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International Series in
Operations Research & Management Science
Thomas Hanne
Rolf Dornberger
Computational
Intelligence in
Logistics and
Supply Chain
Management
International Series in Operations Research
& Management Science
Volume 244
Series Editor
Camille C. Price
Stephen F. Austin State University, TX, USA
Associate Series Editor

Joe Zhu
Worcester Polytechnic Institute, MA, USA
Founding Series Editor

Frederick S. Hillier
Stanford University, CA, USA
More information about this series at http://www.springer.com/series/6161

Thomas Hanne • Rolf Dornberger
Computational Intelligence
in Logistics and Supply
Chain Management
Thomas Hanne Rolf Dornberger
Institute for Information Systems Institute for Information Systems
University of Applied Sciences University of Applied Sciences
and Arts Northwestern Switzerland and Arts Northwestern Switzerland
Olten, Switzerland Basel, Switzerland
ISSN 0884-8289 ISSN 2214-7934 (electronic)

International Series in Operations Research & Management Science
ISBN 978-3-319-40720-3 ISBN 978-3-319-40722-7 (eBook)
DOI 10.1007/978-3-319-40722-7
Library of Congress Control Number: 2016943140
© Springer International Publishing Switzerland 2017

This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of
the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission
or information storage and retrieval, electronic adaptation, computer software, or by similar or
dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are exempt
from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this
book are believed to be true and accurate at the date of publication. Neither the publisher nor the
authors or the editors give a warranty, express or implied, with respect to the material contained
herein or for any errors or omissions that may have been made.
Printed on acid-free paper
This Springer imprint is published by Springer Nature

The registered company is Springer International Publishing AG Switzerland
Preface
Over the last decades, logistics and supply chain management (SCM) have become
one of the most often and intensively discussed fields in management and econom-
ics. Although many ideas and concepts used in logistics and SCM are reasonably
old, much effort has been undertaken to transfer them into practice and to improve
them further. Many publications, in academia as well as in application-oriented
literature, have appeared. Logistics and SCM have become fields which are rich in
terms of innovation and progress.
Despite these promising developments, there are still obstacles to bring
advanced visions of improved planning and cooperation along logistics processes
and supply chains into reality. On the one hand, there are many practical issues such
as the availability and transparent processing of information, difficulties in
establishing cooperation, or because of an increasingly uncertain or rapidly chang-
ing planning environment. On the other hand, it has become more and more
apparent that the underlying planning problems are very complex and hard to
solve even in the case that respective data is fully retrievable and complete.
From a computational point of view, many of these problems can be character-
ized as NP-hard, which means that the number of possible solutions is increasing
exponentially with the problem size and that presumably no algorithms exist, which
can solve them exactly within acceptable time limits—at least when the problems
are “rather large.” Unfortunately, most real-world problems can be considered
rather large.
Especially during the last 20 years, these problems have been investigated
intensively in the academic literature, and many suitable solution approaches
have been suggested. As the problems usually cannot be solved exactly within an
acceptable time, these methods allow to find sufficiently good, although not nec-
essarily, optimal solutions.
One of the still growing streams of methods belongs to the field of computational
intelligence (CI), which comprises mostly approaches inspired by concepts found
in nature, e.g., the natural evolution or the behavior of swarms. These methods
are based on general heuristic ideas and concepts for problem solving, which
v
vi Preface
can—with some adaptations—be applied to a wide range of problems. To distin-

guish these methods from simple heuristics, which are often very specific to a single
type of problem, they are also denoted as metaheuristics.
Although the respective computational intelligence methods have been studied
in numerous applications related to logistics and supply chain management, they
are hardly discussed in general textbooks in these fields. Often, the treatment of
formal planning problems in these books does not go much beyond some rather
simple and general results, which are often not applicable in real-world settings, for
instance, the more than 100-year-old equation for calculating economic order
quantities.
The book is intended to reduce this gap between general textbooks in logistics
and supply chain management and recent research in formal planning problems and
respective algorithms. It focuses on approaches from the area of computational
intelligence and other metaheuristics for solving the complex operational and
strategic problems in these fields.
Thus, the book is intended for readers who want to proceed from introductory
texts about logistics and supply chain management to the scientific literature, which
deals with the usage of advanced methods. For doing so, state-of-the-art descrip-
tions of the corresponding problems and suitable methods for solving them are
provided. The book mainly addresses students and practitioners as potential
readers. It can be used as additional reference for undergraduate courses in logistics,
supply chain management, operations research, or computational intelligence or as
a main teaching reference for a corresponding postgraduate level course. Practi-
tioners may read the book to become familiar with advanced methods that may be
used in their area of work. For a reader, a basic understanding of mathematical
notation and algebra is suggested as well as introductory knowledge on operations
research (e.g., on the simplex algorithm or graphs).
The book is organized as follows: The first two chapters provide general
introductions to logistics and supply chain management on the one hand and to
computational intelligence on the other hand. The subsequent chapters cover
specific fields in logistics and supply chain management, work out the most
relevant problems found in those fields, and discuss approaches for solving them.
In Chap. 3, problems in transportation planning such as different types of vehicle
routing problems are considered. Chapter 4 discusses problems in the field of
production and inventory management. Chapter 5 considers planning activities on
a finer level of granularity, which is usually denoted as scheduling. While Chaps. 3
to 5 rather discuss planning problems, which appear on an operative level, Chap. 6
discusses the strategic problems with respect to the design of a supply chain or
network. The final chapter provides an overview of academic and commercial
software and information systems for the discussed applications.
We hope to provide the readers a comprehensive overview with specific details
about using computational intelligence in logistics and supply chain management.
Olten, Switzerland Thomas Hanne

Basel, Switzerland Rolf Dornberger
Acknowledgments
The authors would like to express their gratitude to their employer, the University
of Applied Sciences and Arts Northwestern Switzerland, particularly the School of
Business, for supporting the proofreading of the book. Our dedicated thanks go to
Christine Lorgé, assistant at our Institute for Information Systems, who read this
rather scientific book about computational intelligence and logistics with great
passion, although she is not coming from these disciplines.
Our deep gratitude goes to our beloved families, i.e., our wives and children. As
professors who are active in research and teaching, with Rolf additionally being
head of the institute and Thomas being head of one of its competence centers, we
spend so much time with working issues that we always feel that our families are
missing out. Therefore, we wish to express to them our highest thanks for their great
understanding and their never-ending support! Thomas additionally thanks his wife
Doris for proofreading some of the chapters, for discussion of some contents, and
for support with the lists of symbols and acronyms.
vii
Contents
1 Introduction to Logistics and Supply Chain Management . . . . . . 1

1.1 The Concept of Logistics and Supply Chain Management . . . . . 1
1.2 A Short History of Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Recent Trends and the Modern Importance of Logistics . . . . . . 5
1.4 The Need for a Better Planning . . . . . . . . . . . . . . . . . . . . . . . . 10
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2 Computational Intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Foundations of Computational Intelligence . . . . . . . . . . . . . . . . 14
2.1.1 Artificial and Computational Intelligence and Related
Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.2 Properties of Computational Intelligence . . . . . . . . . . . . 17
2.1.3 The Big Picture of Computational Intelligence . . . . . . . 18
2.1.4 Application Areas of Computational Intelligence . . . . . . 20
2.2 Methods of Computational Intelligence . . . . . . . . . . . . . . . . . . 22
2.2.1 Evolutionary Computation . . . . . . . . . . . . . . . . . . . . . . 22
2.2.2 Evolutionary Algorithms . . . . . . . . . . . . . . . . . . . . . . . 23
2.2.3 Swarm Intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.2.4 Neural Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.2.5 Fuzzy Logic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.2.6 Artificial Immune System . . . . . . . . . . . . . . . . . . . . . . . 36
2.2.7 Further Related Methods . . . . . . . . . . . . . . . . . . . . . . . 36
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3 Transportation Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.1 Assignment Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.2 Shortest Paths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.3 The Travelling Salesman Problem . . . . . . . . . . . . . . . . . . . . . . 47
ix
x Contents
3.4 Methods for Solving the Travelling Salesman Problem . . . . . . . 50

