Logistics management 100 marks assignment


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Logistics management 100 marks assignment

  1. 1.  Introduction: - As far back as history records, the goods that people wanted were not always produced where they wanted to consume them, or these goods were not accessible when people wanted to consume them. Food and other commodities were widely dispersed and were only available in abundance at certain times of the year. Early peoples had the choice of consuming goods at their immediate location or moving the goods to a preferred site and storing them for later use. However, because no well developed transportation and storage systems yet existed, the movement of goods was limited to what an individual could personally move, and storage of perishable commodities was possible for only a short time. This limited movement-storage system generally constrained people to live close to the sources of production and to consume a rather narrow range of goods. Even today, in some areas of the world consumption and production take place only within a very limited geographic region. Striking examples can still be observed in the developing nations of Asia, South America, Australia, and Africa, where some of the population live in small, self-sufficient villages, and most of the goods needed by the residents are produced or acquired in the immediate vicinity. Few goods are imported from other areas. Therefore, production efficiency and the economic standard of living are generally low. In this type of economy, a well-developed and inexpensive logistics system would encourage an exchange of goods with other producing areas of the country, or even the world. As logistics systems improved, consumption and production began to separate geographically. Regions would specialize in those commodities that could be produced most efficiently. Excess production could be shipped economically to other producing (or consuming) areas, and needed goods not produced locally were imported. This exchange process follows the principle of comparative advantage.
  2. 2. This same principle, when applied to world markets, helps to explain the high level of international trade that takes place today. Efficient logistics systems allow world businesses to take advantage of the fact that lands, and the people who occupy them, are not equally productive. Logistics is the very essence of trade. It contributes to a higher economic standard of living for us all. To the individual firm operating in a high-level economy, good management of logistics activities is vital. Markets are often national or international in scope, whereas production may be concentrated at relatively few points. Logistics activities provide the bridge between production and market locations that are separated by time and distance. Effective management of these activities is the major concern of this Program.  Logistics is the management of the flow of goods between the point of origin and the point of use in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and often security. Logistics is a channel of the chain which adds the value of time and place utility. Today the complexity of production logistics can be modeled, analyzed, visualized and optimized by plant simulation software, but is constantly changing. This can involve anything from consumer goods such as food, to IT materials, to aerospace and defense equipment.
  3. 3. Military Logistics In military science, maintaining one's supply lines while disrupting those of the enemy is a crucial—some would say the most crucial—element of military strategy, since an armed force without resources and transportation is defenseless. The defeat of the British in the American War of Independence and the defeat of the Axis in the African theatre of World War II are attributed to logistical failure. The historical leaders Hannibal Barca, Alexander the Great, and the Duke of Wellington are considered to have been logistical geniuses. Militaries have a significant need for logistics solutions, and so have developed advanced implementations. Integrated Logistics Support (ILS) is a discipline used in military industries to ensure an easily supportable system with a robust customer service (logistic) concept at the lowest cost and in line with (often high) reliability, availability, maintainability and other requirements as defined for the project. In military logistics, logistics officers manage how and when to move resources to the places they are needed. Supply chain management in military logistics often deals with a number of variables in predicting cost, deterioration, consumption, and future demand. The US Military's categorical supply classification was developed in such a way that categories of supply with similar consumption variables are grouped together for planning purposes. For instance, peacetime consumption of ammunition and fuel will be considerably less than wartime consumption of these items, whereas other classes of supply such as subsistence and clothing have a relatively consistent consumption rate regardless of war or peace. Troops will always require uniform and food.
  4. 4. More troops will require equally more uniforms and food. Some classes of supply have a linear demand relationship—as more troops are added more supply items are needed—as more equipment is used more fuel and ammunition is consumed. Other classes of supply must consider a third variable besides usage and quantity: time. As equipment ages more and more repair parts are needed over time, even when usage and quantity stays consistent. By recording and analyzing these trends over time and applying to future scenarios, the US Military can accurately supply troops with the items necessary at the precise moment they are needed. History has shown that good logistical planning creates a lean and efficient fighting force. Lack thereof can lead to a clunky, slow, and ill-equipped force with too much or too little supply.
