Unit 4 - Logistics PDF

LOGISTICS AND Presentation 2023 DISTRIBUTION Unit 4 | IE 402 Supply Chain Management  Unit 4 | IE 402 Supply Chain Management Contents 4.1 Con cepts of Logistics and Distribution 4.2 P l anni ng f or Log i sti cs 4.3 Log istics P roc...

LOGISTICS AND Presentation 2023 DISTRIBUTION Unit 4 | IE 402 Supply Chain Management  Unit 4 | IE 402 Supply Chain Management Contents 4.1 Con cepts of Logistics and Distribution 4.2 P l anni ng f or Log i sti cs 4.3 Log istics P rocesses 4.4 F re i ght Transpor t Intended Learning Outcomes Understand basic concepts of Logistics Understand the basic principles in designing logistics strategies and processes Recognize some of the industry practices for Freight Transport CONCEPTS OF LOGISTICS AND DISTRIBUTION Unit 4 | IE 402 Supply Chain Management Scope and Definition Parallel to the growth in the importance of distribution, logistics and the supply chain has been the growth in the number of associated names and different definitions that are used. Amongst the many different names can be found: physical distribution; logistics; business logistics; materials management; procurement and supply; product flow; marketing logistics; supply chain management; demand chain management; Unit 4 | IE 402 Supply Chain Management Scope and Definition Logistics is, therefore, a diverse and dynamic function that has to be flexible and has to change according to the various constraints and demands imposed upon it and with respect to the environment in which it works. Thus, these many different terms are used, often interchangeably, in literature and in the business world. One quite widely respected definition also helps to describe one of the key relationships. This is as follows: Logistics = Materials Management + Distribution Unit 4 | IE 402 Supply Chain Management Scope and Definition An extension to this idea helps to illustrate that the supply chain covers an even broader scope of the business area. This includes the supply of raw materials and components as well as the delivery of products to the final customer. Thus: Supply Chain = Suppliers + Logistics + Customers Unit 4 | IE 402 Supply Chain Management Scope and Definition In general, it can be said that: supply and materials management represents the storage and flows into and through the production process; while distribution represents the storage and flows from the final production point through to the customer or end user. It should also be noted that logistics and the supply chain are concerned not only with physical flows and storage from raw material through to the final distribution of the finished product, but also with information flows and storage. Unit 4 | IE 402 Supply Chain Management Scope and Definition Unit 4 | IE 402 Supply Chain Management Scope and Definition Unit 4 | IE 402 Supply Chain Management Scope and Definition Unit 4 | IE 402 Supply Chain Management Logistics and Supply Chain Structure Unit 4 | IE 402 Supply Chain Management Total Logistic Concept (TLC) The total logistics concept (TLC) aims to treat the many different elements that come under the broad category of distribution and logistics as one single integrated system. It is a recognition that the interrelationships between different elements. An understanding of the concept is especially important when planning for any aspect of distribution and logistics. Unit 4 | IE 402 Supply Chain Management Total Logistic Concept (TLC) Unit 4 | IE 402 Supply Chain Management Financial Impact of Logistics Unit 4 | IE 402 Supply Chain Management Channels of Distribution Physical distribution channel is the term used to describe the method and means by which a product or a group of products are physically transferred, or distributed, from their point of production to the point at which they are made available to the final customer. In addition to the physical distribution channel, another type of channel exists. This is known as the trading or transaction channel. The trading channel is also concerned with the product and with the fact that it is being transferred from the point of production to the point of consumption. The trading channel, however, is concerned with the non-physical aspects of this transfer. These aspects concern the sequence of negotiation, the buying and selling of the product, and the ownership of the goods as they are transferred through the various distribution systems. Unit 4 | IE 402 Supply Chain Management Physical Distribution Channel Channel alternatives: Manufacturer-to-retail Unit 4 | IE 402 Supply Chain Management Physical Distribution Channel Channel alternatives: direct deliveries Mail Order or Catalogue Shopping Factory direct to home Internet and shopping from home Factory-to-Factory or Business-to-Business Unit 4 | IE 402 Supply Chain Management Physical Distribution Channel Channel alternatives: different structures It can be seen from the list of alternative channels that channel structures can differ very markedly from one company to another. The main differences are: the types of intermediaries; the number of levels of intermediaries (how many companies handle the product before it reaches the final customer); the intensity of distribution at each level (are all types of intermediary used at