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PASS QUESTION (CIA DEC.2009 LOGISTICS)

QUESTION 1

Distribution refers to the activities involved in transporting products from suppliers to customers, or making services available to customers. Such activities include; the procurement of raw materials or equipment, packaging, warehousing wholesale and retail, and other value added services.

In simple terms, distribution provides an inlay between the producer of a product and the seller of that product. After a product is made, it is usually then sold to a distributor, who in turn will sell the product either directly to customers, or to retailers who will in turn sell it to customers.

Logistics:  The process of planning, implementing, and controlling procedures for the efficient and effective storage of goods, services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. It includes inbound, outbound, internal, and external movements. Logistics involved the planning, execution, and control of the movement / placement of goods and / or people, and the related supporting activities, all within a system designed to achieve specific objectives.
Their principal objectives are:

  • Customer service
  • Demand and supply planning, and purchasing management
  • Transportation management
  • Quality control, customs and insurance
  • Warehouse management
  • Inventory management
  • Distribution
  • Production (in-house logistics)

Throughout history, distribution has been related to questions in the field of logistics, namely, how one gets a particular product to a customer. Thus, the distribution end of supply chain management must contend with such decisions as to whether to sell the product directly, or through a retailer; whether the product should be distributed on a wholesale basis; whether the product should be sold via multi level marketing channels, this where distribution and logistics management comes to play.

QUESTION 2 (A)

Reducing operational costs and improving productivity has quickly become a top of mind business objective amid today’s challenging financial markets. Logistics cost form an important part of the overall cost structure in any organization. Cost optimization aims to reduce the baseline costs of the business, while maintaining acceptable service levels. Organizations are working towards developing a systematic cost reduction program and building a solid organizational foundation that promotes a culture of cost containment and improved productivity. Every cost management program needs a certain level of commitment and vision from the organization. Cost optimization must be done in such a way that it does not undermine the organization’s efforts to capitalize on future growth opportunities. While there are many ways to accomplish this goal, the approach remains the same:

  • Review current services
  • Develop both technology and business based cost savings strategies
  • Negotiate with current vendors
  • Solicit competitive options
  • Optimize services

Cost reduction is the key word for success in today’s global competitive market scenario. It is the new economic mantra. Gone are the days; where the vendor can pass on the cost of his inefficiency, low productivity and bureaucratic way of functioning to the customer, as he used to often do in the old sellers market’s hay days.
Today’s customer has a wide choice in a Net connected global market, where one or the other market savvy vendor is ready to offer the required quality of products and services at competitive rates, often for strategic reasons of capturing the unconquered market.

 

 

 

 

 

QUESTION 2 (B)

 

No matter what product a firm manufacturers, one of most important parts of that process of servicing customers and manufacturing products has to be logistics. Logistics includes all of the shipping and delivering involved in the production process, including getting raw materials from vendors to the manufacturer and taking the finished products from the manufacturer to the distributors. Since logistics is so critical to the success of a business, managing these transportation decisions effectively is vital.

What affects logistics performance? The first thing to consider in logistics, as always, is cost. Any businessman worth his salt knows that he will be in the losing end if the tries to reach for a global market yet incur high overhead expenses. It will not be a wise move to ship items to another location if the actual costs of the activities are not going to be retrieved by the expected profit. Another thing to consider is the time that it will take for the goods and services to be delivered to their destination.

Logistics management involves a number of elements. First, it includes choosing the vendors who will be providing transportation services. It also includes selecting the most efficient routes for the shipping of goods and investigating the best method for delivery. Plus, in more recent years, logistics management has also included the selection of software and IT resources to help manage the entire process.

Unfortunately, not all firms make wise logistics management decisions, and this can cause problems beyond simply not having their goods get from Point A to Point B in a timely fashion. The failed or delayed deliveries can cause greater buyer dissatisfaction. Damaged goods as a result of transportation can also be an issue. Poor logistics planning can result in higher costs and the implementation of inefficient logistics software can cause more difficulties than it corrects. The majority of these problems are a result of bad outsourcing decisions, either choosing the wrong vendor or of opting to perform delivery tasks in-house without sufficient resources.
Another issue is choosing transportation providers. Businesses that look only at price may actually put themselves at a competitive disadvantage in their markets. For example, delivery time to customers for firms takes between 3 to 14 days. Those companies at the bottom end of that spectrum are not able to provide the added value of faster shipping times to their customers and may end up losing revenue as a result.

Every company has surplus assets on their balance sheet. Poor inventory control management and tracking of these non-performing assets can cause unseen business losses before anyone recognizes the problem exists. Every organization is at risk.

Lastly, one should take note of a country’s over-regulation. There are many countries that have customer practices that are detrimental to their own economic development. Goods are stocked for so long in the customs bureau and they just get released after months of waiting. This kind of bad practice seriously impairs the goal of logistics.

In reality, the poor performance of any logistical approach does not always have something to do with the company, but with other external factors as well. It is therefore necessary that poor logistics performance should not always be blamed on the source of goods.

QUESTION 3

Information and communication technologies may be defined as “electronic means of capturing, processing, storing, and disseminating information”. All these technologies provide new mechanisms for handling existing resources and information. The term “ICT’ is used to delineate various Telecommunication and Information technologies, which have been used in the fields of transport since the mid80s. Over the past decade (the 1990s), there was development technologies, the systems, and their applications in the fields of transport, such as freight resource management, freight and vehicle tracking and tracing, and front or back-office logistics systems The internet and related ICT enabled the cost-effective dissemination of information between disparate parties in the supply chains

The application and development of Information and Communication Technologies (ICT) have already had significant effects on many industries, especially in the field of logistics. Because of it, the style of business operation, up-/downstream partnership and customer relationship are changing. The application of computers, internet, and information communication systems can be seen in almost every activity in the logistics industry, such as transportation, warehousing, order processing, material management, and procurement. It is suggested that passing information to all businesses in the supply chains via ICT will improve performances. ICT has been promoted as a means to enhance logistics competitiveness. It is one of the few factors which has been proved to have the capability of increasing logistics competence and decreasing its costs simultaneously. Today, besides enterprises, governments around the world and the global organizations are all devoting their efforts to searching for chances of new development or application of information and communications techniques.

Development in ICT has made the integration of supply chains become possible, so that the links between suppliers, producers, customers, and third parties are easier to establish. Information technology capabilities can significantly influence overall logistics competence, specifically on quick response, standardization, and flexibility.

The Internet is used to manage the major components of supply chains including transportation, purchasing, inventory management, customer service, warehousing, production scheduling, and vendor relations. It will continue to provide logistics managers with business information and enable them to improve the profitability of their supply chains. The development of IT and e-commerce on Internet has been predicted dramatically to affect the ways that business is conducted. With the integration of information and substantiation, new products, services, and marketing processes can be created to change the relationship between manufacturers and customers and to improve customer’s orientation ability. The successful companies have developed focused e-business solutions for improving customer service elements that are most important in their business.