  5. 5. Business logistics Logistics as a business concept evolved in the 1950s due to the increasing complexity of supplying businesses with materials and shipping out products in an increasingly globalized supply chain, leading to a call for experts called supply chain logisticians. Business logistics can be defined as "having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer", and is the science of process and incorporates all industry sectors. The goal of logistics work is to manage the fruition of project life cycles, supply chains and resultant efficiencies. In business, logistics may have either internal focus (inbound logistics), or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply chain management). The main functions of a qualified logistician include inventory management, purchasing, transportation, warehousing, consultation and the organizing and planning of these activities. Logisticians combine a professional knowledge of each of these functions to coordinate resources in an organization. There are two fundamentally different forms of logistics: one optimizes a steady flow of material through a network of transport links and storage nodes; the other coordinates a sequence of resources to carry out some project.
  6. 6. Production logistics The term production logistics is used to describe logistic processes within an industry. The purpose of production logistics is to ensure that each machine and workstation is being fed with the right product in the right quantity and quality at the right time. The concern is not the transportation itself, but to streamline and control the flow through value-adding processes and eliminate non–value-adding ones. Production logistics can be applied to existing as well as new plants. Manufacturing in an existing plant is a constantly changing process. Machines are exchanged and new ones added, which gives the opportunity to improve the production logistics system accordingly. Production logistics provides the means to achieve customer response and capital efficiency. Production logistics is becoming more important with decreasing batch sizes. In many industries (e.g. mobile phones), a batch size of one is the short-term aim, allowing even a single customer's demand to be fulfilled efficiently. Track and tracing, which is an
  7. 7. essential part of production logistics—due to product safety and product reliability issues—is also gaining importance, especially in the automotive and medical industries.  Warehouse management systems and warehouse control systems Although there is some functionality overlap, the differences between warehouse management systems (WMS) and warehouse control systems (WCS) can be significant. Simply put, a WMS plans a weekly activity forecast based on such factors as statistics and trends, whereas a WCS acts like a floor supervisor, working in real time to get the job done by the most effective means. For instance, a WMS can tell the system it is going to need five of stock-keeping unit (SKU) A and five of SKU B hours in advance, but by the time it acts, other considerations may have come into play or there could be a logjam on a conveyor. A WCS can prevent that problem by working in real time and adapting to the situation by making a last-minute decision based on current activity and operational status. Working synergistically, WMS and WCS can resolve these issues and maximize efficiency for companies that rely on the effective operation of their warehouse or distribution center.  Logistics outsourcing Logistics outsourcing involves a relationship between a company and an LSP which, compared with basic logistics services, has more customized offerings, encompasses a broad number of service activities, is characterized by a long-term orientation, and, thus, has a rather strategic nature.
  8. 8. Third-party logistics Third-party logistics (3PL) involves using external organizations to execute logistics activities that have traditionally been performed within an organization itself.[4] According to this definition, third-party logistics includes any form of outsourcing of logistics activities previously performed in-house. If, for example, a company with its own warehousing facilities decides to employ external transportation, this would be an example of third-party logistics. Logistics is an emerging business area in many countries. Fourth-party logistics The concept of Fourth-Party Logistics (4PL) provider was first defined by Andersen Consulting (Now Accenture) 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. Whereas a third party logistics (3PL) service provider targets a function, a 4PL targets management of the entire process. Some have described a 4PL as a general contractor who manages other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer.