3.4.1 Heuristics for the Travelling Salesman Problem . . . . . . . 50
3.4.2 Evolutionary Algorithms for the Travelling
Salesman Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.4.3 Other Metaheuristics and Neural Networks
for the Travelling Salesman Problem . . . . . . . . . . . . . . 55
3.4.4 On the Performance of Solution Approaches . . . . . . . . . 56
3.5 The Vehicle Routing Problem . . . . . . . . . . . . . . . . . . . . . . . . . 57
3.5.1 The Vehicle Routing Problem
with Time Windows . . . . . . . . . . . . . . . . . . . . . . . . . . 59
with Multiple Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . 59
with Multiple Depots . . . . . . . . . . . . . . . . . . . . . . . . . . 60
3.5.4 More Differentiated Problem Variants . . . . . . . . . . . . . . 61
3.6 Solution Approaches for Vehicle Routing Problems . . . . . . . . . 62
3.7 The Pickup and Delivery Problem . . . . . . . . . . . . . . . . . . . . . . 65
3.8 Network Flow Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
4 Inventory Planning and Lot-Sizing . . . . . . . . . . . . . . . . . . . . . . . . 73
4.1 The Need for Inventory Planning . . . . . . . . . . . . . . . . . . . . . . . 73
4.2 Economic Order Quantities and Safety Stocks . . . . . . . . . . . . . 75
4.3 Capacitated Lot-Sizing Problems . . . . . . . . . . . . . . . . . . . . . . . 79
4.4 Solution Approaches for Capacitated
Lot-Sizing Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
4.5 Planning Warehouse Operations . . . . . . . . . . . . . . . . . . . . . . . 85
4.6 Storage Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
4.7 Inventory Routing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
5 Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.2 Simple Rules and Heuristics . . . . . . . . . . . . . . . . . . . . . . . . . . 100
5.3 Standard Scheduling Problems . . . . . . . . . . . . . . . . . . . . . . . . 103
5.3.1 Job Shop Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . 105
5.3.2 Flow Shop Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . 106
5.3.3 Open Shop Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . 107
5.4 Specific Scheduling Problems in Logistics . . . . . . . . . . . . . . . . 108
5.5 Solving Scheduling Problems with Computational
Intelligence Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.5.1 Encoding Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.5.2 Usage of Metaheuristics in Scheduling . . . . . . . . . . . . . 115
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Contents xi
6 Location Planning and Network Design . . . . . . . . . . . . . . . . . . . . 121

6.1 Location Planning as Multicriteria Decision Problems . . . . . . . 121
6.2 Discrete Location Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
6.2.1 The p-Median Problem . . . . . . . . . . . . . . . . . . . . . . . . 124
6.2.2 The p-Center Problem . . . . . . . . . . . . . . . . . . . . . . . . . 128
6.2.3 The Uncapacitated Facility Location
Problem (UFLP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
6.2.4 The Capacitated Facility Location Problem (CFLP) . . . . 133
6.3 Continuous Location Problems . . . . . . . . . . . . . . . . . . . . . . . . 135
6.3.1 The Uncapacitated Multi-facility
Weber Problem (UMWP) . . . . . . . . . . . . . . . . . . . . . . . 135
6.3.2 The Capacitated Multi-facility Weber
Problem (CMWP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
6.4 Location Routing Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
6.5 Hub Location Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
6.6 Multi-Echelon Network Design . . . . . . . . . . . . . . . . . . . . . . . . 145
6.7 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
7 Intelligent Software for Logistics . . . . . . . . . . . . . . . . . . . . . . . . . 153
7.1 General-Purpose Optimization Software . . . . . . . . . . . . . . . . . . 153
7.1.1 Setting Up a Suitable Model for the Optimization
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
7.1.2 Integration of Optimization Software with Logistics
Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
7.1.3 Adapting the Method to the Problem
Under Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . 157
7.2 Software Providing Specific Optimization Algorithms
or Supporting Particular Optimization Problems . . . . . . . . . . . . 157
7.3 General-Purpose Business Software . . . . . . . . . . . . . . . . . . . . . 160
7.4 Logistics Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
7.4.1 Warehouse Management Systems . . . . . . . . . . . . . . . . . 163
7.4.2 Software for Transportation Planning . . . . . . . . . . . . . . 165
7.4.3 Packing and Loading Software . . . . . . . . . . . . . . . . . . . 166
7.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Authors Brief Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
List of Symbols
λ Number of offspring (parameter of an evolution strategy)

π Permutation
ℜ Set of real numbers
ρ Number of recombined parents (parameter of an evolution strategy)
σ Standard deviation, prediction error
σd Standard deviation for demand
σLT Standard deviation for lead time
μ Number of parents (parameter of an evolution strategy)
A (Feasible) set of alternatives, search space
A, B Start and destination location of a transport
a Capacity requirement per unit
ai Capacity requirement at location i
(ai1, ai2) Coordinates of customer i
aij Influence factors (in particle swarm optimization)
ap Capacity requirement per unit of item p
ati Arrival time of job i
b Capacity requirement per setup
C, Ci Completion time (of job i)
c, ct Costs, unit costs
cibest, ciglobal Acceleration factors (in particle swarm optimization)
cij Transport costs (between i and j)
Cmax Makespan
D Total required quantity (in the time horizon)
d(.,.) Distance function
ddi Due date of job i
dij Distance between i and j
dli Deadline of job i
dp Demand of item p
dt Demand in t
xiii
xiv List of Symbols
d^ t Predicted demand in t
d Average demand
E Set of edges (arcs) of a graph
ea Earliness
ei Edge of a graph
f(.) Objective function
fi Finishing time
fj Setup costs of facility j
G ¼ (V,E) Graph
G ¼ (V,E,c) Graph with weights (which correspond to costs)
h, ht, hp (Unit) holding costs
hr Holding cost rate
ipt Inventory of product p in t
iApt , iBpt Inventory of product p at location A (B) in t
it Inventory in t
L Set of locations
LC Set of customer locations
LD Set of depot locations
LT Lead time
LT Average lead time
la Lateness
li Location
lCj Customer location
lDi Depot location
M Large constant number
m Number of neurons
N(0, σ) Normal distribution with expected value 0 and standard deviation σ
n Number of variables (e.g., locations in a tour)
n! Factorial function of n
O(.) Run time complexity of an algorithm (big O notation)
P Subset of locations
p Price per unit
p Number of facilities to open in a p-median problem
pglobal Global best position of a particle (in particle swarm optimization)
pi Particle i (in particle swarm optimization)
pibest Best previous position of particle i (in particle swarm optimization)
pij Processing time of job i (on machine j)
q, qj Capacity (e.g., of a vehicle or a facility)
qij Transported quantity between two locations
RP Reorder point
ribest, riglobal Random coefficients (in particle swarm optimization)
S Set of facility locations
SS Safety stock
si Start time of job i
List of Symbols xv
sik Arrival time of vehicle k at location i

simax Latest arrival time at location i (with specified time window)
simin Earliest arrival time at location i (with specified time window)
T Planning horizon, time horizon, total number of periods
tij Travel time from i to j
u, ut, up Fixed costs per order, setup costs of a production process
Ui Order-up-to level quantity of product i
V Set of vertices (nodes) of a graph, set of vehicles
vi Vertex (node) of a graph, velocity vector of a particle (in particle
swarm optimization)
wi Inertia weight (in particle swarm optimization)
wL, wE Weights (for lateness and earliness)
wt Production capacity in period t
x, xij, xijk, xpt Decision variables
xo Economic order quantity
xt Production quantities in t
yt, ypt Binary decision variables
Z Service level
z Auxiliary variable for objective function values
zit Binary variables (denoting whether node i is visited at time t)
List of Abbreviations and Acronyms
2E-VRP Two-echelon vehicle routing problem

