Trade-Offs in International Logistics,

Multi-Modalism
Interaction between related activities such as the offsetting of higher costs in one
area with reduced costs or other benefits in another. In air freight, for example, the
classic “Tradeoff” is one of time (quick delivery) versus money (greater expense).
Total logistics costs consider the whole range of costs associated with logistics,
including transport and warehousing costs and inventory carrying, administration,
and order processing costs. Administration and order processing costs are relative to
the total volume being handled. However, for the same volume being handled,
transport and warehousing costs will vary according to the adopted distribution
strategies. The above graph portrays a simple relationship between total logistics
costs and two important cost components; transport and warehousing. Based upon
the growth in the shipment size (economies of scale) or the number of warehouses
(lower distances), a balancing act takes place between transport costs and
warehousing (inventory carrying) costs. There is a cutting point representing the
lowest total logistics costs, implying an optimal shipment size or number of
warehouses for a specific freight distribution system. Finding such a balance is a
common goal in logistical operations. It depends on numerous factors, such as if the
good is perishable, the required lead time, and the market density.

Effective Supply Chain Management results in an opportunity to discover the best

tradeoffs for your clients. Processing, planning, implementing and controlling your
business ensures efficiency and cost effectiveness. The process or steps that
change your product from its raw materials into the finished product is your supply
chain. Managing that chain of products, and ensuring the efficiency of the steps to
achieving successful delivery, is called Supply Chain Management (SCM). Here are
some potential benefits to your clients that effective and efficient SCM can provide:

 Reduced Costs: Improving your bottom line can result in bringing

the costs down for you and for your consumer.
 Better delivery: As you research and improve transportation
methods, the delivery of your product to the end user will improve.
  Enhanced Product Conformity/Reliability: Improvements to your
product based on research, design improvement and adherence to
standards results in better reliability and performance.
 Better Service: As you explore methods to better serve your
customers, overall public perception of your product will improve.
 Customer Satisfaction: Your customer will be more impressed with
your product, and therefore more apt to continue to purchase, use
and enjoy it.
 Better Technology: When you add technology to the development
of your product, you improve the technology of the end product itself.
 Better Availability: As you increase your methods of delivery, shelf
stocking, sales, and product distribution, your customer benefits
because your product is there when he needs it, where he needs it.

Cohesive and efficient SCM results in improved products for your customers. That is
the bottom line that all organizations need to remember when considering logistical
tradeoffs.
The framework that we use with companies uses the following attributes:

 Reliability
 Responsiveness
 Agility
 Cost
 Asset Management Efficiency

Once you understand what you are trying to optimize, you can move on to prioritizing
and measuring.
Reliability
Reliability is the ability to consistently deliver what the customer orders when the
customer expects it in perfect condition (Perfect Orders). Reliability allows you to
look at your business through the lens of your customer.
A company once that touted a 97% fill rate. However, when we looked at the Perfect
Order metric, they were just below 30%. Over 70% of the time, they were not
meeting customers’ expectations.
Responsiveness
Responsiveness is a measure of how fast an order is fulfilled. This starts with the
customer order and ends with the customers’ acceptance. Amazon recently
announced the investment of $800M to reduce 2-day delivery down to one day. Do
your customers expect to get their product fast once they have ordered? How much
are you investing?
Agility
Agility is the ability to respond to unplanned external factors and manage risk. Agility
measures upside and downside adaptability and value at risk.  External factors might
be a host of things such as unplanned changes in demand, severe weather,
congestion at ports, shortage of raw materials, etc. Agility is about planning for the
unplanned and being able to respond when disruptions occur.
Agility shouldn’t only focus on the sales side of the business but also returns. Does
your company risk a product recall on the products you manufacture or distribute?
How would you support it if it did?
Cost
Cost is exactly what is says, however we are looking at more than just COGS. We
want to look at total Supply Chain costs. This includes COGS + all other Supply
Chain costs (direct and indirect).
Asset Management Efficiency
The last area deals with how effectively your company is managing financial
resources. In this area we look at Cash-to-Cash cycle, Return on Supply Chain Fixed
Assets, and Return on Working Capital.
Multi-Modalism
Intermodalism involves the organization of a sequence of modes between an origin
and destination, including the transfer between the modes. Its main goal is to
connect transportation systems that could not be connected otherwise because they
are not servicing the same market areas due to their technical characteristics.
However, each segment is subject to a separate ticket (for passengers) or a contract
(for freight) that must be negotiated. Mutimodalism is simply an extension of
intermodalism where all the transport and terminal sequences are subject to a single
ticket or contract (bill of lading) that can be assumed by a single integrated carrier.

