Logistics & Supply Chain Management
1. Introduction
P. 3-19
How many countries are involved in getting the product to you? 49 countries
Apple works with +1300 subcontractors and 1200 parties to complete the supply chain → to
spread the risk and to put pressure on the suppliers
Cars: great example for how logistics can work in an efficient way, advanced
→ they’re assembling their supply, everything has to be just in time, storage space, pressure
on the cost
1.1 The evolution of logistics and scm
▪ 6 key developments triggered the evolution
o Reduced transport intensity of freight
o Falling product prices
▪ Logistics had to cut on the cost
▪ Made it hard to operate
o Deregulation of transport
▪ Government doesn’t have monopoly on transportation
o Productivity improvements
o Emphasis on inventory reduction
▪ Inventory: everything the company keeps on hand to facilitate production
and sales
▪ A company has to think of a smart way to allocate its resources
o Changes in company structure
1.1.1 Reduced transport intensity of freight
▪ Before:
o Bulky raw materials (coal, sugar, salt… in huge amounts)
o High volume
o Low value
▪ 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 cost
Farmaceuticals: ebola region in Rwanda → speed is really valuable so then it becomes
economically feasible
,1.1.2 Falling product prices
▪ Increase of competition + falling marketplace prices
➔ Reduction in costs (especially in logistics)
▪ Reduction of storage costs, transport costs,… is a key area for companies!
Rotterdam is very good at logistics, it’s building the most automated port in the world (to cut
on the cost of the people, to increase the speed). It’s betting big on self-driving ships, smart
containers and autonomous cranes. (bad for dockers)
1.1.3 Deregulation of transport
▪ 5 principal modes of transport:
o Road
o water
o rail
o pipeline
▪ from Russia to Europa with oil
▪ From Alaska to the VS with oil
o air
o 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
o E.g.: Fedex (biggest one, used to have monopoly (risky, can’t go everywhere, too
expensive), L of logistics in logo)
▪ But some countryside regions are sometimes cut off because of deregulation
1.1.4 Productivity improvements
▪ Containerization effects: (evolution of containers made international shipping possible)
o Efficient space utilization
o Switching of transport mode easily possible because of standard handling units
▪ Multimodal transport
▪ Technology
o Online tracking and tracing
o Radio frequency identification (RFID)
o Barcoding
o Internet of Things (IOT)
▪ To be interconnected with everything
• E.g. app to control the heat in your apartment
• Formula 1: cars are monitored at all moments
• RFID: Radio-frequency identification → RFID has been used in a
number of practical applications, such as improving supply chain
management, tracking household pets, and accessing office
, buildings. By applying RFID tags to raw materials in a production
process, manufacturers can gain accurate, real-time visibility of the
work-in-progress. (less used)
o Blockchain
o Artificial Intelligence (AI)
1.1.5 Emphasis on inventory reduction
▪ Often significant funds are tied up in unnecessary inventory (accounting: the working
capital!)
o the currents assets of the company (cash and inventory, the payments you still
have to receive). The cash is tied up in unnecessary inventory.
▪ Importance of inventory management because of market pressures
o Competition
o Customer requirements
▪ An essential competitive weapon
▪ Introduction of JIT deliveries (cfr. Car manufacturers)
▪ Ability to easily respond to changing demand conditions
1.1.6 Changes in company structure
▪ Structure of companies has changed a lot
▪ More specialization, less vertically integrated
o Vertically integrated: you look at the chain, connect related activities e.g. you
have a factory of oranges and a factory where they bottle it
▪ Trend towards outsourcing
▪ 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 (companies started to control
logistics)
1.2 What is logistics?
▪ Logistics involves getting:
o the right product
o in the right way
o in the right quantity and right quality
o in the right place at the right time
o for the right customer at the right cost
▪ Logistics is
o 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.
, o It’s about getting the job done, reaching the goals, efficiency
▪ What is Logistics Management
o Logistics management is primarily concerned with optimizing flows within the
organization
o The mission of logistics management is to serve the customer in the most cost-
effective way
o More than “trucks and sheds” / “wheels and walls” alone
1.3 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.
▪ 3 flows:
o Manufacturer - customer (goods)
o reverse logistics: customer – manufacturer (money)
o both ways: information
▪ End-to-end perspective (materials and services, maximizing revenue)
1.3.1 The integrated supply chain: End – to – End
Operations: manufacturer, distribution: warehouse, distribution centre
Best way: integrating all the different parts into one supply chain, getting away from the
departmental structure
Cash goes upstream