DSM 2306
Integrated Transport and Distribution
Management in Shipping
Topics
1. Integrated distribution management (6L, 2T, 14SDL)
1.1 Introduction to logistical management in shipping
1.2 Integrated logistic in a competitive shipping environment
1.3 Logistic in a shipping channel context: adjustment, transfer, storage, handling and
shipping
1.4 The channel wide logistical process
1.5 The nature of logistical and shipping channels
1.6 The concept of channel distribution separation
1.7 Interdependence of freight transaction and logistical activities
2. The components of logistical systems (4L, 2T, 10SDL)
2.1 Inter organisational distribution channels
2.2 Typical integrated logistical & shipping systems: Echelon system, Direct system, Flexible
systems and Voyager Estimate System (VES)
2.3 Introduction to geo market differentials total logistical channels: production, handling,
distribution and shipping
Topics
3. Element of ship handling and materials handling (4L, 2T, 14SDL)
3.1 Advantages of information ship directed handling
3.2 Understanding methods of containerisation: rigid and non rigid containerization
and palletisation
3.3 Container handling equipments
3.4 Conventional and Specialised Transport (CST)
4. Transportation and distribution in maritime industry (6L, 3T, 15SDL)
4.1 Introduction to Total Distribution Costs (TDC): transportation modes,
Administration, warehouse, transport decision.
4.2 Maritime and total transportation: the legislative background
4.3 Shipping marginal social cost pricing concept: arbitrary pricing, average cost
Pricing, infrastructure costs, land and sea costs.
4.4 Sea and land transport policy: transport policy white paper
4.5 Sea transport: Movement costs, containerisation, cargo handling, port Expenses,
freight
Topics
5. Intermodalism (4L, 2T, 15SDL)
5.1 Definition
5.2 Elements/Types
5.3 Intermodalism and seamless logistics
5.4 Advantages and disadvantages
5.5 Intermodalism and Integrated transport relationship
6. Customer Service (4L, 2T, 10SDL)
6.1 Define customer service.
6.2 Show the central role that customer service plays in an organization’s
marketing and logistics efforts.
6.3 How to calculate cost-revenue trade-offs.
6.4 Identify opportunities for improving customer service performance.
Objective
To ensure the student encompasses the cognitive process which is
remembering, and explaining the features of integrated transport and
distribution management in shipping, to explore the problem, and the
various related elements involving the integrated transport and
distribution management in shipping.
Learning Outcome
• Define the characteristics of integrated transport and distribution
management in shipping
• Identify the challenges involving the integrated transport and distribution
management in optimising and improving the shipping services efficiency
• Describe the evolving matters in the integrated global shipping industry
• Demonstrate the concept of integrated transport and distribution
management discipline in shipping
• Describe the various elements of integrated transport and distribution
management towards achieving seamless operational efficiency
Always Ask
• Who
• What
• Why
• How
• When
• Where
References
• Integrated logistic Handbook (3rd ed.).James Jones McGrawhill 2006
• Strategic Logistics Management, 4th Edition, James R. Stock & Douglas
M. Lambert, McGraw-Hill Irwin, International Edition 2001.
• Shipping and Logistics Management, Y.H.V. Lun, K.H. Lai, T.C.E. Cheng,
2010
• Lloyd’s Practical Shipping Guide - Introduction to Marine Cargo
Management, J. Mark Rowbotham, Informa 2008.