the different levels or just selective intermediaries?) Unit 4 | IE 402 Supply Chain Management Physical Distribution Channel Channel alternatives: different structures Unit 4 | IE 402 Supply Chain Management Channel Selection Channel Objectives To make the product readily available to the market consumers at which it is aimed To enhance the prospect of sales being made. To achieve cooperation with regard to any relevant distribution factors. To achieve a given level of service. To minimize logistics and total costs. To receive fast and accurate feedback of information. Unit 4 | IE 402 Supply Chain Management Channel Selection Channel Characteristics: Market Characteristics Unit 4 | IE 402 Supply Chain Management Channel Selection Channel Characteristics: Product Characteristics The importance of the product itself when determining channel choice should not be underestimated. This is because the product may well impose constraints on the number of channels that can be considered. High Value Items are more likely to be sold direct via a short channel, because the high gross profit margins can more easily cover the higher sales and distribution costs that are usual from short channels. Complex Products often require direct selling because any intermediary may not be able to explain how the product works to potential customers. New Products may have to be distributed via a third-party channel because final demand is unknown and supply channels need to be very flexible to respond to both high and low demand levels. Time sensitive products Unit 4 | IE 402 Supply Chain Management Channel Selection Channel Characteristics: Product Characteristics Time sensitive products need a ‘fast’ or ‘short’ channel Products with a handling constraint may require a specialist physical distribution channel, eg frozen food, china and glass, hanging garments and hazardous chemicals. Unit 4 | IE 402 Supply Chain Management Channel Selection Channel Characteristics: Competitive characteristics Competitive characteristics that need to be considered concern the activities of any competitors selling a similar product. Typical decisions are whether to sell the product alongside these similar products, or whether to try for different, exclusive outlets for the product in order to avoid the competition and risk of substitution. Of particular significance is the service level being provided by the competition. It is essential that channel selection is undertaken with a view to ensuring that the level of service that can be given is as good as, or better than, that which is being provided by key competitors Unit 4 | IE 402 Supply Chain Management Channel Selection Designing a channel structure Unit 4 | IE 402 Supply Chain Management Outsourcing Channels Third party or own account? It is probably true that the most important channel decision for those operating in distribution and logistics is whether to use an own -account (in-house) operation or whether to outsource to a third-party logistics (3PL) service. Third-party logistics (3PL) services have been available as an important alternative to own account (in-house) operations for some time. They have been used across most of Europe and North America for some years. Recently, however, the use of providers has grown significantly in Asia Pacific as well. Unit 4 | IE 402 Supply Chain Management Outsourcing Channels Opportunities for outsourcing A partnership approach. The use of incentivized contracts. The creation of integrated global contractors who are able to offer a full logistics service across all regions rather than just partial services. A move to a much more rigorous selection of contractors. The introduction and use of better metrics. The growing importance of environmental issues. The creation of innovative enterprises that oversee and take responsibility for the integration of all of the outsourced operations that a user might have. Unit 4 | IE 402 Supply Chain Management PLANNING FOR LOGISTICS Unit 4 | IE 402 Supply Chain Management Strategic Planning Unit 4 | IE 402 Supply Chain Management Logistics Design Strategy Unit 4 | IE 402 Supply Chain Management Logistics Design Strategy Logistics process design is concerned with ensuring that business methods are aligned and organized so that they operate across the traditional company functions and become supply chain-oriented. Thus, they should be streamlined and should not be affected or delayed because they cross functional boundaries. Logistics network design refers to the more traditional elements of logistics strategy. These include aspects related to the physical flow of the product through a company’s operation, such as the manufacturing location from which a product should be sourced, the inventory that should be held, the number and location of depots, the use of stockless depots and final product delivery. Unit 4 | IE 402 Supply Chain Management Logistics Design Strategy Logistics information system design should include all of those information-related factors that are vital to support the processes and the physical structure of the operation. As well as these, however, it is important to recognize that there are also enterprise-wide information systems (enterprise resource planning or ERP systems), which may have