BCom SCM - Logistics Management

Bachelor of Commerce
in Supply Chain Management

(Year 3)
LOGISTICS MANAGEMENT
Module Guide
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MANCOSA
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Bachelor of Commerce in Supply Chain Management
LOGISTICS MANAGEMENT
Preface.................................................................................................................................................................... 3
Unit 1: Introduction to Logistics Management ....................................................................................................... 11
Unit 2: Demand Forecasting and Forecasting Supply Chain Requirements ......................................................... 24
Unit 3: Site Selection, Design of Facilities and Warehouse Management............................................................. 44
Unit 4: Packaging .................................................................................................................................................. 63
Unit 5: Transport Management and Global Logistics ............................................................................................ 76
Unit 6: Logistics Information Systems and Customer Service............................................................................. 100
Unit 7: Reverse logistics and environmental management ................................................................................. 112
References.......................................................................................................................................................... 126
Bibliography ........................................................................................................................................................ 127
i
Logistics Management
List of Contents
List of Tables
Table 2.1 Forecast deviations ........................................................................................................................... 27
Table 2.2: Example of a time series sequence ................................................................................................. 30
Table 2.3 Steps in the forecasting process ....................................................................................................... 32
Table 2.4 historical data for cold-storage trucks on a daily basis...................................................................... 37
Table 2.5: Selection of an appropriate forecasting technique ........................................................................... 40
Table 3.1 Steps in the warehouse design process ........................................................................................... 51
Table 3.2 Warehouse activities ......................................................................................................................... 54
Table 4.1 Benefits and cost of RFID ................................................................................................................. 71
Table 5.1 Transport mode comparison ............................................................................................................. 83
Table 5.2 Future developments in transport ..................................................................................................... 88
Table 6.1 Sample customer service measures ............................................................................................... 108
Table 7.1: Examples of value carriers............................................................................................................. 116
Table 7.2 Distribution of unsold goods............................................................................................................ 117
Table 7.3 Examples of returns and exchanges ............................................................................................... 117
Table 7.4 Examples of hazardous and non-hazardous waste ........................................................................ 122
List of Figures and Illustrations
Figure 1.1 The different type of logistics ........................................................................................................... 13
Figure 1.2 Functions of Logistics ...................................................................................................................... 14
Figure 1.3 Different levels of logistics decisions ............................................................................................... 15
Figure 1.4 Logistics activities ............................................................................................................................ 18
Figure 2.1 Features of forecasting .................................................................................................................... 26
Figure 2.2 Types of forecasting ........................................................................................................................ 29
Figure 2.3 Line graph........................................................................................................................................ 38
1 MANCOSA – Bachelor of Commerce In Supply Chain Management

Figure 2.4 Examples of data patterns ............................................................................................................... 39
Figure 3.1 Three purposes of warehouses ....................................................................................................... 46
Figure 3.2 Different types of warehouses ......................................................................................................... 48
Figure 3.3Types of cross docks ........................................................................................................................ 56
Figure 3.4 Common warehousing problems ..................................................................................................... 58
Figure 4.1 The functions of packaging .............................................................................................................. 65
Figure 4.2 Packaging design and solutions ...................................................................................................... 68
Figure 4.3 Technological innovations in packaging .......................................................................................... 71
Figure 5.1 Transport perspectives .................................................................................................................... 79
Figure 5.2 Functions of transport ...................................................................................................................... 80
Figure 5.3 Primary modes of transport ............................................................................................................. 80
Figure 5.4 Secondary modes of transport......................................................................................................... 81
Figure 5.5 Global scene .................................................................................................................................... 93
Figure 5.6 Globalisation trends ......................................................................................................................... 94
Figure 5.7 Forces that affect managerial decision-making in the current environment ..................................... 95
Figure 6.1 Customer service elements ........................................................................................................... 105
Figure 7.1 PESTLE framework ....................................................................................................................... 114
Figure 7.2 Diagrammatical representation of the forward and reverse flow of logistics .................................. 115
Figure 7.3 ISO 14 000 mandate...................................................................................................................... 120
Figure 7.4 Recycling of waste ......................................................................................................................... 123
MANCOSA – Bachelor of Commerce in Supply Chain Management 2

Preface
A. Welcome
Dear Student
It is a great pleasure to welcome you to Logistics Management (LM7). To make sure that you share our passion
about this area of study, we encourage you to read this overview thoroughly. Refer to it as often as you need to,
since it will certainly make studying this module a lot easier. The intention of this module is to develop both your
confidence and proficiency in this module.
The field of Logistics Management is extremely dynamic and challenging. The learning content, activities and
self- study questions contained in this guide will therefore provide you with opportunities to explore the latest
developments in this field and help you to discover the field of Logistics Management as it is practiced today.
This is a distance-learning module. Since you do not have a tutor standing next to you while you study, you need
to apply self-discipline. You will have the opportunity to collaborate with each other via social media tools. Your
study skills will include self-direction and responsibility. However, you will gain a lot from the experience! These
study skills will contribute to your life skills, which will help you to succeed in all areas of life.
We hope you enjoy the module.
MANCOSA does not own or purport to own, unless explicitly stated otherwise, any intellectual property
rights in or to multimedia used or provided in this module guide. Such multimedia is copyrighted by the
respective creators thereto and used by MANCOSA for educational purposes only. Should you wish to use
copyrighted material from this guide for purposes of your own that extend beyond fair dealing/use, you
must obtain permission from the copyright owner.

B. Module Overview
 The Bachelor of Commerce in Supply Chain Management degree is a dynamic programme designed to give
candidates specialist knowledge within the growing field of supply chain management. A well implemented
supply chain management system has been identified as a key tool in the success of today’s leading
businesses.
 Supply chain management involves the co-ordination, production, shipment and delivery of goods from the
point of production to the point of consumption.
 Students enrolled on the programme will be exposed to the learning areas of operations, supply chain
management, logistics and purchasing. Students will obtain in-depth knowledge in the field of supply chain
management.
 The module is a 15 credit module at NQF level 7.
 Students are expected to read the introduction and then work through the text. Each unit of study will include
either an activity or task that will assist in you better understanding the unit. Please work through all activities
and ensure the prescribed and recommended readings are consulted.
C. Exit Level Outcomes and Associated Assessment Criteria of the Programme
Exit Level Outcomes (ELOs) Associated Assessment Criteria (AACs)
 An understanding of the key concepts in  Key concepts in supply chain management,

supply chain management, logistics, logistics, operations and purchasing are
operations, and purchasing examined to allow students to develop an
understanding of the field of supply chain
management.
 The ability to develop and implement  Strategic supply chain plans are explored to
strategic supply chain plans enable student to develop and implement these
plans.
 The skills and knowledge to analyse the  The performance of supply chain partners and
performance of supply chain partners and methods to improve supply chain performance are
develop methods to improve supply chain analysed to gain skills and knowledge in these
performance areas
 The ability to analyse and interpret  Strategy formulation and decision making in
information to facilitate strategy formulation supply chain management is explored to allow
and decision making in supply chain students to develop the ability to analyse and
management interpret information to facilitate strategy
formulation and decision making in the field of
supply chain management

 Be able to apply and integrate knowledge to  Complex supply chain problems are investigated
solve complex supply chain problems to allow students to gain skills to be able to apply
and integrate knowledge to solve these problems
D. Learning Outcomes and Associated Assessment Criteria of the Module
LEARNING OUTCOMES OF THE MODULE ASSOCIATED ASSESSMENT CRITERIA OF THE MODULE
 Understand the concepts and functions  The concepts of logistics management and the importance
of logistics management and the of logistical decisions are investigated to develop the
importance of logistical decisions. students understanding of logistics management.
 The functions of logistics management are discussed to

enable students to improve their understanding of logistics
management in organisations
 Analyse the relationship between  The relationship between demand forecasting,

demand forecasting, procurement, procurement, inventory management, order processing
inventory management, order and logistics management is explored to enable students
processing and logistics management. to analyse the importance of these functions.
 The various functions of logistics management are

analysed to allow students to explore the integration
between these functions.
 Discuss site selection, design of facilities  The concept of site selection is explored to enable
and operations of a warehouse. students to discuss the implications of choosing the correct
site.
 Design of facilities and operations of a warehouse are

examined to allow the student to understand and discuss
these concepts.
 Investigate the role of packaging and  The different aspects of packaging and materials handling
materials handling in logistics are investigated in order for students to acknowledge the
management. impact on logistics management.
 The different types of packaging are explored to enhance

the students understanding of the importance of packaging

 Compare and contrast the various modes  The various modes of transport are compared to enable
of transport and recognise the students to choose the best mode of transport.
significance of global logistics
 The concepts of global logistics are examined to enable
students to understand the significance of global logistics
on the logistics function.
 Examine how information systems  Information systems are examined to determine how they
support logistics communication and support communication between logistics partners.
customer service.
 The benefits of information systems are explored to enable
students to understand how it can improve customer
service
 Explore the importance of reverse  Reverse logistics concepts are explored to understand its
logistics and waste management on the impact on the logistics function.
logistics function.
 Waste management is discussed to enable students to
discover the importance of proper waste management.
E. Learning Outcomes of the Units

You will find the Unit Learning Outcomes on the introductory pages of each Unit in the Module Guide. The Unit
Learning Outcomes lists an overview of the areas you must demonstrate knowledge in and the practical skills you
must be able to achieve at the end of each Unit lesson in the Module Guide.

F. Notional Learning Hours
Notional Learning Hour Map for the Programme
Learning time
Types of learning activities
%
Lectures/Workshops (face to face, limited or technologically mediated) 10
Tutorials: individual groups of 30 or less 0
Syndicate groups 0
Practical workplace experience (experiential learning/work-based learning etc.) 0
Independent self-study of standard texts and references (study guides, books, journal 60
articles)
Independent self-study of specially prepared materials (case studies, multi-media, etc.) 20
Other: Online 10
TOTAL 100
G. Acronyms
CSCMP Council of Supply Chain Management Professionals
PESTLE Political, Economic, Social, Technological, Legal and Economic
H. How to Use this Module

This Module Guide was compiled to help you work through your units and textbook for this module, by breaking
your studies into manageable parts. The Module Guide gives you extra theory and explanations where necessary,
and so enables you to get the most from your module.
The purpose of the Module Guide is to allow you the opportunity to integrate the theoretical concepts from the
prescribed textbook and recommended readings. We suggest that you briefly skim read through the entire guide
to get an overview of its contents. At the beginning of each Unit, you will find a list of Learning Outcomes and
Associated Assessment Criteria. This outlines the main points that you should understand when you have
completed the Unit/s. Do not attempt to read and study everything at once. Each study session should be 90
minutes without a break

This module should be studied using the prescribed and recommended textbooks/readings and the relevant
sections of this Module Guide. You must read about the topic that you intend to study in the appropriate section
before you start reading the textbook in detail. Ensure that you make your own notes as you work through both the
textbook and this module. In the event that you do not have the prescribed and recommended textbooks/readings,
you must make use of any other source that deals with the sections in this module. If you want to do further reading,
and want to obtain publications that were used as source documents when we wrote this guide, you should look
at the reference list and the bibliography at the end of the Module Guide. In addition, at the end of each Unit there
may be link to the PowerPoint presentation and other useful reading.
I. Study Material
The study material for this module includes tutorial letters, programme handbook, this Module Guide, a list of
prescribed and recommended textbooks/readings which may be supplemented by additional readings.
J. Prescribed and Recommended Textbook/Readings

There is at least one prescribed and recommended textbooks/readings allocated for the module.
The prescribed and recommended readings/textbooks presents a tremendous amount of material in a simple,
easy-to-learn format. You should read ahead during your course. Make a point of it to re-read the learning content
in your module textbook. This will increase your retention of important concepts and skills. You may wish to read
more widely than just the Module Guide and the prescribed and recommended textbooks/readings, the
Bibliography and Reference list provides you with additional reading.
The prescribed and recommended textbooks/readings for this module are:

Prescribed Reading/Textbook
 De Villiers, G., Nieman, G. and Niemann, W. (2019). Strategic Logistics Management: A supply chain
management approach. Second Edition. Van Schaik Publishers
Recommended Readings
 Pienaar, W.J & Vogt, J.J. (2016). Business Logistics Management: A value chain perspective. Fifth Edition.
Oxford University Press
 Harrison, A & Van Hoek, R. (2014). Logistics Management & Strategy Competing through the Supply Chain.
Fifth Edition. Prentice Hall International Edition
 Wisner, Tan, K, Leong, G. (2012) Supply Chain Management A Balanced Approach. Third Edition. South
Western

K. Special Features
In the Module Guide, you will find the following icons together with a description. These are designed to help you
study. It is imperative that you work through them as they also provide guidelines for examination purposes.
Special Feature Icon Explanation
LEARNING The Learning Outcomes indicate aspects of the particular Unit you have
OUTCOMES to master.
The Associated Assessment Criteria is the evaluation of the students’

ASSOCIATED
understanding which are aligned to the outcomes. The Associated
ASSESSMENT
Assessment Criteria sets the standard for the successful demonstration
CRITERIA
of the understanding of a concept or skill.
A Think Point asks you to stop and think about an issue. Sometimes
THINK POINT you are asked to apply a concept to your own experience or to think of
an example.
You may come across Activities that ask you to carry out specific tasks.
In most cases, there are no right or wrong answers to these activities.
ACTIVITY
The purpose of the activities is to give you an opportunity to apply what
you have learned.
At this point, you should read the references supplied. If you are unable
READINGS to acquire the suggested readings, then you are welcome to consult
any current source that deals with the subject.
PRACTICAL
Practical Application or Examples will be discussed to enhance
APPLICATION OR
understanding of this module.
EXAMPLES
You may come across Knowledge Check Questions at the end of each
KNOWLEDGE
Unit in the form of Knowledge Check Questions (KCQ’s) that will test
CHECK
your knowledge. You should refer to the Module Guide or your
QUESTIONS
textbook(s) for the answers.
You may come across Revision Questions that test your understanding
REVISION
of what you have learned so far. These may be attempted with the aid
QUESTIONS
of your textbooks, journal articles and Module Guide.

Case Studies are included in different sections in this Module Guide.

CASE STUDY This activity provides students with the opportunity to apply theory to
practice.
You may come across links to Videos Activities as well as instructions

VIDEO ACTIVITY
on activities to attend to after watching the video.

Unit
1: Introduction to Logistics
Management

Unit Learning Outcomes
CONTENT LIST LEARNING OUTCOMES OF THIS UNIT:
1.1 Introduction  Introduce topic areas for the unit
1.2 Logistics management definitions  Explain the definitions and concepts of logistics management
and concepts
1.3 Logistics functions  Assess the functions of planning, implementing and

controlling within logistics management
1.4 Levels of logistical decisions  Examine the different levels of logistical decisions
1.5 Logistics management activities  Evaluate the various logistics management activities
1.6 Summary  Summarise topic areas covered in the unit
Prescribed and Recommended Textbooks/Readings
 de Villiers, G., Nieman, G. and Niemann, W. (2019). Strategic
Logistics Management: A supply chain management approach.
Second Edition. Van Schaik Publishers
 Pienaar, W.J & Vogt, J.J. (2016). Business Logistics Management: A
value chain perspective. Fifth Edition. Oxford University Press
 Harrison, A & Van Hoek, R. (2014). Logistics Management &
Strategy Competing through the Supply Chain. Fifth Edition. Prentice
Hall International Edition
 Wisner, J, Tan,K, Leong,G. (2012) Supply Chain Management A
Balanced Approach. Third Edition. South Western

1.1. Introduction
No region is able to function as an island in which they are able to produce all the products that they need. To
ensure the needs of the population are met, there will need to be a mechanism in place to procure goods and have
them at the right place at the right time. This mechanism will need to ensure goods can be procured and allow for
these goods to be available for consumption, distribution or storage (Pienaar and Vogt, 2016:1). Over the year’s
consumers have become increasingly empowered with lots of information that is available at their fingertips, this
has made consumers even harder to please. Globalisation has created a universal market and the needs of
consumers are constantly changing, this has necessitated a revised method of providing goods to consumers
(Pienaar and Vogt, 2016:1).
1.2. Logistics management definitions and concepts

The Council of Supply Chain Management Professionals (CSCMP), defined logistics management as a part of the
supply chain that plans, implements and controls the flow of goods. It is the activity that is needed to effectively
and efficiently move goods/inventory along a specific supply chain. There will be a forward and reverse flow. These
goods can be raw materials, work in progress or finished goods. The logistics function is therefore essential for a
well-coordinated supply chain from the point of origin to the point of consumption (Pienaar and Vogt, 2016:1).
For many years, procuring goods and materials management was largely viewed as function of the marketing and
operations department. Since the 1990s there has been a shift with a large focus on Supply Chain Management
and the use of a value chain. This has brought logistics to the forefront of the fundamental activities of a company.
Globalisation, informed and well educated consumers as well as the increasing use of technology has resulted in
Logistics Management becoming a major business function (de Villiers, Nieman and Niemann, 2019: 4).
Logistics can be separated into five different types as depicted in figure 1.1 below.
Military Engineering Business Production Reverse

Logistics logistics Logistics Logistics Logistics
1Figure 1.1 The different type of logistics

Source: de Villiers, et al., (2019:4).
 Military logistics: as the name suggests, it pertains to the delivery of goods that are needed in the military.
Ammunition, medical supplies as well as spare parts are examples of goods moved in military logistics. The
aim is to have the right product delivered at the right place and timing is crucial.
 Engineering logistics: similar to military logistics and refers to concepts such as integrated logistics support.
 Business logistics: refers to finished goods. The activities are commercial in nature. This term is generally
referred to as logistics.

 Production logistics: this refers to logistics that occur between the time the raw material is procured up until
the completion of a finished product. It is these logistics activities that enable the manufacture of a good.
 Reverse logistics: the actions that relate to waste disposal and returns. This flow will be in the opposite direct
of the other four types of logistics (de Villiers, et al., 2019: 4-5).
Activity
Provide a detailed definition of Logistics Management.
In your definition, please include the different types of logistics and

provide examples.
1.3. Logistics Functions

The abovementioned definition of logistics focused on three major functions of logistics management. The
functions are included in Figure 1.2 below.
Plan
Implement
Control
2Figure 1.2 Functions of Logistics

Source: Pienaar and Vogt (2016:11)
a) Plan: Planning and preparation in logistics includes a variety of activities, such as the selection of the site in
which operations will be based, the number of people that can be accommodated, production capacity as well
as the correct location in relation to the supply chain. The appropriate carriers will need to be selected in line
with the location. A key factor in planning is the use of third party and fourth party logistics.
b) Organisation implementation: refers to the positioning of resources and the design of production and
distribution activities to best suit the needs of the customers and the supply chain. The end result is to ensure
that the firms goal is the met in the most efficient and effective manner.
c) Control: is inclusive of the actual scheduling and mapping of trips, vehicles and staff. A key factor is the
constant monitoring and evaluation of performance. Monitoring and evaluation will allow for remediation

Revision Questions
Please read your notes before answering the revisions questions.
1. Explain the concept of third party logistics.

2. Explain the concept of fourth party logistics.
3. Provide an example of military logistics
4. Suggest a technology that can be used to assist in monitoring
and evaluation.
5. Provide an activity associated with reverse logistics
1.4. Levels of Logistical Decisions

There are various decisions that take place in organisations, these decisions are taken at different managerial
levels. According to Pienaar and Vogt (2016:11), logistics decisions can be classified in the following ways as
depicted in figure 1.3 below.
Strategic Level
Tactical Level
Operational Level
3Figure 1.3 Different levels of logistics decisions

 Strategic level: These decisions that will have a holistic impact on the firm. These decisions will focus on
the long term functioning of the firm; an example would be customer zones. Strategic decisions are made
by top level management.
 Tactical level: These decisions are taken over a medium timeframe approximately a year. Tactical
decisions are made by middle level managers.
 Operational level: Are decisions that are taken on a daily basis. Operational decisions are made by
frontlines managers or supervisors (Pienaar and Vogt, 2016:12).