Additional references supporting the course
• Ports, cities, and global supply chains (transport and mobility).James
Wang et al.Ashgate Publishing, Ltd. 2007
• Getting the goods: ports, labor, and the logistics revolution. Edna
Bonacich & Jake B. Wilson Cornell University Press. 2007
• The Handbook of Logistics and Distribution Management, 5th Edition
Alan Rushton, Phil Croucher & Dr Peter Baker Kogan Page. 2014
Assessment Methods and Types
• Quiz 10%
- written
• Test 20%
- written
• Assignment 30%
- written
• Final Examination 40% - written
Grading Scheme
Marking Range
90-100
80-89
75-79
Grade Point
4.00
4.00
3.67
Grade
A+
A
A-
Result
Pass
Pass
Pass
Exam Eligibility
70-74
65-69
60-64
3.33
3.00
2.67
B+
B
B-
Pass
Pass
Pass
55-59
2.33
C+
Pass
50-54
47-49
44-46
2.00
1.67
1.33
C
CD+
Pass
Fail
Fail
Supplementary
Supplementary
40-43
30-39
0-29
1.00
0.67
0.00
D
E
F
Fail
Fail
Fail
Supplementary
Re-take
Re-take
Rules of Class
• Attendance
• Mobile Phone to silent mode
• No talking during lecture
• Centralized dissemination of notes
1. Integrated distribution management
1.1 Introduction to logistical management in shipping
Logistics
• What is logistics
• The Oxford English Dictionary defines logistics as "the branch of military science relating
to procuring, maintaining and transporting material, personnel and facilities."
• Council of Logistics Management definition: “Logistics is that part of the supply chain
process that plans, implements, and controls the efficient, effective forward and reverse
flow and storage of goods, services, and related information between the point of origin
and the point of consumption in order to meet customers’ requirements.”
• Logistic vs Logistics
• Importance of Logistics Activities?
• Economic Development
• Business Growth
• Matching supply and demand
Logistics Management
Synonyms:
•
•
•
•
•
•
•
•
•
•
Logistical Management
Business Logistics
Logistics
Channel Management
Materials Management
Distribution Management
Physical Distribution
Industrial Logistics
Quick-response systems
Supply Chain Management
Components of Logistics Management
Logistics Functions
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Customer Service
Procurement
Demand Forecasting
Production planning/scheduling
Inventory Management
Logistics Communications
Materials Handling
Order Processing
Packaging (for shipment and storage)
Parts and Service Support (after sales)
Plant and Warehouse (Site Selection)
Procurement (e.g. sourcing, quotations)
Reverse Logistics (e.g. remanufacturing, refurbishment, salvage & scrap disposal)
Traffic and Transportation
Warehousing and Storage
Exercise/Discussion 1
• Organise flow of Logistics activities
• Flow progresses from upstream (raw material) to downstream (the
end-customer)
Supply Chain
1. Integrated distribution management
1.2 Integrated logistics in a competitive shipping environment
Integrated Logistics Management
Integrated Logistics Management
• Cross-Functional Teamwork inside and/or outside the Company
• Building Channel Partnerships - teamwork
• Third-Party Logistics
• A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a
firm that provides service to its customers of outsourced (or "third party")
logistics services for part, or all of their supply chain management
functions.
• Third party logistics providers typically specialize in integrated operation,
warehousing and transportation services that can be scaled and
customized to customers' needs based on market conditions and the
demands and delivery service requirements for their products and
materials.
Integrated Logistics Management
Integrated Logistics Management
Transportation Modes
• Rail - Nation’s largest carrier, cost-effective for shipping bulk
products, piggyback (trailer on flatcar -TOFC)
• Truck – Flexible in routing & time schedules, efficient for shorthauls of high value goods
• Water – Low cost for shipping bulky, low-value goods, slowest
form
• Pipeline – Ship petroleum, natural gas, and chemicals from
sources to markets
• Air – High cost, but efficient for long-hauls of high value goods
Which transport modes produce the most emissions?
Exercise/Discussion 2
Discuss the differences between “Logistics” vs “Transport”
1. Integrated distribution management
1.3 Logistic in a shipping channel context: adjustment, transfer,
storage, handling and shipping
Logistics Channel
Logistics channel
• The network of intermediaries engaged in adjustment, transfer,
storage, handling, and communications functions that contribute
to the efficient flow of goods.
