HZ 2017 Handout 1

International Logistics
Helmut Zsifkovits
Chair of Industrial Logistics

Montanuniversitaet Leoben, Austria
Ibague, July 2017
industrielogistik
Goal of the Course:
Identify the importance of logistics planning and performance
for local and international business processes
Agenda of the Course
Logistics as a Value Generator for Enterprises
Evolution of Logistics and Supply Chain Concepts and Best Practices
Logistics Systems and Logistics Activities, Logistics Networks
Logistics Goals - Service Level and Costs
Planning and Management of Logistics Process
Material Flow and Information Flow
Push vs. Pull Systems
Just in Time
Logistics Processes
Reverse Logistics
Global Value Chain Management
Types of Value Chains/Supply Chains - Lean vs Agile
Best Practice Supply Concepts
Make-or-Buy Decisions, Outsourcing and the Role of Logistics Service Providers
Logistics Systems Management
Logistics Facilities
Integrated Logistics
The Management of Product/Process Complexity
Logistics Technology
European Logistics
Wipers Case
International Logistics - Helmut Zsifkovits 3

industrielogistik
1. Logistics as a Value Generator for Enterprises
Evolution of Logistics and Supply Chain Concepts and

Best Practices
Logistics Systems and Logistics Activities
Logistics Networks
Logistics Goals - Service Level and Costs
industrielogistik
What Logistics Is About .
How do we get
the right product

at the right time
to the right place
in the right quality
in the right quantity
at the right cost
from the supplier to the customer?

Supplier Customer

industrielogistik
Logistics Defined
Logistics
(from the Greek term lgos, which means order, or from the
French loger, which means allocate)
is the discipline that studies the functional activities
determining the ow of materials (and of the relative
information)
in a company, from their origin at the suppliers up to delivery
of the nished products to the customers and to the post-
sales service.

industrielogistik
Logistics Systems
A logistics system is made up
of facilities, where one or more
functional activities are carried
out (e.g. storage and distribution).
The figure represents a
logistics system in which the
manufacturing process of the
nished goods is divided into a transformation phase
and an assembly phase, performed in different centres.
At the start are the suppliers of materials and components which feed the nal
manufacturing process.
The end part represents a typical two-level distribution system with a tree
structure. The Central Distribution Centres (CDCs) are directly supplied by the
production plants, while each Regional Distribution Centre (RDC) is connected
to a single CDC which has the task of serving the customer, who can also be
dealers or retailers.
Ghiani et al. (2013)

industrielogistik
Supply Chain or Supply Network?
Deliver Source Make Deliver Source

Your You Your
Supplier Customer

industrielogistik
Supply Chains Supplier and Customers
Lambert (2010)

industrielogistik
Evolution from Logistics to Supply Chain Management
1970 Transport Transport

Manufac- Traditional
Purchasing Picking Picking Sales
turing Logistics
Storage Storage
Transport Transport
1980 Procure-
Picking Production Picking Distribution Central
ment
Storage Storage Logistics
Coordination
Central Logistics Department
1990 Order Management
Development Procurement Production Distribution Flow Logistics
Rckfhrung
S S LSP C C
2000+ LSP LSP LSP C Supply Chain
S S C
Manage-
S S C C ment
LSP LSP LSP
S C
S Supplier, C Customer, LSP Logistics Service Provider Zsifkovits 2012, adapted from
Baumgarten 2008, Wildemann 2010

industrielogistik
Supply Chain as a Strategic Differentiator
Dell:
Sell direct, build to order, and ship direct
Mass Customization
Wal-Mart:
Partnership with Procter & Gamble to replenish inventory showed the
power of integrating with key suppliers, shifted from buying from
distributors to buying directly from manufacturers
Cross-docking: moving goods through a distribution center in less than a
day. Rapid inventory turns contribute to the lower costs, and the speed
of the flow of inventory results in the increase in customer service.
Benetton:
By developing a QR (Quick Response) system utilizing bar coding of
cartons and linking production to retail locations, Benetton achieves low
in-store inventory, right stock availability, and high levels of customer
service.
Postponement: applying color at a late stage of the textiles supply chain

industrielogistik
Trends and Challenges
for Supply Chain Management
1. Globalization The World is Flat

2. Complexity Mass-Customized Products
3. Changing Processes From Just-in-Time to the Last Mile
4. Environment and Resources
5. Infrastructure Logistics Networks
6. Technology Smart Things and Smart Factories

industrielogistik
Trend 1: Globalization

industrielogistik
Global Sourcing
Global transport Goods production
China factory of the world

India service factory
Eastern Europe factory of Europe Straube (2010)
United Arab Emirates hub of the world
Russia, South America resources

industrielogistik
A Milestone in Logistics
Malcom Purcell McLean (* 14.11.1913 in Maxton, North Carolina, USA; 25.5.2001 in

Manhattan, New York, USA)
American transport entrepreneur who developed the modern intermodal shipping container
(1956).

industrielogistik
Container Transport Today
Maersk Mc-Kinney Mller (18.300 TEU)
JadeWeserPort (JWP) in Wilhelmshaven.

Eugen Maersk, Majestic Maersk
(18.000 TEU)
TEU Twenty-foot Equivalent Unit

industrielogistik
What Do these Brands Have in Common?
Reebok Li & Fung Ltd. ()

Nike
Toys R Us They use the same supply chain manager.
Esprit Global supply chain manager primarily for US and EU brands,
department stores, hypermarkets, specialty stores, catalogue-led
Abercrombie & Fitch companies, and ecommerce sites.
Debenhams Li & Fung founded in 1906 in modern-day Guangzhou, headquartered
Next in Hong Kong. Apparel, furniture and home furnishings, beauty and
personal care products, fashion accessories and general
Limited Brands merchandizing, such as seasonal gifts.
Marks & Spencer Li & Fung employs about 25,000 people worldwide. 15,000 suppliers to
Walmart service 8,000 customers. (2016)
Metro Product design and development, raw materials and factory sourcing
and capacity building, vendor compliance and distribution.
Sainsburys Own brands: Toys R Us, Tommy Hilfiger y
Carrefour
Walt Disney Li & Fung is involved in the production of 40-50% of
Coca-Cola the clothes that you find in any US shopping mall
(Forbes.com)

industrielogistik
Globalization Strategies
Production
Markets
Wrede (2000)

industrielogistik
Globalization
Ethnocentricity: a company when doing business abroad thinks and
acts as if they were still operating in their home country
Polycentricity: a company adopts the host country perspective
Geocentricity: a company acts completely independent of geography
and adopts a global perspective, and will tailor to the local
environment as appropriate (i.e. glocalisation)
Problem for transport networks:

Directional imbalances
Mismatches in the volumes or types
of freight moving in opposite
directions in a freight market.
Major trade corridors:
Mangan et al. 2008

industrielogistik
Trend 2: Complexity and Individualization
Automotive
Audi 80: 10 colors, A4: >60
BMW: 100 variants 600 (within 10 years),
> 1 mill. configurations
Bosch: 825 types of windscreen wipers (2000)
Toothpaste brands
Germany: 14 (1950) 93 (2000)
Food/drink
Breakfast cereals: > 200
Coffee Republic: 6.000 varieties of coffee
Services/telecom
Trend personalized goods
Mass Customization
MCI 388 new services from 1993 to 2003

industrielogistik
Production Strategies & Manufacturing Technology
Supply <
Demand 1955
Steady Lean 1980
Demand Production
Mass
Output Volume Production Influence of
Mass
Market Demand
Customization Globalization
2000
Push
1913 Pull
Craft
Rocky
Production
Demand
1850
Supply >
Demand
Output Variety
Homogeneous Low- Heterogeneous

Society Needs
Cost Products Products
Sources: Adapted from Mangan et al. 2008 and

http://treehouselogic.wordpress.com/2011/02/11/from-bespoke-to-mass-customization/

industrielogistik
Trend 3: Changing Processes
Logistics
Supplier Service Customer
Provider
Fabrication/Quality Check Quality Check Storage Fabrication
Conventional F/Q S Q S F
Ship to Stock F/Q S S F
Delivery Call-up
F/Q S F
(Ship to Line)
External Procurement
F/Q S F
Warehouse
Just-in-Sequence
F/Q F
(line to Line)

industrielogistik
Supply Chain Operations Reference Model (SCOR)
Plan
Plan Plan Plan Plan
Deliver Source Make Deliver Source Make Deliver Source
Return Return Return Source Make Deliver Return Return Return
Supplier Customer Customers

Suppliers Return Return Internal or External Customer
Supplier Internal or External
Your Company

industrielogistik
Supply Chain Operations Reference Model (SCOR)
Level
No. Description Schematic
1 Plan The SCOR model is
Top Level Source Make Deliver endorsed by the
(Process Types) supply-chain council,
Return
an independent, not-
2 Configuration for-profit corporation
Level of more than 1000
(Process companies.
Categories)
3 Process Element
Level
(Decomposed
Processes)
P1.1
P1.3 P1.4
P1.2
4 Implementation
Not in Level
Scope (Decomposed
Process Elements)

industrielogistik
SCOR Processes
Plan P1 Plan Supply Chain
P2 Plan Source P3 Plan Make P4 Plan Deliver P5 Plan Returns
Source Make Deliver

Suppliers
Customers
S1 Source Stocked Products M1 Make-to-Stock D1 Deliver Stocked Products
S2 Source MTO Products D2 Deliver MTO Products

M2 Make-to-Order
S3 Source ETO Products M3 Engineer-to-Order D3 Deliver ETO Products
Return Return
Source Deliver
Enable
industrielogistik
The Last Mile
Last Mile final steps of the supply chain, from distribution center or hub
(terminal, train station etc.) to customer
Challenges:
Increasing number of smaller shipments
Absence of recipients
Incresing number of returns
CEP (Courier/Express/Parcel Services): 50 75 % of logistics costs on last
mile

industrielogistik
Problems and Tendencies in Last Mile Deliveries
Internal Problems Tendencies

Order Heavily fluctuating incoming orders Expanding number of parcels
structure Less positions per order Increased cost pressure due to
Increased order frequency more expensive logistic handling incl.
returns shipment
Selling Lack of historical data for forecasts Change of priority from front-end (e-
shop) to back-end (e-fulfilment)
behaviour High quantity growth
Standardized individual service due
International/global handling
to increased individualism of the
Poor customer loyalty customer
Customer Intermediate delivery Flexible automation in warehousing
and conveying technology
expectation Returns free of charge
Shipment tracking
Customer service

industrielogistik
Trend 4: Environment and Resources
40 % of trucks run empty

Road traffic causes emissions, noise and accidents
Intermodal transport
Verarbeitende Industrie
Packaging
Cycle economy Einkaufen Fertigen Verkaufen
Ver-kaufen
Ein-
kaufen
Grundstoff- Umfor-men
Logistik- Lagern
Handel
industrie Kreislauf
Ver-
Gewin-nen
kaufen
Aufar-
Verkaufen beiten Sammeln
Abfallwirtschaft

industrielogistik
Climate Change and Resource Scarcity
75% 25%
German Railways: CO2 emissions -45% (1990-2011)
DB Schenker: optimized utilization of storage space
(+ 25%)
Deutsche Post/DHL: improved CO2 efficiency by
30% until 2020
Energy-efficient power trains 35% 15% 43%
~ 9% ~ 4% ~ 11%
Improved isolation
Energy-saving lamps
Solar energy
Geothermal energy
Air conditioning


industrielogistik
Energy Efficiency Analysis of a Plant
Wiendahl

industrielogistik
Trend 5: Logistics Infrastructure

industrielogistik
Trend 5: Infrastructure
Source: World Economic Forum: The Global Competitiveness Report 2012-2013