ABC Artificial bee colony
ACO Ant colony optimization
AGV Automated guided vehicles
AI Artificial intelligence
AIMMS Advanced interactive multidimensional modeling system
AIS Artificial immune system
AMPL A mathematical programming language
ANN Artificial neural network
AP Alternating position crossover
APS Advanced planning systems or advanced planning and scheduling
AS/RS Automated storage/retrieval system
ATP Available-to-promise (functionality used in APS for supporting
order promising and fulfillment)
BA Bees algorithm
BE Bionic engineering
BOM Bill of materials
CCLSP Coordinated capacitated lot-sizing problem
CFLP Capacitated facility location problem
CI Computational intelligence
CMA Covariance matrix adaption
CMA-ES Evolution strategy with covariance matrix adaptation
CMWP Capacitated multi-facility Weber problem
COI Cube-per-order index
CS Cuckoo search
CSCMP Council of supply chain management professionals
CULSP Coordinated uncapacitated lot-sizing problem
CVRP Capacitated vehicle routing problem
CX Cycle crossover
xvii
xviii List of Abbreviations and Acronyms
DE Differential evolution
DLL Dynamic linked library
DPSO Discrete particle swarm optimization
DPX Distance-preserving crossover
EA Evolutionary algorithm
EC Evolutionary computation
ELS Economic lot size
EOQ Economic order quantity
EP Evolutionary programming
ER Genetic edge recombination crossover
ERP Enterprise resource planning
ERX Edge recombination crossover
ES Evolution strategy
FA Firefly algorithm
FIFO First-in first-out
FL Fuzzy logic
FNN Feedforward neural network
GA Genetic algorithm
GAMS General algebraic modeling system
GCLSP General capacitated lot-sizing problem
GDP Gross domestic product
GE Grammatical evolution
GEP Gene expression programming
GIS Geographic information systems
GNX Generalized n-point crossover
GP Genetic programming
GPS Global Positioning System
GRASP Greedy randomized adaptive search procedure
GSO Glowworm swarm optimization
HNN Hopfield neural networks
HS Harmony search
IEEE Institute of Electrical and Electronics Engineers
ILS Iterated local search
ILS-FDD Iterated local search with fitness-distance-based diversification
JiT Just-in-time
LCS Learning classifier systems
LGP Linear genetic programming
LOX Linear order crossover
LSAP Linear sum assignment problem
MA Memetic algorithms
MACS Multiple ant colony system
MCFP Multicommodity-flow problem
MCLC Maximal covering location criterion
MGP Metagenetic programming
List of Abbreviations and Acronyms xix
MICLSP Multi-item capacitated lot-sizing problem

MIP Mixed-integer optimization problems
ML Machine learning
MLLSP Multilevel lot-sizing problem
MLULSP Multilevel uncapacitated lot-sizing problem
MNS Multi-neighborhood search
MOO Multiobjective optimization
MPX Maximal preservative crossover
MRP Material requirement planning
MRP II Manufacturing resource planning
NC Natural computing
NN Neural networks
NP Nondeterministic polynomial (complexity class)
NP-hard Complexity class
NSGA, Non-dominated sorting genetic algorithms
NSGA-II
OOP Object-oriented programming
OpenOPAL Software toolbox for optimization and learning
OPL Optimization programming language
OptimJ Java-based modeling language for optimization
OX, OX1, Order (or order-based) crossover
OX2
PACO Population-based ant colony optimization
PMX Partially mapped crossover
PNN Perceptron neural networks
POS Position-based crossover
POX Precedence preserving order-based crossover
PPS Precedence preserving shift mutation
PSO Particle swarm optimization
RFID Radio-frequency identification
RIL Reinforcement learning
ROI Return-on-investment
RVNS-VNS Reduced and standard variable neighborhood search
SA Swarm algorithms
SC Soft computing
SCM Supply chain management
SCX Sequential constructive crossover
SI Swarm intelligence
SICLSP Single-item capacitated lot-sizing problem
SLAP Stock location assignment problem
SLSP Single link shipping problem
SOFM Self-organizing feature maps
SOM Self-organizing maps
xx List of Abbreviations and Acronyms
SPEA, Strength Pareto evolutionary algorithms

SPEA2
SPT Shortest processing time
SSCFLP Single source capacitated facility location problem
TMS Transportation management system
TSP Traveling salesman problem
TSPLIB Traveling salesman problem library
UFLP Uncapacitated facility location problem
UMWP Uncapacitated multi-facility Weber problem
USILSP Uncapacitated single item lot-sizing problem
VLSN Very large-scale neighborhood search
VND Variable neighborhood descent
VNDS Variable neighborhood decomposition search
VNS Variable neighborhood search
VR Voting recombination crossover
VRP Vehicle routing problem
VRPTW Vehicle routing problem with time windows
WES Warehouse execution system
WMS Warehouse management system
ZIO Zero inventory ordering
Chapter 1
Introduction to Logistics and Supply Chain
Management
Abstract In this chapter we provide a brief introduction into the concepts of

logistics and supply chain management. Considering different production factors,
functions and processes in a company and across companies both terms are spec-
ified taking into account different definitions from the literature. After that a brief
reflection of logistics history is given, followed by a discussion of the modern
importance of logistics and supply chain management. The last section motivates
the usage of advanced planning methods as discussed in later chapters of the book.
1.1 The Concept of Logistics and Supply Chain

Management
Roughly simplified a company can be considered as a system which receives a

specific input, creates goods or services out of it and delivers the output to its
customers. These three main activities can be denoted as procurement
(or purchasing), production, and distribution (or sales). Very often input and output
are physical objects or materials which require a specific handling such as trans-
portation or storage in order to realize the basic functions of a company. These
activities are considered the core tasks of logistics (Fig. 1.1).
To be more precise, the input of a company, often called the production factors,
can be distinguished into input which is used up during the production and input
which is available for a longer period of time. The first group of production factors
is often just called materials or consumption factors, whereas the second group
includes the classical production factors capital and labor (employees). These
factors are also often called resources and include machines, equipment, and
buildings. They are not used up during the production but frequently their capacity
(available time over a period) needs to be matched with the time needed for
production. Also “modern” production factors like information, human capital or
management belong to the latter group.
In a more traditional understanding logistics only refers to the materials and
could therefore also be called material logistics. Of course, many concepts from
© Springer International Publishing Switzerland 2017 1

