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GS 120 iGlobalization: Moving The Things We Buy

Professor: Dr. Jean-Paul Rodrigue

Topic 6 Logistics and Supply Chain Management


A The Role and Function of Logistics B Value Chains C Distribution Systems

Hofstra University, Department of Global Studies & Geography

A The Role and Function of Logistics

Logistics Goals and Operations Fulfillment (Goals)


Order
Right product Right quantity

Demand (Operations)
Transportation
Handling Packaging

Delivery
Right location Right time Stock Management
Production scheduling Warehousing

Quality
Right condition
Orders Processing
Sales Purchase

Cost
Right price

Value-Added Functions and Differentiation of Supply Chains

Value-Added Functions Production Costs Location Time Control

Supply Chain Differentiation Logistics Costs Transit Time Reliability Risk

Taxonomy of Logistics Decisions


Level Production structures Transport structures Distribution structures Logistics structures Description
Commercial decisions on outsourcing, offshoring and sub-contracting. Number, location and capacity of production units. Choice of a freight network linking a company and its suppliers and customers. Choice of modes and terminals; the transport chain. Choice concerning the number, location and capacity of distribution centers. Frequency and timing of distribution (e.g. just-in-time). Usage of production, transport and distribution capabilities to fulfill short, medium and long term strategies (e.g. lower costs, gain market share, improve service efficiency, reduce response time, reduce environmental footprint). Usage of third party logistics providers.

Logistical Improvements, Manufacturing Sector, 1960s to 2010s


20 18 16 14 % of GDP 12 25 25 35 30 40 35

10 8
6

20
15 10

4 2 0 7 4 3 2 5 0

1960s 1970s(% GDP) 1980s Logistics Costs Cycle Time Requirements (days)

1990s Costs 2000s Inventory (% GDP)

2010s

Days

Worldwide Logistics Costs, 2002

6%

4%

39% 24%

Transportation Warehousing Inventory Carrying Order Processing Administration

27%

From Push to Pull Logistics


Push

Pull
Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier

Supplier

Freight flow Manufacturer Manufacturer Distributor Returns / Recycling Distributor Customer Point-of-sale data Customer

3PL

Layers to Logistics Services

Actors

Services

Cargo owners

1PL 2PL 3PL 4PL


Service integration

Manufacturing, Retailing

Carriers

Transportation

Logistics service providers

Logistics

Lead logistics providers & consultants

Supply chain management

Supply chain integration

Logistic Performance Index, 2010

B Value Chains

The Commodity Chain (or Value Chain)


Stages
1- Commodities
Raw materials
Attributable to climatic (agricultural products, forestry products) or geological (ores and fossil fuels) conditions.

2- Intermediate Goods
Manufacturing and assembly
Transformation that confers added value. Metals, textiles, construction materials and parts used to make other goods.

3- Final Goods
Distribution

Mark et

Goods shipped to large consumption markets. Flow and inventory management.

Flows

Bulk shipping

Unit shipping
Transport Chain

LTL shipping

Mark et
Low volumes High frequency

High volumes Low frequency

Average volumes High frequency

Commodity Chains and Added Value

High

Added value

R&D

Fabrication

Sales / Service
Marketing Distribution

Branding
Design Manufacturing

Low

Concept Commodity chain

Logistics

Product Life Cycle


Sales

Monopoly

Competition

Idea

Promotion First competitors Mass production Obsolescence

Research and development


Stage 1

Growth Stage 2

Maturity Stage 3

Decline Stage 4

APL Logistics Freight Distribution Center, Shenzhen, PRC, December 2005

Container Waiting to be Loaded, APL DC Shenzhen

Extended Distribution Center System of JVC Belgium

Palletization of Floor Loaded Shipments, Belgium

C Distribution Systems

Types of Supply Chain Facilities

Fabrication
Heavy manufacturing

Cold Chain Air cargo

Light manufacturing

Multitenant Rack-supported warehouse

Regional warehouse

Bulk Cross-docking warehouse

Distribution

Storage

Optimal Location and Throughput by Number of Freight Distribution Centers

Cross-Docking Distribution Center


Distribution Center
Suppliers
Suppliers

Before Cross-Docking

LTL

Receiving Sorting Shipping

Customers

After Cross-Docking

FTL Cross-Docking DC FTL

Customers

Retail Logistics and E-commerce

Conventional Retail Logistics Suppliers


Regional Distribution RDC Center Store Deliveries

E-commerce Retail Logistics Suppliers

E-Retailer

RDC RDC

Order Retailer (In store inventory) Online purchases


Parcel Delivery Company

Travel to store

Home Deliveries

Customers

Customers

Order-Delivery Sequence of an Apple iPad


Order placed Order processed online 3hrs 34min Shipment notification Order Fulfillment (Cycle time of 12 days 18hrs 08min) 12 days 15hrs 34min

Note: Path is approximate Consolidation (Shenzhen/HK) 2hrs 45min 4hrs 23min 7hrs 34min Transfer (Anchorage) Deconsolidation (NY Metro) 4hrs 00min 1hr 11min 2hrs 48min

17hrs 04min 1hr 57min 1hr 22min 6hrs 03min

At Anchorage hub Left Anchorage hub Shipment notification Left Newark hub Delivered Leaving local DC At Hong Kong hub At Newark hub At local DC Cleared customs Shipment picked up

Delivery (Lead time of 48hrs 11min)

Logistic Activities and their Green Dimensions


Product Design and Production Planning Product design Near sourcing Sustainable sourcing Physical Distribution Certified distribution facilities Certified carriers Load consolidation Alternative modes and fuels Materials Management Packaging Recycled inputs Recyclable outputs (waste management)

Forward Channel

Producers

Distributors

Suppliers
Recyclers Collectors
Reverse Channel

Consumer

Forward and Reverse Distrib

Packaging with Less Footprint

Operational Conditions of Cold Chain Logistics


Conditional demand
Each product has a specific perishability. Shelf life and revenue. Demand conditional to qualitative attributes.

Load integrity
Reefers as the common load unit. Packing, packaging and preparation. Empty backhauls.

Transport integrity
Uninterrupted integrity of the transport chain (modes, terminals and DC). Specialized modes (speed) and terminals?

Temperature Standards for the Cold Chain

"Banana"

Pharmaceutica l

Chill

Frozen

Deep Freeze -30 -25 -20 -15 -10 -5 0 Degrees Celcius 5 10 15

Shelf Life of Selected Perishable Food Products


Product Apples Bananas Bell Peppers Cabbage Eggs Onions Lettuce Fresh Meat (beef, lamb, pork, poultry) Oranges Pears Potatoes Shelf Life (Days) 90-240 7-28 21-35 14-20 180 30-180 12-14 14-65 21-90 120-180 30-50 Optimum Temperature (Celsius) 0 13.5 7 1 1.1 1 0.6 -2 7 -0.6 10

Seafood (shrimp, lobster, crab)


Strawberries Tomatoes

120-360
5-10 7-14

-17.8
0.6 12

Lettuce Shelf Life by Storage Temperature


14

12
10 Shelf Life (Days) 8 6 4 2 0 0 5 10 15 Temperature (Celsius) 20 25

Seaborne Reefer Trade, 2008

14% 3%

20% Bananas Citrus Deciduous Fruit Exotics Fish & Seafood Meat Dairy Other

7% 24% 10%

19%

3%

Reefer Stacking Area, Maher Terminal, Newark

Grocery Chain Cold Storage Facility, Regina

Subtropolis Distribution Center, Kansas City