FREIGHT LOGITICS OPERATION (FLO)

Module objectives:
 Role of forwarder in logistics
 Logistics systems
 Steps in a logistics project
 Terms: JIT, pull systems, physical distribution, supply chain, tailor made services
 Warehousing procedure, types of warehouse, financial aspects of storage

Management actions
Planning Implementation Control

Inputs Outputs
Suppliers into Logistics activities from Customers
logistics logistics

CHAPTER I: LOGISTICS AND FORWARDING

1. Overview of logistics:
1.1. Definition of logistics:
o “Logistics is the 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 for the purpose of conforming to
customer requirements.
o The definition includes inbound, outbound, internal and external movements and
return of materials for environmental purposes.” (CLM, 1999)
o Logistics is basically ensuring that all the material and personnel are in the right place
at the right time to make sure that a project or a business objective is accomplished. In
the military, it is the science of planning and carrying troops and equipment, plus the
movement and maintenance of forces (Marketbusinessnews).
o Logistics can be defined as having the right type of product or service at the right
place, at the right time, for a fight price and in the right condition.
o The logistics of physical things – things we can touch – generally involves the
integration of material handling, information flow, production, packaging,
transportation, inventory, warehousing and security.
1.2. Definition of logistician:
o A specialist in logistics is called a logistician. They analyze and coordinate a business’
or organization’s supply chain – the system that moves products from supplier to
consumer.
o A logistician analyzes and coordinates an organization’s supply chain – the system
that moves a product from supplier to customer.
o Logisticians oversee activities including purchasing, shipping & transportation,
inventory, warehousing, and delivery. They direct the movement of a range of good,
people, or supplies, from common consumer goods to military supplies.
o Typically, logisticians to the following:
 Foster business relationships with both suppliers and customers
 Strive to determine what customers’ needs are, understand them, and how to make
sure they are met
 Determine where materials, supplies, and finished products go
 Find the cheapest and fastest way to move goods
 Assess each logistical function, and try to improve those identified as needing
improvement
 Present plans, assessments and performance data to management
 Make suggestions and proposals to management and customers regarding
improvements
 Keep informed regarding latest advances in logistics technology and incorporate
new technologies into current procedures.

1.2.1. Workplace:
o The federal government employs the largest number of logisticians, many of whom
are civilians doing logistical work for the military.
o Some logisticians work in the logistical department of a company, others work for
firms specializing in logistical work, such as a freight shipping company.

1.2.2. How to become a logistician?

o A bachelor’s degree is typically required for most positions, although an associate’s
degree may be sufficient for some logistician jobs; industry certification is helpful for
jobseekers.
o Important qualities:
  Communication skills
 Critical-thinking skills
 Customer service skills
 Organizational skills
 Problem-solving skills

1.3. Logistics role:

o Goods and services are subject to a variety of transforming activities with following
logistical benefits:
 Format benefit (Form utility)
 Location benefit (Place utility)
 Time benefit (Time utility)

1.3.1. Format benefit (Form utility):

o Form utility refers to how a product or service meets customer needs. By
understanding what customers want and need in products or services, a company can
use product features and benefits to meet those requirements.
o Format benefitting activities are performed in the following manner:
 Processing of certain materials into other materials
 Assembly of some semi-manufactured articles of parts
 Destruction

1.3.2. Location benefit (Place utility):

o Place utility is the transport of goods or services from a specific sender to a specific
destination at a specific, intended time.
o Place utility is the value that logistics creates in a product by changing the product’s
location. Transportation creates place utility.
o Place utility Is the value that is added to a product when it is transported from one
location to another.
o There are many factors that contribute to place utility:
 The mode of transportation
 The distance traveled
 The type of product
1.3.3. Time benefit (Time utility):
o Time utility is the storage of goods and services for a specific time at an intended
place.
o Time utility is the availability of a goods or service when customers want to purchase
it.
o Time utility exists when a company maximizes the availability of a product so that
customers can buy it during the times that are the most convenient for them.
o Time utility means offering the customers their desired products at the time they
require them.

1.4. Importance of logistics:

o It depends on the seller whether they want to manage the delivery system by
themselves or outsource the logistics to a reliable company to handle their supply
chain management.
o In business, success in logistics translates to increased efficiencies, lower costs, higher
production rates, better inventory control, smarter use of warehouse space, increased
customer and supplier satisfaction, and improved customer experience.
o There are 7 pillars of effective logistics:
1. Material handling: Logistics includes calculating and managing contributing
factors and costs, such as backorder delays, competitor priority rankings and
lockouts, add-on services costs, extraneous fees, increased shipment costs due to
distance or regulatory environments, warehousing costs.
2. Transportation: At the core of logistics is the act of physically transporting goods
from point A to B. Transport managers need to document and track shipments,
manage billing and report on performance using dashboards and analytics.
3. Order fulfillment: To complete a transaction, items must be picked from the
warehouse per the customer order, properly packaged and labeled and then
shipped to the customer.
4. Warehousing: Both short- and long-term storage are common parts of logistics
planning. But WMS also enables logistical planning. Organization within the
warehouses is part of logistics planning. Typically, goods that move frequently or
are scheduled for transport soon are placed at the front of the warehouse.
 5. Demand foreseeing: Logistics relies heavily on inventory demand forecasting to
ensure that a business never runs short on core or high-demand products or
materials.
6. Inventory management: By using inventory management techniques to plan
ahead for increased demand in seasonal or trending products, companies can keep
profits higher and make inventory turns faster, meaning the ratio of how many
times you sell and replace inventory in a set period. Logistics is key to moving
inventory where it is likely to get the best price.
7. Supply chain management: Logistics is an important link in the supply chain as
it facilitates the movement of goods from suppliers to manufacturers and then to
sellers or distributors and finally to buyers. A supply chain is essentially a series of
transactions.

1.5. Process of logistics cycle:

o Following are the processes involved in a logistics cycle:
1. Serving customers: The main objective of the logistics is to serve the customers
by providing them with the products they need.
2. Product selection: If you are a logistician, then it depends on you that which
category products you want to move from one point to another.
3. Quantification: Quantification means the procurement or sourcing of the material
from the manufacturer/supplier. It focuses on the calculation of the estimate of the
quantities.
4. Inventory management: In the logistics management system, the role of
inventory management is the storage and distribution of goods.
5. Logistics Management Information System: The logistics management system
of the supply chain system runs on the communication between the sender, the
supplier and the receiver. This process is defined as the Logistics Management
Information System (LMIS) that plays a significant role in the delivery of right
products, in the right quantity, at the right place, on the right time.\

1.6. Logistics management:

o Basically, logistics management is a process in the supply chain system that majorly
focuses on moving goods to different locations in order to meet the requirements of
the customers.
 o Six (6) benefits of logistics management:
1. Visibility: This enables businesses to better control costs, tease out efficiencies,
spot supply chain problems, conduct demand planning and gain insights into
opportunities.
2. Reduced overhead: Logistics management enables companies to reduce overhead
in areas from cutting shipping costs to shrinking how much warehouse space they
need by proactively controlling inventory levels.
3. Improved customer experience: An excellent customer experience (CX) is the
driving factor behind repeat sales.
4. Preventing loss: Logistics management helps prevent loss in several ways. By a
true inventory accounting and by ensuring optimal storage and transport
conditions.
5. Support expansion: Demand forecasting supports expansion by realistically
calculating inventory needs and ordering, transporting and stocking accordingly.
6. Competitive edge: Delivering orders correctly and on time is a foundational
element in the customer experience – and good CX is key to repeat orders as well
as solid brand reputation and net promoter scores, which in turn help a company
acquire new buyers.

