Principles of Business for CSEC®

2nd edition

Answers to Chapter 7: Logistics and supply chains

“Setting the scene” answers
1. The case study explains that logistics is concerned with getting materials and supplies to where
they are required in an efficient way. By organising the delivery of solar panels from different
suppliers so that they arrive at the same time, Solar Solutions can reduce the number of journeys
required to transport solar panels from the container port in Jamaica. A storage facility will enable
the solar panels to be stored until they are ready to be transported in convenient quantities. A
logistics hub will provide a centre for organising simplified operations. Transport costs, paperwork
costs and organisational costs will therefore be reduced as there will be far fewer journeys and
consignments to organise.
2. Lowering costs enables a business to reduce its prices. In addition a further competitive
advantage is that the distribution process will be much better organised, so retailers will
have a much clearer picture of when solar panels will be delivered and therefore will be
encouraged to place more orders with Solar Solutions.
3. A logistics hub is a location for organising all of the processes involved in distributing
goods, such as receiving the goods, packaging and repackaging goods where needed,
bringing together different modes of transport, sending goods to intermediate and final
destinations etc. The logistics hub provides a centralised facility totally dedicated to the
logistics process, with personnel dedicated to the key task of managing logistics and
distribution. A logistics hub therefore simplifies the distribution process into clear and well
organised patterns.
4. The acquisition and distribution of resources and goods is highly complex. Many
intermediaries are involved as well as the original producers of the goods and the final
consumers. There are many journeys to organise. There are many different types of freight to
organise (coming in all shapes and sizes). There is a lot of paperwork to organise (e.g. relating
to when goods will be delivered, payments for goods, paying taxes on goods to government
tax authorities, etc.). It is easy to see that without a joined-up process items could get lost,
stolen and broken, and left in locations for a long period of time. ICT makes it possible to
simplify processes so that, for example, a single set of well-organised documents can be
supplied to all of the parties involved in the movement of goods. Joining up processes
involves creating an integrated transport journey, integrated loading and unloading, an
integrated supply of information about where goods are, integrated information related to
the payment of goods, etc.

1 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 7: Logistics and supply chains

“Now try these” answers

7.1 Explain the terms “logistics” and “supply chain operations”
1. Eggs may need to be stored in the farm, in a store house before being displayed by the
retailer, and then by the final customer before they consume the eggs. They need to move
quickly down the supply chain so they are still fresh when they reach the end consumer.
2. The farm, supplier and retailer should all be involved in organising the supply chain.
3. Logistics is important in making sure there is no delay in moving products along the supply
chain, and that they reach their destination in the best shape and as quickly as possible.
4. (a) Forward logistics, as the metal is moving up the chain.
(b) Reverse logistics, as the bottles are being returned to further down the chain.
(c) Reverse logistics, as the computer is being returned down the chain to be fixed.
(d) Forward logistics, as the waste is being moved up the chain to a disposal unit.
5. Business in action: This will be unique for each student.

7.2 Describe the links in the chain of distribution

1. Logistics helps to join up all of the people/businesses along the chain of distribution, and to
stop hold ups or issues along the way.
2. Wholesalers are intermediaries who store large quantities of goods before they are sold. It
allows for lots of products to be made and stored, without the need for them to all be sold
quickly.
3. For example, the wholesaler could be removed, which would increase the profit for the
supplier. However, it would mean that products would have to be sold as soon as they are
created, as there would be nowhere to store them in large quantities.
4. Business in action: This will be unique for each student.

7.3 Distinguish between multimodal and intermodal transport

1. (a) Multimodal transport, as it means the exporter only deals with a single carrier.
(b) Intermodal transport, so the containment can stay together.
(c) Intermodal transport, so the freight is not split up.
(d) Multimodal transport, as it means the exporter only deals with a single carrier.
2. (a) Air transport, as it is a more protective way of transporting expensive items.
(b) Sea transport, as it is cost-effective at moving very large loads.
(c) Pipelines, which can move liquids and gases quickly and cheaply.
3. Business in action: This will be unique for each student.

7.4 Interpret information on transport documents

1. An import licence is a permit from a government body giving permission for goods to be
imported into a country. A bill of lading is a document that needs to be signed by a carrier to
form a receipt for the goods it will be carrying. An airway bill is the air transport equivalent of
a bill of lading.