  9. 9.  Business Logistic Defined: Business logistics is a relatively new field of integrated management study in comparison with the traditional fields of finance, marketing, and production. As previously noted, logistics activities have been carried out by individuals for many years. Businesses also have continually engaged in movestore (transportation-inventory) activities. The newness of the field results from the concept of coordinated management of the related activities, rather than the historical practice of managing them separately, and the concept that logistics adds value to products or services that are essential to customer satisfaction and sales. Although co-ordinated logistics management has not been generally practiced until recently, the idea of co-ordinated management can be traced back to at least 1844. In the writings of Jules Dupuit, a French engineer, the idea of trading one cost for another (transportation costs for inventory costs) was evident in the selection between road and water transport: ―The fact is that carriage by road being quicker, more reliable and less subject to loss or damage, it possesses advantage to which businessmen often attach a considerable value. However, it may well be that a saving induces the merchant to use a canal; he can buy warehouses and increase his floating capital in order to have a sufficient supply of goods on hand to protect himself against slowness and irregularity of the canal, and if all told the saving in transport gives him a cost advantage, he will decide in favour of the new route.‖ The first textbook to suggest the benefits of co-ordinated logistics management appeared around 1961, in part explaining why a generally accepted definition of business logistics is still emerging. Therefore, it is worthwhile to ex-
  10. 10. plore several definitions for the scope and content of the subject. A dictionary definition of the term logistics is: ―The branch of military science having to do with procuring, maintaining, and transporting material, personnel, and facilities.‖ This definition puts logistics into a military context. To the extent that business objectives and activities differ from those of the military, this definition does not capture the essence of business logistics management. A better representation of the field may be reflected in the definition promulgated by the Council of Logistics Management (CLM), a professional organization of logistics managers, educators, and practitioners formed in 1962 for the purposes of continuing education and fostering the interchange of ideas. Its definition: - ―Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers‘ requirements.‖ This is an excellent definition, conveying the idea that product flows are to be managed from the point where they exist as raw materials to the point where they are finally discarded. Logistics is also concerned with the flow of services as well as physical goods, an area of growing opportunity for improvement. It also suggests that logistics is a process, meaning that 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. However, the definition implies that logistics is part of the supply chain process, not the entire process. So, what is the supply chain process or, more popularly, supply chain management? Supply chain management (SCM) is a term that has emerged in recent years that captures the essence of integrated logistics and even goes beyond it. Supply chain
  11. 11. management emphasizes the logistics interactions that take place among the functions of marketing, logistics, and production within a firm and those interactions that take place between the legally separate firms within the product-flow channel. Opportunities for cost or customer service improvement are achieved through co-ordination and collaboration among the channel members where some essential supply chain activities may not be under the direct control of the logistician. Although early definitions such as physical distribution, materials management, industrial logistics and channel management - all terms used to describe logistics - have promoted this broad scope for logistics, there was little attempt to implement logistics beyond a company‘s own enterprise boundaries, or even beyond its own internal logistics function. Now, retail firms are showing success in sharing information with suppliers, who in turn agree to maintain and manage inventories on retailers‘ shelves. Channel inventories and product stock outs are lower. Manufacturing firms operating under just-in-time production scheduling build relationships with suppliers for the benefit of both companies by reducing inventories. Definitions of the supply chain and supply chain management reflecting this broader scope are: ―The supply chain (SC) encompasses all activities associated with the flow and transformation of goods from the raw materials stage (extraction), through to the end user, as well as the associated information flows. Materials and information flow both up and down the Supply Chain.‖ Supply chain management (SCM) is the integration of these activities, through improved supply chain relationships, to achieve a sustainable competitive advantage.‖ After careful study of the various definitions being offered, Mentzer and other writers propose the broad and rather general definition as follows: ―Supply chain management is defined as the systematic, strategic coordina-
  12. 12. tion of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.‖ The supply chain management model in Figure 11 viewed as a pipeline shows the scope of this definition. It is important to note that supply chain management is about the co-ordination of product flows across functions and across companies to achieve competitive advantage and profitability for the individual companies in the supply chain and the supply chain members collectively. It is difficult, in a practical way, to separate business logistics management from supply chain management. In so many respects, they promote the same mission: ―To get the right goods or services to the right place, at the right time, and in the desired condition, while making the greatest contribution to the firm.‖ Some claim that supply chain management is just another name for integrated business logistics management (IBLM) and that the broad scope of supply chain management has been promoted over the years. Conversely, others say that logistics is a subset of SCM, where SCM considers additional issues beyond those of product flow. For example, SCM may be concerned with product pricing and manufacturing quality. Although SCM promotes viewing the supply channel with the broadest scope, the reality is that firms do not ractise this ideal. Fawcett and Magan found that companies that do practise supply chain integration limit their scope to one tier upstream and one tier downstream. The focus seems to be concerned with creating seamless processes within their own companies and applying new information technologies to improve the quality of information and speed of its exchange among channel members. The boundary between the logistics and supply chain man-
