GS 120 – iGlobalization: Moving The Things We Buy

Professor: Dr. Jean-Paul Rodrigue

Hofstra University, Department of Global Studies & Geography

Topic 6 – Logistics and Supply Chain Management

A – The Role and Function of LogisticsB – Value ChainsC – Distribution Systems

A – The Role and Function of Logistics

Logistics Goals and Operations

Fulfillment (Goals)

Order•Right product•Right quantity

Delivery•Right location•Right time

Quality•Right condition

Cost•Right price

Demand (Operations)

Transportation•Handling•Packaging

Stock Management•Production scheduling•Warehousing

Orders Processing•Sales•Purchase

Value-Added Functions and Differentiation of Supply Chains

Value-Added FunctionsSupply Chain Differentiation

Production CostsLocation

Time

Control

Logistics CostsTransit Time

Reliability

Risk

Taxonomy of Logistics Decisions

Level Description

Production structures

Commercial decisions on outsourcing, offshoring and sub-contracting.Number, location and capacity of production units.

Transport structures

Choice of a freight network linking a company and its suppliers and customers.Choice of modes and terminals; the transport chain.

Distribution structures

Choice concerning the number, location and capacity of distribution centers.Frequency and timing of distribution (e.g. just-in-time).

Logistics structures

Usage of production, transport and distribution capabilities to fulfill short, medium and long term strategies (e.g. lower costs, gain market share, improve service efficiency, reduce response time, reduce environmental footprint). Usage of third party logistics providers.

Logistical Improvements, Manufacturing Sector, 1960s to 2010s

1960s 1970s 1980s 1990s 2000s 2010s0

2

4

6

8

10

12

14

16

18

20

0

5

10

15

20

25

30

35

40

35

25

7

43

2

Logistics Costs (% GDP) Inventory Costs (% GDP)Cycle Time Requirements (days)

% o

f G

DP

Da

ys

Worldwide Logistics Costs, 2002

39%

27%

24%

6%4%

Chart Title

TransportationWarehousingInventory CarryingOrder ProcessingAdministration

From Push to Pull Logistics

Supplier Supplier Supplier

Manufacturer

Customer

Distributor

Supplier Supplier Supplier Supplier

Supplier Supplier Supplier

Manufacturer

Distributor

Customer

3PLReturns / Recycling

Point-of-sale data

Freight flow

Push Pull

Layers to Logistics Services

1PL

2PL

3PL

4PL

Manufacturing, Retailing

Transportation

Logistics

Supply chainmanagement

Cargo owners

Carriers

Logistics serviceproviders

Lead logistics providers& consultants

Supply chain integration

Actors Services

Serv

ice in

teg

ratio

n

Logistic Performance Index, 2010

B – Value Chains

The Commodity Chain (or Value Chain)

Transport Chain

Rawmaterials

Manufacturingand assembly Distribution

Bulk shipping Unit shipping

High volumesLow frequency

Low volumesHigh frequency

LTL shipping

Average volumesHigh frequency

1- Commodities 3- Final Goods2- Intermediate Goods

Attributable to climatic (agricultural products, forestry products) or geological (ores and fossil fuels) conditions.

Transformation that confers added value. Metals, textiles, construction materials and parts used to make other goods.

Goods shipped to large consumption markets. Flow and inventory management.

