Service Provider Logistics
Block 7
Week 1 – Service Provider Logistics SPL (1/5)
Module objective
1. Create a business (finance/economic, strategies, etc.) and operations plan (cargo
bookings baggage capacity plan, turn-around: ramp, fuel, cabin service, etc.)
including resource planning (baggage forecasting and cargo and baggage planning).
2. Explain the use, influence and application of a capacity planning system and
strategies.
3. Analyze the turn-around, end-to-end cargo and baggage supply chain, including the
roles and activities of stakeholders, and the various products in the supply chains
(pharmaceuticals, food, temperature control freight, live animals, etc.).
4. Analyze the use and importance of IT in the aviation industry with emphasis on its
application for effective logistics operations.
5. Explain the functions of warehouses, particularly in relation to cargo warehouses.
6. Analyze, explain describe: the physical flow of various activities around the aircraft,
cargo products and baggage in the warehouse. This includes the design of the
warehouse using systematic lay-out planning (SLP) and/or the systematic handling
analysis (SHA).
7. Understand an apply indicative hazard/event analysis methods and human error types
and taxonomies that are also relevant to the cargo warehouse: bow-tie model, risk
controls/barriers.
Week 1 – Operations Management and the Airline Industry (2/5)
Third-party logistics
Third-party logistics is a company’s use of other businesses to perform parts of its
operations or other business functions, third-party logistics providers typically specialize in
integrated operation, warehousing and transportation services.
Outsourcing
Outsourcing is buying goods or services rather than producing goods or performing services
within the organization. The reason for this is to reduce overhead, gain flexibility, take
advantage of supplier’s expertise.
A third-party logistics relationship is a form of business process outsourcing focuses on the
strategic operation of the client’s supply chain.
- Enterprises may contract with a number of third-party logistics to manage specific
traffic segments or customer bases. Or they can outsource the entire supply chain.
Reasons for outsourcing:
- Transfer of risk;
- Cost saving (no training of own staff etc.);
- Access to expertise;
- Focus on core processes;
- Capacity management;
- Technology know-how;
- Saving of valuable time.
, Service Provider Logistics
Block 7
What can be outsourced?
- Entire functions:
o HR, IT, Facilities, Real estate management and Accounting.
- Elements of functions:
o Marketing department – tele marketing, web development, market research.
o Operations – computer aided design (CAD), drafting, manufacturing,
engineering, customer support, call center functions.
- Offshoring – Moving activities to another country.
Risks and disadvantages of outsourcing
Financial costs:
- May have higher cost due to cost and difficulty in managing suppliers.
- Transaction costs – conducting negotiations, managing and tendering process,
oversight of supplier performance.
Loss of control:
- Possible loss in continuity of supply or quality control should supplier not perform as
expected (industrial action, bankruptcy), not be able to supply product.
Loss of competitive knowledge:
- Opens opportunities for competitors.
- Companies lose ability to introduce new designs based on own agenda.
- In using several suppliers may prevent the development of new insights, innovations,
and solutions that usually require cross functional team work.
Conflicting objectives:
- Increased flexibility (adjust production rates as recommended) for buyer, hence
outsourcing; supplier wants long term and stable commitment.
Increase in risk:
- Loss of in-house expertise that might never be regained.
- Losing experts may make it difficult to manage contract effectively.
- May have commercial secrecy and confidentiality with suppliers as they become more
aware of customers’ operations and performance.
Aviation Sector
Within the aviation sector, outsourcing by third-party logistics can be found in:
- Ground handlers;
- Cargo supply chain;
- Warehousing/ Warehouse management and
- Baggage system.
Week 1 – Capacity Planning (3/5)
Capacity Planning
Indicating the amount of space needed for your operation in the:
- Baggage sorting area.
- Arrival hall (L&F service desk).
- Departure hall (check-in and ticket desks).
- Cargo warehouse.
- Offices.
Establish demand → Do capacity planning (man and materials) → Make design of layout.
, Service Provider Logistics
Block 7
Questions of priority and capacity
• What are we going to make?
• What does it take to make it?
• What do we already have?
• What must we get and when?
It’s a balancing act of:
Prioritizing
- What is needed, when and how much?
Capacity
- Capacity to produce what is needed at the right time
How can differences between priorities and capabilities best be resolved?
Sales and Operations plan (SOP)
- Management sets objectives, the Strategic Business Plan.
o Realize the strategic plan and objectives and to give feedback to revise the
strategy.
- Based on product and marketing plans, production and sales plans are drawn up: Sales
and Operations Plan.
- This indicates the total volume that should be generated.
o The quantities to be produced each month per product
family (gps of products, parts, features and options,
special parts, etc.).
o Different units of measure can be used e.g. items, tons,
hours, no. of workers.
- Multidisciplinary: sales, marketing, R&D, production,
maintenance procurement, HRM and Finance.
- Provides management visibility of production, inventory, and
backlogs.
The image shows who brings what to the table for a certain product.
Aviation Sector
Sales in airlines terms:
- PAX capacity sold.
- Cargo bookings.
Operations plan in airlines terms:
- Passenger flight schedule.
- Bags forecast.
- Cargo flight schedule.
