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)
Demand (Operations)
Order
Transportation
• Right product
• Right quantity
• Handling
• Packaging
Delivery
• Right location
• Right time
Quality
• Right condition
Cost
• Right price
Stock Management
• Production scheduling
• Warehousing
Orders Processing
• Sales
• Purchase
Value-Added Functions and Differentiation of Supply Chains
Value-Added Functions
Supply Chain Differentiation
Production Costs
Logistics Costs
Location
Transit Time
Time
Reliability
Control
Risk
Taxonomy of Logistics Decisions
Level
Description
Production
structures
Commercial decisions on outsourcing, offshoring and sub-contracting.
Number, location and capacity of production units.
Transport
structures
Choice of a freight network linking a company and its suppliers and
customers.
Choice of modes and terminals; the transport chain.
Distribution
structures
Choice concerning the number, location and capacity of distribution centers.
Frequency and timing of distribution (e.g. just-in-time).
Logistics structures
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
40
18
16
35
35
30
12
25
25
10
20
8
15
6
10
4
7
2
5
4
0
1960s
1970s
Logistics Costs (% GDP)
1980s
1990s
Inventory Costs (% GDP)
3
2
2000s
2010s
Cycle Time Requirements (days)
0
Days
% of GDP
14
Worldwide Logistics Costs, 2002
6%
4%
39%
24%
27%
Transportation
Warehousing
Inventory Carrying
Order Processing
Administration
From Push to Pull Logistics
Push
Pull
Supplier
Supplier
Supplier
Supplier
Manufacturer
Distributor
Supplier
Supplier
Supplier
Freight flow
Supplier
Supplier
Supplier
Manufacturer
3PL
Returns / Recycling
Distributor
Customer
Point-of-sale data
Customer
Layers to Logistics Services
Actors
Services
1PL
Manufacturing, Retailing
Carriers
2PL
Transportation
Logistics service
providers
3PL
Lead logistics providers
& consultants
4PL
Service integration
Cargo owners
Supply chain integration
Logistics
Supply chain
management
Logistic Performance Index, 2010
B – Value Chains
The Commodity Chain (or Value Chain)
Stages
1- Commodities
2- Intermediate Goods
3- Final Goods
Raw
materials
Manufacturing
and assembly
Distribution
Attributable to climatic (agricultural
products, forestry products) or
geological (ores and fossil fuels)
conditions.
Flows
Bulk shipping
Transformation that confers added
value. Metals, textiles, construction
materials and parts used to make other
goods.
Goods shipped to large consumption
markets. Flow and inventory
management.
Unit shipping
LTL shipping
Market
Transport Chain
High volumes
Low frequency
Average volumes
High frequency
Market
Low volumes
High frequency
Commodity Chains and Added Value
High
Fabrication
Added value
R&D
Low
Marketing
Branding
Design
Concept
Sales / Service
Distribution
Manufacturing
Commodity chain
Logistics
Product Life Cycle
Sales
Monopoly
Idea
Competition
Promotion
First competitors
Mass production
Obsolescence
Research and
development
Growth
Maturity
Decline
Stage 1
Stage 2
Stage 3
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
Regional warehouse
Cross-docking
Distribution
Light
manufacturing
Multitenant
Bulk
warehouse
Rack-supported
warehouse
Storage
Optimal Location and Throughput by Number of Freight
Distribution Centers
Cross-Docking Distribution Center
Distribution Center
Before Cross-Docking
Suppliers
Suppliers
LTL
Receiving
Sorting
Customers
After Cross-Docking
Shipping
FTL
FTL
Customers
Cross-Docking
DC
Retail Logistics and E-commerce
Conventional Retail Logistics
E-commerce Retail Logistics
Suppliers
Regional
Distribution
Center
RDC
Store Deliveries
Retailer
(In store inventory)
Suppliers
E-Retailer
RDC
RDC
Order
Online
purchases
Parcel Delivery
Company
Home
Deliveries
Travel to
store
Customers
Customers
Order-Delivery Sequence of an Apple iPad
Order placed
online
Order Fulfillment (Cycle time of 12 days 18hrs 08min)
Order processed
3hrs 34min
Shipment notification
12 days 15hrs 34min
Note: Path is approximate
Consolidation (Shenzhen/HK)
2hrs 45min
4hrs 23min
7hrs 34min
Transfer (Anchorage)
17hrs 04min
1hr 57min
1hr 22min
Deconsolidation (NY Metro)
6hrs 03min
4hrs 00min
1hr 11min
2hrs 48min
At Anchorage hub
Left Anchorage hub
Shipment notification
Left Newark hub
Leaving local DC
At
Hong
Kong
hub
At
Newark
hub
At local DC
Cleared customs
Shipment picked up
Delivery (Lead time of 48hrs 11min)
Delivered
Logistic Activities and their Green Dimensions
Product Design and
Production Planning
• Product design
• Near sourcing
• Sustainable sourcing
Physical Distribution
Materials Management
• Certified distribution
facilities
• Certified carriers
• Load consolidation
• Alternative modes and
fuels
• Packaging
• Recycled inputs
• Recyclable outputs
(waste management)
Forward Channel
Producers
Distributors
Suppliers
Consumers
Recyclers
Collectors
Reverse Channel
Forward and Reverse Distribution
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"
Pharmaceutical
Chill
Frozen
Deep Freeze
-30
-25
-20
-15
-10
-5
Degrees Celcius
0
5
10
15
Shelf Life of Selected Perishable Food Products
Product
Shelf Life (Days)
Optimum Temperature (Celsius)
Apples
90-240
0
Bananas
7-28
13.5
Bell Peppers
21-35
7
Cabbage
14-20
1
Eggs
180
1.1
Onions
30-180
1
Lettuce
12-14
0.6
14-65
-2
21-90
7
Pears
120-180
-0.6
Potatoes
30-50
10
Seafood (shrimp, lobster, crab)
120-360
-17.8
Strawberries
5-10
0.6
Tomatoes
7-14
12
Fresh Meat (beef, lamb, pork,
poultry)
Oranges
Lettuce Shelf Life by Storage Temperature
14
12
Shelf Life (Days)
10
8
6
4
2
0
0
5
10
15
Temperature (Celsius)
20
25
Seaborne Reefer Trade, 2008
14%
20%
3%
7%
24%
10%
19%
3%
Bananas
Citrus
Deciduous Fruit
Exotics
Fish & Seafood
Meat
Dairy
Other
Reefer Stacking Area, Maher Terminal, Newark
Grocery Chain Cold Storage Facility, Regina
Subtropolis Distribution Center, Kansas City