International Logistics

Exam
- The slides with question mark!!!
- Multiple choice questions
- Reflection questions based on examples discussed in class
- List elements
- Goal of this class: make us aware of the impacts, opportunities, BM, etc on logistics
and strategic reflection to be successful and avoid failures. Should be aware of
neglecting SC elements in the business decisions. DONT LEARN BY HEART

Group assignment

 6 out of 20!
 Groups of 4! – Maximum 12 PowerPoint slides
 Bullet point format- no long sentences
 Respect a tender process
 Homework to be submitted with names of student number, the cie name, and he
wants that by email, and get approval for topic before starting. We should submit our
work on 17th of March.
 Homework of Amazon will be posted on Moodle

Reflect on a supply chain resilience (what is SC resilience, robustness?) and explain one
concrete example of how a company who improved its resilience or suffered from a lack of
resilience. It will be interesting to link this with the Covid-19.
1. Short description of what supply chain resilience is, what does it mean?
2. What are specific elements that we should consider to increase supply chain
resilience., focus on international aspects
3. Find 1 company of our choice
- What did they do to be resilient?
- What did they change to become resilient?
- What was the impact of not being resilient?

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INTRODUCTION

CFL Freight Activities

How does a logistic company present itself?
Let’s see a video of CFL Multimodal in Luxembourg. 6 companies in the European countries.
A global service provider. CFL is one stop shop. Tailor services to customer’s needs. When
there is a need, they provide a solution right for the client. CFL is a future forward company
that wants to continue with improvement. Connects main ports and economic activity
centres. Maintain a responsible approach in their industry. Freight transport.
Strategy of continuous improvement in all their centre of expertise.

What is logistics?
Logistics is about transporting stuff but it is much more than that, not only driving stuff from
a point A to a point B.
There is also optimization, organisation, supply chain. Finding logistics solution and setting
up logistics. Logistics is also about sourcing stuff, customer services as well. Logistics is not
only about transporting stuff from one origin to a destination. It’s much more than that.

What needs to be "good" or "right" to have good logistics?

Optimize costs, right tools, organisation, environmental. Timing, deliver at the right time, we
need to have the right tools. We need to have the right customer services. We need to have
the right customer. Even if we have a good logistics but not the right customer, it is not
useful.

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COURSE 1

PART 1 – Definitions

What is logistics?
 Transport
 Warehousing
 Distribution
 Intralogistics: facilitate flows within a firm using digital, internet of things, etc.
 Purchasing
 Packaging: when we transport things, raw materials, individual parts, packaging is an
element of that
 Information

Logistics as a flow. The most important thing is that is not just ‘trucks and sheds’ (sheds=
hangars), so transportation and storing stuff.

What is needed for good logistics? The 7R’s exam

We need to have the right product, in the right condition (temperature control, …), in the
right quantity, in the right place at the right time. Logistics involves develop a solution for
the right customer at the right cost.

NB: condition= product not damaged, the right temperature, etc.

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Supply chain & logistics
“The supply chain is the network of organizations that are involved, through upstream and
downstream linkages, in the different processes and activities that produce value in the form
of products and services in the hands of the ultimate consumer”.
Fine line between what is logistics and SC management
 SC management: Supplier + logistics + customer
“It is the management across and within a network of upstream and downstream
organizations of both relationships and flows of material, information and
resources”.
More complete, include upstream and downstream, everything that is required for
order fulfilment. Cross all the stakeholder that come in the way of creating value for
the company, enhance efficiency and satisfy customers.

 Logistics: material management (stocking, warehouse, …) + distribution (so the

transport)

 Traditionalists: supply chain inside of logistics

 Unionist: logistic is part of supply chain.
The teacher is more “unionist”, he’ll talk more about SC than logistics

The evolution of log SC management

Everything was separated and then everything was put together, and that was called supply
chain. SC managers need to have a lot of competences.

6 recent major developments: exam

 Reduced transport intensity of freight:
o Intensity of freight = value creation of these products
o Means that in the early days of transportation or logistics, there was a lot of
bulk & raw material transport (sand, coal, …) and through time the type of
product transported have changed : the intensity of freight= the value
creation and the size are different.

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 o We have increased the transport of raw materials and that explains the
decrease of transport intensity. The value is added near the consumption
point.
o Transport costs are less sensitive  increased value / decreased volume
 Falling product prices: the consumed products’ prices have fallen drastically, so huge
impact on how SC needs to be set up. The costs of transport have to be lower!
 Deregulation of transports:

o The EU is for the freedom of goods, workforce, and deregulation is part of the
European goals and laws and gave a lot of opportunity to develop. They now
allow private companies to use the old public infrastructure. Other counter-
competition rules were put in place.
o Example of the railway transport : In the past the infrastructure and the
railway operator where the same companies. So today old monopolist players
have heavy market shares, but deregulation have allowed company to enter
these markets, laws are now allowing competition! The infrastructure is
obligated to accept other players to operate on the railway.
SNCF cargo, SNCF, ICR are competitors. In France we have high competition
with SNCF: Euro-rail, ECR, regional railway companies, etc.
 Productivity improvement: that implies less costs.
 Emphasis on inventory reduction: inventory is money. There are different types of
cost related to inventory (just in time)  important development!
 Changes in company structure:
o Less vertical integration, which means that they don’t do everything from A to
Z, so it goes in pair with the increase of outsourcing.
o Less silo, more transversal: the structure is more flat, less hierarchical
o Bigger and more international: we have logistics experts who consider
logistics across larger companies.
o There is a corporate focus on logistics.

Key flows in SCM

Physical flows of materials and flows of information that are even more important to
manage the SC properly. We can’t underestimate the importance of having the right
information.
Importance of the resources tangible or intangible (finance, people, equipment,
intercompany relationships …) to operate SC effectively.

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Application to manufacturing & services exam
SCM can be used to generate both cost savings and services enhancements.

Triangle: Cost, quality and time, we can improve it by managing capacity utilization, how our
assets are used, how we manage our inventory, can help us to work on our cost, quality, but
also to work on our services (to be more responsive, reliable, etc).

Robust logistics strategies enable the entire SC to compete:

 Example: Ikea
Embedded the SCM in their design level: ‘flat packed’ products, simplified &
standardized processes. The products are designed for logistics: to save costs on
logistics, maximize the volume used in sea containers, the boxes fit in our car (they
are designed to optimise transportation as well)
 Example: Triage
Medical triage= when the number of patients to be treated exceeds the care
capacity, determines which patients have priority and the order in which they will be

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 treated and evacuated, with the objective of saving the maximum number of people.
Usually with bracelets of colours.
Used in hospitals, rapid assessment of patient needs, matching patients with the
right care stream as early as possible according to the gravity of their injuries.

PART 2 – Next generation SC

Supply chain success factors exam
1. You can have it all. Companies that focus on improving their supply chain
performance (= think of SC as a strategic asset) achieve much better financial and
operational results than their peers do. The ones that do it achieve 70% higher
performance.
Ex: inventory turns, deliver OTIF (on time in full = ratio between the "delivered"
completely without error or damage on the date requested by the customer and the
"ordered" for that date)
2. Focus on best-in-class delivery, flexibility and costs in order to meet increasingly
demanding customer requirements: If we focus on ‘on-time delivery’, we have a
higher success rate. Stay resilient helps to cope with customer requierments.
3. One size doesn’t fit all: you cannot do everything so you need to tailor-made your SC
solutions for all aspects of the company. The same SC solution won’t be ok for all
times and for everyone, need to adapt to the needs of the ≠ customer segments.
4. Retain control of core strategic functions if you outsource, keep control of what we
outsource and not do it irresponsibly. Need to know what you outsource and why
you do it.
5. Digital, assets, competences of people: leaders invest more heavily in differentiating
SC capabilities.
6. Interest in next generation technologies and sustainability in SC.

Maximising value of SC exam

In terms of where to focus, or how do we create value through the SC.

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 1. Maximize delivery performance and minimise costs: measure on time performance,
and goals that are achievable. Don’t start with the end of the chain with tax
optimization. To create value, we need to value on time performance.
2. Maximize volume flexibility and responsiveness  agility, adjust and optimize it.
3. Manage the complexity of your SC, minimise the risks by making sure volatility risks
are shared with partners and suppliers, try to understand it, sustainability = optimize
resilience of SC
4. Then only tax optimisation & efficiency

There is more to win in the beginning than in the last part of the graph.

PART 3 – International logistics elements

Specific international elements exam
What are specific elements that we would think about when we think about international
logistics? What is different when we do logistics across countries?
- Customs clearance
- Specific contracts and terms
- Exchange rates
- Different players
- Different modes of transport
- +
- Regulations: contracts, rules, paper work (for Brexit for example)
- International law: we need to understand the local legal constraints
- Rates can differ a lot on the international level.
- Trade rules / Incoterms: we need to understand the conditions and how is
responsible for what.  Sea freight plays an important role
- Planning and the complexity linked with the international environment
- Language, culture divergence
- Different quality/ performance levels. What is normal for us is not the same
elsewhere.
Example: India, when we transport goods, they do 100 km per hour. In India, the
scale is different.
- Geopolitics which can change from one day to the other
- Insurances
To conclude, international transport is very complex. The key element is that there are much
more unknowns when we go international than when we go national. We should try to
eliminate as much as we can the unknown.