The differences between intermodalism and multimodalism appear to be subtle, but

they are fundamental. Although multimodalism may look more efficient at first glance
since less transactional costs are involved for the user, it is not necessary the most
efficient and sustainable. A multimodal transport service provider will be inclined to
use its routes and facilities during the transport process, which are not always the
most convenient. The main purpose of a 3PL is to maximize the use of its assets,
which could be at odds with the benefits of its users.
Transmodalism involves connecting different segments of the same mode between
an origin and a destination. It tries to reconcile different modal services on the same
network. There is no specific term if transmodalism takes place as a single or
separate ticket or contract. Transmodalism is common for air transportation since
passengers can easily book a ticket between two locations, even if it involves
transiting through an intermediary airport and using separate carriers. The strategies
of air carriers particularly relied on transmodalism with the setting of major hubs that
maximize the number of city-pairs serviced. For freight transportation, transmodalism
is more challenging since it was conventionally complex to switch load units within
the same mode because of the large amount of handling required. Paradoxically, it is
the development of intermodalism that has favored the setting of transmodalism
since it incited the development of long-distance transportation services and an
increase of container volumes to be handled across the same mode.
For maritime shipping, transmodalism took shape in the setting of intermediate hubs
such as Singapore, Dubai, and Panama, connecting deepsea and feeder services.
For rail, the North American rail system and its landbridge are interconnected at
major transmodal hubs such as Chicago. The Eurasian landbridge is emerging on
transmodalism as well.
Advantages of Multi-modal Transportation
The economic and commercial advantages of multi-modal transportation aie
enonnous and it helps in making international trade competitive due to reduction in
the overall transportation cost. Some of the benefits of multi-modal transportation
could be listed follows:

 Reduces transportation cost.

 Helps faster cargo flow.
 Enhances export potential.
 Facilitates of export of non-traditional goods.
 Reduces uncertainty in transportation cost.
 Reduces congestion.
 Reduces inventory levels by stable supply of imports.
 Facilitates optimumutilization of national infrastructure.
 Reduces paper works by simplifying custom procedures.
 Effect improvement of GNP through more economic activity on
national highways and sea/land interface.

