Chap. 1 - Intro to Logistics Services Flashcards
f you look at the large sectors of economic value creation - why is the service industry becoming more and more important?
The growing importance of the service industries is being driven - especially in developed countries by:
- high disposable income and market saturation for industrial and consumer products
- the importance of service components in the sales process of industrial products
- the increasing digitalization of everyday life and associated service-driven business models
What are the key differences between a physical product and a service?
A physical product:
- is tangible
- is presentable and checkable before purchase
- the production lies before consumption
- production, sale, and consumption are separated locally
- the transfer of ownership during the purchase is possible
- is transportable and storable
- has the possibility of resale
Services have the opposite characteristics - the most important “features” are the intangibility (= non-storeability) and the uno-actu principle (production and consumption at the same time).
What are the main components of the “Service Operation”-Model?
The main components of the “Service Operation” model are:
- A collection and “Pre-Combination” of important factors for the service performance (Business Readiness!)
- The service performance itself resp. the “End-Combination” of the factors combined with the needed external factor
- The result of the service - the service “output”
In which aspects could the “Service-Operation”-model be helpful in improving services?
The model can be helpful in different ways for improving services:
-
It works as a checklist:
Did I identify all the necessary factors for my service performance? Did I miss anything, which could be important for the performance or the result of the service? -
It works as a guideline for service development:
Where do I have problems along the service operation? Which parts of the model are producing customer complaints? -
It helps to improve service-controlling and -monitoring:
What are the right measurements for all the service factors? What is better for each factor: Make-or-Buy? How do I really measure the service output?
Why plays the state of “Business Readiness” such an important role in the successful management of logistics services?
The corridor of “Business Readiness” defines the optimum amount and quality of capacities (mobile and immobile, infrastructure and people) for a specific (usually fluctuating) demand for a customer target group.
- Is the demand higher than the available capacity, logistics service providers are in danger of losing business and/or quality problems may occur because of business stress.
- Is the demand lower than the optimal capacity usage, logistics service providers are in danger of losing performance and/or also quality problems may occur because of missing urgency of business.
- The optimal business readiness is to provide a capacity, which is higher than the optimal capacity usage but also lower than the maximal available capacity (= corridor of business readiness)
It is a corridor because the specific demand and the corresponding optimal business readiness fluctuates permanently over time (e.g. seasonal effects)
What are the three possible “Views of Services” and why they are helpful for the management in improving service quality and performance?
The three “Views of Services” are:
- The “Potential View of Services” with the focus on all factors for the optimal “business readiness” regarding service performance
- The “Process Oriented View of Services” with the focus on the service performance and its improvement in time, cost and quality aspects
- The “Result Oriented View of Services” with the focus on improving the measuring, controlling and monitoring the output of a service process.
If a logistics manager is analyzing performance and/or quality problems of a logistics service the three “Views of Services” could work as a checklist for potential leverages and improvement solutions.
From the perspective of the “potential view” of services:
Which kinds of capacity are important in influencing the “Business Readiness” of a Logistics Service Provider?
Two kinds of capacity are relevant for an optimal “Business Readiness”:
- Quantitative capacity of performance [Leistungsvermögen]; e.g. the capacity of a warehouse measured in pallet locations [Palettenstellplätze]
- Qualitative capacity of performance = capacity of problem solving, e.g. the knowledge of a logistics service provider to build and operate a 3PL-warehouse
What are possible management solutions for an LSP dealing with the problem of seasonal fluctuations in transportation demand?
Possible management solutions for dealing with seasonal fluctuations in transportation are:
- Flexible contracts (so-called floater)
- Yield management (flexible pricing policies)
- Strategic alliances / collaborations with other LSPs
Please explain in brief the concept of a “Diesel Floater” in a transport contract!
A diesel floater has the task of counteracting the fluctuating diesel prices.
It is a variable fuel surcharge that automatically adjusts to the development of fuel prices. It is agreed individually between the customer and the LSP.
