Logistics and Supply Chain Management Notes

Dajanae Dawkins

All rights reserved

Logistics (this is a part of supply chain)

It moves goods from the producers to the final consumers. Simply it includes all the activities that have an impact on making goods and services available to customers when and where they wish to acquire them

OR

This is the part of the supply chain process that plans, implements and controls the efficient, effective flow and surface of goods and services and related information from producers to the final consumers to meet customer requirements. (Basically organizing how a good gets from a producer to a consumer in a timely manner)

Eg; ordering something online, the message is picked up by people in Amazon and then it’s picked up from the warehouse, shipped by boat or plane to Jamaica, then sent to customers then to a courier service then you pick it up at the store.

Supply chain

Encompasses all activities associated with the flow and transformation of goods from raw materials stage through to the end user. It is the way that a business gets its resources makes a final product and gets it to the consumer

Eg: iPhones; they source resources from different countries (eg: motherboard from china) to make the phone then transport it to the consumer

Supply chain management

-All the activities involved in logistics and supply

-Strategies used to ensure the management processes work effectively giving the firm a competitive edge (outshining your competitors)

-the management of the flow of goods and services starting from getting the raw materials to the producers and converting it into final goods for consumers and getting it to them and the processes involved in

Supply chain operation

-How you take the good from raw materials to finished goods happening within an organization (behind the scenes of a business in how they take raw materials and turn it into finished goods)

Logistics vs Supply chain

Supply chain involves logistics but also extends to raw materials. The raw materials from suppliers go to the firm who makes the goods, stores it, and then from the firm to the final consumer. It involves all the processes that are involved in these

While

Logistics involves the planning, implementation and activities involved in getting the good from the producer to the consumers.

Difference

The difference between the two is that logistics deals with getting the good from the producer to the consumer, while the supply chain looks at getting the raw materials from the supplier to the firm and from the firm to the consumer.

Components of logistics

-Forward flow

-Reverse flow

-Inventory

-Warehousing

-Transportation

-Insurance

1. Forward flow

The part of the supply chain that plans, implements, controls and deals with the efficient and effective flow and storage of goods, related information and products from the producer to the consumer in order to meet customer’s requirements.

(Move from the producer to the distributor to the wholesaler to the end consumer)

Examples:

**The different types of forward supply chain management includes:

>Direct order -the consumer goes directly

>Fulfillment- you pay for it at one company but the order is fulfilled by another company

>Hub services-one company that acts as a middle man for other companies (like at a transport center where different people and busses meet and the people take the different buses to different locations)

>Pick and pack services-people in Amazon pick the product off the shelf and other people pack the package to be sent off

>Shipping-the product is shipped to you from another country through a courier service

*With forward logistics shipping a sales forecast is used to project the requirement

2. Reverse flow

This component deals with the movement of products or materials in the opposite direction for the purpose of creating or recapturing value or for disposal (the customer sends it back for them to recreate it or dispose of it)

Eg: you purchase a laptop on Amazon and you realize the screen isn’t working so you return it back to the producer

*Reasons for reversing goods

-Returning goods to supplier because it’s faulty

-Reclaiming parts

-Recycling

-Resell

-Refurbish/Recondition

-Remanufacture

3. Inventory management

This is keeping enough stocks of goods to meet customer’s requirements and simultaneously it ensures cost of production is low.

They balance having enough products and not losing customers as well as maintaining market opportunities.

4. Warehousing

Storing finished goods until they are sold. It is important so that the goods can be in a place where it’s safe and not hindered with

5. Transportation

The movement of goods from the supplier to the buyer. When an order is placed the transaction is not complete until the goods are physically moved to the customer.

The physical movement of goods through various transportation modes ensures there’s no waste, that shipment is compliant and that the legal papers are obtained for transporting goods.

Eg: by land, by sea, by air, by pipelines

6. Insurance

This provides coverage against physical damage or loss of goods during shipping, whether by land, sea or air or even during storage.

Class activity

1. In your own words, why is logistics important?

Logistics is the flow of goods and services from the producer to the distributor to the wholesaler to the retailer and then to the end consumer. It is important because without logistics the consumer wouldn’t be able to get the right goods, in the right quality at the right place, time and price. Since logistics involves the arrangement and organization of goods and services, without it there will be disorder, people will receive the wrong packages and some packages might not even leave the producer at all causing chaos.