1.7. The 7 R’s of logistics:

o “…getting the right product, in the right quantity, in the right condition, at the right
place, at the right time, to the right customer, at the right price.”
1. Right product: Meaning delivering the product that was ordered according to
specifications: color, size, brand, quantity. The point is to get buyers the products
that are right for them or their situations.
2. Right quantity: Getting quantity right demands clarity in how inventory is listed
as well as proper picking and packing.
3. Right condition: New, used, or refurbished, customers expect a product to
function properly and otherwise be usable.
4. Right place: Tracking to ensure receipt and that shipped items were delivered to
the right address are essential parts of logistics management.
5. Right time: From the customer’s perspective, timing is everything.
6. Right customer: Order mix-ups, address errors and other mishaps communicate a
lack of respect for the customer and inattention to detail.
 7. Right price: It is important that your pricing be competitive for the geographic
area and the industry to turn your inventory regularly and at a good margin.
1.8. Logistics efficiency metrics:
o The efficiency in any work a major role whether it is logistics or any other service.
Some of the key logistics efficiency metrics are the following:
1. Warehouse capacity: The capacity of the warehouse is an important factor to
monitor the inventory and calculate the logistics operations.
2. Shipping time: When a customer places an order to you, then it is important that
you ship the order as soon as possible and acknowledge the customer.
3. Order accuracy: The delivery of wrong products to any customer will lead to
return them and please send the right ones. So, finally, it will cause a loss to the
logistician.
4. On-time delivery: Whenever you accept an order from any customer, it is very
important that you deliver it to them at the time that you committed. The delay in
delivery of the order ruins the customer experience.
5. Transportation cost: In order to increase the efficiency in your logistics service,
you must choose the shortest path possible that will reduce the cost of the fuel.
6. Damaged products: Always define that if any product damages in the way and
the customer receives it in that condition, then who will bear the loss regarding
that damage.

1.9. Logistics vs Supply chain:

o You can say that logistics is basically a subset or a portion of the supply chain.

Criteria Logistics Supply chain

Objective Customer satisfaction Competitive advantage

Concept Evolved earlier Modern concept

Number of organizations Single organization involved Multiple

Process Flow and storage of goods Control and management

o Logistics deals with the movement of goods from a single company’s perspective,
meaning the movement of materials and goods one company receives and manages
internally as well as when it moves those goods to a customer. A supply chain is a
 network of businesses involved sequentially in the production or distribution of
goods/services.

2. Forwarding in Supply chains:

2.1. Forwarding:
o The forwarder in the supply chain process
o Common and divergent tasks in logistics and forwarding activities
o Conventional activities of the forwarder.

2.2. Forwarder:
o A freight forwarder, forwarder, or forwarding agent, is a person or company that
organizes shipments for individuals or corporations to get goods from the
manufacturer or producer to a market, customer or final point of distribution.
o An agent who performs services (such as receiving, transshipping, or delivering)
designed to move goods to their destination.
o International freight forwarders typically handle international shipments and have
additional expertise in preparing and processing customs documentation and
performing activities pertaining to international shipments.

2.2.1. The role of forwarder in the supply chain process:

o The activities such as alteration, storage and transport occur during the logistics
process called “a chain”
o A carefully elaborated strategic plan to control the chain should exist in order to
manage the goods flow
o Global forwarding: offering world-wide logistics solutions, integrate different means
of transport.
1. Global transportation network: Freight forwarders are well versed in the law of
various regions as well as intercultural differences and with their knowledge, can
help businesses take advantage of the same.
2. Integration of operations: Freight forwarders unify the different verticals of
supply chain management by conveying the correct information at the right time
and to the right recipient, initiating and facilitating the movement of goods.
 3. Consultant/Advisory services: A business can rely on a freight forwarder to seek
advice on competitive situations, export strategies, trader terms to be included in
foreign trade contracts, consumer needs and so on.
4. Cost effective: With their established global network, forwarders facilitate
import/export by providing standard services at economical prices.
5. Legal assistance: All the necessary documents and certifications are prepared by a
freight forwarder, who handles all the legal procedures and hence expediting the
entire flow of goods from the shipper to the destination.

2.2.2. Common and divergent tasks:

o Common tasks:
 Carrier agent/Forwarding agent
 Transshipment and on carriage
 Warehousing and storage
 Materials handling
 Cargo consolidator
 Carrier/contracting carrier
 Multimodal transport organization
 Customer service.
o The main tasks of a freight forwarder include:
 Organizing the shipment of goods
 Negotiating terms of carriage with carriers, booking cargo space and making
payments
 Managing customs clearance procedures, transport documents and insurance
paperwork
 Monitoring and communicating real-time shipment status
 Checking that shipments are delivered as planned and resolving any issue.
o Divergent tasks:
 Demand forecasting
 Inventory management
 Materials handling
 Order processing
 Packaging
 Parts and service support
  Plant and warehouse site selection
 Procurement
 Reverse logistics, etc.
o A freight forwarder is an asset to almost any company dealing in international
transportation of goods, and is especially helpful when in-house resources are not
versed in international shipping procedures.
2.2.3. The divergent tasks by service:
o Logistics service providers (LSP) are providers of logistics solutions for specific
clients. LSP or 3PL providers, are outsourced entities, shippers, leverage to manage a
company’s warehousing, distribution and transportation of freight. An LSP is an
outsourced company that provides supply chain management services such as
transportation, warehousing or distribution services. It includes 3PL, 4PL, and LLP
(lead logistics provider).
o Logistics integrators (LI) are system providers focusing on worldwide parcel
distribution, applying different transport modalities. An integrator is a company that
owns and operates its own fleet.

2.3. Conventional activities of forwarders:

o Transport:
 The value only exists once the client receives it
 Transport not only forms an integral part of client’s needs but also add
subsequently to the value of a product.
o Warehousing:
 Storing may have a “time benefit”
 Keeping any kind of stock always costs money and procedures with no direct
results
 Inventory incurs many costs and takes up a large portion of capital.
o Handling:
 Materials and documentation.
o The freight forwarder’s responsibilities as specified by international conventions:
 The international conventions have specified the responsibilities of carriers, which
include:
 Providing insurance for goods in transit, valid for the transportation period
 Notifying before the transportation begins
  Compliance to the requirements of the convention for ADR forwarding of
dangerous cargo
 Compliance to the requirements for transportation of oversize loads in the
countries through which the forwarding route passes.
o Advantages ensured by the forwarders in international freight forwarding:
 Preparing price quotations
 Informing about the freight prices, port charges, cost of special documents,
insurance prices, and prices for handling goods
 Providing recommendations for the best packaging
 Settling the packing of the goods.
o Obligations of the forwarders in international road freight forwarding using
automobile transport:
 Organizing the transportation with own trucks or vehicles provided by
subcontractors
 Providing valid insurance for the vehicles – trucks and trailers
 Providing appropriate transportation means with adequate load capacity
 Providing all necessary licensing, authorization, and paying the road tolls.
o Obligations of the forwarder in regard to loading/unloading:
 Written notification regarding the expected arrival date at the final destination
 Compliance to the deadline for free time for loading and unloading, including
customs clearance.
o Obligations and liabilities for claims for incurred damages:
 When situations arise in which claims for damages are asserted, the obligations of
the forwarder include:
 Presentation of the CMR and the Standing Card
 Presentation of the information and documents certifying the compliance with the
deadlines for loading and unloading of the vehicle.