Logistics Functions
Functions:
• Adjustment - Consolidation of goods into one cargo shipment /
containers or Break Bulk repacked into smaller separable unit
• Breaking bulk. Wholesalers and retailers purchase large quantities of
goods from manufacturers but sell only one or a few at a time to many
different customers.
• Transfer – movement of cargo shipment / container from packing
/consolidation areas to warehouse
• Storage – warehousing of cargo shipment / container
• Handling – movement of cargo shipment / container from
warehouse to carrier (e.g. ship)
• Shipping – transportation by sea or other modes of transportation
1. Integrated distribution management
1.4 The channel wide logistical process
1. Integrated distribution management
1.5 The nature of logistical and shipping channels
The nature of distribution channels
• What is distribution channel?
• Why are intermediaries used?
• The function of distribution channel
• Channel level
What is distribution channel?
• A set of interdependent organizations (intermediaries) involved in
the process of making a product or service available for use or
consumption by the consumer or business user.
• Distribution Channels – comprised of various players in the flow of
products : Producer to Consumer
• Channel decisions
• Efficiency of distribution costs
• Affecting marketing decisions - Intermediaries are specialists in selling,
have the contacts, experience and scale of operation which means greater
sales can be achieved than if the producing business tried to run a sales
operation itself.
• Involve long-term commitments
Distribution Channels
How a Distributor Reduces the Number of
Channel Transactions
1
2
3
4
5
6
A. Number of contacts
without a distributor
MxC=3X3=9
7
8
9
= Manufacturer
= Customer
How a Distributor Reduces the Number of
Channel Transactions
1
B. Number of contacts
with a distributor
MxC=3+3=6
4
Store
2
5
3
= Manufacturer
6
= Customer
= Distributor
Role of Intermediaries
• Greater efficiency in making goods available to target markets
• reduce the number of transactions by creating assortments—providing a
variety of products in one location—so that customers can conveniently
buy many different items from one seller at one time
• Intermediaries provide
•
•
•
•
Contacts
Experience
Specialization
Scale of operation
• Match supply and demand
Channel Intermediaries/ Facilitators
• Ownership channel
• Banks, finance companies
• Negotiations channel
• Brokers
• Financing channel
• Banks, insurance companies, finance companies
• Promotions channel
• Advertising agencies, public relations agencies
• Logistics channel
• Freight forwarders
Exercise/Discussion 3
Functions of Distribution Channel
Functions of Distribution Channel
• Transportation and Storage (Physical Distribution)
The transportation and storage of goods is another type of physical distribution function. Retailers
and other channel members move the goods from the production site to other locations where
they are held until they are wanted by customers.
• Ordering
Channel intermediaries also perform a number of facilitating functions, functions that make the
purchase process easier for customers and manufacturers. Intermediaries often provide customer
services such as offering credit to buyers and accepting customer returns.
• Repair & Maintenance (After Sales)
Some wholesalers and retailers assist the manufacturer by providing repair and maintenance
service for products they handle.
• Risk Taking
Channel members also perform a risk-taking function. If a retailer buys a product from a
manufacturer and it doesn’t sell, it is “stuck” with the item and will lose money.
Functions of Distribution Channel
• Communication & Transaction
Last, channel members perform a variety of communication and transaction functions.
Wholesalers buy products to make them available for retailers and sell products to
other channel members. Retailers handle transactions with final consumers. Channel
members can provide two-way communication for manufacturers.
• Selling & Promotion
They may supply the sales force, advertising, and other marketing communications
necessary to inform consumers and persuade them to buy.
• Information
And the channel members can be invaluable sources of information on consumer
complaints, changing tastes, and new competitors in the market.
• Payment & Financing
Channel Level
• Manufacturer
• Wholesaler
• Retailer
• Consumer
• Type
• Horizontal
• Vertical
Channel Level
Channel Behavior and Conflict
• The channel will be most effective when:
• each member is assigned tasks it can do best.
• all members cooperate to attain overall channel goals and satisfy the
target market.
• Focus on individual goals leads to conflict
• Horizontal Conflict occurs among firms at the same level of the channel.
