Logistics and Forwarding
01 Basic Theory on Logistics
 02 Forwarding and Physical
Distribution Systems
 03 Subsystems and Activities in
Logistics
 04 Information System and Future
Issues
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What is logistics on your fist thought?
◦ Process of goods moving from origin to destination
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What kinds of activities do logistics have?
◦ Inbound: demand forecasting, purchasing,
manufacturing, assembling, warehouse & inventory
◦ Outbound: load and unload, transport, picking and
sorting, packing, distribution, delivery, reverse
logistics, customer services
◦ Two way: information system, strategy and
business model, supply chain.
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Who’s doing Logistics?
◦ Supplier / Manufacturer / Distributor / Retail /
Customer
◦ 3PL, logistics centers, freight centers, warehouses,
distribution centers, express delivery
◦ Shipper / FF / Port Authority / Port Terminal
Operator / Carrier / Consignee
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DOUG LAMBERT, 1998
◦ The process of planning, implementing and
controlling the efficient, effective flow and storage
of goods, services, and related information from
point of origin of consumption for the purpose of
conforming to customer requirements.
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CSMP
◦ Logistics management is part of the supply chain
process that plans, implements, and controls the
efficient, effective flow and storage of goods, services
and related information from point of origin to point of
consumption in order to meet the consumers
requirements (1998)
◦ Logistics management is that part of supply chain
management 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. (2001-2010)
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SHAPIRO and HESKETT, 1985
◦ Getting the right product to the right customer, in
the right quantity, in the right condition, at the
right place, at the right time, and at the right cost.
◦ This actually tell us logistics is:
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Not just about moving of the goods
Not just about transport and warehousing
Not just about information system
No just about forwarding
 But also the whole process of right management of the
goods flow
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CSCMP, 2010
◦ Supply chain management encompasses the
planning and management of all activities involved
in sourcing and procurement, conversion, and all
logistics management activities. Importantly, it also
includes coordination and collaboration with
channel partners, which can be suppliers,
intermediaries, third party service providers, and
customers. In essence, supply chain management
integrates supply and demand management within
and across companies.
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Beginning Stage (1910 – 1950)
◦ Scholar named ARCH SHAW put forward the concept
of modern logistics – Physical Distribution, which
was the foundation of discipline history;
◦ During World War II, the United States military
employed a system of supplier activities, which
called LOGISTICS.
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Preliminary Stage (1950 – 1960)
◦ It was agreed that logistics should be regarded as
the a strategy of enterprises and countries in the
26th Boston marketing conference.
◦ In 1956, “Trade-off (antinomies)” theory was put
forward to describe the relationship between
logistics functions;
◦ Logistics substituted Physical Distribution as the
formal concept, and also the formation of
systematical theories and methodologies, made
logistics as a new discipline began to established.
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Development Stage (1960 – 1980)
◦ In 1961, DONALD BOWERSOX wrote the world’s first
textbook on logistics management – logistics
management.
◦ In 1960’s, Two universities, the Michigan State
University and Ohio State University, opened the
course of Logistics Management respectively, and
become the world’s first logistics education in the
undergraduate and graduate level academic
education system.
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In 1962, renowned management Professor
Peter Ducker published a paper of “The
Economy’s Dark Continent”, put logistics as
the “dark continent” of the economic cost;
Council of Logistics Management was
founded in 1963 in USA;
Toyota Corporation created far-reaching “JIT
production”
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Deepen and Transformation Stage (1980 –
Today)
◦ In 1990’s The concept of supply chain management
achieved great development;
◦ American and Japanese government began to
formulate and implement national level logistics
planning and strategy;
◦ The theoretical framework of logistics discipline
was build up, including the theories of customer
service, supply chain management, global logistics
etc.
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On January 2005, the Council of Logistics
management was renamed as the Council of
Supply Chain Management Professionals
(CSMP), a brand new stage of supply chain
was opening;
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Today
◦ Logistics as a academic discipline remains
immature.
