Topic 3 How it works: physical supply

chains
Introduction

Before you begin to understand how global supply chains are financed, it is important that
you first learn about the operation of the physical supply chain and can identify the roles
played by the main parties involved. Are global supply chains linear or multidimensional
processes? Have we reached a point in time where supply chains are in fact omnichannel
ecosystems? Do you know of any products that you use on a day-to-day basis that would
have been created using a single linear physical supply chain?

Learning objectives

By the end of this topic you will understand:

• what a supply chain is;

• how the physical supply chain works;
• the roles of the key stakeholders involved;
• the processes involved; and
• how these processes are increasingly automated and digitised.

Think...

What process was involved in building your iPhone or Android mobile device? Were all
processes carried out in the same country? How did the parts move from one location to
another? How were the different processes financed?

3.1 What is a supply chain?

A supply chain involves multiple entities that will interact and play their role in the sourcing,
manufacturing, production and distribution of goods. It is likely that most parties will be
both a buyer and a seller and each will have an interdependency on each other.

Supply chains, whether simple or complex, work on the basis of collaboration between the
different entities in the chain. Their importance in the supply chain will be governed by
where they are placed in the chain and the level of contribution they are expected to make
for the chain to work. Some may be major corporations, while others may be SMEs. Each

© The London Institute of Banking & Finance 1

will have their own needs and requirements that have to be considered if the supply chain is
going to work effectively.

APICS Supply Chain Council defines the supply chain as: “the global network used to deliver
products and services from raw materials to end customers through an engineered flow of
information, physical distribution and cash” (APICS Dictionary, 2019).

FACTFIND

What was the profit on a bottle of water that sold for $1.50 in 2010?

• $1.40
• $1.25
• $1.00
• $0.75

Find out more:

WP Carey School of Business: Module 1 What is supply chain management?

Do you think this has changed? What would the profit on that same bottle of water be
today?

3.2 What is a physical supply chain?

The physical supply chain represents the movement of raw materials, parts and goods
associated with a finished product and involves the procurement, manufacture/processing,
distribution arrangements and lead times that end with the goods being in the hands of the
end buyer.

Physical supply chain

The physical supply chain is a system of organisations, people, activities, information, and
resources involved in moving a product or service from seller to a buyer, either domestically
or across borders.

The definition goes on to explain that physical supply chain activities:

• transform natural resources, raw material and components into semi-finished and
finished products that are delivered to the end customer;
• form the underlying basis of economic functions which give rise to financial
requirements; and
© The London Institute of Banking & Finance 2
• must be supported by financial supply chain activities.

(GSCFF, 2016, p17)

FACTFIND

You should now be familiar with the Global Supply Chain Finance Forum (GSCFF) website.
Explore the site further and navigate to the glossary. The definition of the physical supply
chain is available there.

GSCFF: Glossary

3.3 Parties
A physical supply chain usually involves at least three links in the chain. The primary parties
are always the buyer and seller, who combine to produce the end product. Why three links
instead of two? The reason is that the seller has to source raw materials, components or
finished goods that they then sell to the buyer. In practice, supply chains extend to multiple
parties as illustrated in Figure 3.1 and Table 3.1.

Figure 3.1 Primary parties

Table 3.1 Parties and roles

Party Supply chain role

Seller Raw material producer Extraction

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 Buyer and seller Manufacturer Manufacture – inventory (raw material,
WIP and finished goods)
Buyer and seller Wholesale distributor Distribution – inventory (bulk finished
goods)
Buyer and seller Retailer Retail – inventory (unit-level finished
goods)
Buyer Consumer Consumption

Figure 3.1 and Table 3.1 illustrate a relatively simple physical supply chain with relatively
few ‘links’ and a linear process. In practice, supply chains tend to be more complex.
Whereas, in the past, supply chains were based around a local or regional network of
suppliers, the trend over many years, driven by reduced trade barriers and a greater
inclination to trade internationally, has been to gain efficiencies through globalisation. That
said, in recent years we have seen a move towards nearshoring and on-shoring, where
possible. This is a result of technology developments reducing the advantage of low-labour-
cost economies relative to shorter transit times and lower freight costs. Environmental
pressure has also encouraged this trend, as consumer’s demand ethically sourced products
with lower carbon footprints.