a direct influence on logistics process and network design. Typical information systems that may support logistics process and network design might be electronic point of sale (EPOS), electronic data interchange (EDI) between companies, warehouse management systems, vehicle routing and scheduling and many more. Unit 4 | IE 402 Supply Chain Management Logistics Design Strategy The final design element is that of the logistics organizational structure. It is the experience of many companies that an inadequate organizational structure can lead to substantial problems. These include issues such as sub -optimization whereby functions tend to concentrate on their own operation in isolation from the rest of the company, or even worse examples where different functions and their managers compete against one another and develop antagonistic attitudes, often styled as a ‘blame culture’. Unit 4 | IE 402 Supply Chain Management Product characteristics One of the major factors to be considered when planning for logistics is, perhaps not surprisingly, the product itself. The product is, in fact, perceived to be an amalgam of its physical nature, its price, its package and the way in which it is supplied. For the logistics planner, the physical characteristics of the product and package are seen to be of great significance. This is because, in distribution and logistics, we are directly concerned with physical flow – movement and storage. Unit 4 | IE 402 Supply Chain Management Product characteristics There is a variety of product characteristics that have a direct, and often important, impact on the development and operation of a distribution system. This impact can affect both the structure of the system and the cost of the system. There are four main categories: volume to weight ratio; value to weight ratio; substitutability; and high -risk products. Unit 4 | IE 402 Supply Chain Management Product characteristics Volume to weight ratio Volume and weight characteristics are commonly associated, and their influence on logistics costs can be significant. A low ratio of volume to weight in a product (such as sheet steel, books, etc) generally means an efficient utilization of the main components of distribution. Thus, a low-volume/high-weight product will fully utilize the weight- constrained capacity of a road transport vehicle. Also, a low -volume/high-weight product will best utilize the handling cost component of storage (most other storage costs are not significantly affected by low volume to weight ratios). Unit 4 | IE 402 Supply Chain Management Product characteristics Volume to weight ratio The converse, a high volume to weight ratio, tends to be less efficient for distribution. Typical products include paper tissues, crisps, disposable nappies, etc. These products use up a lot of space, and are costly for both transportation and storage, because most companies measure their logistics costs on a weight basis (cost per tonne) rather than a volume basis (cost per cubic metre). Unit 4 | IE 402 Supply Chain Management Product characteristics Volume to weight ratio Unit 4 | IE 402 Supply Chain Management Product characteristics Value to weight ratio Product value is also important to the planning of a logistics strategy. High -value products are more able to absorb the associated distribution costs because the distribution element is a relatively low proportion of the overall product cost. Low -value products need to have an inexpensive distribution system because the cost is a large proportion of the overall product cost – and if too high the effect on the total cost of the product might make it non-viable in terms of its price in the marketplace. Unit 4 | IE 402 Supply Chain Management Product characteristics Value to weight ratio Once again, it is useful to assess the value effect in terms of a weight ratio: the value to weight ratio. Low value to weight ratio products ( eg ore, sand, etc) incur relatively high transport unit costs compared with high value to weight products ( eg photographic equipment, computer equipment, etc). Storage and inventory holding unit costs of low value to weight ratio products tend to be low in comparison with high -value products because the capital tied up in inventory is much lower for the low -value products. Unit 4 | IE 402 Supply Chain Management Product characteristics Value to weight ratio Unit 4 | IE 402 Supply Chain Management Product characteristics Substitutability The degree to which a product can be substituted by another will also affect the choice of distribution system. When customers readily substitute a product with a different brand or type of goods, then it is important that the distribution system is designed to avoid stockouts or to react to replenish stocks in a timely fashion. Typical examples are many food products, where the customer is likely to choose an alternative brand if the need is immediate and the first choice name is not available. Unit 4 | IE 402 Supply Chain Management Product characteristics Substitutability In a distribution system, this can be catered for either through high stock levels or through a high-performance transport mode. Both options are high cost. High stock levels will decrease the likelihood of a stockout, but will raise