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GS 120 – iGlobalization: Moving The Things We BuyProfessor: Dr. Jean-Paul Rodrigue
Hofstra University, Department of Global Studies & Geography
Topic 6 – Logistics and Supply Chain Management
A – Logistics and Value ChainsB – Distribution FacilitiesC – Distribution Systems
A – The Role and Function of Logistics
Read section 1
Logistics
■ Is there a difference between logistics and supply chain management?• Yes and no…• A wide set of activities dedicated to the transformation and
distribution of goods, from raw material sourcing to final market distribution as well as the related information flows.
■ Physical distribution• Activities involved in the movement of goods from points of
production to final points of sale and consumption.■ Materials management• Activities involved in the manufacturing of commodities in all
their stages of production along a supply chain.
The Nature of a Supply Chain
Supplier CustomerManufacturer /Distributor
Orders
Transportation
Orders
Transportation
InventoryParts or
raw materials
In-process inventoryParts or
finished goods Inventory
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Logistics Goals and Operations
Fulfillment (Goals)Order• Right product• Right quantity
Delivery• Right location• Right time
Quality• Right condition
Cost• Right price
Demand (Operations)
Transportation• Handling• Packaging
Stock Management• Production
scheduling• WarehousingOrders Processing• Sales• Purchase
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Value Added by Logistics
Production CostsImproved efficiency of manufacturing with appropriate shipment size, packaging and inventory levels.LocationTaking better advantage of various locations, implying access to expanded markets (more customers) and lower distribution costs.TimeHaving goods and services available when required along the supply chain.
ControlBetter marketing and demand response.
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Supply Chain Differentiation: Selective Performance Preferences
CostsStability of the cost structure.Dependent on the cargo being carried.TimeInfluence inventory carrying costs and inventory cycle time.Routing options in relation to value / perishability.ReliabilityStability of the distribution schedule.Reliability can mitigate time.
RiskLevel of confidence that the shipment will reach its final destination within expected costs, time and reliability considerations.
Explain how logistics adds value and how supply chains are differentiated.
Logistical Improvements, Manufacturing Sector, 1960s to 2010s
1960s 1970s 1980s 1990s 2000s 2010s0
2
4
6
8
10
12
14
16
18
20
0
5
10
15
20
25
30
35
40
35
25
74 3 2
Logistics Costs (% GDP) Inventory Costs (% GDP)Cycle Time Requirements (days)
% o
f GDP
Days
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Worldwide Logistics Costs, 2002
39%
27%
24%
6%4%
Chart Title
TransportationWarehousingInventory CarryingOrder ProcessingAdministration
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What are the main components of logistics costs and what do they mean?
Warehousing costs: fixed costs of owning or leasing warehousing space. They vary according to the number and the size of facilities and are irrespective of the amount of inventory being handled.Inventory carrying costs: variable costs of maintaining inventory in a warehouse (utilities, insurance, taxes, labor costs). It varies according to the volume handled.
Logistics Costs and Economic Development
0 10,000 20,000 30,000 40,000 50,000 60,000 70,0000
5
10
15
20
25
30
35
United StatesJapan
South Korea
Singapore
Malaysia
Thailand
Vietnam
Indonesia
China
Peru
ArgentinaBrazil
Colombia
MexicoChile
South Africa
FranceIndia
Finland
AustraliaCanada
Germany
GDP per Capita (in current US dollars)
Logi
stics
Cos
ts (S
hare
or G
DP)
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From Push to Pull Logistics
Supplier Supplier Supplier
Manufacturer
Customer
Distributor
Supplier Supplier Supplier Supplier
Supplier Supplier Supplier
Manufacturer
Distributor
Customer
3PLReturns / Recycling
Point-of-sale data
Freight flow
Push Pull
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Main Actors of the Logistics Chain
Cargo owners Carriers
Logistics service providers
Lead logistics providers & consultants
Layers to Logistics Services
1PL2PL
3PL4PL
Manufacturing, Retailing
Transportation
Logistics
Supply chainmanagement
Cargo owners
Carriers
Logistics serviceproviders
Lead logistics providers& consultants
Supply chain integration
Actors Services
Service integration
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Value Chains
■ Definition• Functionally integrated network of production, trade and
service activities.• Covers all the stages in a supply chain:
• Transformation of raw materials.• Intermediate manufacturing stages.• Delivery of a finished good to a market.
