Saturday, 30 May 2015

Chit Chat: Automotive Trends in 2015 - Part 2

Last Saturday we mentioned that one of the main automotive trends for 2015 is the connectivity of the car. In order to achieve connected cars there will be two major developments in the market.

  1. Technical integration and infrastructure development
  2. Various market players including software developers, telecommunication carriers and platform providers introducing new in-car allocations.
Decisions will need to be made as to whether the companies will need to use their own applications or make use of the applications created by the multiple market players. Leading luxury and high end automotive manufacturers will be the ones behind the innovation and technology. It is expected that the in-car connectivity will be found in 80% of luxury vehicles by the end of the year. They will have their own transmitter and receiver units. It’s expected that around 33% of city cars will have connectivity and these will be appealing to the younger drivers and the urban market. In City Cars the connectivity will be available via the driver’s own smart phones rather than a unit.

Young drivers will not want to pay for their connectivity and so low cost and flexible solutions will need to be found. An aftermarket in car connectivity solution will be difficult because of the lack of ability to retrieve the date of the car. The aftermarket will therefore won’t be focused on the data from the vehicle. Manufacturers will need to be focused on customer loyalty to protect their aftermarket revenue from third party providers.  So the aftermarket will focus on applications, especially after 2015.

Friday, 29 May 2015

About the carrier decision-making problems

There are several problems that are experienced during the carrier decision making. These problems include:
  • Dynamic driver assignment problem – This is a problem found in TL trucking where the crews are assigned to the vehicles so they can support the operations that have been planned. The problem is when a loaded vehicle is waiting to be fully loaded even though it is assigned to a scheduled operation to a driver. The vehicle isn’t fully loaded immediately as the customer information regarding their demands is not given in advance and each driver is supposed to be assigned to one of the demands at a time.
  • Fleet-composition problem – Carriers work to save money by avoiding using their maximum number of vehicles needed during peak times. They use a base number and will hire additional vehicles when the peak period arrives. They work to save money by minimising the total cost of the hired vehicles and the use of their own vehicles.
  • Vehicle allocation and scheduling problem – Carriers work to get the best use from their fleet by creating an optimum allocated schedule that responds to the highest number of demands. The carriers decide how the demand needs to be responded to and which demands to reject. 

Thursday, 28 May 2015

The 3 Planning Level of Transportation System

The three planning levels of the transportation system are as follows:
  • Strategic planning is for the long term. The decisions are made at the top level of management and they require long term investment. The decisions result in the creation of general policies and the structure of the functional strategies that will be used in the system. An example of a decision made in the strategic planning is the locating main facilities such as the hubs.
  • Tactical planning is for the medium term and it requires a medium term investment. This planning isn’t as critical as strategic planning. The system involves a well organised allocation and operation of resources that are used to make improvements to the system. Examples of the decisions that are made in tactical planning include the schedule of service, positioning of fleets and the routing of traffic.
  • Operational planning works in the short term and in times that require urgent decisions to be made. The local management and dispatchers are the ones involved in this planning. These decisions don’t demand large investments to be carried out. The schedules, crews and maintenance activities may be completed or adjusted, along with routing and dispatching the vehicles for example.

Wednesday, 27 May 2015

The Different Long Haul Consolidated Freight Transportation – Part 2

In yesterday’s post we took a quick look at the long haul consolidate freight transportation system. Within this system, there are different networks that are put to use. Today we’ll be focusing on the rail-transportation networks and the LTL networks and the difference between the two.

Railway Transportation Network
A railway network includes double or single track lines. The lines connect different train yards together and when a customer needs a service the nearest yard to the customer are chosen. A suitable amount of railcars is selected, inspected and then transported to where the freight needs to be collected. The cars are loaded with the freight before returning to the original yard to be grouped, consolidated and assembled into blocks.  The blocks are then consolidated into a single unit and they may have different final destinations. The blocks will be separated along the line of the track when they reach the correct destinations. At the end of the line the railcar will be moved to the next pick up point or wait for another assignment at the yard.

LTL Transport Network
The LTL network involves smaller vehicles that are sent from different points of origin to deliver freight to the end of line terminals. Once they meet up at the break bulk terminal they are grouped together and consolidated into larger batches to be sent on the long haul journey. 