3.4 Non-linear multidimensional chains

Globalisation and better communications have facilitated increased market access, leading
to more competition and a need for companies to source more efficiently. The nature of
global sourcing that we have today is a consequence of this and has resulted in physical
supply chains becoming less linear and more complex and multidimensional.

An example of this is the two-tiered framework of the automotive industry, which is

illustrated in Figure 3.2.

Figure 3.2 Multi-tiered framework – An example from the automotive industry

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In this example from the automotive industry, we have described how two tiers of suppliers
might contribute to the production of the finished vehicle. In practice, a complex supply
chain such as this might involve multiple tiers distributed across many countries.

The roles of the two tiers referenced here are as follows:

• Tier 1 – Suppliers of components or sub-assemblies to the manufacturer.

• Tier 2 – Suppliers of raw materials, components or sub-assemblies to the Tier 1
suppliers.

In some cases, the Tier 1 supplier acts as a procurement agent and consolidator for the
manufacturer, sourcing components or sub-assemblies from the Tier 2 suppliers who may
well ship directly to the manufacturer, rather than to the Tier 1 supplier.

The underlying commercial/contractual relationships may not, in this example, mirror the
movement of goods. An understanding of how physical supply chains work in practice is
fundamental to the delivery of effective supply chain finance solutions and to the
development of supply chain finance products or propositions.

Figure 3.3 Multi-tiered framework in practice

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3.4.1 Variations on the two-tiered framework

As already noted, the buyers and sellers in the example from section 3.3 may well be
situated across the globe and will be companies of different sizes, strengths and levels of
sophistication that operate in different jurisdictions with different legal processes and
business cultures.

The following examples, from Mark Millar’s book Global Supply Chain Ecosystems, illustrate
the complexity and diversity of modern supply chains.

iPhone

The supply chain for an iPhone involves some 786 suppliers in 31 countries, including 349
suppliers in China and just 60 in the USA.

Boeing

Boeing’s global supply chain involves 5,400 factories employing 500,000 people.

(Millar, 2015)

FACTFIND

Impact of supply chain efficiencies on product availability

Read about how the supply of components affected iPhone delivery dates in a positive way.

© The London Institute of Banking & Finance 6

Campbell: iPhone X supply chain improvements, not weak demand, to thank for reduced
ship times

3.4.2 Three examples: two-tiered framework

Figure 3.4 illustrates three possible models involving Tier 1 and Tier 2 suppliers to a
manufacturer.

[Visit the course site to watch the full animation.]

Figure 3.4 Tier 1 and Tier 2 models

The first is the ‘back to back’ model, in which the Tier 2 supplier sells goods to the Tier 1
supplier who, in turns, sells to the manufacturer. There are two separate contractual
relationships, though the manufacturer may well approve the Tier 2 supplier.

The second is the procurement model, in which the Tier 1 supplier contracts with the Tier 2
supplier, but the latter ships goods directly to the manufacturer. The manufacturer will
almost certainly allow Tier 2 suppliers that they have approved.

The third is the commission agent model, in which the Tier 1 supplier introduces a Tier 2
supplier, who then contracts directly with the manufacturer. The Tier 1 supplier would
receive a commission on the sale value.

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Activity 3.1 Developments in physical supply chains
Part 1

Read these articles to learn more about how physical supply chains have developed in the
turbulent years since 2020.

Shih: Global supply chains in a post-pandemic world

Alicke et al.: How Covid-19 is reshaping supply chains

BRS: Future of supply chains 2025

Part 2

Consider these questions:

• How have companies changed their approach to positioning supply bases since the
Covid-19 pandemic?
• What are the advantages and disadvantages of increasing inventories and how do these
compare to near-shoring as a way of mitigating supply chain disruption?
• What improvements do technological developments offer to ensure the smooth
operating of physical supply chains?
• What steps can and have been taken to better monitor risk, following several major
recent global supply chain disruptions (eg Covid-19 and the war in Ukraine)?