QUESTION 4 (A)

In cases where a marketer utilizes more than one distribution design the marketer is following a multi-depot or hybrid distribution system. Some company follows this approach as their distribution design includes using a direct retail system by selling in company-owned stores, a direct marketing system by selling via direct mail, and a single-party selling system by selling through retails stores.

The advantages are:

  1. The multi-depot approach expands distribution and allows the marketer to reach a wider market; however, the marketer must be careful with this approach due to the potential for channel conflict.
  2. Distribution costs are typically the largest single expense in many logistics systems, being greater than the warehousing, inventory maintenance, order processing, and administration costs. The control of distribution costs is thus a major concern to management. Multi-depot distribution system can help minimize these costs in term of transportation cost reduction because a distribution centre is located close to where goods are requested.
  3. Quick response to customer order enables the company to enjoy goodwill and increased market share and create a competitive advantage.
  4. Implementation of a multiple sales-channel system can also serve to balance out risk. Through creating a sales-channel portfolio, the independence of certain customer groups, which may occur with a concentration on specific segments only, can be overcome. Furthermore, this can reduce the dependence on certain distribution systems or on a particular infrastructure or technology.

Centralized distribution system

  1. Stronger, more professional inventory managers may be employed who furthermore are removed from day-to-day events that cause reactionary actions.
  2. These individuals can be thoroughly trained in both the general principles of inventory management and the particular system being used to drive the ordering process.
  3. Finally, special buying opportunities can be more effectively explored since all the information resides in one location and the individual is taking a total company view

QUESTION 4 (B)

Reverse logistics stands for all operations related to the reuse of products and materials. It is “the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics. The reverse logistics process includes the management and the sale of surplus as well as returned management. Forward logistics deal with events that bring the product towards the customer. In the case of reverse, the resource goes at least one step back in the supply chain. For instance, goods move from the customer to the distributor or to the manufacturer. 

QUESTION 5 (A)

Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets. Demand forecasting may be used in making pricing decisions, in assessing future capacity requirements, or in making decisions on whether to enter a new market. 

Accurate forecasting can make or break the flow of your warehouse operations If you’ve always believed that demand forecasting was a job for the front office think again. A good demand forecast could make all the difference in the world in of competition.

The Delphi method is a systematic, interactive forecasting method which relies on a panel of experts. The experts answer questionnaires in two or more rounds. After each round, a facilitator provides an anonymous summary of the experts’ forecasts from the previous round as well as the reasons they provided for their judgments. Thus, experts are encouraged to revise their earlier answers in light of the replies of other members of their panel. It is believed that during this process the range of the answers will decrease and the group will converge towards the “correct” answer. Finally, the process is stopped after a pre-defined stop criterion (e.g. number of rounds, achievement of consensus, and stability of results) and the mean or median scores of the final rounds determine the results.

Delphi is based on the principle that forecasts from a structured group of experts are more accurate than those from unstructured groups or individuals. Delphi has been widely used for business forecasting and has certain advantages over another structured forecasting approach, prediction markets.

QUESTION 5(B)

There will be other people who work within your organisation who are also your customers because you provide a service to them. We describe these people as internal customers. It is easy to forget that they are customers and quite often they are not treated in the same way that we would treat our external customers.

If you do not have a good working relationship with these internal customers and if you do not provide them with the service that they require in the way that they need it they will not be able to do their jobs effectively. This could have an adverse effect on the running of your company and the service that is provided to the external customers of the business.

Here are some examples of internal customers and the services provided:

 

 

A driver’s internal customers may be:   The service provided to these internal customers may include:
 Warehouse Staff Presenting the vehicle and self in a suitable condition and a safe manner.

Complying with Health and Safety procedures.

Assisting and advising staff on the safe loading of the vehicle.

Checking the products being loaded and unloaded.

Handling products carefully.

Securing loads for safe transit.

Presenting and receiving correct load documents.

Traffic Office Staff and Transport Manager  Presenting self to traffic office staff to receive instructions.

Following company procedures for paperwork and the completion of documents.

Ensuring delivery documents, time sheets, drivers hours records etc are kept in good condition and returned on time.

Communicating with traffic staff whilst ‘on the road’ using telecommunication systems.

Driving safely and providing a good industry/company image to the public.

Maintenance Workshop Staff Looking after the vehicle and keeping it clean and tidy.

Completing daily vehicle check and defect reports.

Communicating with maintenance staff about vehicle performance and condition.

Sales and Marketing Staff Demonstrating a courteous and helpful approach to customers.

Presenting self in a neat and tidy way.

Reporting customer problems or dissatisfaction with service levels.

 

JUNE 2009 (CIA LOGISTICS)

QUESTION 1

In the economic sense, the social phenomenon of individual human beings or organizations each concentrating their productive efforts on a rather limited range of tasks is refer to as specialization.  Specialization entails focusing on a narrow area of knowledge or skill or activity. It involves a person’s or an organization’s adapting for the unusually effective or efficient performance of some particular function, often at the expense of the individual’s or organization’s ability to perform most other functions for themselves, which are then necessarily left to others with more appropriate skills or talents or abilities.

The field of logistics manages how materials and finished goods are delivered to where they are needed in a timely and cost-efficient manner. Logistics is a vital component that contributes to the success of managers in organization, specialization therefore is a must.

Logistics management is highly integrated and requires mastery of purchasing, materials management, supply-chain management, transportation, customs regulations, foreign exchange, information technology, and cultural issues, among various other aspects.

It increases efficiency:    One of the most complex jobs in several industries is that of the Logistics manager.

 Reduce cost: Profitability, to a great extent, depends on a manager’s skills. Though largely invisible to the outside world, internally, managers use their skills in cutting cost and improving performance thereby increasing profitability.

It saves time:  There is no need of switching from one task to another in that case the organization concentrates on her/his field as a result time is saved in production and customers order delivery.

Reduces wastage:  Accuracy in production – it is likely to be accuracy in production due to the fact that every participant will engage in the particular work where he will be concerned with his area of specialty thereby improving product quality.

QUESTION 2

Value proposition is a description of the customer problem, the solution that addresses the problem, and the value of this solution from the customer’s perspective. It is statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.

