Dynamics of logistics

Transportation, warehousing and

distribution system
Mohammed Hanif Ajari
Visiting faculty
Institute of Business Administration
Take home from this coure

1. Introduction to logistics and

distribution
2. Integrated logistics and supply
chain
3. Customer services and logistics
4. Warehousing
5. Freight management
6. Global trade and negotiable
instrument
7. Serialization
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 Emma Maersk
Have  a good look & read of this right to the end…..
See  the editorial under the last picture. That says it  all!
The Emma Maersk, part of a Danish shipping  line, is
shown in the photos below

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What a ship....no wonder 'Made in China ' is displacing 
North American made goods big time. This monster 
transports goods across the Pacific in just 5 days!!
Another  two will soon be  commissioned

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These  ships were commissioned by Wal-Mart to get their  imported
goods from China ... They hold an incredible  15,000 containers and
have a 207 foot deck beam!!  The  full crew is just 13 people on a ship
longer than a US  Aircraft Carrier which has a crew of 5,000.  With its 
207' beam it is too big to fit through the Panama or Suez  Canals ........
     

It  is strictly transpacific. Cruise speed: 31 knots. 

The goods arrive four days before the typical  container ship (18-20
knots) on a  China-to-California run. 91% of Wal-Mart products are 
made in China. So this behemoth is hugely competitive even  when
carrying perishable goods.   
The ship  was built in five sections. The sections are floated together 
and then welded. The command bridge is higher than a 10-story 
building and has 11 cargo crane rigs that can 0perate  simultaneously
unloading the entire ship in less than two  hours.

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Additional info:
Country of origin  - Denmark
Length - 1,302 ft
Width - 207 ft
Net cargo  - 123,200 tons
Engine - 14 cylinders in-line diesel engine  (110,000 BHP)
Cruise Speed - 31 knots

Cargo  capacity - 15,000 TEU (1 TEU = 20 cubic feet)

Crew - 13  people! First trip - Sept. 08, 2006
Construction cost -  US $145,000,000+
Silicone painting applied to the ship  bottom reduces water  resistance and
saves 317,000  gallons of diesel per year. 8
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 Editorial  Comment!
1. A recent documentary in late March,  2010 on the
History Channel noted that all of these containers  are
shipped back to China,  EMPTY!
2. Yep,  that's right. 
3. We send nothing back on  these ships.
4. What does that tell you about the current  financial state
of the west in crisis?
5. So folks, just keep  on buying those imported goods
(mostly gadgets)
until you run  out of money.  Then you may wonder
what the cause of  unemployment
(maybe even your job) in the US, UK,  Canada and even
in Australia????
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 Learning Objectives
To understand the basic structure of the logistics,
freight, custom brokerage, inbound, outbound
logistics and the concept of material and
information flow and the added value of logistics
To learn about the organizational integration that
reflects the role of and importance of logistics and
distribution
To understand “total logistics” concept and
introduce and the need to recognize the
opportunities for logistics trade off
To learn what a failure to develop adequate long
term plans for logistics strategy
To understand the customer expectation from the
logistics function including pre-transaction, post
transaction, and post transaction elements
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Definition of logistics

Logistics is ---the management of

all activities which facilitate
movement and the coordination
of supply and demand in the
creation of time and place utility.

(logistics is the …the positioning

of resource at the time , in the
right place, at the right cost ..at
the right quality)CILT UK

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International Logistics

International logistics is the

design and management of a
system that controls the forward
and reverse flow of materials,
services, and information into,
through, and out of the international
corporation.

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 Further dissection of logistics management
Management of flow of goods and
services
Integration of information,
transportation, inventory etc.
Reduce operational costs, improve
delivery performance and enhance
customer satisfaction
Importance of logistics is growing and
now the logistics industry has become
highly recognized in the global scenario
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 International Logistics
Through the implementation of international
logistics, the firm can implement cost-saving
programs such as just-in-time (JIT), electronic
data interchange (EDI), and early supplier
involvement (ESI).
The two phases of the movement of materials
include:
materials management, or the timely movement of
materials, parts, and supplies.
physical distribution, or the movement of the firm’s
physical product to its customers.