Think Point
Consider an organisations such as Barloworld or an organization of your

choice that is in the field of Supply Chain Management.
Research the company and describe the different decisions that may
take place at the different managerial levels.
1.5. Logistics Management Activities

Logistics management encompasses all activities that relate to the forward and reverse flow of goods. The flow of
goods starts at the point origin and usually begins in the primary sector and progresses to the final point of
consumption which generally takes place in the tertiary sector (Pienaar and Vogt, 2016:13).
Pienaar and Vogt (2016:11), list the following logistics activities:
a) Demand forecasting: refers to the prediction of the amount of goods that may be needed for the short or
long term future. The future forecast is needed by all participants in the supply chain. Having a solid
understanding of the demand levels will allow for the appropriate volumes of goods to be produced and
moved to the required locations. These forecasts will have a knock on effect on the marketing, sales as
well as manufacturing functions.
b) Facility site selection: the selection of a location, the number of staff and the required facilitates are
strategic decisions taken by top level management. A key consideration in selecting an appropriate site
is the resources that will be needed for efficient operations and the various markets that will be serviced.
A location will need to be selected based on the inbound and outbound activities that are depicted below.
Having a strategically chosen location will ensure the transport routes are easily accessible and the raw
materials are easily acquired. Various costs such as labour, transport, security and other utilities will need
to factored in.
c) Design: The plant will need to be designed to accommodate the various modes of transportation that will
be used. The use of automated facilities will necessitate a design to support these automations.
d) Procurement: this is a key function in the supply chain with a focus on the acquisition of raw materials,
semi-finished goods and finished goods. The acquisition of these goods are an ancillary function to
enhance the functioning of the supply chain. Supply chain partners will need to be carefully assessed and
selected as the dependability of the partners will determine the dependability of the logistics function. It is
imperative for firms to develop and maintain good relationships with their partners.
e) Materials handling: pertains to the movement of goods that are either semi-finished, finished or in their
natural form. If materials handling is executed correctly, the productivity within the facility will be increased
and costs related to processing, storage and inventory will be reduced.
f) Packaging: is needed for the protection of goods. Goods are moved across various routes and intermodal
transportation can be utilised. All materials that are used to cover up a goods are referred to as packaging

materials. Packaging materials also provide a sense of identification. Scanners and increases in
technological bar coding have increased the efficiency in identifying goods via packaging.
g) Warehouse management: warehouses are storage facilities in which inventory is stored for a period of
time. In most cases the goods produced will not be immediately consumed by the end customer and will
need to be moved. The longer the time period for storage, the greater the costs incurred. It is therefore
imperative to practice warehouse management and take into consideration the location, capacity and the
possible lease or acquisition of this facility. The level of automation will also need to be considered.
h) Inventory management: a trade-off of between the holding of inventory and the possibility of having a
stock out will need to conducted. The downside of holding too much inventory is the cost and the downside
of holding too little inventory will be the loss of customers and reputational risk. Inventory management is
directly affected by demand forecasting.
i) Order processing: refers to the activities related to fulfilling the consumer’s orders. The correct details for
orders, credit checks and despatch of the goods are essential. The increased advancements in
technology have decreased the time limit to receive, process and dispatch goods.
j) Logistics communication: the key activity that links all the other activities in the supply chain is effective
communication. Communication is needed between firms and clients, their suppliers as well as the other
departments in an organisation. Effective communication creates coordinated logistics.
k) Transport: is a critical logistics activity and is essential to having goods delivered to customers at the right
time and in the right place. There are various considerations that must be taken into account. The choice
to acquire vehicles, the type of vehicle, the mode of transportation and the associated routes must all be
carefully considered.
l) Reverse logistics: as the name suggests, it will refer to the reverse flow of goods. Goods that are received
by a consumer and will need to be returned, or the eventual waste products. There is an increased
pressure from governments for business to act responsibly and ensure recycling and sustainability are
being practised.
m) Customer service: excellent customer service can provide firms with a competitive advantage. A firm may
be able to provide superior goods are lower prices due to the efficiency of their logistics functions. After
sales service is a crucial factor in customer satisfaction. The manner in which returns and defective
products are handled will be dependent on the logistics function (Pienaar and Vogt, 2016:13-16).

Below is a diagrammatical representation of some of the logistics activities
4Figure 1.4 Logistics activities

Source: de Villiers, et al., (2019: 5)
Logistics Management can be categorised into two focus areas: supply management and distribution management.
Supply management includes inbound activities such as the procurement and transportation of raw materials to a
production/manufacturing site. The raw materials will then be processed into semi-finished or finished goods.
These goods will be stored in distribution centres/warehouses. Distribution management entails the movement of
goods to the end consumer. Various modes of transportation can be used to deliver the goods to wholesalers and
retailers. Last mile logistics will be the final mode of transportation that is used to deliver the good to the end
consumer (de Villiers, et al., 2019:5).
Case Study
Pamba Easy Meals is a relatively small soya food processor in Tzaneen. After a modest
beginning the company moved from strength to strength and is currently the biggest of its kind
in the Limpopo province. The company has been growing at an average growth rate of 10%
over the past three years. In spite of negative market conditions during the past 12 years, the
company has managed to survive. The companies’ viability is insured through quality
improvement, product innovations and unique customer service. Pamba Easy Meals is a
relatively small manufacturer of soya based products, serving the geographical markets of
Limpopo, Mpumalanga, Gauteng, North-West province, Namibia and Botswana with a broad
product line. Pamba market their products through a network of sales representatives. The
representatives report that there is a strong pressure to increase the service to retail chain
stores. They report that the retail buyers are raising questions about the number of stock outs

that they have recently been experiencing. These buyers have even suggested that they might
switch to other brands, if the service is not improved. Pambas’ product lines focus on varying
additions of dehydrated vegetables, herbs and spices, vegetable oils, starches, flavourants,
rice and noodles. Other products are gravy, custard, jelly powder, cool drink powder, milk-
blend powder and rooibos tea. Pamba caters for the lower income groups in the rural areas,
which are dependent on non-perishable foods. The target market is served mainly by
agricultural cooperatives and Pamba is the main supplier of soya products. Other target
markets are retailers, caterers, and pre-packers of ration packs, wholesalers as well as
entrepreneurs involved in primary school feeding schemes. All products are delivered on order
as stipulated. Pamba makes use of their own transport for distribution to the outsourced
warehouses. Although they strive to maintain low transport costs, the costs are still high due
to the negative effects of economic fuel factors and fleet maintenance. Products are produced
in Tzaneen. Production takes place in large batch quantities in order to maintain low production
costs, and to ensure consistent production quality. As items are packed they are generally
transported to the warehouses in mixed truckloads. Product inventories are normally stored
around the country in five outsourced warehouses. The sales representatives call on
customers and generate orders, which are sent by email to these outsourced warehouses.
The outsourced warehouses then arrange transportation to the retail customer. Orders are
generally small, amounting to five or six cases per order, or about 150 kg to 200 kg at a time.
These orders are delivered using contract carriers, selected individually by each outsourced
warehouse. The costs are then billed to Pamba. Transport costs are high, because of the small
shipments. Delivery schedules vary by carrier; some provide fast and reliable service, while
others have been erratic to the point that customers have commented on poor delivery service.
The location of the current customer base is 60% in Limpopo, 20% in the North-West province,
10% in Mpumalanga, 5% in Botswana and 5% in Namibia. Pamba’s management is divided
into two major departments. One is marketing and sales, and the other is production. (There
are also several smaller staff units for human resources, purchasing and finance.) Production
is the older of the two. Marketing came about almost as an afterthought and had a difficult time
establishing credibility within the company. Production is responsible for scheduling production
as well as arranging transportation and maintaining inventory in the warehouses. Staff
members are motivated by a production bonus on a weekly basis. Staff are informed of
marketing and production objectives as well as any problems that may have occurred or may
occur. Employees receive in-house training and current employees fill new positions. Staff are
encouraged to improve their housing, by means of loans granted by the company. All staff
members receive the benefits of a pension fund as well as a medical aid fund. Due to the
above-mentioned incentives, the company maintains a high level of team spirit and motivation,

with low personnel turnover. Customer service is improved by constant communication with
the sales representative network. In the event of an emergency, customer service is rendered
as per cost. Pamba takes products not sold and damaged back for credit. No order is too big
or small for Pamba. The local crops of soya beans do not fulfil the local demands, therefore
necessitating soya bean imports. The meat industry also makes use of texturized vegetable
protein, leading to a further shortage of soya beans. Currently there is only one supplier of
texturized vegetable protein in South Africa, situated in Mokopane, approximately 150 km
south-west from Tzaneen. This main supplier has obligations in terms of foreign contracts,
leading to shortages. Due to the volatile exchange rate, it is too costly to import soya beans.
Over the past months there has been an erratic supply of the basic raw material leading to
Pamba being unable to meet its demands. There are a variety of role players in the soya food
industry. Competitors in Pamba’s market are Nutritional foods, Imana, Ayos and Umgeni. As
in most industries there are many new entries, but they do not survive and leave the market
quickly. Pamba’s quality, product differentiation, price and service offerings are most
competitive.
Source: Villiers, G. d., Nieman, G., Niemann, W. (2017). Strategic logistics management. Fifth
Edition. South Africa: Oxford University Press.
Identify three logistics activities and substantiate your answer with statement from the case
study.
1.6. Summary
Logistics has been around for a long period of time, it gained popularity in the 1990s and was seen as the part of
the supply chain that is responsible for planning, implementing and controlling the forward and reverse flow of
goods. Different concepts and types of logistics were examined in this study unit. The different management levels
at which logistics decisions are made were discussed with a focus on the timeframe of these decisions. Inbound
and outbound activities were differentiated and a graphical representation of logistics management was provided.
The unit concludes with a brief description of the various logistics activities that are performed.

Knowledge Checks
Please ensure you read your notes before attempting the questions.
Indicate if the following statement are True of False.
a) Business logistics is essentially referred to as logistics.

b) Reverse logistics pertains to the waste management and returns.
c) Logistics essentially has three functions: plan, implement and control.
d) There are four levels of logistical decision making,
e) Packaging is a needed logistics activity.
Select the correct answer from the available option
1. Logistics can be placed in different categories. Which of the following refers to the
categories of logistics?
a) Military logistics
b) Engineering logistics
c) Business logistics
d) Production and reverse logistics
e) All of the above
2. Logistics has different levels of decision making. Which level of decision making covers
the long term functioning of the logistics activities.
a) Strategic level
b) All levels
c) Operational level
d) Tactical level
3. Distribution management includes which activities
a) Receiving goods
b) Loading goods to be delivered to a wholesaler
c) Sorting of goods to be stored in the warehouse
d) Labelling
4. Packaging is an essential logistical activity. Select the option that best describes the
function of packaging
a) It is needed for protection
b) Packaging can provide a sense of identification
c) Packaging can assist in the sales and advertising
d) All of the above
e) None of the above

Answers to revision question and self-assessment activities

Activity 1.2
Solution
Logistics can be defined as the series of activities in the supply chain that allow for the planning, implementing
and controllingl of activities. Logisitics managment involves inbound and outbound actitives. Essentially there are
five types of logistics:
 military logistics – amunnition and medical supplies

 engineering logistics – concepts such as integrated learning support
 production logistics – on site production and manufauring of raw materials into finished products
 business logistics- the movement of goods for commercial purposes
 reverse logistics. – waste, recycling and returns
Revison questions 1.3
1. Third part logistics is the middle man or the third party that completes activities on behalf of the firm. A
firm may contract certain logistics activities to a contractor. This contractor will then be referred to as the
third party.
2. Fourth party logistics is the extension of third party logistics, this is when an entire supply chain is
contracted to another firm. Please consult your prescribed and recommended readings for more
detailed explanations of third and fourth party logistics.
3. The delivery of ammunition such as guns and bullets to soliders. The delivery of medical supplies to war
torn/pandemic areas.
4. Global positioning system to for improved track and traceability.
5. The return of goods or the recycling of goods such as empty lotion bottles.
Think point 1.4

There are essentially three levels of decision making.
Strategic – The location of the Barloworld facilties, the rental or purchase of equipment and the type of
automation.
Tactical – The medium term decisions such has the supplier and partners that will be utilised. Barloworld makes
use of third party logistics and fourth party logistcis.
Operational – the operation decisions are for short term and will refer to the day to day activities which will
include the specific routes that will be utilised.
The answers will vary based on the firm that was chosen. Please use the internet to review other examples.

Case study 1.5

 Procurement -raw materials are procured. It has been erratic
 Warehouse management- warehouse are outsourced
 Inventory management. Customers are experiencing stock outs which indicates that inventory
management has not been performed in the most efficient manner
 Order processing: orders are processed but delivery is not timeous
 Transport. – Pamba makes use of their own transportation. This is a decision to buy instead of
contracting to a third party logistics partner. The transport costs are high and this has a knock on effect
on customer service
 Customer service: Poor customer service due to stock outs based on inventory management and
transportation
Knowledge checks
True or False questions
a) True
b) True
c) True
d) False
e) True
Multiple choice questions

1. E
2. A
3. B
4. D

Unit
2: Demand Forecasting and
Forecasting Supply Chain
Requirements

CONTENT LIST LEARNING OUTCOMES OF THIS UNIT:
2.2 Features of forecasting  Explain the features of forecasts
2.3 Types of forecasting  Evaluate the different types of forecasting
2.4 The forecasting process  Demonstrate an understanding of the forecasting process
2.5 Selecting appropriate forecasting  Distinguish the ability to select appropriate forecasting
techniques techniques
2.6 Summary  Summarise topic areas covered in unit
 Harrison, A & Van Hoek,R. (2014). Logistics Management &
Strategy Competing through the Supply Chain. Fifth Edition. Prentice
Hall International Edition
 Wisner, J, Tan, K, Leong, G. (2012) Supply Chain Management A

2.1. Introduction
Demand forecasting benefits both the buyer and the seller. Imagine you are browsing through a catalogue and see
the exact smartphone that you want. You go into the shop and look for it, but it is not on the shelves. You enquire
with the sales staff and they inform you that the product you want is out of stock. This is very disappointing and
you may decide to buy a substitute product or you may choose to even keep your old product, after you have tried
numerous ways to get the desired product. This situation will not benefit you and it will negatively impact the
business. Hence the need to have the products available when the consumer needs it. This will only happen if
demand forecasting is done correctly. When the firm is able to correctly anticipate (forecast) the demands of
consumers, they will be able to better satisfy their demand in the short and long term. Demand forecasting is
primarily performed by the sales and marketing teams and this information is crucial for the efficient functioning of
the manufacturing and logistics department. A common view expressed by Al Enns, the director of supply chain
strategies at Motts North America is that if one can get the forecast right, then everything else will flow better as
you are operating from a proactive versus a reactive state of mind (Pienaar and Vogt, 2016:112)
2.2. Features of forecasting

The following illustration depicts the important features of forecasting.
It can be difficult
Groups are better

than single items
Short period is
better than a long
period
The past is a good

guideline
5Figure 2.1 Features of forecasting

It is difficult to get the forecast accurately and sometimes it can be regarded as impossible. Various unexpected
activities such as pandemics, natural disasters and acts of terrorism affect the accuracy of the forecast and reduces

the level of certainty. The main purpose of forecasting is to create good and close to accurate forecasts over short
and long periods of time. The main objective is to keep the margin for error as low as possible.
In most cases firms find that it easier to generate a forecast for a group of items instead of a single item. In the
event of generating a forecast for single item the margin for error is much greater. However, if one were to generate
a forecast for an entire line of products then if some were more accurate than others, it will even out the forecast.
For example, if Nestle were to complete a forecast for a single item such as Kit Kat, it may be harder to forecast
accurately. However, if Nestle were to generate a forecast for all confectionery items then the forecast may be
more accurate due to the fact that the deviations balance out (Pienaar and Vogt, 2016:112).
Table 12.1 Forecast deviations
Item Kit Kat Aero Crunch Rolo Turtles
Forecasted 15 14 13 14 11
demand
(000 000s)
Actual 11 10 13 13 10
demand
(000 000s)
Deviation 4 4 0 1 1
Source: Authors adaptation
In the above table, the deviation for a single item such as Kit Kat is 4 000 000. However, if the manufacturer
generates a forecast for multiple items then the forecast figures may be more accurate as they cancel each other
out. The calculation will be as follows:
(4+4+0+1+1) = 10 000 000
10 000 000/5 = 2 000 000
Forecasts that are provided over a short of time period has proved to be more accurate than the longer-term
forecast. With the short term, there would be fewer uncertainties therefore making it easier to predict. The long-
term forecast may be affected by unexpected circumstances. In general, most economic indicators provide
predictions for a short period of time, such as inflation and interest rates (Pienaar and Vogt, 2016:112).
The following factors should be used in evaluating the forecast values. The following factors are the foundations
of a good forecast.

 The forecast must be of a timely manner. When generating a forecast, the time period should allow for
the implementation of changes due to unforeseen circumstances.
 The forecasts must be reliable and trustworthy, if forecasts are generated and they constantly produce
unreliable and inaccurate results, this will limit the credibility of the forecasts that will be generated in the
future. One needs to produce accurate and reliable forecasts to allow for improved decision making by
various stakeholders.
 It is imperative for the forecasting teams to communicate with the decisions makers and inform the
decision makers about the assumptions and conditions that were used in the forecasting process. Should
the assumptions and conditions change, then It must be communicated to the decision makers.
 Forecasts must be customised to suit the users of the forecast. If the forecast is going to be used by the
manufacturing department, then it should be in units as that is the accepted measure for the
manufacturing department. The finance department will need forecasts that are in monetary units (Rands
/ US Dollars) as that is the accepted measure for the finance department.
 The selected forecasting technique must be relevant thus ensuring the data that is used is appropriate for
the technique. The data should be factored into the forecasting technique.
 It is essential for the benefits accrued from forecasting to outweigh the cost of the implementing the
forecasting techniques.
 The forecast must adequately address the uncertainty. One way to achieve this will be to include limits:
an upper and lower limit. Forecasting teams must analyse the accuracy and the limits on previous
forecasts to provide a basis for future forecasts (Pienaar and Vogt, 2016:112).
Revision Questions
Please read your notes carefully before attempting the revision exercise
1. Provide a definition of forecasting

2. List five factors that can be used to evaluate forecast values
3. State whether the following statements are True or False
a) Forecasting is one of the easier tasks for the Sales and Marketing Department.
b) Forecasting is beneficial to the entire Supply Chain.
c) The accuracy of forecasts is not dependent on the time frame.
d) The forecasts of multiple items will be more accurate than the forecast for a single
item.
e) Forecasting is an important activity for customer satisfaction

2.3. Types of forecasting

There are two general types of forecasting, as suggested below.
Quantitative Qualitative
forecasting forecasting
Time series Delphi method
Jury of
Explanatory
executive
models
option
Sales force
composite
Consumer
market survey
Figure 62.2 Types of forecasting

2.3.1 Quantitative forecasting

Quantitative forecasting can be used when the firm has past information on the demand. This allows the firm to
make future forecasts based on the past patterns of data. This may not be entirely accurate in special
circumstances. However, the past is generally a good predictor of the future. There are two types of quantitative
forecasting models, these are depicted above: time series and the explanatory model (Pienaar and Vogt,
2016:112).
a) Time series is a sequence of notes that are taken over a period of time, this period can be daily, weekly,
annually etc. The only focus is on the past values that are used to predict the future values. Table 2.2
provides an example of a daily time series.

Table 22.2: Example of a time series sequence

Monday Tuesday Wednesday Thursday Friday
Orders 10 12 12 13 A forecast can

received for be made based
delivery on the figures
observed for the
previous days.
Source: Authors adaptation
b) Explanatory models can also be referred to as regression models. With this type of forecasting technique,
related variables can be used to formulate a mathematical relationship in which the demand for a variable
and the associated factors that causes a consumer to demand that particular product are reflected. For
example, the number of air conditioning units that are demanded by consumers may be affected by the
temperatures, the humidity and the disposable income. A mathematical equation can then be created
2.3.2 Qualitative techniques

Qualitative techniques will be applied when there is an absence of quantitative information. However, there
must be adequate qualitative data available. Qualitative forecasting techniques rely on input from specialists
in the field. There are four different techniques for qualitative forecasting as explained below:
a) The Delphi method utilises the knowledge of a panel of experts. All panel members are guaranteed
anonymity, there are between five to seven experts. The selected panel will not meet and discuss their
views, they can be geographically dispersed. The following process will be followed in the Delphi
technique
Step 1: the panel of experts will be selected.
Step 2: questionnaires pertaining to the variable that needs to be forecasted will be provided to all the
members on the panel.
Step 3: the results from the questionnaires are collected and then summarised.
Step 4: the summarised and transcribed results from the questionnaire are provided to the panel members
for a further review.
Step 5: the panel members will take into account the views shared by the other panel members and make
their revisions.
Step 6: step 3, 4 and 5 are repeated until there is a general consensus.

b) The Jury of executive option uses the judgement and experience of managers and executives to make
forecasts, this is a subjective method of forecasting as it relies on the personal opinions, experience and
frame of reference of the manager/executive. It will be advantageous to have people from different
functional units thus providing a diverse knowledge mix. Meeting sessions will encourage participation.
c) The sales force composite is focused on the sales unit of the business. All sales staff from across the
different regions are requested to provide forecasts for his or her region, these forecasts will then be
combined to produce a national forecast.
d) A consumer market survey is used to gather information from existing customers and potential customers
regarding their future plans to purchase. These surveys will shed light on their buying patterns (Pienaar
and Vogt, 2016:113).
Think Point
If you were asked to provide a forecast on the expected amount of cans of coke that will be
sold per day and given access to previous sales data for the last 365 days.
Would you use a quantitative or a qualitative method of forecasting? Substantiate your

answer.