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Measurement of Logistics
There are tools to help us understand the logistic aspects in the different countries.
What kind of criteria we need to take into account when we rate the logistics of countries?
The World bank ranks the countries on the logistics performance index.

Video: Unknown terrain

Logistic are the back bone of international trade: connecting to global value chains, trade
facilitation, efficient multi-modal transport, efficient distribution, sustainability  SC
efficiency is the key!
But there is a gap between high-income countries and developing countries even if they are
catching up. Reforming logistics is complex.
The World bank establishes a ranking (= LPI, the logistics performance index) every 2 years
for measuring logistics performances based on 6 indicators: border control agencies,
infrastructure, competitively priced shipments, tracking and tracing, timeliness and quality of
logistics services.

Measurement of Logistics performance index = LPI exam

1) Efficiency of the clearance process (i.e., speed, simplicity and predictability of
formalities) by border control agencies, including customs;
2) Quality of trade and transport related infrastructure (e.g., ports, railroads, roads,
information technology);
3) Ease of arranging competitively priced (international) shipments.
4) Competence and quality of logistics services (e.g., transport operators, customs
brokers);
5) Ability to track and trace consignments (pallet for instance, the minimum packaging
you can handle);
6) Timeliness (reliability of timing) of shipments in reaching destination within the
scheduled or expected delivery time. It is done on a world wide scale to be able to
score.
The last report dates from 2018 (see appendix of course 1). https://lpi.worldbank.org

Wooclap:
How many EU countries are in the top 3 2018? In the ranking of 2018, there are 3 top
European countries: Germany, Sweden and Belgium.
The first Asian country is Japan; Singapore is in the 7 th position. The USA are not in the top
10!
On the webpage of the world bank, we can find a lot of information on the countries. We
can find different information in terms of logistics.
China ranks 26 in 2018 and in terms of custom clearance it is quite low. If we compare China
with Japan, Japan is better and in terms of digitalisation, logistics competency, reliability they
are much higher.

Incoterms exam
INternational COmmercial TERMS

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Incoterms have been updated recently in 2020. There are incoterms defining the
responsibility between the sellers and the buyer of the goods. When we talk about defining
responsibility in incoterms it is in terms of costs, risks and insurance of the goods.

We can put them into 4 groups:

- E group: only EXW
- F group: transport not paid by the seller
- C group: transport paid by seller
- D group: destination bound, the destination has an importance in the use of the
incoterms. Delivery duty paid (duties that need to be paid will be paid by the buyer).

https://www.xeneta.com/blog/incoterms for more info

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New releases 2020 exam
What has changed in 2020? Not a lot. There is no added value in knowing the key changes to
incoterms, only for trade specialists.

1. DAT Incoterm changed to DPU

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 2. Insurance points are clarified in CIF and CIP incoterms rules
3. Costs and cost structures are now clarified
4. Security in relation to transport is now clearly detailed
5. Provisions to allow for own transport rather than assuming 3rd party transport 6.FCA,
FOB and Bills of Lading
6. Presentation and design is much more user friendly

Purpose of incoterms exam

In the international logistics, it is to create a vocabulary to make it easier logistics
connexions, contracts, with other parties and countries.

 Eliminate barriers caused by distance, language, and local business practices in

global business dealings
 Provide a universal vocabulary accepted by all of the major international financial
institutions
 Eliminate uncertainties and different interpretations of trade terms on a worldwide
scale
 Reduce the risks, delays and disruptions caused by misunderstandings, disputes, and
litigation
 Minimize problems at critical points.

Out of scope of incoterms exam

- When is the property rights of goods transferred?
- There are still some liabilities involved, it doesn’t’ free us from any
responsibility/obligations in case of unexpected or unforeseeable events.
- It doesn’t limit/mitigate or eliminate all the consequences of breaches (=violations)
of contracts. Except the things that are delimitate in incoterms: so the transfer of the
costs and risks. It doesn’t replace a contract!!

Selection of incoterms exam

There a couple of criteria such as:
- The amount of control wanted
- How well do we know the other party; the nature relationship between the buyer
and the seller.
- We need to consider the origin and destination country’s customs
- Know our internal capabilities to handle foreign exchange transactions. What are we
able to do? Accounting department’s ability to handle foreign exchange
transactions.
- Do we have a rep, a subsidiary in that country where we want to export or import
from? Physical presence in the country of origin
- What do we specify in our contract in terms of carriage rates/ price of transport?
Make sure there is a coherence between the different disciplines

Incoterm execution exam

- Attach a formal explanation of the Incoterm selected to the contract or purchase
order

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 - Request a confirmation of acceptance of all responsibilities of that Incoterm from
the supplier/customer
- Draw up a checklist of all duties and rights under the selected term and ensure that
all transactions are met and nothing is omitted. Request that the supplier/customer
also create a checklist + Exchange checklists
- Request that the supplier/customer change or add nothing or as little as possible to
the selected term
- Require signed acceptance in the event that a change or addition is required.

It can help to reduce risks but it still important to know how to execute the incoterms. We
can’t just request a formal confirmation to be sure that the other party understood what we
mean.
 “Explicit” is the key word here. We should make it explicit to talk about incoterms.

Incoterms examples
EXW: car transportation
- There is a car manufacturing in Metz in France that sold cars to Turkey. The point is
that the Turkish buyers bought the cars with the incoterms EXW (Metz), turkey was
responsible for everything from the firm in Metz but they weren’t able to take care of
the logistics themselves.
- They subcontracted the logistics solutions to Captain Solution (3PL/4PL), they
subcontracted the rail connection from Metz to Antwerp to Holnmayer an Austrian
company, but they subcontracted it to CFL cargo LUX.
- On the root from Metz to Antwerp, a lot can happen. Arriving in Antwerp, the cars
were damaged. But since there was a long list of suppliers, so who was responsible
for this damage? Since things weren’t clear, we didn’t who was responsible between
the seller, and the other subcontractor.

CPT carriage paid to: Coke transported from Poland to France: transport was only
responsible by the sellers until the border of Poland, the rest was taken care of by the
buyers.

PART 4 – Logistics service provider

The players - exam
Logistics service provider: we need people to execute the SC or logistics and the different
business solutions.
Logistics has become more important and has more awareness. The number of players has
increased.

What kind of structures or LSP - logistic service provider there are?

 Haulier/ trucking companies/ operators: considered first part logistic providers, the
people who transport stuff. Similar in air, sea, rail. One specific activity = 1PL (= party
logistics)
 International forwarders: similar to above but not necessarily all with their own
resources and across borders. They have resources in one country and compile other

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 resources and other players in other countries, they work together with other
companies. There are not just doing things by themselves, they do compilations of
other things. They do their own things but not with their own resources = 2PL
 Freight forwarder (freight agents/ brokers). They are logistics “travel agencies”, they
take care of custom clearances, they have warehouses, vessels, vehicles and have
other assets. They are called 3PL (contact logistics)
 Integrators: they take more responsibilities; it is an end to end service. Can include
picking, light manufacturing, reverse logistics, service logistics, inventory
management. We can integrate them in our SC, assembly, disassembly, finishing of
parts, … 4PL in case of total outsourcing of logistics aspects

Layers or logistics provider exam

- The main interest in 3PL and 4PL: transfer in true responsibility in supply chain
management, they have contract services, KPI’s, etc.
- 1PL and 2PL are more active in logistics itself.

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1) 1PL: standardized services. A venture or small enterprise that sends goods or
products from 1 location to another. For example, a farm that transports eggs
directly to shopping markets or grocery stores is a 1PL.

2) 2PL: complete transportation. An organization or enterprise that maintains assets like

vehicles or airplanes to transport products from one place to another. The same
local farm might hire a 2PL to transport their vegetables, cereals, or eggs from the
farm to the supermarket.

3) 3PL: packaging + warehousing included.

o Within a 3PL model, an enterprise asserts management supervision but
outsources operations of transport and logistics into a supplier who might
subcontract out some or all of the implementation.

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 o To add value to the supply chain, additional services may be done, such as
packaging, boxing, and crating.
o Taking the farm-to-grocery store example, a 3PL provider could be
responsible for packaging the vegetables, cereals, or eggs in cartons and then
transferring the relevant items from the farm to the grocery store or
supermarket.

4) 4PL: logistics companies optimizing logistics processes for their clients.

o In the 4PL model, a venture outsources the management of logistics activities
as well as the implementation throughout the supply chain.
o The 4PL provider provides management and more strategic insight over the
enterprise’s supply chain.
o A producer will utilize a 4PL to outsource its logistics operations. In this case,
the 4PL may strategically manage the 3PL on behalf of the farmer to package
and deliver eggs to the grocery store. They will handle the communication
with the farmer to produce more vegetables, cereals, or eggs.

