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OM Lec 06
OM Lec 06
and Management - 6
21MECH42H-O
LOGISTICS
1
Origins
Dr. Noha Mostafa
Mechanical Engineering Department
Operations Research & Management
5
Mass production
2
Logistics Systems
What is Logistics?
▰ Logistics is concerned with the organization, movement and storage of material and
people.
▰ The objective of logistics is to provide customers with the right product in the right
place at the right time, while optimizing a given performance measure and satisfying
a given set of constraints.
Necessary components in a factory.
Logistics functions
Order processing
Inventory and warehouse management
Transportation management
Logistics costs
Logistics 25%
Cost
Marketing
27%
Cost
Manufacturing 48%
Cost
Logistics systems
Facilities are sites were material are Transportation services move materials
processed (manufactured, stored, sorted, sold between facilities using vehicle and
or consumed): equipment. Each transportation link may be
simple (truck line), or more complex (port
▻ Manufacturing and assembly centers terminals).
▻ Warehouses ▻Cars
▻ Distribution Centers (DCs) ▻Trucks
▻ Transshipment points ▻Trains
▻ Transportation terminals ▻Containers
▻ Retail Outlets ▻Pallet Dr. Noha Mostafa
Mechanical Engineering Department
Operations Research & Management
14
Logistics systems
Importance of Logistics
▰ Today, business competition is often no longer company vs. company but supply
chain vs. supply chain.
▰ Logistics is more and more important due to the increasing and intense
competition and the availability of alternative products.
▰ So, the logistics activities should provide:
▻ Less lead time
▻ Less cost
▻ Greater accuracy
Dr. Noha Mostafa
Mechanical Engineering Department
Operations Research & Management
17
Vertical Integration
Vertical Integration
https://www.globalwoodmarketsinfo.com/ikea-logging-romania/
44 factories in 11 countries
https://www.goodnewsnetwork.org/ikea-buys-forest-in-georgia/
Vertical Integration
https://www.globalwoodmarketsinfo.com/ikea-logging-romania/
44 factories in 11 countries
https://www.ikea.com/eg/en/customer-service/faq/
433 stores in 50 countries (24 owned the rest franchised) Dr. Noha Mostafa
Mechanical Engineering Department
Operations Research & Management
20
Vertical Integration
3
How do Logistics systems work?
Order Processing
Inventory management
Inventory management
Problems of inventory:
Opportunity cost, represented by the ROI that the firm would have realized if
money was better invested
Warehousing costs (private, leased, public)
Holding costs.
Plant Retailers
Freight Transportation
Distribution channels
4
Issues, Trends, Decisions
Logistics decisions
▰Strategic decisions
▻ Have long-lasting effects (over many
years).
▻ Such as, logistics system design, facility
locations and capacities, warehouse layout,
and fleet size.
▻ Uses forecasts based on aggregate data.
Logistics decisions
▰Tactical decisions
▻ Medium-term basis (monthly or quarterly).
▻ Such as, distribution planning , storage allocation, order picking strategies,
transportation mode selection, and consolidation strategy.
▻ Uses forecasts based on disaggregate data.
Logistics decisions
▰Operational decisions
▻ Daily basis or in real time and have a
narrow scope.
▻ Such as, warehouse order picking, shipment
and vehicle dispatching, and drivers
assignment.
▻ Based on very detailed data.
▰Benchmarking
▻ The most popular logistics benchmarking is based on
the Supply Chain Operations References (SCOR)
model.
▻ SCOR is a process reference model that has been
developed and endorsed by the Supply Chain
Council (SCC) as the cross-industry standard
diagnostic tool for supply chain management.
▰Simulation
▻ To evaluate specified alternatives and answer what-if
questions, e.g. a simulation model to estimate the
average order retrieval time in a given warehouse is
a specific storage policy is used.
▰Optimization
▻ Mathematical optimization problem is formulated to
generate an optimal policy.
▻ Linear Programming, Network Flow (NF), where
thousands of variables and constraints can be
optimized by using computer.
▻ Most of the models in this course use IP, MIP, NLP,
which are difficult to be solved, so we can use
heuristics.
Dr. Noha Mostafa
https://www.youtube.com/watch?v=Si8tiSEuMKA Mechanical Engineering Department
Operations Research & Management
47
Optimization
▰Optimization
▻ Single-echelon or multi-echelon
5
Long-haul freight
transportation
Dr. Noha Mostafa
Mechanical Engineering Department
Operations Research & Management
50
Players
Long-haul freight transportation: Goods are moved over long distances by one
or more mode.
Short-haul freight transportation: Goods are moved over short distances usually
by trucks between pick-up and delivery points in the same area.