Key Factors in a Transport Modes &

Trade-Off
In economics a trade-off is expressed in terms of the opportunity cost of a particular
choice, which is the loss of the most preferred alternative given up. A tradeoff, then,
involves a sacrifice that must be made to obtain a certain product, service, or
experience, rather than others that could be made or obtained using the same
required resources. For example, for a person going to a basketball game, their
opportunity cost is the loss of the alternative of watching a particular television
program at home. If the basketball game occurs during her or his working hours,
then the opportunity cost would be several hours of lost work, as she/he would need
to take time off work.
Many factors affect the tradeoff environment within a particular country, including the
availability of raw materials, a skilled labor force, machinery for producing a product,
technology and capital, market rate to produce that product on a reasonable time
scale, and so forth.
A trade-off in economics is often illustrated graphically by a Pareto frontier (named
after the economist Vilfredo Pareto), which shows the greatest (or least) amount of
one thing that can be attained for each of various given amounts of the other. As an
example, in production theory, the trade-off between the output of one good and the
output of another is illustrated graphically by the production possibilities frontier. The
Pareto frontier is also used in multi-objective optimization. In finance, the capital
asset pricing model includes an efficient frontier that shows the highest level of
expected return that any portfolio could have given any particular level of risk, as
measured by the variance of portfolio return.
Factors That Play a Key Role in Selecting Mode of Transport Are
1) Cost of Transport
2). Reliability and Regularity of Service
3) Safety
4) Characteristics of goods
5) Budget
6) Timescale
7) Flexibility
Factors That Play a Key Role in Selecting Mode of Transport Are
1) Cost of Transport
When selecting the best and most suitable transport for exportation of products, the
budget is the most important consideration. Costs vary based on the type and
amount of goods needed to be transported. It is important to keep in mind that the
cost of transport influences the cost of goods.
If heavy or bulky products are being transported over a long distance, inland, then
rail transport is the most economical. Land transport, typically by trucks, is best
suited for small amount of goods being transported over short distances, as it also
saves packing and handling costs. The cheapest mode of transport is water
transport, albeit the slowest too, but most suited for heavy or bulky goods that need
to be transported over long distances, where time is not an important factor. Air
transport is the best option for transportation of perishable, fragile and valuable
goods, even though it is the most expensive.
It is important for importers and exporters to consider the overall cost of
transportation, keeping the “hidden costs” such as insurance premiums and finance
charges in mind.
2) Reliability and Regularity of Service
The reliability and regularity parameters of different transport modes, differ from each
other. The urgency and speed by which the goods are to be delivered, influences the
decision as to which mode of transport to use. All modes of transport, land, ocean
and air, are affected by bad weather such as heavy rains, snow, fog and storms,
which may cause delays.
3) Safety
Another crucial factor influencing the selection of a mode of transport is the safety
and security of goods in transit. Land transport is more preferred to railway transport
because the losses are less.
From the safety point of view, sea transport is the most risky, as water transport
exposes the goods to the perils of sea, and the long duration of travel adds to the
risk factors. Certain types of packaging also helps in safeguarding the goods in
transit and are highly recommended, but they do influence costs as well.
Some goods also require special facilities such as refrigeration or special security
measures that need to be taken into consideration when selecting a mode of
transport.
4) Characteristics of goods
When selecting the mode of transport, the size and weight of goods play a crucial
role. Land and air transport primarily cater to fragile and small shipments. Rail and
sea transport are a more suitable option for heavy shipments.
How dangerous, fragile or high value the products are, also influences the selection
of the transport mode. For breakable and fragile, high value products, air and land
transport are the best option.
5) Budget
Transportation costs are add-on cost on the sale price of a product. The transport
costs add to how much the goods can be sold for, to make a profit. Hence budget
requirements need to be considered accordingly. The volume or weight of the goods
play a key role in determining which method of transport is the best value. Also the
type of good in terms of urgency of delivery, such as how perishable the goods are,
and how quickly they need to arrive, influences the choice of mode of transport.
Typically, water transport is the most cost effective, and is mostly suitable when
there is no hurry, and the goods are bulky or heavy, and need to be carried a long
distance. Rail transport is relatively inexpensive for these types of goods. The
advantage of road transport, in terms of cost is that there are savings to be made on
the costs of handling and packaging. Air transport is one of the most expensive
modes, but has the benefit of being fast, so is best suited for perishable and fragile
goods.
6) Timescale
Air transport is the best option for long distances requiring urgent and speedy
transport, to meet deadlines or because the goods are perishable or fragile. Motor
transport is faster than rail transport for short distance deliveries. However, for longer
haul journeys rail is faster and more economical. Water transport is often not suitable
where time is a factor.
7) Flexibility
The most flexible mode of transport is Motor or road transport, as it is not
constrained by factors such as flight times, shipping routes or pre-scheduled
timetables. Motor transport can operate day and night, at personal convenience, to
suit all time frames, and has the added advantage of door-to-door delivery.
Considerations of Speed, Frequency in
trade off
Inventory Velocity is described as the is the percentage of inventory the company is
projecting to consume within the next time period.
Inventory Velocity = (Opening Stock / Next Month’s Sales
Forecast)
This metric is important as it helps in the understanding of the match of the inventory
in hand to its demand. Monthly tracking of Inventory Velocity sheds light on the areas
of improvement with regards to realigning the inventory level to meet optimal levels
of results. It works in matching the supply with demand and prevents the needs for
excessive stocking in the warehouses.
Perfect Order Measurement
Perfect Order Measurement = [(Total orders – Error orders) /
Total orders] × 100
Inventory Turnover Ratio
Inventory Turnover Ratio (ITR) = Cost of Goods/ [(Opening
Stock – Closing Stock) / 2]
The Inventory Turnover ratio helps determine the number of times a company sells
or turns the average inventory that is kept in the storehouses. Therefore, in other
words, it is a measure of opportunities to make profits from the working capital that is
invested in the form of inventory.
Cash to Cash Cycle Time
Cash to Cash Cycle Time = Materials payment date – Customer
order payment date
This ratio measures the number of days between the payment of materials to the
getting the payment for the product. It is averaged on a weekly, monthly or quarterly
basis. The ratio tells of the amount of time the operating capital is tied up for and it is
important from the point of view that cash tied up is unavailable for use for other
purposes. A smooth cash to cash operation denotes a supply chain that is profitable.
Days of Supply
Days of Supply = [Average inventory on hand (as value) /
Average monthly demand (as value)] × 30 (for measurement on
a monthly basis)
This forms one of the key performance indicators that measure the efficiency in
supply chain.
Days Sales Outstanding
Days Sales Outstanding = (Receivables/Sales) × Days in Period
This metric provides a measure of how quickly revenue can be collected from clients.
The lower the day’s sales outstanding number, the more efficient a business.
Inventory Turnover
Inventory Turnover = (Cost of Goods / Average Inventory)
The Inventory Turnover denotes the number of times a company’s inventory cycle
takes place during a year. A high turnover means the supply chain is efficiently
managed.
Customer Order Cycle Time
Customer Order Cycle Time = (Actual delivery date – Purchase
order creation date)
This ratio measures the amount of time it takes to deliver an order to the customer
after the purchase order (PO) has been received. Another variant of this ratio is
expressed as:
Customer Order Cycle Time = Requested delivery date –
Purchase order creation date
Gross Margin Return on Investment
Gross Margin Return on Investment (GMROI) = [Gross Profit] /
[(Opening Stock-Closing Stock) / 2] × 100
The GMROI ratio is indicative of the gross profit that is earned for every average
investment that is made with regards to inventory. Tracking this metric on a monthly
cycle helps in identifying which item produces a higher gross profit in the inventory.
Turn-Earn Index
Turn-Earn Index (TEI) = (ITR) x (Gross Profit %) × 100
TEI enables in combining the gross margin and turnover. The idea is to keep the
Inventory Turnover Ratio high for those products that generate low margins. This
way the ITR is kept at medium or low for those products that generate high margins.
On Time Shipping Rate
On Time Shipping Rate = (Number of On Time Items / Total
Items) × 100
This ratio denotes the percentage of items, Stock-keeping unit or order value that is
received on or before the requested ship date. It is an important metric as on-time
delivery rate indicates that customers are kept satisfied and higher the rate the more
efficient the supply chain.
Fill Rate
Fill Rate = [1 – ((Total Items – Shipped Items) / Total Items)] ×
100
The Fill rate is important to customer satisfaction and has its implications for
efficiency with regards to transportation. This ratio indicates the percentage of a
customer’s order filled on the first shipment.
Average Payment Period for Production Materials
Average Payment Period for Production Materials = (Materials
Payable/Total Cost of Materials) × Days in Period
This the average time from the time of the receipt of materials to the time of payment
for those materials. It does a company well to pay the suppliers slowly as the longer
the average payment period, the more efficient is the business.
Supply Chain Cycle Time
This is the time it takes to fill a customer order if the levels of inventory were zero. It
is the sum of the longest lead times that are taken at each stage of the cycle. This
time tells of the overall efficiency of the supply chain management. If the cycles are
shorter it means a more efficient supply chain. Looking at this metric helps identify
the pain points and uncover competitive advantages.
Inventory Days of Supply
Inventory Days of Supply = (Inventory on hand / Average daily
usage)
This metric shows the number of days that it would take for a company to run out of
supply if it is not refilled. The goal of supply chain management is to minimize the
days and hence, minimize the risk of excess inventory lying around. The obsolete
inventory curtails the operational cash flow.
Freight cost per unit
Freight cost per unit = (Total freight cost / Number of items)
The SCM aims to minimize this cost per unit to achieve operational efficiency.
Freight bill accuracy
Freight bill accuracy = (error-free freight bills / total freight
bills) × 100
This number shows the percentage of error-free freight bills. Accuracy in matters of
billing is crucial for profitability and for the satisfaction of customers.

