to do with negligence. there can be quite a serious loss to the customer. The system controlled 21 miles of track that routed baggage through an underground cavern that connected the gates. Vendors promise a more efficient running warehouse and speedier deliveries after implementation or integration of new technology. IS problems are common. two others go south. And most often found at the top of a list of difficulties are information system (IS) dilemmas. The airport was to be the eighth wonder of the world. The meshing of different software programs can lead to problems.” Raysman says. Working Out Service Levels Other problems involve service levels. for every six largescale software systems that are put into action. . Sometimes when a logistics outsourcer takes over warehousing operations they have to reengineer an already existing warehouse. but a lot of times an entirely new warehouse is built and then outfitted with technology.Problems that surface in logistics outsourcing deals often revolve around a few specific areas.000 electric eyes. 28. and product delivery specifications.” he says. but what isn’t always promised is a speedy installation. finally opening to skeptical travelers on Feb.1 million a day in interest alone. According to Scientific American.

termed “performance credits. and the customer will eat that amount. he says. and protection of proprietary rights for intellectual property that the vendor brings to the table.” he says. “The vendor gets. “and it tends to be tricky. “Logistics is such a key element of a customer’s business and can make negotiations difficult.” Applying Performance Credits There are also other acceptable penalties. From the supplier’s point of view they have to understand the pricing. The other complex part is allocation of risk of loss.” From the vendor’s point of a view there are certain absolute requirements that must be in the contract.000 a year. algorithms. These include pricing. which means the vendor is covered up to a specified dollar amount for damaged or lost products. Customers may look at their own loss and damage experiences in the past and use them as a baseline for the third-party provider. “Customers are very nervous about handing over full control of shipping and warehousing to an outside vendor. Because of the complexity of the numerous service level agreements. Performance credits can be negotiated into the contracts. It has to be made perfectly clear when the risk of loss passes from the customer to the supplier and when it is handed back from the supplier to either the customer or the final destination. but not impossible.” .” he says. he says.” which a customer can receive from a vendor for delayed shipments. If the shipment isn’t delivered within the agreed upon time frame there will be a credit of some amount and those amounts are negotiable against future payments.” Raysman says.Raysman says that there is sometimes a certain amount of nominal loss that is built into the agreement. Raysman says that it is surprising how often pricing algorithms are not understood by the supplier and the vendor. “Anything that is lost or damaged over and above that would then be allocated to the vendor. the first $100. Raysman argues that logistic outsourcing contracts are among the hardest to write. for example. the limitation of liability arrangement. “There really has to be full discussion and a meeting of the minds as to how all of this works.

At physical inventory time. Returned products carry double freight bills and the invoices will not be paid until credits and adjustments are issued. Using the Web can increase sales drastically. when found. . Misplaced inventory: When consolidating items on shelves. shortage of saleable items or excess inventory. nobody paid attention to the "landed cost" accuracy. and possibly missing the early payment discount date offered by the vendor." In previous years in a less competitive market with a higher gross margin of profit and a stronger dollar. • • Production coming to a grinding halt: Not having accurate inventory control will result in parts' shortages that can bring the assembly line to a grinding halt. not being able to scan and verify it against the purchase order will result in excessive paper work. resulting in business disruptions. Having outdated software will result in incorrect shipments. higher labor cost. Purchase order verifications: When inventory is received at the warehouse. assuming it would "averaged itself out. this "lost" inventory often becomes excess inventory that might not be sold. Profit or loss when using the Web? The Web can be a key to sales' success or business disruptions. or result in disruption of the back office business flow. often it will become excess inventory. inventory often gets misplaced resulting in unnecessary replenishments. If the shipped inventory is replenished.Supply Chain Logistics Common Issues Not having accurate control of the various "landed costs" was a fact of life this distributor learned to live with saying: "it's the cost of doing business. Wrong shipments: When incorrect products or quantities are shipped it creates the "domino effect" of business disruptions." Common Issues • • • • Buying based on "guesswork": Not having accurate computer information will result in purchasing the wrong products or quantities and the unsold inventory will "collect dust" on the shelves in the warehouse.