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5) 5PL providers: the last two years, a new type of providers has appeared, especially
with the Corona crisis.
o 5PL is a rather new model (its roots come from the present decade we
operate in). It controls all of the operations in a supply chain with the usage of
information technology and combines the proven methods of 3PL and 4PL.
o A 5PL operator is a logistics service provider that plans, organizes and
implements logistics solutions on behalf of other commercial entities who
don’t produce or meet the customers anymore. They take the responsibility
to optimize and do improvements.
o The 5th logistics service supplier can fortify demand. Additionally, it
negotiates rates with other service providers, like trucks, airlines, etc.
o The businesses which outsource their logistics’ management functionalities to
third parties make a great illustration of such a remedy.
o The 5PL theory recently gained hype with the popularization of e-commerce.
o Along with the integration and management of a supply chain, the 5PL
organizations provide some other beneficial services, such as call facilities or
online payments  cash collection.
o Example of the farmer: the logistics company managers the farmer’s
complete SC network from production to delivery.
The teacher is not convinced with the 5Pl, because we should still have some control
on what is going on.

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Outsourcing exam
= The transfer to a third party of the management & delivery of a process previously
performed by the company itself
Importance of who we work with, how, what are the responsibilities, etc. Set of criteria to do
so. It seems easy but it is not.

Criteria exam
 Should be reliable for the delivery on time
 Quality certification
 Write up specifications, and do they fill my requirements? Conformance to agreed
specifications.
 Delivery lead time: how long does it take from origin to destination?
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  Financial capability of our potential provider/ supplier, how big will be our contract in
their portfolio.
 Look at reference customers they have, the performance track record.
 The price or cost reduction= what could we save and what is the opportunity in time
for this supplier to reduce cost.
 Senior management attitude
 Responsiveness to demand uncertainty: how they respond to unforeseen event,
flexibility capacity, etc.
 Look at their corporate social responsibility (CSR = RSE), their ethic, moral, green
strategy, their CO2 emission etc.
 Etc…
What are the different steps to do a successful outsourcing of the SC? We talked about the
different layers, the criteria when outsourcing

Example of houses / what could be a logistic solution, 3PL/ 4P; set up

Transportation is by rail from Antwerp to Bettembourg. In Bettembourg the containers are
unloaded and are stored (which is managed by CFL multimodal). There is a difference with
normal storage and the hot house. Hot house is a heated warehouse (50° degrees).
Based on very flexible and evolving demand, they are delivered by road just in time or just in
sequence to the production plants. There are many types of rubber. We need to deliver by
the hour the right type of rubber, at the right temperature to the different sites. It is a
complex logistic set-up.
And we talk about 15-25 container per day.
It shows the complexity, the holistic services that can be delivered and offered to the
customers.
Those containers need to go back to Rotterdam/ Antwerp, but they manage the empty
containers as well to bring them to some depots etc.
Customs declaration: custom clearance to be done in Antwerp and Rotterdam because the
goods came from south America etc.

To manage all of that, we have to be as much digitalized as possible.

L’Oréal example: it was sales pitch

A tender document how it is set up. Show that we have the required expertise and that we
have the access to the different type of shipping requested, showing that we have a digital
footprint.
Processes when we guarantee control.
It is complex to do a pitch for a 4PL contract. It takes time and energy.

Example: Amazon has a service that goes close to the 5PL. They advertised a lot about AWS
(Amazon Web Services). For the first time, the AWS contribute for more profit in their
balance than the other activities. They have realized that their competence is not having an
e-commerce platform but executing logistics. They can foresee with artificial intelligence

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that a demand is coming from a place, and they ship things before any demands is
submitted.

SC Integration (not for the exam)

- When we have organisational integrity
- Integration: we share the same data, we are on the same communication or data
channels, people are in the organisation of the provider. We integrate structure
process tools. There are more risks in terms of integration: dependency, etc.
- Consider integration when we have organization maturity at both sides, or we can’t
manage or digest integration and keep the model intact.

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COURSE 2

PART 1 – Modes of transportation

Wooclap
1. All the modes: Air, road, sea/water, rail, pipeline for some specific goods
2. Sort the modes from most to least used 1995 in EU?
o Road
o Rail
o Water
3. Proportion of road in 1995: 70%
4. In 2010 the proportion was 80% (in 2018 75%)
5. What could differentiate the different modes?
o Cost yes
o Speed even though it is not absolute (air is not always the fastest as we have
to go to the airport)
o Risks, security
o Administration, paperwork can differ from one mode to the other
o Flexibility
o Cross the borders, access to frontiers
o Reliability; resilience
o Infrastructure requirements  this is why road is so successful
o Distance
o Handling, how much is it required, how often, how to do it

Sea freight exam

- Cost economies (the most economic): what is the total cost (first mile and last mile to
take into account as we need to take the goods to the ports)?  the cheapest, boats
remains the most economic
- Availability widely available but fluctuating a lot…
Ex: at the beginning of the Covid crisis many boats were available but with the boost
of the online stores lots of capacity was sold out. Today we have problems with lack
of empty containers.
- Very slow: can have an impact on costs as well
- Need for double handling: ‘manutention’
- Delay problems: journey time unpredictable, pre-shipment, handling, weather (high
or low water, rivers/open sea, storms, piracy, …)
- Damage, especially during handling + costs of risks
- Intermodal = containers >< bulk= sand, coal, steel, etc. no container or repackaging
needed
- Long distance and short sea (distinguish inland and deep water): containers or not

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Actually many containers can be lost in the sea (see slide 12)
International road freight exam
- Most widely used: huge offer on the market & barrier to entry is low
- Geographical/legal constraints: not able to go everywhere in the world; cabotage
rules, rest times
- Very quick: matter of good planning or/and multi drivers. Because most of the time
we take it from place A to B straight away
>< airport where you need to bring the goods to the airport first or issue with
clearing, same for sea to go to the port.
- Complete loads: FTL. Reduced need for handling if full load: no pre or post transport
- LTL= less than a truck load  slower because part of a collection & distribution
centre before the delivery to the customer.
- Packaging cost minimal
- Competitive so price has come down (1,5€/km or 60 cents the km): price index very
dependent on market situation
- Flexible: go to any origin as long as you make good planning
- Not always green: with new technologies trucks pollute less (EURO 6 and electric)
but they use lots of infrastructures  burden for the government to repair the road
& traffic jam

Cabotage exam
= limited in the number of intra-EU deliveries you can do as a non-EU transport company.
Cabotage is the term used to describe situations where a foreign truck makes domestic
deliveries on the territory of an EU Member State right after an international trip from
another Member State or from a country outside the EU. Until now, EU rules allows for 3
cabotage operations within 7 days of the international delivery, then you have to leave the
territory. This was put in place as a protection to avoid too many low cost non-EU drivers 
regulate and enforce completion in the EU, yes, but protect in a way our EU companies
because there are hundreds of thousands of them. It is also put in place to force these
companies to comply with the EU regulations.

The new proposed rules (to simplify it) will allow for any number of cabotage operations
within 5 days of the international delivery. It’s important to understand that international
truck deliveries (between EU Member States) are fully liberalised in the EU, there is no need
to go back to the country of origin of the truck before a new international trip is carried out.
Only cabotage is still subject to restrictions.
Advantages:
o More sustainable: avoid empty trucks to reduce CO2 (in 2015, 23% of the EU
heavy good vehicles ran empty)
o Same rules within the whole EU as the allowed lengths are different
depending on the country laws.
o More flexible and simpler for drivers and companies
o Simple and realistic enforcement  no need to count operations anymore

On slide 18: the image below, the yellow stuff is used to put the truck on a train, for
intermodal use.

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Conventional rail freight exam
- Packing requirement: there can be huge shocks when trains are composed  single
wagon and you form a full train can receive big shocks and therefore damage goods.
- Often doubled handling: by road for instance to go to a station. Take the car truck on
slide 20. Transport from the factory to the station to put it on the wagon and risk that
something happens during that handling. Same with the woods, we have to take
them from the wood to the plant/truck, to the station, etc. So there is an increase in
the risks the more we handle it.
- Limited number of stations and loading sites (on industrials sites)
- In general, slow: exception intermodal
- Compatibility issues: Possibility of crossing boarders  start with a wagon but
unload and reload when we cross boarders of countries… Ex: go to Spain from Russia
- Technical constraints: difficult to have one locomotive to run everywhere in the EU
(in 5 or 6 countries, difficult to connect them all).
Ex: Different locomotive safety system within the EU
- Reliable: but cannot be generalized  issue on the track, the whole train is stuck
- Not expensive: “relative”, need to look at TOC= total cost of ownership: lead time,
first miles, packaging, last mile, etc.

Slide 20: coal, 6 month of study to make it happen because we had to remove some lights,
because it was too big, etc.