3. Logistics activities:
o Provision of logistical services
o Logistics covers:
 The production planning, assembly and dismantling of products and services
 The storage and the transport of the auxiliary materials, raw materials, semi-
manufactured articles, products and services.
 o Logistics activities:
 Stock
 Procurement
 Production
 Stock-keeping
 Transport
 Distribution
 Return flows

3.1. Stock:
o Stock is the inventory of products held in a warehouse or production facility.
o The production company has at least 2 types of stock available:
 Inbound materials and auxiliary materials stock
 Product stock
o The production company also accommodates stock for work in progress.

3.2. Procurement:
o Procurement includes all the activities which are necessary for the supply of products,
materials, etc. to another company such as:
 Supplier selection/development
 Ordering
 Receiving
 Inspection
 Planning
 Information processing.

3.3. Production:
o Production includes all the activities in order to offer products and services that can be
distributed to the clients as follow:
 The receiving of materials and auxiliary materials
 Materials’ transformation into products or services
 Inspection, planning, and information processing.
3.4. Stock-keeping:
o The controlled preservation of productions, services, materials and auxiliary materials.
o The activities involved:
 The receipt of products, services, materials, etc.
 The storage, inspection, planning, and information processing.

3.5. Transport:
o The controlled carrying of products.
o The activities involved:
 Receiving
 Loading
 Carrying
 Discharging
 Inspection
 Planning
 Information processing
 Dispatching
How to choose the best type of logistics transportation for your company:
o The product:
 First, analyze the shipment you are transporting
o Location:
 Shipping origin
 Borders
 Shipping destination
 Consumer
o Special considerations:
 Time
 Urgency
 Budget
 Existing relationships

3.6. Distribution:
o The controlled storage and transport of products from the supplier to the client.
3.7. Return flows:
o In case where supplied items (or parts) need to be returned for the following reasons:
 Packing
 Packaging
 Superfluous stock
 Articles without a money-back guarantee like re-called equipment.
o Any item making its way back to your warehouse needs to be tracked and handled
appropriately, including:
 Rented products
 Items unable to be delivered to a customer
 Unsold inventory from third-party retailers and distributors.
o The reverse logistics process:
 The customer decides to ship a product back to the retailer
 The customer drops off the item at a pickup point or at a local store, or uses a
return label to post it back to the retailer’s warehouse
 Once the item arrives, the retailer decides what to do with the inventory
 The customer is refunded (if their order qualifies).

4. Development and implementation of logistical services:

o Originally, logistics focus on:
 Reducing costs in a company
 Seeking optimization of administrative, warehouse and distribution process
o Logistics activities:
 Materials management
 Physical management
o Under the increasing influence of marketing and strategic planning, logistics has
evolved to supply chain management (SCM).
o SCM aims to provide the best possible customer service (value) at the lowest possible
costs, throughout the entire chain from raw material to end user.
o The five most critical elements of SCM are developing a strategy, sourcing raw
materials, production, distribution, and returns.
1. Planning: This relates to raw materials needed during each stage of
manufacturing, equipment capacity and limitations, and staffing needs along the
 SCM process. Large entities often rely on ERP system modules to aggregate
information and compile plans.
2. Sourcing: In general, SCM sourcing include ensuring: the raw materials meet the
manufacturing specifications needed for the production of goods; the prices paid
for the goods are in line with market expectations; the vendor has the flexibility to
deliver emergency materials due to unforeseen events; the vendor has a proven
record of delivering goods on time and in good quality.
3. Manufacturing: The manufacturing process may be further divided into sub-
tasks: assembly, testing, inspection, or packaging. During the manufacturing
process, a firm must be mindful of waste or other controllable factors that may
cause deviations from original plans.
4. Delivering: The distribution process is often seen as a brand image contributor, as
up until this point, the customer has not yet interacted with the product. In strong
SCM processes, a company has robust logistics capabilities and delivery channels
to ensure timely, safe, and inexpensive delivery of products.
5. Returning: The supply chain management process concludes with support for the
product and customer returns. This return process is often called reverse logistics,
and the company must ensure it has the capabilities to receive returned products
and correctly assign refunds for returns received.
o Globalization:
 “The world has become one global village”
 Due to the transition from general cargo to containers, the performance of the
transport industry has seen revolutionary improvements
 The container has converted the physical part of the supply chain into world-
encompassing unity
 The interest has done the same for its informational requirements.

5. Outsourcing and tendering:

5.1. Outsourcing:
5.1.1. Definition:
o Contracting services from outside providers (forwarder, common carrier, warehouse
operator, etc.)

5.1.2. Reasons:
 o Many interesting opportunities for forwarders as logistics service providers (LSP).
The companies (clients) have started:
 To focus on their core activities
 To outsource a number of specific logistics duties, including distribution services,
etc.
 To avoid unnecessary investment for non-core activities may be a reason for
production companies to outsource transport and warehousing.
5.1.3. Shipper’s considerations:
o There are a number of aspects to take into consideration for shippers to decide whether
to outsource or not:
1. Costs: When the scale of the company is insufficient to compete with the prices of
a professional tender for logistics services.
2. Available capacity: To implement logistics activities, investment is required.
> Shipper limitations: may not have enough capital at his disposal, may be unable to
raise enough money to invest in a logistics system.
> Distribution requires transport capacity: various companies have their own freight
trucks, semi-trailers and tractors. They want their vehicles used to maximum capacity.
When the amount of products to be distributed varies constantly, transport capacity
will be inadequate and superfluous.
3. Quality: The quality of logistics activities may present more problems to the
shipper.
4. Available knowledge: When a shipper has to make a choice, a very important
aspect is the amount of knowledge available in the field of distribution.
5. Manageability: The lack of knowledge has an additional, rather damaging
consequence, i.e. the manageability of distribution. Distribution can become so
complex that specialized knowledge will be required to manage it.
6. Risk: Greater complexity leads to more risks. If the shipper wants to avoid the
threats of risk, he will do so by outsourcing high-risk distribution activities.
7. Secrecy: A commercially operating company will aim to keep its customer
database secret from the competitors. A matter that should be of the utmost
importance to the LSP is the guarantee of total secrecy for shippers.
8. Identity: The trade or the brand names of companies should be displayed to the
public as often as possible. If cooperation between professional carriers and the
 shipper is intense, an agreement may be reached which will allow the trade name
of the shipper to appear on the vehicles.
9. Service: The services may vary from tracking and tracing to employment of
workers in the warehouse. In order to accomplish services efficiency, a good
relationship would need to exist between shipper and LSP.