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GLOBAL LOGISTICS

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GLOBAL LOGISTICS

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WORLD 10 TOP LOGISTICS COMPANIES

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 Supply-Chain Management
Supply-chain management is the
integration of business processes from
end user through original suppliers, that
provide products, services, and
information that add value for
customers.
Supply-chain management connects a company’s
supply side with its demand side.
It opens up supplier relationships for companies
outside of the buyer’s domestic market.

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 LOGISTICS CHALLENGES IN PAKISTAN

Lack of quality infrastructure

Railroad transportation is the cheapest form of
transportation for distances over 450 km. However,
railroads are not extensively used due to the lack of
enough intermodal connections with railroads in maritime
ports and inland distribution centers. Ports have not
developed enough infrastructures for an efficient
connection with railroad and truck transportation
systems. In addition to this, the lack of efficiency in
customs inspection means that the average stay of
containers in the ports is double the international
average
The lack of a border crossing agreement for trucks
causes delays and inefficiency in import/export
processes.
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 LOGISTICS CHALLENGES IN PAKISTAN

Too many regulations, import/export procedures, and

required documents make international trade very slow
and costly.
The lack of trained staff means that companies cannot
estimate correctly their inventory and cargo movements
according to customer demand.
Lack of coordination between the different participants
in the supply chain.
A high crime and insecurity index, both in facilities and
transportation systems.
Lack of certainty in the business environment inhibits
investments and project development and stifles the
country’s efficiency and economic growth.

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 LOGISTICS CHALLENGES IN PAKISTAN

Limited use of information technologies by small and

medium-sized companies. Most of them see the
technologies as an expense, instead of an investment.
There is not much promotion on the benefits of using
advanced technologies, and there is a backlog in
affordable staff training for small companies.
Transshipments issues despite strategic location of our
sea ports network.
Limited direct airlines connection.
Lack of responsiveness and reliabilities
ANF checking's for export related shipments.
TRIPS related issues
Peril of having Afghanistan trade

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 Logistics total market profile

Annual logistics cost of the world is $ 1.5 trillion The

global logistics market is growing at 7.3%

The annual cost of logistics in any country of the world is

in the bandwidth of 9% to 20%.

Retail logistics services dominate the global logistics

market with 63.9% of the market's value.
Americas accounts for 35.2% of the global logistics
market's value. Or is the 10% of the world logistics
market
Largest service providers are based in Europe.
Logistics industry market is $ 300 billion

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TECHNOLOGY CHALLENGES FOR LOGISTIC INDUSTRY

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BLOCK CHAIN AS AN INTEGRATED PART OF LOGISTICS AND SUPPLY
CHAIN

A P MOLLER

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Courier express
parcel
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WORLD BANK BRIEF REVIEW ON LOGISTICS MARKET

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 Logistics total market profile-- continued
The global air freight sector is expected to reach total
revenue of $103.2 billion in 2010, representing a
compound annual growth rate (CAGR) of 1.9% for the
period spanning 2006-2010.The global logistics market
grew by 7.3% in 2007 to reach a value of $804.6 billion
The global marine freight industry is expected to have
total revenue of $336.5 billion in 2010, representing a
compound annual growth rate (CAGR) of 1.5% for the
period spanning 2006-2010.
The global rail freight sector is forecast to have total
revenue of $161,797.3 million in 2010, representing a
compound annual growth rate (CAGR) of 3.7% for the
period spanning 2006-2010.
The global road freight sector is expected to have total
revenue of $1,720.4 billion in 2010, representing a
compound annual growth rate (CAGR) of 0.5% for the
period spanning 2006-2010. 39
 Current status and dynamics of industry

Pricing pressures, high cost of

operation, low ROI, hiring and retaining
talents, pressures from the clients
Role of services providers on continues
change
Demand on third party service providers
is increasing without any respite.
3P is growing at the faster pace in
South East Asia.