T. Hanne, R. Dornberger, Computational Intelligence in Logistics and Supply Chain
Management, International Series in Operations Research & Management Science 244,
DOI 10.1007/978-3-319-40722-7_1
2 1 Introduction to Logistics and Supply Chain Management
Fig. 1.1 The company and its main functions
logistics can be applied to other “objects” like human beings as well. Humans
(e.g. tourists) too need to be transported and accommodated.
Expressed in a more abstract way, logistics deals with transfers of materials in
space, time, and quantity from the procurement of materials needed for production
via the storage of materials, intermediate products, and finished products to the
physical distribution to customers. Thus, logistics focusses on the planning and
execution of spatial, temporal and quantitative transfers.
Spatial transfers could simply be called transportation and can be distinguished
into long- and short-distance transports. Long distance transportation means trans-
ports between different locations such as warehouses, plants, and different compa-
nies that primarily use trucks, trains, ships, and aircrafts. Short-distance
transportation means transports inside a location (plant, warehouse). This type of
spatial transfer is occasionally also called material flow. In the short-distance
transportation usually different devices are used than in long-distance transporta-
tion, e.g. fork lifts, conveyors, or automated guided vehicles.
Temporal transfer means “transport” over time, i.e. from today when a material
is available to the future when the material is needed. This is the purpose of what we
call more simply storage or warehousing.
Quantitative transfers take place when, for instance, large amounts of some
goods are provided in smaller quantities. This is one of the usual activities of
retailers which buy goods in larger quantities from the producers or wholesalers
and usually sell them in smaller amounts to end customers. Changes of quantity also
take place when customer orders are fulfilled. Ordered items are picked from the
warehouse (where they are usually available in larger quantities), brought together,
packaged and sent to the customers.
Taking these three aspects into account, we can define the main tasks of logistics
as processes for the settlement of differences in space, time and quantity of goods.
Let us note that production itself is not considered a logistics activity. Logistics is
rather everything that is needed “around” the production with respect to the
physical products which are finally provided to customers.
Another frequently used possibility to define logistics is to express the tasks of
logistics by different aspects that must be done right. Today this is specified by the
six (or seven) Rs of logistics: Have the right items (material), in the right quantity,
at the right time, at the right place, in the right quality (condition), with the right
costs (and the right information).
1.1 The Concept of Logistics and Supply Chain Management 3
If we look at more recent definitions of logistics, we can observe that they have
been formulated in a more elaborate way. For instance, Christopher (2010, p. 4)
defines logistics as “the process of strategically managing the procurement, move-
ment and storage of materials, parts and finished inventory (and the related infor-
mation flows) through the organization and its marketing channels in such a way
that current and future profitability are maximized through the cost-effective
fulfillment of orders.”
Another rather general definition of logistics management by the Council of
Logistics Management describes logistics as “the process of planning,
implementing, and controlling the efficient, effective flow and storage of goods,
services, and related information from point of origin to point of consumption for
the purpose of conforming to customer requirements” (Lambert 2008).
Thus logistics does not only concern the production of physical goods but goods
and services in general. It is therefore also relevant for public administration and
institutions like hospitals, schools and service-providing companies like traders,
banks and other financial service providers or insurance companies. Another
interesting aspect in such definitions is that logistics does not only refer to
in-house processes in a company and processes with direct market partners but
includes processes beyond that scope. Strictly speaking, “from point of origin to
point of consumption” includes everything from the initial production of agricul-
tural products or the extraction of raw materials in mines to finished products used
by customers (or companies). Usually, the relating processes involve a large
number of companies and it is often neither useful nor possible to consider every
step of these processes. Realistically, only those parts of the overall processes
should be taken into account where a common planning of the activities is possible
and makes sense for the involved partners.
Summarizing, there is a rather narrow point of view which limits logistics to the
transport and storage of physical goods (material logistics) and a wider point of
view which includes immaterial goods (services), considers neighboring processes
and extends the scope to other companies in the supply and demand network. We
chose a wider point of view but consider mostly situations in material logistics as
they are more illustrative.
The trend towards wider definitions of logistics has been incorporated in the idea
of what is today called supply chain management. In particular, this concept has
been motivated by the awareness that many logistic processes are not just relevant
in a considered company but that such processes should also be considered at
suppliers and customers for providing a good product or service to end customers.
Moreover, from the viewpoint of involved companies, it often makes sense to plan
these activities in an integrated way to recover the contribution of the partners in the
supply network and to maximize their added value.
Let us have a look at some recent definitions of Supply Chain Management.
Cooper and Ellram (1993) define it as “an integrative philosophy to manage the
total flow of a distribution channel from the supplier to the ultimate user”. Harland
(1996) defines supply chain management as “the management of a network of
interconnected businesses involved in the ultimate provision of product and service
packages required by end customers”. A more official definition comes from the
Council of Supply Chain Management Professionals (CSCMP): “Supply chain
management encompasses the planning and management of all activities involved
in sourcing and procurement, conversion, and all logistics management activities.
Importantly, it also includes coordination and collaboration with channel partners,
which can be suppliers, intermediaries, third party service providers, and cus-
tomers. In essence, supply chain management integrates supply and demand man-
agement within and across companies.”
1.2 A Short History of Logistics
The origin of the word “logistics” is quite old. It is derived from the old Greek word
“logos” which means something like (written) speech, language, word, reason,
ratio, and calculation. Apart from maybe “ratio” there is little obvious connection
to our modern day understanding of logistics.
However, the aspect of calculation was considered for denoting an administra-
tive person in ancient Rome or Greece as “Logistika” who was responsible for
finance, procurement, and distribution, mainly with a military focus (Tudor 2012).
Such a focus on military activities was taken up in modern times. During the
nineteenth century, the terms tactics, strategy and logistics were broadly used to
distinguish essential activities for being successful in warfare. According to the
Oxford English Dictionary logistics was “the branch of military science relating to
procuring, maintaining and transporting material, personnel and facilities.” Thus, it
was not military activity in a closer sense but everything what was identified as
necessary for mastering such activities.
Just like tactics and strategy, logistics found its way from military planning into
the civil sector. The first wider usage in business took place during the 1960s in the
U.S., mainly with the focus on planning and organizing distribution activities.
From then on logistics became more and more popular, its meaning and areas of
application were extended significantly. Logistics was supplemented by additional
concepts, in particular “supply chain management” which came up in the 1980s and
focused on an even wider field. The insight that logistics should not just focus on
isolated activities (such as a single transport or the warehousing of a good at a
defined location) was the starting point of a process-oriented thinking and the
consideration of logistic networks (or “supply chains”). It became evident that
logistic activities are usually closely connected with other (logistic or
non-logistic) activities so that an integrated planning can produce a higher utility
for the customers or a greater added value for the involved companies.
Although it seems that logistics and supply chain management are rather modern
ideas, there is much evidence that even complex logistics problems have been
successfully dealt with in the distant past. If we go back to prehistoric times, the
earliest human civilizations were denoted as hunters and gatherers (or hunter-
gatherers). Thus, these civilizations were named after a logistic activity, the
1.3 Recent Trends and the Modern Importance of Logistics 5
procurement of food. Apart from that, we can assume that other logistic activities
played a major role as well: Due to the varying supply of food—often uncertain and
fluctuating during a year—measures for storing food were essential for the survival
of a tribe. Another aspect was the distribution of food: Since not all members of a
tribe went hunting or gathering food—and since the hunters and gatherers were not
all equally successful—it made sense to share the prey and the harvest for a better
division of labor and a reduction of risks.
Another prehistoric example of logistics is the transport and trade of goods such
as stones, pottery, metals, or other raw materials sometimes even over long dis-
tances. For instance, there is good evidence that Obsidian, a volcanic glass with a
limited occurrence throughout the world, was transported over several hundred
kilometers (Dogan and Michailidou 2008).
Ancient examples for large logistics operations are, of course, antique wars of
conquest. Impressive examples in the civil sector include, e.g. water irrigation
systems, which are sometimes based on networks of canals, tunnels or pipes
covering some hundred kilometers, for instance in the Maya, the Persian or the
Roman civilization.
1.3 Recent Trends and the Modern Importance of Logistics
Although many problems and concepts in logistics are not that new, there are good
reasons why logistics has become more important during the last decades and why
the increase of public (and academic) attention in this area is not just a
modern hype.
On the one hand, there are a number of general economic trends which facilitate
an increased engagement into logistics questions. On the other hand, technological
progress was significant in logistics and related fields.
Let us start with general economic aspects. One of the long-term concepts for
discussing economic development is the three-sector hypothesis. Roughly speak-
ing, this hypothesis is based on a classification of economic activities into three
sectors: The primary sector which deals with the production of raw materials
(especially agriculture), the secondary sector which includes manufacturing and
industry, and the third or tertiary sector which deals with services. During the
maturing of economies usually the following development takes place: First
(i.e. some hundred years ago) the primary sector strongly dominates. Then the
secondary sector grows and becomes the most important, e.g. during the industrial
revolution in Europe and the U.S. in the nineteenth century. Later on and in
particular in the industrialized countries during the second half of the twentieth
century, the second sector starts to shrink while the third sector grows and, finally,
dominates. These long-term developments demonstrate the importance of logistics
because logistic activities can be classified as services and belong, therefore, to the
growing third sector.
Although this says little about the growing importance of particular logistics
activities, there is further evidence: Along with the long-term economic develop-
ment, growth and increased standards of living can be observed. These increased
standards of living lead to more complex and challenging customer needs. For
instance, customers require a higher quality of goods and services, the speed and the
security of deliveries have become more important, and special requests like
individualized goods or services are often to be taken into account as well. Some
of these aspects have clear logistic implications: For a fast and secure supply, good
forecasts of demand, an adequate warehousing or fast transportation systems are
very important. Other aspects such as the quality of products are partially dependent
on a good mastering of logistics. The selection of suppliers, an efficient handling of
materials, the avoidance of deficient products, an adequate dealing with customer
claims, etc. may contribute to the quality perceived by customers.
Apart from such customer-centric aspects various other global developments in
the economy are relevant for the evolution of logistics and supply chain manage-
ment: One of them is the economic liberalization. Over a longer period of time we
have observed a strengthening of free trade. Since Ricardo’s proof of the advan-
tages of free trade in the nineteenth century, tolls and customs duties were reduced
or abolished in many parts of the world. Also other restrictions on international
trade, such as import or export contingents were reduced in many cases. The
freedom of establishment was realized in many parts of the world and it has become
much easier to set up a business in other countries today. The entrance to specific
industries and markets (e.g. in the shipping trade) was disburdened. All this leads to
specific opportunities but also to new challenges due to an increased competitive
pressure.
Ever since their fall at the end of the 1980s, the previously communist countries
have played a special role. Today, most of them have transformed into market
economies. Other nations having been called developing countries only a few
decades ago have shown a strong economic growth, and some of them are rather
called emerging markets today. Famous among them are the BRIC countries Brazil,
Russia, India, and China. This group of countries was first analyzed by O’Neill
(2001) and later on expected to become larger (in terms of GDP) than the G6, the
formerly largest industrialized countries (USA, Japan, Germany, France, UK, and
Italy) before 2050 (Wilson and Purushothaman 2003).
Especially since the beginning of the twenty-first century trade between distant
parts of the world (especially between East Asia and Europa/U.S.) has increased
significantly. Whereas countries like China were broadly appraised to produce
cheap low-quality goods 10 or 20 years ago, today many high quality products
are manufactured there. The competitive challenges are evident. Not only produc-
tion conditions in different parts of the world become more similar, but customer
desires assimilate as well. For instance, eating Chinese food in Western countries
became quite usual already some decades ago. But also a reverse trend can be
observed meanwhile: While a product like chocolate played an infinitesimal role in
China 20 years ago, it has become popular today. So there are also clear opportu-
nities for industries in Western countries which are often focusing on rather
1.3 Recent Trends and the Modern Importance of Logistics 7
expensive high-quality products. Rising incomes in emerging countries make