Outsourcing

of logistics Pros Cons

services

Reduced costs

Pay what you use More communication

Economics
Less capital tied up More administration

Increased cash flow

Labor redundancy
Focus on core business
Confidentiality
Management No staff or assets
Less customer contact
Costs more explicit
Loss of expertise

Specific experience
More flexibility
Operations Damage risk
Access to information
Less direct quality control

5.2. Tendering:
5.2.1. Definition:
o Tendering is the process, in which an organization seeks quotes for a particular project
to be carried out by a contracting LSP.
5.2.2. Description:
o From client’s side: bidding process
o From LSP: following a tender
6. Quality management:
6.1. Definition:
o Quality is the entirety of characteristics of one unit relating to its ability to fulfill
determined and provided requirements.

Customers Company

Expected quality Planned quality

Measurement of the Measurement of the

customer’s satisfaction company’s ability

Perceived quality Performed quality

6.2. Stages of concept development:

o Quality assurance: Quality inspection at the end of the process
o Quality management: Proactive management of all resources and processes which are
relevant for producing quality, internal audits
o Business excellence: Generic focus on quality, not only on production, but also on
financing, customer and employee satisfaction, self-assessments.

Aims Focus
Quality - Quality of the final product - QC
assurance - No cull - Statistical QC
- Fulfillment of the requirements - Administration of test equipment
 - Final testing
 “End of the pipe”
Quality - Customer satisfaction - Customer focus
management - Proactive error prevention - Analysis of the process
- Permanent improvement - Quality cycle (PDCA)
- Improvement programs
- Quality reporting
- Quality costs
- ISO 9000:2000
 Proactive QM
Business - Satisfaction or enthusiasm of all - Enabler and results
excellence stakeholders - Self-assessment
- Superiority in the competition - Benchmarking
- Best practice - Balanced scorecard
- Enduring success - Employee survey
- ISO 9004:2000 / EFQM-model
 Integrated management
system in all areas, quality
culture

6.3. ISO (International Standard Organization):

6.3.1. Definition:
o The ISO 9000 are sets of international quality management systems and guidelines.
o Development:
 1987: The first version was published, ISO 9000
 2000: Reviewed and another set ISO 9000:2000 was launched.
o The set of ISO standard consists of:
 ISO 9000:2000 QMS – Fundamentals and terminology
 ISO 9001:2000 QMS – Methods and requirements
o ISO 9004:2000 QMS – Methods to improve performance. The most significant of ISO
are ISO 9001 and ISO 9004 that deal with quality management over the course of five
chapters:
 QM systems
 Management responsibility
  Personnel management
 Production management
 Measuring methods, process analysis and improvement.

6.3.2. ISO 9000:2000 for transport:

o Management shares the direct responsibility for the development and the maintenance
of quality with the quality manager.
o Top management of a company should see to the frequent development, introduction,
improvements and revision of the QMS.
o The QMS has to give some thought to the way in which the procurement of services
and such is done.

6.4. QMS:
o It is the part of business management that fixes:
 The quality policy
 Quality-relevant functions
 Responsibilities
 Competencies in the company
o It includes:
 Quality planning
 Quality control
 Quality inspection
 Quality improvement
6.5. Audits of QMS :
o Objective: to find out whether the company is adhering to the requirements as
specified
o Quality audit:
 Internal audits: Company has its own investigation to find out whether all
departments and officials still adhere to the specifications as set out by the QMS.
 External audits: The ancillary suppliers (LSP) are investigated to establish whether
they are still adhering to the specifications as set out by the ISO 9000:2000. An
independent certification company will investigate whether a company still
adheres to the quality requirement specs. In order to retain the ISO QM certificate
of approval, external audits should be performed at least every 12 months.

6.6. Documentation:
o The QM is a very important document of a company.
o This manual should meet the following requirements:
 It should comply with the specs as determined by the ISO
 Its contents should be user-friendly
 It should have a loose-leafed format, to allow modifications (revise, change).
o The QM contributes significantly to the value of a company’s quality management
documentation.
o It consists of the following documents:
 QM manual For external use (normally)

For internal use, at executive and supervisor

QM procedures
levels

Work instructions For internal use, operators

Inspection instructions For internal use, testing teams

CHAPTER II: LOGISTICS PROJECT
1. Definition of project:
o A project is a group of actions performed to achieve a certain goal.
o A piece of planned work or an activity that is finished over period of time and
intended to achieve a particular purpose.
o A project is a set of tasks that must be completed in order to arrive at a particular goal
or outcome.
o In many cases, logistics activities can be regarded as a project.

7 key project terms to know:

1. Project lifecycle: The 5 phases of a project lifecycle serve as the most basic outline
that gives a project definition: initiation, planning, execution, monitoring, and closure.
2. Project scope: Determining project scope requires the project manager and their tea to
set goals and objectives, detail deliverables, create tasks, establish important dates and
more.
3. Stakeholder: Refers to anyone and everyone involved in a project. A stakeholder can
be involved at every stage of the project, or just in a certain way.
4. Deliverable: Refers to the specific outcome(s) a project creates. Deliverables can be
“tangible” or “intangible”.
5. Milestone: Milestones are predetermined achievements that help track project
progress.
6. Resources: A resource is anything necessary to complete a project. A project manager
must be able to identify all of the project resources in order to create a resource plan
and manage the resources accordingly.
7. Dependencies: Project dependencies refer to how resources must be shared and
allocated within a project.

2. Phased approach:
o A project phase is a collection of related project management activities. The
relationship of the phases in the project life cycle is often sequential, and each project
phase culminates with the completion of one or more project deliverables.
o Project phases can be distinguished:
 Problem definition
 Design
 Realization
  Evaluation (aftercare)
PHASE 1: Problem Definition
In this phase, the requirements that are associated with the result of the project are determined
as clearly and as completely as possible. This list can serve as a memory aid in this regard:
o Preconditions
o Functional requirements
o Operational requirements
o Design limitations

Activities in the Project Definition phase:

o Compile list of requirements together with client, possible customer, end users,
experts, project team
o Balance requirements
o Test the feasibility of the requirements
o Report to client, customer or both about the requirements
o Report on the control factors.

Result of the Project Definition phase:

o Approved (tentative) list of requirements
o Approved control reports and prognoses

Operations:
o Current or prospective project leader
o Client
o Current or potential customer
o End users
o Experts
o Current or future programmers and designers
o System administrator

