Principles Of Business Unit 7: Logistics And Supply Chains PDF

PRINCIPLES OF BUSINESS UNIT 7: LOGISTICS AND THE SUPPLY CHAINS Objectives: - - - - - - - - - - **Logistics** **Logistics** involves coordinating and organising the flow of items between their point of origin and the point at which they are consumed. The "items" might incl...

PRINCIPLES OF BUSINESS UNIT 7: LOGISTICS AND THE SUPPLY CHAINS Objectives: - - - - - - - - - - **Logistics** **Logistics** involves coordinating and organising the flow of items between their point of origin and the point at which they are consumed. The "items" might include materials, equipment, supplies and finished goods. Many processes are involved in organising this movement, including sharing information, handling materials, production processes, packaging, storage (including warehousing), transport and security arrangements. **Supply chain operations** The "supply chain" refers to the steps involved in getting products and services to the end consumers. "Supply chain operations"thus refers to the management of these steps.It is the integration of all the businesses processes involved in moving goods and services from the original suppliers , through the suppliers that add value to the original goods and services, to the end consumer **Flow of goods:** is the movement of goods either forwards or backwards along the supply chain **E-commerce:** buying and selling goods electronically via the internet. **The components of logistics** The major components of logistics are outlined below **Component of logistics** Details ----------------------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Forward and reverse flow of goods The forward **flow of goods** involves the stages of gathering raw materials and supplies, making them into finished packaged goods, then transporting and storing them on their way to the consumer. The reverse flow of goods involves moving items in the opposite direction.For example, collecting unwanted items so that they can be reused or recycled. Storage of goods Goods will usually be stored in central locations as part of their journey forwards or backwards. For example, they may be stored in a warehouse. Services such as insurance Insurance and other distribution services provide cover for the goods during transit and storage. Information services Information( such as pricing, delivery dates and the method of transport used) will need to be managed and shared between destinations. Packaging Packaging goods in ways that make them easier to load and transport. For example, using strong, stackable boxes that can be carefully labelled for dispatch and delivery. Inventory management Inventory is a complete list of the stock a business holds. Inventory management is all about organising how stock is stored and accessed, as well as decisions about how much stock is held. **Activities involved in supply chain operations** There are many activities involved in supply chain operations. The table below illustrates these through the example of onion soup. **Supply chain activity** **Details** ------------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Transformation of natural resources Onion seedlings are cultivated in a warm, moist compost mix in polytunnels. Movement and storage of raw materials The onions are harvested and taken in tractor trailers to the storage units. Processing of raw materials and components into finished goods The onions are dried and transported to a soup manufacturing and canning plant, where they are boiled with other ingredients to add flavor. The soup is then bottled or canned. Storage of work-in-process and finished goods The canning plant will have a large storage facility to hold cases of onions that are waiting to be processed, as well as to store finished cans of soup. Delivering the finished product from point of origin to point of destination Transport will be required at each stage of the process to move the seedlings, onions and cans of soup from one place to another. The point of destination will be shops and restaurants. **Links in the chain of distribution** Traditionally a chain of distribution involves the following links to get the goods from their point of origin to their final destination: - - - - However, today there are a range of alternative distribution channels such as the following. "Distribution chain" Simplifying the chain of distribution, for example by cutting out the wholesaler, helps to cut costs so that more profit can be taken directly by the manufacturer. This is particularly the case with e-commerce, where a manufacturer can cut out wholesalers and retailers to deal directly with consumers. Alternatively, an e-trader like Amazon can purchase supplies from lots of manufacturers and deal directly with consumers across the globe through its website and associated logistics system. **The difference between traditional commerce and e-commerce** Traditional commerce focuses on the exchange of goods or services in person. **E-commerce** involves buying and selling goods electronically via the internet. The following table highlights some of the significant differences between traditional commerce and e-commerce. **Traditional commerce** **E-commerce** ------------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------- Processing transactions The transactions are processed manually by a person. Transactions are processed automatically , by a computer Accessibility Limited, to opening hours Unlimited, available 24 hours a day, 7 days a week, 365 days a year. Physical inspection Goods can be inspected physically before purchase. Goods cannot be inspected physically before purchase. Customer interaction The customer talks with a person face to face. The customer interacts with a computer screen. Payment Goods are paid for with cash, cheque, debit card or credit card. Goods are paid for with credit card or debit card. Delivery Instant, as goods can be handed to the customer. Takes time, as goods have to be delivered to the customer. **Summary questions** 1. 2. 