• Vertical Conflict occurs between different levels of the same channel.
Videos
• What are distribution channels?
• https://www.youtube.com/watch?v=ALoo4vrKKUw
• Channels of Distribution
• https://www.youtube.com/watch?v=17JMFvMmT3w
1. Integrated distribution management
1.6 The concept of channel distribution separation
Channel Separation
• Channel Structure is a function of product life cycle, logistics
systems,
effective
communication
networks,
product
characteristics, and/or firm size.
• The purpose of the channel is to provide consumers with the
desired combination of its outputs (lot size, delivery time, and
market decentralization) at minimal cost.
Channel Separation
• Separated channels are more efficient ones
• Specialization and focus
• Speed and efficiency
• Independent & Interdependent
• Channel separation is the mode for the future
Channel Separation
• Four flows of channels to describe the structure of supply chains:
•
•
•
•
Selling (information flow)
Ordering (order cycle)
physical distribution (physical flow)
Payment (Cash Flow)
• The flows of four channels are chosen for at least three reasons.
• Firstly, they describe the four most important channels in the supply chain.
• Secondly, these channels can be organized separately.
• Thirdly, these separate channels will get their own protocols for operations
and services (i.e. such as internet for marketing and ordering purposes).
Selling Channel
• is a chain of companies concerned with all the operations in sales
activities and decisions, from available possibilities as well as new
structures for selling channel choices.
• Channel is responsible for serving customers with flow of all
information concerning products and services
Ordering Channel
• is a chain of companies that consists of all the operations
concerning ordering activities as well as decisions about ordering
channel’s structure
Physical Distribution Channel
• is a chain of companies that are concerned with product planning,
production and physical movement of different types of products
and decisions for the structuring of these activities starting from
raw materials ending at final products
Payment channel
• is a chain of companies covering the decisions and structures
concerning payment, insurance, and finance activities in the supply
chain
1. Integrated distribution management
1.7 Interdependence of freight transaction and logistical activities
The Systems and Total Cost Approaches to Logistics
• Systems Approach
• Interdependence of company and logistics goals
• Interdependence of functional areas
• Stock-keeping units (SKUs)
a distinct item for sale, such as a product or service, and all attributes associated with the
item that distinguish it from other items
• Interdependence of logistics activities or Intrafunctional logistics
• Total Cost Approach
• Cost trade-offs: changes to one activity cause some costs to increase and
others to decrease
• Total Logistics Concept: to find the lowest total cost that supports an
organization’s customer service requirements
Freight
A charge paid for carriage or transportation of goods by air, land, rail
or sea.
Why does freight move?
Firm B
P1
M2
P2
M1
Firm A
P
3
P4
Why does freight move? (con’t)
• Freight moves only because in so doing it delivers competitive advantage to
the firm supplying the freight (or good or commodity) to the buyer of the
freight.
• A competitive advantage is an advantage over competitors gained by offering
consumers greater value, either by means of lower prices or by providing greater
benefits and service that justifies higher prices.
• It moves as a result of a price transaction in the market place; and firms
will not enter the market or enter into the transaction unless by so doing it
confers advantage.
• The transaction may not deliver maximum advantage or maximum utility
or maximum value; but it will not take place if it does not deliver an actual
or perceived value that satisfies both seller and buyer alike – it is most
likely to be a ‘satisficing’ rather than an ‘optimising’ transaction.
Interdependence of Freight Transaction and Logistical
Activities
Firm B
P1
M2
P2
M1
Firm A
P
3
P4
Interdependence of Freight Transaction and Logistical
Activities (con’t)
• Figure suggests possible freight pathways between an exporting Firm
A in Market 1 and a buying Firm B in Market 2. P1, 2, 3 and 4 are
ports along coastlines and link land routes with shipping routes.
• The firms may choose different operators, different modes and
different networks; but freight will only move between them if there
is advantage in so doing and on the basis of real or perceived value
delivery.