Data collection:
 o Data collection is the process of gathering and analyzing accurate data from various
sources to find answers to research problems, trends and probabilities, etc., to evaluate
possible outcomes.
o Data is various kinds of information formatted in a particular way. Data collection is
the process of gathering, measuring, and analyzing accurate data from a variety of
relevant sources to find answers to research problems, answer questions, evaluate
outcomes, and forecast trends and probabilities.
o Before an analyst begins collecting data, they must answer 3 questions first:
 What’s the goal or purpose of this research?
 What kinds of data are they planning on gathering?
 What methods and procedures will be used to collect, store, and process the
information? (Qualitative data covers descriptions such as color, size, quality,
appearance/Quantitative data, unsurprisingly, deals with numbers, such as
statistics, poll numbers, percentages, etc.)
o What are the different methods of data collection?
 Surveys, transactional tracking, interviews and focus groups, observation, online
tracking, forms, social media monitoring, etc.
Data collection breaks down into 2 methods:
 Primary: This is original, first-hand data collected by the data researchers. Primary
data are highly accurate provided the researcher collects the information.
 Interviews: The researcher asks questions of a large sampling of people, either by
direct interviews or means of mass communication such as by phone or mail.
 Projective data gathering: PDG is an indirect interview, used when potential
respondents know why they’re being asked questions and hesitate to answer.
 Delphi technique: In the realm of data collection, researchers use the Delphi
technique by gathering information from a panel of experts. Each expert answers
questions in their field of specialty, and the replies are consolidated into a single
opinion.
 Focus groups: The group consists of anywhere from a half-dozen to a people, led
by a moderator, brought together to discuss the issue.
 Questionnaires: They are a simple, straightforward data collection method.
Respondents get a series of questions, either open or close-ended, related to the
matter at hand.
 Secondary: Secondary data is second-hand data collected by other parties and already
having undergone statistical analysis. Quantitative data makes up a majority of
secondary data.
 Financial statements
 Sales reports
 Retailer/Distributor/Deal feedback
 Customer personal information (e.g. name, address, age, contact info)
 Business journals
 Government records
 Trade/Business magazines
 The internet
o Data must be collected on the following:
 Inbound/Outbound goods flows
 Numbers of items to be stored
 Technical requirements of the goods to be handled/stored
 Actual buildings, equipment, facilities, etc.
 Actual costs, staff numbers
 Actual service levels
o What are the key steps in the data collection process?
1. Decide what data you want to gather: The first thing that we need to do is
decide what information we want to gather. We must choose the subjects the data
will cover, the sources we will use to gather it, and the quantity of information that
we would require.
2. Establish a deadline for data collection: We should set a deadline for our data
collection at the outset of our planning phase. Some forms of data we might want
to continuously collect.
3. Select a data collection approach: We will select the data collection technique
that will serve as the foundation of our data gathering plan at this stage.
4. Gather information: Once our plan is complete, we can put our data collection
plan into action and begin gathering data.
5. Examine the information and apply your findings: It is time to examine our
data and arrange our findings after we have gathered all of our information. The
analysis stage is essential because it transforms unprocessed data into insightful
knowledge that can be applied to better our marketing plans, goods, and business
judgements.
 o Data collection considerations and best practices:
1. Take into account the price of each extra data point
2. Plan how to gather each data piece: Sometimes the data is there, but we may not
have access to it. Consider how time-consuming and difficult it will be to gather
each piece of information while deciding what data to acquire.
3. Think about your choices for data collecting using mobile devices: Mobile-
based data collecting can be divided into 3 categories:
> IVRS (interactive voice response technology) will call the respondents and ask them
questions that have already been recorded
> SMS data collection will send a text message to the respondent, who can then
respond to questions by text on their phone
> Field surveyors can directly enter data into an interactive questionnaire while
speaking to each respondent, thanks to smartphone apps.
4. Carefully consider the data you need to gather: It is all too easy get information
about anything and everything, but it is crucial to only gather the information that
we require.
> What details will be helpful?
> What details are available?
> What specific details do you require?
5. Remember to consider identifiers: Identifiers, or details describing the context
and source of a survey response, are just as crucial as the information about the
subject or program that we are actually researching.
6. Data collecting through mobile devices is the way to go: They enable us to
gather many various types of data at relatively lower prices and are accurate, fast.

Actual situation analysis:

o An analysis is made of the actual situation and the problems/bottlenecks experienced
in the current situation.
o One example is the outsourcing of storage to a public warehouse: Before a suitable
offer can be issued to the clients and this can be implemented, many issues must be
carefully analyzed and prepared.
 o Situation analysis is basically the process of critically evaluating the internal and
external conditions that affect an organization, which is done prior to a new initiative
or project.
o Importance:
 Helps define the nature and scope of a problem
 Helps identify the current strategies and activities in place to overcome the
problem
 Helps understand the opinions and experiences of stakeholders
 Helps give a comprehensive view of the current situation of the organization
 Helps detect the gaps between the current state and desired state
 Provides information necessary to create a plan to get to reach the goals
 Helps identify the best courses of action to take during the project
 Helps make sure that efforts and actions are not repeated and wasted
unnecessarily.
o Situation analysis tools:
 SWOT analysis: The SWOT analysis is a tool can be used to scan the internal and
external environment of an organization. The SWOT analysis is also frequently
used to assess the same factors about the organizations, products and services of
your competitions.
 PESTLE analysis: The PESTLE analysis is another environmental scanning
techniques that help provide insight into the external situation of an organization
from many different angles. It focuses on political, economic, social,
technological, legal and environmental factors.
 Porter’s 5 forces: P5F is used to analyze the competitive environment. It looks at
the following areas that may affect an organization’s competitive position: supplier
power, buyer power, competitive rivalry, threat of substitutes, threat of new
entrants.
 5 C’s analysis: This tool helps assess the organizational environment from 5
different areas that may affect your logistics decisions: customers, competitors,
company, collaborators, climate.
 VRIO analysis: The VRIO analysis is another tool that can be used to evaluate the
resources of a company such as financial resources, human resources, etc. It stands
for Value, Rareness, Imitability, Organization.

Description of the goals:

 o A goal is “the end toward which effort is directed” or “aim”. A goal is an objective or
target that someone is trying to reach or achieve.
o A business goal is an endpoint, accomplishment or target an organization wants to
achieve in the short term or long term.
o This includes a description of the goals which should be achieved by the project:
 Cost reductions
 Improvement of service level

Starting points and preconditions:

o All relevant starting points and preconditions to the project need to be listed.
Preconditions are conditions that must be met before an operation can be completed.
o One vital precondition is:
 What is the strategy of the client?
 What is his market vision and long term objectives?
 The solution which will be offered should be in line with this strategy.
o Preconditions could also include.