3. **Multimodal and Intermodal transport** When goods are transported to a relatively distant destination, several forms of transport may be required along with several journeys. It is important to establish who takes the responsibility for the goods and journeys involved. The term **multimodal transport** refers to a situation where goods are transported under a single contract (involving at least two different modes of transport). The carrier is responsible for the entire carriage, even though it is performed by several modes of transport (such as air, sea, and rail). Different firms may be used to transport the goods, like a road haulage firm and a shipping company. However, there will be a single contract or bill of lading covering the whole journey. In contrast, **intermodal transport** involves using several modes of transport where each of the stages will involve a contract with a different carrier. The goods are usually sealed in one container for the whole journey, which can be lifted easily onto a lorry, ship or train. The advantage of intermodal transport is that the freight does not have to be handled when changing modes. This speeds up the transportation and reduces the likelihood of damage or theft. **NB: Digital delivery** the electronic delivery of information and content, usually via the internet. **Modes of transport and their suitability for different goods** The table below shows the advantages and disadvantages of different modes of transport for carrying different types of goods. **Types of transport** **Advantages** **Disadvantages** --------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Air The fastest way of moving goods over long distances.Remote deliveries are possible. A cheap way of carrying small, valuable items. The most expensive way of carrying goods, particularly bulky or heavy goods. Fuel consumption is expensive. Rail Not disrupted by traffic congestion. Services are usually frequent. Relatively fast over long distances. A useful way of carrying heavy goods like iron ore and steel, as well as bulk liquids. Tied to fixed routes and timetables. Very expensive to install. Slow when compared with air. Can only be used over relatively flat terrain. Road Flexible in terms of routes and times. Door to door. Easy loading and unloading. An excellent way of carrying many types of goods to retailers and end consumers. The weather can disrupt journeys. Expensive for long distances. Traffic jams can cause delays. Marine (cruise and cargo) Enables the transport of heavy goods across seas and oceans. Very large loads can be carried (such as passenger liner carrying cars, boxed goods, fuel and other products). Economical over large distances. A very safe method of transport. Relatively slow over long distances. Unfavourable weather/storms can cause disruption. Customs and excise restrictions mean goods might need to be checked at several ports before reaching their final destination. Pipeline An efficient way of transporting bulk liquids or gases (like oil and natural gas). Expensive to install. A relatively slow method of transport over long distances. Digital delivery Digital delivery is a fast method of transferring information and content (e.g. photographs and documents). Not appropriate for transporting physical goods. **Summary questions** 1. 2. 3. **Transport documents and the role of transport in marketing** **Transport documents** There are several types of documents that are required to transport goods, particularly to overseas destinations **Import licence** +-----------------------------------------------------------------------+ | **Licence to import goods** | | | | **2021/3428** | | | | *In line with the Import Control Regulation 2006, a licence is hereby | | granted to:* | | | | *Letitia Lotions PLC* | | | | *Box 204* | | | | *Port of Spain* | | | | *To import into Trinidad and Tobago during the year 2021 the | | following goods:* | | | | *Tariff code: 38* | | | | *Description of goods: Barbados Cherry Infusion* | | | | *Country of origin: Barbados* | | | | *Value: \$20 000* | | | | *Goods: 2 000 sachets* | | | | *Port: Port of Spain* | | | | *Signature:\_\_\_\_\_\_\_\_* **Date:** 01/01/2021 | | | | (Authorised Officer) | +-----------------------------------------------------------------------+ An import **licence** is a permit from a government body giving permission for goods to be imported into a country.It is required for goods such as certain agricultural products, medicines and chemicals. Import licence helps to control the imports of certain items and to protect home industries from foreign imports. The requirement to have an import licence can also help protect health and the environment; for example, ensuring certain animals are only imported with a special licence ensures the health of local citizens and local species are protected. Details on an import licence typically include: - - - - - An import or export declaration is another type of document setting out the types and quantities of goods being imported and exported. **Bill of Lading** +-----------------------------------------------------------------------+ | **Bill of lading** | | | | Bill of lading number:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | Carrier:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | | | Shipper/Consignor:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | | | Item code | | (HTS):\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ | | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | | | Details:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ | | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | \_\_\_\_ | | | | Quantity:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | \_\_Weight:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | +=======================================================================+ | Terms:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ | | _\_\_\_\_ | | Total:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | | | Prepaid:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ | | _\_\_\_\_ | | | | Collect:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ | | _\_\_\_\_ | | | | Carrier:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ | | _\_\_\_\_ | | Shipper:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | | | Pick up | | date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | Pick up date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | | | Signature:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ | | _\_\_\_ | | Signature:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | +-----------------------------------------------------------------------+ | Received in apparent good order | | | | Received | | by:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | | Signature:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | +-----------------------------------------------------------------------+ A **bill of lading** is a document acknowledging the receipt of goods by a carrier (often a ship's captain). It acts as a receipt from the carrier to the person consigning (sending) the goods. Representatives from the carrier, the shipper and the receiver must sign it.The bill of lading sets out the details of the goods being carried and acts as proof of shipment for customs purposes. **Airway bill** An **airway bill** is the equivalent of a bill of lading and is used for the transport of goods by air. It is a receipt issued by an international airline and acts as evidence of the contract of carriage. Similar to a bill of laden, the airway bill will have a specific reference number so that the consignment of goods can be tracked. **The role of transport in marketing** Where products will be sold is a key consideration in marketing, and this involves thinking about which modes of transport are best suited to getting the products to their final destination. The benefits of having a fast and efficient transport system are illustrated in the following table: Fast-track sourcing of commodities Transportation makes it possible for goods to reach markets quickly. For example, Mass production of agricultural products becomes possible when they can be transported to markets quickly and still remain fresh. ------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Ensuring security of supply A well-organised transport system ensures a reliable and efficient supply of materials and goods. This helps to ensure a smooth production process (for example, time is not lost because a late delivery of raw materials is holding up production). Cost reduction Fast and efficient transport helps to minimise the cost of distribution and these reduced costs can be passed on to the consumer. Because of this, countries like Jamaica continue to build transport hubs, such as container ports, to drive national competitive advantage. **The importance of transport in domestic, regional and foreign trade** Domestic trade takes place within a country. Regional trade takes place between a country and regional partners (such as between different countries in the Caribbean). Foreign trade involves exchange beyond this regional grouping, such as between a Caribbean country and the USA. Within the Caribbean, road transport is key for domestic trade. Regional trade is likely to involve transport by sea (goods are rarely carried by air within the Caribbeanunless they are very important or need to reach remote, inaccessible locations). Foreign trade also relies heavily on sea transport (particularly for petroleum products), but air transport plays a vital role here too. **Summary questions** 1. 2. 3. **Advantages and challenges of supply chain operations** The table below outlines some of the advantages of effective supply chain operation operations. **Advantages of effective supply chain operations** **Details** ----------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Better quality of life People can enjoy more goods from a wider range of sources, giving more choices and variety, often at lower prices. New an innovative job opportunities Many new jobs are created through supply chain work, such as jobs in organising logistics or coordinating the shipment of goods. There is also scope for entrepreneurial openings such as setting up small, specialist road haulage firms, or selling goods through telemarketing and new online channels. Wealth creation Effective supply chains enable countries to become wealthier, which in turn means that standards of living can rise. For example, Barbados operates logistics hubs throughout its passenger and container ports, creating lots of jobs and enabling all firms in the country to benefit from the effective transport links it has with the rest of the Caribbean and the world at large. **Challenges of supply chain operations** Some of the challenges associated with supply chain management are outlined below **Challenges of supply chain operations** **Details** ------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Globalisation Global supply chain management is concerned with developing efficient global supply chains. However, in many countries (including some in the Caribbean) poor infrastructure and logistics can weaken the effectiveness of global supply chains. Counterfeiting The development of global trade has resulted in more counterfeiting. This refers to the false labelling of products and passing off inferior products as if they are the "real thing". Product complexity Many modern products are extremely complex, involving lots of components, provided by many suppliers. This means there is more potential for "glitches" along the supply chain. Regulatory complexity There are many regulations governing the movement of goods and these vary between countries. Logistics planners need to be aware of these regulations , particularly when it comes to international trade. Rapid product obsolescence Some products become outdated far more quickly than in the past, as they are replaced by new products and new manufacturing systems and approaches. This means the supply chain needs to be regularly rethought and redesigned. Management blunders Managers sometimes get the design or handling of the supply chain wrong. Examples include not obtaining sufficient information about customer requirements and creating systems that over-handle freight. Changing market conditions The demand for a product frequently rises or falls. Failure to keep up with these changes in demand can lead to an insufficient or excessive supply of the product, which is not cost-effective for the business. Natural disaster/political instability Natural disasters such as hurricanes and earthquakes can make it very difficult to manage the supply chain in a smooth way. The more stages in the supply chain, the greater the scope for these problems. Political instability also affects the supply chain, as a change of government or a weak government can lead to industrial unrest and civil disobedience **The impact of logistics and supply chain operations on the competitiveness of business** There are many positive impacts of logistics and supply chain operations that can give a company an "edge" compared to its competitors. Efficient logistics can improve competitiveness. Organising the supply chain and logistics efficiently can speed up the manufacture and delivery of goods and reduce costs, thus allowing a business to compete better with its rivals. Well-managed logistics may help to give a business a competitive advantage , where it is able to produce and distribute a similar product at a lower cost than rival goods. **Outsourcing** can also make a business more competitive by allowing it to concentrate on what it does best (making or selling goods). Distribution-related activities such as transport and storage are often outsourced. The business that outsources its activities in the first party. Another three parties can be involved in outsourcing, these are: - - - (**Insert out-sourcing diagram)** **Summary questions** 1. 