Packing and Insurance in International

Transportation
Sea or ocean freight transportation is often used by companies that need to ship
large amounts of goods at once. While this is the longest mode of transportation, it is
ideal for bulk shipments, especially minerals and coal. It is a suitable option for
products with long lead times, and for large volumes, it is an affordable and
economical transportation solution. However, this mode of transportation tends to be
quite slow, is subject to customs restrictions, and can lead to product damage due to
environmental hazards and movement if your goods aren’t packaged properly.
Load Optimization is Crucial When Loading an Ocean Freight Container
When transporting your products via ocean freight, it is crucial that you optimize your
container load. Not only will you reduce your shipping expenses, but you will also
reduce the potential for damage during transport. Non-optimized loads mean that
you’ll have unused space within the container, allowing your items room to shift and
move up against each other during transport. For proper load optimization, follow a
few simple steps:
Inspect the container. Your container needs to be inspected carefully before
anything is loaded. Pay close attention to any contamination or residue on the floor,
as these substances could cause a negative reaction with your cargo.
Load heavy materials first. Large, heavy items should always be loaded first on the
floor and against the container’s front wall. Lighter items should be placed at the top.
Distribute weight across the container. If your container is loaded to maximum
capacity, it is important that the weight is evenly distributed across the floor area.
Before loading, it is important to plan ahead. There are advanced tools and
software programs that use values like package weight, dimension, volume, and
restrictions in order to help you reach an optimal container load.
The transportation of goods through marine channel is a complex and risky process
that depends on both man-made and natural situations. Hence, it is important to take
appropriate marine insurance to cover the risks associated with the goods that get
transported through this medium.
Air Freight
Companies that work with short lead times and require their packages to be
transported as quickly as possible often choose air freight. This is a relatively safe
mode of transport, and it reduces supplier lead times while improving the overall
level of service. However, only certain goods are suitable for air transport, and this
expensive option often comes with airport taxes, custom and excise restrictions, and
other regulatory requirements.
Hazards of Air Freight Transport
If you choose to transport via air freight, there are certain hazards for which you
need to prepare by choosing the right packaging:
Atmospheric changes and environmental exposures. High and low atmospheric
pressures can have a dramatic effect on certain packages, and humidity changes
can result in condensation or corrosion that could affect your product if not packaged
properly.
In-transport movement. Your packages are liable to shift and move significantly
during air transport. From acceleration and take-off, to in-flight dropping and pitching
if turbulence is experienced, your package needs to be able to withstand any
unexpected pitching or jarring.
Shock. Shock occurs during transport and handling as a result of impacts with
containers, racks, floors, and other shipments. Proper cushioning within your
package will reduce damage that results from shock, and most products will require
some level of shock protection in order to prevent damage during distribution.
Road Transport
Almost all packaging will require road transport to some degree. Road transportation
is cost effective and ideal for transporting perishables for short distances. It is easy
to monitor the location of your goods, but your packaging could be damaged by
mishandling or careless driving. If you are choosing road transport, it is important to
prepare for potential delays, including traffic, truck breakdown, and bad weather.
Ensuring Proper Vibration Protection during Road Transport
When shipping your products via road transport, it is important that you choose the
right package design. Package cushioning can be designed for vibration protection if
you consider that cushions should perform like springs. Depending on the thickness
and load-bearing area of the cushion, it should be designed in a way that either does
not have an influence on the input vibration or isolates the product from the vibration.
The right design will make all the difference in how well the cushion can protect your
product from vibration damage.
Transit Insurance Requirement
A transit insurance plan proves to be most useful for businesses as it offers many
advantages. Here are some of the advantages of a transit insurance policy that
makes them must buy:
The coverage offered by transit insurance provides businesses financial support,
which may encounter considerable losses when their goods are damaged at the time
of transit. In this way, it helps to keep the finances of a business stable even after
encountering a loss.
As mentioned above, the coverage is provided as per global standards, thus even
when you are transporting your goods internationally, then as well you can meet with
the coverage requirements of that country wherein the goods are headed.
You can customize the policy as per your business requirements; therefore, transit
insurance policy is suitable for almost all types of businesses.
Transit insurance provides a policy that includes compensation against common
perils that might cause damage to the items that are being transported. The common
perils against which a transport or transit insurance provides protection are:

