This presentation provides a brief introduction about “supply chain management” and especially, the role of transportation in the smooth operation of “modern” supply chains is discussed.

1. Supply Chain Management:
An Introduction
Behzad Behdani
b.behdani@tudelft.nl
behzadb09@gmail.com

2. Learning objectives
• A generic understanding of:
– What is a supply chain
– Which aspects might be important in supply chain
design/operation
– What decisions companies face in making and
moving products around the world
• A general discussion on some main trends in
the supply chain management and how this
may impact the role of transportation

3. What is a Supply Chain?
• A supply chain consists of
All parties involved, directly or indirectly, in the flow and
transformation of goods and services from raw materials to
customer
Supplier
Upstream
Manufacturer
Distributor
Retailer
Customer
Downstream

4. SCM in a Supply Network
Cash
Products and Services
Information
CHINA
N-Tier Suppliers
THAILAND
NETHERLANDS
Manufatureres
Logistics
GERMANY
Distributors
GERMANY/POLAND
Retailers
 Supply Chain Management (SCM) is concerned with the
management and control of the flows of material, information,
and finances in supply chains so as to provide the desired levels of
service to supply chain customers in most profitable way

5. The objective of a Supply Chain
• The objective of every supply chain is to
maximize the overall value generated.
• For most commercial supply chains, value will
be strongly correlated with supply chain
profitability, the difference between the
revenue generated and the overall cost across
the supply chain.
• For any supply chain, there is only one source
of revenue: the customer.

6. The objective of a Supply Chain
(cont...)
What makes customers
happy:
• Low price
• Variety of options
• Good quality
• Product availability
• …
First rule in supply chain:
Select a customer segment and adapt your supply chain
based on the service needs of that customer segment

7. The range of possible supply chain designs
Efficient SC
Responsiveness spectrum
Cost-sensitive SC
Efficiency:
• Producing and supplying at
lowest possible cost
Responsive SC
Time-sensitive SC
Responsiveness:
• Meet short lead times
• Handle a wide variety of
products
• Meet high service level

8. Cost-Responsiveness Tradeoff
Responsiveness (in time, high service level and product variety)
High
Low
High
Cost
Low
Ref: Sunil Chopra and Peter Meindl (2012). Supply Chain Management: Strategy, Planning, and Operation, 5th edition,
Pearson Education.

9. The range of supply chain designs
Commodities
Detergent
Rice
Pasta
Price
Low
Customized products
High Fashion Clothing
PC
Notebook
Customer Need
Responsiveness
High

10. Drivers of Supply Chain Performance
How to achieve
Efficiency
Responsiveness
Supply chain structure
Facilities
Information
Inventory
Sourcing
Transportation
Pricing
Logistical
Drivers
CrossFunctional
Drivers
Ref: Sunil Chopra and Peter Meindl (2012). Supply Chain Management: Strategy, Planning, and Operation, 5th edition, Pearson Education.

11. Drivers of Supply Chain Performance
(cont…)
Driver
Responsive
Efficient
Facilities
• Excess capacity
• Little excess capacity
• Many smaller facilities close • Few centralized facilities
to customers
serve wide areas
Inventory
• High inventory level
• Wide range of items
• Low inventory level
• Fewer items
Transportation
• Frequent shipment
• Fast and flexible movement
• Shipement few, large
• Slow cheaper modes
Information
• Collect and share timely
more information
• Minimize /rationalize the
cost of collecting
information
Sourcing
• Assigning tasks based on
uncertainty handling
• Assigning tasks based on
economies of scale
Pricing
• Differential pricing startegy
to attract more customers
• Fixed pricing startegy

12. Some trends in managing supply
chains
• Globalization and Global Supply Chain
Management
• Outsourcing
• Just-in-Time
• ….

13. An example of global sourcing in
supply chain
Source: Daniels, J. D., Radebaugh, L. H. and Sullivan, D. P. (2004). International Business: Environments and
Operations, Addison-Wesley.

14. What means this globalization of
business for transportation?
• Transportation is key to success of every
supply chain

15. What means this globalization of
business for transportation?
600
milion TEU
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
World Container Traffic and Throughput (Source: World Bank database)

16. What means this globalization of
business for transportation?
• Similar trend can be seen in main EU ports
12
11
Million TEU
10
9
Rotterdam
8
Hamburg
7
Antwerp
6
Bremen
5
Valencia
4
3
2
2006
2007
2008
2009
2010
2011
Container traffic in main European ports (Source: website of Port of Rotterdam)
16

17. What means this globalization of
business for transportation?
Maersk Mc-Kinney Møller
18,270 TEU
Source: http://maritime-connector.com/ships_uploads/maersk_mc_kinney_moller-9619907-container_ship-8-168317.jpg

18. Source: http://www.porttechnology.org/news/maersk_mc_kinney_moller_arrives_at_europes_largest_port

19. Maersk Mc-Kinney Møller in China
Source: http://www.shipspotting.com/gallery/photo.php?lid=1841852

20. Maersk Mc-Kinney Møller in Rotterdam
Source: https://worldmaritimenews.com/archives/92900/maersk-mc-kinney-moller-blazes-trail-of-record-productivity-at-ports/

