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Summary Chapter 1: introduction
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Summary introduction (chapter 1)
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Chapter 1: Introduction(pg 3-19 in textbook)
1. The evolution of logistics and supply chain
management
6 key developments triggered the evolution:
1. Reduced transport intensity of freight
2. Falling product prices
3. Deregulation of transport
4. Productivity improvements
5. Emphasis on inventory reduction
6. Changes in company structure
REDUCED TRANSPORT INTENSITY OF FREIGHT (1)
Before:
Bulky raw materials
High volume
Low value
Now:
More in-process and finished products => added value to products
Increased value to volume ratio => lower transport cost sensitivity
Higher value freight better able to absorb transport costs
FALLING PRODUCT PRICES (2)
Increase of competition + falling marketplace prices => reduction in costs
Reduction of storage costs, transport costs,… is a key area for companies
, DEREGULATION OF TRANSPORT (3)
5 principal modes of transport:
1) Road
2) Water
3) Rail
4) Pipeline
5) Air
6) The internet? E.g. software
By removing unnecessary barriers to competition, markets become more competitive and prices should
come down.
Deregulation has had a positive impact leading to cheaper services.
Sometimes private monopolies have replaced public ones. E.g. Fedex.
But some countryside regions are sometimes cut off because of deregulation
PRODUCTIVITY IMPROVEMENTS (4)
Containerization effects:
- efficient space utilization
- switching of transport mode easily possible because of standard handling units
Technology
- online tracking and tracing
- radio frequency identification (RFID)
- barcoding
- internet of things (IOT)
- blockchain
- artificial intelligence (AI)
EMPHASIS ON INVENTORY REDUCTION (5)
Often significant funds are tied up in unnecessary inventory (accounting: the working capital!!)
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