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Chapter 7: Logistics and supply chains
2. Answers will vary, but may include: Import licence: licence number, which company the
licence is granted to, description of the goods, their value, the port at which they are arriving.
Bill of lading: the carrier’s name, the date, the bill of lading number, the quantity of goods,
whether it has been prepaid. Airway bill: the airline name, the date, the airway bill number,
the quantity of goods, whether it has been prepaid.
3. Multiple copies are needed so that each company in the supply chain can have a copy (as the
area that the supplies are travelling across is vast, and international travel is involved, there
are likely to be a number of bodies involved in the supply chain).
4. Business in action: Answers will vary, but may include: the carrier name, the date, the bill of
lading/air waybill number, the quantity of goods, whether it has been prepaid.

7.5 Explain the role of transport in marketing

1. Most Caribbean countries are relatively small, therefore other forms of transport such as air
and rail would not be as cost-effective. There is not the infrastructure needed to allow for rail
to be the main form in most Caribbean countries.
2. In many Caribbean countries, parts of the road network are poor, which delays transport.
3. Containers help to make regional transport more effective because they can store, carry and
protect lots of products. There are container ports in the Caribbean which are well placed to
support trade with other Caribbean countries.
4. Business in action: This will be unique for each student.

7.6 Identify advantages and challenges of supply chain operations

1. This will be unique for each student.
2. Answers will vary, but may include: poor transport systems and infrastructure, a shortage of
logistics professionals, technology challenges, political upheaval, etc.
3. Business in action: This will be unique for each student.

7.7 Explain the impact of logistics and supply chain operations on

the competitiveness of a business
1. This will be unique for each student.
2. First party: Ramchand Soap Industries. Second party: Soft Soap and a range of independent
stores across the east coast of the United States. Third party: International Shipping Line and
Road Solutions. Ramchand Soap would benefit from employing a fourth party because this
fourth party would be a logistics service provider who could oversee the work of the third
parties, and get the right goods to the right second parties at the right time.
3. Business in action: This will be unique for each student.

7.8 Identify the problems likely to be encountered in distribution

1. Some other Caribbean countries do not have extensive port facilities, which help with
organising fast-moving and efficient supply chains.
2. Answers will vary, but may include: delayed shipment, spoilage and inadequate warehousing
facilities.

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Chapter 7: Logistics and supply chains

3. Factors such as materials and parts not being ready, poor weather conditions and problems
with transport would lead to delayed shipment. This would have knock-on effects for the
supply chain because the materials and parts would not be in the right place at the right
time, therefore delaying the whole chain.
4. Business in action: This will be unique for each student.

7.9 Outline measures to mitigate problems in distribution

1. Answers will vary, but may include: a fourth party could be employed to oversee the whole
distribution process. The bakery could hire its own vans to transport raw materials to the
wholesaler. The wholesaler could hire its own vans to transport materials to the retailer.
2. Answers will vary, but one example is that the stocks would be less likely to spoil if the time
they are held for is reduced.
3. Business in action: This will be unique for each student.

7.10 Outline the impact of information technology on logistics

and supply chain operations
1. A logistics hub is a location that acts as a centre for a range of activities relating to transport,
logistics and goods distribution, both for national and international purposes. The rest of this
question will be unique for each student.
2. Answers will vary, but may include: it enables importers and exporters to buy space on
cargo ships, and allows shipping lines to advertise and sell cargo space. It also provides
information on the movement of goods and the location and availability of containers.
3. Business in action: This will be unique for each student.

“Develop your exam skills” answers

Paper 1
1. The correct answer is C. Procurement logistics takes place early on in the supply chain, and is
concerned with obtaining and arranging suppliers and raw materials.
2. The correct answer is B. A just-in-time approach involves bringing in parts and supplies so
they arrive at the moment they are needed for production.
3. The correct answer is C. Discount stores sell standard items at discounted (reduced) prices.
4. The correct answer is C. Air transport is the best way of carrying light, valuable and urgent
consignments for long distances (assuming the existence of nearby airports).
5. The correct answer is A. Pipelines are used to transport natural gas from offshore fields to
terminals on land.
6. The correct answer is C. Bills of lading are used for marine transport and not for air transport.
7. The correct answer is B. An import licence enables customs authorities to identify what goods
are entering a country. One reason for this is to prevent the import of certain dangerous and
harmful products (such as narcotics), or goods that do not meet safety specifications.
8. The correct answer is C. The more complex and unpredictable the supply chain, the greater
the need for fourth-party logistics solutions.