Project organization:
o Project organization refers to the style of coordination, communication and
management a team uses throughout a project’s life cycle.
o Project organization will also need to be mentioned:
 Project manager
 Team members
 Structure for communication
 Progress control
 Financial controlling
 Reporting etc.
o Types of project organization:
 Functional: Functional project organization is structured around traditionally
functioning departments with managers who report to an executive. There are no
project managers.
 Project-oriented: Also known as projectized organization, the project-oriented
approach has dedicated project divisions within the company. Each division
focuses on a specific project and what is necessary to complete its tasks.
  Organic: Organic project organization focuses on a project’s natural progression.
This type of organization is flexible with a more relaxed workflow approach. This
approach is also known as “laissez-faire”.
 Matrix: Matrix project organization focuses on both functional and project-
oriented approaches. This approach means the team considers both the project and
team member roles equally. There are 3 subtypes of matrix organizational
structures:
> Balanced: Both project managers and functional managers have equal (for similar)
levels of authority.
> Strong: Project managers have more authority than functional managers.
> Weak: Functional managers have more authority than project managers.
 Multi-division: Several individual groups share the same goal and skills. These
groups might work on distinct tasks but progress toward the overall team
objective.
 Virtual: Virtual project organization involves team members from across the
country or around the world who work on the same project together. This team
does not focus on functional roles but rather on overall contribution to project
objectives.
 Democratic: Democratic project organization is when a company makes decisions
based on the majority’s opinion and feedback. A team uses the democratic
approach to enforce structures, rules, and expectations that most employees agree
on.
o Tips for organizing projects:
 Encourage feedback: Feedback lets a team member understand their overall
performance toward completing a team project. Feedback provides each member
with an evaluation of how to improve and what to continue doing well.
 Meet often as a team: These meetings give team members a chance to ask
questions or for help.
 Reorganize when necessary: Revision is a good way to adapt to changes and
respond to feedback positively.
 Use programs and digital tools: Consider investing in a program that helps
organize all your information and simplifies communication. Some tools focus on
goal setting while others are used more for instant messaging.
Report and client approval:
o Client approval is all about aligning your clients’ vision and expectations with your
work. This means that client approval can take place in different following project
stages with other purposes.
o The client approval process will help you:
 Make sure you follow brand guidelines
 Adequately addresses the client’s problems with your solution
 Help a client achieve predefined goals
o Conclusion of this phase with a report should be approved by the client, to ensure that
all parties share the same vision on the project.
o The four-step client approval process:
1. Share your files with your reviewers
2. Get feedback and discuss ideas for improvements: Getting client feedback on
your projects has a bunch of benefits. Three key reasons you should always ask for
client feedback: Improved results, increased client retention, work more
efficiently.
3. Develop and share a new version: With all the feedback in one place, it is time to
get to work on the next version. As you improve your work with each review
round, you need a clear way of showing reviewers which version is the latest.
4. Repeat until you get approval: As the name suggests, the client approval process
is ultimately about getting approval for your work.

PHASE 2: Design (Preliminary)

Project design is an early phase of the project lifecycle where ideas, processes, resources, and
deliverables are planned out in seven steps. Providing solution for problems, objectives and
starting points. Includes:
o Concept and alternative concept
o Budgeting and cost calculation
o Implementation detailed planning

The 7 steps of project design:

Step 1. Define project goals
 o Lead an initial ideation meeting where you document the general project timeline and
deliverables. Consider the needs of the project and stakeholders. Begin writing a short
description of the project and who is involved. Once you’ve outlined in detail.
Step 2. Determine outcomes
o Narrow down the outcomes of the project. Document the outcomes and major
deliverables needed alongside the project goals to begin building a timeframe.
Step 3. Identify risks and constraints
o Once you’ve identified the outcomes, consider your project risks and constraints.
Evaluate the aspects of your project that could lead to risk in order to prevent wasted
resources down the line.
Step 4. Refine your project strategy with a visual aid
o A project strategy is a visual roadmap of your project, helping communicate purpose
to team members. Create your strategy by choosing a visual aid that you can share
with stakeholders. There are many types of visual aids:
 Flow chart
 Gantt chart
 Work breakdown structure (WBS)
 Mind map
 PERT chart
Step 5. Estimate your budget
o Estimate your project budget to begin resource allocation. Your budget will
incorporate the project’s profitability, resources available, outsourced work needed.
Step 6. Create a contingency plan
o Create a contingency plan – a backup plan for the risks and constraints outlined earlier
in the process. Having an organized plan when issues arise helps to resolve them in
real time and streamline efficiency.
Step 7. Document your milestones
o This is done to ensure work is being completed on time and to easily identify
inconsistencies as they arise.

Concept and alternative concept:

o A solution is prepared for the problem, objectives and starting points analyzed in the
previous phase.
o The alternative scenarios will provide a preliminary sketch and not in full detail.
o Philip Kotler has given 5 completive/alternative concepts:
1. The Production Concept:
The production concept holds that consumers will favor those products that are
widely available and low in cost.
Elements of the production concept include:
> Low price
> High/wide availability.
2. The Product Concept:
The product concept holds that consumers will favor those products that offer the
most quality, performance, and innovative features. The product concept is an
improvement over the production concept.
Elements of the product concept include:
> Low price
> Wide availability
> Better qualities, innovative features, and performance
3. The Selling Concept:
Consumers won’t buy company’s products if they are not informed, convinced or
requested.
Elements of the selling concept include:
> Low price
> Wide availability
> Quality, innovative features, performance
> Aggressive selling and promotional efforts
4. The Marketing Concept:
The key to achieve organizational goals consists in determining the needs and
wants of target markets and delivering the desired satisfaction more effectively and
efficiently than competitors.
Elements of the marketing concept include:
> Low price
> Wide availability
> Quality, innovative features, performance
> Selling and promotional efforts
 > Target markets (not total market)
> Integrated marketing
> Emphasis on consumer satisfaction
5. The Societal Concept:
The organization’s task is to determine the needs, wants and interests of target
markets and to deliver desired satisfaction more effectively and efficiently than
competitors in a way that preserves or enhances the consumer’s and society’s well-
being.
The societal concept is based on the following assumptions:
> Consumers want to protect their long-term interest and welfare
> Consumers favor those products, which protect their interest and social welfare
> Therefore, management is concerned with developing products that satisfy
consumers with protecting their interest.
Elements of the societal concept include:
> Low price
> Wide availability
> Quality, innovative features, performance
> Selling and promotional efforts
> Integrated marketing
> Consumer satisfaction
> Protection of consumers’ and society’s long-term interest and well-being

Budgeting, cost calculation:

o Calculations and elaborations provide the level detail required to make the right
selection in terms of:
 Investments
 Operational costs
 Achievable service levels, etc.
o The alternative solutions will be presented to the client who will decide what the most
favorable option is.

Implementation plan:
o The preliminary design of the selected option will then be further detailed in terms of:
 Organization
  Equipment, layout and routing
 Working methods
 Budget, investment, operational costs
 Implementation activities and planning

PHASE 3: Project Realization

Organization:
o A proper project organization consists of:
 An internal or external client
 Project manager
 Project plan
 Project team
 Structure for communication

Activities:
o In this phase the selected scenario will be implemented.
o Depending on the situation this may include activities, such as:
 Construction of a new building
 Procurement, installation and testing of equipment
 Adaptation of organization, procedures, working methods
 Staff (de-)recruitment, training