Companies use this statement to target customers who will benefit most from using the company’s products, and this helps maintain an economic moat. The ideal value proposition is concise and appeals to the customer’s strongest decision-making drivers. Companies pay a high price when customers lose sight of the company’s value proposition. An example value proposition,

In the 1970s and early 1980s many companies had to admit that they didn’t know how to make durable goods or deliver reliable services. The buzz of Total Quality and all its variants filled the air. Companies learned to operate in a continuous-improvement mode, turning state-of-the-art into standard operating procedure. Gradually, good functioning became the norm. But rather than satisfy customer hunger, it only increased value-whetted appetites for more convenience, lower prices, and an endless stream of innovative products and services. Successful organizations where those who excelled at delivering one type of value – best total cost, best product, or best total solution – to their chosen customers. Managers focused on a single value discipline and build their organizations around it. Choosing one discipline does not mean abandoning the others. It means that a company directs its energy and emphasis. It narrows its focus to become a market leader – it is going for the gold in their chosen discipline and settling for a silver or bronze in the other

The solution; customer’s relationship management. Better recognize your customers’ and prospects’ needs, value perceptions and priorities. You will learn to target your offerings and delivery ability relative to that of your competitors and customer’s notion of “ideal”. Develop customer and prospect segmentation strategies that facilitate effective separation and targeting of offerings. Customers refuse to be anonymous. They continue to raise the level of their requirements, but their range extends beyond best price and best product. Today’s customers want exactly the right selection of products or services that will help them get exactly the total solution they have in mind. Now, more than ever, customers hunger for superior results from the products or services they use. And customer intimacy gives it to them.

 

QUESTION 3

“QUEST FOR QUALITY IN LOGISTICS” Competitive pressure has prompted many business firms to deliver better value in their product/service offerings. Accordingly, the importance of quality improvement has received increasing attention among business firms. Some of them even view quality in the form of a certified quality system like the ISO 9000 quality management series, as a competitive advantage or as a minimum qualification for survival in the marketplace. A number of factors are seen to account for the increase in the adoption of quality management systems (QMSs). These factors include arise in quality awareness, an increase in customer pressure, and a need to install a mechanism to improve work processes. Improving product and service quality has been extensively discussed in the literature as an effective strategy for gaining sustainable competitive advantages. Empirical evidence suggests that quality management leads to improvements in organizational performance in terms of increased productivity and profits. Recognizing the potential benefits that improved quality is likely to bring, firms are increasingly according it a high priority in their management agenda. Quality management is a holistic management approach that strives for improvement in all functions of an organization. Oakland (1993) defined it as an approach to improving the effectiveness and flexibility of business as a whole. According to him, quality management is essentially away of organizing and improving the whole organization, every department, every activity, and every single person at every level. The aim is continuously to improve process performance by placing the customers at the focal point of operations in order to satisfy them fully. It is a continuous quest for excellence that has to reach every individual within an organization in order to make prevention of defects possible and satisfy customers totally at all times. Nevertheless, the principles of quality management, to a greater or lesser extent, incorporate the following:

(1) the generating of objective data (‘facts’) for the systematic improvement of work processes and products as a prerequisite for taking action;

(2) a focus on key problem areas and customer satisfaction;

(3) the involvement and empowerment of employees.

Although quality management originates in the manufacturing sector, its widespread   adoption has gradually been extended to the service sector, including the logistics industry. The management approach is intended to empower employees to promote continuous, sustained, and long- term improvement in quality and productivity to accomplish such corporate goals as increased customer satisfaction and reduced costs. The principles of quality management are applicable and useful in logistics for creating customer value at a low cost in many aspects of their services. These include warehouse management, shipment consolidation, logistics information management, order fulfillment and processing, carrier selection, and production assembly. Similar to firms in the manufacturing sector, quality management can help logistics achieve dual cost and service objectives by the continuous improvement of work processes through procedure design, policy deployment, human resources management, and a set of quality management toolkits. As quality awareness in logistics industry is becoming a commonplace, a quality logistics service is fast becoming a pre-requisite for survival and long-term success in the logistics industry.

TQM and Logistics

According to the European Logistics Association (ELA) “…Logistics is ensuring the availability of the right product, in the right quantity, in the right condition, at the right price, at the right time, or the right customer, at the right price …”.

In order to achieve victory in today’s world, everyone must learn to adapt to the new environment characterized by change, complexity and competition.

Today’s world is radically different from the recent past. Companies must take action to adapt to this new environment.

Organization must be changed to reflect a new stance as one of the players in the competitive world economy

The nature and type of organization needs to be transformed into flexible entities geared to superior quality, high service and low cost.

Today’s world is radically different from the recent past. Companies must take action to adapt to this new environment. Our thinking must be changed to reflect a new stance as one of the players in the competitive world economy.

In this new environment, quality and reliability are necessities. The nature and type of organization needs to be transformed into flexible entities geared to superior quality, high service and low cost.

There are many approaches to meeting this challenge. These approaches have various names but most importantly, all of these efforts have one common objective – satisfying the customer

One of these approaches is TQM.

Total Quality Management (TQM) is an approach that seeks to improve quality and performance which will meet or exceed customer expectations. This can be achieved by integrating all quality-related functions and processes throughout the company. TQM looks at the overall quality measures used by a company including managing quality design and development, quality control and maintenance, quality improvement, and quality assurance.TQM takes into account all quality measures taken at all levels and involving all company employees.

 

Principles of TQM

Be Customer focused :  whatever you do for quality improvement , remember that ONLY customers determine the level of quality , whatever you do to foster quality  improvement , training employees , integrating quality into processes management , ONLY customers determine whether your effort were  worthwhile.

Insure Total Employee Involvement:  This done after you remove fear from work place , then empower employee … you provide the proper environment.

Process Centered: fundamental part of TQM is to focus on Process thinking.

Integrated system:  All employee must know business mission and vision, must monitor the process .an integrated business system may be modeled by ISO 9000.

Strategic and systematic approach: Strategic plan must integrate quality as core component.

Continual Improvement:  using analytical and creative thinking in finding ways to become more effective.

Fact Based Decision Making: decision making must be ONLY on data , not personal thinking or situational .

Communication: communication strategy, method and timeliness must be well defined.

 

WHY TQM

TQM requires and organizational environment and a system for continuous improvement to achieve victory. These elements must be shared by everyone. This requires lots of continuous hard work.

 Achieving victory requires a vision and the leadership to make the vision a reality. The involvement of everyone working together in an atmosphere of trust and encouragement is necessary.

Logistics and TQM have a natural relationship.

Logistics has many definitions, but the essence of logistics has been to satisfy the customer. Whether it is meeting a readiness objective or providing a service or product the logistician focuses on the customer (user)

Logistics constantly strives to influence design, continuously improve the logistics process; provide the right quantity of the right product in the right place at the right time and give the optimum mix of support at the lowest possible life cycle cost.

Logistics and TQM both focus on the highest quality and service at the optimum cost to satisfy the customer.  The logistics elements of maintenance, training, documentation, supply support, transportation, support equipment and facilities relate to the customer service aspects of TQM. In addition, the logistics elements of reliability, maintainability, manpower and computer resources relate to the design elements of TQM.

TQM and logistics have a direct relationship. Using the combination of TQM and logistics can significantly improve the possibility of achieving victory. Applying the TQM principles with logistics can provide flexible, responsive and less costly solutions.

