2. Generic goals and models in optimizing transportation networks

Question 1

Why trends are called demand and supply trends, examples of 2 demand-side trends, and 2 supply-side trends and reasons?

Answer 1

Demand-side trends because they are drivers of logistics demands. Examples- Globalization, post-industrialization, On-demand economy, Ecological sensitivity
1. Globalization and Dislocation: it deals with the integration and interdependence of regions around the globe to enhance trade and economic development. Dislocation deals with the spreading of production and consumption, manufacturing companies having new locations worldwide

• Intensified competition in transport due to lower labor costs, old drivers
• declining trade and investment barriers e.g GATT

2. Ecological sensitivity: increasing levels of environmental awareness led to the application of intermodal solutions, telematics (GPS- navigation system useful for steering traffic flow), and reverse logistics

Supply-side trends because they are drivers of logistics solutions. Examples: Flow management, New technologies, Deregulation, and Shareholder and value logic

1. Flow management: a rediscovery of process re-engineering
   - focus on value chains (choosing between MTS or MTO strategies)
   - resource optimization using lean production techniques
2. New technologies: providing solutions to logistics demands through Hard and Soft technologies
   - using EDI, VMI, smart objects like RFID and other IOT tools

Question 2

If you would be a logistics forwarder: which of the demand and supply-side trends are going to have the biggest impact on your future business? Explain your answer by giving examples

Answer 2

Ecological sensitivity: climate change issues, high energy prices, additional fees etc

New technologies: robots replacing humans in some logistics operational duties, IOT tools cutting out jobs etc

Question 3

What are the three main improvement goals in logistics systems?

Answer 3

1. Reduce costs: involves reducing flow costs and tied-up capital in all generic processes and also make the object flow faster. RATIONALIZATION, outsourcing non-key part of business processes
2. Increase Object Value: increase the availability of the products or service objects for your customer. Improving or increasing object value in place and time. INTEGRATION
   Hint: goals of 2nd meaning of logistics-ensuring availability, using MTS. KPI- order fill rate
3. Increase Adaptivity - reacting quickly to sudden changes in the market. Flexibility is key
   Postponement strategy also gives flexibility and ability to react to fluctuations in demand. TRADE-OFF

Question 4

If you would be the manager of a CEP provider, how would you measure each goal in practice?

Answer 4

1. Reduce costs - measuring the Profit turnover rate per day
2. Increase Object Value: measuring the Order fill rate per day
3. Increase Adaptivity: successful delivery per day, Order recieved/ order fulfilled per day

Question 5

How to reduce transaction cost give 3 possibilities

Answer 5

Transaction costs are the costs involved in making documentation, negotiations, set up, searching for suppliers

1. reduce by automating the processes
2. standardizing the processes
3. strategic alliances
4. E-commerce e.g Amazon

Question 6

Explain the “Cost-Service” Trade-off. in your own words? What characterizes a “trade-off”?

Answer 6

Trade-offs are compromises achieved between conflicting logistics goals. They are decisions that involve losing a quality/quantity in one aspect in return for gain in other aspects. basically, lose a quantity in order to gain another quality

Cost-service trade-off is the situational decision we make when we negotiate between reducing costs and increasing our service level. Flexibility is key in managing the cost-service trade-off. Postponement strategy (customizing your product very late in the value chain) helps to be highly flexible in order to react to sudden changes in the market.

Question 7

Please explain the “trade-off” mechanic on the following costs components of a logistics system: Inventory costs and transportation costs

Answer 7

Inventory costs vs transportation costs

The higher the transportation costs, the lower the inventory costs (reduces tied-up capital)

Question 8

If you would try to optimize the logistics network of UPS – where are the leverages for optimization regarding:
Network – Configuration?
Network – Programming?
Network – Mobilization?

Answer 8

1. Network Configuration: focus on the resources
   - how many hubs, depots needed
   - how many competent drivers needed
   - make or buy decisions
2. Network programming - focus on the processes
   - giving the right instructions to the drivers on delivery or customer service levels
   - consolidation of shipments
   - continuous flow of the OTP process
3. Network mobilization-
   - controlling and monitoring of the entire logistics tour
   - review and response to complaints
   - choosing between push and pull systems

Question 9

If you would be a dispatcher at UPS - responsible for the planning and routing of the worldwide transports –what characteristics of the network components do you have to know for planning efficient transports routes and tours? Give concrete examples!

Answer 9

1. Transport objects: size, weight, necessary documents
2. Loading Unit: loading securing, return of loading units like pallets, containers
3. Mode & Means of Transport: time & cost restrictions, chosen service product (is road the only way to deliver?), type and capacity of vehicles
4. Depot: location, opening times, service area
5. Street, Road, Channel: navigation and route planning, round-trip planning, constraints (canals, borders etc)
6. Source or Origin: location, opening times, loading or unloading procedure
7. Sink or destination: location, opening times, loading or unloading procedure, organization of reverse flows