The Differences between the LTL and Railway Systems
The LTL works in a similar fashion to the railway system, but they are simpler to operate. They have much more flexibility as compared to the railway system as they are able to choose the best way to move the freight to the final destinations. Railway systems are limited as they are limited to using the single or double tracks, whereas the LTL can use any road so long as they obey the weight regulations.

Tuesday, 26 May 2015

The Different Long Haul Consolidated Freight Transportation – Part 1

There are a variety of transportation options for shipments travelling over long distances or between cities and terminals. The various forms of transportation include rail, ship, trucks and aeroplanes. Long haul consolidation transportation systems include the entire network of links and related terminals. The carriers perform the transportation service by making use of the multiple vehicle options, such as using trailers, railcars, ships, containers or another other form of transport included in the system.

The terminals have different designs are varied in size and they play an important role in the freight network. Some will be designed for a particular operation or designed for a single type of shipment. Others may have multiple types of transportation available and be able to accommodate a variety of shipments. Railway transportation network and LTL network are the main networks that put to use in the system.

Monday, 25 May 2015

What is the Delivery Frequency System?

A good delivery frequency can decrease equipment and facilities investment while saving money in logistics and reducing the cost of transportation. There are three approaches for choosing delivery frequency system are customized transportation, consolidation transportation, and frequent operation.

Customized transportation approach allows truckload driver or driving team to dedicate to a specific customer and creates a dynamic environment for carriers. Most transportation specifications related to customers, which hence creates a dynamic environment for truckload carriers.

Consolidate transportation is one of the popular methods to allow the business to take advantage of the economies of scale by substituting large cargos for smaller ones.  Consolidating freight covers the following three policies:

o    Quantity policy – the maximum capacity of the vehicle to be used by carrying the maximum number of freight quantity
o    Time policy – Time being the most important factor of a delivery
o    Quantity and time policy – both being the important factors

Consolidating freight covers the above policies and ensures the vehicle doesn’t ship the goods until it is full. As a result lower costs are achieved and high capacity usage is maintained.

Frequent operation is a third alternative that carriers may use. The carriers give a fixed schedule that matches the customer shipping requirements. The deliveries are fully organised in advance but this method does come with a level of uncertainty. In order to manage the uncertainty the carriers have to make a higher-capacity investment but the advantages are the accurate delivery dates and the predictable schedules.

Saturday, 23 May 2015

Chit Chat: Automotive Trends in 2015 – Part One

One of the automotive trends in 2015 is the demand for in-car services. There are three factors that characterise this trend:
  • Relation to Mobility
  • Individualisation
  • Brand identity of the vehicle
The relation to mobility is the biggest factor to creating a connected car. There are services that are being used such as the enhancement of navigation along with quality of content that will determine the success of the in car services. 

Customers are showing to be willing to pay for these services but they must be timely. 

The individualisation is being demanded by the younger drivers. The younger drivers love to embrace technology and they want their own car to be an extension of their own virtual environment. The car needs to be able to take their social media and provide personalised services and an individual user profile to meet their demands.

Branding is also a trend that manufacturers are focusing on. The branding helps them to separate themselves from their competitors and give them an edge by building on customer loyalty.

Friday, 22 May 2015

What are the Different Transportation Participants?

There are three transportation participants:

The Shippers – Shipper services are considered to be one of the best ways of transporting freight. The shippers will move the freight from the source to the set destination, providing their customers with the lowest costs while shipping in a set time period. The shopper will ensure the freight is collected and delivered on time and that there are no damages or losses.

The Carriers – Carriers provide services on transportation such as railways, shipping lines, tracking companies, intermodal container services, postal services and are classified into the following three carrier classes: common (e.g.: public airlines, motor carriers, cruise ships, bus lines, railroads, and other freight companies), private, and contract. 

Manufacturers and distributors generally choose between these classes for transporting goods and products according to their market needs. Usually, the common carrier’s route is defined and set in advance, while the rates and time schedules for transporting people and goods have been approved by regulators and government bodies.

Common carrier offers the general public their service under license or the authority provided by a regulator but it is often hard to anticipate the number of customers in advance. To resolve the issue of shipments predictability, some firm may opt to use private carriers to deliver their products to their end users due to its flexibility and economy. While a contract courier act as a for-hire carrier agent that under specific contractual arrangements serves a limited number shipper at a specified cost.  They are similar to private carrier with the exception that they do not serve the general public and have contract rates that are lower than the common carriers.

