LOGISTICS AND SUPPLY CHAIN

Definitions:
Logistics​ ​ Refers to activities within one company or organisation involving product
distribution. It is basically ​the commercial activity of transporting goods to customers.

Logistics Hub​ A centre or specific area designated to deal with activities related to
transportation, organisation, separation, coordination and distribution of goods for national and
international transit, on a commercial basis by various operators.

Supply Chain (the way in which a business gets its resources) ​ ​ - A system of organisations,
people, activities, information and resources, (raw materials, components and work-in-process),
involved in moving a product or service from supplier to customer.

Activities involved in supply chain operations:

(i) transformation of natural resources;

(ii) movement and storage of raw materials;

(iii) processing of raw materials and components into finished goods;

(iv) storage of work-in-progress and finished goods; and,

(v) delivering the finished product from point of origin to point of destination.

Transportation - ​is concerned with the mode(s) of transportation that will be used to get the
product to the consumer. The means of transportation employed by the firm could affect the cost
of shipment and the length of time it will take. Some of the common modes of transportation
include air, freight, by sea, by land (both roadway and railway) and by pipeline (for products
such as oil or LNG).

● Perishable goods such as fruits and vegetables may require a fast means of
transport. Air is the quickest means of transport but can be costly to the firm.
Therefore, refrigerated trucks are used by local firms to transport these types
of goods.
● Trucks may be required to transport cements, blocks and steel locally but
ships may be more suitable to transport these goods from one country to the
next.
● Petrol may be transported from one country to another via ships but within the
country via trucks or pipeline.

Warehousing - ​involves the receipt, storage and shipment of products. A firm may use its own
warehouse or a public warehouse; public warehouse usually has a charge attached to it, the firm
must therefore analyse options to see whether or not it would be more cost effective to use its
own warehouse or a public one.
Distribution - ​ is the process through which goods and services go on their way to the
consumers. ​Distribution channels ​are how businesses get their finished product/service to the
market e.g. retailers, wholesalers, etc. One supply chain may be another’s distribution channel or
vice versa.

Problems may likely be encountered in Measures to reduce problems related to

distribution distribution

● spoilage of goods ● proper ​storage​ and packing of

● misdirection of goods goods
● insufficient facilities for storing ● careful ​documentation​ and
goods routing of cargo
● delayed shipment ● proper ​security measures​ and
● lack of proper security measures at frequent checks at ports
ports ● creating good ​communication
● industrial unrest measures which are put in place
● poor communication between importers, exporters and
customs.
● taking out insurance
● Government
intervention-government can
publish recommendations of good
practice to be observed by those
involved in distribution.
● Selecting appropriate channels of
distribution.
● Avoiding holding large stocks

Order processing - ​Care must be taken to ensure that the consumer receives the product that
was ordered and within the time frame that they are expecting it. A consumer will want to know
that the product itself and the process that is involved in getting the product to him/her are
satisfactory. Failure to do so could result in the consumer being inconvenienced, which could be
bad publicity for the business.

The links in the chain of distribution

The distribution chain has the following:
(a) manufacturer/producer
(b) wholesaler;
(c) retailer;
(d) consumer

Material handling - ​This part of the process involves the physical handling of the product. It
includes receiving, identifying, sorting, storing and retrieving the good when it is time for
shipment. This is a very tedious but important process. Products can easily be misplaced, stolen
or damaged in this process. With advancements in technology the process has become more
organized. The firm can use bar codes to attach tracking numbers for the products. Computer
software could easily give the location of the product in the warehouse and the amount that is
available. Once shipped the firm and customer can get information on the product from shipment
to when it is delivered. Effective materials handling will help the firm to save time and
warehouse space and reduce costs.

Inventory control - ​deals with finding the most adequate level of stockholding that will prevent
the firm from holding excess stock and at the same time ensuring that there is enough to meet
consumers’ needs.

The difference between multimodal and intermodal transport

Multimodal transport​ - also known as combined transport. It is the transportation of goods

under a single contract but performed with at least two different means of transport. The carrier
is liable (in a legal sense) for the entire carriage, even though it is performed by several different
modes of transport

Intermodal Transportation​ – refers to the firm using more than one mode of transportation.
This involves the transportation of freight in an intermodal container or vehicle, using multiple
modes of transportation (rail, ship, truck) without any handling of the freight itself when
changing the modes.

