Chapter 1
The evolution of logistics and supply chain management.
6 key developments triggered the evolution:
1. Reduced transport intensity of freight
Before:
-Bulky raw materials – high volume – Low value
Now:
- More in-process and finished products => added value to products
- Increased value to volume ratio => lower transport cost sensitivity
- Higher value freight better able to absorb transport costs
2. Falling product prices
- Increase of competition + falling marketplace prices
➔ Reduction in costs
- Reduction of storage costs, transport costs,… is a key area for companies!
3. Deregulation of transport
(=government less involved in transp. & less rules)
5 principal modes of transport:
1) road 4) pipeline
2) water 5) air
3) rail 6) The internet? E.g. software
- By removing unnecessary barriers to competition, markets become more competitive
and prices should come down
- Deregulation has had a positive impact leading to cheaper services
- Sometimes private monopolies have replaced public ones (E.g.: Fedex
- But some countryside regions are sometimes cut off because of deregulation
4. Productivity improvements
• Containerization effects:
- Efficient space utilization
1
, - Switching of transport mode easily possible because of standard handling units
• Technology
- Online tracking and tracing
- Radio frequency identification (RFID)
- Barcoding
- Internet of Things (IOT)
- Blockchain
- Artificial Intelligence (AI)
5. Emphasis on inventory reduction
• Often significant funds are tied up in unnecessary inventory (accounting: the
working capital!)
• Importance of inventory management because of market pressures
• Competition
• Customer requirements
• An essential competitive weapon
• Introduction of JIT deliveries (cfr. car manufacturers)
• Ability to easily respond to changing demand conditions
6. Changes in company structure
• Structure of companies has changed a lot
• More specialization, less vertically integrated
• Trend towards outsourcing
• Functional or silo-based thinking: hinder the overall performance of a company
• KSF: key success factor: e.g. time(order to delivery time), costs
> CONCLUSION:
• All 6 trends have led to supply chain revolution
What is logistics?
Logistics involves getting:
- the right product, - in the right place at the right time,
- in the right way, - for the right customer at the right
- in the right quantity and right cost
quality,
Depending on who speaks about logistics: 4, 7, 8 R’s
Definition: The process of planning, implementing and controlling procedures for the
efficient and effective transportation and storage of goods including services, and related
information from the point of origin to the point of consumption for the purpose of
conforming to customer requirements.
2
, What is Logistics Management?
• Logistics management is primarily concerned with optimizing flows within the
organization
• The mission of logistics management is to serve the customer in the most cost-
effective way
• More than “trucks and sheds” / “wheels and walls” alone
WHAT IS SCM (supply chain management)?
What is a supply chain?
A supply chain is a system of organizations, people, activities, information and resources
involved in moving a product or service from supplier to customer. Supply chain activities
transform natural resources, raw materials and components into a finished product that is
delivered to the end customer.
A supply chain is a network of connected and interdependent organizations mutually and
co-operatively working together to control, manage and improve the flow of materials,
resources (money + people + equipment) and information from suppliers to end users.
Supply chain management
SCM is the management of a network of relationships within a firm and between
interdependent organizations and business units consisting of material suppliers,
purchasing, production facilities, logistics, marketing, and related systems that facilitate the
forward and reverse flow of materials, services, finances and information from the original
producer to final customer with the benefits of adding value, maximizing profitability
through efficiencies and achieving customer satifaction.
(=management of physical products, information flows & money, and how we can structure
that in an efficient way)
The integrated supply chain: End – to – End
Downstream
M aterials flow
suppliers procurem ent operations distribution custom ers
Requirem ents inform ation flow
Upstream
3
, Supply Chain Views
1. Supply view = PUSH
=producing without exactly knowing how much customer is going to source.
2. Demand view = PULL
=producing based off what the
customer wants
DISTINGUISHING LOGISTICS AND SCM
SUPPLY CHAIN IS A WIDER CONCEPT THAN LOGISTICS
(Don’t have to know the different names of the views, just that they exist and be able to
discuss them)
Application to manufacturing and services
• Logistics and SCM can be used to generate both:
- cost savings - service enhancements/
improvements
(sometimes will have to make a decision that leads more to one of both)
Chapter 2: Globalization and International Trade
4
The evolution of logistics and supply chain management.