Normal: Aviation Sector:
Block 7
Week 1 – Service Provider Logistics SPL (1/5)
Module objective
1. Create a business (finance/economic, strategies, etc.) and operations plan (cargo
bookings baggage capacity plan, turn-around: ramp, fuel, cabin service, etc.)
including resource planning (baggage forecasting and cargo and baggage planning).
2. Explain the use, influence and application of a capacity planning system and
strategies.
3. Analyze the turn-around, end-to-end cargo and baggage supply chain, including the
roles and activities of stakeholders, and the various products in the supply chains
(pharmaceuticals, food, temperature control freight, live animals, etc.).
4. Analyze the use and importance of IT in the aviation industry with emphasis on its
application for effective logistics operations.
5. Explain the functions of warehouses, particularly in relation to cargo warehouses.
6. Analyze, explain describe: the physical flow of various activities around the aircraft,
cargo products and baggage in the warehouse. This includes the design of the
warehouse using systematic lay-out planning (SLP) and/or the systematic handling
analysis (SHA).
7. Understand an apply indicative hazard/event analysis methods and human error types
and taxonomies that are also relevant to the cargo warehouse: bow-tie model, risk
controls/barriers.
Week 1 – Operations Management and the Airline Industry (2/5)
Third-party logistics
Third-party logistics is a company’s use of other businesses to perform parts of its
operations or other business functions, third-party logistics providers typically specialize in
integrated operation, warehousing and transportation services.
Outsourcing
Outsourcing is buying goods or services rather than producing goods or performing services
within the organization. The reason for this is to reduce overhead, gain flexibility, take
advantage of supplier’s expertise.
A third-party logistics relationship is a form of business process outsourcing focuses on the
strategic operation of the client’s supply chain.
- Enterprises may contract with a number of third-party logistics to manage specific
traffic segments or customer bases. Or they can outsource the entire supply chain.
Reasons for outsourcing:
- Transfer of risk;
- Cost saving (no training of own staff etc.);
- Access to expertise;
- Focus on core processes;
- Capacity management;
- Technology know-how;
- Saving of valuable time.
, Service Provider Logistics
Block 7
What can be outsourced?
- Entire functions:
o HR, IT, Facilities, Real estate management and Accounting.
- Elements of functions:
o Marketing department – tele marketing, web development, market research.
o Operations – computer aided design (CAD), drafting, manufacturing,
engineering, customer support, call center functions.
- Offshoring – Moving activities to another country.
Risks and disadvantages of outsourcing
Financial costs:
- May have higher cost due to cost and difficulty in managing suppliers.
- Transaction costs – conducting negotiations, managing and tendering process,
oversight of supplier performance.
Loss of control:
- Possible loss in continuity of supply or quality control should supplier not perform as
expected (industrial action, bankruptcy), not be able to supply product.
Loss of competitive knowledge:
- Opens opportunities for competitors.
- Companies lose ability to introduce new designs based on own agenda.
- In using several suppliers may prevent the development of new insights, innovations,
and solutions that usually require cross functional team work.
Conflicting objectives:
- Increased flexibility (adjust production rates as recommended) for buyer, hence
outsourcing; supplier wants long term and stable commitment.
Increase in risk:
- Loss of in-house expertise that might never be regained.
- Losing experts may make it difficult to manage contract effectively.
- May have commercial secrecy and confidentiality with suppliers as they become more
aware of customers’ operations and performance.
Aviation Sector
Within the aviation sector, outsourcing by third-party logistics can be found in:
- Ground handlers;
- Cargo supply chain;
- Warehousing/ Warehouse management and
- Baggage system.
Week 1 – Capacity Planning (3/5)
Capacity Planning
Indicating the amount of space needed for your operation in the:
- Baggage sorting area.
- Arrival hall (L&F service desk).
- Departure hall (check-in and ticket desks).
- Cargo warehouse.
- Offices.
Establish demand → Do capacity planning (man and materials) → Make design of layout.
, Service Provider Logistics
Block 7
Questions of priority and capacity
• What are we going to make?
• What does it take to make it?
• What do we already have?
• What must we get and when?
It’s a balancing act of:
Prioritizing
- What is needed, when and how much?
Capacity
- Capacity to produce what is needed at the right time
How can differences between priorities and capabilities best be resolved?
Sales and Operations plan (SOP)
- Management sets objectives, the Strategic Business Plan.
o Realize the strategic plan and objectives and to give feedback to revise the
strategy.
- Based on product and marketing plans, production and sales plans are drawn up: Sales
and Operations Plan.
- This indicates the total volume that should be generated.
o The quantities to be produced each month per product
family (gps of products, parts, features and options,
special parts, etc.).
o Different units of measure can be used e.g. items, tons,
hours, no. of workers.
- Multidisciplinary: sales, marketing, R&D, production,
maintenance procurement, HRM and Finance.
- Provides management visibility of production, inventory, and
backlogs.
The image shows who brings what to the table for a certain product.
Aviation Sector
Sales in airlines terms:
- PAX capacity sold.
- Cargo bookings.
Operations plan in airlines terms:
- Passenger flight schedule.
- Bags forecast.
- Cargo flight schedule.
Normal: Aviation Sector:
