Logistics: Evolution, Intermodal Transport, Measuring Performance and Distribution System - Assignment Example

Q1:Critique and provide examples where appropriate on the following ment. "integrating information and knowledge shall be the next transformation of logistics evolution." Logistics defined simply is managing the upstream and downstream resources in a company. With globalization becoming a reality companies are increasingly becoming cost effective based on lean supply chains, process planning, production, and distribution structures. Globalization, the World Trade Organization (WTO), emergence of trade blocs and the Internet aim to achieve seamless integration of the world trade. Globalization coupled with free availability of information is creating a common resource base and common marketplace. This has intensified the movement of “rights goods, at right time, into the right people.” The movement of goods over supply lines has intensified and so has the information flow over corporate information structures. Concepts like Just-in-time (JIT) in manufacturing and product tracking (in courier service) industry have led to development of intensified information based control systems. Time is not far off when we will see the development of the ‘virtual organizations’ based on information processing technologies integrating with each other on the knowledge sharing based architectures. The initial thrust of web technology “has ended up with disparate islands of diverse technologies”(Malhotra). In other words, there is free information and ‘islands’ of technology in the sea of information. The economic resource planning constitutes discrete information usage to meet company objectives. Any wrong usage of information to convey, command, and conduct an activity or use resources may prove costly enough to throw a profitable company into losses. The failure of energy powerhouse Enron is attributed to indiscreet use of information to make wrong decisions. However, such a situation is faced by employees, suppliers, partners and buyers are faced due to free availability of information on the Internet. Orders, acquisitions, requisitions, control over supply chains, value additions over distribution chains, supply chains and logistics is achieved by discreet use of information. Definitely, we are in information and we have to move towards ‘knowledge’ age in logistics. Hence the need of development of business intelligence, fuzzy logic solutions that can process information (without human interface) has emerged. Discernment between and only provides useful information inputs non-useful information will be made business intelligent applications. As a result we will not only see rise of business intelligent software, and advanced tracking and control applications but also intelligent interface in located at the input and output gates of a company. The information age will lead be succeeded by development of knowledge-based “Virtual organizations”. They will be large aggregates of information ordered and collected, and operated with an accessible and retrieval system providing real time inventory and logistics management solutions. These virtual organizations will also maintain virtual stocks and inventory levels. It is noted that information available or flowing across the system is always not heterogeneous. However, finely sieving required information and homogenizing it through dynamic information and knowledge interface will practically separate the useful from non-useful information in the sea of data. The system will provide dynamic knowledge support in procedures, systems, and processes to make efficient decision-making in logistics. Already knowledge based logistics systems are being tried and tested in pilot studies as done in the Eastern Worldwide Company Limited. (Chow et. al). Though information has been used by companies and concerns since times immemorial, “digitizing and embedding knowledge in the processes only date back to 1993 (Malhotra)”. With the use of knowledge-based logistics strategy system, can support logistics strategy development stage by stage; retrieving and analyzing knowledge in a timely and cost effective manner (Chow et.al). The study of Chow et. al included incorporation of knowledge based system with radio-frequency identification (RFID) and multi-agent (MA). RFID application developed by Industrial Technology Research Institute (Taiwan) provides seamless integration of business process flow, besides providing requisite information to employees, suppliers, customers, and partners of an enterprise, Studies are aiding in development of real time, knowledge based system. For example, SAP helps in “opportunistic (cross-docking)—and detecting cross docking in a dynamic environment. (SAP.com)”. In retrospect we observe how companies became dependant on gaining competitive advantage through cost differentiation based on more efficient logistics management. As the companies came to increasingly rely on databases for their inventory management, supply and distribution channels, there was a paradigm change of logistics being understood as a function in information management than physical movement of goods. Dell, for example, has totally modeled its marketing, supply, distribution, and customer care in as an integrated information and knowledge management function. Wal-mart has successfully demonstrated that cost differentiation can be achieved through logistics management based on integrating information and knowledge. Wal-mart had perfected its logistics management on hub and spoke model long time before anyone realized its worth (Malhotra). The production planning and process control that was a standalone information technology through Computer Integrated Manufacturing is now being further integrated into marketing and inventory control