products more affordable for the population.
As mentioned before, a certain consequence of this globalization is that more and
more goods are transported over longer distances. As a result, increased transporta-
tion costs in the economies can be expected. If we look at the transportation costs
(e.g. for the U.S., see below) in percentage of the GDP we observe that they rather
decreased over the last decades. This is even more remarkable because the prices for
fuel tended to increase over that time (with strong fluctuations). The main reasons for
this can be found in aspects relating to technical progress. First of all, many types of
vehicles (trucks, planes, vessels) are more fuel-efficient than before. Often, vehicles
have become larger (especially ships) which also leads to lower costs per ton
transported cargo. Economies of scale do not just arise because of technical reasons.
For instance, the crew for a larger ship can be kept constant in size.
Along with such aspects of single transportation activities the whole infrastruc-
ture for transports has been upgraded. For instance, turnover activities in a harbor
can be done more smoothly today. The container as a well standardized transport
equipment plays a major role. A transport chain comprising truck, train or ship
transportation (intermodal transport) works more efficiently than in pre-container
times. Transportation is nowadays better supported by information and communi-
cation technology than in the past. GPS-based navigation systems facilitate the
planning and execution of transports. Better planning algorithms allow for more
efficient transportation. This aspect will be treated in more details in Chap. 3.
Apart from these transportation related aspects, the technical progress in infor-
mation and communication technologies supports other logistics activities as well
(and, of course, business activities in general). Some of the most obvious aspects
have been the improved performance of computers and the decrease of respective
costs during the last decades. Another obvious development is the rise of the
Internet and the emergence of e-business. Let us just consider one example of
how logistics is directly influenced by these trends: Because of e-business today
goods are more often directly shipped to customers instead of being distributed
through retailers. Compared to shipments to retailers this requires a significantly
larger number of usually smaller shipments.
Another less visible effect of the technological progress is the increased usage of
automation technology in companies. Today, companies often master their
in-house logistic tasks by using a significant amount of material flow technology
or robotics. Examples of such technologies are conveyors for in-house transporta-
tion, automatic storage and retrieval systems, automated guided vehicles (AGVs),
or an increased usage of mobile devices by humans. One specific technology which
has been discussed intensively during the last 10 years is RFID (radio-frequency
identification). Small chips (or smart tags) which consist of an electronic circuit
(including a memory and possibly sensors) and an antenna for communication can
be attached to goods (or parcels). Such technology can be used for a better
identification of objects, for a better tracing and tracking during their transportation,
or for more intelligent purposes such as the monitoring of a cold chain for
frozen food.
Table 1.1 Logistics costs in the US

Total logistics cost (%) Inventory and related costs (%) Transportation costs (%)
1981 16.2 8.3 7.3
1986 11.6 4.9 6.3
1991 10.6 4.3 5.9
1996 10.3 3.9 6
2001 9.5 3.4 5.8
2003 8.6 2.8 5.4
2006 9.9 3.2 5.8
2007 10.1 3.5 6.2
2008 9.4 2.9 6.1
2009 7.7 2.5 4.9
2010 8.3 2.7 5.2
2011 8.5 2.8 5.3
2012 8.5 2.8 5.3
2013 8.5 2.9 5.3
2014 8.0 2.7 5.0
Source: Own computations and Wilson (2013)
Along with new planning technologies and respective software, such technical
progress can lead to innovative logistics solutions and/or the decrease of costs.
If we want to understand the present importance of logistics, it makes sense to
consider the quantitative figures of that economic sector. For the US there is a
regular statistics about logistics in the annual “US State of Logistics Reports” which
are commissioned by the Council of Supply Chain Management Professionals
(CSCMP). For 2014 the following data for logistics costs are shown in the respec-
tive report (Wilson 2013; Robinson 2015):
• 917 Bio. US$ for transportation (702 Bio. US$ for motor carriers)
• 476 Bio. US$ for warehousing/storage including interest costs and taxes, etc.
• 56 Bio. US$ for logistics administration
• 1449 Bio. US$ total logistics costs
When seeing these impressive numbers, we should bear in mind that many costs
for logistics services (esp. those provided internally) are not even considered in the
official statistics. Very often, companies do not even know their own logistics costs,
because parts of them are not well attributed in their financial accounting (e.g. costs
for in-house transportation).
Table 1.1 shows the logistics costs for the US expressed in percentage of the
gross domestic product (GDP) of this country. Total logistics costs and the two
main subcategories, inventory-related costs and transportation-related costs, are
depicted (The category administrative costs is omitted so that the two percentages
of the subcategories are slightly less than the percentage for the total logistics
costs.) Moreover, the developments of these costs from the early 1980s until 2012
are shown.
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The result was a more crushing victory for the Catholics than
they had ever won before. Of 152 Representatives they elected
no less than 104. The Liberal party was almost annihilated,
securing but 20 seats in the Chamber; while the Socialists
rose to political importance, winning 28 seats. This
representation is said to be not at all proportioned to the
votes cast by the several parties, and it lent force to the
demand for a system of proportional representation, as the
needed accompaniment of plural voting, which had been urged
when the constitution was revised. In the Senate the
Conservatives obtained 52 seats and the Liberals 24. In the
next year an electoral law relating to communal councils was
passed. In this law, the principle of proportional
representation was introduced, along with that of cumulative
or plural voting. Compulsory voting, enforced by penalties
more or less severe, was also a feature of the law. In
November, the first election under it was held, and again the
Socialists made surprising gains, at the expense of the
Radical party, the Catholics and Liberals generally holding
their ground.
BELGIUM: A. D. 1895.
New School Law.
Compulsory religious teaching restored.
See (in this volume)

EDUCATION: A. D. 1895 (BELGIUM).
Industrial combinations.

TRUSTS: IN EUROPEAN COUNTRIES.
BELGIUM: A. D. 1897 (July).

British notice to terminate existing commercial treaties.
ENGLAND: A. D. 1897 (JUNE-JULY).
BELGIUM: A. D. 1898 (June).

The Sugar Conference at Brussels.

SUGAR BOUNTIES.
BELGIUM: A. D. 1898 (July-December).

In the Chinese "battle of concessions."

CHINA: A. D. 1898 (FEBRUARY-DECEMBER).
BELGIUM: A. D. 1899 (May-July).

Representation in the Peace Conference at The Hague.

PEACE CONFERENCE.
BELGIUM: A. D. 1899-1900.
Threatened revolution.
An explosion of discontent with the working of the electoral

provisions of the new constitution (see above) occurred in
June, and created for a time an exceedingly dangerous
situation. It was precipitated by an attempt on the part of
the government to pass a bill providing for proportional
representation in certain districts, which was expected to
increase the advantage already possessed by the Clerical or
Catholic party. Excitement in the Chamber of Deputies reached
such a height on the 28th of June that fighting among the
members occurred, and soldiers were called in. That night and
the next day there was serious rioting in Brussels; barricades
were built; sharp battles between citizens and soldiers were
fought, and a general strike of working men was proposed. On
the 30th, the government arranged a compromise with the
Socialist and Liberal leaders which referred the question of
proportional representation to a committee in which all
parties were represented. This quieted the disorder. In due
time the committee reported against the measure which the
government had proposed; whereupon a change of ministry was
made, the new ministry being expected to bring forward a more
satisfactory plan of proportional representation. It produced
a bill for that purpose, the provisions of which failed to
give satisfaction, but which was passed, nevertheless, near
the end of the year.
Commenting, in July, on the disturbances then just quieted in