 

QUESTION 4(A)

Logistics is complex processes of relations between humans, nature, technology and resources that interact and unpredictably self-organize into emerging paradoxical patterns with value creating potential. The difficult aspects of the logistics managers work were is that most logistics activities are clouded with uncertainties. The overall increased complexity which affected them in their logistics processes and activities can be grouped into four uncertainty dimensions:

(1)Customer demands and expectations:  The first dimension relates to increasing and changing demands from customers, the impacts of which increasingly affect logistics. The scope of the customer demands on logistics had increased and involved several factors such as: shrinking time-windows for deliveries, customized order bookings, increased number of packaging types, customized labeling, variations in number of products per pallet and per order, increased frequency of deliveries, JIT demands, increased product variants, and less volume per order.

 (2) Internal processes;  the importance of integration of sales/marketing and logistics,  several of the participants explained that the internal communication between sales/marketing and logistics is a source of great uncertainty in their daily logistics activities. Sales and marketing have no awareness for how logistics works.  The marketing function provides the worst demands possible on logistics, front-end have knowledge and competence about customer needs while the knowledge about logistics is often in the back-end. The general picture was that logistics processes are supposed to work accurately and efficiently, but without associated costs. For the logisticians this internal factor provides them with unnecessary uncertainty based on the fact that in many cases they are invited into customer arrangements rather late. Hence, their function becomes one of complying with, rather than providing more effective solutions from the beginning.

(3) Human factors; Human aspects came up in all areas of logistics. These human factors created uncertainty; “we are not robots, we do make mistakes.”  One example is the importance of meeting the “right “people when visiting customers. Other aspects of human related uncertainty are power, hidden truths, and protectionism. The issue of power is declared as an uncertainty factor since it hampered decision processes, and made communication more difficult, i.e. was merely an obstacle creating problems in several situations, for instance, if “people are afraid of making decisions due to internal power structures. Concerning hidden truths, there are many things we do for the simple reason that we have done them for a very longtime; another thing is that in people resistance to change. You always hear such things as “we have done that before, it did not work years ago. Human factors are both the creators of value and the producers of uncertainty in the logistics context. The more awareness and understanding of human involvement the more leverage is to be gained in improvement efforts and the higher levels of integration with customers and internally, can be achieved.

(4) General trends: The general trends are related to general developments of technology, ideas, and concepts. The picture provided was of an ever-changing environment where it was continually necessary to check if improvements efforts were right. For example, radio frequency identification (RFID) technology and t how it could be applied to businesses. There are  uncertainties about what RFID mean to their operations, when to start doing something concrete, and concerns about who should pay, how should any cost-sharing policies come about etc are apparent. There are ever increasing amount of ideas and concepts that are provided and made available on the market the question is  “how do we prepare our workers for future demands and requirements? “This type of issue involved both a short-term and long-term perspective since efforts were needed relatively fast, while the results were to be gained later on, i.e. far.  One other problem is that IT tools which should benefit and assist logisticians were developed by IT people and best understood by IT people, not logisticians. This huge investment is fraud with risks and uncertainties. 

As companies are becoming more multifaceted themselves in their relationships with suppliers and customers, and in view of the increased turbulence facing almost all industries, the complexity facing logisticians is a clear fact. These challenges are characterized by novelty (the type of problems are contemporary), and paradoxes which are of an “unsolvable character “and can only be handled by balancing efforts each and every day.

Question 4(B)

Customers judge the value of merchandise not only by quality, but also by availability. Logistics can increase this value. Suppliers or distributors, for instance, can offer the customer increased added value by taking over logistics activities like free delivery. Such performance-oriented concepts improve customer satisfaction and create competitive edges.

Logistics activities are necessary if a customer is to make optimal use of goods and products. In this context, one also speaks of the utility value of merchandise. This utility value can be increased not only by improving the characteristics of the merchandise, but also by improving the availability of the merchandise.

Efficient logistics contributes to added-value in four major interrelated ways:

  • Production. Derived from the improved efficiency of manufacturing with appropriate shipment size, packaging and inventory levels. Thus logistics contributes to the reduction of production costs by streamlining the supply chain.
  • Location. Derived from taking better advantage of various locations implying expanded markets and lower distribution costs.
  • Time. Derived from having goods and services available when required along the supply chain with better inventory and transportation management, and the strategic location of goods and services.
  • Control. Derived from controlling most, if not all, the stages along the supply chain, from production to distribution. This enables better marketing and demand response, thus anticipating flows and allocating distribution resources accordingly.

 

QUESTION 5

   A channel of distribution can be defined as the collection of organizational units, institutions, or agencies within or external to the manufacturer, which perform the functions that support product marketing.

   The structure of a distribution channel is determined by the logistics functions that specific organizations perform. Some channel members perform single functions-carriers transport products, and public warehouse users store them. Others, such as third party logistics providers and wholesalers, perform multiple functions. Channel structure affects (1) control over the performance of functions, (2) the speed of delivery and communication, and (3) the cost of operations.

   While a direct manufacturer-to-user channel usually gives management greater control over the performance of functions, distribution costs normally are higher, making it necessary for the firm to have substantial sales volume or market concentration. With indirect channels, the external institutions or agencies (e.g. carriers, warehouse users, wholesalers, retailers) assume much of the cost burden and risk, so the manufacturer receives less revenue per unit.

   Most distribution channels are loosely structured networks of vertically aligned firms. The specific structure depends to a large extent on the nature of the product and the firm’s target market. There is no “best” channel structure, for all firms producing similar products. Management must determine channel structure within the framework of the firm’s corporate and marketing objectives, its operating philosophy, its strengths and weaknesses, and its infrastructure of manufacturing facilities and warehouses. If the firm has targeted multiple market segments, management may have to develop multiple channels to service these markets efficiently.

The “Last Mile” (or “Last Kilometer”) is a common distribution problem. Although it was initially conceived for the telecommunication sector (e.g. phone and cable services), it applies particularly well for freight distribution. Long distance transportation tends to be well serviced by high capacity modes and terminals and is prone to economies of scale (massification). As we get closer to the final customer, economies of scale are increasingly difficult to apply as the size of batches tends to diminish (atomization). The “Last Mile”, notably for retailing, often consists of truck deliveries taking place over short distances, but likely in a congested urban setting and in less than full truck load. It is often one of the most complex elements of the commodity chain to organize as it reconciles many customers, a variety of shipments and reliability difficulties related to congestion. The “Last Mile” concept also applies to the “First Mile”, albeit in reverse, which involves consolidation to a nearby transport terminal of the output of potentially several producers.

“Flexibilization” refers to the changing work practices by which firms no longer use internal labor markets or implicitly promise employees lifetime job security, but rather seek flexible employment relations that permit them to increase or diminish their workforce, and reassign and redeploy employees with ease.