 The gap of theory and practice;
 Two optimization direction;
 Many optimization factors;
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Cultivate pillar industry
◦ Brief economic history of Hon Kong
 Port – Freight Center – Commerce Center –
International Financial, Trade and Shipping Center.
◦ Memphis (1973)
 FEDEX started its operations.
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Upgrading traditional transport, warehousing
and forwarding industries
◦ From functional service providers to integration
service providers
◦ Information, Transparent supply Chain
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Upgrading traditional retailing industry
◦ Chain store, by 3rd party common delivery
◦ Ecommerce, by express delivery
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Upgrading traditional manufacture industries
◦ Supply chain management: value chain coordination
◦ Lean production, Agile production, cooperation with
sales companies
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Industrial Products
◦ Efficient production logistics, inventory management,
sales logistics, forwarding service, intelligent logistics
technology improving manufacture distribution channel
and sales.
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Agricultural Products
◦ Shorten Market channel, optimize operation
management, lower the waste
 Due to the immature of cold chain system, China’s a fruits
and vegetables suffered a post-harvest loss rate as high as
20% up to 100 millions tons agro-products (75 billion Yuan)
were lost in the logistics process.
 The rate in advance countries ( USA, Germany, Japan ) was
about 5%.
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Logistics are always part of enterprises
strategy
◦ Competition phase theory for modern enterprises
◦ Logistics was one of the key factors to the
transition of competition phase
◦ Phase 4: business model base competition
◦ Phase 3: Fast changing; small lot size; personalized
demand. Time based competition.
◦ Phase 2: Consumerism; Information; Rational
demand. Service based competition.
◦ Phase 1: Marketing; Promotion; Mass demand. Price
and cost based competition.
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Many divergent tasks in logistics services
◦ Take an example of transport service
 Model: water transport (ocean, river), road transport,
railway transport, airway transport, pipeline transport,
multimodal / intermodal transport.
 Scope: trunk line transport, branch line transport, city
express, last mile delivery
 Special goods: bulk products, light bulky/heavy cargo,
cold chain large shape product, dangerous goods
 Trade contract requirement: C.K.D; S.M.D;
 Cross border: customs clearance; inspection and
quarantine; booking etc.
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Specialization trend in logistics in China –
leading by ecommerce
◦ Truckload to LCL transport
◦ Storage warehouse to storage-sorting integration
warehouse
◦ Distribution center to logistics center network
◦ Normal transport to express delivery
◦ Last mile was noticed
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Will internet change the operations model of
forwarding?
◦ Cross border ecommerce
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Categories of forwarders (mainly international
forwarders)
◦ Business field
 Airfreight forwarders: Sinoair, DHL, UPS, Panalpina,
Kuehne & Nagel etc.
 Railway/Highway forwarders: COSCO, CRCT, CREF,
BRLB
 Ocean freight forwarders / NVOCC: Sinotrans, COSCO,
Fedex, DHL
 Ocean freight agency: Penavico, Singoagent
 Freight Carrier: UPS, Fedex, CSCL, Maersk; Evergreen,
APL; China Airline, Huayu, Debang
 3PL: Fedex, UPS, Schenker, DHL, EXEL
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Structure of property rights
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State-owned
Private
International
Joint Stock
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Activities of forwarders
◦ Agent Service
 Take orders, shipping, warehousing, yard, cargo,
concentration, customs clearance, inspection,
transshipment, booking broker.
◦ NVOCC (Work as a shipper)
 Sing contract, issue B/L, charge expenses,
consolidation
 Assume liabilities, undertake obligations and risks
◦ 3PL (Agent service and carrier)
 Moderate possession of carrier function with
integrated logistics
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Differences between logistics and forwarding in
international trade
◦ Functions – integration as a trend
 Logistics: emphasis operation of physical distribution and
management
 Forwarding: emphasis agent and broker service
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Field – Logistics is closer to supply chain
◦ Logistics: includes manufacture, inventory etc. innerenterprises fields, and distribution, retailing channel etc.
between – enterprises supply chain fields.