6 key developments triggered the evolution:
1. Reduced transport intensity of freight
Before:
-Bulky raw materials – high volume – Low value
Now:
- More in-process and finished products => added value to products
- Increased value to volume ratio => lower transport cost sensitivity
- Higher value freight better able to absorb transport costs
2. Falling product prices
- Increase of competition + falling marketplace prices
➔ Reduction in costs
- Reduction of storage costs, transport costs,… is a key area for companies!
3. Deregulation of transport
(=government less involved in transp. & less rules)
5 principal modes of transport:
1) road 4) pipeline
2) water 5) air
3) rail 6) The internet? E.g. software
- By removing unnecessary barriers to competition, markets become more competitive
and prices should come down
- Deregulation has had a positive impact leading to cheaper services
- Sometimes private monopolies have replaced public ones (E.g.: Fedex
- But some countryside regions are sometimes cut off because of deregulation
4. Productivity improvements
• Containerization effects:
- Efficient space utilization
1
, - Switching of transport mode easily possible because of standard handling units
• Technology
- Online tracking and tracing
- Radio frequency identification (RFID)
- Barcoding
- Internet of Things (IOT)
- Blockchain
- Artificial Intelligence (AI)
5. Emphasis on inventory reduction
• Often significant funds are tied up in unnecessary inventory (accounting: the
working capital!)
• Importance of inventory management because of market pressures
• Competition
• Customer requirements
• An essential competitive weapon
• Introduction of JIT deliveries (cfr. car manufacturers)
• Ability to easily respond to changing demand conditions
6. Changes in company structure
• Structure of companies has changed a lot
• More specialization, less vertically integrated
• Trend towards outsourcing
• Functional or silo-based thinking: hinder the overall performance of a company
• KSF: key success factor: e.g. time(order to delivery time), costs
> CONCLUSION:
• All 6 trends have led to supply chain revolution
What is logistics?
Logistics involves getting:
- the right product, - in the right place at the right time,
- in the right way, - for the right customer at the right
- in the right quantity and right cost
quality,
Depending on who speaks about logistics: 4, 7, 8 R’s
Definition: The process of planning, implementing and controlling procedures for the
efficient and effective transportation and storage of goods including services, and related
information from the point of origin to the point of consumption for the purpose of
conforming to customer requirements.
2
, What is Logistics Management?
• Logistics management is primarily concerned with optimizing flows within the
organization
• The mission of logistics management is to serve the customer in the most cost-
effective way
• More than “trucks and sheds” / “wheels and walls” alone
WHAT IS SCM (supply chain management)?
What is a supply chain?
A supply chain is a system of organizations, people, activities, information and resources
involved in moving a product or service from supplier to customer. Supply chain activities
transform natural resources, raw materials and components into a finished product that is
delivered to the end customer.
A supply chain is a network of connected and interdependent organizations mutually and
co-operatively working together to control, manage and improve the flow of materials,
resources (money + people + equipment) and information from suppliers to end users.
Supply chain management
SCM is the management of a network of relationships within a firm and between
interdependent organizations and business units consisting of material suppliers,
purchasing, production facilities, logistics, marketing, and related systems that facilitate the
forward and reverse flow of materials, services, finances and information from the original
producer to final customer with the benefits of adding value, maximizing profitability
through efficiencies and achieving customer satifaction.
(=management of physical products, information flows & money, and how we can structure
that in an efficient way)
The integrated supply chain: End – to – End
Downstream
M aterials flow
suppliers procurem ent operations distribution custom ers
Requirem ents inform ation flow
Upstream
3
, Supply Chain Views
1. Supply view = PUSH
=producing without exactly knowing how much customer is going to source.
2. Demand view = PULL
=producing based off what the
customer wants
DISTINGUISHING LOGISTICS AND SCM
SUPPLY CHAIN IS A WIDER CONCEPT THAN LOGISTICS
(Don’t have to know the different names of the views, just that they exist and be able to
discuss them)
Application to manufacturing and services
• Logistics and SCM can be used to generate both:
- cost savings - service enhancements/
improvements
(sometimes will have to make a decision that leads more to one of both)
Chapter 2: Globalization and International Trade
4