2.4. The forecasting process

The forecasting process must be viewed from a systematic perspective. The following steps are prescribed:
Table 32.3 Steps in the forecasting process
Step in the Action needed

forecasting
process
Step 1 The need and purpose for the forecast must first be established. All objectives regarding
the forecast must be clearly specified.
Step 2 The items or the units that will need to be forecasted must be decided upon. It is
important that forecasts are customised to the respective departments or regions. If they
are not customised for department, they may not be useful.
Step 3 The time frame for the forecast must be decided on. It can be daily, monthly or annually
(dependent on the use and the product).
Step 4 All the data (quantitative or qualitative) will need to be collated.
Step 5 A model for forecasting will need to be selected.
Step 6 The model that was selected in step 5 will need to be validated. This can be done by
evaluating the various models and assessing the perfect fit based on historical data.
Step 7 The forecast can now be made
Step 8 The results will need to be implemented.
Step 9 The results will need to be tracked. It is important to measure the forecast with the actual
values. This will improve future forecasts

Activity
Read through this blog post by Anita Raj on the supply chain forecasting from a
technological perspective.
We are operating in the digital industrial era where technologies are evolving rapidly to
create a more efficient, more productive, and more agile factory. With the advent of the
IoT and the complexities involved in operating a global supply network, today’s
manufacturing companies are more interested than ever before to get a sense of the
future. After all, it is important to know how certain events could impact operations in
the future and what companies can do to mitigate unforeseen risks due to volatile
production conditions to efficiently manage warehouse operations.
While predicting the future may not be completely possible, what companies do have
are a bunch of intelligent and powerful solutions that can give an accurate picture of
their supply situations and the elements that influence their production cycles. Thanks
to advances in technology, including Machine Learning, Artificial Intelligence (AI),
Robotics, etc., companies are able to orchestrate continuous collaboration between
supply and demand, planning and fulfilment, expectations, and customer satisfaction.
Supply Chain Forecasting

Supply chain forecasting is a great way to help manufacturers, operations managers,
and production planners make educated predictions about factors influencing
warehouse operations. This includes production elements such as material sourcing,
job allocation, transport logistics, production scheduling, inventory, supply chain
optimization, and more.
In fact, a recent study revealed that accurate forecasting was one of the topmost
priorities for manufacturing companies as modern manufacturing continues to develop,
diversify, and expand to new regions of the world.
While supply chain forecasting methods positively impacts the manufacturing

organization at several levels, it particularly sees some great benefits in the warehouse.
After all, the competitive advantage it gives to managers of manufacturing operations
management with effective production capacity planning and control is unbeatable.
How AI can enable supply chain forecasting?

Here are the 5 ways how AI-driven operations enable plant managers to make accurate

supply chain forecasting for efficient warehouse management and better shop floor
control.
1. Robust production scheduling

When we talk about streamlining operations, the no. 1 prerequisite is usually having
effective production scheduling. Achieving the desired sequence of production depends
largely on a streamlined sequence of inflow and outflow of materials, at the right time +
quantity + place + adequate manner. Accurate demand-supply forecasting can easily
contribute to achieving the most optimum production scheduling on the factory floor.
This helps plant managers effectively run schedules and align with the availability of
raw materials and component parts.
Forecasting helps by giving accurate indications needed to plan production cycles and
helps managers operate with more agility, transparency, and flexibility and the
readiness to adapt to changing production environments as well.
2. Managing optimum inventory levels

Inventory levels are like the building blocks of manufacturing set up. A shift in any
direction, whether high levels or low levels can shake the basic foundation of the
operations cycle. From warehousing strategies, transportation costs, or even yard and
container management, effective inventory control can impact the core operational
aspects of a factory’s production stream. Supply chain planning and forecasting types
can equip operations managers to accurately predict demand or orders for certain
products. This helps them work more effectively with suppliers to attain adequate
inventory levels which greatly reduces the risks of parts overstocking or shortages.
Accurate supply chain forecasting gives plant managers the necessary clarity of
demand and supply situations. This helps easily evaluate the market demand
forecasting versus the actual volume of inventory necessary to successfully fill orders
and ensure scheduled delivery windows.
3. Gaining visibility into deep-rooted bottlenecks

From an operational angle, usually, the asset, machine, or resource that takes the
longest amount of time is characterized as the bottleneck. Bottlenecks are the biggest
cause for industrial waste with millions of dollars being spent in operational delays,
inefficiencies & lost revenue. Therefore, plant managers are always looking at
eliminating potential bottlenecks that can affect a supply chain’s throughput, operational

efficiency, overall productivity, and profitability. Adequate visibility into the supply chain
using data from equipment, processes, and products can help determine where
bottleneck operation occurs and eventually boost safety and throughput while
extending the life of key processing and material handling equipment.
Accurate supply chain forecasting helps gain visibility and analyse existing data with
valuable insights. This can give operations managers the necessary functional
intelligence for bottleneck elimination at the source.
4. Reducing the total cost of operations

With rising complexities in industrial operations, plant managers have to constantly deal
with mounting operations costs. Unplanned equipment downtime, increasing quality
expectations, inventory lockouts, and managing unused industrial material or parts are
just some of the reasons contributing to high operational costs. Accurate supply chain
forecasting comes as a boon here as it helps managers with the much-needed foresight
to not order more stock than necessary to fulfil customer orders. In addition, forecasting
techniques also reduces costs associated with other critical operational tasks such as
job allocation and management, sourcing raw materials, process optimization, and
product obsolescence costs.
Supply chain forecasting has a long term impact on operational cycles, touching each
and every aspect of the value chain. Therefore, accurate forecasting can be highly cost-
effective at every step leading to a higher throughput.
5. Effective Shipping and Logistics Control

Operational success finally depends on whether the product/ service was delivered on
time to the customer. After all, nothing is more annoying than having 99% of operational
processes in place and finally not having the shipment done as per committed
schedules. This can create a huge dent on the bottom line. Having a robust smart
supply chain forecasting mechanism can contribute to effective logistics and shipment
control. If operations managers get on-time visibility into the delivery schedules and are
alerted about any discrepancies ahead of time, unnecessary delays and costs can be
avoided.
Effective forecasting models can contribute to improved distribution planning and

logistical control to help balance various aspects like order management, packaging,

distribution, and outbound logistics.
AI-driven Supply Chain Intelligence – Now achieve operational efficiencies across the
shop floor
When supply chain forecasting happens through the powerful realms of AI, this can
result in superior operational outcomes. All of this with minimal effort of time, resources,
and human involvement. AI provides the supply chain with contextual intelligence which
can be used to reduce the operating costs, eliminate wasteful processes and
bottlenecks and accelerate decision making. With the introduction of AI, manufacturing
companies can work on enhancing factory scheduling and production planning, by
analysing different issues at several levels and then optimize them.
Source: Raj, A. (2020). Importance of Supply Chain Forecasting for Plant Managers.
[Online]. Available: https://www.supplychainbrief.com/forecasting/logistics/?open-
article-id=13117366&article-title=importance-of-supply-chain-forecasting-for-plant-
managers&blog-domain=throughput.world&blog-title=throughput
Are you able to create a presentation in which you explain the need for forecasting?
The presentation should be approximately 15 minutes with PowerPoint slides.

2.5. Selecting the appropriate forecasting techniques

In the above table, step 5 is when a model is selected. A forecaster can look for patterns in the historic data and
use that as a basis to predict future behaviours. One of the easiest ways will be to plot the historical data graphically.
Once these patterns are plotted, the results can be examined to predict future patterns. Table 2.4 below is an
example of the historical data that has been collected for cold storage trucks.
Table 42.4 historical data for cold-storage trucks on a daily basis

WEEK DAY TIME DEMAND
1 Monday 1 67
Tuesday 2 54
Wednesday 3 51
Thursday 4 46
Friday 5 62
2 Monday 6 66
Tuesday 7 55
Wednesday 8 47
Thursday 9 45
Friday 10 64
3 Monday 11 75
Tuesday 12 58
Wednesday 13 56
Thursday 14 49
Friday 15 71
4 Monday 16 76
Tuesday 17 57
Wednesday 18 53
Thursday 19 50
Friday 20 69
5 Monday 21 78

Tuesday 22 60
Wednesday 23 54
Thursday 24 53
Friday 25 80
6 Monday 26 81
Tuesday 27 63
Wednesday 28 58
Thursday 29 52
Friday 30 83
The first 20 responses from table 2.4 have been plotted on the graph depicted below. Figure 2.3 is a graphical
representation of the responses and can be interpreted as a line graph.
7Figure 2.3 Line graph

There are four basic patterns of data that can be observed in the figure below: level, trend, seasonal and cyclical.
These patterns have their own unique shape as seen in figure 2.4 below.

8Figure 2.4 Examples of data patterns

 Level or horizontal data: can also be called stationary data. The data will fluctuate around a mean that is
constant. This data pattern can be observed for products which have a predictable demand and are
essentially in the mature stage of their life cycle. The variable does not increase or decrease over time.
 Trend or non-stationary time series: is when an increase or a decrease of the variable can be observed
over time. It can take on a linear pattern.
 Seasonality: this can be seen as a pattern that is repetitive for a timeframe. An example would be
restaurants that experience a peak in sales over the Friday and Saturday followed by a decrease in
Monday sales.
 Cycles: this type of pattern is linked the business cycle. Products that are linked to economic variables
such as the interest rate or a recession will exhibit a cyclical pattern (Pienaar and Vogt, 2016:115).
Once the data pattern has been correctly identified, the historical data observed and the time frame noted. The
table below can be used to select the appropriate forecasting technique.

Table 52.5: Selection of an appropriate forecasting technique

Forecasting method Data pattern Minimum number of Forecast time frame
observations
Naïve Stationary 1 or 2 Very short
Moving averages Stationary At least the number of Very short

periods in the moving
average.
Exponential smoothing models
Simple Stationary 5 to 10 Short
Holt Linear trend 10 to 15 Short to medium
Holt- Winter’s additive and Trend and At least 4 or 5 per Short to medium
multiplicative seasonality season
Regression bases models
Time series data Linear and Minimum of 10 Short to medium

nonlinear trend observations. 4 or 5 per
without season if seasonality is
seasonality included.
Causal (cross sectional data) Can handle Minimum 10 Short, medium and long
almost all data observations per
patterns independent variable.
Readings
Please consult the prescribed reading and review Chapter 5.
You will need to read the entire section on quantitative and qualitative techniques.
The below links can serve as additional sources that can be consulted
 https://scm.ncsu.edu/scm-articles/article/forecasting-methods
 https://smartcorp.com/?utm_source=Google&utm_medium=Ads&utm_campaign=B
est&gclid=EAIaIQobChMI6-
aGoKDg6QIVFeDtCh3bRAHtEAAYASAAEgLWH_D_BwE

2.6. Summary
Forecasting and the impact of forecasting was reviewed in this unit. Further to that, the various features of forecasts
were discussed. Thereafter the two broad categories of forecasting were explained: qualitative and quantitative.
The different quantitative and qualitative methods of forecasting were examined. Explanations and graphical
representations of patterns were provided. The unit concluded with an explanation of the method used to select
an appropriate forecasting technique.
Knowledge Checks
Read the questions and select the correct answer
1. Identify the features of forecasting
a) It can be difficult
b) Groups of items are better than a single item
c) Shorter periods are better than long periods
d) The past is a good guideline
e) All of the above
2. There are two general types of forecasting, identify the two types
a) Quantitative and Qualitative
b) Quantitative and Delphi Method
c) Time series and explanatory model
d) Quantitative and Consumer market survey
3. Historical data can be plotted on a graph to reveal four basic patters. Which
pattern of data can be referred to as stationery data.
a) Level or horizontal
b) Trend
c) Seasonal
d) Cyclic

4. Qualitative techniques will be applied when there is an absence of

________________ information However, there must be adequate qualitative data
available.
a) Surveys
b) Responses
c) Quantitative data
d) Resources
e) Candidates
5. A qualitative forecasting technique in which information is gathered from

existing customers and potential customers regarding their future plans to purchase.
These surveys will shed light on their buying patterns
a) Delphi method technique
b) Jury of executive option
c) Sales force composite
d) Consumer market survey
e) Time series


Revision questions 2.2
Solution
1. Demand forecasting is the act of predicting future demand using a variety of tools.
2.
 Forecast must be timely
 All forecasts must be relaible
 Effective communication is essential
 The technique must be relevant to the data pattern
 The forecast must be cost effective
 Forecasts must be able to address situations of uncertainty.
3.
 False
 True
 False
 True
 True
Think point 2.3
A quantitative forecasting methods. The presence of historical data permits this.
Activity 2.4
The readings should provided you with added insights on forecasting,
Readings 2.5
The additional readings provide alternate perspectives for qualitative and quantitative forecasting.
Knowledege checks
1. E
2. A
3. A
4. C
5. D

Unit
3: Site Selection, Design of
Facilities and Warehouse Management

CONTENT LIST LEARNING OUTCOMES
3.2 Why firms use warehouses and  Assess the reasons to use warehouses and distribution
distribution centres centres
3.3 Site selection, warehouse design and  Explain the factors affecting site selection and warehouse
layout design and layout
3.4 Typical activities performed in a  Distinguish between different activities performed in a

warehouse warehouse
3.5 Cross docking  Demonstrate and understanding of cross docking
 Outline the functions of a cross dock
3.6 Common warehousing problems  Evaluate the common warehousing problems faced by
organisations
3.7 Summary  Summarises content areas of the unit
 Harrison,A & Van Hoek,R. (2014). Logistics Management & Strategy
Competing through the Supply Chain. Fifth Edition. Prentice Hall
International Edition
 Wisner,J, Tan,K, Leong,G. (2012) Supply Chain Management A

3.1 Introduction
The logistics function is integrated with warehouses/distribution centres. Logistic activities are spatially dispersed
and rely on storage facilities to store and distribute the goods. The design of the warehouse must be suited to the
level of automation that is needed, the types of products as well as the design of the facility. There are costly
implications to the warehouse not meeting the requirements of the logistics function as this will not be easily
changed over the short term. A warehouse will need to be designed to facilitate effective entry and exit and easy
access to the facilities. Safety and quality standards must be implemented. This study unit will examine the nature
of warehouses, their location and the optimal design in relation to the supply chain (de Villiers, et al.,2019:61).
3.2 Why firms use warehouses and distribution centres

Warehouses fulfil three major functions: movement, storage and information transfer. This can be referred to as
the three purposes of a warehouse as depicted in Figure 3.1 below.
Movement
Storage
Main purpose of the warehouse
Can be categorised into four Information transfer
Goods can be stored in a
key actvities: receiving, warehouse for short or long
transfer, order selection and period of time. Information moves when the
shippping goods move.
Bufffer/safety stock is held
Information is transferred when
goods are moved or stored.
9Figure 3.1 Three purposes of warehouses

Source: de Villiers, et al. (2019:61)
There are many reasons as to why a firm would utilise a warehouse. The following list sheds light on the various
reasons as to why a firm would use a warehouse.
 Firms try to achieve economies of scale in order capitalise on cheaper costs per unit, which necessitates
storage space for those large volumes.
 Firms try produce a high volume of products to spread out the costs over the large volume of products.
This can be referred to as production economies and will result in a firm requiring storage spaces.
 Firms purchase large quantities of goods to obtain discounts. These firms will buy in bulk and will need to
store these goods in a warehouse.
 Firms that supply essential items such as medical supplies will need to ensure they have stock on hand,
these will need to be stored in warehouses.

 A firm will need to ensure the customers are receiving their products as and when they need it. Stock outs
will need to be prevented and this will necessitate firms storing stock in a warehouse.
 Most firms anticipate consumer demand quite accurately however there are times when the market
conditions unexpectedly change, this can result from celebrity endorsement or seasonal changes. Firms
will only be able to meet customer demand if they have adequate stock in storage.
 Firms supply customers that are geographically dispersed and will need to have warehouses to
accommodate for the time and space difference.
 Warehouses help firms to save on last mile logistics by making goods available closer to the consumer,
this is achieved by having warehouse that are geographically dispersed.
 Manufacturing firms will need to store parts for their production process. Firms may opt to have a
warehouse in which these parts are stored so that internal processes are completed more efficiently.
 Firms that practise a Just in Time approach to manufacturing will need to have goods/parts in a nearby
accessible location, this can be achieved with a warehouse.
 Warehouses allow for firms to store finished goods which will allow the firm to keep a steady flow of supply
to retailers and wholesalers, once stock is finished, it can be quickly replenished.
 Warehouses act as an important link between supplier and the producer, warehouses provide an
intermediary function in which they facilitate movement between producer and supplier (de Villiers, et al.,
2019: 58-60).
3.2.1 Warehouses can be further categorised into three types of warehouses.

 Inbound warehouse: these warehouses mainly receive goods like raw materials from suppliers. These
goods will most likely be used in the production process. An example of such a good will be parts in the
automotive industry.
 Outbound warehouses: these warehouses will mainly receive goods that have been produced and are
coming from a production facility and are destined for customers.
 Distribution centre: these warehouses will receive goods from a variety of suppliers and these goods will
be passed on to wholesalers and retailers (de Villiers, et al., 2019: 58).
Figure 3.2 below depicts the three common types of warehouses

Inbound Outbound Distribution centre
10Figure 3.2 Different types of warehouses

Source Authors adaptation
3.2.2 Common equipment in warehouse

Below are a few examples of the different types of equipment that one may find in a warehouse.
Hand pallet loaders are used to move pallets around the

warehouse. They can be moved from receiving to storage
and eventually to despatch.
Reach turrets are required when a warehouse uses vertical

storage in which stock is stored in high shelves that extend
to the ceiling of the warehouse. Reach turrets are used to
load and extract the stock from the shelves located at the
top end of the warehouse.

A manual trolley is used to pick items that are stored in the

warehouse. The items may need to be packed and loaded
for despatch.
Storage bins are used to store inexpensive items.
Open shelving is utilised in warehouses as well as closed

shelving. This is an example of open shelving. Items can
easily be picked.
Forklifts can be used to move bins and pallets. Forklifts

require licensed drivers and clearly demarcated aisles.
Source: (de Villiers, et al., 2019: 80-81)

Think Point
Are you able to differentiate between inbound warehousing activities and

outbound warehousing activities?
3.3 Site selection, warehouse design and layout

3.3.1 Site Selection
Different warehouses will require locations based on the activities completed and types of goods that are received
or distributed. Some warehouses are situated close to harbours or a terminal in the harbour. This type of warehouse
will accommodate firms that receive local goods for the purpose of exporting them in a ship. Should a firm mainly
specialise in the extraction of raw…….3 materials for the purpose of providing these raw materials to other firms
for the manufacturing process, then the firm will need to have the warehouse situated close to the source of raw
materials.
Most firms use warehouses to limit the amount of time that goods are in last mile logistics. The last mile in logistics
refers to the time it takes to get the goods to the final consumer. If a firm has one central manufacturing plant, it
would need to have regional warehouses to ensure the products reach customers timeously, this decreases the
time a product will spend in last mile logistics (Pienaar and Vogt, 2016:330).
3.3.2 Warehouse design

The correct warehouse design will optimise warehouse functionality and ensure operations proceed effectively.
The table below depicts the various steps in developing a warehouse design.