Scale indicates the quality of infrastructure (0 low, 10 high)

industrielogistik
Example: Brazilian Infrastructure Sao Paulo > 20 Mio. population
> 6 Mio. cars
1000 new cars per day
Weak public transportation system
> 200 km congestion
timo = excellent
Bom = good
Regular
Ruim = bad 69%
Pssimo = very bad
Straube (2010)
industrielogistik
Logistics Performance Index (LPI)
Connecting to Compete 2016 - Trade Logistics in the Global Economy

The Logistics Performance Index and Its Indicators
2016 The International Bank for Reconstruction and Development/The World Bank

industrielogistik
Logistics Performance Index 2016 (LPI)

industrielogistik
LPI vs. Gross Domestic Product

industrielogistik
LPI Indicators

industrielogistik
LPI Ranking by Indicators

industrielogistik
industrielogistik
industrielogistik
industrielogistik
Domestic LPI results, time and cost data
a. From the point of origin (the sellers factory, typically located either in the capital city or in the largest commercial center) to the port of
loading or equivalent (port/airport), and excluding international shipping (EXW to FOB).
b. From the point of origin (the sellers factory, typically located either in the capital city or in the largest commercial center) to the buyers
warehouse (EXW to DDP).
c. From the port of discharge or equivalent to the buyers warehouse (DAT to DDP).
d. Aggregates of the distance indicator for port and airport.

industrielogistik
Trend 6: Technology
Transparency and visibility are requisite in order to manage complex

systems and goods flows.
Flexible, adaptive systems are required.
Proximity gains importance again.
Logistics 4.0

industrielogistik
New Technology

industrielogistik
Trends and Strategies
Logistics Costs
Logistics Costs (% of Overall Revenue)
Share of Logistics Costs (%)

Source: Handfield et a., Trends and Strategies in Logistics and SCM , 2013

industrielogistik
Global Challenges Facing Supply Chain
Management
Challenges Symptoms
Demographic Aging domestic populations require new

changes markets for existing products, new
products for existing markets;
Population growth to 9 billion (2050)
60 % live in cities
Geopolitical The rise of the BRIC countries is driving a
changes change in global power structures and
economic centers of gravity;
Global player companies (acting in more
than one continent): 17,000 (1990), 75,000
(2009), 170,000 (2020)
Changes in Global demand and cultural diversity
consumers drives variety and complexity
preferences
Environmental Pressures to reduce carbon emissions,
concerns waste, and resource use are driving
location and operational considerations
Technology Smart networks and auto-ID technologies
are enabling the "network of things"
Supply chain Increased complexity and length of supply Source: The Millennium Project (UN), 2010 State of the Future
risks chains are causing disruptions and delays

industrielogistik
Risk Issues Affecting Supplies
Emerging risk issues which will impact the world economy and society in the decade ahead
(World Economic Forum 2008):
Systemic financial risks
Food security
Energy supply
Supply chain disruptions and
supply chain vulnerability

industrielogistik
Supply Chain Disruptions
Survey by Hendricks/Singhal (2005) analyzes 838 supply chain disruptions

announced by Wall Street Journal and Dow Jones News
Nike Warns Fiscal 3rd-Quarter Earnings Will Miss Estimates by at Least
28% (Wall Street Journal, February 27, 2001)
Sony Sees Shortage of Playstation 2s for Holiday Season
(Wall Street Journal, September 28, 2000)
Hershey will miss earnings estimate by as much as 10% because of
problems in delivering order (Wall Street Journal, September 14,
1999)
Boeing pushing for record production,
finds parts shortages, delivery delays
(Wall Street Journal, June 26, 1997)
Apple Cuts 4th period forecast citing
parts shortages, product delays
(Wall Street Journal, September 15, 1995)
Number of disruptions is growing

industrielogistik
Evolution of SC Concepts Best Practices
CRM
Lean Mfg SCOR
SC
Agile SC RFID Visibility
JIT ERP
Cloud
Global Economic Recession

3PL
Computing
Contract Internet Demand- Sustaina-
Mfg Exchanges Driven SC bility
1990s 2000 2004 2006 2008 2010
Supplier 4PL SC Risk

S&OP
Integration Mgmt
Spare Parts Offshoring

Logistics Compliance
E-Procurement
Globalization
CPFR
WMS E-Fulfillment SC
Six Sigma Collaboration SC
Integration Government
TMS APS
Involvement
Source: Adapted from Langley 2010

industrielogistik
Levels of Logistics Systems
Logistics
Macro-Logistics Meso-Logistics Micro-Logistics
Transport Logistics
Cooperations
Systeme Departments
Logistics Logistics
Industries
Infrastructure Providers
Markets

industrielogistik
European Union (EU)
Transport Infrastructure
Policy
Core TEN-T network corridors
1. Baltic-Adriatic: incl Semmering tunnel, Koralmbahn
2. North Sea-Baltic: the most important element is Rail Baltica
3. Mediterranean: rail projects Lyon-Torino, Venezia-Ljubljana
4. Orient/East-Med
5. Scandinavian-Mediterranean: incl Fehmarn Belt fixed
link and Brenner base tunnel
6. Rhine-Alpine: incl Swiss base tunnels, access routes in
Germany and Italy
7. Atlantic: incl high speed and conventional rail
8. North Sea-Mediterranean
9. Rhine-Danube Corridor
To be completed by 2030.
Announced Oct 17, 2013, aims to remove bottlenecks, upgrade infrastructure
and streamline cross-border passenger and freight movement to turn Europes
existing patchwork of roads, railways, airports and canals into a unified trans-
European transport network.

industrielogistik
Supply Chain Trends Europe
Centralisation of European supply

chain structures
Shortening product life cycles
Outsourcing of warehousing and
transport operations to logistics
service providers
Consolidation in the logistics service
provider industry
Global operations
Country- or customer-specific
assembly or kitting operations as
close to the customer as possible

industrielogistik
Logistics Costs vs. Logistics Service
Sales/
Costs Growth
Indifference
Zone
Utility
Threshold
Lead Time Reduction