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Importance of logistics management

As a percentage of GDP

As per Herbert Davis 2008

report:
1. Transport cost was 50%
2. Inventory carrying 20%
3. Warehousing cost 20%
4. Customer service order
entry system 7%
5. Administrative cost 3%
 Benefit of effective logistics operation
cost savings by centralizing inventory management by
reducing the number of inventory holding locations, as
well as the size and value of the inventory held,
faster order fulfillment by relying on a global
transportation network and logistics inventory
management system, giving them the ability to access
and dispatch inventory 24 hours a day, 365 days a year,
improved cash flow by using bonded warehouses for
testing and storage, providing the option to defer
customs duties and taxes
flexibility to efficiently change distribution patterns for
new products, based on ever changing customer
demands. 42
Component of customer expectation
 WHAT SERVICE PACKAGE BUNDLE COMPRISE OF

DC Transport
Inventory e-Commerce
Consolidation Management In-Store
Management / Managemen Services
Centres Vendor Hubs Logistics
Replenishment t
Supply Parks
Value Added Services Domestic
Freight Forwarding & Reverse Last Mile
Kitting / Sub-Assembly Air-Freight
Customs Brokerage Logistics Delivery
Aervices
Complete range of Value Added Services

Manufacture Primary Secondary End

& Movement Movement Customer
Raw Materials

Export / Distribution B2B and B2C

Import Centres Distribution
Activities

Freight Management Contract Logistics

 NVOCC
Is there any difference between a freight forwarder and NVOCC?
Who is a freight forwarder? How NVOCC works? How NVOCC
differs from a freight forwarder

 The NVOCC means Non-Vessel Operating Common Carrier

 The definition and act of a freight forwarder and NVOCC is

described by government of various countries differently.
The legal obligations to government, clients and public vary
from country to country for an NVOCC and a Freight
forwarder
 A Non vessel operating common carrier is a cargo
consolidator who does not own any vessel, but acts as a
carrier legally by accepting required responsibilities of a
carrier who issues his own bill of lading (or airway bill),
which is called House bill of lading under sea shipment and
House airway bill under air shipment
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 NVOCC CONTINUED

 Activities between a NVOCC and a freight forwarder

are similar to each other except some differences.
 An NVOCC need not be an agent or partner of a freight
forwarding company, where as a freight forwarding
company can act as a partner or agent for an NVOCC.
 Basically speaking, NVOCC acts a ‘carrier to shipper’
and ‘shipper to carrier’.
 Who is Stevedores?
 Any person or company engaged in loading and
unloading cargo on ships can be called as
‘Stevedores”. In some countries the stevedores are
also called ‘docker’ , ‘dock labourer’,
longshoremen’ or ‘wharfie’

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 FEEDER VESSEL VS MOTHER VESSEL

 What is FEEDER VESSEL ?

 Feeder vessel is normally small in size compared to Mother vessel.
Feeder vessels serves between smaller ports and major ports. In other
words, feeder vessels feeds cargo to mother vessel from smaller ports to
large ports for exports and from major main ports to smaller ports for
imports. Compared to mother vessel, feeder vessel is slow.

 Average capacity of a feeder vessel is 300 to 500 TEUs (20’ containers).

Feeder vessel serves short distance, either between  smaller ports, or
between smaller ports  and major ports.
 WHAT IS MOTHER VESSEL?
 Mother vessel is big in size compared to feeder vessel. Mother vessels
only serve Difference between mother vessel and feeder vessel between
major big ports. Mother vessels have the capacity to carry thousands of
containers. Mother vessel calls only main ports. The mother vessel
covers large distance compared to feeder vessel.

 Average capacity of a Mother Vessel is 10000 TEUs (Twenty foot

Equipment Units). In 1960s, vessel capacity was maximum of 500 - 800
TEUs. Mother vessel with a capacity of 15000 TEUs are available now.
We can expect mother vessels with a capacity of 20000 TEUs by the year
2015. 47
Key components of distribution and logistics
INTEGRATED SUPPLY CHAIN & LOGISTICS OF FMCG,
PHARMACEUTICAL ,

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BUSINESS, SCM, AND LOGISTICS MODEL OF HONDA LOCAL ASSEMBED CITY

SUPPLY CHAIN & LOGISTIC MODEL HONDA LOCAL SESSEMBLED CITY CAR (End to End)