◦ Forwarding: mainly trade issues, between enterprises
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Space – Forwarding serve more on
international trade
◦ Logistics: nation-wide, global, all included
◦ Forwarding: more on international trade, less inland
physical distribution
 Demand – supply agent platform
 3PL as a important role on inland forwading
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Theoretically, forwarder can serve each type
of logistics activities in SC Process…
◦ Agent and logistics operator on international trade
 Traditional agent services and carrier, warehouse
operator etc.
◦ Representative of shipper and in charge of the
logistics function
 On behalf of shipper, in charge of total process of
import and export
◦ Integration service provider on whole international
trade process (via global network)
 Whole trade program integrator, financial, exhibition,
consultant
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Forwarders in Each Phase / Echelon of
enterprises supply chain (including inland
logistics service for enterprises, total Supply
Chain Service Provider)
◦ Value – added Service in total logistics and supply
Chain process
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Business ecological platform builder in
foreign trade
◦ Like Alibaba in Ecommerce
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Alibaba from ecommerce
◦ Inland Retail
 Taobao, Tmall
◦ Inland Wholesale
 Alibaba
◦ Mid model
 Ju.taobao
◦ International export
 Ali express
◦ International Import
 G.taobao; tmall.hk
◦ Payment and settlement
 Alipay
◦ Finance: Aliloan
◦ Advisement: Alimama
◦ Logistics: Cainiao
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Customs agents to freight forwarders
◦ Agent function integration on international trade
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FF to 3PL
◦ Carrier function integration on logistics
◦ Transport carrier and warehousing may as the first level
◦ Exhibition and finance as the following
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FF to shipper
◦ Commerce function integration on international trade
◦ As a exhibition organizer or a importer / exporter as the
first level
◦ Sorting and ERP matching as the following
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Single logistics provider…
◦ Single provider – Emergency backup
◦ Relationship management – Alliance of companies
and logistics providers
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Case Study
◦ Vancl and Rufengda Logistics
◦ Alliance and Emergency
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Jingong Supermarket and Tianyuntong
◦ Chain store crisis
◦ Community store and logistics common delivery
◦ Tianyuntong
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Special services in logistics and supply chain
◦ Special services in logistics and supply chain
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Cold Chain: Perishable goods, medicine
Import customs clearance
Finance
Information system
◦ Cold chain in Central Asia
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Network Spatial imbalance
Trunk line and warehousing vs. city delivery
Technology and infrastructure
Demand and opportunity
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Network Providers
◦ Logistics / Distribution Center
◦ Cargo transportation
◦ Warehouse
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Logistics / Distribution Center
◦ Logistics / distribution Centers in Asia
◦ Property management type to incubation type
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Integration of truck line
◦ Transfar Logistics Group
◦ Debon Logistics
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Information system
◦ ERP, SAP: Logistics Ltd.
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Supply demand match platform
◦ Emerging fast in China
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KXTX Logistics platform
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Truck operator; Fleet companies
Shipper, consignee
Forwarders
Logistics/Transport Centers
Warehouse
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Production/Manufacture logistics:
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Main process of production logistics
◦ Production logistics is the physical movement of
materials, WIP, semi-finished goods, finished goods
within the manufacture enterprises.
◦ Start from demand forecasting, purchasing and
terminated by finished goods entering the warehouse.