3.5 Integrated logistics and the extended port operation model

In section 2.6 you learned about the host of service providers that work in support of the
supply chain to facilitate international trade between buyers and sellers. Here you will learn
about how the extended port operation model brings together service providers in
integrated logistics hubs.

Development of containerisation

The major development in the transport of goods in recent years has been containerisation
– the use of standardised containers that can be transferred across multiple forms of
transport. The concept of containerisation is not exactly new; the earliest examples date
back to the late 18th century, but it was after World War II that standardisation began to
drive its widespread adoption. Prior to the adoption of standardised containers, goods were
handled as ‘break bulk cargo’. This meant that each item being shipped had to be loaded
and unloaded individually at each stage in the freight journey. Goods also had to be stored
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in warehouses pending onward despatch. This was an expensive and time consuming
process.

With the exception of ‘bulk cargo’ (eg oil), the vast majority of goods are now shipped in
containers.

Extension of container ports

The almost universal adoption of containerisation has led to the development of container
ports as integrated logistics hubs. In Mark Millar’s book Global Supply Chain Ecosystems, he
describes the “extended port operations model”, which brings together many of the service
providers involved in the physical supply chain. Some of them operate “inside the gate” (ie
at the port itself) and others “outside the gate” (Millar, 2015).

FACTFIND

Integrated logistics hubs

Find out more about integrated logistics hubs around the world.

DP World London Gateway: The definitive guide to DP World London Gateway

Euralogistic: In a few words

Dubai Logistics City: Dubai logistics city free zone

Port of Hong Kong Handbook: Hong Kong – the super connector and logistics mega hub

The World Bank: Three factors that have made Singapore a global logistics hub

The Business Times: PSA launches S$100m innovation lab for port, logistics sector

An analysis of the integrated logistics hubs at Chicago and Atlanta can also be found in Mark
Millar’s book, Global Supply Chain Ecosystems.

3.5.1 Case study – Overcoming decentralisation

This case study demonstrates how a manufacturer of construction equipment was able to
centralise inbound supply chain management, thus improving shipment visibility as well as
the monitoring of performance and costs. This resulted in streamlined inbound flows and
greater efficiency.

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The challenge

A company manufacturing construction equipment for global distribution needed to

streamline its inbound supply chain. Due to a period of intense growth, including a large
increase in the number of factories, suppliers and logistics providers, opportunities to
streamline the process have been overlooked and, as a result, the logistics operating and
management spend has risen sharply.

The solution

The Keuhne and Nagel ControlTower was used in order to establish a central data
management system. Across all points in the inbound supply chain, shared services and a
single point of contact increased efficiency, improved visibility and simplified reporting. This
delivered the desired reduction in logistics spending and improved the overall service level.

Find out more:

Kuehne + Nagel: Case study: Integrated logistics

FACTFIND

Delivering visibility of goods, data and payments

Watch the following video for an example of how a logistics company has combined
“industry expertise, logistics resources and innovative technology to provide essential
network coordination that delivers enhanced visibility of the flow of goods, data and
payments” (Kuehne + Nagel, no date).

Kuehne + Nagel: Services: KN ControlTower

3.6 Digitisation
No matter how simple or complex the physical supply chain is, there have been great efforts
to gain as much efficiency as possible. The development of enterprise resource planning
(ERP) systems has enabled companies to improve their processes and have much better
control and visibility over the movement of goods. This, for example, facilitated initiatives
such as ‘just in time deliveries’, which became the norm in most industries. However, the
Covid-19 pandemic highlighted the frailties of this approach when the movement of freight
was disrupted by national lockdowns. This has led to companies making contingency
arrangements, often leading to higher inventory levels. The increased use of robotics on an
assembly line has, for example, minimised human error, and such intelligent machine-based
tools have contributed to better production and more efficient planning strategies.
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Digitisation has enabled logistics providers to build applications which have contributed to
greater visibility across the supply chain and made the movement and production of goods
as efficient as possible.