Belgium, the "Spectator," of London, remarked: "The recent
explosion of political feeling in Belgium was a much more
serious event than was quite understood in this country. It
might have involved all Europe, as, indeed, it may even yet.
There was revolution in the air, and a revolution in Belgium
would gravely affect the military position both of France and
Germany, would rouse keen suspicions and apprehensions in this
country, and would perturb all the dynasties with fears of
coming change. The new electoral bill drove the Liberals and
Socialists of the little kingdom into one another's arms—both
believing that it would give the Clericals a permanent hold on
power—and whenever these two parties are united they control
the majority of the Belgian people. That majority is a most
dangerous one. It controls all the cities, and it includes
hundreds of thousands of men who resent their economic
condition with justifiable bitterness, and who are penetrated
with a tradition of victories achieved by insurrection. At the
same time they have no pacific vent for their discontents, for
the suffrage gives double votes to the well-to-do, and secures
to both Liberals and laborers on all economic or religious
questions a certainty of defeat. With the inhabitants of the
cities all rioting and killing the officials, the government
would have been compelled to resort to force, and it is by no
means clear that force was decidedly on their side. The
Belgian army is not a caste widely separated in feeling from
the people; it has no instinctive devotion to the Clerical
party, and it has no great soldier whom it admires or to whom
it is attached. The king is distrusted and disliked both
personally and politically; and the dynasty, which has no
historic connection with Belgium, has never taken root in the
soil as the Bernadottes, for example, have done in Sweden. If
the revolutionists had been beaten, they would have appealed
to France, where Belgium is regarded as a reversionary estate;
while if they had been victorious, they might—in our judgment,
they certainly would—have proclaimed a republic. … The danger
has, we suppose, for the moment been smoothed away; but it has
not been removed, probably can not be removed, while the
conditions which produce it continue to exist. The Belgians,
who are commonly supposed to be so prosperous and pacific, are
divided by differences of race, creed, and social condition
more violent than exists in Ireland, where at all events, all
alike, with insignificant exceptions, speak one tongue.
{51}
The French-speaking Belgians despise the Flemish-speaking
Belgians, and the Flemish speaking Belgians detest the
French-speaking Belgians, with a rancor only concealed by the
long habit of living and acting together,—a habit which,
remember, has not prevented the same contempts and aversions
from continuing to exist in Ireland. The Clericals and the
Secularists hate each other as only religious parties can
hate; far more than Catholics and Protestants in any of the
countries where the two creeds stand side by side. The
Secularist seems to the Clerical a blasphemer, against whom
almost all devices are justifiable, while the Clerical is held
by the Secularist to be a kind of evil fool, from whom nothing is
to be expected except cunningly concealed malignity. The
possessors of property expect that the 'ugly rush' which used
to be talked of in England will occur tomorrow, while the wage
receivers declare that they are worked to death for the
benefit of others, who will not leave them so much as a living
wage. All display when excited to a noteworthy fierceness of
temper, a readiness to shed blood, and a disposition to push
every quarrel into a sort of war,—tendencies visible
throughout the history of the country."
At the parliamentary election in June, 1900, under the new law

providing for proportional representation, the Socialists
gained seventeen seats from the Clerical party.
Relations with the Congo State.

CONGO FREE STATE: A. D. 1900.
BELL TELEPHONE SYSTEM, Recent development of.

SCIENCE, RECENT: ELECTRICAL.
BELMONT, Battle of.

SOUTH AFRICA (THE FIELD OF WAR):
A. D. 1899 (OCTOBER-DECEMBER).
BENIN:
Massacre of British officials.
Capture of the town.

NIGERIA: A. D. 1897.
BERGENDAL FARM, Battle of.

SOUTH AFRICA (THE FIELD OF WAR): A. D. 1900 (JUNE-
DECEMBER).
BERING SEA QUESTIONS.
"Several vexatious questions were left undetermined by the

decision of the Bering Sea Arbitration Tribunal.
See, in volume 5,
UNITED STATES OF AMERICA: A. D. 1886-1893.
The application of the principles laid down by that august

body has not been followed by the results they were intended
to accomplish, either because the principles themselves lacked
in breadth and definiteness or because their execution has
been more or less imperfect. Much correspondence has been
exchanged between the two Governments [of Great Britain and
the United States] on the subject of preventing the
exterminating slaughter of seals. The insufficiency of the
British patrol of Bering Sea under the regulations agreed on
by the two Governments has been pointed out, and yet only two
British ships have been on police duty during this season in
those waters. The need of a more effective enforcement of
existing regulations as well as the adoption of such
additional regulations as experience has shown to be
absolutely necessary to carry out the intent of the award have
been earnestly urged upon the British Government, but thus far
without effective results. In the meantime the depletion of
the seal herds by means of pelagic hunting [that is, in the
open sea] has so alarmingly progressed that unless their
slaughter is at once effectively checked their extinction
within a few years seems to be a matter of absolute certainty.
The understanding by which the United States was to pay and Great
Britain to receive a lump sum of $425,000 in full settlement
of all British claims for damages arising from our seizure of
British sealing vessels unauthorized under the award of the
Paris Tribunal of Arbitration was not confirmed by the last
Congress, which declined to make the necessary appropriation.
I am still of the opinion that this arrangement was a
judicious and advantageous one for the Government, and I
earnestly recommend that it be again considered and
sanctioned. If, however, this does not meet with the favor of
Congress, it certainly will hardly dissent from the
proposition that the Government is bound by every
consideration of honor and good faith to provide for the
speedy adjustment of these claims by arbitration as the only
other alternative. A treaty of arbitration has therefore been
agreed upon, and will be immediately laid before the Senate,
so that in one of the modes suggested a final settlement may
be reached."
Message of the President of the United States to Congress,

December, 1895.
The treaty thus referred to by the President was signed at

Washington, February 8, 1896, and ratifications were exchanged
at London on the 3d of June following. Its preamble set forth
that, whereas the two governments had submitted certain
questions to a tribunal of arbitration, and "whereas the High
Contracting Parties having found themselves unable to agree
upon a reference which should include the question of the
liability of each for the injuries alleged to have been
sustained by the other, or by its citizens, in connection with
the claims presented and urged by it, did, by Article VIII of
the said Treaty, agree that either party might submit to the
Arbitrators any questions of fact involved in said claims, and
ask for a finding thereon, the question of the liability of
either Government on the facts found to be the subject of
further negotiation: And whereas the Agent of Great Britain
did, in accordance with the provisions of said Article VIII,
submit to the Tribunal of Arbitration certain findings of fact
which were agreed to as proved by the Agent of the United
States, and the Arbitrators did unanimously find the facts so
set forth to be true, as appears by the Award of the Tribunal
rendered on the 15th day of August, 1893: And whereas, in view
of the said findings of fact and of the decision of the
Tribunal of Arbitration concerning the jurisdictional rights
of the United States in Behring Sea, and the right of
protection of property of the United States in the fur-seals
frequenting the islands of the United States in Behring Sea,
the Government of the United States is desirous that, in so
far as its liability is not already fixed and determined by
the findings of fact and the decision of said Tribunal of
Arbitration, the question of such liability should be
definitely and fully settled and determined, and compensation
made, for any injuries for which, in the contemplation of the
Treaty aforesaid, and the Award and findings of the Tribunal
of Arbitration, compensation may be due to Great Britain from
the United States: And whereas it is claimed by Great Britain,
though not admitted by the United States, that prior to the
said Award certain other claims against the United States
accrued in favour of Great Britain on account of seizures of
or interference with the following named British
sealing-vessels, to wit: the 'Wanderer,' the 'Winifred,' the
'Henrietta,' and the 'Oscar and Hattie,' and it is for the
mutual interest and convenience of both the High Contracting
Parties that the liability of the United States, if any, and
the amount of compensation to be paid, if any, in respect to
such claims, and each of them should also be determined under
the provisions of this Convention—all claims by Great Britain
under Article V of the modus vivendi of the 18th April, 1892,
for the abstention from fishing of British sealers during the
pendency of said arbitration having been definitely waived
before the Tribunal of Arbitration"—therefore the two nations
have concluded the Convention referred to, which provides that
"all claims on account of injuries sustained by persons in
whose behalf Great Britain is entitled to claim compensation
from the United States, and arising by virtue of the Treaty
aforesaid, the Award and the findings of the said Tribunal of
Arbitration, as also the additional claims specified in the
5th paragraph of the preamble hereto, shall be referred to two
Commissioners, one of whom shall be appointed by Her Britannic
Majesty, and the other by the President of the United States,
and each of whom shall be learned in the law."
Great Britain, Parliamentary Publications

(Papers by Command: Treaty Series, Number 10, 1896).
{52}
Judges William L. Putnam, of the United States, and George E.