◦ Reserve process (materials, work in process, finished
goods, buffer)
◦ Transfer process (load and unload, transfer, innerdistribute)
◦ Physical fabrication process (manufacture, assembly)
◦ TQM, Inspection process and remanufacture
◦ Queuing and Waiting process
◦ Other actions
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We will go through some key concepts:
◦ Organization of Manufacture
◦ JIT & Lean Production
◦ BOM & MRP
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Organization of manufacture
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Design the products: modularization
Design the process: pull / push Model
Assemble to order, ATO;
Fabrication to order, FTO;
Purchase to order, PTO;
Engineer / Design to order; ETO;
Develop to order, DTO
Examples
◦ Postponement
◦ Process reengineering in Benetton Company
◦ C2B Ecommorce: Made.com
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Push/pull design
Postponement
Products feature of a pharmaceutical factory
◦ Same pill, different package
◦ From storing finished goods to storing WIP
◦ Hold more WIP inventory while less finished goods
inventory
◦ Improve packing power
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Start up at 2010;
Due to a Furniture shopping;
Sales growth; 700% in 2011
3-4 40 feet container per day;
Voting crowd-funding model;
Opportunities for logistics service
◦ “We would like to become another Idea via Internet”
◦ “Logistics is the key factor for ours innovation and
excellence”.
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Organization of Manufacture
◦ Optimize the flow and action; JIT
◦ Lean Production
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JIT
◦ Eliminate Waste
◦ Continual improvement
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Examples
◦ Kanban management
◦ One piece flow
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JIT not always suitable for various types of
company
Depends on products structure and the
operations management
From JIT to Lean Production
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Action management
POKA YOKE
Kaizen (Continual Improvement)
5S / 5C
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MRP is a computer-based system which is
designed to:
◦ Release production and purchase orders to meet
the production schedule
◦ Ensure the availability of materials for planned
production
◦ Maintain minimum levels of dependent demand
items.
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From MRP to MRP II, ERP, DRP
◦ MRP: Material Requirement Planning
◦ MRP II: Manufacturer Resource Planning
 Including cost, financial, order handling etc. modules,
managing total manufacturer resources
◦ ERP: Enterprises Requirement Planning
 Including Plan, procurement, manufacture and cost,
managing total resources of the enterprise
◦ DRP: Distribution Requirement Planning
 Including distribution, warehousing etc. process,
managing downstream supply chain.
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From reorder point to MRP
◦ BOM (Bill of Materials)
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The basis of MRP
Split product into parts
Low level coding
MPS: Master Production Schedule
Base on safety stock, lot size, lead time, to plan
purchase
Opportunities for Logistics Service
◦ Sorting for product line
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Procurement Logistics
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Demand Forecasting
Purchasing Material & ERP
Supplier selection, evaluation alliance (SRM)
Negotiation and contract management
Procurement Integration Warehousing
Global procurement & Internet procurement
We will go through some key concepts
◦ Forecasting
◦ VMI & CPFR
◦ Global procurement
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It will never be totally accurate for demand
forecasting
Different forecasting methods for different types of
goods under different market situations
◦ A type of beer that have steady demand, what’s the volume
next month?
◦ The cooperation with invest a new type of car, what’s the
demand?
◦ The company invest a new type of pen, what’s the demand?
◦ Ready to eliminate a bookshelf product line, unexpectedly
got a big order, what’s the materials procurement plan next
month?
◦ The ecommerce department of the company designed a
new promotion plan, and promise 1 hour arrival after
making order, what would logistics department do?