Government – The government provides public transportation services in most countries. They plan the roads, rail and port facilities, construct them and operate them. The government is also responsible for the control of shipments, such as hazardous products, and they tax the industry.

Thursday, 21 May 2015

The Role of Transportation in Logistics

Transportation is a vital part of logistics, demanding between one to two thirds of the total costs. Transportation is essential as it is required for the movement of the shipments, be they raw materials moving from the source to the manufacturer of products that are semi-finished being moved from plant to plant to the final goods that need to be shipped from the retailers to the customers.The world we live in is now deeply technological and consumption has grown rapidly along with commerce on a global scale. 

Transportation is unavoidable and therefore there is a high level of competition between the transportation holders and the manufactures that wish to provide excellent customer services.  Competitive factors are also driven as the lead times are reduced, efficiency is increased, reliability and flexibility is a concern and the overall costs of the transportation services. 

As most manufacturers rely on complex shipping process through sales agents and/or  broker to bring their product to end users, the product cost is often increased due to the additional cost in the distribution process.  We call the path followed by a shipment from producers to customers, the distribution channel.  

These channels are classified into four groups. In the first distribution channel, manufacturers sell their products (e.g.: cosmetics, encyclopedia, handcrafts, etc.) directly to end users. In the second distribution channel, retailers or wholesalers may play a more intermediary role depending on product (e.g.: tire, etc.).  While distribution channel three, usually refers to the food industry and lastly, distribution channel four is similar to that of distribution channel three. A producer contracts with a broker or a sales agent who then sells products to wholesalers such as in the clothing industry.

Wednesday, 20 May 2015

Framework for the Development of an Effective 3PL

A 3PL company needs to have a framework on which the 3PL system is built. The framework consists of five dimensions:
  • Strategic planning
  • Inventory management
  • Transportation
  • Capacity planning
  • Information technology
This is a framework that helps the smaller logistics providers to transform their company to the level of a 3PL provider. As companies continue to demand outsourced logistics the market has had to increase. As a result, logistics has attracted more attention and investigations. The 3PL industry continues to expand both locally and globally. The providers need to make sure they are integrating information technology in order to be able to deliver the services being demanded by their clients and to develop relationships with the firms and the customers.

Tuesday, 19 May 2015

3PLs Strategic Behaviour

3PLs may need to adjust their strategic behaviour by offering different portfolios of services due to the dynamic business environment. Providers are split into two dimensions: providers of a specific service and the providers that perform the traditional warehousing and transportation activities verses the providers who have the traditional services along with value added services.

Service providers may need to develop high quality IT support systems and the solutions providers are better to have adaptive systems that are flexible to support the different needs of their customers. It is important to note that when the shipper considers logistics to be a core activity, they will choose service providers and if they do not, then they choose a solution provider. Whether the providers choose to strategically provide a service or solution, it may result in different outcomes and should be addressed carefully.

There are also two major issues that a provider should consider in terms of strategic positioning. A provider need to consider the different skill sets required by for a solution provider and those of a service provider. The solution providers should have analytical skills, along with logistics design and subcontracting skills much more so than a service provider. 

Monday, 18 May 2015

What is the Framework for the Purchasing Process of 3PL?

There are several general steps that are part of the 3PL buying process:
  • Identifying the need to outsource logistics
  • Investigating the alternatives
  • Evaluation of a selection of candidates and the final selection of the supplier
  • Implementing the services
  • Continuation of service evaluations
The framework includes multiple phases, which are as follows:
  • Establishing the types of service
  • Ensuring the volume of the service is understood
  • Standardising and simplifying the process
  • Performing a market survey
  • Requesting information from providers
  • Requesting a proposal from those providers who successfully made it through the screening process
  • Negotiating deals
  • Forming the contract
One of the challenges in the purchasing process is contracting. Contracts help reduce business partnerships risk and explain how the logistics processes, activities, roles, responsibilities, incentives, and penalty system is developed.

There are two opposing views on contracts:
(1)  Signing formal contracts is necessary for defining and managing 3PL roles and relations
(2) Detailed contracts can be an indication of lack of trust

Saturday, 16 May 2015

Chit Chat: Supply Chain Trends for 2015 – Part 3

Today is our final look at the supply chain trends we’re expecting to see grow during 2015.