Stock Reduction
Less Variety
Process Optimization
Negative Positive
Differenciation Differenciation
Logistics Service Logistics Service
Traditional Logistics Focus Wider Logistics Focus

Cost reduction through Growth through
customer-oriented logistics performance
value-added logistics performance

industrielogistik
Logistics Service and Logistics Costs
Logistics Performance Goals
Service Level Logistics Costs
Delivery time Control Costs

Reliability Inventory Costs
Flexibility Warehouse Costs
Condition of Transport Costs
goods received Handling Costs
Logistics
Service Level
Costs

industrielogistik
Service Level Policy (Example)
Delivery lead time:

delivery within 5 days
Reliability:
95% of deliveries within 5 days, 100 % within 10 days
Availability:
97% of A goods in stock
Delivery quality:
98% of orders right in type and quantity
Information:
Confirmation of availability and delivery schedule within 4 hours
...

industrielogistik
Main Cost Categories of a Logistics System

industrielogistik
Logistics Costs
Baumgarten, TU Berlin

industrielogistik
Logistics Expenditures and Outsourcing
http://www.3plstudy.com/

industrielogistik
2. Planning and Management of Logistics Process

Push vs. Pull Systems
Just in Time
Logistics Processes
Reverse Logistics
industrielogistik

industrielogistik
Supply Chain Flows
Material Flow
Suppliers Information Flow Customers
Value Flow

industrielogistik
Logistics Sub-Systems
Enterprise Logistics
Procurement Logistics Production Logistics Distribution Logistics
Raw Material,
Raw Material Final Goods, Spare Parts
Semi-Finished Good,
Final Goods
Goods Manufacturing Plant Distribution

Suppliers Received Warehouse Center Customers
Intermediate
Storage
Recycling Goods, Waste, Returns, Containers

Return Logistics
Material Flow

industrielogistik
Push vs Pull
Push System
Centralized decision making
System for replenishing
distribution center inventories
where inventory decisions
are made at manufacturing
location. The stock is "pushed" out to the distribution centers.
Pull System
Decentralized decision making
System for replenishing distribution center inventories where inventory decisions
are made at the distribution center and "pulled" from the manufacturing plant.
Orientation toward the end customer - whole value added process is not
controlled by manufacturer but by consumer demand (Demand Chain).
Following the requirements the individual demands are planned backwards
with the required time-lag for the provision of individual products.

industrielogistik
Manufacturing Strategies
Development Construction Procurement Production Assembly Distribution

high
Make to Stock
(MTS)
Standardization
Assemble to Order
(ATO)
Make to Order
(MTO)
Engineer to Order
(ETO)
low
Forecast-Driven Order-Driven Order Penetration Point

industrielogistik
Manufacturing Strategies
Make to stock - best strategy for standardized products that sell in
high volume. Larger production batches keep manufacturing
costs down. Having products in inventory means that customer
demand can be met quickly.
Make to order - preferred strategy for customized products or
products with infrequent demand. Produce a shippable product
only based on a customer order in hand. This keeps inventory
levels low while allowing for a wide range of product options.
Configure to order - hybrid strategy in which a product is partially
completed to a generic level and then finished when an order is
received. Preferred when there are many variations of the end
product and you want low finished-goods inventory and short
customer lead times.
Engineer to order goes beyond make to order, used in industries
where complex products/services are created and manufactured
to unique customer specifications.

industrielogistik
Just-in-Time (JIT) Concepts
Method to control inventory levels, aiming to reduce stock by eliminating safety

buffers.
Core of the concept: inventory level exceeding minimum required for current
task is waste.
Goods are delivered at time of use or as close to as possible. Opposed to
traditional philosophy of Just-in-case (keep large buffers).
JIT first developed within Toyotas manufacturing operations by Taiichi Ohno in
the 1970s as a means of meeting customer demands with minimum delay.
Element of Lean Production/Management philosophy. Applied to other
industries.
First realization of cross-corporate approach to logistics: integration of Just-in-
time (JIT) suppliers by automotive industry, including fulfillment of logistic
processes by logistics service providers.
Can be realized in different areas - JIT production and JIT replenishment.

industrielogistik
Benefits of A JIT System
Reduction of stockouts
Reduction of inventory levels
Reduction of need for material handling equipment
Reduction of time frames between delivery and production
Significant quality improvement
Employee inclusion in continuous quality improvement

industrielogistik
7 Types of MUDA - JIT Systems Eliminate Waste
Overproduction
Waiting
Transportation/
Conveyance
Processing
Inventory
Motion
Rework .

industrielogistik
Basic Concepts Compared
Supplier LSP Customer

Fabrication/QA Inspection Storage Fabrication
Conventional F/QA S I S F
Ship to Stock F/QA S S F
Delivery Call-up
F/QA S F
(Ship to Line)
External Procurement
F/QA S F
Warehouse
Just-in-Sequence
F/QA F
(line to Line)

industrielogistik
Physical Logistics Processes
Inventory Warehousing
Management
Order
Management
Packaging &
Container
Transport
Management

industrielogistik
Management
Order Management Order
Management
Order cycle: time from when
an order is received from a Packaging
& Container
customer to when the goods Transport Mgmt
arrive at the customers
receiving dock. 5 stages : Acquire Clients
Acquire Clients via Internet
1. Order planning: even out via Catalog/
workloads Advertising Fulfillment
Process
2. Order transmittal:
postal/telephone, scanners, Customer opens
bar codes, EDI package next morning
Fulfillment
3. Order processing: internal Process
orders (purchasing,
manufacturing, )
4. Order picking and assembly Customer opens
package
5. Order delivery in a week

industrielogistik
Management
Inventory Order
Management
Packaging
& Container
Transport Mgmt
Inventory
Flexibility
Capacity
Setup
Information
Time Quality Material
Suppliers Flow Service
Quality Flow Level
Inventories enable
production without interruptions
timely delivery
bridging bottlenecks and breakdowns
economical production runs
good usage of capacities Western view

industrielogistik
Inventory
Flexibility
Capacity
Inventory
Setup
Information
Time Quality Material
Suppliers Flow Service
Quality Flow Level
Inventories hide
vulnerable processes
unbalanced capacity
lack of flexibility
errors and defects
low service level Japanese view

industrielogistik
Inventory Management
Total
Assets Inventory
$M $M % of Sales Turns Days
Northern Telecom 5878 820 15.2 3.9 92
AT&T 35152 3392 29.9 1.9 186

