Introduction to Logistics PDF

Introduction to Logistics Certified Trainer of FIATA Diploma in International Freight Forwarding  Introduction to Logistics Learning Objectives: After completing studying this module, learners will be able to: Describe the role of the forwarder in logistics activ...

Introduction to Logistics Certified Trainer of FIATA Diploma in International Freight Forwarding  Introduction to Logistics Learning Objectives: After completing studying this module, learners will be able to: Describe the role of the forwarder in logistics activities and define logistics systems. State the main steps in a logistics project. Get acquainted with terms such as JIT‚ ‘pull systems‘, physical distribution, supply chain, tailor made services in logistics Get familiar with the procedure of warehousing, types of warehouse and financial aspects of storage. Introduction to Logistics; June 2024  Introduction to Logistics Module contents: Logistics and Forwarding Logistics Concept/Project Physical Distribution Systems Subsystems in Logistics Information Handling and Control Issues Value Added Logistics Introduction to Logistics; June 2024  Introduction to Logistics Rights and duties of the warehouse operator and the customer Types of warehouses Warehouse documents & it (information technology) for warehouses Warehouse construction, layout and safety Debit of warehouse charges /rent Inventory Control Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Learning Objectives: After completing learning this chapter, learners will be able to: Understand the definition of logistics given by scholars in the area Get aware of the historical development of logistics. Understand the main activities in logistics. Understand the difference between provision of logistics services under own management or by outsourcing and related tendering. Understand the importance of quality Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Chapter contents: Introduction to Logistics Historical Development of Logistics Major Logistics Activities The Freight Forwarder in the Supply Chain Process Logistics Service Provision Forms Quality Management in Logistics Service Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 1.1 Introduction to Logistics AspertheCouncilofSupplyChainManagemen t Professionals, logistics has been defined as: “ The part of the process of supply chain that plans, controls and implements an effective and efficient flow for the purpose of storage of goods and services and other related information from the point of commencement to the point of final consumption with an aim to satisfy Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Introduction to Logistics This definition includes Inbound, (order, receive, store, transport and manage incoming supplies)- supply side Outbound, (order fulfillment, packing, shipping, delivery and customer service related to delivery) Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The Supply ChainCouncil‘s definition of Supply chain management is: “Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.” Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Logistics focuses on the movement and storage of items in the supply chain. Supply chain management (SCM) is more comprehensive, covering all of the coordination between partners that have a role in this network, including sourcing, manufacturing, transporting, storing and selling. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding When used in a business sense, logistics deals with the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations. The resources managed in logistics can include physical items such as food, materials, animals, equipment, and liquids, as well as abstract items, such as time and information. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The logistics of physical items usually involves the integration of: Information flow, Material handling, Production, Packaging, Inventory, Transportation, and Warehousing. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding One way to look at logistics in a business sense is: “Having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer.” Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding For business and industrial sector, logistics plays an important role in reducing costs which in turn increases profits. It is also used as an important tool in creating competitiveness as it helps create effectiveness in customer service, Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 1.2 Historical Development of Logistics With the introduction of transport, villages were able to trade with other villages and this is how global trade started. The term logistics originated from the military, where it means the supply of fighting troops with all necessary material (fuel, ammunition, foodstuff, etc.) and with lodging. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The word “logistics” originates from the Greek “logos“, that is. word, sense, counting. Logistics is first mentioned in Sun Tzu’s Art of War – 500 BC. Alexander the Great produced a logistics system to support troops rather than rely on living off the land Romans introduced supply lines and supply depots at 30 km intervals Napoleon planned his logistics campaigns well and logistics and supply was a top priority. “The amateurs discuss tactics: the professionals discuss logistics.” Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding During World War II logistics received special attention during the war in the Pacific when American troops moved from island to island (“Island hopping”) and had to be supplied with ✔the right quantity of material, ✔at the right time and ✔at the right place. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Logistic activities were divided into: ✔materials management and ✔physical distribution. Materials management comprising of the procurement of raw materials and the organisation of the goods flows through the production process up to the inventory of finished products. These were merely planning-driven activities and considered as the inbound Introduction to Logistics; June side. 2024  Chapter I: Logistics & Forwarding Physical Distribution Management focuses on organising the flow of the finished products to the clients, including the distribution system, warehouse location/allocation, return flows etc. These activities were more directly driven by the customer orders and considered as Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding During the 1960s and 1970s, many companies worldwide focused attention upon what was defined as physical distribution or outbound logistics systems. They attempted to systematically manage a set of interrelated activities including transportation, distribution, warehousing, finished goods, inventory Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding During the 1970s and 1980s, companies increasingly began to recognize the additional opportunities for savings by combining the inbound side (materials management) with the outbound side (physical distribution) described as the logistics system. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Initially, this provided potential savings by having a single transportation manager who could coordinate inbound and outbound transportation, could lead to more efficient operation. The inclusion of purchasing as part of the inbound logistics added significantly to the opportunity to Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The procurement process, which involves making decisions about how much to purchase (inventory quantities) and where to purchase (transportation), has a significant impact on inbound logistics. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding During the 1980s and 1990s, a number of external factors, caused companies to expand their perspective on the logistics process to include all of the firms involved in ensuring that the final customer received: ✔the right product, ✔at the right cost, ✔at the right time, ✔in the right conditions, and ✔in the right quantity. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding As this concept developed, it was referred to as the logistics pipeline. Under the increasing influence of marketing and strategic planning (and due to the rapidly growing number of solutions offered by ICT) logistics has evolved to supply chain management. This is a more integrated approach, looking at chains as a whole, not only within a company, but also between companies active in the same chain. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Supply Chain Management aims to provide the best possible customer service (value) at the lowest possible costs, throughout (parts of) the entire chain from raw material to end user. Due to globalization and the advancement in ICT, the world has become one global village. Due to the transition from general cargo to containers, the performance of the transport industry has seen revolutionary improvements. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 1.3 Major Logistics Activities Logistics cover a wide variety of activities. Every company that has to do with the transport, storage, trading or manufacturing of products and services employs the term logistics in one way or another. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Logistics add value in a number of ways, such as: Supporting form utility (machine processing, heating, cooling, construction, demolishing, etc.); Providing location utility (obtaining, moving and storing); Providing time utility (to be available for, have on hand at Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The development of interest in logistics after World War II contributed to the growth in activities associated with logistics. Given the scope of this growth, the following are the major logistics activities. 1) Transportation It is a very important part of the logistics system. A major focus in logistics is upon the Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding This network is composed of transportation operators that provide the service for the firm. The logistics manager is responsible for selecting the mode(s) of transportation used in moving the items or for developing private transportation as an alternative. 2) Storage A second area, which has a trade-off relationship with transportation, is storage. It involves two separate but closely related Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding A direct relationship exists between transportation and the level of inventory and number of warehouses required. If firms use a relatively slow means of transport, they usually have to keep higher inventory levels and usually have more warehousing space for this inventory. They may examine the possibility of using faster transport to eliminate some of these warehouses and the inventory stored therein. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding A number of important decisions are related to storage activities (inventory and warehousing), including: ✔how many warehouses, ✔how much inventory, ✔where to locate the warehouses, ✔what size the warehouse should be, and soon. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 3) Packaging A third area of interest to logistics is industrial (exterior) packaging. The type of transportation selected will affect packaging requirements both for moving the finished product to the market and for the inbound materials. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding For example, rail or water transportation will usually require additional packaging expenditure because of the greater possibility of damage. In analyzing trade-offs for proposed changes in agencies, logistics examine how personnel generally the change will influence packaging costs. In many instances, changing to a premium transport means, such as air, will reduce Introduction to Logistics; June packaging costs. 