• A series of nodes, linked by transactions, such as sales and intra firm transfers.
• Each successive node involves the acquisition or organization of inputs for the purpose of added value.
The Commodity Chain (or Value Chain)
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Explain the three main stages of a value chain
Transport Chain
Rawmaterials
Manufacturingand assembly Distribution
Bulk shipping Unit shipping
High volumesLow frequency
Low volumesHigh frequency
LTL shipping
Average volumesHigh frequency
1- Commodities 3- Final Goods2- Intermediate Goods
Attributable to climatic (agricultural products, forestry products) or geological (ores and fossil fuels) conditions.
Transformation that confers added value. Materials and parts used to make other goods.
Goods shipped to large consumption markets (cities). Flow and inventory management.
StagesMarket
Flows
Market
Storage Warehouse Distribution center
Benefits of Improved Freight Transportation on Value Chains
Direct
Indirect
Induced
Cost reductions to carriers and shippers.Reduced transit times.Increased reliability of shipments.
Improvements in logistics and sourcing.Lower inventory levels and costs.
Lower costs for suppliers and customers.Improved diversity of parts and goods.
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Value Chains and Types of Transported Freight
Extraction
Transfer Processing
Intra-industrial linkages
ManufacturingRetailing
Distribution
Raw materials Semi-finished products Manufactured goodsRead this content
The Automobile Supply Chain
Supplyingindustries
Steel and
other metalsRubber
Electronics
Plastic
Glass
Textiles
Bodies
Components
Engines and transmissions
Final Assemb
ly
Manufacture and
stamping of body panels
Body assembling
and painting
Manufacture of mechanical and electrical components (wheels, tires, seats, breaking systems,
windshields, exhausts, etc.)
Forging and casting of engine and transmission
components
Machining and assembly of engines and
transmissions
Consumer
market
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Commodity Chains and Added ValueRead this content
Global value chains involves competition over three main dimensions. What are they?
Value Chain
Adde
d Va
lue
Low
High
Manufacturing
R&D Fabrication
DistributionProcurement
Design / Branding Marketing
Sales / Services
Concept Logistics
Production(Tangible Activities)
Pre-Production(Intangible)
Post-Production(Intangible)
Short Assignment: Logistics Goals and Operations
Logistics has several goals. Explain what they are and how they are achieved.
B – Distribution Facilities
Read section 2
Warehouses versus Distribution Centers
■ What are the differences between a warehouse and a distribution center?• Both are physically similar with docking areas and storage
racks.• Time; inventory is stored in a DC for shorter periods of times
than a warehouse (days or weeks).• A warehouse tends to be supply-driven while a DC is focusing
on the demand.
Warehouses versus Distribution Centers
■ Warehouse (Storage)• Holding goods in inventory for an extended period of time and
releasing them on demand.• Ownership of the cargo.• Usually a buffer related function.
■ Distribution center (Distribution)• Consolidating, deconsolidating, sorting a cargo load or
changing the load unit.• Cargo usually owned by others.• Usually a throughput related function.