  13. 13. agement terms is fuzzy. For the purposes of this Program, integrated business logistics management and SCM will be referred to interchangeably. The focus will be on managing the product and service flows in the most efficient and effective manner, regardless of descriptive title. This includes integrating and co-ordination with. For the purposes of this program, integrated business logistics management and SCM will be referred to interchangeably. The focus will be on managing the product and service flows in the most efficient and effective manner, regardless of descriptive title. This includes integrating and coordination with
  14. 14. The supply chain management model in Figure 1-1 viewed as a pipeline shows the scope of this definition. It is important to note that supply chain management is about the co-ordination of product flows across functions and across companies to achieve competitive advantage and profitability for the individual companies in the supply chain and the supply chain members collectively. It is difficult, in a practical way, to separate business logistics management from supply chain management. In so many respects, they promote the same mission: ―To get the right goods or services to the right place, at the right time, and in the desired condition, while making the greatest contribution to the firm.‖ Some claim that supply chain management is just another name for integrated business logistics management (IBLM) and that the broad scope of supply chain management has been promoted over the years. Conversely, others say that logistics is a subset of SCM, where SCM considers additional issues beyond those of product flow. For example, SCM may be concerned with product pricing and manufacturing quality. Although SCM promotes viewing the supply channel with the broadest scope, the reality is that firms do not practise this ideal. Fawcett and Magan found that companies that do practise supply chain integration limit their scope to one tier upstream and one tier downstream. The focus seems to be concerned with creating seamless processes within their own companies and applying new information technologies to improve the quality of information and speed of its exchange among channel members. The boundary between the logistics and supply chain management terms is fuzzy. For the purposes of thisProgram, integrated business logistics management and SCM will be referred to interchangeably. The focus will be on managing the product and service flows in the most efficient and effective manner, regardless of descriptive title. This includes integrating and coordinating with other channel members and service provid-
  15. 15. ers to improve supply chain performance when practical to do so.  The Supply Chain Logistics/SC is a collection of functional activities (transportation, inventory control, etc) which are repeated many times throughout the channel through which raw materials are converted into finished products and consumer value is added. Because raw material sources, plants, and selling points are not typically located at the same places and the channel represents a sequence of manufacturing steps, logistics activities recur many times before a product arrives in the marketplace. Even then, logistics activities are repeated once again as used products are recycled upstream in
  16. 16. the logistics channel. A single firm generally is not able to control its entire prouct flow channel from raw material source to points of the final consumption, although this is an emerging opportunity. For practical purposes, the business logistics for the individual firm has a narrower scope. Usually, the maximum managerial control that can be expected is over the immediate physical supply and physical distribution channels, as shown in Figure 1-2. The physical supply channel refers to the time and space gap between a firm‘s immediate material sources and its processing points. Similarly, the physical distribution channel refers to the time and space gap between the firm‘s processing points and its customers. Due to the similarities in the activities between the two channels, physical supply (more commonly referred to as materials management) and physical distribution comprise those activities that are integrated into business logistics. Business logistics management is now popularly referred to as supply chain management. Others have used terms such as value nets, value stream, and lean logistics to describe a similar scope and
  17. 17. purpose. The evolution of the management of product flows toward SCM is captured in Figure 1-3. Although it is easy to think of logistics as managing the flow of products from the points of raw material acquisition to end customers, for many firms there is a reverse logistics channel that must be managed as well. The life of a product, from a logistics viewpoint, does not end with delivery to the customer. Products become obsolete, damaged, or nonfunctioning and are returned to their source points for repair or disposition. Packaging materials may be returned to the shipper due to environmental regulations or because it makes good economic sense to reuse them. The reverse logistics channel may utilize all or a portion of the forward logistics channel or it may require a separate design. The supply chain terminates with the final disposition of a product. The reverse channel must be considered to be within the scope of logistics planning and control.  The Activity Mix The activities to be managed that make up business logistics (supply chain process) vary from firm to firm, depending on a
  18. 18. firm‘s particular organizational structure, management‘s honest differences of opinion about what constitutes the supply chain for its business, and the importance of individual activities to its operations. Follow along the supply chain as shown in Figure 1-2 and note the important activities that take place. Again, according to the CLM: ―The components of a typical logistics system are: customer service, demand forecasting, distribution communications, inventory control, material handling, order processing, parts and service support, plant and warehouse site selection (location analysis), purchasing, packaging, return goods handling, salvage and scrap disposal, traffic and transportation, and warehousing and storage.‖ Figure 1-4 organizes these components, or activities, according to where they are most likely to take place in the supply channel. The list is further divided into key and support activities, along with some of the decisions associated with each activity.
  19. 19.  INTERRELATIONSHIPS BETWEEN TRANSPORTATION AND LOGISTICS Without well developed transportation systems, logistics could not bring its advantages into full play. Besides, a good
  20. 20. transport system in logistics activities could provide better logistics Efficiency, reduce operation cost, and promote service quality. The improvement of transportation systems needs the effort from both public and private sectors. A well-operated logistics system could increase both the competitiveness of the government and enterprises. Transport Costs and Goods Characters in Logistics Transport system is the most important economic activity among the components of business logistics systems. Around one third to two thirds of the expenses of enterprises‘ logistics costs are spent on transportation. According to the investigation of National Council of Physical Distribution Management (NCPDM) in 1982 (Chang, 1988), the cost of transportation, on average, accounted for 6.5% of market revenue and 44% of logistics costs. BTRE (2001) indicated that Australian gross value added of the transport and storage sector was $34,496 million in 1999-2000, or 5.6% of GDP. Figure 3 shows the components of logistics costs based on the estimation from Air Transportation Association (Chang, 1988). This analysis shows transportation is the highest cost, which occupies 29.4% of logistics costs, and then in order by inventory, warehousing cost, packing cost, management cost, movement cost and ordering cost. The ratio is almost one-third of the total logistics costs. The transportation cost here includes the means of transportation, corridors, containers, pallets, terminals, labours, and time. This figure signifies not only the cost structure of logistics systems but also the importance order in improvement processing. It occupies an important ratio in logistics activities. The improvement of the item of higher operation costs can get better effects. Hence, logistics managers must comprehend transport system operation thoroughly. Transport system makes goods and products movable and provides timely and
  21. 21. regional efficacy to promote value-added under the least cost principle. Transport affects the results of logistics activities and, of course, it influences production and sale. In the logistics system, transportation cost could be regarded as a restriction of the objective market. Value of transportation varies with different industries. For those products with small volume, low weight and high value, transportation cost simply occupies a very small part of sale and is less regarded; for those big, heavy and low-valued products, transportation occupies a very big part of sale and affects profits more, and therefore it is more regarded. 3.2 The Effects of Transportation on Logistics Activities Transportation plays a connective role among the several steps that result in the conversion of resources into useful goods in the name of the ultimate consumer. It is the planning of all these functions and sub-functions into a system of goods movement in order to minimize cost maximize service to the customers that constitutes the concept of business logistics. The system, once put in place, must be effectively managed. (Fair et al., 1981) Traditionally these steps involved separate companies for production, storage, transportation, wholesaling, and retail sale, however basically, production/manufacturing plants, warehousing services, merchandising establishments are all about doing transportation. Production or manufacturing plants required the assembly of materials, components, and supplies, with or without storage, processing and material handling within the plant and plant inventory. Warehousing services between plants and marketing outlets involved separate transport. Merchandising establishments completed the chain with delivery to the consumers. The manufacturers limited themselves to the production of goods, leaving marketing and distribution to other firms. Warehousing and storage can be considered in terms of services for the production process and for product distribution. There have been major changes in the number and location of facilities with the closure of many single-user warehouses and an expansion of consolidation facili-
  22. 22. ties and distribution centres. These developments reflect factors such as better transport services and pressures to improve logistics performance.  The Role of Transportation in Service Quality The role that transportation plays in logistics system is more complex than carrying goods for the proprietors. Its complexity can take effect only through highly quality management. By means of well-handled transport system, goods could be sent to the right place at right time in order to satisfy customers‘ demands. It brings efficacy, and also it builds a bridge between producers and consumers. Therefore, transportation is the base of efficiency and economy in business logistics and expands other functions of logistics system. In addition, a good transport system performing in logistics activities brings benefits not only to service quality but also to company competitiveness.