2024  Chapter I: Logistics & Forwarding 4) Materials handling Materials handling is efficient important to operation. warehouses movement of goods into a concerned Logistics warehouse, the managers placement are with the and the of goods in a warehouse, movement of goods from storage to order- picking areas and eventually to dock areas for transportation out of the warehouse. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The materials handling designs must be coordinated in order to ensure congruity between the types of equipment used. In addition, the company may find it economical to use the same type of forklift trucks in the plants and in the warehouses. 5) Order fulfillment Another logistics activity area is order fulfillment, which generally consists of activities involved with completing customer orders.Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Initially, one might question why the logistics area would concern itself directly with order fulfillment. However, one important physical distribution factor is the time elapsing from the time when a customer decides to place an order for a product until the time that those goods are actually delivered in a satisfactory condition, that is, the lead Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 6) Forecasti Accura forecas of inventory ng te ting requirements and is materi and essential to This is particularly true in companies using als parts effectivelycontrol a just-in-time invent (JIT) or materials requirement planning (MRP) approach to ory. control inventory. Logistics personnel should develop forecasts in those situations to ensure Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 7) Production Planning Another area of growing interest for logistics managers is production planning, which is closely related to forecasting in terms of effective inventory control. Once a forecast is developed and the current inventory on hand and usage rate is assessed, production managers can determine the number of units necessary to ensure adequate market coverage. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding In multiple-product firms, production process timing and certain product line relationships require close coordination with logistics or actual control of production planning by logistics. The integration of production planning into logistics is becoming increasingly common in large corporations. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 8) Procurement The basic rational for including procurement in logistics is that transportation cost relates directly to the geographic location (distance) of raw materials and component parts procured for a company’s needs. In terms of transportation and inventory costs, the quantities purchased would also affect logistics cost. Including procuring within the logistics area is primarily a matter Introduction to Logistics; June of whether this more effectively coordinates 2024  Chapter I: Logistics & Forwarding 9) Customer services Decisions about inventory, transportation, and warehousing relate to customer services requirements. logistics plays an extremely important role in ensuring that the customer gets the right product at the right place and time. Logistics decisions about product availability and inventory lead time are Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 10) Site location Another area that is important to logistics is plant and warehouse site location. A location change could alter time and place relationships between plants and markets or between supply points and plants. Such changes will affect transportation rates and services, customer service, inventory requirements, and possibly other areas. Therefore, the Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 11) Other activities Other areas that may be considered as part of logistics include parts and service support, return goods handling, and salvage and scrap disposal. Here, a very integrative approach is necessary. Logistics offers input into product design as well as into maintenance and supply service, since transportation and storage decisions affect these areas. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 1.4 The Freight Forwarder in the Supply Chain Process The logistics process - be it clearanc payment and function domestic, regional, or global - e, systems, other s encompasses outsourc by freight producers traders speciali transportation, ed Freight warehousing, and forwarders of border the to key zed provider are some specialized s. providers in the logistics network. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding logistics and forwarding activities Logistics is used more broadly to refer to the process of coordinating and moving resources – people, materials, inventory, and equipment from one location to storage at the desired destination. freight forwarding is a set of services that coordinates the shipment of goods from one location to another. Freight forwarders are professionals who Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The freight forwarder’s role is to ensure traded goods reach their correct destination: on-time, in good condition, and in the most economically efficient way. While freight forwarders and logistics companies may seem similar or even synonymous, there are some differences between the two to keep in mind. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Unlike logistics companies, freight forwarders might be partners with a network of logistics companies, but they do not have any assets themselves. Depending on the freight and trade needs, freight forwarders coordinate the shipments of goods with a single carrier or with multiple carriers. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding While many carriers specialize in one mode of transport, such as cargo planes or freight trucking, some offer multiple modes of service. Freight forwarding professionals handle the transportation aspect of all of this for their customers. Additionally, with a deep understanding of suppliers and trade patterns, freight forwarders negotiate with their network of global partners to find solutions for the Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Along with connecting global supply chains, freight forwarders work on behalf of their customers to ensure their goods are smoothly imported and exported around the world. This makes international trade easier for entrepreneurs and industry leaders alike. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Along with coordinating the logistics, experienced freight forwarders are experts in: ✔customs regulations, ✔negotiating tariffs, and ✔the different requirements to This ship knowledge qualified freight by effectively air, land, and ocean. allows forwarders of to shipping manage for their the internationa complex risks customers. l Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Freight forwarders tend to partner with several logistics companies either nationally or internationally, which means that price checking capabilities are far better and more thorough than what you would get when working directly with a logistics company. Freight forwarders also have more knowledge and experience around specialty companies, which often vary greatly regarding types of transport, house moving, Introduction to Logistics; June fragile goods, and lead times, among other 2024  Chapter I: Logistics & Forwarding Generally, a logistics company is responsible for managing goods’ physical movement along the supply chain. In some cases, they may also manage documentation. There are multiple benefits of working with a freight forwarding company as opposed to a logistics company. ✔A network of multiple logistics companies that helps reduce prices with Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding ✔Pricing is more transparent, as most freight forwarders will provide customers with in-depth breakdowns of all costs ✔Maintain data regarding specialty routes along with route optimization to help minimize delays and ensure timely arrival of goods. TSA ✔Have a good understanding of logistics companies in many different specialty Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding freight forwarders can also handle all of the paperwork associated with freight forwarding, including customs documentation, bills of lading, shipper’s export declarations, insurance forms, and letters of invoice. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 1.5 Logistics Service Provision Forms Outsourcing One of the most complex and important decisions facing businesses today is whether to perform logistics activities ✔ on their own or ✔ to get external party Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The trend for the increasing use of outsourcing provides many interesting opportunities for forwarders as logistics service providers. This endeavour is not limited to transport, but can extend to such a degree that even a portion of the production activities will be outsourced. There are a number of aspects to take into consideration for outsourcing decision. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding These considerations are: Costs An important reason for outsourcing logistic activities is the need for cost reduction. A shipper will compare the costs (cost of doing on its own against outsourcing), Available Capacity Performing logistics activities or establishing logistics system require a considerable amount of investment. (resource capacity) Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Quality (Available Knowledge) The quality of logistics services may present more problems to the shipper. If the shipper does not have specialised knowledge of logistics activities, it can be hard to compete with the level of quality offered by the professional logistics service provider. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Manageability Apart from the influence it has on the nature of the target market and the product, the lack of knowledge has an additional, rather damaging consequence; i.e. the manageability of logistics. Logistics can become so complex that specialised knowledge will be required to manage it. When this happens, shippers also tend to outsource logistics. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Risk Greater complexity leads to more risks, which the shipper is often not prepared to take. If the shipper wants to avoid the threat of risk, he/she will do so by outsourcing high-risk logistics activities. Secrecy Companies who are not totally convinced of their customer database’s protection will want to perform logistics themselves. A matter that should be of the utmost importance to the logistics service provider is the guarantee of total secrecy for shippers. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Identity The trade or the brand names of companies should be displayed to the public as often as possible. When own vehicles are employed to display trade and/or brand names, they are seen as mobile advertising-pillars. Existing clients usually find a vehicle bearing the trade name proof of positive contact with the supplier which may motivate the company to acquire its own fleet of vehicles, instead of employing those of professional carriers. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Service (responsiveness) The ability to offer additional services to the client is the other reason why shippers prefer tracing to (i.e. control their the following own logistics shipments activities. The ofservices may vary from progress during distribution), to the tracking warehouse,and and a driver at employment of co-workers in receiving the who will deal with complaints as well as other, more commercial, activities. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Pros and Cons of Outsourcing Logistics Outsourcing of Logistics Services Economics Pros Reduced costs Cons More communication Pay what you More administration use Less capital tied up Increased cash flow Management Focus on core business Labour redundancy No staff or Confidentiality assets Costs Less customer more explicit contact Loss of expertise Introduction to Logistics; June Operations More flexibility 2024 Specific experience  Chapter I: Logistics & Forwarding Tendering The tender process makes it relatively easy to gain an insight into potential suppliers and their price/quality ratios. Tendering helps to select the right logistics service supplier, but it can be a time-consuming process. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Step-by-step guide to the logistics tendering process can be: Preparation of Requirements (functional, technical and process- based requirements) Supporting part or all of the tender process, such as by preparing the required documentation (RFQ/RFP, Service Level Agreement), a long list and shortlist of suppliers and by circulating and supervising an evaluation model Setting up and leading Question & Answer sessions Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding 1.6 Quality Management in Logistics Service “Quality is the entirety of features and characteristics of a product or service that bear on its ability to fulfil stated and implied requirements.” According to the ISO-standard 8402 In other words: one can say that the service has good quality when it complies with the requirements specified by the Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The concepts of how to assure and to manage quality have undergone certain stages of development: Quality Assurance= Quality inspection at the end of the process (e.g. assembly line); traditional form, very expensive; in transport not possible Quality Management = Proactive management of all resources and processes which are relevant for producing quality, internal audits Business excellence =Generic focus on Introduction to Logistics; June 2024 Chapter I: Logistics & Forwarding Development of quality management (source: Wagener & Herbst, Potsdam) Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding A quality management system (QMS) is a set of policies, processes and procedures required for planning and execution (production/development/service) in the core business area of an organization (i.e., areas that can impact the organization’s ability to meet customer requirements). Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding In the year 2000, the ISO-norms were reviewed a new and another set of norms, which is currently known as ISO 9000:2000 were launched. ISO The set of ISO standard consists of: Quality management Fundamentals 9000:2000 systems & terminolog y ISO Quality management Methods and 9001:2000 systems requirement s Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The most significant of the ISO 9000:2000- norms are ISO 9001 and ISO 9004. These norms deal with quality management over the course of five chapters, that is.: quality management systems; management responsibility; personnel management; production management; measuringmethods, process analysis, and its improvement Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Quality can be considered as a cycle which through must quality be ensured management, driven requirements by the and client’s perceptions. The quality circle Customers Company Expected quality Planned Quality Measurement of the customer Measurement of the company’s satisfaction ability Perceived Performed Quality Quality Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding A QMS integrates the various internal processes within the organization and intends to provide a process approach for project execution. A process based QMS enables the organizations to identify, measure, control and improve the various core business processes that will ultimately lead to improved business performance. Introduction to Logistics; June 2024 Chapter I: Logistics & Forwarding Model of a process orientated QM-System (ISO 9001:2000) Responsibility of Responsibility of the the management management C C C Resource management Resource u u u management s s st tt oo Process realization Process oo m t realization m Proces Product Process m Input Input s Output Outpu m e ee Requirement t s A re rr C P r Measure & Measure & analyze, analyze, D improve improve Contentmen t Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Audits of Quality Management System Regular follow-ups should be done to find out whether the company is adhering to the requirements, as specified. These follow-ups are called an “audit”. They may occur either as: internal audits, in which the case company will launch its own investigation to find out whether all departments and officials still adhere to the specifications as set out by Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding external audits, in which case the ancillary suppliers are investigated to establish whether they are still adhering to the specifications as set out by the ISO 9000:2000; External audits, in which case an independent certification company will investigate whether a company still adheres to the quality demand specifications. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding In order to retain the certificate of approval, a similar extrinsic audit should be performed at least every six months. A number of specific subjects are described in the ISO 9000:2000, with which companies should comply in order to qualify for certification. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding ISO 9000:2000 for Transport If a company wants to set-up a quality management system, the full support of its management towards this endeavour will be extremely important. Management can validate their support by issuing a declaration that will verbalise the goals of its quality policy. Management will have to appoint a quality manager who will be allowed adequate time and facilities to perform his duties well. Management will also have to stipulate the duties, responsibilities and capacities of the quality manager very clearly. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The quality manager should be allowed to have a more independent and distant position. This means that the quality manager should not be expected to perform other managerial duties that could influence the quality. The quality manager should have direct access to higher management and should report to them regularly as well. According to the ISO 9000:2000-standards, Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding Documentation of a Quality Management System The Quality Manual is a very important document for the quality management of a company. This manual should meet the following requirements: it should comply with the specifications as determined by the ISO; its contents should be user-friendly, i.e. all co-workers in the company should be able to read and understand it quite easily; it should have a loose-leafed format, to allow for modifications. Introduction to Logistics; June 2024  Chapter I: Logistics & Forwarding The Quality Manual contributes significantly to the value of a company’s quality management documentation. It consists of the following documents usually: Quality Management Handbook 🡪 for external use Quality Management Procedures 🡪 for internal use, describe companies functions and procedures WorkInstructions 🡪 for internal Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Learning Objectives: After completing learning this chapter, learners will be able to: Understand which actions and which phases build a logistics project. Understand how a logistics project can be effectively evaluated. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Chapter contents: Overview Phased Approach Controlling of logistics project Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project 2.1 Overview In many cases Logistics activities can be regarded as a project. A project is in principle a (one-time) group of actions performed to achieve a certain goal. The logistics project can be defined as a complex, special and unique sets of activities which can be described by technical and economic parameters and is Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Project Concept A project concept is similar to a mission statement that outlines the purpose. A project concept is typically considered an element of project branding. A statement that givesa program or project its direction, depth and Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Project Strategy Project Strategy can be defined as “The project perspective, direction, and guidelines on what to do and how to do it, to achieve the highest competitive advantage and the best value from the project.” Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project 2.2 Phased Approach Logistics projects are burdened with a certain degree of uncertainty. The level of this uncertainty differs depending on the type, scope, size of logistics project, the conduct and other factors. The limited availability of the necessary resources for the realization of the logistics project and changing environment makes Introduction to Logistics; June the implementation of projects subjected to 2024  Chapter 2: Logistics Concept/Project To reduce the risk of the logistics project, one can increase oversight of its conduct of the logistics project and it can be divided into phases. Each phase set from first phase to last phase is called the project life cycle. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Division into phases helps to control the phase of the logistics project, but the logistics project manager must look for the whole project to control costs. Thus, before a suitable offer can be issued to the client and this can be implemented, many issues must be carefully analysed and prepared. To organise this properly, a phased approach is advisable. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project The division of the logistics project into successive phases of the project is useful in management of logistics projects (i.e., define specific activities, resources, deadlines, costs, project team). Generally, the following project phases can be distinguished: ✔ Problem definition, ✔ Design, ✔ Realisation and ✔ Aftercare. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Problem definition In this phase an analysis of the actual situation is made and the problems/bottlenecks experienced in the current situation can be identified. This also includes a description of the goals which should be achieved by the project: cost reductions, improvement of service levels etc. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project In logistics projects, first extensive data must be collected on the following: ✔inbound/outbound goods accou flows, taking into seasonal nt fluctuations and future ✔projections; technical requirements of the ✔goods numbers of toitems be to handled/stored; be stored; ✔actual buildings, equipment, facilities etc.; ✔actual costs, staff numbers; and actual Introduction to Logistics; June service levels. 