In logistics, it implies a highly differentiated, strongly market and customer driven mode of creating added-value. Contemporary production and distribution is no longer subject to single-firm activity, but increasingly practiced in networks of suppliers and subcontractors. The supply chain bundles together all this by information, communication, cooperation, and, last but not least, by physical distribution.

Flow-through-oriented distribution centres. Flow-through, also known as pool distribution combines economy-of-scale opportunities with the flexibility of just-in-time initiatives. Broadly defined, flow-through is the process of centralizing inbound shipments, sorting them by delivery destination and then sending them out – all in the same day. This process eliminates the need for fixed assets, like warehouses; reduces the dependence on high inventory levels; and improves the time it takes to get the product to market. Companies become more nimble and create value by being better able to help customers respond to their consumers’ needs. not a new concept. Transportation companies have provided cross docking services for their customers for Flow-through many years. However, today’s flow through networks goes beyond transportation with centers that offer other value-added services, such as pick-and-pack, kitting and crating. In addition, flow through centers frequently use enhanced information technology to make it faster and easier to move cartons from inbound to outbound trailers.

There are four main activities generally included underflow through orientation. They are:

  1. Vendor consolidation: consolidate purchase orders from multiple suppliers going to a single distribution center. By consolidating vendor purchases, the company benefits from greater buying power, which usually means an improved pricing structure.
  2. Pool distribution: a truckload of product from a distribution center is sorted into individual orders for delivery. This increases throughput at the distribution center. Inbound pallets are unloaded and staged for outbound delivery, often times combining pallets from several vendors to create a full truckload.
  3. Import deconsolidation: similar to consolidation, with import deconsolidation the product flow originates at the port and goes to a distribution center. Rather than make distribution decisions at the country of origin, this process allows the company to wait until the product reaches the port to determine its ultimate destination. As a result, companies are more flexible and can allocate distribution based on need and timing. The retailer can allocate to a seasonal warehouse, distribution center, pool point or directly to individual stores.
  4. Flow through order fulfillment: product arrives from vendors in bulk at a distribution center where it is then allocated to orders. Retailers benefit by avoiding the need to maintain high inventory levels at the local store.

The flow-oriented mode affects almost every single activity within the entire process of value creation. The core component of materials management is the supply chain, the time- and space-related arrangement of the whole goods flow between supply, manufacturing, distribution and consumption. Its major parts are the supplier, the producer, the distributor (e.g. a wholesaler, a freight forwarder, a carrier), the retailer, the end consumer, all of whom represent particular interests.

Flexibilization. Increasing logistics cost have inspired – perhaps compelled – many companies to restructure their operations in order to diminish erosion of their profit margins. Companies have developed more flexible manufacturing strategies to help alleviate the impact of higher costs.
A logical consequence of this is the flexibilization of the manufacturing process. Logistics seems to be changing and with it, manufacturing. How to optimize the logistics networks is the most direct way to counterbalance high costs. It seems that the industry is heading towards a new distribution paradigm.

 Flexibilization of working and operating hours and of working conditions, the increasing complexity of logistics synchronization and changes in social norms. The share of people with so-called “standard jobs” is declining, whilst the proportion of nonstandard jobs (night, shift, weekend, part-time work and regular overtime as well as job leasing, temporary or minimum employment and free-lance work) is growing from year to year and spreading to more and more sectors of the economy, especially the service sector which logistics is a part.

This development has been triggered by a number of factors:

  • Technological change, especially in information and communication technologies, as well as in logistics (transport), which have accelerated economic processes in the fields of development, production, and distribution.
  • Globalization, which has sharpened competition in international markets and intensified inter-linkage between markets and companies, and which has been substantially reinforced by liberalization in world markets, the end of the socialism,, and political integration.
  • The increasing importance of the time factor for the economy, which has made acceleration and the precise interlocking of operational processes key elements in competitiveness.
  • The individualization of corporate work organisation as the “corporate internalization of time organisation” triggered by deregulation and the declining impact of collective solutions (i.e., collective bargaining).

All these have helped re-enforces the need fexibilization.

 Customer expectations:  If you’re a service provider, customer expectations can pose a major challenge. That’s because expectations are wondrous creatures: They grow, they shrink, they change shape, they change direction. They shift constantly, and they shift easily. And how satisfied (or dissatisfied) your customers are is determined by these expectations and your performance in meeting them.

If expressed as a calculation, customer satisfaction might look something like this:

Customer Satisfaction =     Your Performance    
Customer Expectations

Of course, customer satisfaction is influenced by a complex interplay of factors; it’s hardly as simple as plugging numbers into a formula and calculating the result. Nevertheless, this calculation serves as a reminder that your customers’ level of satisfaction can be affected by changes in either their expectations or your performance. That means you have to pay attention to both.

And that’s where things can get tricky, because how you perceive your performance may differ from how your customers perceive it. In fact, discrepancies between your perceptions and theirs would not be at all unusual. So, even if you’re working yourself to the proverbial bone, if customers view you as unresponsive, then you are unresponsive — in their eyes.

The reverse is also true: If you really are unresponsive, but customers perceive that you deliver superior service, then you do (in their eyes), and you gain little by trying to convince them otherwise. Though, there is no perfect service, of course, but remember that customer satisfaction is driven by their perceptions, not yours. Their perceptions are their reality, and any overlap between their view of the world and your own may be simply one of those delightful coincidences.

The question then is what do the customers want or expect?

Have you ever had customers who want the universe, gift-wrapped and delivered yesterday? Was that a resounding YES I heard?

Fortunately, most customers don’t demand the impossible. In fact, what they want is exceedingly reasonable. And that’s!

1. To be taken seriously 10. Knowledgeable help
2. Competent, efficient service 11. Friendliness
3. Anticipation of my needs 12. To be kept informed
4. Explanations in my terms 13. Follow-through
5. Basic courtesies 14. Honesty
6. To be informed of the options 15. Feedback
7. Not to be passed around 16. Professional service
8. To be listened to (and heard) 17. Empathy
9. Dedicated attention 18. Respect

It may be that customers who demand the universe gift-wrapped and delivered yesterday just need a strong dose of respect, attentiveness, and courtesy. Before you start searching for universe-size wrapping paper, give it a try.