6 Table 3.1 Steps in the warehouse design process
Steps Action needed for the warehouse design

Step 1: Forecast Generate a forecast for good that will be stored in the warehouse, anticipate the
growth of these products as well as the potential growth of your suppliers. The
forecast should be for a period of 5-10 years.
Step 2: Analyse Analyse the various products that will be stored in the warehouse, the expected
volumes and the frequency in which they come in.
Step 3: Materials Examine what types of materials handling equipment will be needed for the effective
handling equipment functioning of the warehouse. (forklifts to move stock and reach turrets if stock is
being stored high up in the warehouse)
Step 4: Space The space requirements will need to be estimated. The use of material handling
requirements equipment must be factored in to the step. Should forklifts be utilized there will be
lanes required adequate space.
Step 5: Space The space should be calculate based on the 5-10 year forecast in step 1
requirements in
relation to the
forecast
Step 6: Activities Decisions about the assigning of stock will need to be determined. The stock that
needs to be closest to the receiving stores and the stock that will need to be closest
to the dispatch stores.
Step 7: Illustrate Draw multiple layouts for the warehouse and select the one that would work the best
many different ensuring the warehouse has a receiving section, order-picking, storage section,
layouts packing section, and a despatch section
Source: (de Villiers, et al., 2019: 58).
3.3.3 Guidelines to create a smart warehouse layout

The following guidelines should be applied to create a smart warehouse layout.
 The storage space must be calculated. It would be a mistake to build the warehouse too small. This is a
critical step and must be well thought out,
 Careful consideration for aisles in the workshop is needed. Should a warehouse use forklifts there will
need to be clearly demarcated aisles which allow for manoeuvrability of the forklift and easy picking.
 A decision on the cubic capacity must be made and whether horizontal and vertical shelving will be used.
 Items must be strategically positioned close to entry or exit points. Items that stay for longer periods of
time in the warehouse may be positioned at the back of the warehouse. Items that are going to be in for
a short time will be stored close to exit points.

 It is advisable to invest in software to create the best layout in which the space is fully utilised. Software
will facilitate automated grids.
 Ensure high level storage is fully utilised. The best warehouse layout will make maximum use of the area.
Stock will be stored horizontally and vertically, as high as possible. However, all safety considerations
must be factored in. Warehouses need to comply with safety requirements and all necessary safety
measures must be followed. There must be fire monitors/sprays attached to the roof. Warehouses that
make use of high level shelving must take care to ensure there are ample guard rails and safety features
in place to prevent accidents associated with the height. All safety precautions must be taken to prevent
injuries and fatalities such as proper entry and exit routes and proper safety on the aisles if forklifts are
being used. All staff must receive training and regular risk assessments must be conducted.
 The size of the stock and the materials handling equipment used in a warehouse will need to be factored
in the layout. The aisles, entrance and exit points will need to be structured to allow for streamlined
movement of goods.
 The team planning the warehouse layout will need to use work flow principles to facilitate efficient
movement of stock and ideal sequencing of activities (de Villiers, et al., 2019: 64).
Case Study
Vespa Scooters
Vespa Scooters is a well-known international brand and a popular European brand. Two
hundred motor scooters are delivered daily to the Vespa warehouse in Dierdorf, Germany,
and these need to be distributed cost effectively throughout Germany and the European
Union. Vespa face some interesting problems. Until recently, the scooters were packed in
elaborate, costly packaging, which increased both their handling and packaging expense.
The packaging also could not be reused from a reverse logistics perspective and was
discarded once the customer had received the delivered product. Interroll, the warehousing
specialist, was called in to offer some solutions. The company suggested strong, lightweight
aluminum pallets, since these could be stabilised by special roller rails in the warehouse
design and would not bend easily. The risks in the supply chain owing to packaging damage
were significantly reduced, as well as the exposure to damage and delivery problems from
the customer’s point of view. Scooters are not the easiest items in the world to store, owing
to their strange shape and the fact that they do not fit easily into nice cubes (the dream of all
logisticians!). Their packaging and storage thus required careful consideration and planning.
A three-level space-saving flow storage system was designed to organise 1 620 motor
scooters stored in the warehouse, securely lashing them to special aluminium pallets.
Special centering guides were also used to position the aluminium pallets exactly.

Mechanical speed controllers were used for gentle, impact-free movement: this was
important since the loaded pallets had a very high centre of gravity. In other words, gravity
and momentum were used to move the pallets along the racks, and this reduced the costs
of energy consumption in the warehouse. Interroll suggested aluminium pallets since they
organised the warehouse neatly, and this enabled quick identification of the 37 types of
scooter stored (37 types of stock-keeping units or SKUs). The order consigning of stock on
a FIFO (first in first out) system in the warehouse was much easier and more logical. One of
the significant advantages, however, was the reusability of the aluminium pallets. They could
be recycled over and over again, thus reducing the packaging cost to almost zero, and this
was also great for the environment. Good logisticians explore the greenest solutions possible
and try to reduce waste and packaging in the modern, fast-paced disposable consumer
society. Little wonder Vespa, with the aid of Interroll, remains a major player in the scooter
market of Europe and the world. The inbound receiving and put-away process for Vespa has
been significantly improved and simplified. This has also resulted in the order picking and
outbound shipping process moving more efficiently. The faster and more accurately the items
can be put away and then picked, the better. Faster turnaround times in picking result in
better customer satisfaction downstream as goods head on their outbound route to
customers, or customers’ customers. Warehouse design can create significant process flows
or bottlenecks in the inbound or outbound flow of goods. Ideally the flow of inbound and
outbound goods should be precise, and this normally only happens in well-planned and well-
designed warehouses.
Source: Villiers, G. d., Nieman, G., Niemann, W. (2017). Strategic logistics management.
Fifth Edition. South Africa: Oxford University Press.
Can you discuss the benefits of a good warehouse design with reference to the case study.?
3.4 Typical activities performed in a warehouse

To better understand the different warehouse activities, one will first need to understand the basic functions of the
warehouse as well as the different types of equipment that will be used in the warehouse. These functions of
movement, storage and transfer can be broken down into different activities.

7 Table 3.2 Warehouse activities

Activity Description
Receiving This refers to the actual receipt of goods that will be stored in the warehouse.
Placing Upon receipt goods will be scanned and documented and they will be ready to be
placed in the warehouse. Placing is key as staff should not waste time searching for
products. If goods are fast moving it becomes even more critical.
Storage This is dependent on the nature of the stock and the time in which the stock will be
stored in the warehouse. Consider the example of warehouses storing flammable
items or explosives. Special requirements are needed for storage.
Replenishment of A process in which a firm will decide to take out goods from bulk storage and place it
stock in a picking area, this will be for items that move fast and need to be constantly
replaced.
Order picking A process in which the stock is picked as per the customer order. The stock will need
to be picked in readiness to have the order moved out.
Checking This is an added quality measure in which the goods will be checked to ensure they
match the customer order. It will be checked against the receipt if it was inbound.
Packing and Stock will need to packed appropriately and labelled correctly. This is especially
marking important for fragile goods. Some goods may need additional layers of protective
wrap.
Staging and This entails the final preparation for the goods to be shipped. This activity is most
consolidation likely to take place at a dock. All final documents must be checked to ensure the
requirements from the customer are met.
Loading and The process of moving the stock out of the warehouse and onto the vehicles that will
shipping transport them to their destination.
Administrative All the activities mentioned above must be documented. This will entail a variety of
function administrative activities and documents.
Housekeeping This refers to the organisation of the warehouse ensuring that all safety measures
are satisfied and the warehouse is free from hazards and the aisles are always kept
clear. Fire hydrants and must be checked and the warehouse must be in a good
condition.
Maintenance All materials handling equipment will need to be serviced on a regular basis to ensure
they remain in good working condition. Scheduled maintenance and repairs must be
prioritised.
Inventory Warehouses must take all necessary measures to prevent theft and damage to stock.
management Stock taking will need to be performed and items that are damaged as a result of the
supplier must be timeously identified and handled.

Value added This includes sorting, assembling, kitting, repacking and labelling. Some warehouses
services might receive a large consignment of goods and then repackage these goods into
labelled boxes.
Assembly function Some warehouses may perform assembly functions. Baby strollers may be
assembled and delivered to the consumer.
Break bulk Warehouses create break bulk by breaking a larger consignment into smaller units to
be shipped to different customers.
Source: de Villiers, et al., (2019: 73-74).
Revision Questions
Please read your notes before attempting to answer the questions.
a) Discuss the three main functions of the warehouse.

b) Differentiate between inbound and outbound activities.
c) Identify five key activities that take place in a warehouse
d) Explain the consideration needed to have forklifts in a warehouse
e) Provide an example of a value added service for warehouses.
3.5 Cross docking

Cross docking is an efficient process for moving goods within the warehouse. The key point being movement and
not storage. Goods that are received from the manufacturing plant can be sent directly to the consumer. This will
minimise the handling of the good, the storage space used up in the warehouse and the time it takes to have the
goods delivered to the consumer. Cross docking is therefore a process in which goods that come in to the
warehouse will get redirected to the replenishment area to be sent of the customer. This means that the warehouse
will be functioning to satisfy the demand chain. Some warehouses invest in an automated cross docking system
(de Villiers, et al., 2019: 70).
Example: Pick and Pay has distribution centres across the country due to their national footprint. This means they
need warehouses in all provinces that have materials handling equipment as well as their own delivery vehicles
Pick and Pay provides many different products to their consumers and these are generally classified as Fast
Moving Consumer Goods (FMCG). Pick and Pay will receive consignments of stock from various manufacturers.
Such as Nestle, Tiger Brands, ABI, Unilever, Beacon, Mondelez, and KOO. These goods will come in and be
“crossed over” in the distribution centre and loaded on a delivery vehicle destined for a specific store.
Cross docking will only work if the following factors are satisfied:
 There is a continuous flow/demand for goods to the consumers/retailers

 Suppliers can be relied upon to deliver just in time.

 Unpredictability in supply and demand are rare
 Handling of the goods can occur in a uniform manner
3.5.1 Types of cross docks
Cross-dock managed load - CML
Joint-managed load - JML
Supplier managed load - SML
Figure 3.3Types of cross docks

11
Source: Pienaar and Vogt (2016:332).
A cross-docked managed load (CML) allows for identification and the sorting of all the items within the distribution
centre. Once the goods have been received in the warehouse, they will be checked against the delivery note from
the supplier and these items will be sorted in readiness for having them sent to the downstream customers.
A joint- managed load (JML) has stock with the identification codes already on them. They are received in the
warehouse and then sorted out to create a consignment. By having goods already labelled, it eases the pressure
of cross-docking staff and reduces the margin for error.
A supplier-managed load (SML) is when the supplier of the goods will label all the goods and have them sorted
into specific groups for downstream customers as per their order. These items can be stocked on pallets. This
allows for the pallets/carrier of goods to be transferred from the inbound to outbound sections of the warehouse
Think Point
Now that you have a better understanding of cross docking. Take some time to view videos
on what cross-docking actually looks like and the various ways in which cross docking is
performed.
You can go onto YouTube and type in cross-docking into the search bar, there you will find
many videos that you can view to give you a better picture of cross docking,

Alternatively, you can also go through the your prescribed and recommended readings to find
pictures for cross docking.
3.6 Common warehousing problems

Warehouses perform the function of storage, hence all storage space must be adequately used, both horizontally
and vertically. There are various ways to measure the performance of the warehouse, with one method being the
space utilization. Furthermore, goods are always moving in a warehouse. The goods are generally received in our
section of the warehouse, sorted and moved to a storage location based on the good and then finally despatched
to the consumers. This movement may result in multiple people handling the goods and care needs to be exercised.
Most warehouses use materials handling equipment. These machines may become obsolete and it is essential
that all the equipment is correctly maintained to avoid accidents and delays. In addition to some warehouses being
capital intensive, they are also labour intensive. Warehouses rely on forklift drivers, pickers and cleaners, checkers,
packers, receiving and despatch clerks. All warehouses need relevant and timely information to satisfy their internal
and external customers. Customers need to be in the know and they must receive information as and when they
require it. Information is essential for the entire supply chain. All warehouses will need to ensure costs are kept to
a minimum whilst striving to meet their quality standards. Quality, packaging and good service should not be
compromised to keep costs low. The warehouse manager must strike a balance to have costs in check and the
quality standards high (de Villiers, et al., 2019: 75-76). Figure 3.4 highlights the common problems faced by
warehouses.

Storage space
utilisation
Costing and Product

Budgeting handling
Information Warehousing
gaps equipment
Labour intensity
Figure 3.4 Common warehousing problems

12
Source: (de Villiers, et al., 2019: 75-76)

Practical Application or Examples
Amazon distribution centre: using robots to increase efficiency and reduce costs
Amazon is well known for the efficient distribution of books and other materials across
North America and other parts of the globe. When one has so many global customers,
efficiency of operation is of paramount importance. In the past, workers in the Tracy
distribution centre near San Francisco in the US walked many kilometres back and
forth in the aisles to pick items ordered by customers and then prepare them in the
staging area for outbound shipment to end customers. The massive distribution
centre, approximately 28 football fields in size (or 112 000m2) has over 1 500 full-
time employees and a number of part-time workers. These workers use various
automated materials handling devices such as pallet jacks and other tools to move
and pick stock. More recently a rather strange device was added to the warehouse:
robots. Many robots. The 3 000 new robotic materials handling machines glide swiftly
around the warehouse and receive digital commands that are beamed wirelessly to
them from a centralised computer. Essentially their “boss” giving them instructions is
not a human, but rather a computer with carefully coded input data (i.e. collect this
from this exact location and move it to this exact (GPS) location). Each of the squat
orange robots can slider under a stack of shelves that is 1.5 meters wide, holding
1.65 tons of books and other merchandise stored in the distribution centre. Because
the robots can slide underneath the shelves, these shelves can be stacked very close
together so that the warehouse can hold even greater stock levels. All smart
warehouses utilize both their vertical and horizontal space optimally, so by stacking
shelves closer to one another, both vertical and horizontal space are optimized. The
Tracy DC now holds approximately 20 million items at any given time, from bottles of
steak sauce to high-end headsets, to books, PlayStations and video games. The
robots cost Amazon millions of dollars, but the company claims to have seen a
reduction of 20% in their operating costs. Amazon also argues that the fleet of robots
could save the company in the direction of $900 million a year in labour costs.
Amazon faces tough competition in difficult economic times globally from rivals like
Google and eBay, so using technology to keep costs down is always a smart move if
one gets a good return on investment (ROI) or a good return on the assets purchased
(ROA) (in this case it is the significant capital or money paid for the robots, and
whether these will indeed reduce operating costs and labour costs sufficiently)
Source: de Villiers, G., Nieman, G. and Niemann, W. (2019). Strategic Logistics

Management: A supply chain management approach.

3.7 Summary
In this study unit the concept of a warehouse was defined as well as the purpose and key functions of the
warehouse. Inbound and outbound activities were reviewed as well as the different types of equipment one might
come across in a warehouse. The success of a warehouse is dependent on the site selection. In designing a
warehouse, there are certain steps that one must follow in conjunction with the guidelines for a smart warehouse
layout. These steps and guidelines allow warehouse designers to plan for the future whilst ensuring they make
maximum use of the space they have. The various activities that take place in a warehouse were discussed. There
was a special focus on cross docking. The study unit concludes with the some of the common problems that faced
by warehouse managers.
Knowledge Checks
1. Identify the three functions of warehousing
a) Movement, storage and distribution
b) Movement, information management and distribution
c) The movement of goods from the primary sector to the tertiary sector
d) All of the above
2. Identify the three different types of warehouses
a) Inbound warehouses, outbound warehouses and distribution centres
b) Primary and Tertiary warehouses
c) Receiving, storing and distribution
d) All warehouses essentially function the same.
3. Select the type of equipment that would typically be found in warehouses
a) Pallets
b) Forklifts
c) Shelving
d) All of the above

4. Select the different types of cross docks
a) Cross-dock management load
b) Joint managed load
c) Supplier managed load
d) All of the above
5. Identify the typical activities that are performed in a warehouse
a) Quantitative and Qualitative forecasting
b) Feedback collation from the customers
c) Order picking, checking and staging and consolidation
d) All of the above
Please indicate if the following statements are True or False.
a) There are essentially three types of warehouses: inbound warehouses, outbound

warehouse and distribution centres.
b) Even though many warehouses are heavily reliant on automated machines such
as forklifts and conveyors, they will also experience problems pertaining to labour
intensity.
c) There are various activities that can be implemented to ensure the efficiency of
the warehouse. One of these activities is cross-docking as it limits the amount of
time for goods to be stored in a warehouse.


Think point 3.2
Inbound warehousing activities will relate to the raw materials that are supplied and awaiting the transfer to
manufaturing facilities.
Outbound warehousing activties relate to finished goods that are waiting to go to the downstream consumer.
Case study 3.3

The key consideration is the minimisation of waste which was done with the reusable aluminium pallets. Inbound
and outbound actitives must flow seamlessly as shown in the case study.
Positioning, storage and space utilization is key for warehouses.
Revision question 3.4

a) Movement, storage and information transfer. ( a discussion on each activity must be provided, providing
details around each function).
b) Inbound activities pertain to receiving of materials and outbound activties pertain to the movement of the
goods downstream.
c) Administration, housekeeping, inventory management, value added services and maintenance
d) There must be clearly marked aisles and safety measures if forklifts are being used. There needs to be
trained drivers, The ability to move around must be considered.
e) Some warehouses perform assemebly and packaging functions.
Think point 3.5

Students are required to type cross docking in the Youtube search bar.These videos will provide a better picture
of cross docking and the actual movement of the goods in the warehouse. Pratical example 3.6
Students to read the example.
Knowledge checks 3.7

Multiple choice questions
1. A
2. A
3. D
4. D
5. C
True or False
A. True
B. True
C. True

Unit
4: Packaging

4.1 Introduction  Introduce topic areas for this unit
4.2 Definition and functions of packaging  Explain the definition and functions of packaging
4.3 The role of packaging in logistics  Examine the role of packaging in logistics
4.4 Development of packaging solutions  Assess the development of packaging solutions
4.5 Containerisation  Evaluate the characteristics and functions of containerisation
4.6 Integrating technology with  Illustrate the importance of integrating technology with
packaging and containerisation packaging and containerisation
4.7 Summary  Summarise topic areas covered in this unit

4.1 Introduction
Packaging is a crucial component of the supply chain and has an indirect impact on customer satisfaction. Imagine
yourself purchasing a pair of white sneakers and they arrive at your doorstep in a plastic bag and when you
examine the pair of sneakers, they are slightly damaged and this means you need to return them and await a new
pair. Even though you have saved up money for two months to get this pair of sneakers. How would that make you
feel? Having the correct packaging will allow goods to remain in the condition that they were meant to be.
Packaging allows goods to be moved from different sections in the warehouse without having to be overly
concerned about the product being damaged rather, the focus can be on the efficient movement of the goods.
Over the last few years there had been an increased focus on the packaging materials that are used. In some
instances, packaging materials can serve as value added services (Pienaar and Vogt, 2016:280).
4.2 Definition and functions of packaging

Packaging affects all areas in the supply chain either directly or indirectly. A careful consideration with packaging.
the transportation of food is dependent on packaging to prevent damage and most importantly waste. To provide
a more comprehensive definition of packaging one can quote Saghir, in Pienaar and Vogt, (2016:281).
“Packaging represents the single most important interface between the products and the logistics system, and it
can thus be used as a vehicle for enhancing operational efficiency. Packaging also represents an important
interface between the different actors in the supply chain and hence influences the effectiveness of these
companies” (Pienaar and Vogt, 2016:281).
The functions of packaging are depicted in Figure 4.1 below and further explained.
Containment
and protection
Apportionment
and unitisation
Convenience
and
communication
13Figure 4.1 The functions of packaging

Source: (Pienaar and Vogt, 2016:282)

Containment and protection: Containment and protection is especially important for carrying liquid, fragile items
as well as hazardous materials. The packaging will be critically important for the goods to remain in their expected
condition. Features such has the design and the ability to open a product and reseal it must be considered.
Packaging serves a dual purpose in protection, it protects the contents from being destroyed and in the case of
bio hazardous materials, it protects the various participants in the supply chain that come into contact with the
product as well as the community at large. In selecting the appropriate packaging for the product one will need to
consider aspects such has temperature, movement, abrasion as well as tampering.
Apportionment and unitization: Apportionment is the process assigning a product into units that are easily
managed and will be able to be transported and moved easily. In the case of cold drinks. They come in a variety
of sizes and containers. Unitisation will refer to the way in which the carrier is loaded to transport the goods.
Convenience and communication: One must consider the ergonomics of moving the packages, how easy it is
to open, handle, reseal as well as dispose of the product. Many retailers favour shelf ready packaging, thus
providing efficient solutions for the retailer due to decreased handling. Advances in technology such as radio
frequency identification (RFID) tags support a faster and more accurate flow of communication (Pienaar and Vogt,
2016:282).
Readings
Please refer to your prescribed textbook: Business Logistics Management – chapter 12.
If you are unable to acquire the suggested readings, then you are welcome to consult
any current source that deals with the subject. This constitutes research.
4.3 The role of packaging in logistics

Packaging is the link between the products and the logistics system that is used to move the goods. If packaging
is executed correctly it leads to increased efficiency as well as reduced waste.
Packaging created the below benefits:
 Customer service: packaging allows for the products to be moved efficiently to the consumer, in some cases
packaging provides useful information about the product, directions for use of the product as well as expiration
dates. In the case of medical products, the package may allow for easy dispensation as in the case of eye
drops.
 Demand forecasting: point of sale data machines will be able to scan important data if the packaging is correct
and in that way provide more accurate information for demand forecasting.
 Inventory management: inventory will be able to move in a more streamlined manner if stock is packaged in
a large consignment and this will be possible with the right packaging.