 Earthquakes
 Fire
 Explosion
 Lightning
 Any type of manmade or natural calamities
 The vassal containing goods therein collides and causes damage
 Transport vehicle overturning
 Vessel encounters derailment
 Vessel sinks
 Risks encountered at the time of unloading and loading the goods
 Risks encountered at the time of unpacking and packing of goods
 Malicious damages
 Accidental damages
 Theft
 Impact damages, etc

Types of Transit Insurance

The various types of transit insurance policies that you can buy are listed below:

1. Single Transit: Such policies are designed for business owners who
send out shipments occasionally. And the coverage is provided for a
single voyage only. As soon as the shipment reaches its destination
the coverage will cease.
2. Customized Plan: A transit policy can be customized on the bases
of the goods type, transaction limitations, location limitations, mode of
transportation, and any other specific requirements.
3. Overnight Vehicles’ Insurance Policy: If the goods have to be
stored overnight in the vehicle, then this policy is recommended as it
provides coverage for such goods.
 4. Open Policy: This transportation insurance policy provides coverage
for multiple transits that may occur within a given period, which is
generally for one year. So, if a business transports its goods very
frequently, then they can purchase this policy and can assure that
they will get coverage for more than one trip without purchasing a
different transit insurance policy for each trip.
5. Goods in Transit through Third-Party Carrier Cover: If your goods
are being transported through a third-party vessel or carrier, then that
carrier may not take risk of damage to the goods in it. You can,
therefore, purchase this insurance plan to provide cover against the
damage when the goods are transported through a third-party carrier.
6. Goods in transit Through Own Carrier Cover: If you are using your
vehicle for transporting your goods, then this insurance will cover the
goods against damages.
7. Cover for Multiple Vehicles: If you are using multiple vessels for
transporting your goods, then you should take an insurance plan of
this kind as it will cover the goods that are transported through more
than one vehicle. Multiple vehicles are covered under a single plan in
this policy.

Benefits of Transit Insurance

 Transit insurance policies offer global standard coverage. It means

that they cover clauses that are internationally recognized.
 There are multiple coverage options from top insurance providers.
 The policy can be issued immediately online.
 Just by providing limited information, you can get transit insurance
cover.
 One of the simplest ways of providing insurance coverage to your
goods in transit.
 This insurance policy offers coverage between all risks of damage or
loss to goods/ or death of the livestock and the majority of selected
perils that you can select according to your business line.
Warehousing & Benchmarking in Global
Supply Chain Management
Warehousing facilities play a vital role in the overall supply chain process.
Fundamental for warehouses to achieve both efficiency and effectiveness in supply
chains, and provide some perspective on current challenges and the future.
It is evident that continuing globalization and changes/challenges occurring in such
areas as reverse logistics, environmental sustainability, information technology, and
overall supply chain integration are further evolving the strategies, roles, and
responsibilities for warehouses.
In fact the term “Distribution center (DC)” may be much more appropriate in
representing the broad range of activities that now occur in modern warehouses that
go beyond filling customer orders to provide an ever expanding array of value added
services.
Basics
There are a number of situations where DC’s simply would add cost (and little or no
value) to the supply chain. DC’s add little or no value for products bought in bulk
(e.g. raw materials, manufactured items) with little or no time sensitivity associated
with their use. Products insensitive to transportation costs (i.e. transportation cost is
a small percentage of product value) also typically move directly to customers.
For other products, however, DC’s provide a dual value-added role making supply
chains more efficient and more effective. DC’s add efficiency by consolidating
products for shipment to customers, reducing transportation costs, and performing a
broad range of value added services (e.g. branding, labeling, assembly, packaging,
kitting, reverse logistics). DC’s also make the supply chain more effective. The
strategic placement of DC’s allows the positioning of products and services close to
major markets and customers (the economic principle of place utility).
Optimization strategies are utilized to position product availability and delivery as a
competitive advantage while also optimizing the cost trade-offs associated with
transportation, facilities, equipment, workforce, and other critical cost variables. DC’s
also facilitate time utility by storing product until it is demanded.
Product type often determines the need for and specific role of DC’s in the supply
chain. Characteristics to be considered include:

 SEASONALITY in either PRODUCTION or CONSUMPTION

 DEMAND VARIABILITY
 MANUFACTURING ECONOMICS
 MARKETING and PROMOTIONAL INITIATIVES
 TRANSPORTATION ECONOMICS
 SERVICE REQUIREMENTS
 CUSTOMIZABILITY and VARIANTS of PRODUCT

Company capabilities to determine DC requirements are essential for achieving

successful networks and operations. DC requirements include location, design and
operations, determining the information and technology requirements, and
measuring performance.
Location
In addition to transportation costs DC location is determined based on the the
location of major markets and customers, the location of supply points, the volume of
product moving to or from supply points and customers, transportation rates, the
level of service required, and the product characteristics. Local conditions including
access to and cost of labor, land and buildings, IT/communications infrastructure,
transportation infrastructure, and government policies (e.g. environment, incentives,
taxes) also play a significant role in determining location.
Design & Operations
The product, how it is received, the nature of customer orders, service levels, and
transportation mode are the primary determinants of distribution center design and
operations. Product characteristics include weight and dimensions, packaging, shelf
life, temperature and lot control requirements, and hazardous material requirements.
How the product is received is critical to both inbound operations efficiency (dock to
stock cycle time) and space utilization/storage efficiency.
To optimize efficiency in inbound operations it is ideal to receive material in an
immediately storable conveyance (e.g. pallet, case, box). The types and volumes of
orders that are processed and the number of stock-keeping units (SKU’s) in the DC
are important considerations in determining layout, equipment selection, and
business process requirements. Storage equipment selection should be matched to
product characteristics, volume, and any additional unique requirements (e.g.
security, temperature control, lot control).
Benchmark has grown significantly over the years, and we’ve continually invested in
our supply chain management services, which includes critical, diversified, and
global partnerships with material suppliers, shipping partners, and logistics experts.
We’re also committed to maintaining a talented in-house team dedicated to the
supply chain. In fact, Benchmark is among the few complex technology solutions
providers across the world with proven capabilities in every area of supply chain
management. What does that mean for you and your business?
The Benchmark Difference
The most important aspect of our supply chain management services is that
Benchmark has a stake in the outcome. We’re deeply invested in our customer’s
entire product development process and go-to-market strategy because we engage
with customers for the long term.
Because our customer engagements cover end-to-end services ranging from
product development to after-market support, we’re always forward-thinking when it
comes to the success of the product. A failure in the supply chain affects our
customer’s success as much as it does ours and that’s why we’ve always got a
finger on the pulse of production as well as the materials and commodities markets.
Organizations that offer only supply chain management rarely incur this exposure.
As a result, their services follow a set process that doesn’t account for disruptions on
a global scale. While they may try to mitigate some risk, they work with a limited
number of vendors. This means that costs can be unnecessarily high, and flexibility
is limited. Either way, it can be a costly mistake, as the supply management partner
is already getting paid, so they may not go the extra mile to ensure success.
Supply Chain Cycle Time Reduction
Cycle time is a measurement of how many units of product are received, produced
and shipped in a certain period of time, and it indicates the general efficiency of the
supply chain. A company’s cycle time consists of several linked parts:

 Production cycle time: Total time producing a product.

 Order processing: Time of processing an order.
 Cash-to-cash cycle time: Time needed to regain financial
investments.

A long or extended cycle time tests a company’s ability to convert manufacturing

costs to profits. A short cycle time maintains an efficient and agile supply chain.
Productivity loss means wasted resources, extra costs, bad customer experiences
and less success in the market.
Transportation management and processes affect the ability to reduce cycle time. By
reducing the amount of time needed to transport an item from one link in the chain to
another, a company will reduce the cycle time of the entire supply chain. The first
step toward shortening cycle time is the measurement of present processes and
identifying factors that add time to cycle.

 Is your company missing delivery dates?

 Are operators always backlogged?
 Are rush orders ruining the schedule?
 Can you sell the products you are making?