average stock levels and, thus, costs. The provision of a faster and more dependable transport function will reduce acquisition time and length of stockout, but this increase in service will be at a higher transport cost. Unit 4 | IE 402 Supply Chain Management Product characteristics High-risk products The characteristics of some products present a degree of risk associated with their distribution. Typical examples include: perishability, fragility, hazard/danger, contamination potential and extreme value. The need to minimize this risk (sometimes a legal obligation) means that a special distribution system design must be used. Unit 4 | IE 402 Supply Chain Management Product Life Cycle Unit 4 | IE 402 Supply Chain Management Unit Load The idea of using a unit load for logistics was developed from the realization of the high costs involved in the storage and movement of products – particularly in the inefficient manual handling of many small packages. The result of this has been the unit load concept, where the use of a unit load enables goods and packages to be grouped together and then handled and moved more effectively using mechanical equipment. Unit 4 | IE 402 Supply Chain Management Unit Load From the product point of view it is possible to introduce unit load systems to alter the characteristics of a product and thus make more effective logistics possible. One classic example has been the development of the roll-cage pallet that is in common use in the grocery industry. Although the cages are expensive units, the trade-off, in terms of time saving and security, is such that overall distribution costs decrease significantly. Unit 4 | IE 402 Supply Chain Management Unit Load Much of distribution and logistics is structured around the concept of load unitization, and the choice of unit load – type and size – is fundamental to the effectiveness and economics of a logistics operation. Choosing the most appropriate type and size of unit load minimizes the frequency of material movement, enables standard storage and handling equipment to be used with optimum equipment utilization, minimizes vehicle load/unload times, and improves product protection, security and stocktaking. Unit 4 | IE 402 Supply Chain Management LOGISTICS PROCESSES Unit 4 | IE 402 Supply Chain Management Key Logistics Processes Order fulfilment. Probably the most common logistics process that is quoted, order fulfilment is concerned with the ability to turn a customer ’s specified requirements into an actual delivered order. Thus, it embraces many of the traditional functions usually recognized as being a part of the logistics operation. Order fulfilment will involve the information elements of receiving and documenting an order through to the physical means of selecting and delivering the goods. For some ‘make -to-order ’ manufacturing operations, this will also have an impact on the production process itself. Some companies maintain the divide between the order -taking component (which is information-based) and the order-delivery component (which is both information-based and physical).. Unit 4 | IE 402 Supply Chain Management Key Logistics Processes New product introduction. This is an area where many companies find they have problems. There are many logistics issues related to the introduction of new products into the marketplace. Very often existing, standard logistics structures and processes can be inappropriate to enable a satisfactory launch of a new product. One of the main problems is the inability to respond with sufficient speed. Standard processes are designed to deal with known products. There are two likely consequences of introducing new products using existing processes. The first is that the product takes off very quickly and very well but there is insufficient flexibility in the supply chain to ratchet up supply to the required levels. The second is that demand is lower than initially expected and so there is an oversupply of stock, which eventually leads to products being sold off at discount rates or becoming obsolete. Unit 4 | IE 402 Supply Chain Management Key Logistics Processes New product development. In this example, the idea is to design the product so that it can reach the market as quickly as possible from the initial design plan through to availability to the customer. The aim is to link the development of the product with the logistical requirements so that all secondary developments (of which there are normally many) can be identified and re-engineered in the shortest possible time. The automotive industry has led the way in setting up processes to cut significantly the time that is required to bring a product to market from initial design. Unit 4 | IE 402 Supply Chain Management Key Logistics Processes Product returns. There is a growing requirement in many businesses to provide an effective process for the return of products. This may be for returns that come back through the existing distribution network or through a new one that is specifically set up. It may also be for product returns that will be reworked or repackaged to go into stock, product returns for subsequent disposal, or packaging returns that may be reused or scrapped. In the light of developments in environmental legislation, this is