• Iron and steel

plates and bars
Complete
• Parts and
process and finishing under QMRA PROTOCOL Logistics atmosphere
subassemblies
• Tyres
Finished Corporate
• Colours and Assembling
paints
Controlling inventory Depots End
• Gears and control
panel and testing l Direct User
• Horns
Yards s
• Seat covers Sub-assembly Distribution
• Seats transporta centers
• Dash board
• Stereo and radio Utilization tion
• Tools kit
• Class windows
Final assembly
and rear and back
glass

Suppliers PRIMARY AND SECONDARY LOGISTICS Customers

Suppliers, Vendors, Service Providers

Demand side
Upstream Downstream
Inbound Outbound

Physical Physical inbound

Key Process & information
outbound /reverse
 Amazon Wins Patent for On-Demand Apparel
Manufacturing Warehouse

The Seattle e-commerce juggernaut just won a patent for “on-demand apparel
manufacturing,” in which machines only start snipping and stitching once an
order has been placed, Amazon could wade deeper into developing its own
apparel.
1. Amazon was awarded a patent yesterday for an on-demand manufacturing
system designed to quickly produce clothing - and other products - only
after a customer order is placed.
2. The computerized system would include textile printers, cutters and an
assembly line, as well as cameras designed to snap images of garments that
would provide feedback on alterations needed in subsequent items.
3. In order to increase efficiency, the goods would be manufactured in batches
based on factors such as the customer shipping address, the patent says.
4. Once various textile products are printed, cut and assembled according to
the orders, they can be processed through a quality check, photographed
for placement in an electronic commerce system, shipped to customers
and/or stored in a materials handling facility for order fulfillment, the
patent reads.

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 By aggregating orders from various geographic locations and
coordinating apparel assembly processes on a large scale, the
embodiments provide new ways to increase efficiency in apparel
manufacturing.
 Amazon applied for the patent in late 2015 and, whether or not such a
facility is being built, is the latest sign that the e-commerce giant has
its sights set on being a giant player in the clothing industry.
 The company already has a tremendous apparel selection and has also
started selling at least eight of its own clothing brands, representing
everything from kids clothes to women’s dresses to dress shirts for
men.
 The inventors of this patent made it clear, however, that they believe
such a system could work in other categories, such as footwear,
bedding, curtains, towels and be made of materials including but not
limited to paper, plastic, leather, rubber and other materials.
 Amazon does have its own bedding and towel brand, called Pinzon.
 Two of the inventors named in the patent are Aaron Barnet and
Nancy Liang, co-founders of the 3-D printing startup Mixee Labs, who
went to work at Amazon in 2015.

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Logistics costs as percentage of sales turnover
Logistics cost as percentage of turnover (cont)
Logistics market segmentation
 Total Logistics Cost ----What is this
1.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

2.It is a recognition that the interrelationships

between different elements, for example
delivery transport and storage, need to be
considered within the context of the broader
supply chain. Thus, the total system should
be considered and not just an individual
element or subsystem in isolation.
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 The type of trade offs in the logistics and distribution
management

1.With in distribution
components
2.Between distribution
components
3.Between company functions
4.Between the company and
external organizations

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Potential trade offs in logistics
Logistics planning hierarchy
Major functions of the different planning time
horizons
Main logistics elements for the different planning
time horizons
Planning and control cycle
 GLOBALIZATION & INTEGRATION

1.EXTENDED supply lead times

2.PRODUCTION postponement
with local added value
3.COMLICATED node management
4.MULTIPLY freight transport
options
5.EXTENDED and unreliable
transit times and
6.NEED for greater visibility in the
supply chain 65
 Integrated systems
In order to integrate and take the
advantage of global and complicated
logistics network quite revolutionary
“trade offs” are now being practiced
1. To maintain and enhance
cost competitiveness
2. To use the sophisticated
and well designed
information management
system 66
 Integrated system continued
DIRECT PRODUCT PROFITABILITY (DPP)

DPP is a technique of allocating all the appropriate costs and allowances to a

given product. All distribution and transportation cost etc)

MATERIAL REQUIREMENTS PLANNING (MRP) AND DISTRIBUTION

REQUIREMENTS PLANNMRP/DRP systems have been developed as sophisticated,

computerized planning tools that aim to make the necessary materials or
inventory available when needed. The concept originated with materials
requirements planning, an inventory control technique for determining
dependent demand for manufacturing supply. Subsequently, manufacturing
resource planning (MRPII) was developed with the objective of improving
productivity through the detailed planning and control of production
resources. MRPII systems are based on an integrated approach to the whole
manufacturing process from orders through production planning and control
techniques to the purchasing and supply of materials Distribution
requirements planning is the application of MRPII techniques to the
management of inventory and material flow – effective warehousing and
transportation
support.ING (DRP)
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 JUST IN TIME MANAGEMENT
1. The production of goods the
customer wants
2. The production of goods when
the customer wants them
3. The production of perfect
quality goods
4. The elimination of waste
(labour, inventory, movement,
space, etc.

