WEEK 4: Objectives: ● Identify advantages and disadvantages of supply chain operations.

●
Explain the impact of logistics and supply chain operations on the competitiveness of business.
ADVANTAGES OF SUPPLY CHAIN 1. Improved Quality of Life: people depend on the supply
chain to deliver the basic necessities they need to survive, e.g. food, water, shelter and to
improve their quality of life. The supply chain can even aid health care, e.g. medical emergency
transporting victims to hospital for emergency treatment, as is transporting medical supplies to
hospitals. 2. Supports Economic growth (Wealth creation):societies with a highly developed
infrastructure (roads, railways, ports, airports) enable citizens to access goods and services
when they need them, and economically because the supply chain promotes competition.
Competition encourages high quality and competitive pricing. As a result, consumers can buy
more with their income, being assured of getting value for money. Thereby the standard of living
in society is raised. 3. Employment Opportunities: the supply chain encompasses almost
unlimited opportunities for employment. There are also opportunities for self-employment and
entrepreneurship. ● Tele-sales and Telemarketing: allows people to work from home, either for
a business or through self-employment. Tele-sales refers to selling products/services of others
direct to customers by telephone. Tele-sales workers are paid a basic wage with an added
payment based on the number of sales achieved. A telephone, pleasant telephone manner, a
sound knowledge of employer’s product/service and discretion aids the worker at being
successful at his job. Telemarketing also involves telephone use, but can be more interesting
and satisfying. It creates the interest of potential customers and opportunities for the marketing
company, but is used to provide information to customers and potential customers and collect
customer feedback and make appointments. ● E-tailing: (electronic retailing) is the selling of
retail goods on the internet. It requires strong branding and service display, giving the shopper a
personal feel of shopping without being present in a store. E-tailing benefits both consumers
and marketers. Consumers, who are pressed for time save time and energy because they can
browse online, compare with other traders, select and pay online and receive a speedy delivery.
Marketers do not necessarily benefit to the same degree as consumers, but they do gain. A
successful electronic campaign not only increases revenue but also raises brand awareness
and paves the way for boarder distribution. E-tailing also creates employment opportunities, e.g.
more computer workers are needed to set up, maintain and oversee the computer and
information systems that e-tailing demands. There is also a need for increased packaging and
dispatch workers. E-tailing has led to an increase in the need for many smaller courier services,
including opportunities for self-employment and entrepreneurship. This has occurred due to the
increase in online shopping, package tracking and ‘next day’ or committed dated delivery. E-
tailing is an element of the wider electronic-commerce (e-commerce). In addition to e-tailing, e-
commerce encompasses many other online facilities such as electronic funds transfer and
online transaction processing. Both e-commerce and e-tailing have grown enormously. Like
technology, e-commerce has grown to rival traditional store shopping and resulted in: - An
increase in the number of online market places - A move to the use of mobile devices for online
shopping - Widespread use of online payments - Growth in online digital advertising and
marketing DISADVANTAGES OF SUPPLY CHAIN 1. Globalization: has presented many
challenges to the supply chain, especially related to the complexity of products and the process
of such wide trading. - If business management does not cope with the increased complexity of
globalization, the business loses its competitiveness in the market. - Globalization implies
having customers, and perhaps materials and factories, in other countries. This means that the
business is vulnerable to events in those other countries, e.g. natural disasters, political
instability and industrial actions such as port closes. - As a result of globalization it naturally
follows that businesses face global competition because the number of competitors has
expanded considerably. - The collection of information, such as that related to market
conditions, has become increasingly complex because data collection is more widely spread. -
There will be legal issues that have to be addressed when involving countries that have different
laws and regulations with which the marketer must comply, e.g. where a company has a factory
in another country, employment laws may be different from those in the home country. 2.
Counterfeiting: has been ongoing for thousands of years and it is not restricted to currency.