a very important area for process design or redesign. Unit 4 | IE 402 Supply Chain Management Key Logistics Processes Aftermarket or service parts logistics. For a significant number of companies the supply of a product or series of products is inextricably linked to the subsequent provision of service parts to support the continuous use of the initial products. For many logistics operations, neither the physical structure nor the associated processes for the original equipment are really capable of providing a suitable support mechanism for the spare parts as well. This is another example of the need for the development of processes specifically designed to undertake a particular task. Unit 4 | IE 402 Supply Chain Management Key Logistics Processes Information management. Advances in information technology have enabled a vast amount of detailed data and information to be available and manipulated very easily. This has led some companies to recognize the need to devise suitable processes to ensure that data are collected, collated and used in a positive and organized way. For logistics, this means detailed information can be made available for individual customers, concerning not just their product preferences but also any customer service requirements that are distribution-specific (delivery time preference, order size preference, invoicing requirements, etc). This enables a much more positive, proactive approach to be adopted when considering particular customer relationships. Unit 4 | IE 402 Supply Chain Management Tools and Techniques Unit 4 | IE 402 Supply Chain Management Tools and Techniques Unit 4 | IE 402 Supply Chain Management Tools and Techniques Unit 4 | IE 402 Supply Chain Management Tools and Techniques Unit 4 | IE 402 Supply Chain Management Tools and Techniques Unit 4 | IE 402 Supply Chain Management Tools and Techniques Unit 4 | IE 402 Supply Chain Management  FREIGHT TRANSPORT Unit 4 | IE 402 Supply Chain Management Method of Selection Unit 4 | IE 402 Supply Chain Management Operational factors External Factors The basic infrastructure in the country. Trade barriers such as customs duty, import tariffs, or quota payments Export controls and licenses Law and taxation. Financial institutions and services, and economic conditions Communications systems. Culture. Climate. Unit 4 | IE 402 Supply Chain Management Operational factors Customer Characteristics Service level requirements Delivery point constraints Credit rating. Terms of sale preference (INCOTERMS) Order size preference Customer importance Product knowledge Unit 4 | IE 402 Supply Chain Management Operational factors Physical nature of the product Volume to weight ratio Value to weight ratio Substitutability. Special characteristics Other Logistics Components Supply points. Production plants. Warehouses and storage facilities Depots Marketing plans and policies Supply Philosophy Existing Delivery System Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Conventional sea-freight Cost economies. For some products, the most economic means of carriage remains that of conventional sea-freight. This particularly applies to bulk goods and to large packaged consignments that are going long distances. Where speed of service is completely unimportant, then the cheapness of sea -freight makes it very competitive. Availability. Services are widely available, and most types of cargo can be accommodated. Speed. Sea-freight tends to be very slow for several reasons. These include the fact that the turnaround time in port is still quite slow, as is the actual voyage time. Need for double-handling. Conventional sea-freight is disadvantaged by the slow handling methods still used. This is especially true when compared with the more competitive ‘through transport’ systems with which sea -freight must compete. The problem is particularly apparent on some of the short sea routes. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Conventional sea-freight Delay problems. There are three major delay factors that can lead to bad and irregular services, as well as helping to slow up the transport time itself. These are over and above the journey time. They are pre-shipment delays, delays at the discharge port and unexpected delays due to bad weather, missed tides, etc. Damage. The need to double-handle cargo on conventional ships tends to make this mode more prone to damage for both products and packaging. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics International road freight They can provide a very quick service (ferry and tunnel schedules can be carefully timed into route plans if they are a necessary part of the journey). For complete unit loads with single origin and destination points, they can be very competitive from the cost viewpoint. There is a greatly reduced need to double-handle and trans-ship goods and packages, and for direct, full-load deliveries this is completely eliminated. This saves time and minimizes the likelihood of damage. Packaging cost can be kept to a minimum because loads are less susceptible to the extreme transit ‘shocks’ that other modes can cause. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics International road freight The system can provide regular, scheduled services due to the flexibility of road vehicle scheduling. Road freight transport can lose its speed advantage when used for less than lorry sized loads. These entail groupage and so involve double -handling (at both ends of the journey), additional packaging and time delay. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Air freight Air freight compares very well with other transport modes in terms of speed over longer international movements. This is because it has very rapid airport -to-airport transit times over these longer distances. Although air freight is very quick from airport to airport, there can be occasions when this speed factor is diminished because time can be lost due to airport congestion and handling, paperwork and customs delays. One particular advantage of air freight is known as ‘lead -time economy’. The ability to move goods very quickly over long distances means that it is unnecessary to hold stocks of these items in the countries in question (spare parts, etc). The short lead time required between the ordering and receiving of goods, and the resultant saving in inventory holding costs give this benefit its name of ‘lead -time economy’. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Air freight The air freighting of products allows for a great deal of market flexibility, because any number of countries and markets can be reached very quickly and easily. This is particularly advantageous for a company that wishes either to test a product in a given area or to launch a new product. The flexibility of air freight means that a company need not necessarily set up extensive stockholding networks in these areas. The movement of goods by air freight can result in a marked reduction in packaging requirements. As a general rule, the air freight mode is not one that experiences severe physical conditions, and so its consignments are not prone to damage and breakages. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Air freight Air freight transport is very advantageous for certain ranges of goods, compared to many of the alternative modes. This includes those commodities with high value to weight ratios (a lot of money is tied up, therefore an expensive freight on -cost is not significant), perishables (where speed is vital), fashion goods (which tend both to be expensive and to have a short ‘shelf life’), emergency supplies (speed again is vital) and finally spare parts (the lack of which may be holding up the operation of a multimillion project). For the vast majority of products, air freight is a very expensive form of transport. This is by far its greatest disadvantage. In some instances, and for some products, cost is of very little consequence, and it is for these types of goods that air freight tends to be used. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Container and intermodal systems They enable a number of small packages to be consolidated into large single unit loads. There is a reduction in the handling of goods, as they are distributed from their point of origin to their point of destination. There is a reduction in individual packaging requirements, depending on the load within the container. There is a reduction in damage to products caused by other cargo. Insurance charges are lower due to the reduced damage potential. Handling costs at the docks and at other modal interfaces are reduced. There is a quicker turnaround for all the types of transport used. Port utilization also improves. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Container and intermodal systems The all-round delivery time is speedier, and so raises service levels. Documentation is simpler. The concept of ‘through transit’ becomes feasible, and allows for a truly integrated transport system to be developed. In the early days of containerization, the systems that were developed tended not to be well integrated across the different transport modes. This has considerably improved in recent years. Unit 4 | IE 402 Supply Chain Management Transport Mode Characteristics Container and intermodal systems There is a need for special facilities and handling equipment, and these are very costly. Thus, there are a limited number of transfer points available. The initial cost of the containers themselves is very high. The return of empty containers can often be an expensive problem. Trade is seldom evenly balanced, so return loads may not be available. Containers may leak, thereby causing damage due to rain or seawater. Loads may be affected by their position of stow, eg above or below deck. Unit 4 | IE 402 Supply Chain Management Consignment factors Routing and through transit There may be some distinct routing factors that must be adhered to and these may limit the options available to the shipper. Questions that might need to be considered include: –– Is a direct route stipulated by the customer? –– Are there countries through which the shipment may not travel? –– Who is responsible for the through transit? –– Who is paying for the freight costs? Unit 4 | IE 402 Supply Chain Management Consignment factors Distance The distance that the load has to travel for delivery will have an influence on the mode of transport that might be considered: –– What is the distance to be moved? –– Does distance restrict the options that