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VMI and JMI (Joint managed inventory)
◦ From reorder point to VMI
◦ Postpone of ownership transfer
◦ Logistics provider: integrated service on transport /
warehousing
◦ Supplier: risk and cost increment vs. sales
increment
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Case Study
◦ Wal-Mart (Retailer leading)
◦ Western Publishing (Supplier leading)
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Collaborative Planning, Forecasting and
Replenishment
◦ Start from Wal-Mart in 1195
◦ Warner-Lamber, SAP and other 3 supplier setup a
workgroup for Wal-Mart supply chain
◦ Using information system to improve the
relationship between retailer and his supplier,
realized collaborative planning for purchase and
inventory replenishment
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CPFR was procurement alliance through
information system
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Sales Logistics
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Distribution channel / network design
Transportation
Distribution and delivery
Retail inventory
Reverse logistics
We will go though some key concepts
◦ Distribution channel / network design
◦ Transportation
◦ Express delivery
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Divergent distribution channel
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HP, Dell, Acer/Gateway
Apple
Wal-Mart, 7-11, Costco
P&G, Texas Instrument
Amazon, Taobao, Ymatou
MI, Chu Orange
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Retail network design – Cost vs. Performance
◦ Performance
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Order fulfilling time (response time)
Product diversity
Availability (service level)
Customer experience
Time to market
Order visibility
Return convenience
◦ Cost
 Setup cost and inventory cost, Proportional to number of
nodes
 Transportation cost, U shape relationship with number of
nodes
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Emerging distribution Channel
◦ City square and shopping mall
◦ Vertical Ecommerce
◦ O2O
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O2O in China, fast emerging and evolving
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Online sales for offline
Offline sales for online
Build O2O experience
Fans economy and reputation marketing
Go online for traditional offline services
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Pallet pool system; container pool system
Intermodal transport
◦ Spatial seamless
 Transshipment in an acceptable distance
◦ Time seamless
 Transshipment within a acceptable waiting
◦ Information seamless
 Quickly and easily obtain information
◦ Service seamless
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Route Integration
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Growth with ecommerce
◦ City level transportation network
◦ Door to door
◦ From document delivery to ecommerce package
delivery
◦ 50% volume generated from EC
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Outsourcing condition in China
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JD.com; self-operation
Amazon.com; regional self0operation
Vip.com; outsourcing
Taobao, Tmall; outsourcing
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Growth rapidly in volume and revenue
Value added service
◦ COD (cash on delivery); furniture assembly; in-store
pickup etc.
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Specialized service
◦ Cold chain express delivery
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O2O and last mile delivery
Cross border transshipment
◦ New challenger for forwarding companies
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Identification technology
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Tracking technology
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Information sharing and handling system
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Intelligent Logistics technology
◦ Obtaining large number of real-time data in logistics
operation
◦ Bar Code, RFID
◦ Obtaining and tracking the information of position, time
status of logistics units
◦ GPS, GIS
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EDI, POS
Customs clearance system, Inspection system
Order fulfillment system, WMS
ERP
◦ The Internet of Things
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Big data era
Ecommerce accumulating more data
What’s the good use for customer centered
data?
◦ Business decision
◦ Products design – especially service products
design
◦ Marketing and sales campaign
◦ C2B; logistics and supply chain services
◦ Crowd-fundnig, P2P
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Paperless customs clearance system
◦ Single window system
 Connect forwarders, carriers, 3 PL, Customs,
Inspection and quarantine, Tax departments of
government, Port companies, Port Authority, banks
etc.
 Automatically get information (exchange rate, tax
rates, products clearance process) you need, track the
procedure of declaration progress
 Log and enter data once for the whole process
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Inner land (dry port) system
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Local declaration and port clearance
Expand hinterland
Clearance after Release
Chances in the new model of clearance
FTZ
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IOT
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Application
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Logistics
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3rd time Information Revolution
◦ Total Sensing
◦ Reliable transfer
◦ Intelligent processing
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Intelligent
Intelligent
Intelligent
Intelligent
Intelligent
city
transport
tracking
logistics
industries
◦ Transparent
◦ Convenient
◦ Automatic
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Provide a catch up solution for developing
countries
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Where
Where
Where
Where
Where
low industrial concentration economy
multi-echelon agent distribution system
information cost were extremely high
international market were hard to reach
small business were hard to implement
Mobile ecommerce and platforms
◦ Consumer are awakening
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Logistics Change
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Revenues of Global logistics industries
concentrated to Europe, Asia and North
America
Asia: from global manufacture center to
Global logistics center
9 out of 10 largest container ports of the
world in the Asia in 2013
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From 3Pl to LLP (Lead Logistics Provider)
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Integrated logistics and supply chain service
Business ecological service provider
Specialization in one field
Specialization for one time / products
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Products
◦ Shape design for logistics
◦ Package design for logistics
◦ Production line design for logistics
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Business model
◦ C2B design
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Green Logistics
Global logistics
Emergency Logistics
City Logistics
Logistics Finance
……
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THANK YOU