INTT 356 Spring 2021 Ch16 Handouts

INTT 356 International Transportation and Logistics
As the concluding chapter, it is important to provide a capstone or an

integration of the content of this book and to establish a perspective on future
issues and challenges that will face supply chains and supply chain
managers. Thus, this chapter is organized around four main topics: (1)
principles of supply chain management (SCM), (2) CEOs’ perspectives and
expectations for supply chain management, (3) key areas of supply chain
strategy, and (4) supply chain transformation—how to get from where we are
now to where we need to be in the future.
SKIP “Supply Chain Transformation” on Pages 670-671
Chapter 16 - 1
Principle 1: Segment Customers Based on Service Needs

Essentially, this principle suggests a departure from traditional approaches to
customer segmentation based on industry, product, or trade channel to an
approach that segments customers based on logistics and supply chain
needs.
Principle 2: Customize the Logistics Network
This principle stresses the need to develop supply chain approaches that are
responsive to the needs of individual customer segments.
Principle 3: Listen to Signals of Market Demand and Plan Accordingly
In contrast to traditional forecasting approaches that sometimes result in
multiple departments creating separate forecasts for the same products, the
objective here is to see that demand planning is responsive to and aligned
with market signals such as point-of-sale information.
Principle 4: Differentiate Products Closer to the Customer
When successfully implemented, this principle helps to improve customer
service via fewer stockouts and also takes significant inventory carrying cost
out of the supply chain.
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Principle 5: Source Strategically

Although customers of all types should have fact-based knowledge of the cost
of purchased products and services, over the long term, suppliers’ cost
experiences will be passed along to customers in terms of higher prices.
Principle 6: Develop a Supply Chainwide Technology Strategy
The priority here is to replace inflexible, poorly integrated transactional
systems with enterprise-wide systems.
Principle 7: Adopt Channel-Spanning Performance Measures
When individual companies in a supply chain ask the question: How are we
doing? The response should be in the context of the overall supply chain.
1. The seven principles basically survive the test of time.

2. We still have a long way to go on supply chain strategy implementation.
3. Technology and data will be the major game changer going forward.
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Differentiation Strategies
Simply stated, this strategy refers to the extent to which the supply chain approach of a particular company
may be different and unique and thus “differentiate” it from those of competing organizations. The basic
concept underlying differentiation is to see that supply chain capabilities are viewed by customers as being
sufficiently effective and unique to distinguish an organization in the marketplace. To a large extent,
differentiation materializes in some combination of price and service. Although supply chains may strive for
differentiation in many ways, this section will elaborate briefly on elements of time-based strategies, ones that
typically have short- and long-term positive effects on levels of customer service that are delivered by supply
chains.
Time-Based Strategies
The value of time can be measured in a number of different ways. Supply chain strategies that shorten the
length of the order and/or replenishment cycle have been the focus of much attention in recent years. Time-
compression strategies have also received attention
Reducing Cycle Time
Reductions in cycle time are based on three factors: processes, information, and decision making. Another
important source of reductions in cycle time is faster provision of information. The utilization of faster, more
efficient forms of order transmission can significantly reduce the time needed to complete the transaction.
Also, the use of contemporary information technologies is becoming increasingly attractive as technology
costs have been declining significantly. The final factor in reducing cycle time is decision making. The critical
issue is to empower individuals to make decisions relevant to their areas of expertise and responsibility.
Time-Reduction Logistics Initiatives
It is imperative is for firms to develop the ability to know where all products may happen to be at any point in
time. Interest has grown recently in the area of leveraging the power of effective demand planning and
forecasting to more meaningfully moves from “push” to “pull.”
Recent interest in collaborative planning, forecasting, and replenishment also serves as an example of a
highly useful, contemporary technology. Increasingly, companies continue to change from the traditional push
approach to a pull approach, which is a demand-responsive system.
Overall, leading-edge companies have used a number of initiatives to improve their competitive position by
reducing cycle time, thus producing significant benefits in terms of efficiency and effectiveness.
Chapter 16 - 7
Financial Strategies
By placing a priority on cost control, performance effectiveness and efficiency, and viable
measurement strategies, companies are able to improve financial performance, focusing attention
on metrics such as return on assets (ROA) and return on investment (ROI) facilitates the
achievement of financial objectives.
Inventory Productivity
One class of assets that already receives significant attention is inventory, and major strategies
are in place at many firms to reduce inventory levels without diminishing levels of customer
service (or preferably, increasing levels of customer service). Initiatives such as just-in-time (JIT),
vendor-managed inventory (VMI), and continuous replenishment (CRP) are examples of popular
approaches.
Facility Utilization
One of the major trends in supply chain facility management is to more effectively utilize the
capacity of various types of supply chain facilities. High priority is placed on making sure that all
supply chain facilities create value not only for the individual organizations, but also for the supply
chain in a broad sense.
Equipment Utilization Strategies
Another area of asset investment for companies is logistics-related equipment such as materials-
handling equipment used in warehouses and transportation equipment that is leased or owned by
a company. Transportation equipment is an important area in terms of asset investment and has
been another area of improvement for many companies.
Outsourcing
Once a strategy that focused primarily on the commercial procurement of tangible, asset-based
services such as transportation and warehousing, outsourcing now has grown into areas that are
both strategic and customer focused. Thus, recent studies have cited growth in services available
from the outsourced logistics sector such as freight bill auditing and payment, customer service,
information technology, and light manufacturing and assembly. The decision to utilize third-party
or contract logistics companies has been fostered in part by the interest in reducing asset
investment to improve asset productivity. The relevance of using a 3PL becomes even clearer as
increasing numbers of businesses get involved significantly in global commerce.
There has been a continuing trend toward the involvement of 4PL providers. Aside from managing
a number of 3PL operations, a 4PL is looked to for the provision of competencies relating to
knowledge availability, information technology, and skills in forming and sustaining successful
supply chain relationships.
Chapter 16 - 8
Technology-Based Strategies
It has been evident for some time that the realization of future logistics and
supply chain goals will depend significantly on the further development and
utilization of information technologies and whether in the form of hardware,
software, or connectivity, this will be the springboard for progress and
innovation.
Chapter 16 - 9
Relationship-Based Strategies
An area of significant strategic interest is that of relationships and relationship
formation in logistics and supply chain processes
Collaboration: Collaboration occurs when companies work together for
mutual benefit and goes well beyond vague expressions of partnership and
aligned interests.
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For Successful Collaboration to occur, the necessary elements are:

Well-Understood Goals and Objectives Members of the collaboration need
to understand their individual organizational objectives and then be willing to
share these openly with each other.
Trust and Commitment Widely recognized as a fundamental relationship
building block, trust may be thought of as “reliance on and trust in one’s
partner.”
Corporate Compatibility Of greatest importance here is that the relationship
include a sharing of vision, goals, objectives, and cultures.
Communication Regular communication and sharing/use of information are
central to an effective collaborative relationship.
Shared Decision Making and Ability to Reach Consensus on Matters of
Importance Matters that are related to the success of the relationship should
be treated jointly by all involved organizations.
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Equitable Sharing of Gains, Losses, and Investments Although many

organizations demonstrate a dedication to their individual objectives,
successful collaborations require the development of mechanisms to share
gains, losses, and investments.
Overall Benefits to Involved Parties Greater Than Could Be Obtained
Alone To be sustainable over the longer term, successful collaborations need
to create benefits for the involved parties that exceed what those
organizations could accomplish individually.
Effective Measurements and Measurement Strategies A dedication by all
involved participants in collaboration measurements and the development of
measurement strategies will be a key to the success of the relationship.
Strategic Plan for Collaborative Relationship Successful collaborations are
not without their challenges and difficulties.
Impact of Collaboration on Business Processes The greatest potential
benefits of collaboration seem to be associated with business processes such
as inventory management, customer order management, customer service,
and supplier order management.
Financial vs. Non-financial Benefits of Collaboration A question is whether
collaboration “pays for itself” but there are significant opportunities to form
collaborative efforts that are financially successful.
Chapter 16 - 13
To further complicate the assignment for future supply chain executives, most
companies are involved significantly in global commerce. Forces driving
globalization include:
•The great rebalancing – Emerging markets driving greater growth than
developed markets
•The productivity imperative – The most dramatic innovations are likely to be
those that accelerate economic productivity
•The global grid – The connectivity of the global economy is seeding new
business models and accelerating the pace of innovation
•Pricing the planet – The demand for scarce resources will drive an increased
focus on resource productivity, clean-tech industries, and regulatory initiatives
•The market state – The conflicting demands of driving economic growth and
providing a social safety net will place increasing pressure on governments
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Globalization, growth in trade, outsourcing etc all lead to growth in the