2. Which of the following would involve forward logistics and e reverse logistics? In each case, explain why?

a) Returning bottles to a retailer so they can be recycled

Reverse flow is defined as the backward movement of goods, that is, the goods travels from the end user back to the producer. This can be due to malfunctioning and they wish for the producer to fix it or for them to get rid of it and be refunded or recycled. In this scenario bottles the consumer got from the retailer is being returned back to them for recycling, which means the customer sends back the good (bottles) to the retailer so that they can be recycled, hence indicating reverse flow

b)Bringing a computer that is malfunctioning back to the shop to be repaired

This is reverse flow because the customer after receiving the laptop from the producer, sends it back to them to be fixed. The good, which is the laptop, is going back in the logistics chain and not forward.

c) Transferring industrial waste from a manufacturing plant to a waste disposal unit

This is forward flow,  because the goods are moving from the producer to the consumer. The manufacturing plant is the producer of the industrial waste and is giving it to the disposal unit in charge of getting rid of the waste. Furthermore the disposal unit couldn’t have sent back the garbage to the company seeing as the rig job is to get rid of the waste not return it.

Activities involved in the supply chain operation

*supply chain operation-how you take the good from raw materials to finished goods happening within an organization (what happens behind the scenes in how a finished good is made by a business)

Activities

-transformation of natural resources

-movement and storage of raw materials

-processing raw materials and components into finished goods

-storage of work in progress (the good isn’t finished yet) and finished good

-delivering finished goods from point of origin to point of destination

Eg: you’re baking a cake you gather your raw materials (eggs, butter, sugar) and store them in the refrigerator until needed. When ready to bake the cake, the ingredients are mixed and baked resulting in a finished cake. The cakes that aren’t finished decorating are stored for later and the ones that have been decorated are stored for a while in the fridge. The cake is then delivered from the cake company to the wholesaler then to the retailer then bought by the end consumer.

Distribution chain

Describe the link in the chain of distribution (obj 4)

How the goods are distributed from the manufacturer to the end consumer

1. Manufacturer-the person who converts the raw material or semi finished goods into finished goods

Eg: lasco, grace, national bakery, wysnco

2. Wholesaler-a middleman who sells finished goods to retailers and agents. They buy it in bulk then sell smaller quantities.

Eg: Megamart, Price Mart, eBay, Costco

Functions of the wholesaler:

-Risk bearing

-Warehousing of goods

-Breaking bulk (repacking)

-Promoting sales and marketing goods or service

-Forming the link between consumers and producers

-Granting credit to retailers

3. Retailer-a middleman who obtains goods from a manufacturer or wholesaler and sells it to customers in small quantities for consumption

Eg: Restaurant, Corner shop

Functions of the retailer

-breaking the bulk

-providing convenient outlets for the customers

-providing credit

-offering the customer a wide variety of goods

4. Consumer- a person who purchases goods to use for personal reasons and not to resell; they consume the good

-Example of distribution chain

Grace Kennedy produces tin sausages then Mega Mart buys them in bulk to sell to Hilo Foods Supermarket who sells it to high school students who have it for lunch

Distribution Channel

-The path used to get the product from the manufacturer to the end user

This is influenced by:

*Type of product; if it’s fragile it would need protective transport

*The target market you are aiming to reach;

*Quantity to be delivered;

*Frequency of delivery

*Location (where your goods are going)

*Budget (how much you have to spend)

*Speed (how fast to get the product to the user)

Modes of Transport

-Transport is the movement of goods and people from one place to another

-It may be internal (within the country) or external (from one country to another)

Transportation enables:

-workers to travel to and from work

-raw materials to reach manufacturers

-finished products to be distributed

Modes of transportation

>Air (planes)

Advantages

High speed-capable of traveling long distances in short periods of time. Great for for urgent shipping

High standard of security-high degree of security since airport safety restrictions on cargo are strictly enforced which minimizes theft

Disadvantages

Risky-high risk of injury to goods, customers and staff if a minor crash occurs and unpredictable turbulence and flight delays due to whether

Cost-considered to be the most expensive mode, maintaining the aircraft is costly and building avians is more expensive

>Railways (trains)

Advantages

Cost effective -has lower fuel costs compared to road transport especially when shipping high volumes of goods

Capable of transporting large hauls-can handle large freights in one journey, which saves the multiple trips of road transport modes meaning it’s more efficient

Disadvantages

Lack of flexibility-the routes and timings cannot be adjusted to speed up the product to the customer