Product counterfeiting has also been around for a very long time. Product counterfeiting means
imitating something illegally and it is increasing in scope, scale and threat. The global trade in
counterfeit products has increased considerably and this is of course a concern for genuine
producers and the supply chain, but it is also becoming dangerous. Counterfeiting has
expanded from clothing and fashion accessories into items such as medicines and pesticides
that can have serious health and safety implications. 3. Product Complexity & Rapid Product
Obsolescence: product complexity means greater chances of issues in the supply chain
because one or more parts will not be available when they should be. IT systems can help to
create logistic systems to deal with product complexity. As technology and processes change,
products are becoming rapidly obsolete. New products require different manufacturing
techniques, and results in elements of the supply chain no longer being required and new
supply chains may have to be developed. Products have shorter life-spans compared to the
past also. 4. Regulatory Complexity: The number of regulations involved in the shipping of
goods makes the process very complex and technical to perform and complete. The more
complex the route the freight has to take, the more official paperwork and checking needs to be.
5. Management Blunders: ● Over – handling of freight, so that it needs to be loaded and
unloaded too often and in quantities that are too small. ● Not having enough information about
customer requirements, e.g. where to deliver goods. ● Holding too much inventory in stock,
where it can get damaged or become obsolescent. ● Using unsuitable IT systems, or unsuitably
trained staff. 6. Changing Market Conditions: market conditions are always changing, and
businesses have to respond and manage these changes – and they are happening faster than
ever before. Managing these changes is of course easier for large, global-scale businesses but
more difficult for smaller concerns. But they affect the supply chain also, and all businesses,
irrespective of their size, have to embrace the changes in their operations. And, as we observed
earlier, blunders by management can have severe consequences. One of the distinct ways that
market conditions have changed is that consumers, even children and young adults, are more
significant forces in the market. And they are better education overall and more concerned to
tap into the expansion in the choice of goods available to consumers. 7. Natural Disasters:
cause supply chain disruptions, particular with hurricanes in parts of the Caribbean. Even
though weather forecasting projections can calculate the likelihood and impact of hurricanes,
nature is generally unpredictable which mean changes can occur. 8. Political Instability:
Countries with a peaceful political institution will have a favorable supply chain activity than
countries with instable political institutions. Political stability assumes business conditions will be
positive, that is, fewer strikes, more stable prices and less corruption. IMPACT OF LOGISTICS
Logistics can Improve Competitiveness Logistics aims to meet the increasing demands of
customers at the lowest possible costs. Effectively managing the flow of materials, products and
information from the supplier to the end consumer is all part of the logistics system. Logistics
can give a business an edge over its competitors in two ways: - The advantage of providing
value by ensuring materials and products are transmitted faster or to schedule, and providing
efficient assembly of component parts into end products effectively. Doing this is recognizing
customer value. - Providing a cost advantage through partnering effectively with suppliers and
business customers to make activities and processes more efficient, thus resulting in the ability
to put products on the market on time, in the best conditions and at a competitive price.
Logistics can give a Competitive Advantage The success of a business depends considerably
on its ability to match or surpass the services or products of its competitors. Comparative
advantage refers to conditions or circumstances that put a business in a more favorable or
superior, position, in comparison with its competitors. It can gain this advantage through
differentiation and cost advantage. Product differentiation is important: a business’ product is
more important than ever, and can give a business a competitive advantage in a market
dominated by large companies. A product/service can be jointly referred to as a commodity and
a sale will tend to go to the cheapest supplier unless the commodity can be distinguished in
some way from its competitors. It is, therefore, important to be able to identify and add
additional ‘values’ in order to differentiate from the competitors. Branding goods aims to achieve
this, but a good brand depends on a good product that is different or better in same ways from
other in the market, and making consumers aware of this. In this respect, making a product
more attractive, e.g. through packaging and presentation, is important, but gaining a good
reputation is even more important. Logistics can achieve Comparative Cost Advantage
Comparative cost advantage refers to being able to produce a commodity at a lesser cost than
other businesses. Logistics can contribute to achieving this aim, particularly through outsource.