Controlling:
o Project controls are processes for gathering and analyzing project data to keep costs
and schedule on track. The functions of project controls include initiating, planning,
monitoring and controlling, communicating, and closing out project costs and
schedule.
o Activities under the umbrella of project controls may include:
 Aligning projects with portfolio/organization goals and objectives
 Developing a work-breakdown structure (WBS)
 Collaborating on initial project schedules
 Developing a risk management plan
 Project budgeting and forecasting
  Monitoring project costs
 Feedback and reporting
 Optimizing project strategies to enable better outcomes in the future
o Processes that define project controls: The strengths of project controls lie in their
data-focused approach and attention to detail.
1. Project planning. Whether it’s creating plans, schedules, work-breakdown
structures or cost estimates, planning gives your team a baseline to work with
throughout the project.
2. Budgeting. Integrating the budgeting process into project activities is essential to
calculate costs accurately and to understand when and why variances occur.
3. Risk management. By preemptively identifying risks, monitoring risks
continuously, and developing contingency plans to address and mitigate issues,
project controls become possible to reduce impact on budget and schedule.
4. Change management. When a project deviates from its original estimates, it’s
often not due to a single factor, but due to the cumulative effect of several factors
that tend to go unnoticed.
5. Forecasting. By increasing the accuracy of estimates-at-complete, project
controllers and managers can gain more insights into the current drivers of cost
and schedule overruns. It serves as the comparison against actual and committed
costs that enable project controllers to extrapolate a forecast using a combination
of standard forecasting methods and formulas.
6. Performance management. Defining and using key performance indicators (KPI)
to monitor project health and forecast trends is crucial to take corrective actions.
7. Project administration. This process involves establishing processes and systems
that can help team members communicate and collaborate with each other.
o A few team members that controllers interact with are:
 Project manager
 Finance team
 Vendors
 Construction manager
 Procurement team lead
 Technical team lead
o Benefits of project controls:
 Reduced project costs through ability to make timely decisions using KPIs
 Increased project predictability for cost and completion date
  Increased visibility into the financial health of the project as it progresses
 Ability to mitigate project scope creep
 Meaningful benchmarking data for future via well-structured projects
 Increased margins when working in a fixed-price environment
 Improved reputation for properly managing and controlling projects
 Competitive advantage over organization with less mature project management
capabilities
 Increased job satisfaction for project team members
Project controlling includes:
 Progress control:
o The aim of project progress control is to provide a thorough follow-up of a project’s
implementation, enabling the timely detection of schedule, resource, and budget
deviations from project plan. Accurate information about a project’s status enables the
management to take action to resolve schedule, resource, budget, and risk issues.
Project plans may be adjusted when appropriate.
 Financial control:
o Financial controlling is the process of monitoring and analyzing an organization’s
financial performance in order to make informed decisions and take corrective actions.
o Objectives of financial controlling:
 Planning and budgeting
 Monitoring and reporting
 Decision-making
 Risk management
 Cost management
 Compliance
 The goal of financial controlling is to provide accurate and timely financial
information that can be used to support strategic decision-making and optimize the use
if financial resources.
o Tasks of financial controlling:
 Budget preparation
 Budget monitoring
 Financial statement analysis
 Cost analysis
 Risk management
  Compliance
 Performance measurement
 Forecasting
 Internal control
 Reporting
 Financial controlling has the ultimate goal of providing accurate and timely
financial information that can be used to support strategic decision-making and
optimize the use if financial resources.
o Roles and responsibilities in financial controlling:
 Financial controller
 Budget analysis
 Financial analyst
 Cost accountant
 Risk management
 Internal auditor
 Financial reporting

Report:
o The realization phase will be determined with a report (mentioning possible deviations
from the original objectives, etc.) approved by the client.

PHASE 4: Evaluation (Aftercare)

The evaluation includes:
o One-time activities:
 Final results >< Initial objectives
 Final costs >< Initial budget, etc.
o Performance management process: continuous/repetitive
 Comparing of costs and service levels with objectives and making adjustments
where necessary
The evaluation can be achieved by implementing the performance cycle:
o Determining a requested performance level for each relevant activity
o Defining performance indicators (KPA/KPI) to quantify the requested performance
levels
o Implementation of procedures and tools to measure the realized performance
o Comparing the real performance with the performance indicators.
CHAPTER III: PHYSICAL DISTRIBUTION SYSTEMS
1. Operational outsourcing:
o Companies outsource when they hire outside of their business, like when they hire
other contractors and companies to perform specialized work operations. Companies
that use operational outsourcing can employ a third-party company to help perform
standard company operations like producing inventory or completing services on the
company’s behalf.
o Benefits of operational outsourcing:
 Improved quality
 Saves money
 Increases efficiency
 Better operation management

2. Other types of outsourcing:

o Manufacturer outsourcing: With manufacturer outsourcing, a company uses a third-
party manufacturer to produce inventory and equipment. This type of outsourcing is
popular in specialized industries. Small businesses often use manufacturers
outsourcing to save money and to produce a higher number of products so they can
compete with large companies.
o Process-specific outsourcing: Companies use process-specific outsourcing when
outsourcing to a third-party specializes in making a particular product or providing a
particular service. Companies often create contracts when they use process-specific
outsourcing that provides specific details for the third-party to follow when working
with a company.
o Project outsourcing: With project outsourcing, companies use a third-party to
perform project management duties. Companies may find it useful to use project
outsourcing if they have many projects or complex projects that require in-depth
management.
o Business process outsourcing: In business process outsourcing, companies hire a
third-party vendor to process business operations on a short- or long-term basis.
Business process outsourcing comprises 2 different categories: back-office business
process outsourcing and front-office business process outsourcing.
 o Knowledge process outsourcing: Knowledge process outsourcing involves a company
hiring a third-party vendor to perform extensive research and analysis within a specific
field. This type of outsourcing is common within science or health-related fields.
3. Outsourcing and decision levels:

Operational execution,
Strategic system design, Tactical chain
ownership of logistics
tendering, judging management, forwarding
assets

1PL Shipper Shipper Shipper

Carrier, Warehouse
2PL Shipper Shipper
operator

LSP and/or sub-

3PL Shipper LSP: Forwarder
contractor

LSP and/or sub-

4PL Consultant, facilitator LSP: Forwarder
contractor

1PL: All activities are performed under own management

2PL: The shipper only outsources certain specialized operational activities.
3PL: A (large) logistics service provider takes over all tactical and operational activities
(shipper remains in charge of the strategic issues)
4PL:
o All activities are outsourced
o A “facilitator” provides strategic solutions and contracts to one or more 3PL providers
o Facilitator could be a consultant, or contract the 3PL parties at his own or the shipper’s
risk.

4. Categories of logistics service providers/forwarders:

4.1. 1PL – First-party logistics provider:
o First-party logistics refers to businesses or individuals that handle their logistics
operations internally. Rather than outsource the service to a third party, 1PL providers
 own their transportation, are responsible for the shipping and storage of their given
product.

4.2. 2PL – Second-party logistics provider:

o Second-party logistics providers are responsible for the transportation aspect of
logistics management. This will typically include the loading/unloading of goods as
well as the collection of any required paperwork, e.g. customs documents, invoices,
etc. 2PL is the actual carrier, such as shipping lines, airlines, car carriers.

4.3. 3PL – Third-party logistics provider:

o Third-party logistics services are probably the most common forms of logistics
management. A third-party logistics company may be responsible for all, or some
aspects of distribution, warehousing and fulfillment services.
o Compare to others, 3PLs have some certain advantages:
 Use of logistics experts rather than in-house staff
 Easier adaptation to technology advances
 Flexibility of location, offerings, resources, and workforce
 Most cost-effective
 Quicker to add capabilities
o By using 3PL service providers, companies could potentially lose out on:
 Control over transportation logistics
 Development of cheaper and more efficient pricing models
 Independence

4.4. 4PL – Fourth-party logistics provider:

o Fourth-party logistics providers (also known as lead logistics providers, or LLPs) are
the single point of contract for entire supply chains, and are responsible for optimizing
the supply chain as opposed to day-to-day operations management carried out by
3PLs.
o 4PL differ from 3PL in the following ways:
 The 4PL organization is often a separate entity formed by a point venture or other
long-term contract between a client and one or more partners
  The 4PL organization is an interface between the client and multiple logistics
service providers
 Ideally, all aspects of the client’s supply chain are managed by the 4PL
organization
 It is possible for a major 3PL organization to form a 4PL organization within its
existing structure.