2. 3. **Problems encountered in distribution and the impact of ICT.** There are a number of problems that may be encountered when distributing goods. **Relationship between the availability of airport, harbour and docking facilities and the efficient distribution of goods** If a country has large international airports, ports with deep-water docking facilities, large warehousing facilities, and high-quality logistics providers, then goods can be distributed quickly and efficiently. However, countries not blessed with these advantages will find that logistics are far more complicated and the cost of the distribution are much higher **Problems encountered in distribution** **Causes and results of these problems** ------------------------------------------ -------------------------------------------------------------------------------------------------------------------------------------------- Delayed shipment Caused by poor weather conditions, breakdowns, missing paperwork, etc. Results in late delivery to customers. Spoilage Caused by insufficient packaging, bad road conditions, etc. Results in the goods being damaged. Misdirection of goods Caused by poor labeling or inadequate paperwork. Results in a good being sent to the wrong location. Inadequate warehousing facilities Caused by lack of space and equipment, poor temperature control, etc. Results in the goods being damaged. Lack of proper security measures Caused by lack of security personnels or cameras, facilities that are not locked overnight, etc. Results in goods being damaged or stolen. Industrial unrest Caused by angry workers going on strike. Results in the movement of goods being blocked. Ineffective communication Caused by lost or inadequate paperwork, unclear messages. Etc. Results in the supply chain running less smoothly. **Measures to mitigate problems in distribution** Some of the approaches and solutions that can be taken to help solve distribution problems are given below. **Solution** **Details** -------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Government intervention The government of a country can invest in roads, ports, airports and other elements of the transport network, as well as in the infrastructure for ICT communications. Communication networks including use of the internet Logistics providers and supply chain companies can invest in more complex ICT systems that help to improve communication. Insurance Taking out insurance helps to provide cover against spoilage and delays in the supply chain. Selecting the most appropriate channel of distribution Companies should choose the best channel for distributing a particular product (for example, a company might decide to cut out the wholesaler and sell directly to customers to improve efficiency and costs). Use handling services with a good reputation If a business uses the services of a distribution company that has a good reputation, the goods are more likely to get to their destination on time and undamaged. Careful labelling and documentation This helps to prevent goods from being misdirected or held up in the distribution process. Avoiding holding large stocks Manufacturing and distributing only the parts and goods that are needed avoids damages and unnecessary storage costs. Increasing security Employing a security company and using security cameras can help to reduce vandalism and theft. **The impact of information technology on logistics and supply chain operations** The table below outlines some of the ways that information technology contributes to logistics and supply chain operations **Impact of information technology** **Details** -------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Global Positioning System (GPS) An accurate way of finding directions, enabling drivers to plan quicker (and thus cheapefr) transport routes. GPS allows people to pinpoint their exact position using satellites that orbit the earth. Geographic Information System (GIS) This software can be used for the geographical planning of logistics. It helps with the routing of vehicles and management of logistics over a relatively large geographical area. GIS simplifies directions and maps to make vehicle tracking and planning routes much simpler. It can identify the shortest and least congested routes for carrying particular consignments of goods. Portnet Portnet is an ICT system that supports the shipping community by handling the booking, scheduling, tracking and documentation of freight that is carried by international shippers. Telemarketing and E-commerce The development of electronic communications has led to new supply chain patterns, with goods being sold over the telephone (telemarketing), through television shipping channels and via on-line websites. These sales are then distributed by logistics and transport providers who deliver the goods to customers' doors. Global logistics providers Global logistics providers are companies that acts as third parties, handling logistics on the behalf of those wanting to send or receive goods internationally. Examples include FedEx, DHL, and Amazon Logistics, all of which use ICT at the heart of their systems. Logistics hubs A logistics hub is an area around a port of entry that focuses specifically on logistics operations, such as handling containers, storing large quantities of goods in warehouses, organising documentation and so on. Countries seek to set up these hubs because they create many jobs. For example, Jamaica is currently seeking to become an important logistics hub in the Caribbean. An effective logistics hub will require the use of sophisticated ICT. **Summary questions** 1. 2. a. b. 3\. Describe two innovations in information technology that benefit the logistics process. **END OF SECTION 7**