Alcatel 9521 2747 23.6 2.9 123
Siemens 30107 9962 33.2 2.1 169

IBM 73037 9565 23.9 1.8 197
Motorola 6710 1144 13.9 4.4 82

Apple 2082 462 11.3 4.3 83
DEC 10112 1515 20.1 1.9 187

The total cost of
HP 7497 1478 19.2 2.3
inventory is 30-155
50%
Toshiba 27673 5942 20.8 3.5 104
NEC 25161 5140 22.2 3.1 117

industrielogistik
Inventory Analysis
Why inventory is not an asset
$M
Annual Sales 11
Net Profit (@ 9.1%) 1
Inventory Required:
- at 2 turns/year 5
- at 5 turns/year 2
Savings:
- inventory Decrease 1,5 one time gift
- decreased inventory maintenance
(@ 33 1/3% cost of inventory/year) 0,5 per year

industrielogistik
Elements of Inventory
Over time, demand and the ability to service demand (replenish inventory) can
vary. Forecasts may not be precise due to uncertainties, so, a reserve of stock
(safety stock) may be necessary to reduce inventory shortages (stock-outs).
Inventory levels above the safety stock and normal demand are considered
excess inventory.
Inventory
Level
Excess stock
Replenishments
Safety stock
Time
industrielogistik
Economic Order Quantity (EOQ)
The Total-Cost Curve

Cost
Holding costs
Ordering Costs
QO (optimal order quantity) Order

Quantity(Q)

industrielogistik
Warehouse Management
Management
Order
Management
Distribution Centers and warehouses Packaging

in the supply chain perform the sorting Transport
& Container
Mgmt
function
They are the point at which goods are concentrated; from this
concentration a new and different assortment of goods is
selected
and moves forward to be dispersed to the next level.
Types of warehouses:
Public warehouses:
are used by firms that either cannot justify the costs of having their
own facilities or prefer not making a commitment to owning and
operating their own facilities
Private warehouses:
owned or occupied on a long-term lease by a firm using them
Contract warehouses:
form of public warehousing covered by a longer contract between
the two parties

industrielogistik
Types of Warehouses by Function/Location
Raw material / component warehouses / work-in-process / finished

goods warehouses
Plant warehouses: associated with manufacturing operations
Distribution centers: emphasize the distribution aspects of warehousing
instead of the storage operations
Local central warehouses
Value-added warehouses
Stock-holding warehouses - Stockless depots (Transshipment / Cross-
docking depots)

industrielogistik
Crossdocking - Overnight Parcel Delivery
Workers speak the final digits of the destination zip code of incoming
packages into a voice data collection system.
This information is then used to sort packages to the correct shipping
lane.
Before loading on over-the road trailers, a worker with a finger-
mounted scanner connected to a wearable computer with radio
frequency capabilities scans the bar code of the package, clearly
identifying that it passed this point at a specific time.
80
industrielogistik
Management
Packaging & Container Management Order

Management
Packaging
& Container
Building-blocks concept: Transport Mgmt
Retail packages, cartons

Boxes
Pallets
Containers (20/40 feet)
Legal
Functions: Restrictions Economics
Promotional Functions
Protective Functions Environmental Marketing
Packaging
Protection
Handling Functions Criteria
Labeling Functions
Product Consumer
Returnable/reusable packaging Attributes
Logistics
Johnson/Wood: (Contemporary Logistics)

industrielogistik
Transport
Management
Order
Most important element in logistics costs, Management
between one-third and two-thirds of Packaging

total logistics costs Transport
&
Container
Economically important sector Mgmt
Global transportation expenditures exceed $2 trillion annually

15% of GDP, 17% of household expenditure (UK)
Affects prices of most products
Requires extensive public subsidies
Negative external effects
(environment)
Variations in Transport Demand

industrielogistik
Transport Fundamentals
A shipper pays a carrier to transport cargo from an origin to a
destination where the consignee receives the cargo.
The payment made to a carrier is called a freight payment and the
document describing and contracting the movement of the goods
is called a bill of lading.
Cargo is housed in a container (trailer, railcar, or ocean container)
and is moved by a vehicle (locomotive, airplane, or ocean vessel).
Cargo is moved to, from, and between various logistics facilities
(warehouses, terminals, distribution centers, and ports).
The arrangement and location of logistics facilities is called
transportation network.
A shipment is one or more orders traveling together.

industrielogistik
Basic Transport Modes
Traffic
Systems
People Goods Message

Transport System Transport System Transmittal
Land Air Water
Road Rail Pipeline Air Freight Ship
Five transportation modes road, rail, air, water, and pipeline.

Intermodal combinations rail-motor, motor-water, motor-air,
and rail-water

industrielogistik
Size Comparison
Queen Mary 2 one of the largest passenger ships (345 m)

industrielogistik
Comparison of Transportation Modes
Motor Rail Air Water Pipeline
Cost Moderate Low High Low Low
Market coverage Point-to-point Terminal-to-terminal Terminal-to- Terminal-to-terminal Terminal-to-

terminal terminal
Degree of competition Many Few Moderate Few Few
(number of competitors)
Predominant traffic All types Low-moderate value, High value, low- Low value, high Low value, high
mod.-high density moderate density density density
Average length of haul 350 1,000 330 500 to 2,000 400-500
(in kilometers)
Equipment capacity 10 to 25 50 to 12,000 5 to 125 1,000 to 60,000 30,000-2,500,000
(tons)
Speed (time-in-transit) Moderate/fas Moderate Fast Slow Slow
t
Availability High Moderate Moderate Low Low
Consistency (delivery High Moderate High Low to moderate High