to achieve more product variants in lesser and lesser turnaround time. These companies have integrated logistics with internal coordination and controls and add customer value. Companies use geo-sensitive information tools to make trace and track their products on logistics lines. The Supply Chain Management and players of Supply Chain “have come to think and act as one” (Craven and Piercy, 362). Integration of information and knowledge is an intangible process that will control tangible aspects of business like work flow, inventory controls, warehousing. Apart from ensuring continuous feed into the companies inventories of resources for production and later managing the downstream activities like warehousing and distribution, logistics is being is seen as a process that transforms goods (Gourdin). Companies have to dynamically upgrade their databases to retain a flexible stance in with changing market and customer demands while making a quick discernment between what is required and what is not. However each individual, department, company, and corporate group has to discern between required and unwanted information rapidly. Making effective use of the information to meet the unique requirement of a corporate at a particular time to create requires knowledge support frameworks. More efficient and effective networking between customers, suppliers, intermediaries, employees and collaborators will help to make more intelligent business solutions. Hence the time of information handling in logistics is slowly leading to informed information handling, which now is being provided human support. Soon informed information handling will be domain of knowledge management applications and business solutions. This is the next transformation in logistics based on integrating information and knowledge. Q2: Discuss and provide examples where appropriate, why measuring performance is important to logistics service providers at both micro and marco levels. Micro-logistics consist of company level decisions on maintenance of supply chains, distribution channels and information flow ‘into’ and ‘out of’ an organization. On the other hand infrastructural networks that are used for transportation constitute the world of macro-logistics. Ideally, both macro and micro-logistics have to dynamically monitored, improved upon and seamlessly connected for free movement of goods. But purely from a business point of view, while micro logistics are within the control of a company management, it may not be able to exert influence on macro-logistics factors. Macro-logistics may not be under control of business strategists also due to geo-political or economic reasons. However, a company can make informed decisions on macro-logistical choices by monitoring their performance. Since micro and macro logistics are co-dependant, companies have to monitor their performance levels. Road, rail, air, and sea transport constitute the basic macro logistic network. The macro-logistic factors are better maintained in the developed countries than the developing countries. Macro-logistics in developing countries of Asia and Africa are lethargic, deficient and labour intensive. The developed world on the other hand has very slick and mechanized macro-logistics conditions. Since most of production is carried out in the developing countries due to cost effectiveness, companies have to update themselves on the latest performance levels of macro-logistical databases. The studies have yielded pyramid of micro and macro logistics with supply chain management being the top, while activities like procurement, sourcing, rating, routing, receiving, packing, maintenance of safety-stock, and lead times form the base. Micro logistics reveal an interdepartmental and interdisciplinary perspective, and the macro logistics provide an all pervasive view of shipments and transactions through the shipper, consignee and the carrier (Anon, 2001). Failure to recognize logistical problems at planning stage have often resulted in failed businesses and lost causes. The micro logistics should fit into the macro level logistics solutions (Anon, 2001). . Performance metrics for logistics providers are speed, cost, efficient handling, reliability, smooth flow of raw material and distribution of products, transparency, optimization of services and costs to deliver at the right time and right place. Businesses are performing under tight schedules, lean environments, shrinking budgets, increasing costs, and growing competition. Companies want control over their en route shipments aided through use of GIS and GPS technologies. With an ever increasing thrust on logistic improvement, cost cutting, and efficiency, the role of logistics manager is that of a specialist who can optimize and improvise upon his resources. Logistics providers often have to partner with their clients or with competitors for sharing of important resources like warehousing, transportation, and other freight forwarding facilities. Cost differentiation of the final products largely depends upon the agility of the logistics chains to provide the right goods at the right time and at the right place. Companies are increasingly relying on third party service providing (3PL) to cut costs. As a result, the third party service providers are expected to handle intensive and complex logistics in more and more transparent, speedy but flexible manner. In an ideal situation the entire supply chain of logistics is visible, transparent, and available for instantaneous strategic planning and execution. At the micro-level measuring performance of logistics service provides information on customer satisfaction. Businesses have been so economically planned and bottom lines shrunk to a point that the supply chain is the last field, which can make enterprise reducing cost and improving