Outsourcing (contracting out) refers to accessing goods/services by contract from an outside
supplier. It is used by businesses to reduce costs or improve efficiency by relocating tasks,
operations, jobs or processes to an external contracted party for a significant period of time. The
functions might be carried out by the other party either onsite or offsite of the business. E.g. a
manufacturer may outsource some elements of its production (such as the production of
component parts) to a third party in another country, this is usually done to benefit from reduced
labour or material costs. Parties to outsourcing - First-party logistics (1PL): these are logistics
provider firms that own their own logistics activities and sometimes outsource some of their
activities. - Second-party logistics (2PL): these firms provide their own assets such as trucks
and driver, warehouse operations and so on to 1PLs. - Third party logistics (3PL): these firms
perform logistics on behalf of another company (1PL), providing the management skills along
with the physical assets, labour and technology to provide logistics to part or all of the supply
chain, thereby relieving companies of performing these services themselves, e.g. transportation,
warehousing management consulting, freight forwarding, pool distribution (delivery to numerous
destinations) and more. - Fourth party (4PL): these are supply chain integrators. The 4PL
assembles and manages resources, capabilities and technology of an organization’s supply
chain and its many providers, that is it co-ordinates the activities of 3PLs; designing, building
and running supply chain solutions for clients. Other examples of outsourcing include payroll
and accounting, operation of call centres, consultancy, using temporary employees from
agencies, IT technicians and much more. Benefits of Outsourcing: 1. It can free up cash flow,
personnel and time resources for the country 2. It can result in cost savings due to lower labour
costs 3. It enables the company to focus on its ‘core’ business competencies 4. It tends to be
directed to organizations who are specialists in the required services WEEK 5 & 6: Objectives: ●
Identify the problems likely to be encountered in distribution. ● Outline measures to mitigate
problems in distribution. ● Outline the impact of Information Technology on logistics and supply
chain operations. PROBLEMS ENCOUNTERED IN DISTRIBUTION Seaports and Airports are
vital for the health and wellbeing of a country’s international trade, and participation in the global
market. Some countries have many ports and airports, while others may only have one, and that
one may have been positioned a long time ago and cannot be changed. The supporting
infrastructure of effective transport links of road and rail to the ports and airports is vital in order
to make their contribution to the economy effective. While an exporter is familiar with the
infrastructure in his own country, what exist in another country may be very different. Even with
an appropriate infrastructure in the home country there are factors that creates problems for
effective distribution, at home and exporting and importing as well. 1. Delayed shipment:
adverse weather conditions and efficiency affects shipment greatly. Sometimes delay is caused
by a delayed consignment during the transit from one form of transport to another. 2. Spoilage:
in today’s market there has been an increased demand for fresh foodstuff which requires
appropriate storage and handling facilities. 3. Misdirection of goods: goods are mistakenly sent
to the wrong destination (or the wrong goods are sent). E.g. negligent packing or inaccurate
labelling or paperwork can cause a consignment to end up at the wrong destination. 4.
Inadequate warehousing facilities: e.g. for perishable or fragile goods. Cooled storage areas are
necessary for some products and loss of electricity can cause big difficulties. Also storage
space is always limited. 5. Lack of adequate security measures: this can lead to stealing or
insertion of illegal substances into shipments, or even terrorist activities. 6. Industrial unrest: e.g.