 

 

JUNE 2008

QUESTION 1

Among the most significant conditions affecting transport costs and thus transport rates are:

  • Geography. Its impacts mainly involve distance and accessibility. Distance is commonly the most basic condition affecting transport costs. It varies greatly according to the type of transportation mode involved and the efficiency of specific transport routes. Landlocked countries tend to have higher transport costs, often twice as much, as they do not have direct access to maritime transportation.
  • Type of product. Many products require packaging, special handling, are bulky or perishable. Coal is obviously a commodity that is easier to transport than fruits or fresh flowers as it requires rudimentary storage facilities and can be transshipped using rudimentary equipment. Insurance costs are also to be considered and are commonly a function of the value to weight ratio and the risk associated with the movement. As such, different economic sectors incur different transport costs as they each have their own transport intensity. For passengers, comfort and amenities must be provided, especially if long distance travel is involved.
  • Economies of scale. Another condition affecting transport costs is related to economies of scale or the possibilities to apply them as the larger the quantities transported, the lower the unit cost. Bulk commodities such as energy (coal, oil), minerals and grains are highly suitable to obtain lower unit transport costs if they are transported in large quantities
  • Energy. Transport activities are large consumers of energy, especially oil. About 60% of all the global oil consumption is attributed to transport activities. Transport typically account for about 25% of all the energy consumption of an economy. The costs of several energy intensive transport modes, such as air transport, are particularly susceptible to fluctuations in energy prices.
  • Trade imbalances. Imbalances between imports and exports have impacts on transport costs. This is especially the case for container transportation since trade imbalances imply the repositioning of empty containers that have to be taken into account in the total transport costs. Consequently, if a trade balance is strongly negative (more imports than exports), transport costs for imports tend to be higher than for exports. Significant transport rate imbalances have emerged along major trade routes. The same condition applies at the national and local levels where freight flows are often unidirectional, implying empty movements.
  • Infrastructures. The efficiency and capacity of transport modes and terminals has a direct impact on transport costs. Poor infrastructures imply higher transport costs, delays and negative economic consequences. More developed transport systems tend to have lower transport costs since they are more reliable and can handle more movements.
  • Mode. Different modes are characterized by different transport costs, since each has its own capacity limitations and operational conditions. When two or more modes are directly competing for the same market, the outcome often results in lower transport costs.
  • Competition and regulation. Concerns the complex competitive and regulatory environment in which transportation takes place. Transport services taking place over highly competitive segments tend to be of lower cost than on segments with limited competition (oligopoly or monopoly). International competition has favored concentration in many segments of the transport industry, namely maritime and air modes. Regulations, such as tariffs, cabotage laws, labor, security and safety impose additional transport costs.

QUESTION 2

Transport modes are the means by which people and freight achieve mobility. They fall into one of three basic types, depending on over what surface they travel – land (road, rail and pipelines), water (shipping), and air.

  • Road: Road infrastructures are large consumers of space with the lowest level of physical constraints among transportation modes. However, physiographical constraints are significant in road construction with substantial additional costs to overcome features such as rivers or rugged terrain. Road transportation has an average operational flexibility as vehicles can serve several purposes but are rarely able to move outside roads. Road transport systems have high maintenance costs, both for the vehicles and infrastructures. They are mainly linked to light industries where rapid movements of freight in small batches are the norm. Yet, with containerization, road transportation has become a crucial link in freight distribution.
  • Rail transportation: Railways are composed of a traced path on which is bound vehicles. They have an average level of physical constrains linked to the types of locomotives and a low gradient is required, particularly for freight. Heavy industries are traditionally linked with rail transport systems, although containerization has improved the flexibility of rail transportation by linking it with road and maritime modes. Rail is by far the land transportation mode offering the highest capacity with a 23,000 tons fully loaded coal unit train being the heaviest load ever carried.
  • Pipelines: Pipeline routes are practically unlimited as they can be laid on land or under water. The longest gas pipeline links Alberta to Sarnia (Canada), which is 2,911 km in length. The longest oil pipeline is the Transiberian, extending over 9,344 km from the Russian arctic oilfields in eastern Siberia to Western Europe. Pipeline construction costs vary according to the diameter and increase proportionally with the distance and with the viscosity of fluids (from gas, low viscosity, to oil, high viscosity). The Trans Alaskan pipeline, which is 1,300 km long, was built under difficult conditions and has to be above ground for most of its path. Pipeline terminals are very important since they correspond to refineries and harbors.
  • Maritime transportation: Because of the physical properties of water conferring buoyancy and limited friction, maritime transportation is the most effective mode to move large quantities of cargo over long distances. Main maritime routes are composed of oceans, coasts, seas, lakes, rivers and channels. However, due to the location of economic activities maritime circulation takes place on specific parts of the maritime space, particularly over the North Atlantic and the North Pacific. The construction of channels locks and dredging are attempts to facilitate maritime circulation by reducing discontinuity. Maritime transportation has high terminal costs, since port infrastructures are among the most expensive to build, maintain and improve. High inventory costs also characterize maritime transportation. More than any other mode, maritime transportation is linked to heavy industries, such as steel and petrochemical facilities adjacent to port sites.
  • Air transportation: Air routes are practically unlimited. Air transport constraints are multidimensional and include the site (a commercial plane needs about 3,300 meters of runway for landing and takeoff), the climate, fog and aerial currents. Air activities are linked to the tertiary and quaternary sectors, notably finance and tourism, which lean on the long distance mobility of people. More recently, air transportation has been accommodating growing quantities of high value freight and is playing a growing role in global logistics.
  • Intermodal transportation: Concerns a variety of modes used in combination so that the respective advantages of each mode are better exploited. Although intermodal transportation applies for passenger movements, such as the usage of the different, but interconnected modes of a public transit system, it is over freight transportation that the most significant impacts have been observed. Containerization has been a powerful vector of intermodal integration, enabling maritime and land transportation modes to more effectively interconnect.

QUESTION 3 (A)

Logistics can be defined as providing the right type of products and/or services at the right price, at place, time and in the right condition. A quick look back at some logistics history may prove very enlightening.

The birth of Logistics can be traced back to ancient war times of Greek and Roman empires when military officers titled as ‘Logistikas’ were assigned the duties of providing services related to supply and distribution of resources. This was done to enable the soldiers to move from their base position to a new forward position efficiently, which could be a crucial factor in determining the outcome of wars. This also involved inflicting damage to the supply locations of the enemy and safeguarding one’s own supply locations. Thus, this lead to the development of a system which can be related to the current day system of logistics management.

During the Second World War (1939-1945), ogistics evolved greatly. The army logistics of United States and counterparts proved to be more than the German army could handle. The supply locations of German armed forces were inflicted with serious damages and Germany was not able to wreak the same havoc on its enemy. The United States military ensured that the services and supplies were provided at the right time and at the right place. It also tried to provide these services when and wherever required, in the most optimal and economical manner. The best available options to do the task were developed. This also gave birth to several military logistics techniques which are still in use, albeit in a more advanced form.

Logistics has now evolved itself as an art and science. However, it cannot be termed as an exact science. Logistics does not follow a defined set of tables nor is it based on skills inherited from birth. A logistics manager performs his duties and responsibilities based on his educational experiences, skills, past experiences and intuition. These skills are nourished by a constant application of the same by him for the betterment of his organization. The logistics manager ensures that the company is benefited by an effective and efficient system of logistical management. He also needs to ensure that the right kind of products and services are provided at the right time and for a right price, whether inside the organization’s premises or delivery of shipments outside the premises of the organization.