Air freight exam

- Very fast, but not always as there are pre and post transport. Also customs can take
time
- Restricted volume/weights: mostly used for high value weight ratio goods,
perishable, emergency supplies, spare parts, stops in the production line, etc.
- Expensive
- Lead-time economy: less stock
- Flexibility bookings: as long as the capacity is available. Enough capacity in the last
couple of years
- Security concerns: less in cargo aircrafts but still. Terrorism aspects, security can take
time but processes have adjusted.

Container & intermodal systems exam

Intermodals= different modes involved (see slide 21)
 Trailers: continue by road
 Containers for sea

- Consolidation of small units in one standardized bigger unit as there is not only one
type of container but a variety of them
- Reduction of handling cost: easier than to just ship smaller parts  you put them all
in one container
- Standardization: documentation, sizes, interfaces. Helps to speed up and push cost
down. Standardization of containers: easier when we have size to speed up and push
the processes.

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 - Packaging cost low: attention oversea requirements
- Damage ok: lower insurance cost
- Quicker turn around compared to conventional rail  Priority in the international
railway infrastructures as they need to catch the next transport mode on time.
- Good transit becomes possible

- Need for special facilities: terminals

- Big initial cost: unless carrier (2-3-4PL supplier who owes this kind of assets)
- Return of empties to be considered / asset management
- Containers may be damaged, leak, etc. Cost of maintenance of the containers.

Selection of mode exam

tsp= transport

1) Characteristics of the mode itself: like the speed, cost, etc.

2) Service required, what do you really need? Specific to your needs in terms of
transport
3) Consignment factors: volumes, bulk, pallets, etc. how are your good confined and
packed, what is the smallest unit that you transport
4) Operational factors & costs: access to a certain infrastructure that you would need.
o Volumes to be transported
o Distances
o Infrastructure of country (including communication)
o Trade barriers
o Export controls
o Law and taxation
o Culture and climate: Can your good corrode or not (go for or not for a sea
transportation)
o Pick-up and Delivery point constraints in time er dimensions
o Supply plant structure we have in our origin or destination plant
o Warehouse infrastructures and setup: close to an intermodal infrastructure or
not.

Other aspects:  Not learn them by heart but know that there are many elements to
consider when we need to choose a mode.

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 - Physical nature of good:
o Volume to weight ratio: 1ton of paper vs 1 ton of bricks / automotive vs
household
o Value to weight: jewellery vs coal
o Perishable, general, high value, bulk or consignment (pallet for instance, the
minimum hand-able quantity that you transport), etc.
o Hazardous products: explode or inflamable
- Routing and transit considerations: given by customer (I want to you pass by my
warehouse located there), national limitations, responsibilities?
- Distance: exclusions? Like waterways for mini distance or not use trucks for very long
distances
- Quantities: full load or part load, small size  can you go for containers?
- Unit load: can the load be unitized?
- Priority: does urgent really means urgent? On time requirement, is it really important
to arrive at 7 or 8? Can be important for just in time SC
- Commodity value: how much transport can the cargo take?
- Regular shipment: custom solution or one off? What is the frequency? Is it regular?
Can we plan it?
- Service requirements: Reliability, on time
- Trade agreements or fiscal barriers, the 4 freedom in the EU (goods, capital, services,
people) that allow us to take out some modes already.
Financial issues: transport costs (affordability), type of payment, taxes. Incoterms
can play a role in the financial issue, who takes care of the load and when you need
to pay your bills.
- Terms of trade
- Documentation: modes require less documentation and others that have standardize
documentation. Air require some insurance certificates
o Export declaration
o Bill of lading, sea or air waybill
o Import, export license
o Certificate of origin
o CMR (road), CIM (rail)
o Packing note
o Insurance certificate
o Shipping delivery note
o Export invoice
o Customs requirements

TEN-T corridors (not exam)

The infrastructures corridors for railway.
Each colour = one corridor that is managed by a team to connect areas  they push the
infrastructure development in these corridors. Lead to huge investments in railway in the
EU.

Brexit (not exam)

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Hard for the logistics guys: many ships left Asia with papers for goods for the UK not knowing
when the goods arrived in the UK if the paper were going to still be ok… Some company
completely stopped delivering in the UK, because economically it is not interesting to go
there, even though 5000 trucks are going to the UK every day… worked well at the end.
Business case exam
Assumptions:
- Transport cement with a production in Esch (South of Luxembourg)
- Traditionally by road to final destination of use in Luxembourg and close regions
around Lux.
- Significant increase of production through a new market in the area of Lyon: rise of
demand as there is a new customer there.
- Not just-in-time but you have a sequence of the delivery of cement to the
construction site so we cannot deliver how much we want whenever we want it.
There is a planning depending on the advancement of the construction site.

Traditionally:

The last mile delivery would be the construction site so they needed intermodal  road and
train.

1st and 2nd solution

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They ordered a full train with 44 containers/train, 1 train per week.
3rd solution

The demand in Lyon increased so they had issues with the SC. So here they loaded
containers and not a full train. Here it is only 6-8 places in a train 6x a week. You do not carry
the full cost  less risk and ownership.

1) How do the requirements for log change (I to II) with the new business?
 New planning scheme: JIT to the production sites in Lyon is nearly impossible!
Need 10 to 12 hours from Lux to Lyon and within this time frame a lot can
happen like last minute orders/ cancellation: once the train left, we cannot
react anymore. This is why they had first to bring quite a huge volume of
cement to Lyon to be able to dispatch from Lyon to the final site afterwards.
 Even with the increased volumes, they had problems to fill the train with 44
containers  more trucks needed to be loaded. They reserved the entire
plant loading capacity just for the train: bottleneck at loading.

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  Capacity of trucking: these kind of trucks are not always available as it is
specialized equipment, need them in good shape, quality certification to have,
etc. especially on the lux market.
 Changed documentation: international transport= documentation for one
train is cheaper than for 60 trucks!
 So they had good arguments to move to solution II, to a full train solution

2) Some concrete operational differences for this switch

 Loading of a full train on the weekend: other resources and planning
 Changed from truck silo to silo container (other loading): technical
adjustments
 Inventory management: 3 types of cement, forecasting needed in Lyon and be
reactive to the needs for the next weeks (as one train per week only) >< Lux
which is a day to day planning.
 They are responsible to manage the container assets, not just hire trucks; so
big change in terms of SC management.
 What happens if the train doesn’t arrive? We’re talking about trains in
France!!! There are strike, or other reasons (1/4 or 1/3 trains hasn’t arrived)
 the could run out of cement because of it and face end-customer
problems.
3) Why did the producer change again from solution II to III?
 Regular connections (the distribution of flow is more even): 6 trains per week
instead of one, so they had more reactivity
 Less impact in terms of quality issues and risk management: they could put
more containers on the next train if needed, they had easier backup solutions
 Higher utilisation of containers as they had faster turn around and use of
other rail connections possible, so they had a reduction in costs and increase
in flexibility. 6 trains per week= reduce the number of containers rented per
week (40 or 45 only) >< at least 88 containers with the one-week train.
 They could conquer some other markets and develop the business, use the
assets on other trains as many trains leave from Luxembourg. It is a good
example that by learning a new mode of transportation you can learn how to
develop your business and change your BM.

PART 2 – Inventories
Wooclap
1) What are inventories?
- Stock, Data
- Goods for resale: many types of stocks
- FIFO / LIFO
- Sleeping cash: a lot to do with costs

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 2) Why do we have them?
- Availability
- Manage supply, forecasting and have control; also quality control
- Be resilient
- Strategy
- Price management: produce when prices are low and sell when high

3) Specific costs related to inventories

- Storage itself, building or people: Assets
- Obsolescence
- Overhand costs: energy costs or asset costs,
- IT & innovation
- Processes & IT systems
- Capital costs
- Amortization/ depreciation if the stock sit too long
The importance of inventory management
-

 Inventory is another name for materials and is any material that a firm holds in order
to satisfy customer demand (and these customers may be internal and / or external
to the firm).
 Inventory costs money! It ties up working capital and affects cash flow
 Inventory takes up space
 Firms need to hire people to take care of inventory
 The goal in inventory management is to minimise inventory holding while
maintaining a desired customer service level.
 Again a wise compromise to be made

It is everywhere, not only finished goods: in transit, raw material, work in process at the
manufacturer, distributor warehouse, etc.

Types of stockholding/inventories exam

Inventory: everywhere and can take different shapes
- Raw material, components, packaging
- In-process stock, in-transit: WIP
- Finished goods: FGI
- Pipeline stock: within the distribution chain
- General stores; for instance, consumables
- Spare parts: not turn as fast as the parts you use to produce the finished goods
 room to reduce stock.