Advantages Disadvantages
An independent party, capable of offering Without having assets, it would be more

a selection of services which would be difficult for the 4PL to manage operations and

the most favorable. to control performance and service levels.

4.5. 5PL – Fifth-party logistics provider:

o Fifth-party logistics providers work very closely with a company’s in-house
departments, and are responsible for understanding, planning and executing and
managing logistics solutions in their entirety. 5PLs will also be in charge of managing
a number of 3PLs and 4PLs on behalf of the client.
o Fifth-party logistics service provider is also known as a logistics aggregator. They
will aggregate the demands of the 3PL and others into bulk volume for getting better
rates with different types of airlines and shipping companies.
o The characteristics of 5PL are the systems (Order Management System – OMS,
Warehouse Management System – WMS, and Transport Management System –
TMS).

5. Range of services:
5.1. Single provider:
o Carriers:
 Road haulers
 Rail operators
 Shipping lines
  Airlines
o Warehouse operators

5.2. Providers of special services:

o Logistics service providers offering comprehensive logistics solutions, specialized on
a certain branch or customer (e.g. automotive industry, foodstuff industry, etc.)
including transport, warehousing, VAL, etc.
o Logistics service provider management is the outsourcing of logistics operations to a
third party. Companies, or clients, use these third parties known as LSPs to provide
logistics services. A client typically outsources the following services to an LSP:
 Warehousing
 Inventory management
 Cross docking
 Transportation
 Freight forwarding

5.3. Network providers:

o Forwarders offering worldwide logistics solutions, and integrate different means of
transport.

5.4. System providers:

o Integrators focus on worldwide parcel distribution, apply different transport modalities
(air, road, etc.).

5.5. Single-source logistics providers:

o This type of logistics is when you go with one company to handle all of your logistics
considerations in your supply chain, or a significant and distinct portion of your
supply chain. The benefit to this is that there are tons of service suppliers involved in
an entire supply chain. They may include:
 Trucking companies
 Ocean carrier shipping companies
 Drayage service providers
 Warehouse operators
 Customs agents
and officials
 Project managers,
etc.
CHAPTER IV: SUBSYSTEMS IN LOGISTICS
1. Subsystems in logistics:
o According to the order in which goods flow passes through a company, a company’s
logistics contain:

Warehousing Warehousing

Procurement Production
Distribution

Supply
Storage Storage Distribution
and Transformation
of (production of end of end
receipt of and assembly) products
materials products
materials

Reverse logistics

Return flow

1.1. Production:
o The term is used for describing logistics processes within an industry.
o The purpose of production logistics is to ensure that each machine and workstation is
being fed with the right product, in the right quantity, at the right point of time.
o Production logistics describes logistics processes within a value-adding system (e.g.
factory or mine). The concern is with production, testing, transportation, storage, and
supply.
o Production logistics deals with the proper organization of the related flows of goods
through the transformation process:
 Alteration
 Assembly
 Dismantling
 Repairing
 Servicing
  Installation
 Adjusting
The transformation of materials and services into end products is a very complex activity that
needs a lot of attention:
 Logistics is not primarily interested in the physical transformation process itself, but
more in the proper organization of the related flows of goods through the
transformation process:
o The supply and receipt of products, raw materials and auxiliary materials. The
first operational function that we will encounter in the goods flow is the supply and
receipt of products, materials or auxiliary materials. “Materials” refers to all raw
materials, semi-manufactured articles and information that a company needs to
produce and trade its products.
o The storage of raw materials and auxiliary materials. In many cases, raw materials
and auxiliary materials cannot be processed directly and therefore require a certain
amount of storage time. The question of where and how something should be stored
must be directed to the warehouse.
o The transformation of materials into end products. Transformation may comprise
alteration, assembly or dismantling. Transportation may involve other activities as
well, e.g. repairing, servicing, installation and adjusting.
 Still, many trading companies do have a certain type of “transformation” process,
which can also be found at production companies, namely:
o Packing and unpacking
o Internal report
o Information gathering
 Although packing, unpacking, stapling and labeling do not count as official activities
from a production perspective.

1.2. Logistics around the point of sales:

o Dispatch
o Distribution of end products
o Supply to and the receipt of goods at the destination is related to the dispatch and
distribution stage
o Supplier will plan the progress of the dispatch and distribution process
o Professional carrier may contribution to the quality of the supplier’s customer service.
 o The storing of end products. In both production and trade companies, the actual
moment of end products availability and the moment of delivery to the client will
almost always be different. In the warehouse of a trade company, the receipt of
products will be supervised by the procurement department, dispatch is part of the
sales’ responsibilities.
o Dispatch and distribution of end products. A function that is significant for the LSP
in general and for the forwarder specifically is the dispatch and distribution of the end
products. The supply to and the receipt of goods at the destination is related to the
dispatch and distribution stage of the supply company.
1.3. Just-in-time (JIT):
o JIT is an inventory strategy companies employ to increase efficiency and decrease
waste by receiving goods only as they are needed in the production process, thereby
reducing inventory costs. This method requires producers to forecast demand
accurately.
o JIT logistics operate under the concept of receiving raw materials, products and parts
as they are needed, rather than days or even weeks before.
o Benefits:
 It simplifies warehouse-to-shelves inventory flow, making it easier to manage.
 Supply is synchronized with production demand, thus cutting storage costs and
set-up/changeover time.
 Production scheduling and work hour consistency resulting from synchronized
supply and demand lead to reduction of overtime hours of workers and more spare
time for training and workshops to help improve their skill level.
 Employees with multiple skills are also optimized by being allocated to parts of
the process needing manpower.
 Lastly, emphasis is placed on the company’s relationship with it suppliers.
o Key characteristics of JIT management:
 Elimination of waste – of all resources, an essential process for food traceability
systems
 Continuous performance evaluation – can you do something better?
 Continuous improvement – striving for quality and efficiency
o Activities involved:
 The storage of materials and auxiliary materials
 The storage of end products
  Capital in stock
 The aim of JIT is to answer to the needs of the market in a way that eliminate waste.
2. Types of logistics:
o Logistics can be split into 5 types by field: procurement logistics, production logistics,
sales logistics, recovery logistics, and recycling logistics.

2.1. Procurement logistics:

o Procurement logistics is the flow of goods when raw materials and parts necessary for
manufacturing are procured from suppliers.

2.2. Sales logistics:

o Delivery from warehouse to wholesalers, retailers, consumers
o Logistics typically refers to sales logistics. Direct delivery also makes up a large
amount of this volume due to online shopping and e-commerce. Whether delivery
through delivery centers and logistics warehouses or direct delivery from production
sites, higher efficiency in transportation and delivery and shrinking inventory are
indispensable for delivering the necessary goods, to the necessary people, in the
necessary quantities, at the necessary time.

2.3. Distribution logistics:

o It ensures that manufactured goods reach the customer quickly and reliably.
Distribution logistics comprises the planning tasks, control and all processes
concerning the flow of goods and information between production companies and
customers.

2.4. Production logistics:

o Production logistics aims to ensure that each machine and workstation receives the
right product in the right quantity and quality at the right time.
o Production logistics provides the means to achieve customer response and capital
efficiency.