  23. 23.  FORMS OF LOGISTICS OPERATION Supply Chain Management Supply Chain Management (SCM) is the concept for handling the production procedures in broad sense. An effective SCM application could promote the industry to satisfy the demand of new business environment. Ross (1998) defined SCM as ‗a continuously evolving management philosophy that seeks to unify the collective roductive competencies and resources of the business functions found both within the enterprise and outside in the firm‘s allied business partners located along intersecting supply channels into a highly competitive, customerenriching supply system focused on developing innovative solutions and synchronizing the flow of marketplace products, services, and information to create unique, individualized sources of customer value.‘ SCM can be divided into three main activities – purchase, manufacture and transport (Thomas et al., 1996). Cooper et al. (1997) analyzed the three elements of SCM – supply chain business processes, supply chain management components, and supply chain network structure. Figure 4 shows the entire elements in SCM frame. It displays the details of the whole processes from purchasing, management, production, and distribution to customers. The information flow is like an individual system to link the whole supply chain from supplier and manufacturer to consumer. Unimpeded information flow could increase the operation accuracy for costs saving and promote the competitiveness of firms. The product flow proceeds through the whole production processes from material supply via manufactories till providing the finished products to consumers. The items in vertical direction show the
  24. 24. various management tasks within the supply chain. Particularly, the return flow, or reverse logistic, is one of the elements in the system but with converse direction from the others. Reverse Logistics The concept of reverse logistics has been applied in promoting costumer service and resources recycling. Concerning quality control, the defective components and finished products will be returned to their producers through reverse logistics systems. Nowadays, reverse logistics has been developed rapidly for increasing industries‘ competitiveness, promoting customer service level, and recycling the reusable material. Meanwhile, the demand of reverse logistics brings out a new market for the third-party logistics industries. Rogers et al. (1998) defined reverse logistics as ‗the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal‘. Figure 5 shows the structure of logistics systems, which includes forward logistics, backward logistics and information flow. The flow in black arrows presents the direction of reverse logistics, whose direction is counter to the ordinary logistics represented in hollow arrows. The information flow interlaces between different stakeholders within the system. Each stakeholder can communicate with the others directly to maximum their profitability. Reverse logistics will be adopted in various modes and applications in the future due to its efficiency and benefits in environment protection. The two main reasons behind the rise of reverse logistics are the globalisation of markets and policies for environment protection. A successful reverse logistics could help to increase the service level of companies and reduce the costs of producing processes. More and more companies want to build their reverse logistics system, however the system needs professional knowledge in logistics management and particular facilities. Thus the third-party logistics service provides another option for small to middle size
  25. 25. companies to have their reverse logistics system. Figure 6 shows a system of reverse logistics service on how FedEx, a thirdparty logistics provider, serves Acer computer, the customer company. At the first step of the system, the customer applies a request for returning the product through the Internet, and then FedEx builds the data of the products; meanwhile the system organizes the route of the delivery trips of the product. The customer can check the processing condition and wait for sending back at the right time. Maritime Logistics Maritime industry plays an important role in international freight. It can provide a cheap and high carrying capacity conveyance for consumers. Therefore, it has a vital position in the transportation of particular goods, such as crude oil and grains. Its disadvantage is that it needs longer transport time and its schedule is strongly affected by the weather factors. To save costs and enhance competitiveness, current maritime logistics firms tend to use largescaled ships and cooperative operation techniques. Moreover, current maritime customers care about service quality more than the delivery
  26. 26. price. Thus, it is necessary to build new logistics concepts in order to increase service satisfaction, e.g. real-time information, accurate time windows and goods tracking systems. The operation of maritime transport industry can be divided into three main types: (1) Liner Shipping: The business is based on the same ships, routes, price, and regular voyages. (2) Tramp Shipping: The characters of this kind of shipping are irregular transport price, unsteady transport routes, and schedule. It usually delivers particular goods, such as Dry Bulk Cargo and crude oil. (3) Industry Shipping: The main purpose of industry shipping is to ensure the supply of raw materials. This sometimes needs specialized containers, such as the high-pressure containers for natural gas. Air Freight Logistics
  27. 27. Air freight logistics is necessary for many industries and services to complete their supply chain and functions. It provides the delivery with speed, lower risk of damage, security, flexibility, accessibility and good frequency for regular destinations, yet the disadvantage is high delivery fee. ReynoldsFeighan (2001) said air freight logistics is selected ‗when the value per unit weight of shipments is relatively high and the speed of delivery is an important factor‘. The characteristics of air freight logistics are that: (1) Airplanes and airports are separated. Therefore, the industries only need to prepare planes for operation; (2) It allows to speed delivery at far destinations; (3) Air freight transport is not affected by landforms. Research data show that the freight transport market keeps growing. Given the trend of global markets, air freight logistics also has to change their services. The future tendencies of air freight development are integration with other transport modes and internationalization and alliance and merger between air transport companies The future pattern of air freight logistics is cooperative with other transport modes, such as maritime and land transport, to provide a service base on Just-In-Time, and door-to-door.