▰ Transportation costs:
Fleet operating: wages, fuel, vehicle depreciation, maintenance, insurance, administration.
Time dependent wages, insurance; Distance dependent fuel, maintenance.
Time and distance dependent depreciation; Fixed Administration.
Shipment transporting.
Vehicle hiring.
▰ Handling costs:
Bin packing.
Dr. Noha Mostafa
Loading/Unloading.
Mechanical Engineering Department
Operations Research & Management
54
Challenges
▰ Fuel
▰ Emissions
▰ Pricing wars
▰ E-commerce
▰ Security issues at terminals
Modes
1. Freight Forwarders
They are in the business of finding the best and least expensive methods for moving products. These
companies may take the role of an agent on the shipper’s behalf or as the principal who handles all
documentation and freight management from the source to the customer. Freight forwarders negotiate
pricing with land, rail, ocean, and air carriers and award freight contracts on the shipper’s behalf. Other
essential functions include documentation, customs clearance, duty negotiation, and consolidation.
2. Freight Carriers
They are companies that generate revenue by moving products around the country and the globe. These
include: Trucking companies, Rail services, Ocean freight carriers, Air freight carriers. Many times,
shipments are multimodal or intermodal and may require more than one carrier type to complete the
transport.
Dr. Noha Mostafa
Mechanical Engineering Department
Operations Research & Management
62
Top 10
Cargo types
Containerized (Lift-on/Lift-off)
Port layout
Video: World's Biggest Automated Cargo Deep-water Port Starts Operation in Shanghai
https://www.youtube.com/watch?v=IzOeAGAu60k Dr. Noha Mostafa
Mechanical Engineering Department
Operations Research & Management
77
Trends
Since 1980, global trade has grown at 5.5% annually, an expansion of almost 600%.
This explosion of cross-border trade reflects the growth of global supply chains and the expansion of
consumption and production into new locations.
In order to support this trade network, logistics hubs that facilitate the manufacturing and distribution of
goods have been established in virtually every country around the world. Key among these are the
large and strategically located global logistics hubs.
These global nodes process goods by facilitating exchanges between various modes of transport,
including sea, air, rail, road and inland waterways—or any combination of these—optimizing the
distribution process and driving down the cost of trade between suppliers and end-users.
Logistics in Egypt
1-Alexandria port:
the main port in Egypt, 75% of Egypt foreign trade pass through.
Passenger, petroleum, general cargo, bulk, coal, containers,
molasses, vegetable oil
2-Dekheila port:
Container, general cargoes, iron ore terminal, coal, grain silos
3- Abu Qir:
Food products, urea, petroleum offshore activities, citrus exporting
4-Damietta port: Dry bulk, general cargo, containers and LNG
5-Portsaid port: Containers, passenger, dry bulk, general cargo
6-Arish port: Mainly for salt exporting
7-Suez port/port Tawfik: Passenger, general cargo.
8-Adabiya port: Dry bulk, container, general cargo.
9-Safaga port: Passengers serving lines between Egypt / Saudi
Arabia, dry bulk, grain, Aluminum, phosphate.
10-sokhna port: General cargo.
Dr. Noha Mostafa
https://www.emdb.gov.eg/
Mechanical Engineering Department
Operations Research & Management
86
Egyptian sea ports
1-Alexandria port:
the main port in Egypt, 75% of Egypt foreign trade pass through.
Passenger, petroleum, general cargo, bulk, coal, containers,
molasses, vegetable oil
2-Dekheila port:
Container, general cargoes, iron ore terminal, coal, grain silos
3- Abu Qir:
Food products, urea, petroleum offshore activities, citrus exporting
4-Damietta port: Dry bulk, general cargo, containers and LNG
5-Portsaid port: Containers, passenger, dry bulk, general cargo
6-Arish port: Mainly for salt exporting
7-Suez port/port Tawfik: Passenger, general cargo.
8-Adabiya port: Dry bulk, container, general cargo.
9-Safaga port: Passengers serving lines between Egypt / Saudi
Arabia, dry bulk, grain, Aluminum, phosphate.
10-sokhna port: General cargo.
Dr. Noha Mostafa
https://www.emdb.gov.eg/
Mechanical Engineering Department
Operations Research & Management
87
Egypt - Railways
https://english.ahram.org.eg/News/462514.aspx
https://emgf.org/ Dr. Noha Mostafa
https://www.gem.wiki/Cyprus-Egypt_gas_pipeline Mechanical Engineering Department
Operations Research & Management
89
Opportunities
https://oxfordbusinessgroup.com/analysis/zone-developing-suez-canal-zone-major-logistics-centre-part-country%E2%80%99s-future-vision
Glossary