 Logistics communication: when stock is being moved along the supply chain, the various logistics activities
will need to be tracked and reported on. Having the necessary information on the packages as well as the
right information systems makes this possible.
 Materials handling: packaging allows for robust handling of the goods as they progress through the various
channels.
 Parts and service support: if packages enable the fast distribution of various parts and if the correct information
is provided with service kits then repairs can be executed easily.
 Return goods handling: correct packaging facilitates easy return of products; with e-commerce some returns
policy insist of goods being returned in original packaging to make it easy for all the participants.
 Reverse logistics: as mentioned above, the correct packaging will assist the returns which is part of the reverse
flow of goods.
 Sales: good packaging protects the product but great packaging provides a good description as well as added
advertising.
 Safety: packaging is essentially for safety of a product especially in the case of medical products (Pienaar and
Vogt, 2016:281).
Take a moment to think about the following products and the benefit of correct packaging.
 Contraceptive pills
 Cell phones
 Make-up products
 Contact lens
 Food
 Sun glasses
4.4 Development of packaging solutions

The packaging design has a direct impact on the company’s performance. Firms will need to be proactive and
focus on how the design of the packaging can serve to benefit the company in a way that will increase profitability.
Packaging should be looked at as an investment rather that a cost.
For one to develop a packaging system that functions well, one would need to consider all the participants in the
supply chain. Neglecting certain partners will result in inefficient designs. The involvement of all participants will
result in the focus on the supply chain and create gaps for sub optimisation but careful consideration must be given
to the downstream customers to avoid waste. Sustainability is a key factor and care for the environment must be
shown. It is advisable to consider packaging in a broader perspective and it should be regarded as the business
opportunity. (Pienaar and Vogt, 2016:288).

There are four different ways in which this can be approached as depicted in figure 4.2 below. The first option is
what is most practised, however the expectation is to have packaging be seen as an innovation driver that occurs
with product development (Pienaar and Vogt, 2016:288).
Be an innovation
driver and
Allow packaging to improvement of the
be the innovation packaging and
products
Packaging is
integrated with the
Packaging is comes development of the
at the end of the product
product
development phase.
14Figure 4.2 Packaging design and solutions

Case Study
UTi Sun Couriers was founded in 1981 and specialises in the movement of parcels,
envelopes and freight to and from any address in South Africa and the BNLS countries
(Botswana, Namibia, Lesotho and Swaziland). Its distribution network consists of 36
branches, including six hubs and four BNLS branches, and reaches 400 towns on a
daily basis and a further 1 044 towns on a bi-weekly or ad hoc basis. During an
average month, UTi Sun Couriers collects and delivers 1,2 million parcels through
this network.
In 2008, UTi Sun Couriers launched its UTi Pak and Pak prepaid boxes. The Pak box
measures 10 × 30 × 40 cm, and is designed for shipments of up to 2 kg in weight.
The Pak is 20 × 30 × 40 cm in size and can safely carry up to 5 kg. The boxes are
custom-designed to be tamperproof and sturdy.
The Paks are sold to customers at a flat rate (i.e. the cost of the box includes both the
packaging and the transport of the shipment). A special barcoded prepaid dispatch
note was also designed to help clearly identify prepaid shipments. This dispatch note
is pasted onto each Pak before it is sold to the client.
The Paks are targeted at freight originating in regional towns, with the intention of
increasing freight coming out of those towns to which freight flow has traditionally

been relatively one-directional. They can be sent to any main or regional centre
serviced by UTi Sun Couriers within South Africa. Clients can use the barcoded
dispatch note number to track their parcels on Sun Courier’s website
(http://www.sun.co.za) or they can call the national contact centre.
Source: Pienaar and Vogt (2016:302).
a) Explain how UTi Sun Couriers modified their packaging solutions and the
benefits that they were able to accrue.
4.5 Containerisation
Firms use different modes of transportation in their logistics function. In some instances, firms may need to use
multiple modes of transportation to deliver the products to the consignee. Special standardised containers will be
needed to move to the cargo on freight trains, ships and trucks. Containerisation has drastically improved the
efficiency of intermodal transportation as it allows for much faster loading, transloading as well as offloading the
containers (Pienaar and Vogt, 2016:363). Picture 4.1 below depicts containers that are being transported via ship
which will be loaded onto trucks.
Source: Sterdts (2016)

Revision Questions
Please read your notes before attempting the revision questions.

1. Explain the importance of packaging in the supply chain.
2. List the three functions of packaging
3. Discuss five basic roles that packaging fulfils
4. Explain why packaging should not be left to the final stages of product
development.
5. List four ways in which technological integration helps with packaging and
containerization
4.6 Integrating technology with packaging and containerisation

Packaging has generally been made from a variety of material, these can be a combination of the plastic, glass,
different types of paper as well as wood. Some goods require only a single type of packaging material, whilst others
require a combination. In the tertiary sector it is most common to use plastic, metal as well as pallets (Pienaar and
Vogt, 2016:299). Below Picture 4.2 is an example of wooden pallet that is used in warehouses.
Source: de Villiers, et al., (2019)
There has new developments and packaging and containerisation with a focus on technology which has created
new opportunities for firms, it is essential for firms to integrate technology with their packaging solutions.
The following Figure 4.3 shows the four technological innovations that must be researched.

Time- Biosensors
Auto ID Active
temperatiure and
technologies Packaging
sensors Packaging
15Figure 4.3 Technological innovations in packaging

Source: Pienaar and Vogt (2016:300-301)
4.6.1 Auto identification technologies

Radio frequency identification (RFID) is the most common form of auto identification technologies that is used in
the supply chain. A tag or a card will be secured on the package or the container, this can be read by a reader.
There are active and passive tags, with active tags being the more expensive as they have a longer range. These
tags will be connected to a warehouse management system and leads to a more technologically integrated
approach. A firm will need to weigh up the cost and benefits of introducing this technology.
8 Table 4.1 Benefits and cost of RFID
Benefits of RFID Cost
Decrease in materials handling leading to RFID has a huge cost implication as the entire supply chain
overall efficiency. will need to be upgraded to a bar code system. This will result
in an increase in cost all along the supply chain.
Improved traceability
4.6.2 Active packaging

Active packaging is from a scientific perspective in which there are supplementary products which can be used to
improve the standard packaging of the products. In most products the key is to prevent or minimise the oxidation
as this will lead to oxygen and moisture entering the package and destroying the longevity of the product. This type
of technology is commonly used with pharmaceutical and food products. Antimicrobial agents are another growing
technology in which a packaging material can be included in the original package to prevent non desirable
microorganisms from entering the product (Pienaar and Vogt, 2016:300).
4.6.3 Time temperature sensors

There has been an increased focus on chill chain control in which many opportunities and challenges exist to
expand the shelf life of products. If the cold supply chain can remain unbroken, a situation in which the
temperatures remain unchanged. The products will be in a better condition and the shelf life is extended. The
opposite is true if the cold supply chain is broken. Time and Temperature Indicators (TTI) allows for improved

quality and dynamic shelf life. However, this will require significant investments from all participants in the supply
chain (Pienaar and Vogt, 2016:301).
4.6.4 Bio sensors and packaging

Biosensors can be used to ascertain biological activity and identify the presence of microorganisms using a
molecular process. Previously this process only existed in laboratories. As of recent times, there has been
numerous advancements in bio sensors for the food industry and this will undoubtedly have an impact of the
requisite supply chains (Pienaar and Vogt, 2016:301).
Think Point
Take some time to research the abovementioned ways in which technology can be
integrated with packaging and containerization.
Are there any new innovations that you can add to the list?
4.7 Summary
In this unit a definition of packaging was provided and the associated function of packaging was discussed with a
focus on the new packaging solutions. Packaging has a multitude of benefits and if used correctly packaging can
even enhance the marketing and sales function. The role of packaging was reviewed to provide a holistic
perspective on the need for the most suitable packaging. Containerisation and compatibility with packaging was
also reviewed. The study unit concluded with a look at new technological innovations that will shape the future of
packaging solutions.
Knowledge Checks
1. Select the functions of packaging
a) Containment and protection
b) Apportionment and unitization
c) Convenience and communication
d) All of the above
2. Select the benefits of packaging
a) Enhanced customer service
b) Improved demand forecasting

c) Better inventory management
d) None of the above
e) All of the above
3. Select the technological innovations in packaging
a) Auto ID technologies
b) Active packaging
c) Time temperature sensors
d) All of the above
State whether the following statements are True of False
A. Product packaging can be designed upon completion of the entire design of the
product as the packaging is supplementary to the product
B. Containerization will assist in movement of goods as some goods may need to be
moved using different modes of transport (intermodal)


4.2 Readings
4.3 Practical application/examples

 The correct packaging provides a reminder for the days in which specific pills must be taken, the pills are
packed in a plastic carrier to prevent damage and oxidation.
 Cellphones have protective packaging inside the boxes and they are wrapped in plastic with to prevent
scratches
 Make up products are in boxes and they are in much bigger boxes that have additional packaging to prevent
movement and breakages.
 Contact lens come in specific cases for the left and right eye and in packages that prevent damage.
 Certain food items will be stored in packages that can be reheated/baked or refrigerated.
Case study
Packages move much quicker in the supply chain. The use of barcodes allows customers to track packages which
creates better customer satisfaction.
4.5 Revision exercises

a) Packaging protects the products and allows the products to move faster through the supply chain
b) Containment and protection, apportionment and unitization, convenience and communication
c)
 Customer service is improved through better packaging
 Appropriate information on labels/packaging captured by point of sale devices will assist in better demand
forecasting.
 Packaging will assist in inventory management due to the streamlined manner in which goods pass
through the supply chain.
 Logistics communication is improved due to the information that is available from the packaging.
 Sales and advertising can be improved by packaging that attracts the attention of customer.
 Packaging is essential for the safety of the product as well as the people that come into contact with the
package.
d) Should packaging be left to the final stages of the product, then there is no integration with technology and
packaging. Packaging must be developed in line with the products to enhance the product.
e)
 Auto identification technologies

 Active packaging
 Time temperature sensors
 Bio sensors and packaging
4.6 Think Point

Students are expected to research packaging and containerization and the various ways in which these can be
enhanced to better support the end consumer. Some of the innovations can be in recycling and future trends.
4.7 Knowledge checks

1. D
2. E
3. D
True or False
A. False
B. True

Unit
5: Transport Management
and Global Logistics

5.2 Functions and importance of  Examine the functions and importance of transport
transport
5.3 Modes of transport  Evaluate the characteristics of the different modes of transport
5.4 Transport mode comparison  Compare and contrast the various modes of transport
5.5 Future developments in transport  Examine the future developments in transport
5.6 Global logistics  Establish the impact of global logistics on an organisation

 Wisner,J, Tan,K, Leong,G. (2012) Supply Chain Management
A Balanced Approach. Third Edition. South Western

5.1 Introduction
Transportation allows for the movement of people and freight. To have a transport system implemented an
economy will first need to the infrastructure for the different modes of transportation. To have vehicles on the road
you will need to have roads, to utilise rail transportation, there will need to rail roads, the use of water transportation
is dependent on the harbours and ports and the use of air transportation is dependent on the airports.
Transportation has evolved from the days of the horse drawn carriage into a systematic and well planned network.
Freight transportation is primarily conducted by the roads in South Africa. Rail transportation is preferred for bulk
materials that need to be transported over long distances. Air cargo is generally used for specialised cargo and
commands a much higher price. OR Tambo, King Shaka International and Cape Town International are the main
airports that transport cargo.
Freight transport should not be allowed to function on the road network, it is recommended that freight transport
be completed outside of normal working hours. It may be better to have freight moved over the rail network as rail
networks can accommodate bulk containers, break bulk and pallets.
Transportation networks necessitate the need for economic instruments to assist in the upkeep of the infrastructure
as well as the regulation of the volume of traffic. Furthermore, freight transport will need to have specific
components such as truck stops, staging areas, industrial areas as well logistics parks (de Villiers, et al., 2019:
160).
The Technical Transport Planning Guidelines for Comprehensive Integrated Transport Plans of the Department of
Transport suggest the following guidelines for freight transport (Department of Transport, 2009: 111–118):
 Overloading
 Hazardous goods movement
 Dangerous substances
 Heavy vehicle corridors
 Freight routes
 Incident management
 Intelligent transport systems
 Traffic management
 Abnormal transport
 Facilities such as truck stops and staging areas
 Truck safety
 Cargo security
 Modal split

 Toll roads
 Equipment configuration
 Reverse logistic
5.2 Functions and importance of transport

Transport can be viewed from two perspectives: providing accessibility and mobility as highlighted in the Figure
5.1 below.
Mobility
Accessibility
Figure 165.1 Transport perspectives

Source: de Villiers, et al., (2019: 160).
Mobility can be described as the movement of freight or passengers all across the supply chain. Accessibility
refers to the ability to receive the goods. Accessibility will only be possible if there is adequate infrastructure which
may be limited in the rural areas. The mobility and accessibility function can be further classified into three functions
viz. inbound, onsite and outbound transportation.
Inbound transport: pertains to the movement of raw materials such as wood or parts from suppliers. Inbound
transportation can be moved on rail, water and road networks and they can be moved in large loads.
Onsite transportation: will refer to the transportation on site such as a warehouse. Vehicles such as forklifts can be
used to move pallets and break bulk (bags and drums). On site transportation will move raw materials from inbound
transportation to production facilities in which they will be transformed into finished products. Once these goods
have been transformed they can be moved to the finished stores part of the warehouse.
Outbound transport: refers to the movement of finished goods. Finished goods can be loaded on pallets and
transported on tautliner trucks. The goods will be moved to distribution centres and in some cases to the final
consumer (de Villiers, et al., 2019: 70). The three functions of transport are depicted below in Figure 5.2

Inbound transport Onsite transport Outbound transport
17Figure 5.2 Functions of transport

Think Point
Research inbound, onsite and outbound transportation. Provide specific examples for
each type of transportation.
5.3 Modes of transport

There are primary and secondary modes of transportation. The below Figure 5.3 depicts the five primary modes
of transportation.
Road transport- trucks
Rail transport - trains
Water transport ships
Air transport - (aircrafts)
Pipelines
18Figure 5.3 Primary modes of transport


In addition to the five primary modes of transportation, there are two modes of secondary transportation as depicted
in Figure 5.4 below.
Conveyors
Canals or inland waterways
19Figure 5.4 Secondary modes of transport

Source: de Villiers, et al., (2019:161).
5.3.1 Primary modes of transport

Road transport
Road transport is something that most people are familiar with, they would have been in vehicles that travel on
roads or in some cases they may use roads for their daily commute to work. Road transportation has significant
advantages over other modes of transportation for the following reasons:
 It is much easier for transport companies to enter the market using road transportation as the cost to
invest in these vehicles will be substantially lower in comparison to other modes.
 Road transportation offers high speeds with the vehicles, within the confines of the speed limits that are
imposed.
 Flexibility and accessibility is greater with road transport. In some cases, door to door delivery is possible
for passengers and freight (de Villiers, et al., 2019:163).
Rail transport
Rail transport entails the movement of goods via the rail road network. This is dependent on the infrastructure
throughout the country. There are three models used in rail transport.
Freight Demand Model (FDM): this focuses on the economic activity as a value of the production. It will look at the
location in which goods are produced and the area in which they are consumed. Based on that a set of forecasted
figures can be generated for a long period of time such as 30 years. Hence the focus is on long term.
Transportation model (TM): the focus with this model is on the relationship that exists between consumption of
products in each area and for the specific type of good. The TM will determine the route and the mode of
transportation. The TM is essentially a geographic information system that was developed by Transnet. TM
fundamentally connects the 365 districts and offers users the opportunity to run various flow scenarios, including
modal market shares, to determine demand for rail.

Market Share Model (MSM): MSM has been specifically developed for planning rail transport and it looks at how
shifts can be made from road to rail users. It looks at how the market share will change for the different products.
With the MSM, planners will be allowed to plan long term strategies (de Villiers, et al., 2019:163).
Water transport
Water transportation can be facilitated through ships, and other deep sea vessels. Harbours, ports as well as
canals and inland waterways are crucial connectors for water transportation. The design of ports is crucial as the
vessels will be entering and leaving ports (de Villiers, et al., 2019:165).
Air transport
Air transport is a quick and expensive mode of transportation. It provides a fast solution over medium and long
distances. However, due to the cost factor it may be recommended to use another mode of transportation. Air
transportation works using the hub and spoke method in which various origins and locations can be used by being
connected through large airports. A key infrastructure requirement with air transportation is airports. Countries
have large and small airports and this will affect the quantities of cargo. Connectivity allows for greater access to
local and international markets. A research report in 2010 indicated that there were 66 routes per week at the time
which connected South Africa to various international conglomerates (de Villiers, et al., 2019:165).
Pipelines
Pipelines are generally used for liquid or gas and they are underground. Crude oil is transferred via pipelines.
Pipelines offer a cost advantage and will allow for cost effective movement of precious commodities. Companies
will need to pay landowners for the right to have a pipeline erected, maintained and used on their property.
Unfortunately, this disrupts the natural agriculture and will have a negative impact on the vegetation and livestock
on the land. Specific agreements are needed for pipelines to be erected (de Villiers, et al., 2019:167).
5.3.2 Secondary modes of transportation

Conveyors are generally used in warehouse for onsite movement of goods. Goods are generally transported by
the primary modes of transportation and when they arrive at a location such as a warehouse or factory, they will
be moved via conveyors in that particular site.
Waterways are natural passages similar to rivers and streams that allow for ships/boats to pass. Canals can be
regarded as a deliberate waterway that is constructed which will allow for boats and ships to pass through. Canals
and waterways will assist in water transport (de Villiers, et al., 2019:161).