Reasons for holding inventory exam

- Cycle stock or working stock – need to have to work on

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 - Safety stock – what happens if? 10000 units in one week? Not possible so you need
some stock. Flexibility and resilience.
- Speculative stock – forecast? Hedging (=couverture) against price and exchange rate
fluctuations. Use stock to speculate
- Seasonal stock – Planning? Use it better plan
- Buffer against uncertainty.
o Stock to supply your customers and maintain customer levels in case of
volatile demand
o Provide cover for emergencies
o Protect against delivery lead-time variability
o Buffer against unreliable supply source: reduce and manage risk if scarce
supply
Ex: Nokia that had stock of raw material (cilicium) for chips because they are
too important to produce microchips; even though they did not produce
them, they had stocks of it to supply their suppliers if needed.
- Economic trade-offs:
o Production/ transportation batch size
o Transportation mode that requires stock (ex of the cement and the stock
needed in Lyon)
o Order quantity size: we can only produce 100 units a week but when the
customer orders they ask for 1000 units  need of inventory to fulfil the
order.
o Order frequency duration
o Supply price fluctuation: risks management
o Bulk purchase savings

Inventory cost exam

- Capital cost – almost always the largest
- Service cost – stock management and insurance
- Overhead costs: IT, services, consultancy, etc.
- Storage cost – space, handling
- Risk cost – damage, quality, obsolescence (i.e. fashion, food)

Inventory is going up but costs are going up too- why? exam

- Reduced product life cycles: Consumer always wants new product faster. The life
cycle reduction increases costs because it is harder to manager and it becomes faster
obsolete
- Product proliferation: variations like own colour, shape, option, etc. more stock in
the system to deal with all the variation
- Customer expectation - lead time (everyone wants everything faster) so implies that
there is more stock to react quickly.
- Demand volatility: demand in less stable in time than before.
- Extended supply chains - Globalization: long distances! If you buy things in Asia, you
save money on the purchase itself but much longer material flows which will increase
the inventory costs. But depends on the product of course, just globalization as such
as increased inventory costs.

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 - Just-in-Time (JIT): push stock downward in the SC and thus increase the stock! When
not balanced or wrongly applied as we have a lot here in EU.

Economic Order Quantity VS total annual costs exam

not that easy in real life

a) Inventory carrying costs: The more your order, the more the inventory costs you=
cost of inventory
b) Order processing costs: The unit price is lower the more you purchase= cost of
purchase
c) Economic order quantity: The wisest quantity to buy: intersection of both curves, Q*
Inventory build-up and depletion exam

Not in detail

- How long does it take me to order, what is the volume that I get in and when do I
need to order so that I never drop below the red line (safety stock)
- How much consumption do I have, I know how much I order/ the lot I order and the
amount of safety stock I always want to keep.
 Only know that there is a way to calculate the reorder point according to lead time, order
quantity and safety stock.

Inventory reduction strategies exam

Inventory centralisation: reduce the number of inventory keeping point, variation of total
demand is reduced. One product/item stocked  if we stock the product in one same
physical place, it is easier to manage. Have one place (see graph) in the middle of the current
≠ inventories and organise the SC around it: on the graph. It doesn’t work if the stocks are
located very far away.

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Part commonality: attempts simply to reduce the number of different pars in a product
range wherever possible. The goal is to increase the part commonality, so that there are less
number of parts to be stock and managed. On paper it seems easy but in real life it is a bit
complex.

Delay product differentiation: So reduce variation by combining demand at different points;

it is the case of a manufacturer making multiple products. Be innovative, you pretend to do
custom made product but in fact it is configure to order and not custom made, we show
variations we compose the product with standard components anyways but customer
sees that it is custom made.
Transit inventory reduction: reduce lead-times as cheaper transport modes may be slower,
so choose a different mode. Financial consideration in the mode selection can help to reduce
the total costs of the SC: more expensive mode could actually lower total costs by reducing
inventories costs.
Reduce the number of items ABC analysis:
 Too many SKUs (stock keeping units)
 ABC analysis separates out the most important items so that more attention can be
focused on those items and reduce the number of slow movers. It is based on the
principle that out of the myriad of items an inventory manager needs to handle,
there are only a few that account for most of the inventory expenses.
 Treat A, B and C items in a different manner and even suppress some from the stock.
 Cover 80% of your needs with 20% of your parts  80/20 rule.

Inventory reduction principles exam

Pool inventory: Wherever demand for inventory can be combined, the safety stock can be
lowered, still providing the same service level. Same as inventory centralisation.
Reduce variation: Wherever variation can be reduced, safety stock can be reduced too

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Reduce lead time: Overall, not only in the SC, as we could use the inventory cost overall.
When the lead time is long, we need to forecast more into the future, thus the accuracy of
the forecast suffers, increasing the variability of demand and consequently requiring higher
safety stock
Just-in-time- JIT: Do the minimum possible level of inventory holding. Still have inventory in
the SC and you’ll push down some cost if you use the JIT. Can improve quality aspects too by
forcing suppliers to reduce inventories.
 Inventory hides problems! By purposely removing inventory holdings, the problems
the inventory was covering are surfaced, and the problems are then proactively fixed.
JIT can drive quality aspects by forcing some of the SC players to reduce inventory.
 Small lot production
o Ordering in small quantities keeps the average inventory level small. Hence
reduce order processing costs so that the ideal of small quantity ordering can
be accomplished
o The time and effort spent in process setups are the manufacturing equivalent
of order processing costs. Hence, reduce the time and effort in setups

Consignment stock: some of your suppliers pay for the inventory  manage, pay for it & the
infrastructure, take care of obsolescence, new kind of relationship with the supplier so less
easy to change supplier. Just pay for the stock you use. Of course you’ll pay for it but it
reduces costs anyways.

Bullwhip Effect exam

Multi echelon distribution systems most prone; i.e. hot days increase demand of cold drinks
- Increases orders from supermarkets
- ………. up the supply chain to raw material and packaging suppliers

= from the customer to the producer of the goods, often the forecasting processing are slow:
Regional warehouse, national warehouse and the producer thinks he needs to produce more
because everyone is increasing the inventory. But actually the end increase at the producer
stage is much higher than the initial change at the customer stage.
So the demand of customer is 10, the regional warehouse orders 15 to the national and the
national orders 25 to the producer  if seasonal goods, it can be a big issue! It can lead to
obsolescence if we are not aware of this potential effect. Try to eliminate intermediate
forecasting  manage the inventory at a broaden level.

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PART 3 – warehousing
Value-Adding activities exam
Warehousing should aim to provide value-adding services as well as minimizing operating
costs. Aim: to add value, not only to cut costs.
Warehousing operations can achieve this by:
 Creating bulk consignments: consolidate products and elements
 Breaking bulk consignments and distribute them
 Combining freight
 Smoothing supply to meet demand: use it to temporise demand
Not exam side 7: A lot of intelligence solutions in the way we set up the warehouse:
depending on the types of goods we do for instance. Tailor-made in terms of needs and
value-added processes.

Warehouse roles (multiple!) exam

 Inventory holding point
 Consolidation center to consolidate parts (= regrouper les pieces)
 Cross dock center= bypasses the storage area in warehouses and distribution
centres. You just have a zone where you arrive with different units and reassemble
when it goes, you don’t really bother putting it in the warehouse (cross dock= “faire
traverser les marchandises”)
o reduces cost
o improves customer service
o non-value-adding functions are eliminated

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 o typically employed for fast moving freight with constant demand

 Sortation center: quality inspection

 Assembly facility
 Transhipment point: custom clearance
 Returned good center: return logistics to be recycled, upcycled, etc.

WMS= warehouse management system

 technical term for IT system where you can manage stock statistics, plan work to be done,
etc. many software available.
WMS selection: Benefit, ROI, Process first (biggest element for the teacher). Keep in mind
that there is no IT project but only business projects. Understand the process before
implementing IT systems. Consider the in-house competencies. The sourcing process that
you have.

Example of a warehouse – CFL multimodal

Storing tires, not interesting we would say? But if we think about the BM, we can make
money out of it, especially in Lux where they are obliged to put winter tires. The goal was to
increase productivity and have value added services for the customers. Put on stock but also
transport, cleaning and control, racks to optimize the use of the volume, etc.
Example of a warehouse – Tarkett

The warehouse is here used to keep the inventory but also prepare and ship it to the final
customer. Consolidation & distribution center at once.

Example of a warehouse – Delhaize

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In the WH, we have trucks coming from the suppliers in BE and LUX.
Cross docking: so things that are coming and sent out right away to the supermarkets
Put the merchandise in stock and then do picking
Final delivery to the supermarkets.
You have dry food, cold and ambient that need to be treated differently, need specialized
warehousing

Very specialized warehousing studies like for Corps Grand-ducal Incendie & secours  WH is
not only for transporting goods or raw material.
Check on vehicles, equipment, houses: special tasks to be done in the warehouses.

Example of a warehouse – Adidas 1996

- WMS system: IT system used to manage warehouses
- Failures/pitfalls of solution: analysis of why
- Good distribution system but they wanted to change it into a distribution center but
during this project they had compatibility problems between the software and the
computer used at that time. They went live before the system was really ready (as
they had 2 failures with providers) which lead to big issues  unable to process and
ship orders with huge impacts on the turnover.

So the message: always be able to assess potential pitfalls or impacts of project that we do
before setting it up in the SC (take the time to test and verify it).