21. How transportation system can support
the requirements of supply chains?
≈ 2 € / container.km
Source: http://www.ect.nl
≈ 0.21 € / container.km

22. Business for global supply chains is
more risky

23. Risk in global container movement:
just one example
Source: wikipedia.com
Expansion of pirate operations

24. Is your container on board?

25. More risk sources in a global supply
chain
• Port-related disruptions:
– Natural disasters (like earthquake)
– Labor strikes
– Terrorist attacks
–…

26. More risk sources in a global supply
chain: natural disasters
th
• The Port of Kobe, Japan, once the 5 largest container
port in the world, has fallen to 39th as a result of
extensive damage caused by the 1995 Kobe
earthquake, which required two years to repair.
• Aftermath of 1995 earthquake,
some traffic flows in the port of
Kobe redirected to nearby hub ports
such as Busan, Shanghai and
Kaohsiung, some of which never
returned even long after the cargohandling capacity was restored.
Source: Fujita, M. & Hamaguchi, N. 2012. Japan and economic integration in East
Asia: post-disaster scenario. Annals of Regional Science, 48, 485-500.

27. More risk sources in a global supply
chain: natural disasters
Source: Watanabe, Y. (2006), “Impact of the Kobe Earthquake on Transportation and Port Logistics: Lessons
Learned”, International Conference on National Security, Natural Disasters, Logistics and Transportation

28. More risk sources in a global supply
chain: port strike
• The economic impact of the two week labor
disruption at US West Coast ports in October 2002 is
estimated at $1 billion to $2 billion per day.
Source: Sheffi (2005), “The Resilient Enterprise”

29. More risk sources in a global supply
chain: security issues
• Supply chain security is a major concern although no specific
terrorist attack to ports is reported.
• Current Supply Chain Security Programs
– Customs Trade Partnership Against Terrorism (C-TPAT)
– Container Security Initiative (CSI)
– Secure Freight Initiative (SFI) …
• A new Law has born: 100% Container Scanning Legislation

30. More risk sources in a global supply
chain: security issues
• 100% scanning rule: On 3 August 2007 the US
enacted the “Implementing Recommendations of
the 9/11 Commission Act of 2007”. The act
introduced a 100% scanning requirement for USbound maritime cargo at export with
implementation as of 1 July 2012. This
requirement came in addition to existing US
security measures applied at arrival.
• The implementation date is later extended to
2014.

31. More risk sources in a global supply
chain: security issues
• A total of €430 million would be required for
investments for scanning and radiation detection
including significant changes in infrastructure to create
space for extra facilities for ports and terminals
involved in US bound container traffic.
• Operational costs in European ports would rise by
more than €200 million annually, including expenditure
for 2200 extra staff.
• Direct transport costs of US-bound consignments
would increase by about 10%.
• Ports unable to implement 100% scanning would lose
access to the US market; this would tend to increase
congestion and environmental costs for other ports.
Source: European Commission Staff Working Paper. Secure Trade and 100% Scanning of Containers. February 2010

32. Other issues in global supply chain
management
• National cultures and Communication
challenges
• Different regulations
• Financial issues (e.g., exchange rate
fluctuations)
• Political and social instability
• …

33. Outsourcing and increased
complexity in freight transport
• Outsourcing refers to the strategic decision to shift one
or more of an organization’s activities to a third-party
specialist.
Source: Fransoo, J.C. and Lee C.Y. (2010), “Ocean container transport: an underestimated and critical link in global
supply chain performance”: http://cms.ieis.tue.nl/Beta/Files/WorkingPapers/Beta_wp303.pdf

34. Outsourcing and its impacts on freight
transportation
• Lack of visibility: lack of access to necessary
information
• Fragmentation of management: control of resources by
different actors
• Hindrance of interests of main players: the voice of
final customer might be ignored
• Coordination issues: how different activities of
different actors in a supply chain must be coordinated?
How interests of different actors must be aligned?
• Risk management issues: in case of disruption, the
necessary resources to handle a disruption is
distributed among multiple actors.

35. Just-in-Time (JIT) philosophy
• A philosophy that seeks to eliminate all types of waste (like
excessive levels of inventory and waiting times)
• The idea: replenishing material buffers just when they are
needed and not before or after.
Source: Dan Reid, R. & R. Sanders (2010), “Operations Management”, 4th Edition, Wiley.

36. Just-in-Time (JIT) production and its
impacts on freight transportation
•
•
•
•
Little or no buffer in the system
Time compression
Importance of synchronisation
Flexibility in port operation is important
Every one in the network under
stress?

37. Summary
• Supply chain is designed/operated to provide
value for customers and supply chains may take
different forms based on customer needs
• Supply chain management is al about a systemic
view and integration of activates in a supply chain
• Each port is a member of many supply chains and
aligning ports strategy with requirements of
multiple supply chains can be a challenge
• With globalization and outsourcing, there are
more difficulties in the smooth operation of
supply chains

38. Just like passenger transport, in “freight
transport” we need:
Innovation
Economies of scale
Cooperation
Sustainability