time variability)
Loss and damage Low Moderate Low Low to moderate Low
Flexibility (adjustment to high Moderate Moderate to high Low to moderate Low

shippers needs)

industrielogistik
Intermodal Services
Intermodal movements combine the cost and/or service
advantages of two or more modes in a single product movement.
Rail Air
Piggyback Birdyback
Truck
Fishyback
Water Pipeline
Selected Forms of Intermodal Transportation

industrielogistik
Allocation of Costs and Responsibilities
for Delivery
Incoterms (International
Commercial terms) are a
series of pre-defined
commercial terms
published by the
International Chamber of
Commerce (ICC) widely
used in international
commercial transactions.
Blue - seller's costs.
Yellow - buyer's costs
Green - seller's
responsibility for the
delivery
Red - buyer's responsibility
for the delivery.
Grey - exception
Source: http://en.wikipedia.org/wiki/Incoterms
industrielogistik
Transport Optimization
Routing/Shortest Path
Network
Partitioning
Sample
Traveling Salesman

industrielogistik
Reverse Logistics for Sustainability
Space and natural resources on earth have limitations

Development and consumption at any generation should not affect the
development and healthy life of subsequent generations
Resultant global missions in economic development:

Reduction of disposable wastes, meant for landfilling and incineration
Lowering of resource use in economic activities
Re-use of non-biodegradable and harmful substances
Devising mechanism for low-cost production to meet ever-expanding
consumer market

industrielogistik
Reverse Logistics
According to CLM definition, managing reverse flows is part of Logistics

Management: Logistics Management is that part of Supply Chain
Management that plans, implements, and controls the efficient,
effective forward and reverse flow and storage of goods, services and
related information between the point of origin and the point of
consumption in order to meet customers requirements
Reverse logistics is the process of moving goods from their typical final
destination for the purpose of capturing value, or proper disposal.
Remanufacturing and refurbishing activities also may be included in the
definition of reverse logistics.
The reverse logistics process includes the management and the sale of
surplus as well as returned equipment and machines from the hardware
leasing business.

industrielogistik
Reverse Logistics An Example
A manufacturer produces product A which moves through the supply

chain network reaching the distributor or customer.
Any process or management after the sale of product A involves
Reverse Logistics.
If product A happened to be defective the customer would return the
product.
The manufacturing firm would then have to organize shipping of the
defective product, testing the product, dismantling, repairing, recycling
or disposing the product.
Product A will travel in reverse through the supply chain network in order
to retain any use from the defective product. This is what reverse
logistics is about.

industrielogistik
Causes of Product Returns
Planned Return/Reuse: Products given to the customer on a lease/rent basis are
returned and can be reused/refurbished.
Containers: Loading devices (pallets etc.) and containers designed for multiple
uses are returned. These often have standard dimensions for interoperability.
Defects: Product doesnt meet the quality standards set by the
manufacturer. In a high cost product segment, the defects are rectified and
where as in low cost products segment, replacement will be offered, defective
product is returned for refurbishing or remanufacturing.
Product Recalls: Manufacturers may recall the product to address the product
quality issues which cannot be rectified in the field.
Competitive Reasons: Major retailers agree to take back product in order to
gain confidence of consumers. (catalog /internet sales)
Abuse: Some consumers make use of the returns policy and abuse the system in
order to achieve individual gains.
Charity: Organizations use reverse logistics function for philanthropic
goals. Prevalent in food industry; star hotels distribute the leftovers to the needy.
Reclaim Parts: Organizations recycle the parts.
New product introduction: triggers reverse flows to clear channel inventory.

industrielogistik
Business Impacts
Reverse logistics enables product recycling in order to recapture the value and
its disposal. Returns need not be financial write offs, could be refurbished and
sold again, part of product could be recycled/remanufactured.
Reverse logistics is critical in asset disposition (electronic waste/chemicals) to
protect environment and recover IT data.
Reverse logistics is more than just returns management, related to returns
avoidance, disposal and other after-market issues.
4% to 6% of retail purchases are returned, costing the industry about $40 billion
per year. Reverse logistics costs: almost 1 % of the total US gross domestic
product (RL Magazine, Fall 2006). Online sales: up to 50% returns.
Return of unsold goods: In certain industries, goods distributed to downstream
members in the supply chain may be returned for credit if they are not sold
(e.g. newspapers and magazines). The risk of obsolescence is borne by the
supplier who effectively finances the inventory for the downstream member.
Reverse logistics helps to generate additional revenue, differentiate market
position and support product demand, and establish better customer relations.

industrielogistik
Reverse Logistics Network

industrielogistik
Some Global Product Recovery Initiatives
US: over 73 000 remanufacturing firms with total sales of $53 billion,
employing 480 000 workers, average profit margins exceed 20%.
VW & Opel started taking back in 1992, BMW & VW followed.
Remanufactured parts of BMW cars sold at 50 to 70 % of original price.
75% of discarded metal from car recycled.
IBM Europe (Germany, UK & The Netherlands) product recovery
program 1990.
5700 tons of mainframe and PCs of Siemens Nixdorf Informatics System
(Germany) recovered as 33% of total sales in 1997-98.
Since 1991, HP returned & recycled more than 60 million inkjet printers,
cartridges etc.

industrielogistik
Forward and Reverse Logistics
"Forward Logistics"
describes the
conventional
manufacturer-to-
customer supply chain.
"Reverse Logistics" is
the process of
returning goods from
consumers back to
suppliers.