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COURSE 3

PART 1 – Business model

Business model canvas exam
Used to identify weaknesses or strengths
1) Customer segments:
o Start by trying to understand the segment we deliver value in: for who?
o Who are the most important customers?
o Segments can be B2B or B2C, dual BM with stakeholders as suppliers.
2) Value propositions:
o if you have different types of segment maybe there are different types of
value propositions. How do you sell the value proposition to the respective
segments?
o What value do we deliver to the customer? – Which problem do we solve?
o Which need do we satisfy?
o What products/services are we offering?
3) Channel:
o What channel do you use to connect with your segments? How do we reach
our customers?
o How are we reaching the customers now?
4) Customer relationship:
o What is your relation now and what type of relationship is expected?
o Which ones are established?
o How are they integrated with the rest of our business model?
5) Revenue stream:
o What is the structure of it, how do you make money out if proposal of value?
o Lease, sell, rent, freemium model?
o For what value is our customer willing to pay?
o How are they paying, do they want to pay?
o How much does each revenue stream contribute?
6) Key resources: what key resources do our value propositions require, how we
produce it?
7) Key activities: What key activities do our value propositions require?
8) Key partners: internal or external, who are the key partners? suppliers? What key
resources/activities are we expecting from our partners?
9) Cost structure: What are the most important cost inherent to the business model,
what do we pay, how, when, etc. balance/dependencies between revenue streams
and the costs structure. Need to have more revenue than costs of course. But timing
to ensure you do not have all the costs before earning any revenue.

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Business model – Focus on logistics exam
What can we do with the BMC in logistics? Understanding importance of logistics in a
business model is key to:
o Designing the SC set up correctly when new challenge or solution to be set up (in-
house, external, etc). What BM elements will be affected?
o Sell effectively because we can argument the services by understanding the BM of
the logistic service that we sell. By knowing the value proposition of the segment, we
can much better pitch the sales.
o Executing / Innovating: when we understand the BMC elements of our solution, we
are able to identify where there are problems, risks, failures occurring, as we dig
deeper into the activities, how the partners are structures, in our cost structure, etc.
so identify where we need to work on and improve.

 The “right” solution: the 7r’s

The right product, in the right way, in the right quantity and right quality, in the right
place at the right time, for the right customer at the right cost.
We can go deep in exploring the different elements by being creative and involving ≠
kind of people to find details (problems or opportunities) that are part of the BM.

Business model – Example 1 exam

Organ Transport in France
- Classical setup: 1 dedicated aircraft in France which is called to transport organs.
o It starts in 1 where the aircraft is located, fly to the receiver hospital, fly the
doctors to the donor hospital, collect the organ

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 o And then on 3 back to the hospital receiver with the doctors to install the
organ and the flight back to the aircraft base.
- Problem: Reliability, availability (in one night we can have from 0 to 6 organ
transplant so impossible to do them all) and safety (airplane crash when 2 doctors
died)  need another solution.
- Procurement process: Tender for a knew operator

How should a business like this should be set up? The hospital is paying for it but the doctors
are not paid to do that job itself (risk of crash to be consider, customer segment as well).
How to solve all these issues?

Solution – offer to the tender, complete game changing

Have a fleet of aircraft and a centralized coordination of that fleet. We would be the SPOC to
have reactivity and reliability.
- Value proposition: availability (even with no alert, they would be capable to check
the availability of aircrafts: crafts everywhere even though that was not part of the
tender spec), reliability, safety w modern planes.
- Customer Relationship: Reporting and KPI’s, 24H dispatch. Use of KPI’s on the time
to bring organs to the hospitals
- Revenue: Ad had charter + availability – very good
- Key Activities: Clear process, Follow up of capacity, Risk management
- Key Partners: Partnerships with aviation partners
- Cost: Variable – pay per use

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Business model – Example 2 exam
Automotive parts (Renaud) between Turkey and Europe (Paris-based production site)
- Classical setup: Road transportation, usual transport
- Problem:
o Reliability
o Lead-time
o Cost structure. It would be an important element to consider for using a
combined transport solution.
o CO2
o Lack of drivers

Solution
Idea is to have ferry connection from the 3Turkish ports going to Trieste in Italy and then
having a multimodal connection between Trieste and Bettembourg (12 trains/week).

- Value Proposition (VP)

o Multimodal solution -> with the train, we have a higher weight per transport than
if we just go by road, so the price per ton is at the end lower.
o Less cabotage restrictions as we stay in the EU, arriving in Lux, so we can reload
more frequently and use the trailer more effectively. So arriving with the train
means that we are not considered as an international transport because we start
driving in the EU.
o Various transportation routes – back up’s, plan B (requested in the tender)
o CO2 reduction – customer requirement. Green elements become more and more
considered for big tenders

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 o Simplification of custom document process (deal with all the paper on the train,
time to do the customer document, not stuck at one border).
o Less unforeseen events: more reliable, stable, and faster than just driving. Thanks
to that, can respond to more severe KPI’s in terms of delivery conditions.
o Social conditions have improved for the drivers, better solution, better life for
them
o Avoidance of refugee problem: harder to jump on a train than on a truck.
o In Lux and France no restriction of transport on Sunday or bank holiday
o Trailers (green on the graph) are less expensive than a trucking machine (red on
the graph), ratio of 3 to 1. So if you do comb, you can save money as you need
less trucking machines, you put the trailers on the train/ferry.

- Cost
o Different cost model – trailers vs trucks
o Hub strategy
o Can take advantage to the low cost fuel in Lux (1000 of euros per year saved)

Webvan
Old but interesting to show: grocery deliveries in 30 min, door-to-door, B2C

Mistakes
- Failed on the revenue model: they did wrong assumptions: 35% of the people would
buy groceries through the internet  only 25% of the people had internet
- Not well estimated the need of the customers, wrong customers, unclear
segmentation: cultural shift wasn’t there, online availability and the wiliness to order
on the web and be at the door with the groceries. Wasn’t normal in the 2000 years.
- Cost structure not understood: underestimated the investment they needed to
deliver the VP, logistic problems
- Wrongly estimated the VP: allow people to order at ease and be delivered very fast
>< the people did like the idea of going to the shops physically.
 Went bankrupt

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PART 2 – Certification
Why do certifications? exam
- Legal requirements to do business: mandatory
o Safety
o Work legislation, labour laws
o Technology related: obliged to have a number/certification to be allowed to do
business (ex: railway company)
o ...
- Customer/market requirements: voluntary.
o For processes, or others.
o ISO 9001: “guarantee” that processes are described and under control. Become
mandatory if tender or the market requires it for instance
o Specific logistics standards
o … (depending on the business)
- Improve quality and customer satisfaction
- Describe, understand, communicate and improve company processes
- Improve consistency of operations
- Improve efficiency, reduce waste, save money
- Be able to sell at higher price: thanks to a standard we can do it
- Employee moral: attract people thanks to a certain certification, like for CSR in the
HR area for instance.

Example: CFL
- International logistics  obligation of having SMS, ECM (maintenance on wagons),
Authorised Economic Operator AEO to do custom clearance, which is mandatory.
They have a lot of certifications.
- Sometimes no certificate but just a report or industry standards/rule or best practices
that you apply, but no legal obligation of anything.
- VPI: standard to proof that you work according to their standards, with time it has
become the reference. Sometimes, it can establish itself as the general standard in
the industry
- ECM: official one that you need to have to work on railway wagons
- Local stuff like slide 12: waste management in the proper way (Luxemburg one)

What? Exam
- Many specific - some “universal”
- Global (like ISO 9001), national, local (like waste management)
- On top of certifications there are “de facto standards” and reports/audit best
practices: not officially listed but has established itself as a standard in a certain
market (usually industry standards)
- Always important to understand your real needs and understand ROI of trying to go
for a certain certification  what does it imply and why, real value, how much does it

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 cost to get it (1 time, recurring cost like member fees), how much effort is there to
get it, need for a specific person with a certain diploma to do business, etc.
- Specific ones you need to do business: ex of biotech and pharma. Need the stamp
(EU GDP for instance) to say that you comply with a certain regulation.
Ex: ISO for food safety management, food certificate security management, etc.
Ex: specific certification to import honey from a non EU country to the EU

PART 3 – Strategy mapping

Example: HoST webinar
- To establish your strategy, you need to understand where you are at the moment
and where you want to go
- A lot of actions and activities to do in the company but need to make a choice of the
once you want to execute in order to move in the right direction.
- Once you start moving, you should monitor all your activities if you are still pointing
to the right direction
- Resilience: Covid… Vision is not the right strategy that you should follow, so
reconsider the activities you need to reach the vision.

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There are 4 prospectives at looking at the strategy
- First is the financial
- Customer perspective: value proposition that they are expecting for the ≠ segments
- Internal perspective: 4 types of initiatives, prospects.
 Fulfil customer orders best: distribute, manager risk, distribute, etc
 How do you win your customer, grow, etc.
 How to be innovative in terms of delivering the value propositions
 Legal requirement needed to fulfil
- Learning & grow perspective
 It will improve the results of the company. It can be used for our own strategy or
demonstrate why one project is key for the development of a company to the stakeholders.

