INTT 356 Spring 2021 Ch01 Handouts

INTT 356 International Transportation and Logistics
Spring 2021
Skip “Government Policy and Regulation” on pages 11-14
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Globalization
More competitively intense economic and geopolitical environment.
Issues and challenges for supply chains in the global economy:
1. More volatile supply and demand
2. Shorter product lifecycles
3. Blurring of traditional boundaries
Technology
Outsourcing and collaboration opportunities are enhanced.
Organizational consolidation
Driving forces in supply chains changed from product manufacturers to
mass retailers.
Larger retailers are given special consideration like customized
distribution services, vendor-managed inventory systems.
The empowered consumer
Today’s customer is more enlightened, educated, and empowered
through information.
Government policy and regulation
EU, customs agreements, etc.
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Source : OM, 6th Edition by David A. Collier & James Evans
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The Supply Chain Concept

Development of the Concept:
The concept started in the 1960s with the development of the idea of
physical distribution which focused on the outbound side of a firm’s
logistics system. The focus of physical distribution was on total systems
cost and analyzing tradeoff scenarios to arrive at the best or lowest
system cost.
The initial focus on physical distribution or outbound logistics was logical
since finished goods were usually higher in value, which meant that their
inventory, warehousing, materials-handling, and packaging costs were
relatively higher than their raw materials inputs.
During the 1980s, the logistics or integrated logistics management
emerged. In its simplest form, it added inbound logistics to the outbound
logistics of physical distribution. This increased coordination between the
outbound and inbound logistics systems provided opportunities for
increased efficiency and, perhaps, improved customer service.
International or global sourcing of materials and supplies for inbound
systems was growing, which presented some special challenges for
production scheduling.
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A value chain is a chain of activities that a firm operating in a specific

industry performs in order to deliver a valuable product or service for the
market. The value-chain concept extends beyond individual firms to whole
supply chains and distribution networks. The delivery of a mix of products
and services to the end customer will mobilize different economic factors,
each managing its own value chain. The industry wide synchronized
interactions of those local value chains create an extended value chain,
sometimes global in extent.
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A study of “best-in-class” companies showed they spent 7.0 cents of every

sales/revenue dollar for supply chain-related costs, while the median
company spent 13.1 cents of every sales dollar on supply chain-related
costs. For a hypothetical company with $100 million in sales in 1997,
being best in class would mean an additional $5.3 million of gross profit to
an organization, which frequently would be the equivalent profit from an
additional $80–100 million of sales.
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Reviewing supply chain financial benchmarks provides an effective way of

looking at overall supply chain performance. The data in this table has
been divided by industry segment and into quartiles. Top quartile
companies represent the leading 25% of all survey participants; the
second quartile is the next 25% and so on.
Supply chain cost is steadily increasing over time despite intensive efforts
to hold the line. As supply chain cost grows relative to revenue, more
pressure has been put on cost control efforts, and few companies can
accept service level erosion or inventory growth in exchange for reduced
costs. The table above shows the average supply chain costs as a
percentage of revenue divided by quartiles.
Source: http://www.tompkinsinc.com/wp-
content/uploads/2012/07/corebenchmarksreport.pdf
DC: Distribution Center

LSP: Logistics Service Provider (Third-party logistics - 3PL)
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Supply chain management can be viewed as a pipeline for the efficient

and effective flow of products/materials, services, information, and
financials from the supplier’s suppliers through the various intermediate
organizations/companies out to the customer’s customers, the end user.
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A supply chain is an extended enterprise that crosses the boundaries of

individual firms to span the related activities of all the companies involved
in the total supply chain. The supply chain needs to function similar to one
organization in satisfying the ultimate customer.
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Supply Chain Networks: The network facilities must be capable and flexible to
respond and change with the dynamics of the marketplace whether in the short
run or the long run. Technology companies, for example, may have to move
manufacturing operations to a different country in six to nine months because of
changes that can occur that affect their cost and/or customer service. At times,
the flexibility may be required for a shorter duration—for example, a port strike,
floods, hurricanes, etc.
Wal-Mart and Home Depot in the US received great compliments for their ability
to respond in 2005 to Hurricane Katrina and the flood disasters that occurred in
New Orleans and the surrounding Gulf Coast area.
Complexity: Globalization and consolidation in supply chains increase
complexity for organizations in terms of SKUs (Stock Keeping Unit),
customer/supplier locations, transportation requirements, trade regulations,
taxes, etc. Companies need to take steps to simplify, as much as possible, the
various aspects of their supply chains such as rationalizing SKUs, physical
locations, and customer service.
Inventory Deployment: SCM provides an opportunity to reduce inventory levels
with coordination or integration, which can help reduce inventory levels on
horizontal (one firm) and/or vertical (multiple firms) levels in the supply chain.
Information: Today’s technology and communication lead to the collection and
storage of vast amounts of data unless data is shared horizontally and vertically
in the supply chain and used to make better decisions. Information can be a
powerful tool if it is timely, accurate, managed, and shared.
Cost/Value: A challenge for supply chains is the prevention of suboptimization.
Global supply chains compete against global supply chains, which means that
the cost and value at the very end of the supply chain are most important.
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Organizational Relationships: Supply chain management emphasizes a

horizontal process orientation that cuts across traditional functional silos within
organizations and necessitates collaboration with external vendors, customers,
transportation companies, 3PLs, and others in the supply chain. Communication
is critical to explain the opportunities for system tradeoffs that will make the
supply chain more competitive.
Performance Measurement: Most organizations have measures of
performance or metrics in place to analyze and evaluate their efficiency and
progress over different time periods. In some instances, metrics are set that
appear logical for the subunit of the organization but are suboptimal for the
overall organization or supply chain.
Technology: Technology can be viewed as a change driver, but it is also
important as a facilitator of change that will lead to improved efficiency and
effectiveness. The approach necessary is to analyze and adjust or change
processes, educate the people involved, and then select and implement the
technology to facilitate the changes in the processes.
Transportation Management: Transportation can be viewed as the glue that
unites the supply chain model. The critical outcomes of the supply chain are to
deliver the right product, at the right time, in the right quantity and quality, at the
right cost, and to the right destination. Economic changes among transportation
providers such as shortages of drivers, higher fuel costs, and changes in driver
hours of service regulations have led to what some individuals have called a
transportation crisis or the “perfect storm,” a much greater challenge for users.
Supply Chain Security: Since 9/11, this is a concern and potential challenge
since globalization has obviously increased the risk of interruptions or shutdowns
of supply chains. Organizations must be prepared in case of a terrorist attack,
which could close critical links.
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INTT 356 Spring 2021 Ch01 Handouts

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INTT 356 Spring 2021 Ch01 Handouts

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INTT 356 International Transportation and Logistics

Skip “Government Policy and Regulation” on pages 11-14

Source : OM, 6th Edition by David A. Collier & James Evans

Source : OM, 6th Edition by David A. Collier & James Evans

Source : OM, 6th Edition by David A. Collier & James Evans

Source : OM, 6th Edition by David A. Collier & James Evans

Source : OM, 6th Edition by David A. Collier & James Evans

The Supply Chain Concept

A value chain is a chain of activities that a firm operating in a specific

A study of “best-in-class” companies showed they spent 7.0 cents of every

Reviewing supply chain financial benchmarks provides an effective way of

DC: Distribution Center

Supply chain management can be viewed as a pipeline for the efficient

A supply chain is an extended enterprise that crosses the boundaries of

Organizational Relationships: Supply chain management emphasizes a

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