strikes by airport or port workers will cause delays in delivery, and inland labour disputes can
also interfere with smooth and prompt delivery 7. Ineffective communication: delays or
misinterpretation of infrastructure related to a consignment can result in wrong goods being
sent, or sent to wrong place. E.g. an order for goods show an invoice address and a delivery
address that differ. REDUCING DISTRIBUTION PROBLEMS 1. Government Intervention:
governments advise businesses how to become more efficient including: investment in new
equipment and technology, raising staff skills through education and training and innovation
through research and development. They also publish recommendations of good practice to be
observed by those involved in distribution, e.g. drawing attention to existing regulations related
to marketing products. Government implements legislation related to distribution and employs
inspectors to ensure these are being observed, and businesses with whom complaints of
malpractice can be registered for investigation. 2. Creating a Communication Network:
communication technology provides access to rapid exchange of accurate communication via a
range of internet communication networks. Delayed deliveries are reduced by managing
distribution routes, real-time vehicle position awareness and tracking goods. 3. Taking Out
Insurance: many difficulties can be covered by insurance, but there are two important
considerations to bear in mind: - Insurance compensates the insured (sender of
goods/consignor). This is still a cost to the seller/sender of the goods and still causes them
inconvenience, such as extra paperwork. - For the consignee the inconvenience caused by
failure to deliver can be immeasurable, as the insurance does not help them. Their production is
disrupted; their own customers are let down. Therefore, insurance gives monetary
compensation, but does little to enhance reputation. 4. Selecting the Most Appropriate Channel
of Distribution: is important on the grounds of cost and time, and the decisions made determines
the speed of delivery and how they are handled. The channel chosen must be easily accessible
to the end consumer and the nature of the product has considerable influence on the channel
chosen. - Perishable goods require fast, direct distribution. Size and weight has an influence, as
heavy, bulky products (e.g. grains) are best transported by short and direct distribution. High
unit value goods (e.g. jewellery) require secure distribution channel. - Using intermediaries such
as agents, wholesalers and retailers may be used, while at other times the best channel will be
direct. Using an intermediary does not always slow up the process – they can speed up the
process and distribute quickly. They often bring special skills to assist. - If the end customers
are consumers, then the distribution channel will be to retailers, if the customer is another
business, the distribution channel will be different, and often direct. 5. Choosing a Handling
Service: means selecting one with a good reputation, which isn’t as simple tasks. Those seeking
a reliable handling service can ask the following questions to identify the right handling service
provider: - What is their existing client base? Do they have a proven track record? You should
find out if they have clients known to them that have used them for some years, if so, they must
be doing something right! - Do they provide a bespoke service? Are they familiar with your
products/services? Do they have similar specialism? Do they offer a generic service? If it
matters, you may need to look elsewhere. - Where are their sites located? Are their sites
located conveniently to you and your market, or is their access to your market well serviced
(e.g. for international trade). - Do they offer intermodal facilities? In some circumstances this
may be essential to reducing transport risks. - Are you prepared to pay the price for the best, or
are you willing to compromise? 6. Carefully Labelling and Documentation: in order to reduce
customer dissatisfaction, special care, back-up checking and efficient technology must be
utilized. However, even today’s technology can result in distribution difficulties, e.g. a simple
‘cut-and-paste’ solution save times, but can result in damaging mix-ups if care is not taken. 7.
Avoid handling Large Stocks: a business needs stock (inventory) to meet demands, but too
much stock means capital is tied up and stock becomes dated. There are five solutions: -
Reduce lead time: identify ways that supplier(s) can deliver supplies at shorter notice – if
necessary, using alternative suppliers. - Improve forecasting: take steps to identify both supply
and demand functions ahead. Use technology to make forecasting accurate. - Prioritise stock:
eliminate obsolete stock – identify high-selling items and delete those not selling high. Even if
they are still selling, if inventory is the priority, delete them. - Review suppliers regularly:
sometimes an inability to reduce lead time is due to supplier inefficiency. Investigate alternative
suppliers. - Understand how much to order: many businesses order supplies on the Basis of
quantity discounts – the more ordered, the cheaper the price. This can be a false economy if the
priority is to reduce inventory. 8. Employing a Security Company and Using Security Cameras:
Security cameras are video surveillance technology that records the activity of people to detect,
deter and prevent crime. Installed strategically it can be said to: - Prevent theft - Protect facility
(areas and buildings) - Prevent loss - Deter vandalism - Assure employee safety Security
companies are businesses that provide armed and unarmed security services to guard and
patrol premises. The surveillance they provide is immediate. Their guards are not fixed, as
security cameras are. They roam the site and can take immediate action as incidents happen.