are available? Unit 4 | IE 402 Supply Chain Management Consignment factors Type of Cargo Vargo characteristics will certainly need to be carefully considered when the route and type of mode are determined: –– If it is bulk or general cargo, will limited alternatives mean that a certain specific route is preferable? –– If it is bulk or general cargo, are certain routes cheaper? –– Does the cargo have specific characteristics (ie it may be perishable or high value) that make certain routes more attractive? –– Is the cargo hazardous, if so are some routes unavailable? Unit 4 | IE 402 Supply Chain Management Consignment factors Quantity The load quantity may influence the type of mode that can be used: –– full load: container and trailer options should be attractive; –– part load: possibility of consolidation – but time delays/as general cargo, but packaging implications; –– small size: parcel, air freight, groupage/consolidation. Unit 4 | IE 402 Supply Chain Management Consignment factors Unit Load Is the load unitized, if not, is this an option and would it be cost effective? –– Will unitization help? –– Is it a small or large unit load? –– Is containerization feasible? –– Is groupage/consolidation an alternative? Unit 4 | IE 402 Supply Chain Management Consignment factors Commodity value as previously noted in discussions concerning trade -offs, the value of a consignment can significantly influence the choice of mode: –– How significant is the transport cost element to the consignment as a whole? –– If it is import/export, how is the commodity rated – this may impact freight rates? –– Will a fast, expensive mode enable reduced inventory holding and associated cost savings? Unit 4 | IE 402 Supply Chain Management Consignment factors Regular shipments where regular shipments are to be made on certain routes it should be possible to negotiate competitive freight costs: –– How often will these shipments be made? –– Should a contract be negotiated or is ‘spot hire’ adequate? Unit 4 | IE 402 Supply Chain Management Cost and Service Requirement Unit 4 | IE 402 Supply Chain Management Players for Marine Transport Shipping lines They own and operate the various types of ships in their fleets. Their role is to provide the physical means by which cargo may be safely and efficiently transported by sea. Unit 4 | IE 402 Supply Chain Management Players for Marine Transport Port Operator A port operator is a port authority or company that contracts with the port authority to move cargo through a port at a contracted minimum level of productivity. They may be state-owned (particularly for port authorities) or privately run. The work involves managing the movement of cargo containers between cargo ships, trucks and freight trains and optimizing the flow of goods through customs to minimize the amount of time a ship spends in port. Unit 4 | IE 402 Supply Chain Management Players for Marine Transport Freight forwarders / Customs Broker Often referred to as freight management companies, these days their role is to oversee and manage the movement of the freight from the point of origin to the point of destination. Freight management companies provide integrated door -to-door solutions for their customers that may include arranging different modes of transport, customs clearance and documentation, arranging port handling and generally supervising all aspects of the movement. In order to do this effectively they usually have worldwide networks of offices, and agents in many countries. Unit 4 | IE 402 Supply Chain Management Common shipping terms Full container load (FCL) As the term implies, this refers to a load that will fill a given container. Less than container load (LCL) Again, as the term implies, this is a shipment that will not fill a container and therefore will require to be consolidated with other LCLs in order to economically fill a shipping container. Break bulk cargo This is a general term for non-containerized loose freight. Out-of-gauge cargo and heavyweight items that are unsuitable for containerization fall into this category. Bulk cargoes such as crude oil, loose grain or bulk powders, and iron ore would not be classified as break bulk. Unit 4 | IE 402 Supply Chain Management Common shipping terms Weight or measure (W/M) This is a common method used by shipping lines to price sea -freight for break-bulk shipments. It is important to understand that this method considers that 1 metric tonne is equal to 1 cubic metre and that the price quoted applies to the higher of the two numbers. Rather confusingly this system can also be referred to as ‘freight tonnes’ or ‘revenue tonnes’. For example: The cargo to be transported by the carrier weighs 1,500 metric tonnes and has a volume of 7,500 cubic metres. The price quoted is US $75 per weight or measure. Therefore, the price will be calculated by taking the higher number of the weight or measure and multiplying it by US $75: 7,500 × US $75 = US $562,500 Unit 4 | IE 402 Supply Chain Management  Unit 4 | IE 402 Supply Chain Management 02 D e s i g n P ro j e c t C o n s u l t a t i o n Date: November 23, 2024 (Saturday) Presentation of the following (10 mins): Current Supply Chain Design Problem Analysis Proposed Supply Chain Design Submit initial manuscript draft