Summaries & Keywords based on the 3rd edition of the Global Logistics and Supply Chain Management book, by Johgn Mangan & Chandra Lalwani. No information left out.
Initially meant for the Supply Chain Management (part 1) class & exam of Saxion Enschede 2017 – 2018
,Table of Contents
Chapter 1: Introduction ........................................... 1 4.1 Strategy .............................................. 18
1.1 The Evolution of Logistics and Supply Chain 4.2 The Evolution of Manufacturing .................. 19
Management (SCM) .............................................. 1 4.3 Lean Production ........................................... 19
1.2 What is Logistics?............................................ 2 4.4 Agile Supply Chain and Mass Customisation 20
1.3 What is Supply Chain Management (SCM)? ... 2 4.5 Combined Logistics Strategies ..................... 21
1.4 Distinguishing Logistics and Supply Chain 4.6 Critical Factors to Consider in Supply Chain
Management ................................................. 3 Planning .............................................. 22
1.5 Applications to Manufacturing and Services .. 3 Chapter 5: Transport in Supply Chains ................... 23
1.6 Book Framework ............................................. 3 5.1 Characteristics of the different transport
Chapter 2: Globalisation and International Trade ... 4 modes .............................................. 23
2.1 Growth in International Trade ........................ 4 5.2 Transport operations, distribution centres
2.2 Containers: The Humble Hero ........................ 5 and the role of factory gate pricing ................... 24
2.3 Measuring Logistics Performance................... 5 5.3 Load devices used in international
transportation .............................................. 25
2.4 Globalisation ................................................. 6
5.4 Efficiency of transport services .................... 26
2.5 Directional Imbalances ................................... 7
5.5 International transport networks ................ 26
Chapter 3: Supply Chain Relationships .................... 9
Chapter 6: Transport Security ................................ 27
3.1 Globalisation of Supply Chain ......................... 9
6.1 The Need for Transport Security .................. 27
3.2 Outsourcing ................................................. 9
6.2 Piracy .............................................. 27
3.3 Offshoring ...............................................10
6.3 Global Transport Security Initiatives ............ 27
3.4 Failures in Outsourcing .................................11
6.4 Transport Security Technology .................... 29
3.5 Evaluating and Selecting Outsourcees..........11
Chapter 7: Logistics Service Providers ................... 31
3.6 Outsourcer and Outsourcee Relationship
Development ...............................................13 7.1 Classifying Logistics Companies ................... 31
,Chapter 1: Introduction 1
1.1 The Evolution of Logistics and Supply Chain Management (SCM)
Finished products play a greater role than raw material in today’s world in international trade.
To Ship: not necessarily means that the freight went onboard a ship – the term is generally used to mean that the freight
was sent (by any mode(s) of transport) from one place to the other.
Higher value freight is better able to absorb transport costs than is lower value freight, with the ‘transport cost penalty’
imposed by having to move freight over greater distances often being somewhat offset by
For many individual
the fact that the freight is of higher value. Hence, we refer to a generally reducing transport
shipments: increase
cost sensitivity of freight.
value/decrease volume =
Some products don’t even need physical shipping (example: software, via the internet). lower transport cost
This replacement of physical product by virtual product is referred to as material sensitivity
substitution.
Increased competition and failing marketplace prices have forced numerous companies to reduce costs. Thus companies
look to reduce cost in term of product design, packaging etc. to reduce their transport cost sensitivity.
Five principal modes of transport; Air, Road, Water, Rail and Pipeline. Transport markets in many countries have been
deregulated by various governments: removing unnecessary barriers to competition, making markets more contestable
and lowering prices, while increasing services. (However private monopolies sometimes counter that theory.) Generally,
deregulation has had a positive impact.
1950: maritime freight 1956: an iconoclastic entrepreneur Malcom McLean put 58 aluminium truck bodies
was carried on bulk aboard an ageing tanker ship, which set sail from Newark, NJ to Houston, TX. This marked
vessels the beginning of containerised transport: containers are stacked on top of each other
onboard a ship, thus allowing very efficient space utilisation and cargo handling.
Communication and propulsion technologies also improved, such as barcoding, online tracking and tracing of freight,
radio frequency identification (RFID)…
Trend: Shift of management and financial attention into analysing where an organisation’s funds are tied up. Inventory
management (Ch.9). This also became a necessity following increase market competition and customer requirements
(Identifying cost savings, going towards Just-in-Time deliveries).
6 Trends leading to an increased emphasis on the role of transport and inventory, leading to improvements in the way
freight is handled and moved around the world. They have led to what is often termed the Supply Chain Revolution:
- Companies have become less vertically aligned: a concept that implies ownership or at least control of upstream
suppliers and downstream customers.
- They have become more specialised.
- Outsourcing has become more common, with suppliers playing a more important role for many manufacturers
- Just-in-Time (JiT) Deliveries have become more common
- Companies came to realise that so-called functional or silo-based thinking (viewing the various departments
within the firm as separate and non-overlapping entities) will only hinder the overall performance of the
company and they have as a result endeavoured to ensure that the various functions and activities across the
company are integrated more closely.
- Competition based on time has become a key success factor (KSF) in many markets.
*Freight is not the same as Cargo. Cargo = freight + mail (post).
*Consignment: a shipment of goods consigned; the consigner is the term used for the company (e.g. a manufacturer)
who sends the consignment and the consignee is the term used for the company (e.g. retailer) who receives the
consignment.
1
,1.2 What is Logistics?
Logistics, as defined by the New Oxford Dictionary of English: The detailed coordination of a complex
1
operation involving many people, facilities, or supplies. Origin late 19th century in the sense ‘movement and
supplying of troops and equipment’, from French logistique, from loger lodge.