  28. 28. Land Logistics Land logistics is a very important link in logistics activities. It extends the delivery services for air and maritime transport from airports and seaports. The most positive characteristic of land logistics is the high accessibility level in land areas. The main transport modes of land logistics are railway transport, road freight transport and pipeline transport. Railway transport has advantages like high carrying capacity, lower influence by weather conditions, and lower energy consumption while disadvantages as high cost of essential facilities, difficult and expensive maintenance, lack of elasticity of urgent demands, and time consumption in organizing railway carriages. Road freight transport has advantages as cheaper investment funds, high accessibility, mobility and availability. Its disadvantages are low capacity, lower safety, and slow speed. The advantages of pipeline transport are high capacity, less effect by weather conditions, cheaper operation fee, and continuous conveyance; the disadvantages are expensive infrastructures, harder supervision, goods specialization, and regular maintenance needs. The excessive usage of land transport also brings many problems, such as traffic jams, pollution and traffic crashes. In the future, to improve the land transport in transport efficiency and reliability, a revolution of transport policies and management is required, e.g. pricing.
  29. 29. Express Delivery As the increasing demand of time accuracy and decentralization of production, the need to reduce stock costs has led to the Just-In-Time (JIT) delivery rinciple, which involves more frequent delivery of materials at the right time and at the right place in the production process. The characteristics of express delivery are: (1) door-to-door service; (2) efficiency; (3) traceability; (4) Just-In-Time (JIT); (5) growing various delivery demands. The trend toward increasingly compact products is expected to improve the cost-benefit ratio of express delivery by decreasing the transportation cost share. Smaller products will enlarge the market for express delivery services. Also, the increasing value of products requires rapid transportation, be-
  30. 30. cause companies want to reduce the interest costs bound up in stock and inventories. For future development, the industries should consider integrating the services with 24-hour stores so that customers could choose a certain shop as the pick-up station. Meanwhile, the services would become more efficient and controlled due to more regular routes to those shops instead of personal houses. E-commerce E-commerce is the future trend of business style. It brings many benefits for both companies and consumers: (1) E-commerce expands the market area from regional to global; (2) Ecommerce uses electronic techniques instead of traditional paper works, which promotes the industries‘ efficiency and competitiveness; (3) The number of trips is increased. On the other hand the average load of single trip is reduced, which means it needs higher carriage if using the same means of transportation; (4) E-commerce will impact on transport system due to the increased trips; (5) E-commerce might reduce the number of warehouses and the stock cost. Therefore the prices could be lowered. Figure 7 and Figure 8 express the differences between the transport patterns of traditional trade and e-commerce. However other new topics, of course, accompany with the system and need to be concerned, such as Internet security, transport impacts and door-to-door services. A healthy and successful e-commerce environment is determined by the optimal logistics operation.
  31. 31.  CITY LOGISTICS City Logistics is a concept trying to integrate the existing resources to solve the difficulties caused by the impacts of increasing population and vehicle ownerships in the urban area. Many cities, such as Bangkok, London, and Tokyo, have suffered from these problems due to traffic congestions, environment impact, low transport efficiency, and consequently the competitiveness of business decreased. This kind of condition not only reduces the quality of life in urban areas but also the future city development. City Logistics provides an opportunity for innovative solutions to be developed for improving the quality of life in urban areas.It contains several advanced techniques, such as Geographic Information System (GIS), Global Positioning System (GPS), logistics knowledge, Intelligent Transport System (ITS) and modelling, to optimise the city environment. Moreover, it helps to reduce both transport cost and negative environment impact.
  32. 32. Definitions of City Logistics City Logistics is the process for totally optimising the logistics and transport activities by private companies with the support of advanced information systems in urban areas considering the traffic environment, its congestion, safety and energy savings within the framework of a market economy. (Taniguchi et al., 2001b) Cities are the main locations of business activities. Hence they play an important role in economic development. However given the high concentrated development in urban areas, many cities have serious traffic problems and negative environmental impacts, such as noise and air pollution, this is the cost in both developing and developed countries. These negative factors reduce the economic ompetitiveness of a city and make its life quality declined. The residents become the victims in the highly developed cities. The way to solve and balance the condition became a demanding issue in the recent years. City Logistics is a new and innovative concept which aims to solve this complex problem. Urban freight logistics can be broken down in many elements, such as storage, transport and handling. Conventional improvement of the logistics process is usually only focused on single element. However, from a macro-viewpoint, the improvement can help bring the best profit to the society. Figure 9 shows the principle of the cost matters with different transport modes. Airfreight might be more expensive than land transport but the storage cost might be less. Thus in terms of total cost, airfreight might be the most reasonable transport mode for a particular transport purpose, for example, transport of fresh seafood.