Financier’s perspective on digitisation

From a financier’s perspective, an understanding of how physical supply chains operate and
of the drivers for increased efficiency and resilience will provide a basis to explore how they
can be intermediated in the process and add value to their clients.

Traditionally, finance providers have supported cross-border trade on a transactional basis,

using documents which evidence shipment and provide both a security in, and control of,
the underlying goods. In a digital world, these documents do not exist in physical form. The
data relating to the underlying movement of goods can, however, be used by finance
providers to trigger supply chain finance. The concept of ‘electronic documents’ has been
around for several years. Rules have been issued by ICC governing the treatment of such
data in respect of letter of credit transactions. These are referred to as electronic Uniform
Customs and Practice for documentary credits (eUCP). In June 2019, ICC’s Digitisation
Working Group published revisions to eUCP as well as a new set of rules for the treatment
of data in respect of documentary collections, eURC 1.0. More recently, due to Covid-19’s
disruption of the physical movement of trade documents, there has been a greater impetus
by governments to adopt the UNCITRAL Model law on Electronic Transferable Records
(MLETR), first-issued in 2017, or pass legislation that achieves the same effect. The
consequence of adoption is discussed in more depth in Topics 5 and 22 but, in summary, will
enable the legal acceptance of electronic documents of title such as Bills of Lading and
electronic financial instruments such as Bills of Exchange and Promissory Notes.

FACTFIND

Digitising supply chains

“If the vision of Industry 4.0 is to be realized, most enterprise processes must become more
digitized. A critical element will be the evolution of traditional supply chains toward a
connected, smart and highly efficient supply chain ecosystem.” (Schrauf etal., 2016)

Strategy&: Global digital operations study 2018: How industry leaders build integrated
operations ecosystems to deliver end-to-end customer solutions

Electronic Uniform Customs and Practice (eUCP) for documentary credits and Electronic
Uniform Rules for Collections (eURC)

Find out more about the ICC publication dealing with electronic documents presented under
letters of credit (eUCP) and collections eURC.

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ICC: Commentary on eUCP version 2.0 and eURC version 1.0

ICC: Uniform rules for collections: Supplement for electronic presentation (eURC) version
1.0

Trade Finance Global: UCP 600 (uniform customs & practice for documentary credits) –
What does UCP 600 mean?

3.6.1 Enterprise resource planning systems

ERP

The ability to deliver an integrated suite of business applications. ERP tools share a common
process and data model, covering broad and deep operational end-to-end processes, such
as those found in finance, HR, distribution, manufacturing, service and the supply chain.

ERP systems have been around since the 1990s and have now come to refer to software
applications that facilitate the integrated management of core business processes. Initially,
ERP systems were focused on the manufacturing processes, but they soon expanded to
cover all essential business activities. ERP systems are extensively used to track business
resources such as cash, inventory and production capacity as well as sales ledgers, purchase
ledgers and the resulting accounting entries, which is of particular relevance to students of
supply chain finance.

Companies have derived significant benefit from the efficiencies made possible through the
use of ERP systems. For example, greater real-time visibility of production capacity has
facilitated more efficient inventory control and sourcing processes. A manufacturer, for
example, is now able to order components at precisely the point in time when they are
needed rather than having to hold excessive stocks. This allows them to reduce their overall
stockholding level, which in turn reduces their financing costs and improves their working
capital efficiency. On the other hand, their suppliers may now have to hold higher levels of
stock in order to satisfy their customers’ ‘just in time’ demands.

Direct impact on financial processes

The use of ERP systems to manage sales and purchase ledgers has a direct impact on the
financial processes associated with the physical supply chain. Invoices can be produced
electronically using sales ledger data. The same data can then be used to populate other
documents, or their digital equivalents, saving time and avoiding rekeying errors. Once
invoices have been issued, ERP systems can monitor them for payment and raise all of the
relevant accounting entries. The same invoice data can be used to drive financing solutions,
such as factoring or invoice discounting.

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Benefits across various stages

At an earlier stage in the selling process, purchase order data received from buyers can be
recorded on ERP systems and then used to drive the production process. This reduces the
risk of non-conforming goods being produced and increases resulting efficiency.