Stages

Market

Flows

Market

Commodity Chains and Added Value

Commodity chain

Ad

ded

valu

e

Low

High

Manufacturing

R&D Fabrication

DistributionDesign

Branding Marketing

Sales / Service

Concept Logistics

Product Life CycleS

ale

s

Stage 1 Stage 2 Stage 3

Monopoly Competition

Research anddevelopment Maturity Decline

First competitors Mass production

Innovating firm

Compe

titor

s

Growth

Stage 4

PromotionIdea

Obsolescence

APL Logistics Freight Distribution Center, Shenzhen, PRC, December 2005

Container Waiting to be Loaded, APL DC - Shenzhen

Extended Distribution Center System of JVC Belgium

Palletization of “Floor Loaded” Shipments, Belgium

C – Distribution Systems

Types of Supply Chain Facilities

Fabrication

StorageDistribution

Heavy manufacturing

LightmanufacturingCold Chain

Bulkwarehouse

Rack-supportedwarehouse

Cross-docking

Multitenant

Regional warehouse

Air cargo

Optimal Location and Throughput by Number of Freight Distribution Centers

Cross-Docking Distribution Center

Suppliers

Customers

Receiving

Shipping

Sorting

LTL

Suppliers

Customers

FTL

FTL

Cross-Docking DC

Distribution Center Before Cross-Docking

After Cross-Docking

Retail Logistics and E-commerce

Retailer(In store inventory)

Suppliers

E-Retailer

Customers Customers

Suppliers

RDC

Conventional Retail Logistics

Travel to store

Online purchases

Store Deliveries

E-commerce Retail Logistics

Home Deliveries

Parcel Delivery Company

RDC

Regional Distribution Center

Order

RDC

Order-Delivery Sequence of an Apple iPad

Note: Path is approximate

Order Fulfillment (Cycle time of 12 days 18hrs 08min)Order placed online

3hrs 34min

Order processed

12 days 15hrs 34min

Shipment notification

Delivery (Lead time of 48hrs 11min)

2hrs 45min

Shipment notificationShipment picked up

4hrs 23min

Leaving local DC

7hrs 34min

At Hong Kong hub

17hrs 04minAt Anchorage hub

1hr 57min

Cleared customs

1hr 22minLeft Anchorage hub

6hrs 03min

At Newark hub

4hrs 00min

Left Newark hub

1hr 11min

At local DC

2hrs 48min

Delivered

Consolidation (Shenzhen/HK) Transfer (Anchorage) Deconsolidation (NY Metro)

Logistic Activities and their Green Dimensions

Product Design and Production Planning• Product design

• Near sourcing• Sustainable

sourcing

Physical Distribution

• Certified distribution facilities

• Certified carriers

• Load consolidation

• Alternative modes and fuels

Materials Management

• Packaging• Recycled

inputs• Recyclable

outputs (waste management)

Consumers

Producers Distributors

CollectorsRecyclers

Reverse Channel

Suppliers

Forward Channel

Forward and Reverse Distribution

Packaging with Less Footprint

Operational Conditions of Cold Chain Logistics

Conditional demand• Each product has a specific perishability.• Shelf life and revenue.• Demand conditional to qualitative attributes.

Load integrity• Reefers as the common load unit.• Packing, packaging and preparation.• Empty backhauls.

Transport integrity• Uninterrupted integrity of the transport chain (modes,

terminals and DC).• Specialized modes (speed) and terminals?

Temperature Standards for the Cold Chain

-30 -25 -20 -15 -10 -5 0 5 10 15

Deep Freeze

Frozen

Chill

Pharmaceutical

"Banana"

Degrees Celcius

Shelf Life of Selected Perishable Food Products

Product Shelf Life (Days) Optimum Temperature (Celsius)

Apples 90-240 0

Bananas 7-28 13.5

Bell Peppers 21-35 7

Cabbage 14-20 1

Eggs 180 1.1

Onions 30-180 1

Lettuce 12-14 0.6Fresh Meat (beef, lamb, pork, poultry) 14-65 -2

Oranges 21-90 7

Pears 120-180 -0.6

Potatoes 30-50 10

Seafood (shrimp, lobster, crab) 120-360 -17.8

Strawberries 5-10 0.6

Tomatoes 7-14 12

Lettuce Shelf Life by Storage Temperature

0 5 10 15 20 250

2

4

6

8

10

12

14

Temperature (Celsius)

Shel

f Life

(Day

s)

Seaborne Reefer Trade, 2008

20%

7%

10%

3%

19%

24%

3%

14%

BananasCitrusDeciduous FruitExoticsFish & SeafoodMeatDairyOther

Reefer Stacking Area, Maher Terminal, Newark

Grocery Chain Cold Storage Facility, Regina

Subtropolis Distribution Center, Kansas City