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 Logistics management –ROI

On time in full
 One time full

OTIF is a KPI (Key performance indicator) that unites a company. (It can almost
be said to be the measurement of the businesses' ability to work together.) It
measures whether your company delivered your commitment to your customer!
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LOGISTICS ---COMPETITIVE POSITIONS
SUPPLY CHAIN INTEGRATION
CORE PRODUCT VERSUS PRODUCT SURROUND
 TRANSACTION ELEMENTS
1. Pre-transaction elements: these are
customer service factors that arise prior to
the actual
transaction taking place. They include:
– written customer service policy;
– accessibility of order personnel;
– single order contact point;
– organizational structure;
– method of ordering;
– order size constraints;
– system flexibility;
– transaction elements. 82
 TRANSACTION ELEMENTS
1. Transaction elements: these are the elements directly
related to the physical transaction
and are those that are most commonly concerned with
distribution and logistics. Under
this heading would be included:
– order cycle time;
– order preparation;
– inventory availability;
– delivery alternatives;
– delivery time;
– delivery reliability;
– delivery of complete order;
– condition of goods;
– order status information.
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 TRANSACTION ELEMENTS

Post-transaction elements: these involve those elements

that occur after the delivery has taken place, such as:
– availability of spares;
– call-out time;
– invoicing procedures;
– invoicing accuracy;
– product tracing/warranty;
– returns policy;
– customer complaints and procedures;
– claims procedures.

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ORDER FULFILMENT CYCLE TIME
CONCEPTUL MODEL OF SERVICE
QUALITY
CONCEPTUAL MODEL OF SERVICE
QUALITY –THE SERVICE GAP
SERVICES GAPES ---EXPLAINED

88
 OVERALL APPROACH FOR
ESTABLISHING A CUSTOMER SERVICE
Different types of customer servies study
Pros and cons of different type of survey
approaches
Rating table for conducting customer service factors
Customer service targets
Competitive benchmarking
Business case : GAP ANALYSIS
SERVICE LEVEL AND THE COST OF SERVICE

One factor that is clear, however, is the

relationship between cost and service. This is
shown BELOW. The cost of providing a given
service is markedly higher the nearer it reaches
the ‘perfect service’ – that is, the 100 per cent
mark. Thus, an increase of 2 per cent in service
levels will cost far more between 95 and 97 per
cent than between 70 and 72 per cent. It should
also
 RADER GRAM SHOWING PERFECT ORDER TARGETS ACHIEVEMENTS

orders received on time actual

95% target 98%
orders received complete actual
98% target 99%
orders received damage-free
actual 99% target 99%
orders fi lled accurately actual
97% target 99%
orders invoiced accurately actual
94% target 98%
 FOURTH
PARTY
SERVICE
PROVIDER
This is hailed as the future for LOGISTIC MANAGEMENT OUTSOURCING
98
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 WHAT SERVICE PACKAGE BUNDLE COMPRISE OF THIRD
PARTY

DC Transport
Inventory In-Store e-
Consolidation Management Managemen
Management / Logistics Commerce
Centres Vendor Hubs t
Replenishment Services
Supply Parks
Value Added Services Domestic
Freight Forwarding & Reverse Last Mile
Kitting / Sub- Air-Freight
Customs Brokerage Logistics Delivery
Assembly Aervices
Complete range of Value Added Services