King, of Canada, were subsequently appointed to be the two
commissioners provided for in the treaty. Meantime each
government had appointed a number of men of science to
investigate the condition of the herds of fur-seals on
Pribilof Islands, President David S. Jordan, of Leland
Stanford Junior University being director of the American
investigation and Professor D'Arcy W. Thompson having charge
of the British. The two bodies of investigators reached quite
different conclusions. Professor Jordan, in a preliminary
statement, announced; "There is still a vast body of fur seals
on the islands, more than the commissioners were at first led
to expect, but the number is steadily declining. The only
cause of this decline is the killing of females through
pelagic sealing. The females are never molested on the
islands, but three-fourths of those killed in Bering sea are
nursing females. The death of the mother causes the death of
the young on shore, so that for every four fur seals killed at
sea three pups starve to death on shore. As each of those
females is also pregnant, a like number of unborn pups is
likewise destroyed." His formal report, made in January, 1897,
was to the same effect, and led to the following conclusion:
"The ultimate end in view should be an international
arrangement whereby all skins of female fur seals should be
seized and destroyed by the customs authorities of civilized
nations, whether taken on land or sea, from the Pribilof herd,
the Asiatic herds, or in the lawless raiding of the Antarctic
rookeries. In the destruction of the fur seal rookeries of the
Antarctic, as well as those of the Japanese islands and of
Bering sea, American enterprise has taken a leading part. It
would be well for America to lead the way in stopping pelagic
sealing by restraining her own citizens without waiting for
the other nations. We can ask for protection with better grace
when we have accorded, unasked, protection to others." The
report of Professor Thompson, made three months later, agreed
but partially with that of the American experts. He admitted
the extensive starving of the young seals, caused by the
killing of the mothers, but contended that the herd was
diminishing slightly, if at all, and he did not favor drastic
measures for the suppression of pelagic sealing.
The government of the United States adopted measures in

accordance with the views of Professor Jordan, looking to an
international regulation of the killing of seals. Hon. John W.
Foster was appointed a special ambassador to negotiate
arrangements to that effect. Through the efforts of Mr.
Foster, an international conference on the subject was agreed
to on the part of Russia and Japan, but Great Britain declined
to take part. While these arrangements were pending, the
American Secretary of State, Mr. Sherman, addressed a letter
to the American Ambassador at London, Mr. Hay, criticising the
conduct of the British government and its agents in terms that
are not usual among diplomats, and which excited much feeling
when the letter was published in July. This called out a reply
from the British Colonial Secretary, Mr. Chamberlain, in which
he wrote: "When Her Majesty's government sent their agents to
inquire into the actual facts in 1896, it was found that, in
spite of the large catch of 1895, the herd actually numbered
more than twice as many cows as it had been officially
asserted to contain in 1895. The result of these
investigations, as pointed out in Lord Salisbury's dispatch of
May 7, has further been to show that pelagic sealing is much
less injurious than the practice pursued by the United States'
lessees of killing on land every male whose skin was worth
taking. If the seal herd to-day is, as Professor Jordan
estimates, but one-fifth of what it was in 1872-74, that
result must be, in great measure, due to the fact that, while
the islands were under the control of Russia, that power was
satisfied with an average catch of 33,000 seals; subsequently
under the United States' control more than three times that
number have been taken every year, until the catch was,
perforce, reduced because that number of males could no longer
be found.
"Last year, while the United States government were pressing

Her Majesty's government to place further restrictions on
pelagic sealing, they found it possible to kill 30,000 seals
on the islands, of which Professor Jordan says (in one place
in his report) 22,000 were, to the best of his information,
three-year-olds, though (in another place) he estimated the
total number of three-year-old males on the islands as 15,000
to 20,000. If such exhaustive slaughter is continued, it will,
in the light of the past history of the herd, very quickly bring
about that commercial extermination which has been declared in
the United States to be imminent every year for the last
twelve years. Enough has perhaps been said to justify the
refusal of Her Majesty's government to enter on a precipitate
revision of the regulations."
{53}
The two countries were thus being carried into serious

opposition, on a matter that looks contemptible when compared
with the great common interests which ought to bind them in
firm friendship together. But, while the government of Great
Britain declined to enter into conference with those of
Russia, Japan and the United States, on general questions
relating to the seals, it assented at length to a new
conference with the United States and Canada, relative to the
carrying out of the regulations prescribed by the Paris
tribunal of 1893. Both conferences were held at Washington in
October and November of 1897. The first resulted in a treaty
(November 6) between Russia, Japan, and the United States,
providing for a suspension of pelagic sealing during such time
as might be determined by experts. The other conference led,
after some interval, to the creation of a Joint High
Commission for the settlement of all questions in dispute
between the United States and Canada, the sealing question
included.

CANADA: A. D. 1898-1899.
So far as concerned its own citizens, the American government

adopted vigorous measures for the suppression of pelagic
sealing. An Act of Congress, approved by the President on the
29th December, 1897, forbade the killing of seals, by any
citizen of the United States, in any part of the Pacific Ocean
north of 35 degrees north latitude. The same act prohibited
the importation into the United States of sealskins taken
elsewhere than in the Pribilof Islands, and very strict
regulations for its enforcement were issued by the Treasury
Department. No sealskins, either in the raw or the
manufactured state, might be admitted to the country, even
among the personal effects of a traveller, unless accompanied
by an invoice, signed by an United States Consul, certifying
that they were not from seals killed at sea. Skins not thus
certified were seized and destroyed.
In his annual report for 1898, the United States Secretary of

the Treasury stated that no pelagic sealing whatever had been
carried on by citizens of the United States during the season
past; but that 30 British vessels had been engaged in the
work, against 32 in the previous year, and that their total
catch had been 10,581, against 6,100 taken by the same fleet
in 1897. The number of seals found on the Islands was reported
to be greatly reduced.
BERLIN: A. D. 1895.
Census.
GERMANY: A. D. 1895 (JUNE-DECEMBER).
BERLIN: A. D. 1896.
Industrial exposition.
An exposition of German industries and products was opened at

Berlin on the 1st of May, 1896. which excited wide interest
and had an important stimulating effect in Germany.
BERLIN: A. D. 1900.
Growth shown by the latest census.

GERMANY: A. D. 1900 (DECEMBER).
BERLIN: A. D. 1901.
The Berlin and Stettin Ship Canal.
See GERMANY: A. D. 1901 (JANUARY).
BETHLEHEM, Capture of.

SOUTH AFRICA (THE FIELD OF WAR): A. D. 1900 (JUNE-
DECEMBER).
BIAC-NA-BATO, Treaty of.

PHILIPPINE ISLANDS: A. D. 1896-1898.
BIBLE LANDS, Archæological exploration in.

ARCHÆOLOGICAL RESEARCH: BABYLONIA: AMERICAN
EXPLORATION.
BICOLS, The.

PHILIPPINE ISLANDS: THE NATIVE INHABITANTS.
BIDA, British subjugation of.

AFRICA: A. D. 1897 (NIGERIA).
BIG SWORD,
BIG KNIFE SOCIETY.

CHINA: A. D. 1900 (JANUARY-MARCH).
BISMARCK, Prince Otto von: Death.

GERMANY: A. D. 1898 (JULY).
BLACK FLAG REBELLION.

CHINA: A. D. 1898 (APRIL-JULY).
BLANCO, General Ramon, Captain-General of Cuba.

CUBA: A. D. 1896-1897.
BLANCOS.

URUGUAY: A. D. 1896-1899.
BLOEMFONTEIN:
Taken by the British.

SOUTH AFRICA (THE FIELD OF WAR): A. D. 1900 (MARCH—
MAY).
BLOEMFONTEIN CONFERENCE, The.

SOUTH AFRICA (THE TRANSVAAL): A. D. 1899 (MAY-JUNE).
BLUEFIELDS INCIDENT, The.

CENTRAL AMERICA (NICARAGUA): A. D. 1894-1895.
BOARD SCHOOLS, English.

ENGLAND: A. D. 1896-1897.
BOERS.

SOUTH AFRICA (THE TRANSVAAL).
BOHEMIA:
Recent situation in the Austro-Hungarian Empire.

AUSTRIA-HUNGARY: A. D. 1895-1896, and after.
BOHEMIA: A. D. 1897.
The language decrees.

AUSTRIA-HUNGARY: A. D. 1897; and 1898.
BOLIVIA: A. D. 1894-1900.
The dispute with Chile concerning Atacama.
See (in this volume) CHILE: A. D. 1894-1900.
BOLIVIA: A. D. 1899.
Revolution.
The government of President Alonzo (elected in 1896) was

overthrown in April, 1899, by a revolutionary movement
conducted by General José Manuel Pando, who was elected
President by the legislative chambers in the following
October.
BOMBAY: A. D. 1896-1901.
The Bubonic Plague.