Unsuitable for short distances and small loads-isn’t economical nor smart to transport small goods via this method it’s best suited for large shipments

>Road (cars, trucks, vans, bikes)

Advantage

Most profitable-cheapest means of transport available and doesn’t require any special infrastructure to help it (ports, stations)

Flexibility of schedules-adapts to delivery of goods and quantities of packages, unlike air and sea transport that has rigor schedule

Disadvantages

Accident rate-has the highest accident rate and more likely to crash

Traffic restrictions-traffic jams can lead to delays in deliveries

>Pipeline (oil)

Advantages

Can transport large volumes continuously. Its diameter determines exactly how much but it's still a large amount being transported at a time\

Uses less energy compared to railways, hence very energy-saving  and good for the environment

Disadvantages

Isn’t fit for transporting certain goods due to its structure, only useful for natural gases and oil

Underground pipelines cannot be easily repaired and detection of leakage is difficult

>Sea (ships)

Advantages

Ship large volumes at low costs which saves money

*The same containers can be used for further transport on rod or railway you won’t have to get separate containers to accommodate other modes of transport

Disadvantages

Hefty port duties and taxes to be paid for getting the good into another country’s waters

Its difficult to track the progress of goods

>Under water

Advantages

Comparatively less expensive to railway and road transport

Its suitable for heavy goods and large batches of them

Disadvantages

Navigation becomes difficult due to various unforeseen sea weather patterns [monsoons]

Very slow means of transport compared to other modes

>Digital delivery

Intermodal and Multimodal transport

Intermodal

Intermodal transportation is the movement of cargo from origin to destination by several modes of transport where each of these modes have different transport carriers responsible, with its own contract.

Multimodal

The movement of cargo from origin to destination by several modes of transport where each mode has a separate carrier but all are under a single contract

Intermodal vs multimodal

In intermodal transport the manufacturer hires multiple people under multiple contracts to get the product by different transport modes to the end user.

Eg: hiring a ship to get the product across sea, hiring a driver to get the goods by land and hiring a pilot to get the good by sea with multiple contracts .

While in multimodal transport the manufacturer hires multiple people under a single contract to get the product by different transport modes to the end user.

Eg: You sign a contract with Amazon to ship your products to consumers whenever they order. Amazon is now responsible to distribute your products by using the different modes of transport all under one contract

The difference is that with intermodal it is done under separate contracts transporting goods by different modes versus multimodal, it is done under a single contract using multiple modes of transportation

Roles of transportation in marketing

Marketing involves getting the right product to the right person at the right place and right time. Transportation involves getting goods from one point to another. Transport ties into marketing in the sense that it ensures the product gets to the person at a particular place and assigned time.

Due to a need to satisfy demands, manufacturing plays a role in this which brings about the need for a more effective transport system

-to fast-track the sourcing of commodities (make sure it’s fast)

A good transport system will help manufacturers to quickly and easily access raw materials (commodities) needed for making finished products. Ensure that the raw materials are readily available and can be shipped to the manufacturer on time

-to ensure security of supply

Having a good transport system in place makes sure a manufacturer will always be able to get raw materials consistently and businesses can sell finished goods to consumers  (having goods available in the event customers want it at any time so it’s secure)

-cost reduction

The businesses can select the most reliable and economical mode of transportation to reduce cost which means more more money is left back as profits or to invest in the business

Role of transport in domestic, regional and foreign trade

-The main role of transportation in any trade is to get the goods to their respective customers when needed. It can be in domestic, regional/interregional or foreign/global markets

Domestic-this getting goods to customers within an area of a country and is carried out by mainly road transport

Interregional-this is getting goods to customers within a particular area of the world [eg: the Caribbean]  and is carried out by various forms of sea and air transports.

International-includes importing and exporting goods throughout the world from country to country using all modes of transport [road, rail, air and sea].

Transport documents

Bill of lading

-This is used when transporting goods by sea. When the goods are delivered to the shipping company the shipper sends a bill of lading to the importer. A copy is also kept by the ship captain

Includes:

-shipper/exporter

-consignee/importer

-name of vessel and port

-details and weight of cargo

-freight charges payable

Airway bill

-This is used when goods are transported by air. It travels with the goods

Includes:

• Shipper’s name, address, telephone number and signature
• Receiver or consignee’s address and telephone contact details
• Number of packages and description of contents
• Total weight
• Freight charges
• Payment details
• Time and date the package was picked up by or delivered to the courier

Import license

-Documents importers should have to legally bring in certain goods into the county due to the government wanting to monitor what enters. It ensures hazardous or illegal products don’t enter the country.