We’re living in the age of personalised services and products are proving to be popular. There are an abundance of personalised products and services that are readily available, everything from personalised sweet to one on one consultations. What’s next? 

Patient centric medicine and this is expected to take off quickly. The federal government are in fact pushing for personalised health care, so it seems to be a way the world is going to turn.

The pharmaceuticals, who is considering adapting to patient, centric medicine will need to provide their consumers with in-depth and tailored medications to fit in with their health requirements and lifestyle, and ensure that their customers are able to access their products quickly and easily.  Therefore, many changes will need to be introduced along the entire supply chains of the pharmaceuticals offering these services to their customers.

Friday, 15 May 2015

Selecting the Right 3PL

A firm needs to use the following criteria to help them to find the best 3PL service providers for their needs:
  • The experience of the firm and the quality of service, which is far more important than the costs.
  • The flexibility of the 3PL, the higher amount of flexibility is favourable and they must also have a good record of reliability of deliveries and throughput rate.
  • 3PLs should be willing to hold discussions with the shippers frequently.
  • They must have a cost control system with a tariff structure that is clear.
During the screening process,  you’ll need to consider the reputation and seek references from past and current clients. You should also use their performance metrics, services and use of IT in the evaluation. It’s important to pick a 3PL who is in a strong position, profitable and stable so they are more likely to remain in business for a long time.

Thursday, 14 May 2015

What is the Future of Logistic Parties Trends?

Since 4PL and 5PLs have emerged, many firms are now looking at changing the way their logistics departments work, creating a virtual format of zero party logistics. The zero party logistics do away with the 3PL and the 4PL and makes use of the methods of the 5PL to create a virtual organisation.

In addition to the zero party logistics there is a new concept on the horizon, seventh party logistics. This is a hybrid, combining the 3PL with the 4PL. The physical processes and the expertise of the 3PLs are used to enhance the IT and consulting capabilities of 4PLs.

These two new concepts are not yet in place and haven’t been applied intensely to date. However, it is expected that they will continue to grow.

Wednesday, 13 May 2015

What’s the Difference Between 3PL and 4PL?

Many people don’t fully understand the difference between the 3PLs and the 4PLs so here’s a quick list into some of the main differences that stand them apart from one another:
  • 4PLs will act as a single interface and work with the client along with many LSPs
  • The 4PL will deal with managing the entire supply chain for the client.
  • The 4PL is commonly a separate entity that is created as a joint venture between the main client and the multiple LSPs.
  • 3PLs can create their own 4PL firm within the structure that they already have in place.
How 4PL generally works:
  • 4PL and 3PL form a partnership and provide supply chain solutions together.
  • The industry innovator 4PLs will focus on collaboration and ensure their services are synchronised across the supply chain and different industry players.
  • 4PL solution integrators will operate and manage a supply chain for one client, using their resources, technology and capabilities along with using the services of other LSPs for their client.

Tuesday, 12 May 2015

About the New Generation of Logistics Parties – Fourth Party Logistics and Fifth Party Logistics

Firms usually outsource their traditional logistics activities to 3PLs. However, there are new generations of logistics popping up for a more suitable manner of logistic activities. These are beneficial to companies who are looking for more coherent systems.
  • Fourth Party Logistics - 4PL is growing rapidly in supply chain management. They integrate many resources and have vast capabilities and technology to create and run solutions for the supply chain. 
  • Fifth Party Logistics - 5PL is newer and certainly one to watch. The 5PL providers manage the supply chain with e-Business and use an e-logistic network on a global scale.  They fill in the gap between 3PL and 4PL by using the firms’ infrastructure and their technology in order to optimise and create a virtual organisation.

Monday, 11 May 2015

What are the Types of 3PLs?

It is important that companies investigate different 3PL providers to find one that will be compatible with the firm and suitable for a long term business relationship. There are different types of 3PLs to choose from, which are:

Standard Third Party Providers
  • The basic 3PL providers deal with basic functions including: picking, packing, warehousing and distribution.
 Service Developers
  • The service developers offer value adding services including: cross docking, track and trace, packaging and security systems.
 Customer Adapters
  • The customer adapters will take control of the logistics for the company and provide them with the usual services.
 Customer Developers
  • The customer developers integrate with customers and control the whole logistic function. They are the highest level of 3PL providers and will execute tasks comprehensively for few customers.
There are other classifications for 3PL, which are: non-asset based 3PLs and asset based 3PLs. The non-asset based 3PLs don’t own any assets so they work with subcontractors. Asset based 3PLs have assets such as their own trucks and warehousing.