Strategy mapping by Norton and Kaplan exam

A means to visualize how a company intends to deliver value for to its customers to ensure
sustainable success

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 causality between the ≠ layers, links between them

1) Financial performance, a lag indicator, provides the tangible definition of value

2) The customer value proposition defines the source of value
3) Business processes create value for the customer and the shareholder
4) Intangible assets must be aligned with the key processes
5) Cause-and-effect relationships define the logic that converts intangible assets to
tangible outcomes, so explain and point out why the project is important, put in in
context. Simplification of the previous LT shareholder value table.

Strategy mapping – logistics exam

Tool to identify if logistics is key strategic element for company success and position
correctly
 Product
 Service
 Customer service

Visualisation of causality (importance of logistics in the strategy) between logistics projects

and company strategy.

Example of Nokia
38% worldwide market shares at that time (2005)
SC management was important.
They had over 100 independent toolmakers globally. The goal is to use only one tooling
supply partner for plastic parts (10 globally) to facilitate the SC processes. One blue print

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factory and copy it all over the world, on each continent with the processes, machines,
software, etc.

PART 4 – problem solving tools

Problem solving tools exam
 Fishbone “Ishikawa” diagram
 5 whys
 SCOR®

Cause and effect analysis= Fishbone diagram & the 5 why’s exam
- Professor Ishikawa 1960
- Understand specific cause of a problem
- Uncover holdups in your process
- Discover why a process is not working
- Write down problem
- Decide on major factors that may contribute to the problem (6M):
o mother nature: environment
o machine: equipment
o man power: people
o method: processes
o management, decisions
o material (quality, choice, raw materials)
- By data, interviews, statistics, customer complaints, ... pin causes to the different fish
bones in the logistics chains and put the different problems on the fish bones
diagram.
- Dive deeper to the root cause 5Whys : https://en.wikipedia.org/wiki/5_Whys

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 At the end: no proper maintenance on the car
- Assess impact and prioritize: qualify the impacts
- Action plan

Here is a Fish Bone diagram:

- Problem statement like “high return of a certain product”

- Wonder why? Quantify each return: lack of knowledge, high turnover, etc. Classify
each return on one family of cause.
- We can have a counter and we see where are the issues: in the example it is lack of
knowledge and South China sea  tackle these 2 issues first

Supply chain operational reference model: SCOR® exam

Supply-chain operations reference-model (SCOR) is a process reference model for supply
chain management. This reference model enables users to address, improve, and

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communicate supply chain management practices within and between all interested parties
in the extended enterprise

The Supply-Chain Operations Reference is a management tool, spanning from the supplier's
supplier to the customer's customer. The model has been developed to describe the
business activities associated with all phases of satisfying a customer's demand.
It is more a based-practice reference than a certification.

The model is based on 3 major pillars:

- Process modelling and re-engineering
- Performance measurements: about 150 key metrics predefined (standardized vocab
of the metrics and way of measuring that we can communicate to our SC). How to
measure, what to measure, etc.
- Best practices: over 400 tools

SCOR is a process reference model designed for effective communication among supply
chain partners (internal and external partners).

Remember: it exists, it is a framework and only interesting for the people who are really
deep into logistics & mapping logistics processes as it is known on an international level.
Ruled by an official body (Supply Chain Council), officers paying them to develop
continuously the structure like slide 18.

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COURSE 4

PART 1 – Distribution channels & outsourcing

Production at the center of all the channels.
1. Direct delivery: manufacturer direct to retail
Not used very often, unusual nowadays. The teacher doesn’t even have any example
for this.
Only FTL (full truck load)  only makes sense if we have our own vehicles
2. Manufacturer via own distribution channel
Most classical set up but since the 70’s, less and less used.
Manufacturer has finished goods warehouses
Central and regional distribution centres  web of ≠ warehouses but not really used
anymore because owning the entire SC is very costly, not flexible and not the
competence of the manufacturer himself in most of the cases.
All logistics resources are owned by the producer.
3. Manufacturer via retailer distribution center
Delivery to Regional Distribution Centre RDC, National Distribution Centre NDC
owned by retailer
Final distribution to stores done by retailer or a 3PL organization
4. Manufacturer via wholesaler
Intermediate organisation
Advantage through buying power
Wholesalers moved into distribution organisation role
Can be that the retailer himself has some warehouses and would himself take care of
the final distribution so the last miles: who owns what and is responsible for what?
5. 3rd party distribution service to retail
Service industry - specialisation
Consequence of raising distribution cost, changing legislations, ...
Specialized services
Full ownership of logistics from producer to retail shop
 small parcels to retail store= special 3rd party service.
6. Manufacturer via broker
Just buy and resell it; Often no physical contact with the goods but trading (virtual
warehouse). So broker might use 3rd party distribution organization
Rare in retail
More in bulk
7. Direct deliveries B2C
o Mail order, internet shopping: Catalogue, internet, Distribution by parcel
service (kind of 3PL or 4PL services)
o Factory direct to home: One of products, MTO “Manufactured to order”
o Factory to factory (B2B): 2nd, 3rd tier supply chain, Physical distribution in
different ways possible

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Structures of channels exam
- Types of intermediates, can be distinguished by that, so what the intermediates do
- Number of level of intermediates
- Intensity of distribution at each level: work done, value added at each level in the
channels.

Objectives of channels exam

Very specific for each setup but in general:
- Make product readily available to the market consumer at which it is aimed, when it
should be there
- Help drive sales: Enhance the prospect of sales being made
- Achieve cooperation within supply chain
- Achieve given level of service: on time for instance
- Minimize logistics and total cost
- Receive fast and accurate feedback (bullwhip effect). Feedback is important to
monitor and be aware of the things going on in the distribution channels with KPI’s
(at least good channels have them)

Selection of channels exam

1. Market characteristics
 Most appropriate to get product to end user
 Size, spread (local, global), density of the market
 Long channels: Widely spread and many users, several different storage
points and handlings
 Short channels: Small number of users and limited spread
2. Product characteristics
 High value items: short channel, security important, inventory cost, not too
much inventory  for these kind of items, you want to keep control
 Complex products like technical: short channel as need to explain the
products
 New products: 3rd party – response unknown. Needs flexibility in volume,
scale up for instance if the production follows.
 Time sensitive products: perishables like food or products that are sensitive
 Products with handling constraints: fragile or breakable. We will try not to
handle them too much.
3. Competitive characteristics
 Competition solution: Different or alike distribution channel?
 Exclusive locations? Avoid possible substitution
 Service level of competition? lead-time, quantities that the competition is
able to put on the market or how fast they fill in the shelves  is it good
enough? Or we want to differentiate by improving the distribution channel
set up?
 Do we want to be the same? Work with exclusive partners? Be different?
4. Company resources= internal capabilities
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  Ability to execute with own means: physical assets, intellectual or
competences
 Financial strength: maybe we don’t have the $ to invest in the assets
 Strategic objectives

Outsourcing distribution opportunities exam

In Europe, 90% of distribution is outsourced
>< warehouse & inventory is less outsources in EU
- Incentive contracts:
o Through contract  put KPI’s and have bonuses agreements with incentive
like “90% on time” or “breaks of 1% of the product” then we pay higher price
or bonuses. Internally it is more difficult to do that.
o Also if you work with somebody who is everywhere, you can discuss with
them and find solutions to set up a distribution channel to a new market.
- Integrated global contractors: scalability; Gain new market if you have a good
distribution (DHL, UPS, etc).
- More rigorous selection of contractors: easier to change than if it is an internal
resource, depending on the structure and culture (open to change?)  we can drive
innovation and change through outsourcing and make it easier to adjust.
- Better metrics: if you work with someone who only does distribution, they
standardise it so easy to have figures.
- Growing importance of environmental concerns: avoid investments, leverage them:
environmental aspects for instance. If you have everything managed by you, it can be
costly to upgrade the whole SC.
- Creation of innovation through 4PL (partnership approach): they drive innovation for
you, everyone has its core business (drive innovation around the product and not in
the supporting).

Outsourcing distribution risks exam

- Loss of control: of the entire process
- Dependent on them: somehow stuck. The more you are integrated through another
party, the more it is difficult to change.
- Prices increase: if you depend on them, you can be subject with rise in prices
- No direct data access nor management: raw data, we only have pre-formed data,
limited in the analysis we can do

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 - Limited by supplier capabilities: if he doesn’t have the capabilities we need, we are
stuck.
- Lack of innovation through missing competences: if we do not manage the partner
properly or wrongly choose him

Outsourcing process exam

Follow the steps in the right order and sequences

1) Scope what we want and don’t want to outsource and what we don’t want
2) Type of service and service level we want to achieve
3) Look for potential providers
4) Create a shortlist: request for interest RFI= would you be interested to work for us?
5) RFP= request for proposal: who would be interested?
6) Tender process: analyse who would fit and deliver the scope we hope for
7) Risk assessment (see next)
8) Contract (see next)
9) This is the real problem: do good implementation and
10) Manage the relationship

Outsourcing process – Tools exam

- Benchmarking= compare different candidates and look at the top performers on the
market, internet search
- DMA: decision making  for quick decisions. Put down criteria and you give a weight
scale for each of them, on each option.