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Chapter 7: Logistics and supply chains

9. The correct answer is C. Efficient IT is required to help manage journey routes, process
paperwork, keep track of complex records, etc.
10. The correct answer is A. Obsolescence means that the existing supply chain has to be
reworked as the old supply chain becomes outmoded, because of falling demand for
products that are no longer needed.

Paper 2
1. (a) This refers to the management of the flow of goods and resources. An example would
include organising the transport of raw materials or goods from a supplier to a customer.
(b) (i)  Counterfeiting – this occurs when items are illegally imitated. Counterfeiting can
happen along the supply chain.
(ii) Globalisation – with globalisation, products and supply chains are becoming more
complex. Legal issues, political unrest and natural disasters can interrupt supply
chain operations.
2. (a) This is the process of coordinating and organising a number of elements so products
reach the places where they are needed. It involves managing the movement of
products between the point of origin and the point of destination to meet the needs of
customers or corporations.
(b) The role of retailers is to break down large quantities of products. They will provide
smaller quantities which are needed by customers.
(c) Forward flows consists of a flow of operations designed to move a product along a
supply chain, from the supplier of raw materials to the consumer of the product. Reverse
flows consists of all the operations involved in returning goods from the end consumer
backwards down the supply chain.
• Example of a forward flow: a car moving from the manufacturer to the supplier.
• Example of a backward flow: returning damaged goods to be recycled.
(d) Logistics is the detailed organisation and implementation of processes involved in
getting things from where they originate to where they are needed or consumed.
Logistics may involve moving raw materials, finished goods, supplies, and other
items. There are a range of components to logistics including organising the flow of
information, handling materials, storage, packaging and transport.
3. (a) (i)  Donor organs – air/road
(ii)  Gas and water – pipelines
(iii)  Video games – electronic
(iv)  Bulk grain (internationally) – marine
(b) (i)  Lack of adequate security measures – employing a security company and using
security cameras
(ii)  Delayed shipment – selecting the most appropriate channel of distribution
(iii)  Misdirection of goods – careful labelling and documentation

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Chapter 7: Logistics and supply chains

(c) Answers could include two of the following:

• It cuts journey times – this makes delivery quicker and cheaper since fuel
consumption is also reduced
• It enables drivers to plan the quickest route – this reduces idle time spent on roads
• It improves security and safety – vehicles can be tracked in the event of theft and
hopefully the freight can be recovered
(d) Answers could include two of the following:
• Fast-tracks the sourcing and delivery of commodities
• Ensures security of supply
• Reduces costs
4. (a) (i)  Answers could include two of the following:
• Producers/manufacturers
• Wholesalers
• Retailers
• Consumers
(ii) Answers could include two of the following:
• Producers/manufacturers – adapt raw materials using a range of production
techniques. They will sell to wholesalers, retailers or directly to consumers.
• Wholesalers – purchase in bulk from producers. They also package, label and
grade products and sell them to retailers or consumers.
• Retailers – form contracts and purchase from wholesalers or producers. They sell
convenient sizes to customers.
• Consumers – use the final goods. They can purchase from any of the other links.
(b) A bill of lading is given to the consignor by the shipping company as a receipt for
the cargo loaded onto the ship for transport. An airway bill is issued by the airline to
the consignor as a carriage contract. A bill of lading is a document showing proof of
ownership. An airway bill does not show ownership but is evidence of the contract to
carry the goods.
(c) (i)  Inadequate warehousing facilities – poor warehousing can cause damage to goods.
If there is inadequate cold storage then perishable items will spoil. The goods would
not be of any use to consumers who will blame the suppliers.
(ii)  Delayed shipment – delays can arise for many different reasons, such as inefficiency,
the breakdown of lorries and poor weather conditions. These all result in late
delivery to customers, who may then become frustrated and change suppliers. It is
possible that ships may not be unloaded at port if there is no dock space because of
the delays. Customers will be angry if they needed the items for a particular time.
(iii) Industrial unrest – port workers can have grievances that result in unrest. Even
strikes by drivers can slow down the distribution process. Delivery will not be
prompt and customers will be dissatisfied.

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