Logistics, as defined by the Council of Supply Chain Management Professionals, and used by the book: is the process of
planning, implementing, and controlling for the efficient and effective transportation and storage of goods including
services, and related information from the point of origin to the point of consumption for the purpose of conforming to
customer requirements. This definition includes inbound, outbound, internal, and external movements.
What is involved in correct/’right’ logistics? : (*there is also a growing interest in environmental related issues)
1. Right way 2. Right product 3. Right quantity 4.Right quality
5. Right place 6. Right time 7. Right customer 8. Right cost
1.3 What is Supply Chain Management (SCM)?
The Supply Chain is the network or organizations that are involved, through upstream (supplier end of the supply
chain) and downstream (customer end of the supply chain) linkages, in the different processes and activities that
produce value in the form of products and services in the hands of the ultimate consumer.
The Evolution of the integrated supply chain:
Supply chains encompass a number of key flows:
- Physical flows of materials
- Flows of information that inform the supply chain
- Resources (especially finance, but also others such as people and equipment) which help the supply chain to
operate effectively. Furthermore, not all resources in the supply chain are tangible, for example good quality
intercompany relationships are often cited as highly important ingredient of effective supply chains.
SCM: Supply chain management is the management, across and within a network of upstream and downstream
organisations, of both relationships and flows of material, information and resources. The purpose of SCM are to create
value, enhance efficiency, and satisfy customers.
A more detailed definition of SCM: SCM is the management of a network of relationships within a firm and between
interdependent organisations and business units consisting of material suppliers, purchasing, production facilities,
logistics, marketing, and related systems that facilitate the forward and reverse flow of materials, services, finances and
information from the original producer to final customer with the benefits of adding value, maximizing profitability
through efficiencies and achieving customer satisfaction.
2
,Defining “End-to-end” supply chain; from upstream to downstream ends:
- Farm to fork
1
- Sketch to store
- Dust to rust
*While the supply chain is usually depicted as a linear chain, it is perhaps better to envisage it as a multidimensional
network of collaborating entities. Such networks can be more fully understood as systems; taking a systems view
highlights the impact of the interaction that occurs between the various entities. In logistics and SCM these various
entities are sometimes referred to as links (for example transport services) and nodes (for example warehouses). The
various links and nodes can of course contemporaneously play different roles across multiple supply chains.
1.4 Distinguishing Logistics and Supply Chain Management
Four perspective on logistics versus SCM:
- SCM in many respects evolved from logistics and the traditionalist view thus regards SCM as a subset of
logistics, as if it were an add-on to logistics.
- In the re-labelling view, it is contended that logistics has been re-labelled by the more recent term SCM.
Indeed, it is worth noting here that sometimes transport gets re-labelled as logistics, for example the authors
have observed heavy goods vehicles (HGVs) where the word ‘logistics’ is painted over the word ‘transport’ on
the side of the vehicle. Becoming a professional logistics company requires more than just a name change.
- In the unionist view, logistics is seen as part of a wider entity, SCM.
- Finally, the intersectionist view suggests that there is overlap between parts of both logistics and SCM, but
also that each has parts that are separate and distinct.
1.5 Applications to Manufacturing and Services
There are two dimensions of value: (Logistics and SCM can be used to generate both)
1. Cost savings 2. Service enhancements
Triage: Often used in medical emergencies situations involves rapid assessment of patient needs and thus allows those
most in need of care to e attended to first.
1.6 Book Framework
Global Perspective: the terms international and global are often used interchangeably in a logistics context, but this is
not accurate.
- International: of, concerning, or involving two or more nations or nationalities.
- Global: covering, influencing or relating to the whole world.
Thus global is the approach chosen.
The book takes the following approach: Logistics is part of the wider entity which is SCM: Unionist view.
3
,Chapter 2: Globalisation and International Trade 2
2.1 Growth in International Trade
There has been considerable growth in recent decades in world trade; world exports grew from $59 billion in 1948 to a
peak of $18,301 billion by 2013 before subsequently declining.
Regional trade agreements, such as the EU (European Union) and AFTA (Association of South East Asian Nations Free
Trade Area), have been and continue to be developed, and allow more open trading within regions.
The OECD Industrial Production Index and indices for the world: Gross Domestic product, merchandise trade (by value)
and seaborne shipments, 1975-2014 (1990 = 100)
Historically, world trade volumes and incomes have gron together: Growth rate volume or world merchandise exports
and gross domestic product (1950-2013)
4
, The growth of both outsourcing and offshoring has lead to supply chains becoming more stretched (Ch.3).
Transfer pricing: when goods or services are transferred between divisions of the same company, a value is
2
attributed to them called a transfer price, multinational companies can thus move work-in-progress materials
between countries and use transfer pricing to minimize their tax exposure.
2.2 Containers: The Humble Hero
Containers ships get bigger and bigger: we have seen that one of the key benefits of containerisation is improved
productivity; the other is scale. By shipping containers on larger vessels, the unit cost per container moved reduces.
Ever since 1956, container ships have grown larger and larger.
Shipping containers carry approximately 16% of all international seaborne trade volume. However, if we measure
international seaborne trade in value terms, shipping containers carry over 50% of the world’s international seaborne
trade. Containers carry various types of products. Top importer/exporters in the US:
Top three commodities on Asia-Mediterranean-Northern Europe trade lane:
2.3 Measuring Logistics Performance
In term of logistics performance, there are 6 key dimensions:
1. Customs
2. Infrastructure
3. International Shipment
4. Logistics Competence
5. Tracking and Tracing
6. Timeliness
The global logistics performance
index→
The aim of the index is to benchmark
countries’ overall performance on
these dimensions and to assess the
quality of a country’s connections to
the global market.
5
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