flexibility (Zhang). Supply chains and logistics providers are pressed by increasing fuel costs and cutting down of national trade barriers thus opening greater fronts of competition. The winds of globalization have made logistics service providers to join hands, make strategic alliances, and operate competitively. Thus it is all the more imperative for logistic providers at the macro-level to stay lean and mean, more efficient to customer demands. Only then the achievements and of micro-logistics can be fully appreciated. Q3: The use of intermodal transport has been prevailing in todays international logistics operations. Discuss the rationale behind this practice and outline conditions under which the use of such a practice is advantageous. The rationale behind intermodal logistics is optimization, ease, cost-effectiveness, and transparency and efficiency of operations. The logistics today are maintained by intermodal operations where change of mode from one kind of transportation is necessary and smooth. The intermodal method integrates the utility of various kinds of modes of transport and adds to the customer value by decreasing production and transport costs. The modes intermesh at e junctions, or warehouses stations, where goods can be temporarily stored and transferred to the next leg of transportation. For example, a consumer durable can be transferred from one continent to another in a ship and then transferred to a landlocked country with a ship till the port and then on rail train. The final distribution of the product to the retailer, and further to the user, can be completed on a small size truck. Thus intermodal system is an integrated transport network that serves to move goods in a most cost effective manner. In other words, intermodal methods integrates long haulage needs services of a ship, train or tractor trailer and short haulage can be done on small trucks and pick up vans. One logistics or more logistics providers efficiently use the services of different kinds of modes of transport to transfer material. The entire routing of the material is done through a single “Bill of Landing” that accompanies consignment. In the globalization context that has brought about an unprecedented rise in movement of goods and people over national and continental boundaries, intermodal transport is the most cost effective and utilitarian logistics system. The intermodal is the required system of the modern times of free trade blocks, breaking trade barriers and coming together of the world as one economic unit in the spate of globalization. Intermodalism integrates different kinds of modes of transport to give a single threaded cost-effective model of transportation. In fact, intermodalism only spread in the United States after the deregulation of this trade in early 1980. Thus political decisions have a strong bearing on contemporary intermodal services. Shipping companies promised to deliver at the doorstep by integrating rail services and local truck pick up and delivery in a seamless network. Contrasted to the intermodal system is the multi-modal system, which is rarely used except in very high value, scientific, militarily sensitive and fragile products where it is necessitated that a product not be moved till it has reached its destination. At the core of the intermodal transport is the ‘Container’ whose dimensions are specified by the ISO. The large steel box of fixed specifications is easy to move with forklifts and can be transferred from trucks to rail cars and finally to ships with ease. The container can hold goods and products of different variety without transit damage. Specially designed containers can carry goods of different variety across the intermodal network of logistics. Further control is exercised on the intermodal network by management through computerization. In the modern paradigm, intermodal system is being integrated into the production, planning and distribution. “It has to be built into the entire supply chain system, from multi-source procurement, to processing, assembly and final distribution (Rodrigue et.al).” The intermodalism has also metamorphosed Third Party (3PL) Logistical provider to the Fourth Party Logistical Providers (4PL) in business parlance. (Rodrigue et.al). This is because logistical providers also use transport resources of the other companies for seamless transportation over land, air and sea. Lately environmental concerns are making the public policy shift towards non-road transport, and other modes of travel that are cost effective and ecologically less damaging. “In Europe, policies have been introduced to induce a shift of freight and passengers from the roads to modes that are environmentally more efficient.” (Rodrigue et.al). Companies are sourcing cheaper and quality products from all over the world. Some of them are relocating their manufacturing and assembly functions in countries that provide cheaper labour and work environments. These companies later ship these products to home country and elsewhere for sales. Hence the globalized trade environment requires very efficient supply chains and intermodal transport and freight system provides the most efficient system for logistics. Q4: What would be the savings in terms of dollars and percentage per car and for the whole exported quantity should the new distribution system be used. First Case Inventory Cost Carrying cost per car and per month == 20 X10000/12X100== 2000/12== $166 Every car is stored for 19 weeks == 19/4 == 4.75 months Total inventory Rent for 4.75 months == 4.75X166== $788.5 (rounded $789) Other Costs Warehousing cost per day == $0.3 Total Warehousing cost == 4.75X30X.5=4.75X30X.5== $71 Transportation cost to Distribution centres == $350 Transportation Cost to Dealers == $200 Transportation Cost to car terminal == $20 Sum