On the sourcing side, purchase ledger or payables data can be used to drive a payables
finance solution and also to populate traditional trade finance instruments, such as letters
of credit.

Logistics providers have also benefited from the use of ERP systems. They can now manage
freight capacity in real time and link freight movements with the use of robotics to ensure
that containers and their contents are where they need to be at the right time.

FACTFIND
Explore the impact of ERP on supply chain management

“With the big ERP vendors invading their turf, best-of-breed SCM providers are coming up
with deeper, niche-oriented solutions to help shippers manage their supply chains.”
(McCrea, 2017).

Find out more:

McCrea: Supply chain and logistics technology: ERP pushes forward in SCM

3.6.2 Warehouse automation

Warehouse automation is also playing its part in creating greater efficiency. Amazon’s Kiva
robots, which carry goods to packing stations, are a good example (Millar, 2015). Amazon
reports that its robots significantly increase productivity, with the ability to pick four times
as many orders per hour as a human worker; it now has 45,000 robots deployed alongside
its 300,000+ employees. We cover robotics in more detail in the section 3.6.3.

FACTFIND

Empowering innovation

There are numerous examples of how warehouse automation has been a game changer. UK
online supermarket, Ocado, was one of the first to deliver an innovative solution in this
area.

Find out more:

© The London Institute of Banking & Finance 13

Wired: Inside Ocado’s distribution warehouse

Cambridge Consultants: Wireless breakthrough for the Ocado smart platform

3.6.3 Robotics and artificial intelligence

The use of robotics in the supply chain is a relatively recent development and, at this stage,
adoption has been relatively slow. However, this is changing with the evolution of machine
learning and the increased flexibility, ease of use and affordability that this will bring.

Robots are increasingly being used for ‘picking’, ‘packing’ and ‘sorting’ operations, linked to
systems controlling the overall customer fulfilment processes. Such repetitive and physically
demanding tasks are well suited to robotics and can be accomplished with a zero error rate.
In the future, we can expect to see robots combined with artificial intelligence and machine
learning to streamline and enhance their effectiveness. Autonomous vehicles are another
example of robotics that have a potential application in logistics management.

Error reduction and shortened trade cycles

From a financier’s perspective, the improved efficiency in logistics management will reduce
errors and shorten trade cycles. This will improve working capital efficiency across the
supply chain and reduce direct costs. In combination, these developments should enable
finance providers to support growth in global trade for all segments, from SME to major
corporate, more easily and with greater confidence.

FACTFIND

Have robots actually made a difference?

“When we heard about the new terminal three years ago, and that the cranes would be
operated with joysticks and screens from the office, none of us believed it…We thought ‘No
way,’ because you won’t feel or hear the crane and the boxes. But we’re doing it, and for
the most part, it’s better.”

(quoted in Churchill, 2015)

Find out more:

Maersk: Robots running things in Rotterdam

Read about other developments in robotics in logistics:

Joseph: How robotics in logistics helps improve supply chain efficiency

© The London Institute of Banking & Finance 14

3.6.4 3D printing: moving into the realm of the virtual

3D printing has the potential to convert the physical supply chain into a virtual supply chain.
This process is particularly well suited to the production of components and spare parts so it
is, to a certain extent, complementary to the traditional manufacturing and shipment
model. It is difficult to imagine complex products, such as car engines, being produced in
this way, but as the technology is still in its infancy, perhaps we should not make any
assumptions at this stage.

Financing implications

From a financing perspective, 3D printing will have a couple of implications which are that:

• the materials required in the 3D printer will still need to be physically delivered,
though this may well be a predominantly regionalised process rather than a global
process in its own right; and
• the owner of the pattern (or CAD model) that drives the 3D printer will expect to
receive payment for use of their design. As such, the financial implications will
probably resemble those applicable to the delivery of services rather than the
physical delivery of goods.

Trade in services

Focusing on the second point, trade in services is already a well-established practice.

Indeed, though still significantly smaller in scale than trade in physical goods right now, it is
growing at twice the rate. Supply chain finance is equally applicable to services as it is to
physical goods.

