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Summary Logistics & Supply Chain Management (1IBM)
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Summary Modules L&SCM (+ Book)
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Summary L&SCM; Pauline Vandenbroucke; 2021/2022Chapter 1: Introduction (p3-19 book)
1. The evolution of logistics and scm
- Six 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
➔ Both logistics and supply chain (key developments)
➔ Inventory = you already had to pay things, but there is no mpney coming in yet = balance (trade off)
1.1 Reduces transport intensity of freight
- Before:
o Bulky raw materials
o High volume
o Low value
o Before: A lot of transport of bulky raw materials (low value big volume) (ex. ship full of sand)
➔ value of one entity is low
- Now:
o More in-process and finished products => added value to products
o Increased value to volume ratio => lower transport cost sensitivity
▪ Higher value freight better able to absorb transport costs
o producing products at the other side of the world that are more valuable (specialized
transportation)
o Some products are transported by airplanes (bulky raw materials not on a plane, value was
too low when we look at the transportation costs)
o Increased value to volume ratio (value in relationship to the volume is bigger) better able to
absorb transportation costs
1.2 Falling product prices
- Increase of competition + falling marketplace prices
o Reduction in costs
o Demand is stable but more competition = price will drop
o If revenue is under pressure because of a lower price
- Reduction of storage costs, transport costs,… is a key area for companies!
1.3 Deregulation of transport
- A lot or regulations (monopoly) (fedex federal express - in government and now privatized, not public
one anymore) – monopoly was there (like nmbs) but now private monopoly
- Deregulation: pos impact to cheaper services – leads to lower prices
- 5 principal modes of transport:
o 1) road
o 2) water
o 3) rail
o 4) pipeline
o 5) air
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, o 6) The internet? E.g. software
- By removing unnecessary barriers to competition, markets become more competitive and prices
should come down
o Deregulation has had a positive impact leading to cheaper services
o Sometimes private monopolies have replaced public ones
▪ E.g.: Fedex
o But some countryside regions are sometimes cut off because of deregulation
1.4 Productivity improvements
- Containerization effects:
o Efficient space utilization: Much more efficiency right now bcs of innovations
(containerization) – transportations became possible we can do more now (space &
switching)
o Switching of transport mode easily possible because of standard handling units
- Technology
o Online tracking and tracing
o Radio frequency identification (RFID)
▪ (tag in clothes that you can’t steel)
o Barcoding
o Internet of Things (IOT):
▪ devices controlled from a distance, home, car, locker open bpost from distance, (ex.
warehouse full of devices (inventory) you don’t have to scan anything but everything
is conncted witht he internet and if the truck leaves it will track it in the inventory
booking)
o Blockchain:
▪ (bitcoin, crypto, tokens, descentralisation of financial system) – used in supply chain –
((ex. by using block chain we can prove that diamonds are used in an area where the
information is okay, we separate it into blocks and then put information into the
‘blocks’ we cannot change it anymore))
o Artificial Intelligence (AI)
- Boats are getting bigger and bigger
o 20ft equivalence (rechterboot 23000-24000 containers) - productivity scale is bigger
effeciently and effective
1.5 Emphasis on inventory reduction
- Often significant funds are tied up in unnecessary inventory (accounting: the working capital!)
- Importance of inventory management because of market pressures
o Competition
o Customer requirements
- An essential competitive weapon
- Introduction of JIT deliveries (cfr. car manufacturers)
o Ex car manufacturing industry: Volvo cars in gent: they use JIT deliveries, they know what
products are used to get ready in time, benefit: they don’t need to carry the inventory (hard
to accomplish – a good integration and communication is needed between Volvo and their
suppliers)
- Ability to easily respond to changing demand conditions
o Related to accounting (profit and loss are build up and balance sheet are related to inventory
– not converted into cash yes inventory is good but before you can make that you have to
find funding for it, it is not free, inventory is an investment, if its not good you will have to let
it go) (ex. Fruitjuices (exper date))
2
,1.6 Changes in company structuren
- Structure of companies has changed a lot
- More specialization, less vertically integrated
- Trend towards outsourcing (handing over from inhouse to another party – effect: thing isolated (silo
thinking) the performance of the company)
- Functional or silo-based thinking: hinder the overall performance of a company
- KSF: key success factor: e.g. time
- > CONCLUSION:
o All 6 trends have led to supply chain revolution
o Stopping outsourcing: reason: lack of control – you are giving away control and when you are
not synchronized enough (ex. time difference) the quality is not going to be that good
o Apple good quality – outsourcing to China they do quality checking
2. What is logistics?
2.1 Logistics involves getting:
- the right product,
- in the right way,
- in the right quantity and right quality,
- in the right place at the right time,
- for the right customer at the right cost
2.2 Logistics is:
- The process of planning, implementing and controlling procedures 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.
2.3 What is logistics management?
- Logistics management is primarly concerned with optimizing flows within the organization
- The mission of logistics management is to serve the customer in the most cost-effective way
- More than “trucks and sheds” / “wheels and walls” alone
- Distinguishment (within the organization)
3. What is SCM?
3.1 What is a supply chain?
- A supply chain is a system of organizations, people, activities, information and resources involved
in moving a product or service from supplier to customer. Supply chain activities transform natural
resources, raw materials and components into a finished product that is delivered to the end
customer.
- A supply chain is a network of connected and interdependent organizations mutually and co-
operatively working together to control, manage and improve the flow of materials, resources
(money + people + equipment) and information from suppliers to end users.
3.2 Supply chain management
- SCM is the management of a network of relationships within a firm and between interdependent
organizations 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 satifaction.
- End-to-end perspective
3
, Integrated supply chain: end-to-end
Supply chain views: push (supply view and pull (demand view)
Exercise: push or pull?
- I purchase available bottle at the grocery store
o Push : you buy what Is easily available (first)
- I purchase a medium smoothie banana-orange-raspberry with ginger as extra topping
o Pull: (customer order decouple point (CODP)) we have to keep inventory to satisfy the
customers order
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