Saturday, 9 May 2015

Chit Chat: Supply Chain Trends for 2015 – Part 2

One of the trends in the supply chain is the demand for information. As contaminated and counterfeited risks increase as a result of globalisation, governments will demand more transparency throughout the chain. However, it’s not only the governments that want to increase the sharing of information, customers to place extra demands of firms as they wish to know more about the products they are buying. These pressures mean that firms now have to adapt to using new technologies in order to make their information visible at all stages.

Pharmaceutical companies are already facing these changes. The use of RFID technology is increasing, but the standards are expected to become even tighter and there may be greater levels of intervention at a Federal level in 2015 and beyond.  The industry is likely to take control in developing the standards and the controls in order to reduce the risk of their economic values being affected by regulatory intervention. The consumers are also paying more attention to their health and seeking out their own information regarding health care in order to make up their minds. Additionally, the consumers are creating information themselves, as reviews and feedback are being shared online.

Friday, 8 May 2015

What are the Advantages and Disadvantages of 3PL?

Let’s take a look at the different pros and cons of using and building a long term relationship with third party logistics providers.

Advantages of Using 3PLs
  • Improving efficiency by exploiting economies of scale
  • Improving capacity especially when compared with using different clients that may not provide consistent transport quantities
  • Firms using 3PL can reduce their capital investments.
  • Companies are able to reduce their financial risks as the 3PLs outsource to subcontractors such as distribution centres and information networks.
  • Companies are able to expand on their services and increase their bargaining power.
  • Customer services are improved.
  • New systems are quickly implemented and supply chains can be restructured.
Disadvantages of Using 3PLs
  • Difficulties in establishing the cost effective partnership between the shipper and the 3PL.
  • In order to establish a relationship the firm will need to concentrate on 3PL selection and the signing of the contract.
  • Firms that organise in-house logistics may lose their own expertise in logistics by outsourcing.
  • Sharing confidential information may leave some firms feeling vulnerable.

Thursday, 7 May 2015

What are the Activities of 3PLs?

3PLs provide a vast amount of services and global functions. In general the activities include transportation, warehousing, freight consolidation and distribution, cross docking, labelling and packaging, carrier selection, returns, traffic and fleet management, auditing, reverse logistics, order management and logistics information systems. In addition to these services the 3PLs also provides the following functions:
  1. Planning functions involve the selection of location and suppliers along with contacting suppliers and scheduling.
  2. Equipment functions involve the selection, allocation, sequencing, positioning, inventory control, repairs and ordering.
  3. Terminal functions include the gate checks and the control of locations.
  4. Handling functions deal with the pickup and the consolidation of loads, transloading, expediting, distribution and diversion.
  5. Administrative functions involve order management and the preparation of documentation, customs clearance, invoicing, performance evaluation, communications, inventory management and information services.
  6. Post and pre-production functions deals with the receiving, assorting, packaging, marking and postponement.
  7. Warehousing functions involve receiving goods, inventory control and the reshipment of goods.
  8. Transportation functions deal with the modal coordination, the line haul services along with trace and tracking.

Wednesday, 6 May 2015

About Logistics Parties and 3PL

In recent years, outsourcing logistics services has become more popular. These days it is common for long term relationships to be built up between companies and logistics parties, especially the third party logistics service providers. 

Dealing with the movement and storage of materials and products while providing excellent customer service is no longer the sole purpose of logistics. It now also involves new factors including sourcing, IT, business models and management strategies, global markets as well as keeping up with the trends in customer satisfaction and new transportation services.

Logistics has now become part of the value of a product, due to the increasing costs. As a result, logistics management is one of the important parts in the international competitive market. The outsourcing to 3PLs isn’t a new concept by any means. 

In the fifties and sixties warehouses and transportation were often outsource but it wasn’t part of the business strategy of the firm who was outsourcing. It wasn’t until the seventies that companies began looking at ways of reducing costs and working with 3PLs who were able to offer dedicated facilities for their clients, reduce the costs and improve customer services. When the Internet became popular in the nineties, global sourcing resulting in further parties being created, the 4PLs and the 5PLs became the new generation.