total of costs per car == 789+71+350+200== $1410 Second Case Inventory Cost Carrying cost per car per month == 20X10000/12X100 2000/12== $166 Every car is stored for 6 weeks == 6/4 == 1.5 months Total inventory rent for 1.5 months == 166 X1.5 ==249 Other costs Warehousing cost == 1.5X0.5X 30==22.5 Every car is stored for 6 weeks == 6/4 == 1.5 months Transportation cost to dealers == $680 Sum total of costs per car ==680+249+22.5 +20== $971.5 (rounded to $972) Difference in costs of First case and Second Case == $1410-$972==$438 Total cost == 150000X438 == $6570000. Percentage saving 438/10000X100==438/100== 4.38% There is a percentage saving of 4.38% per car if the second system is used. It exceeds the targeted decrease of 3% in the distribution cost and can lead to gain of competitive advantage by offsetting the losses. The case clearly shows how important logistics management is besides, developing and promoting quality products. The existing system should be immediately replaced by the efficient more system. An amount nearing $ 7 million is being wasted in inefficient distribution line thus making a cause for change. Q5:Discuss the major weaknesses of the existing distribution system if the new one is not used? Briefly discuss ways to address these weaknesses. In the given scenario, the competition in cars is fierce. The companies are adopting every kind of change to maintain their market share. Yet, the European car company, having strong market operations in UK, is losing its market share. It is time for an introspection of the system. More often than, it is the inventory management and distribution system that is the “Achilles Heel” of an efficient company. It is true in the given study. The current distribution system is adding overheads to the company. The seven distribution centres make the company; hold up high inventory levels without adding to the customer value or making any gainful contribution to the company. The system needs to be immediately replaced by the second system that cuts down on the inventory levels thus saving money for the company, while maintaining the current standards of after sale service and 96-hour delivery period. Since all cities in UK are well connected by roads and rail, 96-hour delivery period can be maintained even with two distribution centres that are maintained at the ports. Some other weaknesses of the existing distribution system are discussed here. T he existing distribution system is composed of more network nodes than are necessary for the distribution and sales of cost. Besides, increasing the costs in the sale of car, it involves maintenance of 7 distribution centres of cars which cater to supply of cars to the 350 dealers countrywide. The distribution centres add to the cost of the car without making any commensurate effect on sale and services of the cars. The seven distribution centres don’t add to the supply chain and enhance the customer value. The 96-hours delivery period can be maintained if the distribution centres were dispensed with and cars maintained on the two distribution centres at the ports itself. Since the competition is fierce and the car market is growing at the rate of the 5% per annum, yet the European car manufacturer is able to cash on the boom. Rather the company is facing a loss in its market share. The current system also puts unnecessary pressure as the inventory of 19 weeks has to be maintained to give the 96-hour delivery. The distribution chain of the car company is unnecessarily burdened and it can be relieved by relocation of distribution centres at the ports. The high concentration of cars in the two distribution centres at the ports allows the company to carry out its market operations smoothly giving the company the much needed cost advantage. References 1. Cravens, David, W., and Piercy, Nigel F., (2003), Strategic marketing, McGraw-Hill Irwin, International edition. 2. Gourdin, Kent, N.,(2000), Global logistics management: A competitive advantage for new millennium, Blackwell Publishers. 3. Anonymous (2001), Micrologistics and macrologistics - the dichotomy of logistics, “Transportlogistics Website” Accessed on February 15, 2008, http://www.transportgistics.com/dicotomy_of_logisitics.htm 4. Chow, Harry KH., Choy, K, L., Lee, W.B., (2007) Abstract, A dynamic logistics process knowledge-based system - An RFID multi-agent approach, Pp 357-372 Knowledge-Based System Archive, Accessed Feb 15, 2008. http://portal.acm.org/citation.cfm?id=1238320 5. Litman, Elaine, F., (1999) The next logistics transformation: Integrating information and knowledge, “bnet website” Accessed Feb 12, 2008 http://findarticles.com/p/articles/mi_qa3766/is_199901/ai_n8849369/pg_1 6. SAP Best Practices for Logistics Services Providers (n.d) “MSL Learning Website” Accessed Feb 15, 2008, http://www.learningsystems.in/pdfs/bp%20for%20Log%20serv.pdf 7. Vijayaraghavan, T A S (2001), Impact of transportation infrastructure on logistics in India, Logistics spectrum, “bnet website” http://findarticles.com/p/articles/mi_qa3766/is_200101/ai_n8952924/pg_5 8. Bevan, Paul., Shawdon, Christopher (n.d.), The Route to Competitive Advantage for Global Logistics Providers “Transportation Website” Accessed Feb 14, 2008, http://www.unisys.com/transportation/insights/white__papers/papers.htm?insightsID=88352#2 9. Rodrigue, Jean-Paul., Slack, Bran., Comtois, Claude., (2007), Intermodal Transportation, The geography of transport systems, “Hofstra Website” Accessed Feb 15, 2008, http://people.hofstra.edu/geotrans/eng/ch3en/conc3en/ch3c5en.html 10. Sap.com accessed Feb 15, 2008 11. Malhota, Yogesh( 2001), Integrating knowledge management technologies in organizational business processes: getting real time enterprises to deliver real business performance, Accessed Feb 15, 2007, http://www.kmnetwork.com/RealTime.htm Read More