Many of the links in the supply chain are similar, though the manufacture, storage and
movement of physical goods is clearly not applicable. There is still a purchase order,
followed by fulfilment and buyer acceptance leading, eventually, to payment. The difference
is that the data that would drive a supply chain finance solution in respect of services would
be financial data rather than data relating to the physical goods themselves.

At each stage in the process, data can be extracted and used by the finance provider to
provide evidence of contractual fulfilment. Once the buyer has accepted the goods, which in
this case would be signified by downloading and using the CAD model on their 3D printer,
there would be an approved payable. Based on this logic, it is possible to envisage a range of
supply chain finance solutions that provide both receivables and payables finance. Indeed, it
ought to be possible to ‘anticipate’ demand for a CAD model to fund investment in its
design and development, though this is probably beyond the scope of supply chain finance
as we understand it today.

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3.6.5 3D printing: maintaining visibility and control

The challenge will be maintaining visibility and control. Once a CAD model has been
developed, safeguards must be in place to measure the number of times buyers have used it
and to prevent unlawful use. In essence, this is similar in principle to the licensing protocols
associated with application software or music streaming.

Notwithstanding the undoubted challenges, in many ways supply chain finance should be
well suited to trade in services as the trade cycle times will be shorter, reducing risk and
allowing finite finance availability to support more business and faster growth. In addition,
performance risk is less of a concern, given that the sale is effectively complete as soon as
the buyer accepts the CAD model, so greater reliance can be placed on the creditworthiness
of the buyer which can, of course, be enhanced through the use of credit insurance and
traditional bank instruments as required.

FACTFIND

Turning physical goods into a service

With the advent of new technologies such as 3D printing, some of the established processes
associated with the movement of physical goods will change, eliminating certain problems
and introducing other challenges.

DHL: 3D printing to disrupt selected manufacturing techniques says DHL

Activity 3.2 Digitisation of physical supply chains

Part 1

Listen to the following audio recording where Mark Millar, author of Global Supply Chain
Ecosystems, discusses digitisation of the physical supply chain with John Bugeja, author of
these learning materials. They talk about predictive analytics, robotics and 3D-printing and
the effect these technologies have on supply chains.

Please note that this was recorded in April 2018.

Part 2

Consider the following questions:

• Is there any evidence that physical trade can and will be digitised?
• How have advancements in data analytics improved efficiencies across the physical
supply chain?
© The London Institute of Banking & Finance 16
 • Reflect on the impact of robotics, thinking about future potential. What has been the
impact of disruptors such as Amazon and Ocado?
• Is there potential in integrating the physical and financial supply chains using
technologies such as distributed ledger technology?

Conclusion
As finance providers, we might think that we do not need to understand the operation of
the physical supply chain, but we would be wrong. The manner in which physical supply
chains work has a direct impact on a customer’s finance, risk mitigation and settlement
requirements.

The essence of supply chain finance is the ability to leverage the credit standing of the
strongest party in the supply chain for the benefit of all other parties. The nature of the
relationships between the strongest party and every other party is, therefore, fundamental
to our risk appetite and solution structure.

As technology continues to evolve, the opportunity (and challenge) to develop enhanced

supply chain finance solutions becomes ever more significant.

Think again...

Now that you have completed this topic, how has your knowledge and understanding
improved? For instance, can you:

• explain what a supply chain is;

• describe the parties in the physical supply chain;
• illustrate how automation and digitisation are improving the physical supply chain; and
• explain the benefits of integrated logistics hubs?

Test your knowledge

1. Which of the following are physical supply chain activities? Select all that apply.

Select from:

A. Shipping raw materials.

B. Storing finished goods.

C. Issuing a purchase order.

© The London Institute of Banking & Finance 17
Feedback

Although issuing a purchase order is associated with the sourcing process, it is a financial
supply chain event. (See section 3.2.)

The correct answers are: Shipping raw materials and storing finished goods.

2. Which of the following statements is/are correct? Select all that apply.

Select from:

A. There are only ever two parties in a supply chain, a seller and a buyer.

B. A manufacturer will often sell their finished goods in bulk to a wholesale

distributor.