Manufacture Primary Secondary End

& Movement Movement Customer
Raw Materials

Export / Distribution B2B and B2C

Import Centres Distribution
Activities

Freight Management Contract Logistics

 FOURTH PARTY LOGISTICS SERVICE PROVIDER

Fourth-party logistics is where an external

organization is able to provide a user with an
overall supply-chain-wide solution by
incorporating the resources and expertise of any
number of third parties to best effect. The
fourth-party provider will be involved in both the
design and the management of a client’s
logistics system and will act as a coordinator for
many different types of service, which may
include distribution,information Systems,
Financial services, etc.  The idea is
that co-venturer or fourth-party service
providers can offer a number of enhanced
services, which will enable:
101
IMAGE OF FOURTH PARTY LOGISTICS SERVICE PROVIDER

Offshore Information
Logistics Docking
Cross
docking

Custom
brokerage

102
 FOURTH PARTY SERVICES -----CONTINNUED

1. Total supply chain perspective;

2. Visibility along the supply chain;

3. Measurement along the supply chain (cost

and performance)

4. Open systems;

5. Technical vision;

6. Flexibility;

7. Tailored structures and systems

103
 4 PL COMPREHENSIVE DEFINITION

ACCENTURE have defined a fourth-party

logistics service provider as ‘an
integrator that assembles the resources,
capabilities, and technology of its own
organization and other organizations to
design, build and run comprehensive
supply chain solutions’. The main thrust
is for the overall planning to be
outsourced and that the complete supply
chain operation should be included
within the submit of the 4PL.

104
4P AREAS
OF MAIN
SERVICES

105
ADVANTAGE OF FOURTH PARTY
LOGISTICS

106
ADVANTAGE OF FOURTH PARTY
LOGISTICS

107
 FOURTH PARTY SERVICE PROVIDER

DISADVANTAGE

1. LOOSE CONTROL BY THE MANAGEMENT

2. HIGH COST

OTHER SAILIENT FEATURES 3P VS 4P

1. General view refinement of 3P due to the gaps

2. None asset based as compared to the 3P. 4P only owns IT,
Intellectual Capital therefore assets lights.
3. 4P is neutral in asset utilization
4. 3P Vertically 4P Horizontally Integrated

108
ASSET BASED AND NON ASSET BASED TPL

109
 INTRODUCTION TO ASSETS AND NON ASSET BASED
LOGISTICS COMPANIES

1. Most logistics service provider generally

can be divided into two broad categories:
asset and non-asset based  logistics
providers. In general, both providers in a
manner that will:
2. Increase overall efficiency
1. Cut costs both hard costs (freight
rates, claims, accounting) and soft
costs (time, resources, smarter
business decisions through visibility)
2. Decrease errors and mitigate risk
3. And accomplish these on time
110
 ASSET BASED LOGISTICS SERVICE PROVIDER
1. An asset-based logistics provider owns many or
all of the assets necessary to run a client’s supply
chain. These assets include trucks, warehouses
and distribution centers, among others.
2. A well-established asset based 3PL should be able
to provide documentation that knowledge of their
assets’ strengths and vulnerabilities has allowed
them to lower the expense of moving and storing
goods for their clients
3. Asset based logistics providers, however, can
sometimes realize a conflict of interest when
developing supply chain and logistics solutions.
CONFLICT OF INTEREST FOR THERE
NETWORKWORK USE

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NON ASSET BASED SERVICE PROVIDER

112
NON ASSET BASED SERVICE PROVIDERS

1.They does not own any assets

instead use their expertise and
use wide area of contract for better
rates
2. The do not posses conflict and
obsession to utilization of their
assets so very flexible.
3. They rather concentrate on
services than utilization of their
assets for better return
4.Some of the companies posses
high software skill
113
 Advantage of and disadvantage of asset based
and non asset based services providers
1. Asset based may own all of the physical assets
necessary to handle supply chain management, you
can hire an asset based company to completely take
care of your supply chain. Because of this ownership,
asset based logistics providers sometimes offer a
lower cost on warehousing and transportation as they
set their own pricing and are not paying a third party,
such as a carrier or warehouse.
2. If the non asset based 3PL is not savvy, doesn’t have
a large trusted network, or simply doesn’t have the
buying power, when it comes to procurement of parts
of logistics such as warehousing and transportation,
they may not be able to provide cost effective
solutions
3. Financial Stability
4. Conflict of interest
5. Flexibility of solution
114