Reasons for import license:

-required for certain items

-for the government to track what’s entering the country

-to pay a fee

-to legally take things into the country

Certificate of origin

-A certificate that proves a good originates from a country. Used when the government is trying to control the trade in protected species of animals. Important because it proves the eligibility of goods that are imported (Made in China)

Documentary Bill

-a bill of exchange with all the related documents of title attached [including insurance policy and invoice]. It can be used to give a bank the right to take possessions of goods if the bill of exchange isn’t paid when it matures

Export license

-issued by the government of the exporting country giving permission for the export of certain products in certain quantities

Advantages of Supply Chain

Improved quality of life

-The supply chain is the way people get access to things to improve quality of life and meet their basic needs. It gives people ways to access goods they can’t live without (delivering water to supermarkets so they can purchase it). It can even offer health emergency protocols [transporting injured persons to the hospital and medicine]. The supply chain made it possible for the Covid vaccine to be  transported from the US (manufacturer) to the end consumer (Jamaica).

Wealth creation

This affects the business and the country in that when the business makes more money so does the country. The supply chain does this by providing the business with good quality of raw materials to manufacturers.

This creates competition amongst businesses which result in better quality of goods and services and lower prices meaning customers are getting more for their money and their wealth is being created.

Employment opportunities

-The supply chain offers many jobs in different areas and incomes to people especially those in rural areas, (such as to transport materials to companies or to hire suppliers to supply raw materials or to hire workers to convert materials into finished products).

It encourages people to start new businesses which they can get goods from overseas to convert to finish products and sell. This gives rise for more workers in the business hence more people get jobs. This helps to decrease the unemployment level and increase the labor supply

E-commerce-is the selling of goods and services via the internet. Customers indirectly interact with owners on their website allowing them to shop without having to go in person.

Telemarketing-is selling goods and services via the phone. The owners manage queries, questions and interacting directly with customers.

The difference between the two is that e-commerce isn’t a direct interaction between the owner and customer but telemarketing is. Telemarketing also allows for customers to ask questions and be provided with answers in real time while e-commerce doesn’t give way for queries, it's just purchasing goods.

Disadvantages/challenges of Supply Chain

*Counterfeiting

-Genuinity of products becomes destroyed with people trying to make fake versions of it which damages the companies image as well as leads to health hazards and safety insecurities. It affects the supply chain because you’re not getting genuine products and many returns will exist so less people would want to buy the good and the business might in fact fail

Changing Market conditions

-If companies can’t keep up their supply chain with the ever changing market conditions (changes in demand, increase in gas prices) they may lose customers and market advantages over their competitors. Poor management and irresponsible management can lead to things going wrong in the supply chain such as incorrect packages going to the wrong people.

(Back then people weren’t educated as they are now and because of that and because of constant changes they now know what they want (good quality) and they won’t purchase and and anything

Globalization

This is the movement of goods and people all over the world (supplying goods on a global scale). There’s a higher risk of supply chain being affected by external factors.  As the number of distribution channels increases, so does the chance of errors. With more steps and destinations added in the supply chain timeline, without proper management and organization, it is easy to lose track of where everything is going. It also proves to have many room for disruptions since it’s going from country to country which involves complex transport systems needed. (Goods get lost in transit)

Fluctuating foreign exchange rates

-Businesses suffer from high exchange rates which causes their cost to get imported goods high, and they might have to cut down production so less goods are available to customers and orders might not be met and profit decreases. (People would come to Jamaica to start a business because the exchange rate is lower opposed to someone from Jamaica going overseas to start a business as it would be way more expensive)

Laws

-If a country has a law banning certain products this may cause some of your goods to not be allowed into the country hence the good can’t reach the customer

Product Complexity

Natural disasters

-Whether facing a hurricane, tsunami, or blizzard, any kind of natural disaster will inevitably disrupt global supply chains with postponed or paused deliveries, closed ports, canceled cargo flights, and unbalanced supply and demand before, during and after the disaster. It’s also caused by how well the country prepared. Most likely the business might lose products and suffer damage.

Political instability

-Political instability as mentioned before is unrest in the political structure of an economy.