Logistics has come to be a kind of relief for many organizations that formerly looked upon it as a burden. Companies nowadays are hiring people with the requisite knowledge to deliver sustainable enhancements in the field of supply chain management. As has been the case throughout most of logistics history, the task of a logistics manager involves a clear vision and a drive within to deliver results under strict deadlines in addition to his usual responsibilities.

 

Question 3 (B)

Benefits Logistics

  • Long-term strategic alliances with logistic providers.
  • Superior equipment management and analysis skills
  • Goal to continually improve customer satisfaction
  • Logistics and distribution best practices
  • Team oriented approach with customers and logistic suppliers
  • Support in carrier management
  • Development of long-term partnerships with logistic providers assuring customer satisfaction
  • Implementation of supply chain and distribution best practices
  • Internal drive to improve customer satisfaction

 

QUESTION 4

Exporting/Import Logistics

Logistics includes all of the activities in moving merchandise from the origin of manufacture to the point of use or consumption. Export logistics include getting the right amount of product to customers within the required time frame at a cost that leaves a margin of profit for both parties. Recent estimates indicate that logistics in trade account for 15% of the total volume, or $1.5 trillion annually. Therefore, controlling logistical costs should be a priority and can result in more profit for the exporter.

Physical distribution has evolved in recent years and has become a competitive advantage for U.S. Exporters. Many firms refer to their distribution systems as “marketing logistics” instead of just “shipping.”

Importers are more concerned about the landed cost of a product than of the individual product price. An exporter’s ability to provide logistical solutions to help lower the landed cost influences that company’s ability to be competitive.

While it is important to remain cost-competitive, choosing transportation on price alone is not advised. The cheapest method of transportation is usually not the best, and it is often risky to save a few cents by selecting an unknown logistics service provider or carrier. If goods are misrouted, lost or not properly serviced, future business could be lost. A savvy exporter will look for savings at each step beginning with the method of packing goods for shipment and ending at product delivery, without sacrificing the quality of shipment. When an exporter can add value to the transaction, he/she always should.

Export distribution involves the physical act of moving products and is an integral part of international trade. Companies of all sizes should become familiar with the distribution systems between the origin manufacturing location and the targeted markets.

While many aspects of international marketing allow an exporter to be creative and unique, there is little room for error in export mechanics. The role of service providers in international logistics and transportation cannot be underestimated. Exporters should not operate in the “Do It Yourself” mode on these highly volatile and crucial procedures. It is best to leave this process to the experts, who make their living by learning the most efficient and ethical transportation methods available.

Numerous variables impact shipment logistics and distribution. Transportation modes impact the total cost of the goods, which may fluctuate between nations in regards to requirements on packaging, labeling, transit times, perishability, and damage or loss of cargo. Mistakes in this process lead to increased labor costs. Many hours of work can go into solving problems that could have been avoided by taking the time to learn the process in the first place. Familiarizing yourself with how a market imports its goods and how the goods reach the consumer before actively marketing is a gesture that potential buyers appreciate.

 

QUESTION 5

  1. Type of automobile leasing in which a leasing firm undertakes maintenance and repair of the vehicle and offers other services (such as providing a replacement vehicle), upon payment of a fixed fee.

Contract Hire has historically been a proven method of car finance for the business user, providing motor finance for both for new start companies and for established businesses, including those who have a poor credit history, bad credit or adverse credit. New start companies typically may have no credit history or a poor credit record but this need not exclude them from taking out contract hire agreements for their motor finance needs.

  1. A Lease means an assignment of the right to ownership and use of merchandise for a period of time in return for some mutually agreed on remuneration or recompense. A sale, whether it is a sale on agreement, or a sale or return, or retention or creation of a collateral interest, is not labeled as a ‘lease.’ Whether it is a real estate property that is to be leased or an automobile or any other kind of property, it must be done within the terms of a legal and binding contract to avoid misunderstanding, loss and breach of trust. A lease contract is an officially authorized document or record that certifies a lease transaction between the individual renting the property and the leaseholder.

A leaseholder can enter into a lease contract with the individual leasing property by approaching a lawyer and stating his assets and choices of remuneration. The individual leasing the property then states his conditions for leasing the property, as well as the expected remuneration. When the two mutually agree on payment, the contract is carefully drafted by the leasing lawyer or agent and signed by both parties. The period of time the recompense must be made is also stipulated in the contract. In case of breach of contract by the leaseholder through nonpayment of remuneration or repeated, the contract also mentions the penalty incurred therein. Similarly, there is penalty for the individual leasing the property when there is compromise on promised quality, as well as unnecessary inconvenience caused to the leaseholder. However, it must be noted that lease contract are more in the interest of the leaseholder.

Sometimes, a lease contract is combined with an option-to-purchase contract, where at the end of the lease term, the leaseholder can buy the property under mutually agreed terms.

  1. Lean Logistics concepts are deeply rooted inside the lean manufacturing of Toyota Production System. Jim Womack summarizes the key principles of the Toyota Production System as Lean Manufacturing in his book “Lean Thinking”. Lean Manufacturing has now been abbreviated to simply being called ‘Lean”. In its purest form, Lean is about the elimination of waste and the increase of speed and flow. Although this may be over-simplification, the ultimate objective of Lean is to eliminate waste
 

from all processes. At the top of the list of known wastes, according to Lean theory is the elimination of inventory. More simply, any inventory should be eliminated that is not required to support operations and the immediate need of the customer.
The impact of Lean on the logistician is significant, as the goal of Lean is eliminate waste (inventory) which will decrease work in process inventories which in turn will decrease process and cycle times and ultimately increase supply chain velocity and flow.

Lean is a proven approach towards reducing waste and streamlining operations. Lean embraces the practice of continually increasing the proportion of value added activity through ongoing waste elimination. 

A lean approach provides companies with tools to survive in a global market that demands higher quality, faster delivery and lower prices. Specifically,

  Lean dramatically reduces waste in the supply chain.
  Lean reduces inventory and floor space requirements.
  Lean creates robust production systems.
  Lean produces optimized material delivery systems.
  Lean results in increased flexibility.
   

 

  1. Logistics cost form an important part of the overall cost structure in any organization. Focus needs to be on renegotiating freight and shipping rates, reduction in overall freight costs and streamlining operations.

In  logistics, the idea that all logistical decisions that provide equal service levels should favor the option that minimizes the total of all logistical cost and not be used on cost reductions in one area alone, such as lower transportation charges.

  1. Demand chain management is the management of upstream and downstream relationships between suppliers and customers to deliver the best value to the customer at the least cost to the demand chain as a whole. The term demand chain management is used to denote the concept commonly referred to as supply chain management, however with special regard to the customer pull. In that sense, demand chain management software tools bridge the gap between the customer relationship management and the supply chain management. The organization’s supply chain processes are managed to deliver best value according to the demand of the customers.