C. A retailer typically holds stock, so they can sell individual units to consumers.

Feedback

There are usually at least three parties in a supply chain and often a great many more. (See
section 3.3.)

The correct answer is: A manufacturer will often sell their finished goods in bulk to a
wholesale distributor and a retailer typically holds stock, so they can sell individual units to
consumers.

3. How do multi-tiered supply chains work?

Select from:

A. A manufacturer usually has a range of Tier 1 suppliers who source some of

the parts they need to make the products that are then sold to the
manufacturer from Tier 2 suppliers.
B. The manufacturer always has a contractual relationship with Tier 2 and Tier 3
suppliers.
C. Tier 2 suppliers, having contracted with Tier 1 suppliers, may be required to
ship goods directly to the manufacturer.

© The London Institute of Banking & Finance 18

Feedback

The manufacturer will generally have a contractual relationship with their Tier 1 suppliers
but will very often approve Tier 2 and Tier 3 suppliers to ensure quality is maintained. (See
section 3.4.)

The correct answer is: A manufacturer usually has a range of Tier 1 suppliers who source
some of the parts they need to make the products that are then sold to the manufacturer
from Tier 2 suppliers., Tier 2 suppliers, having contracted with Tier 1 suppliers, may be
required to ship goods directly to the manufacturer.

4. What benefits does an integrated logistics hub deliver?

Select from:

A. It delivers a seamless flow of goods to distribution centres.

B. It facilitates better visibility and control for supply chain stakeholders (eg
location of particular containers).
C. It streamlines processes by bringing together different modes of transport in
a single ecosystem.

Feedback

Integrated logistics hubs provide all of the benefits above. (See section 3.5.)

The correct answers are: It delivers a seamless flow of goods to distribution centres. It
facilitates better visibility and control for supply chain stakeholders (eg location of a
particular container) and it streamlines processes by bringing together different modes of
transport in a single ecosystem.

5. How has technological innovation impacted the physical supply chain?

Select from:

A. The deployment of robotics has improved efficiency and reduced cost.

B. 3D printing has rendered the shipment of physical goods obsolete.
C. Procurement efficiency can be optimised by linking sales data and purchase
order data to stockholding data (eg supporting a ‘just-in-time’ strategy on an
automated basis).

© The London Institute of Banking & Finance 19

Feedback

Although 3D printing has converted trade in physical goods into trade in services, this has
not yet had a significant impact on the volumes of physical goods shipped. (See section 3.6.)

The correct answers are: The deployment of robotics has improved efficiency and reduced
cost and procurement efficiency can be optimised by linking sales data and purchase order
data to stockholding data (eg supporting a ‘just-in-time’ strategy on an automated basis).

References
APICS Dictionary (2019) 15th edn. [online]. Available at:
http://www.apics.org/ProductCatalog/APICSProduct?ID=10697

Churchill, J. (2015) Robots running things in Rotterdam [online]. Available at:

https://careers-origin.maersk.com/home/stories/robots-running-things-in-rotterdam

GSCFF (2016) Standard definitions for techniques of supply chain finance [pdf]. Available
at: supplychainfinanceforum.org/ICC-Standard-Definitions-for-Techniques-of-Supply-Chain-
Finance-Global-SCF-Forum-2016.pdf

Kuehne + Nagel (no date) Services: KN ControlTower [online]. Available

at: https://uk.kuehne-nagel.com/-/kn-controltower

McCrea, B. (2017) Supply chain and logistics technology: ERP pushes forward in
SCM. Logistics management, 56(8), p56–61, EBSCOhost: Business Source Corporate
Plus [online]. Available through KnowledgeBank website
at: https://study.libf.ac.uk/refer.php?resource=EBSCO&id=AN=124580002

Millar, M. (2015) Global supply chain ecosystems. London: Kogan Page.

Schrauf, S. etal. (2016) Global digital operations study 2018: How industry leaders build
integrated operations ecosystems to deliver end-to-end customer solutions [online].
Available at: https://www.strategyand.pwc.com/media/file/Industry4.0.pdf

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