Types of Freight Facilities
FabricationStorageDistributionHeavy manufacturingLight manufacturing
Bulk warehouseWarehouse
Multitenant facility
Cold storage facility
Distribution centerCross-docking facility
E-fulfillment centerSortation center
Urban logistics depot
ImportanceHigh
AverageLow
Intermodal TerminalBulk or transload terminal
Manufacturingfacilities
Terminalsfacilities
Storagefacilities
Distributionfacilities
Parcelfacilities
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Grocery Chain Cold Storage Facility, Regina
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Large Scale Grocery Cold Chain Distribution Center
Storage / Sorting
Outbound
InboundAmbient (20 °C)‘Banana’ (10 °C)Chilled (2 °C)Freeze (-10 °C)
Suppliers
Customers
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Subtropolis Distribution Center, Kansas City
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Amazon E-Fulfillment Center
Extended Distribution Center System of JVC Belgium
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Palletization of “Floor Loaded” Shipments, Belgium
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The Role of Distribution Centers and Warehouses
Production unit
Distribution center
Retail store
Deliveries
Deliveries
Producers’ warehouse
Distribution Center Only
Distribution center
Deliveries
Deliveries
Deliveries
Distribution Center and Warehouse
Delivery vehicle
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Consignment
Cross-Docking Distribution Center
Suppliers
Customers
Receiving
Shipping
Sorting
LTL
Suppliers
Customers
FTL
FTL
Cross-Docking DC
Distribution Center Before Cross-Docking
After Cross-Docking
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Asynchronism and Distribution Centers
Production and Consumption
Shipment Size
Supply Chains
Consumption
Production
DC
DC
DC
Market Areas
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Optimal Location and Throughput by Number of Freight Distribution Centers
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Short Assignment: Distribution Facilities
Explain what are the main types of distribution facilities and the role they each play
C – Distribution Systems
Read section 2
Read section 1
Read section 1
The Evolution of Retail Logistics
1970sDirect
replenishment
Suppliers / Wholesalers Stores
1980sRationalization
Distribution Centers
1990sGlobal sourcing
Overseas suppliers
Domestic suppliers
Import Centers
2000s
E-fulfillment centers
Parcel hubs
Sortation centers
Parcel delivery centers
Local depots
Customer home
Collection pointE-commerceDelivery point
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Logistics Facilities Supporting E-commerce
Facility Type Facility Attributes Locational AttributesE-Fulfillment Center Large-sized facility (half a million to one
million square foot).Cross-docking configuration common.High racks storage.Push towards automation.
Low land costs.Proximity to highway.Access to a major parcel hub.
Parcel Hub / Sortation Center
Large-sized facility (half a million square foot).Cross-docking configuration for handling trucks.Automated and semi-automated sortation.
Low land costs.Accessibility to regional distribution.
Parcel Delivery Center / Urban Logistics Depot
Medium-sized facility.Cross-docking configuration for loading vans.
Periphery of metropolitan areas.
Freight Station / Pickup Location
Small or micro-sized facility.Store-like facility (pickup location).Locker banks (freight station).
High density neighborhood locations.
The Courier, Express and Parcel Market
Same Day
Next Day
Day KnownDay
UnknownDocum
ent Parcel LTL FTL1 kg
(2.2 lbs)32 kg
(70 lbs)10,000 kg
(22,000lbs)
Air / Road ExpressPriority ExpressDeferred ExpressPostal
Freight Forwarder
Express Freight
Air CharterCourier, Express, Parcel
Retail Logistics and E-commerce
Retailer(In store inventory)
Suppliers
E-Retailer
Customers Customers
Suppliers
RDC
Conventional Retail Logistics
Travel to store
Online purchases
Store Deliveries
E-commerce Retail Logistics
Home Deliveries
Parcel Delivery Company
RDC
Regional Distribution Center
Order
RDC
Read this contentExplain the main logistical differences between standard retailing and e-commerce
Footprint of Retail-Based and Distribution-Based Commercial Activities
Com
mer
cial
Foo
tpri
nt
Retail Footprint
Distribution Footprint
Total Footprint
Retail-Based Distribution-BasedStore
Distribution center
Information Technologies
Consumer
COMMERCIAL E-COMMERCIAL
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Order-Delivery Sequence of an Apple iPad
Note: Path is approximate
Order Fulfillment (Cycle time of 12 days 18hrs 08min)Order placed online
3hrs 34min
Order processed
12 days 15hrs 34min
Shipment notification
Delivery (Lead time of 48hrs 11min)
2hrs 45min
Shipment notificationShipment picked up
4hrs 23minLeaving local DC
7hrs 34min
At Hong Kong hub
17hrs 04minAt Anchorage hub
1hr 57min
Cleared customs
1hr 22minLeft Anchorage hub
6hrs 03min
At Newark hub
4hrs 00minLeft Newark hub
1hr 11min
At local DC
2hrs 48min
Delivered
Consolidation (Shenzhen/HK) Transfer (Anchorage) Deconsolidation (NY Metro)
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Logistic Activities and their Green Dimensions
ConsumersProducers Distributors
CollectorsRecyclersReverse ChannelSuppliers
Forward Channel
Forward and Reverse Distribution
Product Design and Production
PlanningPhysical
DistributionMaterials
Management
Product designNear sourcingSustainable
sourcing
Certified distribution
facilitiesCertified carriers
Load consolidationAlternative modes
and fuels
PackagingRecycled inputs
Recyclable outputs (waste management)
How can logistics help promote sustainability?