Lead Time:
Lead time is the amount of time that passes from the start of a process until its
conclusion.
The term borrowed from the manufacturing method known as Lean or Toyota
Production System where defined as time elapsed between a customer placing an
order and receiving the product ordered
Lead time = ordered received – ordered delivered
Lead time is a crucial metric for any business. It assists the company in predicting
sales, making operations efficient, and improves customer satisfaction.
Material lead time = Procurement time + Manufacturing time +
Shipping time + Delays
Purchase order/Supply / Material lead time:
Time between purchase order place & Items arrive at manufacturing or received at
workshop floor
Material lead time = Procurement time + Manufacturing time +
Shipping time + Delays
Production /Manufacturing lead time:
Time between order received at production & order shipped
Delivery / transport /shipping lead time:
Time between material shipped from factory & reached at the final destination.
Cumulative lead time / maximum lead time:
The longest length of time involved to accomplish the activity from conceptualizing,
material requirements planning, reviewing each bill-of-material path, and whichever
path adds up to the greatest number defines cumulative material lead time.
Inventory lead time:
Time between order received in warehouse and PO placed to restock products
Demand lead time:
Time between total demand present or current demand to anticipated delivery after
next one reorder to replenish the inventory.
Lead time demand = Lead time  x  Average daily sales.
Customer lead time:
Time between customer order received by salesman to order delivered to customer
Business lead time:
The number of days companies review lead time in manufacturing, supply chain
management, and project management during pre-processing, processing, and post-
processing stages.
(Manufacturing + Supply Chain Management + Project
management) during pre-processing, processing & post
processing stages.
Payment lead time:
Time between vendor invoice raised & customer to pay after satisfaction. It is also
called payment terms.
Cycle time:
Cycle Time is the amount of time a team spends actually working on producing an
item, up until the product is ready for
Cycle time = Net production time / No. of units produced
Reduce lead time of purchase:

 Appropriate funds availability

 Complete, detail specification with drawings, samples, special
instructions of product or service against contract with tolerance limit
should be available.
 Approved list of suppliers for the product or services availability
 Clearly identify source for non-competitive bid products and services
that are unique, designated to match existing product or system.
 Purchase requisition should submit along with all documents
(supporting datasheets, quotes, proposals, pre-hire worksheets,
drawings etc.) in complete in same day
 Risk assessment should done & bring attention of buyer well in
advance.
  Obtain approval for items required before submission of purchase
requisition
 Use & developed a domestic supplier for faster delivery.

Reduce lead time of inventory management:

 Proper tracking of inventory movement like it follow FIFO methods.

 Receiving, put away, picking, packing and shipping time reduction
 Accuracy of inventory data with regular audit
 Smart demand-oriented inventory keeping
 Systematic documentation with automatic bar code procedure
 Visibility enhancement for easy identification.
 Follow system documentation not manual.
 Categorization stock with high value, hazardous & other relevant
area wise as per business requirement
 Smart inventory planning & management operation with different
product portfolio
 Review adequacy of software used & back up planning for smooth
shipping with server down condition