Usually, the valid diesel surcharge is shown as a separate item on the forwarding invoice.
Please explain in brief the logistics strategy of “Yield Management” in transportation!
For a yield management strategy, two variables influence significantly the rate (fare or toll) being charged to use a given transport supply (scheduled flight, ship, etc.):
- Remaining capacity. As the available remaining capacity declines it becomes more valuable with fares increased accordingly. The last remaining capacity can be offered at a high cost to see which user is willing to pay to access it. For instance, an airline often keeps a few seats to make them available in the week before a scheduled flight to cater to time constrained customers (e.g business) willing to pay a higher price for the seats.
- Remaining time. Transport supply is made available at a specific point in time (t), implying that it is scheduled. As the remaining time before a scheduled capacity decreases and in the case that the capacity is not hired, the fare will be reduced in the hope that a taker will be found until the fare reaches operating costs. For domestic flights in the United States, prices generally drop until 30 days before departure, and then they start going up as airlines manage the remaining capacity to maximize revenues.
Operating costs are the fare below which it is preferable not to offer the capacity even if it is available. For instance, an airline company will not sell a seat on a flight at a cost which is below its operating costs (mostly fuel), even if the seat would therefore remain empty. Prices that are too low may also create expectations from users that they are the norm, which will change their future economic behavior.
Source: Rodrigue, J.P. (2017). The Geography of Transport Systems. Online: https://transportgeography.org/?page_id=5694, 29.10.19
How would you explain the concept of a “Process Oriented View of Services”?
The “Process Oriented View of Services” is focused on improving the process of service performance itself - based on an existing state of “Business Readiness”. The aim is to improve the internal and external supply chain of the service performing company according to the core goals of an effective/efficient service:
- Low flow costs: How to reduce the “flow costs” and tied-up capital in all generic processes and also for the whole system? → Rationalization
- High object availability: How to maximize the object value in place and time for the customer? → Integration
- High system flexibility: How to improve the systems / process ability to adopt on environmental changes in time? → Trade-offs
According to the “Result Oriented View of Services” - why is it for an LSP important to know and understand the logistics related processes of the client?
Without knowing the logistics related processes of the client the LSP doesn’t know
- the level of service quality (time, quality, flexibility) which is needed for performing an accepted service level by the client
- what could be “win-win” solutions in balancing the required service quality level with the corresponding costs (balancing the cost-service trade-off = service management)
What are the “Total Landed Costs” of a product / production factor?
What are the possible cost components of these “total landed costs”?
The “Total Landed Cost” (or “Total Cost of Ownership”) includes all cost components for the product plus the necessary supply chain cost. These supply chain costs cover:
- production costs of oversea suppliers
- overseas warehouse & transport costs
- export tariffs
- international freight transportation costs
- import duties
- buyer warehouse and transportation costs to the destination
Explain the importance of the “Price Elasticity of Demand” in the context of transportation!
Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price when nothing but the price changes. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price.
Because the price plays such an important role in transportation (→ yield management) it is very important to know the PED for specific transport modes, specific service products, and specific geografical relations. Otherwise, the LSP doesn’t know, how to set the right price in comparison to other competitors.
What are important service components of freight demand? Why?
Very important service components of freight demand are:
- The transit time: the shorter the TT the lower can be the needed safety stocks and the required tied-up capital in inventory and resources
- The reliability of transportation: the higher the reliability of a transport, the lower is the risk of stockout costs and the more positive is the impact on the good-will on the client-side. The higher predictability of transport performance corresponds with more realistic order patterns in the future.
- The accessibility of the required transport-relation: the easier it is, to implement a door-to-door transport the more convenient is the transport mode for the client.
- The security of the freight (during transport process): the higher the security level of the freight is, the lower can be the safety stock to protect the system against inventory loss or damage.
Please name and explain in brief important KPIs (Key Performance Indicators) for measuring the delivery service in a transport process!