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The Cold Chain Market: Products, Geography and Distribution
Product• Physical attributes requiring
specific temperature and humidity conditions.
Geography (Origin / Destination)• The supply and demand of
perishable goods.• Distance and seasonality.Distribution• Infrastructural and managerial
capabilities.• Fixed and mobile assets.
Operational Conditions of Cold Chain Logistics
Conditional demand• Each product has a specific perishability.• Shelf life and revenue.• Demand conditional to qualitative
attributes.
Load integrity• Reefers as the common load unit.• Packing, packaging and preparation.• Empty backhauls.
Transport integrity• Uninterrupted integrity of the transport
chain (modes, terminals and DC).• Specialized modes (speed) and terminals?
Read this contentExplain the main elements of a cold chain
The Cold Chain Technology
Fabrication
Storage
Terminal
Transport
Monitoring
Preparation methods Packing
WarehousingDistribution center
Reefer storage
ReefersPower generators
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A Focus on the Maritime Reefer: Basic Facts and Figures
2.02 M TEUs of reefers (2011); 5% of the global capacity.$5,000 regular container; $30,000 for a reefer.12% less volume than a similar sized container.Cold chain products usually heavier.FCL use for point to point trade.White paint for higher albedo.
Availability of Fresh Produce by Season and Region
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
ApplesArgentina
ChileNew ZealandUnited States
CitrusUnited States
ChilePeru
Australia
AvocadosChile
PeruMexico
Bananas Ecuador, Costa Rica, ColombiaPineapples Costa Rica, Ecuador, Philippines
Grapes
BrazilChile Chile
MexicoPeru Peru
United States
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Temperature Standards for the Cold Chain
-30 -25 -20 -15 -10 -5 0 5 10 15
Deep Freeze
Frozen
Chill
Pharmaceutical
"Banana"
Degrees Celcius
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Shelf Life of Selected Perishable Food Products
Product Shelf Life (Days) Optimum Temperature (Celsius)Apples 90-240 0
Bananas 7-28 13.5
Bell Peppers 21-35 7
Cabbage 14-20 1
Eggs 180 1.1
Onions 30-180 1
Lettuce 12-14 0.6Fresh Meat (beef, lamb, pork, poultry) 14-65 -2
Oranges 21-90 7
Pears 120-180 -0.6
Potatoes 30-50 10
Seafood (shrimp, lobster, crab) 120-360 -17.8
Strawberries 5-10 0.6
Tomatoes 7-14 12
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Lettuce Shelf Life by Storage Temperature
0 5 10 15 20 250
2
4
6
8
10
12
14
Temperature (Celsius)
Shel
f Life
(Day
s)
Seaborne Reefer Trade, 2008
20%
7%
10%
3%
19%
24%
3%
14%
BananasCitrusDeciduous FruitExoticsFish & SeafoodMeatDairyOther
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Reefer Stacking Area, Maher Terminal, Newark
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