  33. 33. FUTURE PROSPECTS OF LOGISTICS Facing the worldwide competition, the improvement of logistics system should be advanced by both private companies and government. Weeld and Roszemeijer (Ho, 1997) discerned three revolutions in business that have substantial impacts on the purchasing and supply strategies of the manufacturing sectors. These three revolutions are: (1) The globalization of trade; (2) The coming of the information era; (3) More demanding consumers and continuously changing consumer preferences. The main characteristics of future logistics development are: Government role: To keep competitiveness of industries, the government has to lead the way to assist the logistics industries. For instance, the idea of freight village of city logistics provides the environment to promote logistics efficiency and to reduce operation costs. However it involves large of investments and some problems relating laws and national policies. Without the lead and support of government, achieving the plan is difficult.
  34. 34. Growth of international goods transport: The up-growth of international freight transport is contributed by several factors. Firstly, the blossoming of E-commerce pushes ahead the international business activities. Secondly, the change of production strategy needs international cooperation, e.g. importing the semi-finished products from countries with cheaper human resources to those with higher technology to assemble the final goods. Thirdly, the pressure of globalised market, such as World Trade Organization (WTO), pushes local industries to promote themselves to reach an international standard and face the worldwide competition. Improvement of services: Providing a good customer service becomes a necessary requirement of business operation with the intense competition of global market. The quality of services is the main factor to affect consuming behavior among the enterprises with high similarity. The service systems involve several developed techniques now, such as Efficient Consumer Response (ECR) and Quick Response (QR). In the near future, more new techniques would be applied in providing better services for customers. Revolution of logistics operation: IT techniques and its products bring efficiency and fluency to the logistics systems. Radio Frequency ID (RFID) is one of these techniques. The main difference between the bar-code system and RFID is that RFID does not need the action of scanning the barcode on goods. RFID could save manual operation time dramatically. RFID systems could sense the amount of
  35. 35. goods input in the tags automatically and immediately when the costumers push their trolley through the exit (Carroll, 2004). Shorter product life cycle: With the current trend, the merchandise design is changing day by day, and therefore, the product life cycle is shorter and shorter, especially in computer science. To confront the impacts, logistics system must improve its efficiency and reliability of goods delivery. Otherwise an inappropriate logistics system would hinder the competitiveness of new products and the business profits. Improvement of logistics facilities: The advancement and development of logistics are based on several techniques and complete theories. High-tech facilities and systems, e.g. ITS, could bring more possibilities and advantages to logistics. For example, the improvement of related facilities, e.g. Forklift Trucks, is necessary for transport efficiency. In the future, factory automation is the main target for the whole supply-chain procedures. It could help to improve efficiency and also reduce the operation costs. Channel cooperation between companies: In order to save the logistics costs, a key concept is to maximize the usage of available transport capacity. Integrating the logistics demands between numerous departments helps achieve this purpose. In practice, a conglomerate could develop its own logistics service for the branches. For some medium size companies, they could co-operate transport channels with others.
  36. 36. Specialized logistics delivery: One of the notable trends of logistics industries is specialized delivery service. For instance, delivering fresh food from the place of origin needs low-temperature containers. Compute chips, gases and petroleum need particular conveyances to carry. These demands are rising since the products became more and more delicate. Logistics centers: The development of logistics centers is good for industry promotion and the development of national economic system. Logistics centre‘s could successfully shorten the distance between production and marketing vertically and also integrate various industries horizontally, and thus decrease the costs. Governments can propose special areas for storehouses and logistics to reduce land acquisition. The future logistics will co-operate e-commerce, the Internet and the newly door-to-door service to create new business prospects. Freight transport: The alliance between middle-small size delivery companies is an important trend in the future. The strategy could help to expand service areas and increase service quality, and meanwhile raise the loads of single trips to reduce delivery costs.