Revision Questions
Read your notes before attempting the revision questions
a) Discuss the five primary modes of transportation

b) Explain the two secondary modes of transportation.
c) Explain the disadvantages of using pipelines
d) Differentiate between inbound and outbound transport
e) Explain the main purpose of transport
5.4 Transport mode comparison

The five primary modes of transportation were briefly discussed above. The below table will compare the five
different modes of transportation and provide examples of products that are moved by the various modes of
transportation. The benefits and limitations will also be examined to provide a holistic picture of each mode of
transportation.
Table 95.1 Transport mode comparison
Mode of Strengths Limitations Primary function Characteristics Examples of
transportation of the product products that are
that are carried carried by this
mode
 Capacity of the  Movement of  High value  Furniture
Road  Easily
load is limited smaller finished  Electronics
accessible
 High cost consignments goods  Food items
 Fast and
for regional  Low
dependable
and domestic volume of
 High level
market goods
of customer
service C
 Damage rates  Movement of  Low value  Grains
Rail  Cost
tend to be high large in high  Chemicals
effective
 Limited consignments volumes  Cars
 High
accessibility of freight at  Raw  Coal
volumes
based on the cost effective materials
can be
rail network prices across
transported
 Inconsistencies the regional
in delivery and and local
service. markets
 Shipments can be  Time sensitive  Computer
Air  Speed of  Expensive
moved both (military  Pharmaceuticals
delivery  Low capacity
nationally and logistics)
 Flexibility  Easily accessible.
internationally.  Finished
 Freight
goods
protection
 High value

 Slow moving  Large shipments  Low value  Farm products

Water  High Capacity
 Limited accessibility can be moved  Raw materials  Clothing
 Cost effective
depending on ports locally and  Containerised electronics
 Offers
internationally. products
international
capabilities
 Slow moving  Large volumes of  Natural gas
Pipeline  In transit  Low value
 Limited network freight can be  Petroleum
storage  Liquid
moved over long
 Efficient commodities
distances
 Cost effective
Source: de Villiers, et al. (2019:168).
Read through the blog post to get a better understanding of the different modes of transport.
There are not only a ton of transportation companies in Toronto to choose from, there are
various transport methods as well. There are a number of different modes of transportation
in the logistics industry, each having its own merits and disadvantages. From road, railway,
marine, and air transportation, the method that you select depends on a few factors. For
example, industries that need to transport heavy products opt for railway transportation
along with road and Maritime transportation. These methods have the ability to
accommodate heavier products, making them the ideal choice over air transportation. In
this post, we’ll discuss five common types of transportation in the logistics industry:
roadway, rail, marine, air, and intermodal transportation. Hopefully, the pros and cons of
each method can aid in your decision when looking to transport goods from Atlantic Canada
to Toronto and vice versa.
TOP 5 MODES OF TRANSPORTATION IN LOGISTICS
ROAD TRANSPORTATION
There are many advantages to road transportation, especially for companies who rely on
fast delivery to retain their customers. If goods are meant to be transported immediately to
the Maritimes from Mississauga, for example, your best bet would be ground shipping
transportation. Water transport is notoriously slow, and it can be a hassle to book railway
transportation.
Maritime trucking to Mississauga and other locations is more cost-effective than other
options; with rail transport, if there isn’t a railway that leads to your desired destination,

you’ll have to build it, which can be a costly investment. However, there are roads that lead
to pretty much everywhere, and are built and paid for by the government; more often than
not, you’ll only have to pay a small fee to use them. Roadway transportation to Atlantic
Canada from Mississauga can also be cost-effective since it provides door-to-door or
warehouse-to-warehouse service. This allows cartage, as well and loading and unloading
expenses, to be significantly lower compared to other methods.
RAIL TRANSPORTATION
Railway transportation is arguably the most dependable method of transport to the

Maritimes from Toronto and pretty much anywhere else. Unlike road and marine transport,
rail is hardly affected by weather conditions. Transport trains will run in rain, fog, snow, and
other conditions that would otherwise delay shipments carried by other methods. With fixed
schedules that run regularly, railway service is more certain compared to other methods of
shipment.
Rail transport also offers huge carrying capacities, which can grow to fit your needs. Unlike
trucks or boats, which have a fixed about of space that can’t be exceeded, additional
wagons can always be added to trains if you need more room. In addition to all the benefits
for you and your company, you’ll also be giving great opportunities to surrounding
communities. Rail transport can provide employment opportunities to both skilled and
unskilled workers, making it a positive choice for the entire community. The biggest
disadvantage, however, is that if there are delays in the transportation, it can actually take
much longer to get your freight delivered than with other methods of transportation. With
rail transportation, you need to schedule container drop off and pick up at the terminals
which could end up taking a long time.
MARINE TRANSPORTATION
Marine transportation is notoriously slow, but that doesn’t matter when a product has a long
lead time. This is a great option for those looking to ship bulky items that aren’t in much of
a rush. Often cheaper than road transport, ships are usually the main cost that you’ll incur—
you won’t have to worry about road tolls and other similar charges. While roadway
transportation can easily be delayed by rain or other types of inclement weather, the same
conditions may not affect marine transport.
The main disadvantage of marine transport is that it can be difficult to monitor the exact
location of the goods in transit, which can be a deal-breaker for some. As you’ve read in
our past posts, being able to track freight is a common expectation of consumers who order

things from online retailers and can affect their purchase decision. While there are many
advantages to marine transport, the downside of the lack of ability to closely track the exact
whereabouts of the specified freight can be crucial.
AIR TRANSPORTATION
Air transport is extremely useful for many reasons: it`s convenient, fast, and doesn’t have
to compete with natural barriers. While road transport is the quickest way to deliver goods
that only have a short distance to travel, air transportation is the fastest option for freight
that have a further destination—it’s even regarded as the best mode of transportation for
perishable goods for this reason.
In addition, air transportation doesn’t require the infrastructure investment that railways do;
airplanes fly freely, which means you don’t need to spend the initial cash building a pathway
to your destination for it to get there! The lack of barriers also means that it’s accessible to
all areas, regardless the obstruction of land. However, one main disadvantage is that
planes can easily be affected by pretty much any type of inclement weather. Whether it’s
rain, snow, or high winds, your shipment is likely to get delayed if any weather condition
becomes extreme.
INTERMODAL TRANSPORTATION
As you’ve probably noticed through reading this post, each method of transport has its
advantages and disadvantages. What if you could combine the pros of each method to
create one innovative method? That’s exactly what intermodal transportation is.
Intermodal transportation offers the best of both worlds: it combines various transportation
methods to give you the fastest shipping time possible. Not only is this method time-
efficient, it’s cost-efficient as well. More shippers are taking advantage of the option to reap
the benefits of the cost savings, environmental benefits, and highway safety results. With
the lower rates, predictable pricing, standardized transit schedules, and flexibility,
intermodal transportation is continuing to rise in popularity.
TRANSPORTATION COMPANY IN TORONTO, ONTARIO
Philburn Logistics Inc. is one of the top freight companies in Mississauga and the GTA. We
are an asset-based trucking company operating out of Mississauga and offer both TL and
LTL shipping services to all of our clients and ship throughout Ontario and the Maritime
Provinces.
If you’re searching for a transportation company in Toronto that can meet all of your needs
and more, then Philburn Logistics Inc. is the company for you. Getting your freight to its

destination isn’t our only goal—we strive to exceed your expectations and deliver your
goods in perfect condition while getting it to its destination on time. While our distribution
centre is based in Toronto, we ship throughout the entire province and even as far as
Atlantic Canada. If you’d like to take advantage of our exceptional serviced and affordable
rates, contact us today.
Source: Philpott, M. (2019). WHAT ARE THE DIFFERENT MODES OF

TRANSPORTATION IN LOGISTICS? [Online]. Available: https://philburn.com/what-are-
the-different-modes-of-transportation-in-logistics/

5.5 Future developments in transport

Transport has been evolving due to the changes in legislation as well as the technological innovations. It would
therefore make sense for one to monitor future trends and pay attention to developments that may affect the
organisation. The table 5.2 below provides insights into the future developments of transport (de Villiers, et al.,
2019:179).
Table 105.2 Future developments in transport

Future developments Description
Performance based standards In Australia a performance based standard scheme has been tested
for the heavy vehicles. South Africa is piloting a PBS/Smart truck
demonstration project in which vehicles will be tested whilst they are
performing each manoeuvre. The performance parameters of the
vehicles will be compared to the minimum and maximum safety levels.
Electrification of freight traffic There has been an increasing demand to have transportation more
environmentally friendly and to achieve a reduction in carbon
emissions. Consumer vehicles such as the Toyota Prius have
achieved this. The spotlight is now on freight vehicles and the ability
to come up with innovative concepts. Siemens have developed an
alternative resulting in electrification of freight traffic.
Driverless trucks Rio Tinto has launched initiatives such as Mine of the Future
programme, part of this initiative is focused on improving safety on the
roads. This includes cutting edge technology is autonomous haulage
system trucks. This is set to have an impact on the efficiency of trucks.
Driverless trucks are not a completely new phenomenon. This
technology has been used for passenger transport in places such as
Dubai.
Road container economics Future trends in containers suggest a move to allowing road transport
carriers to carry over 105 tons which is the general norm. It is expected
that this will increase to two 12 m containers in a truck and trailer.
However, this must not exceed 30m. This practice currently takes
place in Brazil.
Truck and trailer lift axles Most trucks and trailers are designed with lift axles which are
mechanically lowered or raised. Technological innovations will allow
for the axles to be lowered and raised by a computer-controlled airlift.

This is regarded as best practice and essentially prevents increases

wear and tear resulting optimal usage of the vehicle.
Light rail DVB cargotram This technology was designed to reduce the traffic in inner-cities by
moving cargo on tram tracks. Tram tracks runs on the existing
infrastructure, requiring only minimal freightline construction.
City refuse disposal A key point in transportation is to reduce traffic in high density areas.
The innovative tram was developed to move garbage collection away
from roads. This reduces the time it takes to move garbage away from
cars.
Driverless freight trains AutoHaul is the leader in this technology, having developed the first
completely autonomous heavy-haul, long distance railway system.
Double stack rail transport Double-stack rail transport is a form of intermodal freight in which a rail
road car will have two intermodal containers stacked on it. This has
been used in North America. Using double stack technology will
essentially halve the cost and result in greater efficiency.
Freight shuttle system This system was developed in response to the need for a system that
is suitable for high volume traffic between two points with a maximum
distance of 600 miles. This is a frequent occurrence at marine ports,
border crossings and land ports.
Logistics platform This is a type of logistics platform based on the principle of intermodal
transport. Intermodality increases the profitability of the location and a
type of synergy between all operators.
Terminal of the future This had been practised in Finland. DB Schenker Logistics It combined
four locations and operations inclusive of land transport, air and sea
freight in one building. The centralising of operation will result in an
improved efficiency and streamlining of cargo flows between the
different transport modes.
Source: de Villiers, et al. (2019: 70).

Picture 5 below depicts the future of freight and the demonstration of driverless trucks. TuSimple, an autonomous
trucking firm with operations in the U.S. and China plans to demo their driverless trucks in 2021
Source: CBS Interactive Inc, (2020). Driverless trucks being tested right now on public roads. [Online]. Available:
https://www.cbsnews.com/news/driverless-trucks-being-tested-on-public-roads-60-minutes-2020-03-13/
Picture 5.2 below depicts an example of a freight shuttle system in Texas which was designed to suit the
intermodal network.
Figure 20
Source: Texas A&M Transportation Institute, (2020). Freight Shuttle System [Online]. Available:
https://tti.tamu.edu/freight-shuttle/

Case Study
Chinese imports’ red tape may not be worth the effort
Sanchia Temkin
In spite of last week’s news that the trade and industry department had eased its
restrictions on textile and clothing imports from China, industry experts say the quotas
may result in extra administration costs and business risks for importers. Importers of
goods that could be subject to the restrictions need to ensure that their goods are
cleared correctly, especially with regard to the country that they originate from, says
André Erasmus, senior manager, indirect tax, at Deloitte. Erasmus says that in the
past many goods were manufactured in China and exported from Hong Kong. In such
cases the goods were often declared as originating from Hong Kong, although they
were not manufactured there. In such instances the duty rates remained the same. Now
that imports from China are subject to restrictions, importers found to have declared
goods from Hong Kong which originated in China may have to forfeit their goods. China
is a preferred trading partner for many African countries, says Mark Casey, corporate
finance partner at Deloitte. He says this is because Chinese firms are less risk-averse
than some western firms and because they take a longer-term view on investment.
Although trade between China and the West is small, it is growing fast. The quota
system came into effect from January 1 this year, after complaints by South African
trade unions that Chinese textile imports were having a negative effect on the domestic
industry. It places restrictions on 31 product categories of clothing and textiles from
China. PricewaterhouseCoopers senior manager, indirect tax, Herman Fourie says the
quotas give an unfair advantage to firms that are in the business of importing goods
from China in that they are given a bigger quota than new entrants to the industry. “It is
unfair for those global firms that want to start importing from China.” Says Erasmus:
“The quota restricts the importation of goods only China is willing to manufacture and
certain branded goods for which South African importers do not have exclusivity and
will never be sourced from SA.” The goods are not allowed to be shipped to SA without
a permit. Erasmus says this creates difficulties for goods cleared into bonded
warehouses as these goods are not allowed to be warehoused in volumes in excess of
those stated on the permit. Goods destined for export must be cleared at the time of
entry into SA, including those destined for Botswana, Lesotho, Namibia and Swaziland
(the BLNS countries). Goods shipped under the quota will require additional
administration and costs as shipments will have to be split and shipped to different
destinations separately and importers will have to implement controls to monitor their

quota balances. If more goods are shipped than are allowed by the permit, the whole
shipment will be confiscated. The restriction applies only to SA. Any direct imports into
any of the BLNS countries are allowed without restrictions. However, once the goods
are imported into SA from the BLNS country and it cannot be proved to the satisfaction
of the South African Revenue Service (SARS) that they are not of Chinese origin, the
restrictions will apply. Erasmus says there appear to be anomalies in terms of the rules
of origin that need to be applied to determine whether sufficient value has been added
to determine the origin of the goods. SARS is applying the rule that at least 25% value
needs to be added to Chinese inputs in order for them not to be subject to the permit
requirements. Virusha Subban, a tax associate at Edward Nathan Sonnenbergs, says
it would not be unreasonable for retailers to expect some delays in the starting-up
phase, as SARS and the International Trade Administration Commission would be
actively monitoring imports from China. “This should entail a verification of the
correctness of what is declared on a bill of entry; examination of the actual goods that
are imported and a cross-check as to the allowable quota per importer on the SARS
electronic database.” Importers should also ensure that, despite the fact that SARS will
have the quotas per importer captured on its electronic database, they must always be
in a position to display a valid special import permit certificate. It is advisable that a copy
of the certificate be annexed to the bill of entry to avoid inordinate delays in obtaining
clearance of the goods, she says. According to recent trade statistics published by
SARS, the quota system seems to have borne fruit as far as limiting textile imports are
concerned. Imports of textiles and textile articles were reported to be down by R370
million from January last year. “We can expect this decrease to continue and even more
so towards the end of the year once the quota for this year has been utilised,” says
Erasmus. “What we do not know is to what extent this reduction of almost R370m is
filled by South African production.” If this decrease in imports is not filled by other
sources, there might be an increase in prices to consumers, he says.
Source: de Villiers, G. d., Nieman, G., Niemann, W. (2017). Strategic logistics
management. Fifth Edition. South Africa: Oxford University Press.
Discuss the impact of cheaper imports on South African supply chains.
5.6 Global logistics

Globalisation results in organisations being able to import and export with the rest of the world. Globalization allows
firms to expand their current activities be entering foreign markets. This brings a lot more complexity and many
more uncertainties. Figure 5.4 depicts the various factors that are at play in the global scene (de Villiers, et al.,
2019: 305).

Political and
government
conditions
Different
Competition languages
and cultures
Different
Different legal
channel
systems
members
Gloabal Scene
Exchange
Longer
rate
distances
fluctuations
Rules and
Pricing
regulations
21Figure 5.5 Global scene

To function successfully in a global environment, careful attention must be paid to the abovementioned factors.
Should organisations want to participate in the global market they will need to create world class logistics and
supply chains to cope with the demands of a global village. There are nine key trends that organisations will
need to prepared for if they want to compete globally (de Villiers, et al., 2019: 306).

Rising customer expectations
Networked economy
Cost pressure
Globalisation
Talent shortfalls
Volatility
Sustainability pressures
Increased risk and disruption
New technology
22Figure 5.6 Globalisation trends

Source: de Villiers, et al., (2019: 306).
Based on the above, it is clear that organisations will need to spend a lot of time working on their strategy for going
global. There are various factors that must be considered and the interrelated factors will need to be examined.
Organisations will need to understand the forces that will affect the supply chain to help them make better
decisions. Figure 5.7 lists the various forces that shape the environment in which managers are expected to make
decisions.

Competitive pressure
Corporate social responsibility
Customer expectations
Role shifting
Financial pressures
Global capacity
Mergers and acquisitions
Globalisation
Time compression
Technological innovation
23Figure 5.7 Forces that affect managerial decision-making in the current environment
Source: (de Villiers, et al., 2019:70).
Readings
The impact of globalization on the supply chain
An increasing number of South African companies are engaging in global activities that
involve importing and exporting finished products, components and materials across multiple
borders and through different trade routes by land, sea and air. At the same time, they are
faced with growing competition from overseas companies entering the local market. Both
sides are being driven by the same challenges of shrinking margins, slowing domestic
demand and increasing competition, and by the lure of greener pastures.
In today's world, companies not only need to be agile, flexible and responsive, they need to
drive continual innovation throughout their businesses and supply chains to differentiate
themselves to remain competitive.
Globalization and widespread Internet connectivity are giving rise to extended and
interconnected supply chains that crisscross the globe. As companies venture into new
markets and deal with suppliers and customers across borders, their supply chains become
more complex and are a higher risk to business continuity. Added to this, ever changing
consumer demands, increasing regulatory and sustainability requirements, and steadily
decreasing natural resources are directly impacting businesses and their supply chains

worldwide.
As international supply chain expert Douglas Kent pointed out during a presentation recently
hosted by SAPICS at Barloworld Logistics, the further businesses move away from their own
markets the more they face lesser known or unknown risks. These include, natural disasters,
political unrest, continuing reliance on oil, fragmentation along the supply chain, sudden
demand shocks, export and import restrictions, terrorism, and different compliancy
requirements for different countries.
Ways to mitigate risks include finding alternative sources of supply and trade routes, and
partnering and collaborating with supply chain specialists and trading partners. The GE
Global Innovation Barometer 2013 study shows that companies are realizing that
partnerships are the fastest way to achieve scale by providing critical insights into new
markets and customers and access to better technologies.
Partnering and collaborating with suppliers and other supply chain entities includes sharing
data and information, which can give rise to trust issues. But visibility across all their extended
and interconnected supply chains is an imperative for companies conducting business
globally.
As companies expand beyond their national borders, they are under increasing pressure to
deliver a high level of customer service at an acceptable cost, while achieving a strong profit
performance on a global scale. This includes the ability to help their customers improve their
supply chain processes and reduce costs.
The challenges and opportunities of globalization and the growing complexity of supply
chains are pushing them higher up the boardroom agenda for discussion and scrutiny.
Developing nations are playing an increasingly significant role in the global economy, with
41% of the world's GDP expected to come from emerging markets by 2015.
In a recent report, "Manufacturing the future: The next era of global growth and innovation",
McKinsey & Company predicts that by 2025 a new global consuming class will have emerged
and the majority of consumption will take place in developing economies.
To access new markets, companies in some emerging economies are piggy-backing on

existing global supply chains rather than building their own. This gives them the ability to

export their products and services globally within months. Globalization increases the need
for countries to optimize their road, rail, airport and sea port infrastructure and provide slick
cross-border clearance.
In South Africa there is a need to build an interlinked rail and port infrastructure, supported
by road. More inland port terminals are also needed, and systems must be put in place to
enable cargo to be moved quickly and efficiently between road and rail. According to the
National Planning Commission (NPC), 96% of South Africa's exports are conveyed by sea,
which underlines the importance of the country's ports.
Forward-thinking local companies are taking measures to lessen the impact of the current
inadequate transportation infrastructure on their businesses. These include partnering with
supply chain service providers to assist them in strategic route planning, optimising transport
modes, using more fuel-efficient vehicles, having the right technology systems in place and
generally improving logistics processes.
Source: Temple, S. (2013). The impact of globalization on the supply chain [Online],
available:
http://pressoffice.mg.co.za/barloworldlogistics/PressRelease.php?StoryID=247928
5.7 Summary
The role of transportation in the supply chain was identified and the purpose of transport was clearly explained.
Inbound, onsite and outbound transportation were compared and contrasted. The five primary modes and two
secondary modes of transportation were discussed. The five different modes of transportation were compared to
each other to provide a better understanding of the benefits and limitations for each mode in relation to the type
of goods that need to be transported. The future developments in the transportation industry were examined and
the study unit concluded with a look at global logistics and the various considerations that one needs to be
mindful of when going global.

Knowledge Checks
Please ensure you read your notes before attempting the questions. Indicate if the
following statement are True of False.
a) Air transport is the fastest and most expensive

b) Road transport offers greater accessibility and in some cases door to door delivery is
possible
c) Driverless trucks will not be a possibility due to the technological innovations.
d) Pipelines have zero effect on the agriculture and livestock.
e) Different languages and cultures are a fundamental aspect of the global scene.