industrielogistik
Industry Scope
Publishing In order to encourage sellers to stock new books, publishers began the reverse
flow of unsold books. E.g. return costs the publisher 25 cents in transportation, books are
destroyed that cost between $2 to $2.50 to print.
IT Hardware and Electronics short product life cycles - long warranties. Obsolescence
causes return flows. Carnegie Mellon University: approximately 325 million personal
computers become obsolete in the US (1985- 2005). Out of that, 55 million placed in
landfills (safe disposal), 143 million recycled.
Chemicals and Paints Paint is a mixture of four basic ingredients: Pigments, Resins,
Solvents and Additives. Solvents determine how it may disposed.
Retail Returns as a competitive strategy to attract customers. However, some abuse
returns policy. Cranfield School of Management: 30% of returns in catalog retailing, 2.8
million worth of goods. 90% of the retailers ignore returns processing and do not have any
system in place to manage returns.
Consumer Electronics returns account for 2 to 3 percent of a retailers sales and 5 to 6
percent of a manufacturers sales in consumer electronics.
Automotive Automobile at its end of life will end up with salvage yard and some of the
parts are recycled. Automotive recyclers handle more than 10 million vehicles every year.
Their efforts supply more than 37 percent of the United States ferrous scrap for the scrap-
processing industry.
Food Hotels engage in charity distributing the leftovers to the needy.
A company in Singapore recycles soya bean waste, spent grains and yeast into animal
feed. A food waste treatment plant was set up to turn food waste from food courts, hotels
and factories into compost and biogas.

industrielogistik
Product Recovery Options
Return to suppliers
Resell
Repair to bring a product to working condition (replacing or fixing some parts)
Remanufacture - done by the original manufacturer or an authorized
representative. Returns are completely disassembled to parts/components,
thoroughly inspected, defective and worn-out parts are repaired or replaced
by new ones and then finally reassembled Full manufacturers warranty.
Refurbish/Recondition - performed by third party company. Limited warranty.
Reclaim parts (cannibalization) recovery of parts/components,
Recycle - recovery of material, identity of original product/parts is lost
Examples:
Xerox ModiCorp Ltd. (remanufacturing photocopiers)
United Van der Horst Ltd. (repairing, refurbishing and remanufacturing marine, oilfield and industrial
products)

industrielogistik
3. Global Value Chain Management
Types of Value Chains/Supply Chains - Lean vs Agile

Best Practice Supply Concepts
Make-or-Buy Decisions, Outsourcing and the Role of
Logistics Service Providers
industrielogistik
Classification of Products
Corn Flakes Consumer electronics
Lawn fertilizer New music recordings
Ball point pens New computer games
Light bulbs Fashion clothes
Auto replacement tires Art works
Industrial chemicals Movies
Tomato soup Consulting services
What makes these two groups different?

industrielogistik
Choosing the Right Supply Chain Strategy
Corn Flakes Lean Economical production
Lawn fertilizer Supply Chain runs
Ball point pens Finished goods inventories
(efficient)
Light bulbs
Auto replacement tires Economical buy quantities
Industrial chemicals Large shipment sizes
Tomato soup Batch order processing
Consumer electronics Agile Excess capacity (buffers)

New music recordings Supply Chain Quick changeovers
New computer games (responsive) Short lead times
Fashion clothes
Art works Flexible processing
Movies Premium transportation
Consulting services Single order processing

industrielogistik
Lean vs. Agile Supply Chains
Lean Agile
Lean: Eliminating waste in a pull A key characteristic of an agile
based value stream with level organization is flexibility.
production (even production Initially, manufacturing flexibility
runs with neither idle time nor was through automation to
surges in demand) and just-in- enable rapid changeovers (i.e.
time inventory management reduced set-up times) and thus
Lean concepts work well where enable a greater responsiveness
demand is relatively stable and to changes in product mix or
predictable, variety is low. volume.
From lean manufacturing to Later this idea was extended to
wider concepts of lean the concept of agility as an
enterprise organizational orientation.

industrielogistik
Lean vs Agile Supply Chains: Attributes
Distinguishing Attributes Lean Supply Chain Agile Supply Chain
Typical Products Commodities Fashion Goods
Marketplace Demand Predictable Volatile
Product Variety Low High
Product Life Cycle Long Short
Customer Drivers Cost Availability
Profit Margin Low High
Dominant Costs Physical Costs Marketability Costs
Stockout Penalties Long Term Contractual Immediate and Volatile
Purchasing Policy Buy Materials Assign Capacity
Forecasting Mechanism Algorithmic Consultative
Agility Leanness
Dichotomy
Speed Cost
or Synergy?
Flexibility Productivity

industrielogistik
Lean Supply Chains
The idea of lean manufacturing (Womack, Jones & Roos, 1990), and the
wider concepts of the lean enterprise (Womack, & Jones, 1996).
The focus of the lean approach has essentially been on the elimination of
waste or muda.
Lean manufacturing: Eliminating waste in a pull based value stream of
activities with level production (i.e. even production runs with neither idle
time nor surges in demand) and just-in-time inventory management
The upsurge of interest in lean manufacturing can be traced to the Toyota
Production Systems (TPS) with its focus on the reduction and elimination of
waste (Ohno, 1988).
Lean concepts work well where demand is relatively stable and hence
predictable and where variety is low.

industrielogistik
Agile Supply Chains
A key characteristic of an agile organization is flexibility; the origins of

agility as a business concept lie partially in flexible manufacturing systems
(FMS).
Initially, manufacturing flexibility was through automation to enable rapid
changeovers (i.e. reduced set-up times) and thus enable a greater
responsiveness to changes in product mix or volume.
Later this idea was extended into the wider business context (Nagel and
Dove, 1991), to the concept of agility as an organizational orientation.
The agile supply chain is a demand-pull chain designed to cope with
volatile demand.
Structured so as to allow maximum flexibility
Enabled by mass customization
Often incorporates postponed production

industrielogistik
Best Practice Supply Chain Concepts
Supply Chain Concepts
Push vs Pull
Just-in-Time
Collaborative Models (ECR, CPFR, VMI)
E-Logistics
Last Mile

industrielogistik
Replenishment Concepts
Synchronise the demand with the replenishment, in retail.
Combination of new concepts of distribution technologies modern
information and communication techniques such as
Scanners
Wireless transmission
Electronic data interchange
Standards in identification (bar code, GTIN, RFID)
The most important concepts include
Vendor Managed Inventory (VMI)
Efficient Consumer Response (ECR)
Collaborative Planning, Forecasting and Replenishment (CPFR)
Cross-Docking

industrielogistik
Vendor Managed Inventory (VMI)
Vendor Managed Inventory (VMI) is stock at the purchasers facilities

controlled by the supplier.
The purchaser does not plan his demand and order the needed items.
Transferring the operative stock keeping to the supplier.