INFORMATION TECHNOLOGY AND LOGISTICS AND SUPPLY 1. Global Positioning Systems
(GPS): those businesses engaged in transportation have three particular concerns; security of
their vehicles, avoiding fuel wastage and maximum efficient use of their fleets. GPS tracking
addresses these concerns. - Fuel consumption: a GPS system installed in vehicles enables the
owners to get real-time knowledge of the whereabouts of the vehicle, and to monitor vehicle idle
time, driver behaviour, fuel usage and so on. - Security and safety: the location tracker system
enables the vehicle to be tracked if stolen, thus facilitating retrieval of stolen vehicles and their
freight. - Time predictor monitoring: one of the biggest advantages is the ability to plan the
shortest and best possible routes for vehicles to follow. This reduces fuel wastage and helps to
reduce idle time. 2. Geographical Information Systems (GIS): this is an information system
designed to capture, store, manipulate, analyse, manage and present geographical data such
as street maps and location tags via social media. Typical applications include highway
maintenance, traffic modelling, accident analysis and route planning and environment
assessment of road schemes, such as traffic counting. This helps government to develop
transportation policy and planning that results in a better road infrastructure. 3. Portnet: aims to
help ports and the shipping community to increase productivity and save costs through the
greater use of information technology and the internet. It empowers the shipping community to
manage the complexity of cargo operations and the entire shipping process by: - Handling all
electronic and container data - Simplifying the processing of transactions and shipping business
processes. This results in such benefits as: - Streamlining documentation and shipping business
processes - Reducing repetitive data creation - Simplification and integration between
government and port authorities - Real-time tracking and notification - Real-time, on demand,
information provision, e.g. e-mail and SMS - Simple-to-use system controls 4. Telemarketing
and E-commerce: telemarketing has now been extended into machines that automatically call
people with a recording that sounds as if it really is a real person calling. The sophistication
even includes negotiating a home visit. E-commerce is the application of information and
communication technologies (ICT) to conduct business. These include the older technologies
such as landline telephones, but ICTs offer most scope, particularly for small businesses,
through e-mail, mobile phones, mobile apps and other internet-based technologies. In addition,
e-commerce helps to support profitable business relationships and to more effectively manage
and run businesses. 5. Global Logistics Providers: with international trade expanding around the
world, third-party logistics have taken on an increasingly important role for multinational
manufacturers and retailers. Multinational manufacturers, e.g. need reliable sources of supply
and retailers also need rapid delivery channels for an ever-expanding distribution network of
consumers. This has resulted in the emergence of a relatively small number of 3PLs that can
provide expertise, reach and reliable logistics around the world. These include the following
logistics provider; FedEx, DHL, Amazon Logistics and Excel, among others. 6. Logistics Hubs:
around the world countries have been developing logistics hubs. A logistic hub is a centre or
specific designated area identified to deal with activities relate to transportation, organisation
separation and co-ordinating goods for national and international trade. Operators lease or rent
warehouses, storage areas, distribution areas and offices from airports and seaports and
manage transportation through to the departure terminal. London Heathrow Airport has three
hubs supporting it but in regional areas distanced from the airport thus spreading the
employment and wealth creation over a wider area, but creating effective linkages with the
airport and seaports. And our European airports similarly use hubs. Jamaica will soon have its
own logistic hub, thereby creating a large number of jobs and improving regional logistics.
Logistics hubs play a key role in supporting efficient delivery and reducing emissions by
transporting assembled components to sites using fewer trucks