Demand-Driven Supply Network in

International Logistics
A Demand-driven Supply Chain (DDSC) is defined as a supply chain management
method focused on building supply chains in response to demand signals. The main
force of DDSC is that it is driven by customer demand. In comparison with the
traditional supply chain, DDSC uses the pull (Demand pull) technique. It gives the
market opportunities to share more information and to collaborate with others in the
supply chain.
A Demand-Driven Supply Chain is dependent on aligning all entities across the
supply chain through information flows. A true DDSC can always adapt to the
changing market conditions thereby maintaining or reducing inventory levels and
reduce the invasive problem of expedited orders.
“Demand-driven logistics has not yet been widely adopted,” says Jaris Briski, senior
vice president of business development and parcel at GENCO, a Pittsburgh-based
third-party logistics (3PL) provider. “Shippers may manage only certain subsets of
inbound materials procurement.”
Without a true demand-driven vibe coursing through the supply chain, shippers are
likely to adapt parts, rather than optimize the whole. Companies struggle when siloed
functions aren’t in sync a lack of alignment creates slack in the form of additional
inventory, time, and cost.
Most companies successfully manage outbound transportation and distribution
processes, largely because they directly impact the end customer. When something
goes awry, there is an immediate and obvious consequence. With a demand-driven
logistics approach, impacts are more subtle, and build gradually over the entire order
cycle. That’s why it requires a holistic perspective, and often a paradigm shift within
the organization one that likely doesn’t occur without executive mandate or a push
from 3PLs.
The Power of pull
“Sometimes the ability to successfully run a demand-driven operation depends on
whether a strong enough stake exists within the enterprise to control the inbound
supply line,” says Briski. “If the top of the organization isn’t interested in inbound
logistics or procurement, it becomes a moot point. Once you get past that obstacle, it
comes down to having the technology to evaluate how best to create visibility and
control.”
Transportation is an obvious flash point for companies that struggle with supply
chain visibility, simply because transport costs have a tendency to creep. By
contrast, when shippers are able to accurately forecast demand farther out, they
have more flexibility to mix and match transportation options to meet their need.
For shippers and consignees sourcing globally, failing to communicate with upstream
partners can create any number of inefficiencies and costs. That’s why companies
are driven to reach deeper into the supply chain and work more closely with
suppliers and manufacturers to fine-tune production systems and make sure they are
in lockstep with downstream processes.
Collaborative efforts
Briski compares this disposition to how suppliers might interact with customers.
“Suppliers should be aware of, and intimately clued into, customer needs,” he says.
“Then they can take a mirror-image approach upstream with their suppliers to
achieve the most effective and confident supply chain.”
When consignees and suppliers achieve this level of collaboration, they are better
positioned to decide who should manage transportation and control cost. This is
where a 3PL’s objectivity and expertise can help push value even further.
For example, if a company is purchasing a high volume of product from a supplier,
and that supplier is fulfilling 10 purchase orders, it may not know how to sequence
those shipments. GENCO has had success bridging that gap by taking the real-time
signal from the customer, and coordinating transportation so that orders are properly
sequenced in order of priority.
In a similar fashion, Waltham, Mass.-based 3PL ModusLink Global Solutions has
helped engineer demand-driven solutions for high-tech shippers that allow them to
better manage short lifecycles in a competitive environment.
Offshore manufacturing is a normal course of business for many high-tech
companies. As supplier networks become more complex, shippers are challenged
with managing inventory levels.
Traditionally, high-tech shippers might wait for product to fill a container before
shipping it, which often triggers a swell of inventory in the system. As they seek to
reduce total costs, that model is changing.
Looking at the Little Picture
“There has been growth in consolidation hubs in China and Hong Kong, located at
ports closer to the point of origin,” says Eoghan Dillon, supply chain solutions
manager at ModusLink. “Companies are taking smaller quantities from each of their
suppliers, consolidating them into containers, then shipping.”
In effect, shippers are following a “little-and-often” approach that is predicated on
point-of-origin collaboration and consolidation to move smaller quantities more
frequently, as needed. Such an approach eliminates large minimum order quantity
constraints, and reduces total inventory within the system.
It’s a more sophisticated play that challenges the way companies manage their
supply chains. It tears down operational walls, because ordering smaller quantities
from suppliers often requires process changes and/or incurs higher costs. Shippers
have to be able to see the bigger picture to recognize the total impact.
“Purchasing managers want large volumes of product at the lowest cost,” says
Dillon. “But that increases supply chain inventory. Demand-driven logistics, in
contrast, aims to reduce inventory.”
Shipping smaller order quantities directly impacts transportation. “Instead of shipping
full containers of one particular product or from one particular supplier, companies
need to consider sharing containers and consolidating mixed loads,” Dillon explains.
Predictive Flexibility
That’s why collaboration is the essence of demand-driven logistics. Success requires
different operational functions to work together. With greater visibility downstream
and upstream, organizations can align and orchestrate their supply chains around
this common goal.
Even on a smaller scale and at the local level, demand-driven logistics pays
dividends. When Dublin, Ga.-based SP Fiber Technologies, a producer of high-
quality newsprint and paperboard, partnered with RVCii two years ago, it was looking
for a 3PL that could build, then execute a new purchase order (PO) management
system.
The processor operates two mills located in Dublin and Newberg, Ore. That produce
more than one million tons of product annually, half of which is recycled. Because it’s
a commodity-driven business, managing transportation costs is critical to the bottom
line.
To become demand-driven, companies must consider three actions:
Leverage real-time data. Data is key to providing valuable insights into what is
working in the supply chain and what can be improved. Analyzing data in real time
can help answer the most critical question: ‘What do I do now?’ Dynamic real-time
optimization of the supply chain enables companies to use data to make rapid
decisions and create actionable plans by taking all aspects into account.
For example, a same-day grocery delivery service may have extra delivery trucks on
standby, ready for an influx of orders, to ensure it meets ad-hoc demand and
delivery timeframes. Or alternatively it tries to ‘box’ its delivery schedules with large
time windows to allow more perceived flexibility. This model is not sustainable.
What if the company’s supply chain was optimized to handle random ad-hoc same-
day orders, completing all the deliveries with fewer trucks within accurate time
windows? Leveraging data with dynamic real-time optimization, companies can
consider all factors and determine what truck should take new deliveries while also
keeping the rest of its previously scheduled orders on time.
Optimize staff. Having the right person at the right time is crucial for employers.
Many organizations often understaff, overstaff, or assign one person to a task when
another is better suited, impacting productivity and customer service.
Just as a company may overbuy delivery trucks to have on hand for surge times, it
also tends to have more employees than necessary for the same reason.
Companies can do more with fewer employees if they properly identify the
inefficiencies and constraints. With interruptions to staff availability, changing shift
schedules and demand, as well as regulatory and operational constraints happening
each day, businesses must be able to quickly adapt. Resource optimization can
adjust accordingly and also take into consideration issues such as required breaks,
logical shift planning, and who can best cover when an employee calls in sick.
Prepare for disruptions. Being able to adapt to any disruption keeps a business
operating smoothly and efficiently. No matter the size of the disruption, the financial
impact can be severe for a company with a supply chain that isn’t optimized and
prepared to react in real time.
The key is making the supply chain nimble and able to react quickly with an
actionable plan when (not if) a disruption occurs mitigating as much risk and financial
loss as possible.