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 - Outsourcing FMEA – risk management: simple steps but tool that can be driven very
far. We list what can go wrong with each subcontractor
 List potential failure modes: what could go wrong?
 Severity: Impact of failure event 1-10. If it happens, what is the impact?
 Probability to happen: Frequency of occurrence of failure event 1-10 (one a
year, once a week?)
 Detection: Ability of process to detect 1-10. Is there anything in the process,
any control tool in the process that can detect the failure before it goes to the
end?
 Risk priority number (RPN) = SxOxD. The higher the number, the higher the
risk
 Risk classification, mitigation actions of the high RPN items. After the
mitigation action, what other elements are on the list that we need to tackle?
We call it the post RPN.

PART 2 – logistics pitfalls, SC failures

Corporate governance, the strategy of the company

Potential causes exam

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Number of causes are big!

At source - no or reduced production at supplier

- Natural: earthquake, floods, wind, snow, freeze (no access to ports)
- Man-made: fire, strike, civil unrest, terrorism
- Economic: insolvency, trade credit, loss of patent, non-performance of supplier

In transit – transportation and logistics

- Natural: same + volcanic activity (fly impossible)
- Man-made: same + piracy, dock strikes, pandemic, embargo, quarantine

At destination – delivery quality

- Defective components
- Patent infringement, child labour

Corporate Level
At the SC at such or at the corporate governance (management)
- Exchange rate
- IT systems (ex: Adidas!!)
- Social media/reputation, marketing
- Decisions

Potential impacts exam

- Increased cost
- Reduced sales
- Lose key customers, market shares
- Fines: anti-competition fine in the EU
- Damages to bran, reputation

Reasons for growing frequency, severity and complexity of disruptions exam

- Changing business models: outsourcing / offshoring
- Competition and cost pressure
- Geographic clustering: some specific components on the planet are made in confined
areas.
Ex: phone chargers in 2006, only 3 companies were making it in the world, located in
China very close if natural disaster there, then all 3 are concerned.
- Size and complexity of SC (up to 6-8 layers of SC in an industry)
- Dependency on modern communication: increases the dependency on these
technologies to be available  If internet is down, it has a big impact on SC as it
depends on IT systems

Case studies exam (not in detail)

Supply chain disruption
- Japan, earth cake/tsunami, 11 March 2011
- Thai Chao, floods, July 2011
Product Recall

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 - Grounding of Boing 787, January 2013
- Matell, toys, 2007
Man-made cause
- Port lockout, US west coast, October 2002
- UK, Explosion, December 2005
- Evonik explosion Germany, March 2012
- G4S, recruitment issue, 2012
Natural
- Hengchung, earthquake, December 2006
- Chile, earthquake, February 2010
- Iceland, Volcanic ash, April 2010
- Superstorm Sandy, Oct 2012
Economic causes
- Thompson/Rover, UK, 2001
Reputation cause
- Nike, child labour, 2001
- Apple, suicides, 2009/2010
- Ikea, production in DDR, 2012
- Social media attack, KitKat, 2010

Case of ToysRus
Huge campaign for Christmas but they couldn’t deliver their promises:
- Website down for 7 days
- Workers overwhelmed
- Orders can be placed fast on the internet but it doesn’t mean they can be delivered
faster (26% of the orders where not delivered at the right date). Children as customer
segment and it was for Christmas so not good!

They focused too much on marketing and not enough on logistics & enough toys but not
enough assets to ship it.
Gave 100$ voucher because of it  cost impact

They then turned to Amazon and partnered & outsourced  found elements to learn from
the failure.

PART 3 – Contract management

Types
Pay attention to the contract with agents

Applicable law – Rules (conclusions) exam

- Very difficult know for sure what law applies how

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 - Countries do or do not ratify treaties, what embargos are running, how to know it?
Understand the unknowns and the uncertainties when we enter international
contract agreements.
- National courts sometimes do not accept international jurisprudence or decisions are
taken that international law cannot violate national principles

Elements of contracts exam

All of these elements should be in the contract.
 Contract language:
o Translations vs original as there is normally only one version of the original
contract, one language used in court. Pay attention to the translation!
o Vocabulary
 Good faith: description of it, that we assume there are no undisclosed, ulterior
motives (vices cachés).
 Force majeure: Event beyond the control that prevents a party to fulfil its obligations.
BUT important to define it, specific definition can be very important depending on
the related risk.
Usually something that is not under the party’s control, but specify it!
http://store.iccwbo.org/t/ICC%20Force%20Majeure%20Hardship%20Clause
 Scope of appointment / obligations
o Defines the services, goods to be performed/delivered and how
o It also defines territories (in case of distribution/agency contract)
o Key element to define clear metrics (KPI’s)
o Exclusions (i.e. distribution contracts – corporate accounts), out of scope to
describe specifically
 Terms of Appointment
o Duration
o Start-end
o Renewal process & criteria for renewal: how it is supposed to be renewed or
not  yearly mandatory business meeting in the contract in order to do it
 Choice of Law
o National law to be applied or often UK or Switzerland are used as they are
neutral, less Lex Mercatoria
o Choice of forum / court if dispute appears
 Arbitration clause – binding
o Rules of Conciliation and Arbitration by ICC
o 130 countries but for instance China doesn’t = problem
o ... “finally settled by the panel”
o https://iccwbo.org/Products-and-Services/Arbitration-and-
ADR/Arbitration/Standard-ICC-Arbitration-clauses/Standard-ICC-Arbitration-
Clauses-in-several-languages/
 Advantages:
 Perceived as a fair process (technical experts)

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  Tends to be cheaper – not always. Set limits in contract
 More efficient – faster, less formal
 More creative and effective – experts
 Not open to public so it keeps the brand reputation and the case private.
 Can preserve relationships
 Mediation clause – non-binding
o Before arbitration or court
o Should be defined pragmatically
o Less formal
 Intellectual property: cover in case you create IP or patent infringement.
 Branding ownership / sales clauses
o Who can use which brand and how? Who can sell to whom?
o Like in case of agent or distributors
o In B2B less important
 Termination clause
o Before arbitration or court
o Should be defined pragmatically: examples or specific numbers/ calculations/
KPI’s for instance.

Attention exam
- Credit limit, payment terms
- Specific general terms (in case to case)
- Always have anti-competition rules

PART 4 – Trends
 E-commerce: on the B2B still a lot to do, on the B2C it is there!
 Discount stores/retailers: cheap stuff & logistics around it
 Oil prices going down
 Globalization, global logistics is a big trend
 Integration of trading nations: trade agreements
 Europe is struggling
 Technology, big trend! Majority of trends actually
 Hardware & chips are going up
 Geopolitical instability impacts a lot logistics
 Uber! It is not just Uber but all about BM innovation, people reinventing cost models &
revenue models

Trends exam
- No single source - Many pretend to know what’s coming  Gartner, Forbes, etc a lot
of articles about it (like resilience is one, and is it actually there)
- Strong overlap
- Trends have winners and losers  a lot of opportunities like new business models &
start-ups

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 - Timing is important  Maturity
- Understand impact of trends on our business model: leverage or mitigate the trends
that are coming up.

Trends Forbes 2021 exam

1) Digital Giants incursion
2) Rise of the Start-ups: going into technology & BM
3) Pandemic-Proof Supply Chain: resilience
4) Sustainable Logistics: green
5) Block-Chain Enabled Digital Ecosystems
6) Logistics as a service (LaaS): 5PL, Amazon web-service
7) Computing is pushed to the edge: technology
8) Digital Twins of everything: trying to be able to simulate and play scenarios on the
digital world before even executing it
9) Artificial intelligence driving logistic
10) Predictive logistics insights  point 7, 8 and 9 can be combined here
https://www.forbes.com/sites/forbestechcouncil/2021/02/08/top-10-digital-ecosystem-
trends-in-supply-chain-and-logistics/?sh=23f74443f738

Reverse logistic exam

1) Forward logistics: produce a part and bring it to the customer (manufacturing steps)
2) Reverse logistics:
o Reuse and bring it back to the cycle, rebrand it
o Repair it
o Remanufacture it and use it in a second life
o Or go down to reusing raw material and inject it back to the cycle
Packaging is ≠, origin & destination are ≠, not always consolidation point to collect
the recycled product, etc so start-ups are popping up. The trend will definitely
continue.

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 another image

City logistics exam

Classical set-up: You produce and you bring all the different trucks to the city (image one)
OR
City log: Consolidate at the entry of a city, from huge variety of different products and
suppliers. So the picking/consolidation is done in only one place for the specific shops of all
the items. So there are companies only dealing with city logistics. More and more cities are
doing it because we have greener ways of transports than several trucks going around in the
city.

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