Think point 5.2
Inbound transportation refers to vehicles that transport raw materials such has wood from forestry firms to
manufacturing firms.
On site transportation refers to pallet jacks and forklifts that move material within warehouse and factories. The
movement on wood within the Sappi plant is an example.
Outbound transportation refers to the movement of finished goods to wholesalers and retailers. The movement of
paper to from Sappi to Makro.

a) Road, Rail, Water, Air and Pipelines
b) Waterways and Conveyors
c) There is a negligible effect on the agriculture, livestock and plants. The permission of landowners is
needed and various incentives will need to be paid.
d) Inbound transport related to the primary sector and the transport of raw materials. Outbound transport
refers to the movement of finished goods (tertiary sector).
e) To provide accessibility and mobility for passengers and freight
Practical examples 5.4

Case study 5.5
Cheaper imports will put additional pressure on supply chains to perform in the most important manner. If cheaper
imports are left unchecked this could result in firms not being able to maintain their business.
Readings 5.6
Ensure the readings are completed.

a) True
b) True
c) False
d) False
e) True

Unit
6: Logistics Information Systems
and Customer Service

6.2 Logistics information systems  Examine the characteristics and importance of logistics
information systems on logistics communication and customer
service
6.3 Customer service elements and  Explain customer service elements and dimensions
dimensions
6.4 Establishing a customer service  Demonstrate the importance of implementing a customer

strategy service strategy


6.1 Introduction
According to de Villiers, et al. (2019: 209), communication is a key element in the supply chain, whenever goods
and money are exchanged there would be a subsequent exchange of information. This information pertains to
details such as quantity, price and destination. An information system can be defined as a set of interrelated
components that collect, process, store and disseminate information to various stakeholders internally and
externally. The information is essential used in supporting the flow of goods from the point or origin to the point of
consumption. Information systems are dependent on sophisticated computer hardware and software (de Villiers,
et al., 2019: 209).
6.2 Logistics information systems

There are two broad categories of information systems: centralised and decentralised information systems. A
decentralised information system is when the data is managed locally within individual departments. In this instance
an individual department such has Human Resources will not have access to the data that is maintained in
Production department (de Villiers, et al., 2019: 209).
According to de Villiers, et al. (2019: 212), a centralised information system will be the opposite. The data for all
departments are maintained in one central repository and individual departments have access to data for all
departments.
According to de Villiers, et al. (2019: 209), the key benefits of a centralised information system for logistics are as
follows:
 There is an elimination of duplication and redundancy in the data that is stored.
 There is easier access to information for all departments
 Information will be accessible in real time for all departments
 Centralization of data allows for greater control over business processes
 Human resources management, inventory management and materials handing will be enhanced through the
real time access.
 Customer interaction will be improved

Case Study
Heineken
A hypothetical decentralised information system
Heineken (the client) once again approaches Nampak for 500 000 beer bottles (finished
goods). But this time, Heineken needs the bottles urgently so as to respond to uncertain
demand from their customer, which is hosting South Africa’s biggest music festival ever,
featuring national and international artists. The Nampak sales team does not have real-
time access to information regarding inventory. So they approach the inventory
department to check the availability of 500 000 beer bottles. This process takes time, and
Heineken (the customer) chooses another vendor (e.g. Consol glass), leading to loss of
revenue and customer dissatisfaction. Now suppose that, when 500 000 beer bottles are
out of stock, the sales team approaches the production planning team to manufacture
the bottles for future demand. The production planning team checks the availability of
cullet, soda ash, limestone and silica sand (required raw materials). However, raw
material information is separately stored by the production planning department as well
as the inventory department. The storage of inventory information by two separate
departments gives rise to data maintenance costs. A particular raw material (soda ash)
required to manufacture the bottles is available in the inventory, but according to the
database of the production planning team, soda ash is out of stock: in other words, the
databases of the inventory and production planning departments are not synchronised or
integrated. So the production planning team places an order to CHC (supplier) for soda
ash (raw material), which then gives rise to material and inventory holding costs. Once
the raw material is available, the shop floor department suddenly realises there is a need
for more personnel. The shop floor department approaches HR, and HR hires temporary
employees at higher than market rates; thus labour costs increase. The production
planning department fails to update the finance department regarding the raw materials
purchased. As a result, the finance department defaults the payment deadline set by the
vendor CHC, causing Nampak’s loss of reputation and possible legal action by CHC (the
vendor).

A hypothetical centralised information system for Heineken
Heineken (a customer) approaches the Nampak sales team to buy 500 000 beer bottles
(finished goods) on an urgent basis. The sales team has real-time access to the inventory

levels, which are updated by the inventory department on the centralised system. The
Nampak sales team promptly responds to Heineken regarding availability of stock,
leading to increased revenue and customer satisfaction. In case manufacturing is
required, the sales team updates the centralised database; which automatically alerts the
production planning department in terms of materials required. The production planning
team checks the availability of the raw materials in the centralised database, which is
updated by the inventory department. Thus data duplication is avoided and accurate data
is made available. The shop floor team updates their manpower status regularly in the
central database, and this can be accessed by the HR department. In case of a shortage
in terms of the workforce, the HR team starts the recruitment process with considerable
lead time, so as to hire suitable candidates at market price; thus labour costs are kept to
a minimum. Furthermore, vendors can submit their invoices directly on the centralised
information system, which can be accessed by the finance department, leading to timely
payments and prevention of defaults, or legal action being taken against the provider.
Can you identify the benefits of the centralised information system?

6.3 Customer service elements and dimensions

According to Pienaar and Vogt (2016:155), the general standard of customer service dates back to over four
decades ago to a model that was developed by La Londe and Zinszer in which customer service was grouped
according to the transactions that take place between the customer and the organization. It is important for
organizations to understand the different customer service elements and dimensions to allow them to better serve
their customers.
6.3.1 Customer service dimensions

These transactions are depicted below in Figure 6.1 and they can be influenced by the logistics activities to improve
customer service

Pre -transaction
elements
Post transaction Transaction

elements elements
24Figure 6.1 Customer service elements

Source: Pienaar and Vogt (2016:153-154).
a) Pre- transaction elements

The pre-transaction element refers to the environment that is created by the organisation. These are policy
elements and will require the support and implementation of management. Organisations will create specific
policies to support the customer service strategy which in turn will guide the actions and behaviour of staff. Pre-
transaction elements include the expected service standard as well as the associated performance management.
It is imperative that the policy is communicated to all staff. All customers should have a single point of contact for
all their interactions. Organisations can take this one step further and upskill the customer to manage their
processes which will result in the optimisation of inventory management and an improved buyer-supplier
relationship (Pienaar and Vogt, 2016:153).
b) Transaction elements
The transaction element includes the elements that result in the sale and delivery of the product. This is dependent
on the following factors:
 Product availability results in the customer having the product when they need it. Stock outs will not be
beneficial.
 Order convenience refers to the ease in which a customer can place the order with the necessary forms
and terminology.
 Oder cycle is the time it takes for the customer to receive the stock form the time the order is placed until
the delivery. This is inclusive of order picking, communication and processing.
 Quality assurance refers to the quality of the delivery and the goods.
 The most suitable transport and logistics service must be selected.
 Expedited shipments should be considered and will reduce handling time
 A suitable product substitution policy should be in place to allow for substitutions (Pienaar and Vogt,
2016:154).

c) Post transaction elements

The post transaction elements refer to all the support that is offered after the sale. Customers will expect a level of
service to assist in the application of the product and protection against defective or dysfunctional products that
will need to returned. In some cases, customers may need to return the product carriers such as pallets and
containers, this must be made as easy as possible. Post transaction elements have a strong similarity to reverse
logistics (Pienaar and Vogt, 2016:154).
6.3.2 Customer service dimensions

According to de Villiers, et al. (2019: 194), customer service is the bedrock of a successful organisation. If
customers are not satisfied with the level of service due to delays and stock outs, then there are serious implications
for the supply chain and a closer inspection of the logistics activities is needed. To enable firms to meet customer
demands, a firm must first ensure that the product is available for the consumer to purchase it.
There are various dimensions regarding customer service from a logistics perspective. Bowersox and Closs (1996)
identify three dimensions:
 Availability
 Operational performance
 Reliability
The first dimension is one of availability. A customer will not be able to purchase a product if the product is not on
the shelves as and when the consumer needs it. Availability also pertains to the an organsations ability to have the
correct inventory on hand to respond to consumer demands so that the organisation is able to provide the right
products to the consumer at the right time. Consider the Christmas period, if the Christmas goods arrive late, after
Christmas day and there are delays in having the christmas goods on the shelves, those goods may not be sold
after the 25th of December. Stockouts are indicative of products that are not available when the consumer needs
them and can be indicative of an organsition not holding the correct amount of inventory or safety stock. An
organisation therefore needs to strike a balance between the desire to reduce inventory carrying costs and meeting
customers’ expectations of availability (de Villiers, et al., 2019: 194).
The second dimension is operational performance and is concerned with the various activties that are completed
in the supply chain. Special consideration is paid to the speed of the supply chain and relates to the time it takes
to get the order to the consumer. All consumers prefer a shorter product cycle and without a compromise in quality.
Consumers also expect consistency in deliveries and a certain level of customer service. Consistency can
essentially be described as the organisation’s repeated ability to provide a certain level of service. In terms of the
order cycle, if an organisation is known to always require a specific time period before an order is delivered. If the
time period remains the same, over and over again. This knowledge of this enables the customer to plan
adequately.

It is only normal for organisations to be faced with unusual demands from customers and demands that constantly
change. Should an organisation want to keep their customers happy they must strive to meet their demands and
create a sense of loyalty from their customers, one way to achieve this is to ensure the customer demands,
regardless of how unusual they are, are being met. This requires a level of flexibility from the organisation. A further
factor in operational perofrmance is the ability to minimise malfunctions and abnormalities (de Villiers, et al., 2019:
194).
The third dimension is reliability and is concerned with the organsiations ability and their willingness to provide
accurate and timely information to customers regarding their orders as well as the related activities of the suppy
chain. Providing customers with timely and accurate information will allow customers to make better decisions.
Should customers be misinformed than they may face disappointments and losses (de Villiers, et al., 2019: 194).
According to de Villiers, et al. (2019: 194), an organization should try to establish efficacious customer service
strategies which will translate into a competitive edge. This is essential for an organization to survive in an ever
changing and dynamic environment.
Revision Questions
Please answer the following revision questions.

a) Differentiate between a centralised and decentralized logistics information
system
b) Discuss the three customer service elements
c) Explain the customer service dimension of reliability
d) Define a logistics information system
e) List the three dimensions of customer service
6.4 Establishing a customer service strategy

The importance of customer service has already been discussed. In many intsances organisations will tend to look
at what their competitors are doing. This can be dangerious as the customer is and their needs are being
overlooked. Some organisations may focus on satisfactory performance as opposed to investigating the needs of
their customers and evaluating their level of customer service (de Villiers, et al.,2019: 196).
It is therefore imperative to have a customer service strategy in place. However one must be cognisant of the fact
that the organisation will be spending money on exceuting their customer service strategy, herin lies a trade off
decision between levels of customer service and and the cost factor in implementing a customer service strategy.
In most cases the improvement of logistics activities will definitely improve the customer service levels and may
improve the revenue stream but this will come at a cost. The accrued revenue must be greater than the cost of

implementing this customer service strategy as this will definitely impact the profitabiity of the organisation (de
Villiers, et al.,2019: 196 -2020).
Organisations can choose between the following customer service service strategies:
 Customer strategy based upon consumers reaction to stock out
 Customer/revenue trade-offs
 ABC analysis
 Customer service audit (de Villiers, et al.,2019: 196 -2020).
6.4.1 Measures of customer service performance

Upon implementing a customer service strategy the next step will be to monitor the logistics operations and
measure the performance to ascertain if the level of customer service does in fact meet the expectations of the
organisations. Such measures will help an organisation to ascertain if they are satisfying, exceeding or faiiling on
their customer service targets. Table 6.1 below provides a description of the prescribes measures (de Villiers, et
al.,2019:205).
11 Table 6.1 Sample customer service measures
ELEMENT BRIEF DESCRIPTION TYPICAL MEASUREMENT UNIT

PRODUCT AVAILABILITY A common measure of customer % availability in base units (orders,
service is a percentage of stock in products or rands)
a base unit.
ORDER CYCLE TIMES The time it takes to receive the Speed and consistency in the
order once the order has been example eight days were taken for
placed. This can be expressed as a 87% of all orders.
combination of order cycle time and
product availabilty . For example
87% of all orders were delivered in
eight days.
DISTRIBUTION SYSTEM Pertains to the ability of the system The response time for a logistics
FLEXIBILITY to respond to special requests system to respond to special
made by the customer and in some requests made by customers.
cases unexpected needs of the
customer. The abililty of a logistcis
system to expediete orders will be
measured.

DISTRIBUTION SYSTEM Pertains to the organisations ability The accuracy, speed and
INFORMATION to respond to their customers consistency in which information is
information requests. relayed to consumers.
DISTRIBUTION SYSTEM Relates to the efficiency in which The speed of response time and
MALFUNCTION the logistics function is able to deal the time taken for correction and
mitigate and resolve malfunctions recovery.
arising from a distribution system
malfunction. (i.e. damage claims
and errors on billing documents).
POSTSALE PRODUCT Refers to the effectiveness and Response time for product support
SUPPORT efficiency in providing support to and the quality of response
the consumer after the delivery provided.
has taken place as well as the
technical information provided.
Source: (de Villiers, et al.,2019: 196 -205).
Think Point
Can you provide examples on various mechanisms that a logistics company can
have in place for post-sale product support?
6.5 Summary
A logistics information system was looked at and the two fundamental types of logistics information systems:
centralised and decentralized information systems were examined. A hypothetical example for a decentralized and
centralized information system was looked to provide a more holistic view of the benefits and limitations of the two
types of systems. Thereafter, customer service in the context of logistics management was discussed and the
three elements of customer service was highlighted. In addition to the customer service elements, the different
dimensions of customer service were also reviewed. The unit concludes with insight on the creation and
implementation of a sustainable customer service strategy and the various measures that one can use to ascertain
the effectiveness of the customer service strategy.

Knowledge Checks
Match column A with Column B
Column A Column B
1. Pre- transaction elements A. All elements relating to post

transaction such as returns.
2.Customer service strategy B. The elements related to the

actual purchase and delivery of
the goods.
C. _____________ includes
3.Post transaction elements
availability,operational and
performance reliability.
4.Customer service D. ABC analysis is an example

dimensions
5.Transaction elements E. The elements such as policy

to create an environment of trust
and the expectation of good
customer service.


Case study 6.2
Different departments have real time access to information allowing for improved decision making. Sales,
production, inventory and all other departments function cohesively due to real time access.
a)
Centralised logistics information system Decentralised logistics information system
Real time access to information Information will need to be updated locally
Information in centralised Information is decentralised
All department have access to a central repository of Access is restricted to the department
information
b) Pre transaction elements, transaction elements and post transaction elements

c) Reliability and is concerned with the organisations ability and their willingness to provide accurate and
timely information to customers regarding their orders as well as the related activities of the supply
chain.
d) A logistics information system is a type of software with interrelated components that collect, store,
process and distribute information. It allows for improved storage, eliminates redundancy and improves
the accuracy of information stored.
e) Availability, operational performance and reliability
Think point 6.4
A specific contact number is used to facilitate faster exchanges, returns and malfunctions. Improved mechanisms
in place to support the pick-up of carriers.
1. E
2. D
3. A
4. C
5. B

Unit
7: Reverse Logistics and
Environmental Management

7.1 Introduction  Introduce topic areas of the unit
7.2 The impact of reverse logistics  Analyse the impact of reverse logistics on a supply chain
on a supply chain
7.3 Reverse logistics activities  Assess the various reverse logistics activities
7.4 Financial implications of  Analyse the financial implications of reverse logistics

reverse logistics
7.5 Environmental management  Explain the impact of environmental management on reverse logistics
and waste management
7.6 Waste management  Examine the areas of waste management
7.7 Summary  Summarise topic area covered in the unit


7.1 Introduction
Logistics is a common term and gives the indication of movement. Reverse logistics refers to the reverse flow of
activities and involves all activities for a reverse flow of goods. Goods, demand information and money will move
in the opposite direction to primary logistics. Reverse logistics focuses on waste management inclusive of
collection, transport and disposal of non-hazardous waste. It is clear from above that reverse logistics has a focus
on the movement from the point of consumption to the point of origin and will entail recalls and recycling (de Villiers,
et al., 2019: 147).
7.2 The impact of reverse logistics on a supply chain

The supply chain includes elements and activities that essentially start with the extraction of raw materials and
move through the manufacturing stage and then to the tertiary sector. These supply chain elements and activities
are the fundamental reasons for an interrelated array of factors that lead to the critical nature of reverse logistics
in supply chain management, which can best be viewed by applying the political, economic, social, technological,
legal and environmental (PESTLE) framework. This framework provides a holistic overview for understanding the
growing importance of reverse logistics in the supply chain management (de Villiers, et al., 2019: 148). Figure 7.1
depicted below provides a graphical representation of the PESTLE framework.
Political
Environmental Economic
Legal Social
Technological
25Figure 7.1 PESTLE framework

A key factor from the PESTLE environment is the pressure for sustainability. There is a need to focus on the
sustainability and the environment which has placed added pressure on reverse logistics to comply with ISO 14 001
standards and take more responsibility for the end of the life of products. In the case of plastic bottles, there is a

huge focus on the reduction of plastic waste and the need to recycle to reduce the plastic waste accumulating in
the oceans. Additionally, consumers have increasingly shown an interest in greener products which necessitates
the need for innovative designs to meet the “green standard” (de Villiers, et al., 2019:148). Figure 7.2 below
provides a diagrammatical representation of the forward and reverse flow of goods.
Forward flow
Reverse flow
26Figure 7.2 Diagrammatical representation of the forward and reverse flow of logistics
Source: de Villiers, et al. (2019: 149)
Think Point
Imagine you purchase a pack of six soft drinks, these soft drinks are usually carried
in plastic/glass bottles.
a) What do you do with the carrier (plastic/glass bottle)?

b) What do you think a company such as PepsiCo can do to limit the amount
of plastic soft drink bottles that end up as waste in the oceans?