2024  Chapter 2: Logistics Concept/Project Secondly, all relevant starting points and preconditions to the project need to be listed. ✔One vital precondition is: what is the commercial strategy of the client? What is his market vision and long term objectives? The solution which will be offered should of course be in line with this strategy. ✔Preconditions could also Introduction to Logistics; June include a 2024  Chapter 2: Logistics Concept/Project The project organisation will also need to be mentioned: project manager, team members, structure for communication, progress control, financial controlling, reporting etc. It is good practice to conclude this phase with a report which should be approved by the client, to ensure that all parties share the same vision on the project. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Design In this stage a solution is prepared for the problems, objectives and starting points analysed in the previous phase. In complicated projects a soluti more number of ons options alternative for material-(scenarios) and information mayflows, be equipment and systems. prepared with different Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Preliminary design The alternative scenarios will provide a preliminary sketch and not in full detail; calculations and elaborations provide the level of detail required to make the right selection in terms of investments, operational costs, achievable service levels etc. The alternative solutions will be presented to the client who will decide what the most favourable option is (in line with his Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project The preliminary design of the selected option will then be further detailed in terms of e.g. ✔organisation; ✔equipment, lay-out & routing; ✔working methods; ✔budget, investments, operational costs; and ✔implementation activities & planning The detailed design phase will be Introduction to Logistics; June terminated with a report, 2024 including a  Chapter 2: Logistics Concept/Project Realisation In this phase the selected scenario will be implemented. Depending on the situation this may include activities such as: construction of a new building; adaptation of procurement, installationprocedures, and testing of organisation, equipment; working methods; and staff (de-)recruitment, Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Realization of logistics projects requires the simultaneous use of various resources, such as physical, financial, human. Implementation of the project is conditional on access to resources, which are usually limited in time. The realisation phase will be terminated with a report (mentioning possible deviations from the original objectives Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Inspection is performed after each stage. It is related to the approval of the effects of the previous phase and the decision to move to the next (or discontinue the project). In some cases, it is possible that the next phase will begin before the previous is finished (parallel work of logistics projects). Such a situation is acceptable when the risk of not completed phase is low. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Aftercare After implementation the project will be evaluated. The evaluation includes not only a one-time activity concerning the project itself (the final results related to the initial objectives, the final project costs related to the initial budget etc.). Aftercare should also comprise performance management, which is a continuous, repetitive process of comparing of costs and service levels with Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project This can be achieved by implementing the performance management cycle: determining a requested performance level for each relevant activity; defining performance indicators to quantify the requested performance levels; implementation of procedures and tools to measure the realised performance; comparing the real performance with the performance indicators; determining corrective actions, in case the realised performance does not meet the performance indicators. Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Project Organisation A proper project organisation consists of: an internal or external client, who require the project results and with whom the measurable goals (deliveries) should be agreed; a project manager who is responsible for achieving the goals and who has the competency to decide on resources (budget, input); a project teamdefinite consisting of packages a project contract plan with work and milestones experts and (i.e. in dates at which definite some cases ors. deliverables must be presented); and Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project 2.3 Controlling of logistics project The level of uncertainty is accordingly high in the first stage, i.e. the stage of planning the realization of an order of a project type. The uncertainty on realization of a logistics project is reduced to zero in the final stage of realization. What also increases the risk of failure is Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Internal and external factors of a givena logistics project also play an important role. It is impossible to completely eliminate uncertainty. It may be reduced to minimum by taking certain actions, like ✔implementing rules, ✔methods and ✔mechanisms of management. In order to increase the chance of logistics project success, project Introduction to Logistics; June 2024  Chapter 2: Logistics Concept/Project Controlling of logistics projects, is a subsystem of enterprise controlling, selected next to controlling sales, finance, marketing, controlling production, etc. It can be described as a support system for management of logistics project, which by coordinating the planning, control, collection, and processing of information, ensures the effective achievement of the objectives of the project logistics during logistics project life cycle. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Learning Objectives: After completing learning this chapter, learners will be able to: Understand what physical distribution is and why it matters Understand the different categories of logistics service providers, related to the level of outsourcing and related to the range of services offered. Understand the main techniques for inventory management. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Chapter contents: Physical Distribution Range of Services Level of Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems 3.1 Physical Distribution Physical distribution deals with the series of actions that moves The channels from final products involved include production to theinvent control, order warehousing, ory consumer. transportation, processing, and customer service. material handli Physical distribution and the ability to get s ng, a product to a consumer quickly and economically has a direct impact on customer satisfaction. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Physical distribution is a supply chain forecasting & management term best viewed as a system of distribution channels linked together for the efficient movement of products. These components are interrelated, meaning decisions made in one area affect the relative efficiency of others. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Customer Service: Customer service refers to the precisely- defined standard of customer satisfaction that can be provided to customers. Once a standard is set (ex: 60% of all shipments delivered to customers within 48 hours of ordering) a physical distribution system is then set up to reach that goal at the lowest possible cost. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Transportation: Transportation is an indispensable component of distribution management. From a cost perspective, transportation accounts for the lion share of physical distribution costs amounting between one- third and two-third of total logistics costs. Fortunately, organizations can use anyone, or a combination of the transport modes to offset some of the overall shipment cost. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Warehousing: The warehousing component of physical distribution refers to the process of receiving inbound shipments, storing merchandise, breaking down bulk materials, and ecommerce fulfillment for delivery to the customer. A Warehouse distribution centers generally keep goods for longer periods, whereas fulfillment centers operate as central distribution locations for quick shipments Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Order Processing: Order processing is a physical distribution function that directly affects the ability of a retailer to meet the customer service standards defined by the owner. Assuming the order processing system is efficient, the owner can avoid the costs of premium transportation or high inventory levels. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Inventory Control: Inventory control is a major component of any physical distribution system. Inventory control is used to keep inventories in a desired state while continuing to adequately supply customers. Costs include funds invested in inventory, depreciation, and possible obsolescence of the goods. Materials Handling:. Material handling comprises all of the activities associated with moving products within a production facility, warehouse, and transportation terminals. Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Physical distribution is important because it comprises the final steps a business takes before they put their product in the hands of their customer. That’s why so many businesses invest in a third party logistics provider to ensure their physical distribution is handled with care. Properly handled physical distribution streamlines and better accommodates Introduction to Logistics; June fluctuating supply and demand throughout 2024  Chapter 3: Physical Distribution Systems 3.2 Range of Services A distinction among logistics service providers can be made according to the services offered. ✔Forwarders: offering world-wide logistics solutions, integrate different means of transport ✔Carriers: road hauliers, rail operators, shipping lines, airlines, warehouse Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems ✔Logistics Providers: logistic Service offering comprehensive customer, solutions, including transport, warehousing, specialized on a certain VAL etc. branch or ✔Integrators or System Providers: focusing on worldwide parcel distribution, applying different transport modalities (air, road etc.), very standardized services Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Some examples are mentioned in the following illustration: Global Forwarders Global Carriers Danzas Panalpina P&O Nedlloyd Kühne & Nagel Hanjin Exel MSC Maersk Logistics Yang Ming Maersk Sealand Logistic Link CMA-CGM APL Logistics APL 4PL Logistics Services Integrators Providers UPS Frans Maas DHL Geodis Vitesse TNT Vos Logistics Federal Express Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems 3.3 Level of Outsourcing Outsourcing is performed in relation to a certain decision level (strategic, tactical and operational). 1PL: all activities are performed under own management. 2PL: the shipper only outsources certain specialised operational activities. 3PL: a (large) logistics services provider takes over all tactical and operational activities Introduction to Logistics; June 2024  Chapter 3: Physical Distribution Systems Level of Outsourcing Strate gic Tactical Operational desig tenderi Chain management, Forwarding Execution, Ownership of Syste n, ng, m logistic assets judgin g 1PL Shipper Shipper Shipper 2PL Shipper Shipper Carrier, person in charge of warehouse 3PL Shipper Logistic service provider Logistic service provider and/or sub- 🡪 Forwarder contractor 4PL Consultant, Logistic service provider Logistic provid and/ service er or facilitator 🡪 Forwarder subcontractor Introduction to Logistics; June 2024