PLAGUE.
BOMBAY: A. D. 1901.
Census returns.
Decrease of population.
A telegram from Bombay, March 6, 1901, reports that "the

census returns show the city of Bombay has 770,000
inhabitants, a decrease of over fifty thousand in ten years,
mainly due to the exodus of the last two months on account of
the plague. Partial returns from the rural districts show
terrible decreases in population through famine."
BORDA, President: Assassination.

URUGUAY: A. D. 1896-1899.
BORIS, Prince: Conversion.

BALKAN AND DANUBIAN STATES (BULGARIA).
{54}
BOSTON: A. D. 1895-1899.
The municipal experiments of Mayor Quincy.
First elected Mayor of Boston in 1895, and reelected in 1897,

the two terms of the administration of Mayor Josiah Quincy
were made remarkable by the number, the originality and the
boldness of the experiments which he introduced in extension
of the functions of municipal government. They consisted on
the one hand in the substitution, in certain branches of
public work, of direct labor for the contract system, and on
the other in the provision of new facilities for promoting
popular health, recreation, and instruction. He established a
municipal printing office, a municipal department of
electrical construction, and another municipal department
which conducts every kind of repairing work that the city
requires; all of these to supersede the old system of
contracts and jobs. He instituted a great number and variety
of public baths,—floating baths, beach baths, river baths and
swimming pools. He opened playgrounds and gymnasiums, both
outdoor and indoor. He carried the city into the work of the
fresh air missions for poor children. He reorganized the
administration of public charities. He placed the artistic
undertakings of the city under the supervision of a competent
board. He instituted cheap concerts of a high order, as well
as popular lectures. Boston at length took alarm at the extent
of the ventures of Mayor Quincy, complained of the cost, and
refused him reelection for a third term. But the Boston
correspondent of a New York journal opposed in politics to
Mayor Quincy, writing on the 15th of December, 1900, testifies
that "most of the experiments are working well, and a study of
them cannot fail to be beneficial to those who have the
government of other cities in their hands. … The madness of
Mayor Quincy had evidently a method. It seems to have made
permanent a good many excellent institutions. Some good
citizens say that things were done too quickly, that they cost
too much money, that the Mayor was always robbing Peter to pay
Paul, as it were. But, after all, it seems cause for
thankfulness that they were done at all."
BOSTON: A. D. 1899.
Completion of the Subway.
In this year the city of Boston completed a very important

public improvement, undertaken in 1895, and carried out under
the direction of a commission appointed that year. This was
the construction of a Subway under Boylston and Tremont
streets, and under various streets in the northern district,
for the transit of electric cars through the crowded central
parts of the city. The section of Subway from Park Square to
Park Street was finished in the fall of 1897; the remainder in
1899. The entire length of underground road is one and
two-thirds miles. The cost of work done was $4,686,000: cost
of real estate taken, $1,100,000. The legislative Act
authorizing the work provided further for the construction of
a tunnel to East Boston, and for the purchase of rights of way
for an elevated road to Franklin Park, with new bridges to
Charlestown and West Boston.
BOWER, Sir Graham:

Testimony before British Parliamentary Committee on
the Jameson Raid.
See (in this volume))

SOUTH AFRICA (THE TRANSVAAL): A. D. 1897 (FEBRUARY-
JULY).
BOXERS, The Chinese:
The secret society and the meaning of its name.

CHINA: A. D. 1900 (JANUARY-MARCH), and after.
BRADFORD'S HISTORY:
Return of the manuscript to Massachusetts.

MASSACHUSETTS: A. D. 1897.
BRAZIL: A. D. 1897.
Conflict with the "Fanatics."
A religious enthusiast, called Conselheiro (Counsellor), who

had made his appearance in the State of Bahia and gathered a
great number of followers, began in 1897 to become dangerous
to the government, which he denounced as atheistic; his
following grew disorderly, and political malcontents were
taking advantage of the disturbance which he caused. Attempts
on the part of the government to stop the disorder were
fiercely resisted, and its conflict with "the Fanatics," as
Conselheiro and his followers were known, soon became a very
serious war, demanding many thousands of troops, and spreading
over wide regions of the country. Amazonian bands of women
fought with "the Fanatics," and were among the most dreaded
forces on their side. The headquarters and stronghold of the
movement were finally taken in July, after an obstinate
defense, and in October Conselheiro was killed; after which
the rebellion came to an end.
BRAZIL: A. D. 1898.
Election of Dr. Campos Salles to the Presidency.
The nomination and election of Dr. M. F. de Campos Salles, who

was inaugurated President of the United States of Brazil on
the 15th of November, 1898, "marks the decided distinction of
parties in Brazil. Previously, there had been various
divergencies among the Republicans, but no distinct party
differences. But at that time there arose a party advocating
the selection of a candidate who would favor the national
against the foreign (naturalized) element; one who would have
influence with the few remaining advocates of the monarchical
government; who would give preference to a military over a
civil government; finally, one who would introduce into the
government the system called 'Jacobinism,' a designation which
the new party did not refuse to accept. Dr. Campos Salles was
the candidate of the moderate Republicans or Conservatives,
who were organized under the name of the Republican party,
with a platform demanding respect for the constitution and
declaring for the institution of such reforms as only reason
and time should dictate. The sympathies of the conservative
element and of foreigners who had interests in the country
were with the candidate of this party and gave him their
support. The election of Dr. Campos Salles inspired renewed
confidence in the stability of Brazil, a confidence which was
at once manifested by the higher quotation of the national
bonds, by an advance in the rate of exchange, and by greater
activity in business throughout the country. Brazil, in spite
of all hindrances, has prospered since 1889."
Bulletin of the Bureau of American Republics,

December, 1898.
{55}
BRAZIL: A. D. 1900.
Arbitration of the French Guiana boundary dispute.
Award of the Swiss Government.
A dispute with France concerning the boundary of the French

possessions in Guiana, which Brazil inherited from Portugal,
and which dates back to the 17th century, was submitted at

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Computational Intelligence in Logistics

and Supply Chain Management 1st

Logistics Supply Chain Management Martin Christopher

Global Logistics and Supply Chain Management Lalwani

Operations, Logistics and Supply Chain Management Henk

Enterprise Risk Management in the Global Supply Chain

Procurement and Supply Chain Management Kenneth Lysons

Supply Chain Engineering and Logistics Handbook-

Guide to Supply Chain Management Colin Scott

Supply Chain Management and its Applications in

Associate Series Editor

Founding Series Editor

More information about this series at http://www.springer.com/series/6161

ISSN 0884-8289 ISSN 2214-7934 (electronic)

Library of Congress Control Number: 2016943140

© Springer International Publishing Switzerland 2017

Printed on acid-free paper

This Springer imprint is published by Springer Nature

can—with some adaptations—be applied to a wide range of problems. To distin-

Olten, Switzerland Thomas Hanne

1 Introduction to Logistics and Supply Chain Management . . . . . . 1

3.4 Methods for Solving the Travelling Salesman Problem . . . . . . . 50

6 Location Planning and Network Design . . . . . . . . . . . . . . . . . . . . 121

Authors Brief Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

λ Number of offspring (parameter of an evolution strategy)

sik Arrival time of vehicle k at location i

2E-VRP Two-echelon vehicle routing problem

MICLSP Multi-item capacitated lot-sizing problem

SPEA, Strength Pareto evolutionary algorithms

Abstract In this chapter we provide a brief introduction into the concepts of

1.1 The Concept of Logistics and Supply Chain

Roughly simplified a company can be considered as a system which receives a

© Springer International Publishing Switzerland 2017 1

Fig. 1.1 The company and its main functions

1.2 A Short History of Logistics

1.3 Recent Trends and the Modern Importance of Logistics

expensive high-quality products. Rising incomes in emerging countries make

Table 1.1 Logistics costs in the US

See (in this volume)

See (in this volume)

BELGIUM: A. D. 1897 (July).

BELGIUM: A. D. 1898 (June).

See (in this volume)

BELGIUM: A. D. 1898 (July-December).

See (in this volume)

BELGIUM: A. D. 1899 (May-July).

See (in this volume)

An explosion of discontent with the working of the electoral

Commenting, in July, on the disturbances then just quieted in

At the parliamentary election in June, 1900, under the new law

See (in this volume)

BELL TELEPHONE SYSTEM, Recent development of.

See (in this volume)

BELMONT, Battle of.

See (in this volume)

See (in this volume)

BERGENDAL FARM, Battle of.

See (in this volume)

"Several vexatious questions were left undetermined by the

The application of the principles laid down by that august

Message of the President of the United States to Congress,

The treaty thus referred to by the President was signed at

Great Britain, Parliamentary Publications