7.3 Reverse logistics activities

There are many different channels of reverse logistics and these channels will be dependent on the nature of
products and the nature of the logistics activity. It is important to distinguish between product recalls and product
returns. Product recalls occur when there is a manufacturing fault and the manufacturer has to recall the product
for safety reasons. A product return may occur when there is a logistical error. For example, a consumer may
purchase a pair of jeans in the size 30 upon receiving the product the consumer notices that the size is marked
36, this will not suffice and the consumer will now have to return the product due to the order being received or
dispatched incorrectly (de Villiers, et al., 2019: 149).
7.3.1 Value carriers

Value carriers can be described as items that carry something of value and can be reused. In some cases, the
value carrier may be more expensive than the actual product that they are carrying. Value carriers will flow in the
opposite direction of the goods and they must be carefully managed. For example, if a soft drink manufacturer has
a shortage of bottles, this will seriously affect the organisations capacity to supply the goods and the reliability of
the supplier. Most value carriers are reused on a continual basis; it is therefore imperative for these carriers to be
designed to be durable (de Villiers, et al., 2019: 149). Table 7.1 below provides examples of value carriers.
Table 7.1: Examples of value carriers

12
Examples of value carriers Channel of distribution

Empty gas cylinder Easigas and Cedac
Pallets that are not in use CHEP
Empty railway wagons Spoornet
Source: de Villiers, et al. (2019:149).
7.3.2 Costing of value carriers

The initial purchase of value carriers is quite high and there needs to be proper management controls in place to
ensure the business does not need to incur additional cost to continually replace the value carriers. There are
essentially two types of value carriers: carriers that are distributed to the consumer and carriers that are used in
the closed loop. In the instance of the value carrier being distributed to the consumer, the value carrier can be used
repeatedly. An organisations can use many mechanisms such as the inclusion of a deposit which will be redeemed
upon return of the carrier, provided that the carrier is still usable condition. Alternatively, an organisations can use
a carrier that will have no use outside of that particular supply chain owing to the fact that it specific only for its
function in that particular supply chain. In this case, the carrier is used repeatedly and the cost of purchase is
capitalized. An example of a returnable carrier would be a plastic crate made for soft drinks, while the non-
returnable container would be the plastic bottle in which the soft drink is packaged. The value carriers that are used
in a closed loop are items such as pallets, containers and rolltainers. These items are not sold; they are used in

parts of the logistics chain to facilitate movement and/or storage. Owners will have their names stencilled on these
carriers to prevent theft and will sent in the reverse direction (de Villiers, et al., 2019:150).
7.3.3 Return of unsold goods

In some industries there is an agreement between suppliers and customers in the supply chain in which the buyer
can return unsold goods for a credit. An example would be when a store such as Woolworths orders magazines.
They may choose to order a large quantity well over the demand because they can return the unsold goods at no
cost to them. This can be seen as an incentive for the downstream partners to carry much more inventory than
they usually would. The risk of the strategy lies in the fact that the downstream partner can exploit this unique
situation by ordering exorbitant amounts of stocks (de Villiers, et al., 2019: 150). Table 7.2 below provides
examples of the distribution channel for unsold goods.
Table 7.2 Distribution of unsold goods

13
UNSOLD GOODS DISTRIBUTION CHANNEL

BREAD CROUTONS Bakeries and restaurants
BOOKS Publisher, distributor, recycler
NEWSPAPERS Publisher, distributor, recycler
7.3.4 Product returns and exchanges

Damaged goods, incorrectly ordered goods, warranty claims and after-sales service will result in product returns
and exchanges. Returns and exchanges must be carefully controlled. Returns must also be monitored to identify
trends, this will allow for firms to improve their management and proactively manage the demand for reverse
logistics capacity (de Villiers, et al., 2019: 151). Table 7.3able below provides examples of product returns and
exchanges.
Table 7.3 Examples of returns and exchanges

14
Product returns and exchanges Examples of channels of distribution

Incorrectly ordered or supplied foods Grocery retailers
Warranties and repairs on cars, bicycles and trucks BMW, Mercedes and Toyota
Damaged clothes, accessories and shoes Clothing retailers

Revision Questions
Please answer the revision questions below
a) State the different factors that make up the PESTLE framework

b) Illustrate the forward and reverse flow of logistics
c) Describe value carriers
d) Explain the costing of value carriers
e) Discuss the financial implications of reverse logistics
7.4 Financial implications of reverse logistics

According to studies conducted by the CSCMP in the United States of America, reverse logistics account for
approximately 4% of the total logistics cost of the county. This amount is quite substantial in absolute terms and
will need to be carefully monitored. The increase in business to consumer internet trading has resulted in an
increase in online purchases and this has had a result on some customers being unhappy with the purchases due
to the fact that the image they may have seen online is different to the actual product.
Reverse logistics differs from other activities in that there is no value added to the actual product with the cost.
This makes it even more important to continuously monitor and review the reverse logistics cost. A key factor is
the cost of value carriers. Value carriers have an initial estimated lifetime and organisations that spend too much
on these carriers will have to deal with the cost for the lifetime of the carrier. Value carriers must be responsibly
and economically disposed of at the end of their lifetime (de Villiers, et al., 2019: 155).
Dumisani Baloyi is a “born entrepreneur”. However, he currently works as a team leader in the
distribution centre for a manufacturer of multiple brands of consumer goods. He notices that a
limited amount of customer returns makes it back onto the shelves of the distribution centre.
His employer measures employee morale by the number of suggestions received from the
employees per month. Dumisani has, on three occasions, suggested to management that
something should be done about the waste of “good” customer returns. During the adjudication
of the last round of suggestions, management offers an outsourcing contract to Dumisani to
manage their reverse logistics.
Source: de Villiers, G. d., Nieman, G., Niemann, W. (2017). Strategic logistics management.
Fifth Edition. South Africa: Oxford University Press.
Can you provide suggestions on how to manage reverse logistics for Dumisani?

7.5 Environmental management

Environmental management is closely linked to the International Organization for Standardization (ISO). The ISO
14 000 series of standards for environmental management is issued by ISO. These standards record the various
environmental policies, measurements for management, objectives and the commitment to the management of
the environment (de Villiers, et al., 2019:155).
ISO 14000 is used to monitor the progress of companies towards compliance with the environmental standards.
The ISO 14000 series of standards prescribes external audits by professional auditors. The ISO 14 000 is not
mandatory for all organisations. However, ISO 14 000 is an excellent and holistic approach to efficient
environmental management. ISO 14000 will require a comprehensive commitment from senior management for
successful implementation (de Villiers, et al., 2019:155).
ISO 14 000 prescribes a formal management of the environment and is inclusive of the following key variables as
depicted in figure 7.3 below Thereafter a brief overview of the actions needed by an organization to successfully
implement the ISO 14 000 standards will be provided.

Environmental
policy
Comprehensive
Strategy
approach
Review and ISO Structures

auditing
14000
Monitor Objectives &

compliance measurements
Training &
communication
27Figure 7.3 ISO 14 000 mandate

It is essential for the levels of management to fully support the commitment to environmental management by
having organizational policies in place to entrench the support of management and key stakeholders. Flowing from
the policies, there needs to be adequate strategies in place to effectively implement the policy. The policy and
strategy will enable organizations to apply the necessary structures to support environmental management (de
Villiers, et al., 2019: 155).
Organisations will need to provide sufficient training and communication to all members within the organization to
fully capacitate the staff on the initiatives. Once all staff have been informed and trained the organization can start
to implement the measures for monitoring the organizations compliance. A review and auditing process must take
place as a mechanism to assess the level of compliance, these audits can be internal and external. All
organizations must be mindful that compliance with the ISO 14 000 standards is a comprehensive task that

requires effort, time and resources. However, the benefits are equally comprehensive and will greatly assist in
marketing the firm’s products (de Villiers, et al., 2019: 155).
Case Study
Imagine that you have been appointed as environmental officer for Tutti-Frutti Drinks,
a Durban-based South African manufacturer of fruit juices and carbonated beverages.
Tutti-Frutti currently sells its products in KwaZulu-Natal, Gauteng and the Free State,
but wants to expand its market into the rest of South Africa and the African continent.
Currently, Tutti-Frutti sells its fruit juices in one-litre plastic sachets in the local market,
and the carbonated beverages in 340 ml clear-glass bottles. The non-returnable glass
bottles are packed in wooden crates with limited stackability for distribution to spaza
stores, supermarkets and restaurants. The plastic sachets are placed in stackable
plastic crates for distribution. Tutti-Frutti has a fleet of eight- to ten-year-old trucks for
deliveries.
Tutti-Frutti realises that it will have to re-evaluate its supply chain if it wants to become
more environmentally friendly. You have been asked to provide input as to the
logistics and environmental requirements that the new supply chain will have to meet.
Source: (Pienaar and Vogt, 2016:330).
Suggest ways in which Tutti-Frutti can improve its design?
7.6 Waste management

Waste is a natural by-product of the production and logistics process. It is important for organisations to properly
manage waste generation in the most efficient manner paying careful attention to disposal and recycling of waste.
Furthermore, organizations must ensure the waste is disposed in a commercially viable manner whilst still taking
into consideration the environmental impact (de Villiers, et al., 2019:152).
7.6.1 Hazardous and non-hazardous waste

Hazardous waste can be classified as materials that have a negligible impact on the environment and the health
of people that may come into contact with it. Non-hazardous waste is generally termed as general waste and has
little impact on human health if it is properly disposed of. There are special conditions and sites for the hazardous
waste (de Villiers, et al., 2019: 152). Table 7.4 able below provides examples of hazardous and non-hazardous
waste.

157.4 Examples of hazardous and non-hazardous waste
Examples of hazardous waste Examples of non-hazardous waste

Radioactive waste Domestic waste
Toxic waste Garden refuse
Flammables such as ethanol Paper
Source: (de Villiers, et al., 2019: 153).
7.6.2 Reduction in waste generation

It is the responsibility of society and well as each and every organization to look at ways in which waste can be
reduced. The value chain must be closely examined to identify areas that create unnecessary waste. The reduction
of waste in organisations will positively impact the profitability and the environment (de Villiers, et al., 2019: 152).
7.6.3 Collection of waste

The collection of general waste differs significantly to the collection of hazardous waste. In the case of waste, it is
important for sorting of the waste to take place as close as possible to the source to save on costs related to waste
management. General waste is collected by the municipality and the regular waste disposal trucks are used in the
collection and transport of the waste. These vehicles are rear-ending loaders and come in a variety of sizes. Roll-
on/roll-off containers can be either open or closed. The open version come in a variety of sizes between 15 cubic
metres and 30 cubic metres and the closed version between 11 cubic metres and 35 cubic metres. The closed
containers are used at large transfer stations and can be connected to a compaction unit (de Villiers, et al., 2019:
153).
7.6.4 Transport of waste

Different countries will use different methods of transportation for the waste. In many countries, waste is transported
via water. Road transport is primarily used due to its door-door ability capability. (de Villiers, et al., 2019:153).
7.6.5 Disposal of waste

The disposal of waste has now become a science in which newer and more innovative ways of waste disposal are
needed to ensure the sustainability of the environment. New legislation in South Africa requires that all waste
dumping sites should have a permit issued by the Department of Water Affairs and Forestry (DWAF). Hazardous
waste sites can be categorized according to the types of waste that they accept. H sites can take all types of
hazardous waste and h sites can only take moderate to low hazardous material. In the case of medical waste, it is
usually incinerated (de Villiers, et al., 2019: 154).

7.6.6 Recycling of waste

Different counties will have different legislation to ensure the protection of the environment. Glass, tin, paper,
aluminium are common materials that are recycled. Recycling has the following benefits:
 50% of the waste can be reduced if recycling is done correctly.
 Recycling reduces the space that is needed for waste storage
 Recycling using less energy and creates less pollutants (de Villiers, et al., 2019: 154).
Recycling of waste can be completed in a variety of ways. Figure 7.4 figure below depicts the various ways in
which recycling of waste can be completed.
Creating compost
from garden refuse:
Separation at the
Grass cutting and
source: the most Scavenging: Street pick up:
leaves are
effective. Waste is Separation of waste Paper and boxes
separated from the
separated into at the waste will be left on the
waste and
different bins at the disposal site pavement
delivered to a
source
garden waste
disposal site
28 Figure 7.4 Recycling of waste


Video Activity
Click on the links below to watch videos on waste management
https://www.youtube.com/watch?v=HjNv_iTsXn8
https://www.youtube.com/watch?v=I_fUpP-hq3A
https://www.youtube.com/watch?v=14r7f9khK70
Once you have watched these videos you can review your study guide content in
relation to the videos that you have watched to get a better picture of waste
management, you can also note down additional points regarding waste
management.
7.7 Summary
In this unit reverse logistics was explained and the impact of reverse logistics on supply chain activities were
reviewed. The PESTLE framework was looked at to better understand the effect these factors will have on reverse
logistics. A diagrammatical representation of forward and reverse logistics was provided to better understand the
flow of goods. Value carriers were discussed highlighting the need for value carriers and the amount of money that
is spent on value carriers. The financial implications of reverse logistics were discussed and the need to monitor
and control the cost. The unit concludes with a look at waste management and the various requirements to
implement the ISO 14 000 standard.
Knowledge Checks
State whether the following are True of False

a) All waste can be classified as hazardous waste
b) Compliance with ISO 14 000 standards will require internal and external audits
c) Reverse logistics adds value to the production process
d) The PESTLE framework affects reverse logistics
e) Recycling is a better option than waste disposal

Think point 7.2
a) Students to apply their personal experience

b) Students can apply their minds. Ideas such as changing the package to be bio degradable, allow for a
payment of returned packages.
a) Political, economic, social, technological, legal and environmental

b) Refer to figure 6.1
c) Value carriers can be described as a container that carries the item to be sold. In some cases, the value
carriers are more expensive then the item they carry.
d) Value carriers have an initial cost and then they will be used for the same purpose for their lifetime.
e) Reverse logistics accounts for 4% of the total logistics cost. Reverse logistics cost must be carefully
monitored because RL cost do not provide any value added services to the product.
Practical application 7.4
Students to use their knowledge from the unit, the following should be included
 A diagram for reverse logistics

 Returns policy
Practical application 7.5
Students can provide suggestions along the lines of improved design, change in material and improvement of the
fleet.
Video activity 7.6
Student to watch videos as per the links that are provided. Students will get a better picture of waste management
and the various methods that can be employed.
False
True
False
True
True

References
 de Villiers, G., Nieman, G. and Niemann, W. (2019). Strategic Logistics Management: A supply chain
management approach. Second Edition. Van Schaik Publishers.
 CBS Interactive Inc., (2020). Driverless trucks being tested right now on public roads. [Online].
Available: https://www.cbsnews.com/news/driverless-trucks-being-tested-on-public-roads-60-minutes-
2020-03-13/ [Accessed:05 May 2020].
 Philpott, M. (2019). WHAT ARE THE DIFFERENT MODES OF TRANSPORTATION IN LOGISTICS?
[Online]. Available: https://philburn.com/what-are-the-different-modes-of-transportation-in-logistics
[Accessed: 25 May 2020].
 Pienaar, W.J & Vogt, J.J. (2016). Business Logistics Management: A value chain perspective. Fifth
Edition. Oxford University Press.
 Raj, A. (2020). Importance of Supply Chain Forecasting for Plant Managers. [Online]. Available:
https://www.supplychainbrief.com/forecasting/logistics/?open-article-id=13117366&article-
title=importance-of-supply-chain-forecasting-for-plant-managers&blog-domain=throughput.world&blog-
title=throughput [Accessed: 15 May 2020].
 Sterdts. (2016). Our services: Covering all aspects of international shipping & logistics. [Online].
Available: https://www.sterdts.co.za/our-services [Accessed 14 May 2020].
 Temple, S. (2013). The impact of globalization on the supply chain [Online], available:
http://pressoffice.mg.co.za/barloworldlogistics/PressRelease.php?StoryID=247928 [Accessed: 01 May
2020].
 Texas A&M Transportation Institute, (2020). Freight Shuttle System [Online]. Available:
https://tti.tamu.edu/freight-shuttle/ [Accessed 06 May 2020].

Bibliography
 de Villiers, G., Nieman, G. and Niemann, W. (2019). Strategic Logistics Management: A supply chain
management approach. Second Edition. Van Schaik Publishers.
 CBS Interactive Inc., (2020). Driverless trucks being tested right now on public roads. [Online]. Available:
https://www.cbsnews.com/news/driverless-trucks-being-tested-on-public-roads-60-minutes-2020-03-13/
[Accessed:05 May 2020].
 Harrison, A & Van Hoek, R. (2014). Logistics Management & Strategy Competing through the Supply
Chain. Fifth Edition. Prentice Hall International Edition.
 Philpott, M. (2019). WHAT ARE THE DIFFERENT MODES OF TRANSPORTATION IN LOGISTICS?
[Online]. Available: https://philburn.com/what-are-the-different-modes-of-transportation-in-logistics
[Accessed: 25 May 2020].
 Pienaar, W.J & Vogt, J.J. (2016). Business Logistics Management: A value chain perspective. Fifth
Edition. Oxford University Press.
 Raj, A. (2020). Importance of Supply Chain Forecasting for Plant Managers. [Online]. Available:
https://www.supplychainbrief.com/forecasting/logistics/?open-article-id=13117366&article-
title=importance-of-supply-chain-forecasting-for-plant-managers&blog-domain=throughput.world&blog-
title=throughput [Accessed: 15 May 2020].
 Sterdts. (2016). Our services: Covering all aspects of international shipping & logistics. [Online]. Available:
https://www.sterdts.co.za/our-services [Accessed 14 May 2020].
 Temple, S. (2013). The impact of globalization on the supply chain [Online], available:
http://pressoffice.mg.co.za/barloworldlogistics/PressRelease.php?StoryID=247928 [Accessed: 01 May
2020].
 Texas A&M Transportation Institute, (2020). Freight Shuttle System [Online]. Available:
https://tti.tamu.edu/freight-shuttle/ [Accessed 06 May 2020].
 Wisner, Tan, K, Leong, G. (2012) Supply Chain Management a Balanced Approach. Third Edition. South
Western


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Bachelor of Commerce

in Supply Chain Management

Unit 1: Introduction to Logistics Management ....................................................................................................... 11

Unit 2: Demand Forecasting and Forecasting Supply Chain Requirements ......................................................... 24

Unit 3: Site Selection, Design of Facilities and Warehouse Management............................................................. 44

Unit 4: Packaging .................................................................................................................................................. 63

Unit 5: Transport Management and Global Logistics ............................................................................................ 76

Unit 6: Logistics Information Systems and Customer Service............................................................................. 100

Unit 7: Reverse logistics and environmental management ................................................................................. 112

Bibliography ........................................................................................................................................................ 127

Table 2.1 Forecast deviations ........................................................................................................................... 27

Table 2.2: Example of a time series sequence ................................................................................................. 30

Table 2.3 Steps in the forecasting process ....................................................................................................... 32

Table 2.4 historical data for cold-storage trucks on a daily basis...................................................................... 37

Table 2.5: Selection of an appropriate forecasting technique ........................................................................... 40

Table 3.1 Steps in the warehouse design process ........................................................................................... 51

Table 3.2 Warehouse activities ......................................................................................................................... 54

Table 4.1 Benefits and cost of RFID ................................................................................................................. 71

Table 5.1 Transport mode comparison ............................................................................................................. 83

Table 5.2 Future developments in transport ..................................................................................................... 88

Table 6.1 Sample customer service measures ............................................................................................... 108

Table 7.1: Examples of value carriers............................................................................................................. 116

Table 7.2 Distribution of unsold goods............................................................................................................ 117

Table 7.3 Examples of returns and exchanges ............................................................................................... 117

Table 7.4 Examples of hazardous and non-hazardous waste ........................................................................ 122

List of Figures and Illustrations

Figure 1.1 The different type of logistics ........................................................................................................... 13

Figure 1.2 Functions of Logistics ...................................................................................................................... 14

Figure 1.3 Different levels of logistics decisions ............................................................................................... 15

Figure 1.4 Logistics activities ............................................................................................................................ 18

Figure 2.1 Features of forecasting .................................................................................................................... 26

Figure 2.2 Types of forecasting ........................................................................................................................ 29

Figure 2.3 Line graph........................................................................................................................................ 38

1 MANCOSA – Bachelor of Commerce In Supply Chain Management

Figure 2.4 Examples of data patterns ............................................................................................................... 39

Figure 3.1 Three purposes of warehouses ....................................................................................................... 46

Figure 3.2 Different types of warehouses ......................................................................................................... 48

Figure 3.3Types of cross docks ........................................................................................................................ 56

Figure 3.4 Common warehousing problems ..................................................................................................... 58

Figure 4.1 The functions of packaging .............................................................................................................. 65

Figure 4.2 Packaging design and solutions ...................................................................................................... 68

Figure 4.3 Technological innovations in packaging .......................................................................................... 71

Figure 5.1 Transport perspectives .................................................................................................................... 79

Figure 5.2 Functions of transport ...................................................................................................................... 80

Figure 5.3 Primary modes of transport ............................................................................................................. 80

Figure 5.4 Secondary modes of transport......................................................................................................... 81

Figure 5.5 Global scene .................................................................................................................................... 93

Figure 5.6 Globalisation trends ......................................................................................................................... 94

Figure 6.1 Customer service elements ........................................................................................................... 105

Figure 7.1 PESTLE framework ....................................................................................................................... 114

Figure 7.3 ISO 14 000 mandate...................................................................................................................... 120

Figure 7.4 Recycling of waste ......................................................................................................................... 123

MANCOSA – Bachelor of Commerce in Supply Chain Management 2

We hope you enjoy the module.

3 MANCOSA – Bachelor of Commerce In Supply Chain Management

C. Exit Level Outcomes and Associated Assessment Criteria of the Programme

Exit Level Outcomes (ELOs) Associated Assessment Criteria (AACs)

 An understanding of the key concepts in  Key concepts in supply chain management,

MANCOSA – Bachelor of Commerce in Supply Chain Management 4

D. Learning Outcomes and Associated Assessment Criteria of the Module

LEARNING OUTCOMES OF THE MODULE ASSOCIATED ASSESSMENT CRITERIA OF THE MODULE

 The functions of logistics management are discussed to

 Analyse the relationship between  The relationship between demand forecasting,

 The various functions of logistics management are