Tuesday, 5 May 2015

What are the Five Layers of Logistic Services?

Today we’re looking at the five layers that are found in logistic services.

First party logistics
The shippers are the cargo owners who decide on the supply and the demand of the cargo. This is all performed by the firm. These days, many of the offshore manufacturing and distribution services are now outsourced as a result of globalisation.

Second party logistics
Transport service providers are involved in the second party logistics services. They provide a service over part of the chain, such as rail, trucks or ships that move the cargo as it moves from the point of origin to the destination.

Third party logistics
Third party logistics, or 3PL, involves freight forwarders who offer a comprehensive service that moves freight along the transport chains. The services they provide include: warehousing, packaging and labelling, transloading, light manufacturing and terminal operations.

Fourth party logistics
Adding value is possible by using the fourth party logistics services. They redesign the processes and manage the logistics for carriers, warehouses or forwarders. The 4PL often outsource to the 3PLs and the 2PLs as they don’t own their own warehouses or modes of transport. They provide a management service and will go on to create the supply chain for their customers by outsourcing.

Fifth party logistics
The fifth party logistics service focuses on getting better rates for bulk volumes of cargo for the 3PLs and other logistic service providers.

Monday, 4 May 2015

What are the Different Types of Logistic Philosophies?

Today we’re taking a brief look at the various philosophies found in logistics, which are:

Lean Logistics Philosophy
Lean philosophy aims to eliminate waste throughout the supply chain. The lean concepts were also used in manufacturing, transportation and warehousing. True lean achievement requires changes in inbound and outbound sides in logistics. For example, changes include all activities from design to actual manufacturing in the manufacturing process.

Japanese Philosophy
The Japanese philosophy is also known as the ‘just-in-case’ philosophy.  This is when the suppliers would hold lots of extra stock in their inventories just in case they were required. This also prevents the management from seeing the manufacturing process and any issues coming up, such as bottle necking and problems with quality.  With this philosophy, Japanese created the Kanban concept, which is a pull system to make sure the products supplied from the assembly lines can arrive in time to meet the demand.

Just-in-Time Philosophy
Just-in-Time system aims at reducing the amount of inventory that needs to be held along with improving customer service and quality of the product. This can be done by minimising unproductive time in the production process. There are several benefits found when using this philosophy: improvement in the turnover of the inventory, improved customer service, faster response times and reduced space requirements.

Saturday, 2 May 2015

Chit Chat: Life Science Supply Chain Trends for 2015 - Part 1

One of the three key trends that are taking place during 2015 is the evolution of emerging markets. Globalisation has had a huge impact on the supply chain and created multiple problems such as contamination and counterfeiting. Companies now have to find ways of hitting the moving target. Outsourcing from China and India is no longer just about low cost labour for manufacturing and customer services. It now includes advanced work, clinical research for example.

The low cost factor is also changing and many companies are now looking for even lower costs in other locations. Chinese wages increased by 224.5% between 1997 and 2006 and they are projected to rise continuously. Indian wages in manufacturing also rose by 13.8% in 2006. 

Increasing in earnings means that the advantages of outsourcing to these countries are no longer as advantageous as they once were. Finally, Chinese and Indian consumers are earning more and therefore they are now a market that is prime for revenue growth.

Friday, 1 May 2015

What are the tools for logistics strategic decision making?

There are many tools that are required in the strategic planning making:
  • Benchmarking tools are all about comparing the performance of the logistics systems to the standard best practice performance. There should be a focus on finding where the competitors are failing their customers and filling these gaps in the market.
  • Optimisation programming involves using algorithms to come up with solutions. Some common ones used in logistics strategies are the Tabu search, simulated annealing and genetic algorithm.
  • Simulation is used to evaluate the way a system works under different conditions. The results are shown along with the reactions to the scenarios and these tools are used to evaluate strategies before capital is spent and logistics are established.
  • Continuous approximation is a tool that can be used when demand is high as there are many customers, resulting in a continuous spatial function.
  • Forecasting often determines the uncertain outcome of variables. In logistics, customer demand, prices or raw materials, lead times and labour costs are predicted during forecasting. There are long, medium and short term forecasts.