-This can cause delays in the supply chain seeing as one party might put a ban on exporting goods and it can cause a domino effect such as the ship won’t get the good to ship off, the courier doesn’t pick it up at the wharf and the customer doesn’t get the product,

-Another point is that with war and conflict in an economy the parties going head to head won’t be concerned with paying workers who may quit due to no income aka higher turnover rates or due to striking or due to stress or depression

-political uprisings in the Middle East have made it harder for gas companies to access petrol and oil so it’s hard to get raw materials

-if there is political trouble in a country people won’t do business with firms in that country

-supply trucks may have to be forcibly rerouted from their usual route, and there may even be cases of employees leaving work in favor of joining said strikes and therefore delaying certain operations. When delivery of supplies becomes delayed, production will receive the supplies later and therefore also be delayed in the manufacture of product which in turn will delay subsequent operations further down the supply chain.

Impact of logistics and supply Chain operations on the competitiveness of a business

Logistics improves through competitiveness, by helping them better meet their demands and responsibilities

1. Competitive advantage-companies aim to have a powerful supply chain that will get their products to move faster and more efficiently than their competitors (due to a better supply chain customers will have better experience and want to continue with the business and even recommend it to others because they value their good experience)
2. Comparative Cost Advantage-this refers to being able to produce goods at lower costs than other businesses. It can be done through outsourcing;

-second party [2PL]

-third party [3PL]

-fourth party [4PL]  [eg; imported concentrates]

Outsourcing-(this is sometimes referred to as contracting out) it refers to accessing goods or services by contracts from an outside supplier. It is used by businesses to reduce costs or improve efficiency by relocating tasks, operations, jobs or processes to an external contracted party for a significant period of time.

The functions might be carried out by the other party either on-site or off-site of the business

1PL-one party logistics provider

2PL-second party logistics provider

3PL-third party logistics provider

4PL-fourth party logistics provider

1PL-manages all of its own logistics and distribution processes internally, instead of outsourcing them (they can if needs be).

-logistics provider firms that own their own logistic activities and sometimes outsource some of their activities

[these are methods of outsourcing]

2PL-a company that provides assets (drivers, trucks, warehouse operators) to carry out certain operations on behalf of another firm or 1PL

3PL-a firm that does every single supply chain and logistics activity on a firm’s behalf, so the firm does little to no work. 3PL provides the management skills along with physical assets, labour and technology to provide logistics to part or all of the supply chain. (They might do everything and they might not)

e.g transportation, warehouse management consulting, freight forwarding, pool distribution (delivering to numerous destinations) and more.

4PL- a firm that takes care of the entire supply chain management and logistics operations and management of these operations for a business . It completes everything for the firm, unlike 3PL who might not

Problem encountered in distribution

How available the airport, harbor and docking faculties are

-if you don’t reserve your space on the vessel or get there on time, your good won’t be shipped

Delayed shipment

Spoilage

-not protecting goods properly or using the correct transport methods and packaging

causes them to  go bad hence the good can’t be given to the customer

Misdirection of goods

-they don’t go to the correct location or area, like ordering a good to ship to Jamaica but it goes to Japan

Inadequate warehousing facilities

-not large enough to hold the goods, unorganized and goods can’t be found

Lack of proper security measures

Industrial unrest

Ineffective communication

Measures to mitigate problems of distribution

>Insurance-since it gives financial protection, if your goods get lost then you can get financial compensation or a new good in return (but it takes a while to get the money)

>Careful labelling and documentation (forming a system where you carefully label goods and put them in a specific order so you can find them easier and they don’t get lost) [solves misdirection of goods and inadequate warehousing facilities]

>Select the most appropriate channel of distribution based on product (so with milk you’d find a channel that won’t take long so it would spoil, hence ship it via a plane where it can get to the destination quickly)

[ solves spoilage]

>Avoid holding large stocks (refrain from holding too many of the goods so that space is there for everything and you’re not running out) [ solves inadequate warehousing facilities]

>Employing security company and use of security cameras [solves lack of proper security measures]

>Communication network including use of internet [solves ineffective communication]

>Handling services with good reputation [solves delayed shipment and misdirection of goods]

>Government intervention

**The impact of information technology on logistics and supply chain operations

-Global Positioning Systems {GPS]

-Geographical Information System [GIS]

-Portnet

-Telemarketing

-E-commerce

-Global service providers such as Fedex, DHL

-Logistics hub