 DCM is a natural next step in the evolution of the Supply Chain Management (SCM) concept based on the necessity for adaptation to changing external and internal conditions and the availability of new tools.

DCM involves:
(1) an integration between demand and supply processes,
(2) a structure between the integrated processes and customer segments, and
(3) working relationships between marketing and supply chain management.

Demand-chain management provides a framework for continually gathering important data, storing it in one central environment, analyzing it and acting on it in ways that ensure profitability. In its best form, demand-chain management even anticipates customers’ needs well before they express them.

 

MARCH 2009

QUESTION 1

Total logistics costs consider the whole range of costs associated with logistics, which includes transport and warehousing costs, but also inventory carrying, administration and order processing costs. The above graph portrays a simple relationship between total logistics costs and two important components; transport and warehousing. Based upon the growth in the shipment size (economies of scale) or the number of warehouses (lower distances) a balancing act takes place between transport costs and warehousing (inventory carrying) costs. This function differs according to the nature of freight distribution. There is a cutting point representing the lowest total logistics costs, implying an optimal shipment size or number of warehouses for a a specific freight distribution system. Finding such a balance is a common goal in logistical operations.

 

 

QUESTION 2

Marketing is the activities of a company associated with buying and selling a product or service. It includes advertising, selling and delivering products to people. People who work in marketing departments of companies try to get the attention of target audiences by using slogans, packaging design, celebrity endorsements and general media exposure. The four ‘Ps’ of marketing are product, place, price and promotion.
Many people believe that marketing is just about advertising or sales. However, marketing is everything a company does to acquire customers and maintain a relationship with them. Even the small tasks like writing thank-you letters, playing golf with a prospective client, returning calls promptly and meeting with a past client for coffee can be thought of as marketing. The ultimate goal of marketing is to match a company’s products and services to the people who need and want them, thereby ensure profitability

In today’s environment-where changes in price, promotion, and product often are quickly imitated-the way to sustain competitive advantage may lie in changes to ancillary services, such as logistics. By leveraging excellent and superior logistics services, intricately linked with marketing strategy, firms can potentially create and maintain competitive advantage. The purpose of this paper is to begin the theoretical development process by understanding the implications of logistics leverage on marketing strategy.

QUESTION 3

Availability is a performance criterion for repairable systems that accounts for both the reliability and maintainability properties of a component or system. It is defined as the probability that the system is operating properly when it is requested for use. That is, availability is the probability that a system is not failed or undergoing a repair action when it needs to be used. For example, if a truck has a 99.9% availability, there will be one time out of a thousand that someone needs to use the truck and finds out that the truck is not operational either because the truck is out of service or the truck is in the process of being repaired or replaced. (Note: Availability is always associated with time, much like reliability and maintainability).

Logistics service providers operate in an intense competitive environment that requires continuous improvement in logistics service quality and firm performance. Monitoring 3PL partners may contribute toward the improvement in performance of logistics service providers.

Supply Chain measurements or metrics such as Inventory Turns, Cycle Time, DPMO and Fill Rate are used to track Supply Chain performance. Commonly used by Supply Chain Management, metrics can help you to understand how your company is operating over a given period of time. Supply Chain Measurements can cover many areas including Procurement, Production, Distribution, Warehousing, Inventory, Transportation, and Customer Service – any area of logistics. However, a good performance in one part of the Supply Chain is not sufficient. Your Supply Chain is only as strong as its weakest link. The solution is for you to focus on the key metrics in each area of your Supply Chain.

DPMO: Defects Per Million Opportunities: DPMO is a Six Sigma* calculation used to indicate the amount of defects in a process per one million opportunities.

Fill Rate calculates the service level between 2 parties. It is usually a measure of shipping performance expressed as a percentage of the total order.

Inventory Turns (Inventory Turnover): The number of times that a company’s inventory cycles or turns over per year. It is one of the most commonly used Supply Chain Metrics.

Cycle Time: Cycle time include- Customer Order Promised Cycle Time,  Customer Order Actual Cycle Time, Manufacturing Cycle Time, Purchase Order Cycle Time, Inventory Replenishment Cycle Time, Cash to Cash Cycle Time,  and Supply Chain Cycle Time.

QUESTION 4

Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably. Its objectives are to deliver the right product, in the right place, at the right time, at the right price (CIM)

The CIM definition of the marketing, looks not only at identifying customer needs, but also satisfying them (short-term) and anticipating them in the future (long-term retention).

Now that you have been introduced to some definitions of marketing and the marketing concept, remember the important elements contained as follows:

  • Marketing focuses on the satisfaction of customer needs, wants and requirements.
  • The philosophy of marketing needs to be owned by everyone from within the organization.
  • Future needs have to be identified and anticipated.
  • There is normally a focus upon profitability, especially in the corporate sector

 

Logistics in the other hands focuses specifically on providing product availability at appropriate time & place. Logistics focuses on getting supplies and products from producers and manufacturers to retail outlets this includes both inbound and outbound supplies. The main responsibilities include inventory management, purchasing, packaging, and transportation. People in these careers maintain the fragile balance between supply and demand and sustain a steady flow of goods through the supply chain. The whole area of logistics is predominantly service driven; you cannot deliver and keep your customers happy unless you have an efficient and effective logistics management.

Although marketing and logistics aims at satisfying the final consumer, they are both different in approach and methodology. They should therefore be separated.

QUESTION 5

Transportation is the most visible of all functions of logistics and high contributor to logistics cost. We can see trucks, containers and wagonloads of material being moved from place to place as an activity directly associated with trade and business.  We should also appreciate that this is an activity that adds highest amount of cost to the activity of making inputs and outputs available to consumers. Transportation function moves the products to meet customer expectations at minimum cost.

Economy of scale: It is common knowledge that per unit transportation cost comes down as the bulk of the items transported increases. Hence in order to gain benefits in terms of reduction in transportation costs logistician tries to consolidate the bulk and then ship the consignment rather than shipping half truck loads or half container loads. This benefit is Economy of scale. Economy of distance: The transportation cost per kilometer comes down as the distance moved increases. Hence transportation is planned in a single long lap rather than number of short laps to reach the destination. The fixed costs and costs like overheads of loading and unloading are spread over the distance through which the load is moved. When alternate transportation strategies are evaluated to meet customer service expectation, economy of scale and economy of distance are fundamental.


2 Comment(s)

  1. nkem

    May 24, 2011 at 10:01 am

    Dear Sir,
    Thank you.



  2. ISO 9000

    August 18, 2011 at 2:54 pm

    I read your post . it was amazing.Your thought process is wonderful.The way you tell about things is awesome. They are inspiring and helpful.Thanks for sharing your information and stories.

    iso 9000



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