Modes of transport and their suitability for different goods:

(a) air – suitable for light and perishable goods
(b) rail – suitable for bulky goods e.g. asphalt, alumina, coal iron ore, etc.
(c) road – suitable for door to door deliveries e.g. furniture, parcels, groceries, etc.
(d) marine (cruise and cargo) – mostly for shipping of containers (with items)
(e) pipeline – suitable for oil, water, gas
(f) digital delivery – e-books, music, images

Factors to consider before selecting mode of transportation

● type, bulk and weight of the product
● perishability or fragility of the product
● urgency
● cost of transport
● quantity to be carried
● destination
● distance involved
The role of transport in marketing:
● to fast-track sourcing of commodities;
● ensure security of supply
● cost reduction

Importance of transport in domestic, regional and foreign trade.

The main role of transportation is to enable goods to reach the customers when they need them.
The type of transportation use in the ​domestic market (​home country) is carried out by road transport
e.g. trucks and vans.
Inter-regional transports ​include sea and air and ​International trade ​includes road, rail, air and sea.

Advantages Of Supply Chain Operations Challenges Of Supply Chain Operations

● better quality ​of ​life - it allows ● Globalization
consumers in countries without the ● Counterfeiting
resources to develop many of the ● product complexity
goods to benefit from products such as ● rapid product obsolescence
special health care products and ● regulatory complexity
equipment not available in their ● management blunders
country . ● changing market conditions
● wealth creation - cooperation between ● natural disasters
different organizations within supply ● political instability
chains helps to share best practice,
knowledge, skills and ideas-in turn
these help to increase their
productivity.
● new and innovative job opportunities
including - entrepreneurship, for
example, telemarketing.

The impact of logistics and supply chain operations on the competitiveness of business

(a) Logistics improve competitiveness.

Businesses compete with each other on product quality, features, promotions and prices as well as on
delivery time and costs.

(b) Logistics gives competitive advantage

Integrating the supply chain and logistics operations can improve efficiency and reduce costs. It can give
a business an absolute cost or competitive advantage over rival businesses, so it can lower prices without
reducing profits.
(c) Logistics can achieve comparative cost advantage through outsourcing.

Parties to outsourcing:

(i) first party logistics(1PL) - thes are logistics providers that own their own logistic activities and
sometimes outsource some of their activities.

(ii)second party (2PL) - these firms provide their own assets such as trucks and drivers, warehouse
operators, etc to 1PLs.

(iii) third party (3PL) - these perform logistics on behalf of another company (1PL) , providing the
management skills along with the physical assets, labor and technology to provide logistics to part or all
of the supply chain, thereby relieving companies of performing these services themselves e.g.
transportation, warehouse management, consulting, freight forwarding etc.

(iv) fourth party (4PL) - these are supply chain integrators. They assemble and manage resources,
capabilities and technology of an organization’s supply chain and its many providers, i.e. it coordinates
the activities of 3PLs: designing, building and running chain solutions for clients.

Other examples of outsourcing:

Payroll and accounting, call centers, temporary employees agencies.

Comparative cost advantage refers to being able to produce a commodity at a lesser cost
than other businesses.

Benefits of outsourcing:
● It free up cash flow, personnel and time resources for businesses
● Results in cost savings due to lower labor costs.
● Enables the company to focus on its ‘core business’ competencies.
● It tends to be directed to organizations who are specialists in the required service.

INFORMATION TECHNOLOGY AND LOGISTICS AND SUPPLY

1. ​Global Positioning Systems (GPS)

Businesses engaged in transportation have three particular concerns:
● (i). ​Security of​ ​their vehicle ​- location tracker allows the vehicle to be tracked.
● (i​i). Avoiding fuel wastage​ - GPS allows the owner to get real-time knowledge of the
vehicle whereabouts, to monitor idle time and driver’s behavior and fuel usage.
(iii). ​Maximum efficient use of fleet​ - one of the biggest advantage of GPS is the ability to plan
the shortest and best possible routes for vehicles to follow. This reduces fuel wastage and helps
to reduce idle time.

2. ​Geographical Information Systems (GIS

This is information system designed to capture, store, manipulate, analyse, manage and present
geographical data such as street maps and location tags via social media.
 3. ​Portnet
This technology helps ports and shipping community to increase productivity and save costs
through use of the internet. It empowers the shipping community to manage the complexity of
cargo operations and the entire shipping process by:
● Handling all electronic and container data
● Simplifying the processing of transactions and shipping business processes.
The benefits are:
● Streamlining documentation and business processes
● Reducing repetitive data creation
● Simplification and integration between government and port authorities
● Real-time tracking and notifications
● Real-time, on demand, information provision e.g. email, SMS
● Simple to use system controls.

GLOBAL LOGISTICS PROVIDERS

FedEx, DHL, Amazon Logistics and Excel (among others).

3. Outline THREE ways in which

Questions distribution problems may be
1. Define the term ‘chain of reduced.
distribution’.
2. Explain the impact of logistics and
supply chain operations on the
competitiveness of business.