demand for logistics services. The particular link between economic growth
and transport growth is important. As economies grow, more transport is
required to move the freight that economic growth inevitably generates. A
core issue for policy makers is to find ways of allowing economic growth
without comparable growth in transport. One way to do that is by
reconfiguring supply chains so that small deliveries direct to all end customers
are replaced with centralized deliveries to a node from where end customers
retrieve their goods. Other ways include increasing the scale on global
shipping and seeking more efficient ways of moving and storing freight so as
to reduce the environmental impact of these activities.
The impact of logistics activities on the environment and concepts such as

carbon footprints can be noted. The term “carbon footprint” describes the
environmental disbenefits associated with economic activities such as the
movement of freight.
The issue then becomes how can logistics and supply chain systems be
made more sustainable given the continued demand which exists for their
services.
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The triple bottom line (3BL) approach, referring to the social, environmental
and financial dimensions of sustainability, is a term first coined by John
Elkington in 1994.
The 2005 World Summit noted that sustainable development requires the
reconciliation of environmental, social and economic demands - the "three
pillars" of sustainability.
PEOPLE – SOCIAL
PLANET – ENVIRONMENTAL
PROFITS - ECONOMIC
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One of the major weaknesses of the 3BL concept is that, although it is easily
to justify economic goals in monetary terms, there is no clear way to justify
environmental or social goals. As such, there is no way for companies to sum
across the three bottom lines, and thus the assessment of a company’s 3BL
performance remains qualitative at best, which makes it difficult to reach a
consensus when comparing between companies or ranking against a
benchmark. In this regard, it makes it difficult for businesses to recognize the
benefits of using TBL for the company, itself.
(https://wiki.smu.edu.sg/0910t2lgst001g4/LGST001G4#Triple_Bottom_Line_A
ccountability)
Chapter 16 - 20
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Closed-loop supply chains (CLSC) are supply chain networks that "include the returns
processes and the manufacturer has the intent of capturing additional value and further
integrating all supply chain activities" (Guide et al., 2003).
A closed-loop supply chain essentially combines the traditional supply chain (forward
logistics) with reverse logistics, considering the item after it’s served its original purpose.
Once the item has been manufactured, shipped, and distributed through a reseller, the
manufacturer works to encourage the item’s return once it’s no longer functional or
needed. Reverse logistics then kick in, and the items can either be repaired and resold, or
they can be broken down for reuse in future products. The “closed-loop” term refers to the
fact that the chain is intended to maintain and recover value from unused products, while
helping to create as little waste as possible.
(https://www.business2community.com/product-management/introduction-creating-closed-
loop-supply-chain-01764268)
Even if a product is designed to be recyclable, there exist some challenges in
designing a closed-loop supply chain that can recycle sustainably.
•Does a company gain or lose economically by selling remanufactured products along with
new ones
•How can a firm ensure sufficient access to used products if it plans to remanufacture
•Who should be responsible for collecting used products (the retailer, the manufacturer, or
a third party)
•What incentives need to be in place for the economic interests of the entire supply chain
to be aligned
•Do any decisions change if the product has a short or long life cycle
•What incentives need to be in place for suppliers to design and produce durable
products?
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In the words of Henry Ford, “If you always do what you’ve always done, you
will always get what you always got.” Considering that sustained success in
the current business environment requires organizations to figure out how to
change and improve, it is fortunate that there are an increasing number of
ways in which supply chains may take advantage of opportunities to innovate.
Consider examples of recent innovative concepts that have current or likely
impacts on supply chain design, strategy, or operations: omni-channel; store-
direct delivery; Uber-freight concepts; self-driving vehicles; use of drone
technologies; order-packing robots, the IOT; 3D printing; and blockchain.
Chapter 16 - 26

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INTT 356 International Transportation and Logistics

As the concluding chapter, it is important to provide a capstone or an

SKIP “Supply Chain Transformation” on Pages 670-671

Principle 1: Segment Customers Based on Service Needs

Principle 5: Source Strategically

1. The seven principles basically survive the test of time.

For Successful Collaboration to occur, the necessary elements are:

Equitable Sharing of Gains, Losses, and Investments Although many

Globalization, growth in trade, outsourcing etc all lead to growth in the

The impact of logistics activities on the environment and concepts such as

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