industrielogistik
Efficient Consumer Response (ECR)
ECR is a form of vertical cooperation between manufacturers of

branded consumer goods and food vendors.
The goal is to minimize the costs of the value chain and to maximize
consumer satisfaction by cooperation between manufacturers and
vendors.
The instruments of ECR are the supply chain management (logistic
cooperation) and category management (marketing cooperation).
Condition is the reversing of the direction of the control from a stock-
oriented, anticipating replenishing strategy (push-principle) of the value
chain to a control based on the actual demand, reacting,
retrospectively oriented (pull-principle).

industrielogistik
Collaborative Planning, Forecasting and
Replenishment (CPFR)
The CPFR concept originates from the USA. Some large

European companies in the FMCG (Fast-Moving Consumer
Goods) industry and retailers have started pilot projects.
In CPFR, the coordinated planning, prognosis and
management of stocks in the value chain from production to
the sales at the outlets are at the centre of the focus.
The name of the concept already indicates that CPFR uses the
same basic strategies as ECR.
CPFR is an industry standard sponsored by VICS (Voluntary
Inter-Industry Commerce Standards; same industry-governing
body that uses the Uniform Code Council to produce the
standards for bar coding as well as for EDI).

industrielogistik
Crossdocking - Overnight Parcel Delivery
Example: any overnight

parcel delivery company.
Workers speak the final digits
of the destination zip code
of incoming packages into
a voice data collection system.
This information is then used to sort packages to the correct shipping

lane. Before loading on over-the road trailers, a worker with a finger-
mounted scanner connected to a wearable computer with radio
frequency capabilities scans the bar code of the package, clearly
identifying that it passed this point at a specific time.

industrielogistik
E-Business - Models for Electronic Markets
Multiple
integrated
functions Value Chain Integrator
Functional Integration
Third Party Marketplace
Collaboration Platform
Virtual Community
eMall
Value Chain Service Provider
eProcurement eAuction
eShop Trust Services

Info Brokerage
Single
Function low high
Innovation
Source: International Journal of Electronic Markets

industrielogistik
E-Commerce Growth

industrielogistik
Solutions for the Last Mile Problem

industrielogistik
Supply Chain Management is Collaboration

industrielogistik
Multi-Channel Strategy - Best Buy
Integrating Retail, Catalog and Online Sales

Let customers order over the Internet and pickup items at a retail store location

industrielogistik
Relationship-Based Strategies (Value Nets)
Collaboration: parties involved share and interchange information.
Group benefits more than individual benefits.
All parties modify their business practices.
All parties provide a mechanism and process for collaboration.
Gatewayss Value Net:

industrielogistik
Logistics Outsourcing Globally
Source: Handfield et a., Trends and Strategies in Logistics and SCM , 2013

industrielogistik
The Value Chain
The value chain provides a map of firm capabilities

and allows systematic search for core competencies
Infrastructure
Activities
Support
Human Resources
Research and Development (Innovation)
Materials Procurement
Operations
Outbound
Marketing
Inbound
Logistics
Logistics
Service
& Sales
Core
Competences
Primary Activities
Source: Porter 1985

industrielogistik
The Range of Make or Buy Decisions
Range of functions for achieving the business goals
Criteria for Core Competencies
Value do a firms resources
and capabilities allow a firm to
respond to its environment?
Rare do rival firms possess this
resource/capability?
Inimitable do firms face a
cost disadvantage in
obtaining this
resource/capability
compared to firms that
Core competences already have it?
Buy Make or Buy Nonsubstitutable are there
Inhouse production, corporate image, strategic alternatives?
company culture, customer expectations
Organization is the firm
Source: Hess organized to exploit the full
potential of its
resources/capabilities?

industrielogistik
Outsourcing Strategy
What areas of expertise are or could become strategic differentiators?
> keep in-house
Consider for outsourcing: low strategic importance, or activities that a
third party could do better, faster, or at lower cost. Added flexibility and
agility.
Outside partners can deliver three potential advantages:
Scale -Third-party providers often can offer services at l because of a large
customer base that keeps utilization rates high and unit costs low. Also can
help companies to scale up production quickly without having to invest in
new manufacturing capacity.
Scope - For companies that want to expand into new markets or
geographies, outsourcing partners can provide access to operations in new
locations which would not be economical to replicate internally at current
business volumes.
Technology expertise - Outsourcing partners may have mastered a product
or process technology that would require a sizable investment to develop
internally.

industrielogistik
Outsourcing and Offshoring
Outsourcing: Transfer to a third party of the management and delivery of a
process previously performed by the company itself
To reduce costs
To increase flexibility
To focus on core competences
To gain access to the latest technologies
Offshoring: Transfer of specific processes to lower cost locations in other countries

Not the same as outsourcing - outsourcing involves handing process ownership over to
a third party. In offshoring, the company may still own and control the process itself.
Expected benefits:
Less stringent regulatory control in offshore regions
Deregulation of trade facilities offshoring
Lower communications and IT costs
Improving capabilities in offshore regions
Clusters of specific activities (e.g. call centres) emerging in certain regions
Mangan et al. 2008

industrielogistik
Logistics Outsourcing to Third Parties
Channel intermediaries provide linkages between shippers and carriers.
Transportation Brokers: provide services to both shippers and carriers by arranging and
coordinating the transportation of products. Brokers negotiate rates, oversee shipments.
Freight Forwarders: Purchase transport services from various carriers, can own the assets
themselves.
Third-Party Logistics Service Providers (3PL): Outsourcing logistics operations to third
parties. 3PL will handle all or most freight offers. 3PL manages the information, freeing the
company from day-to-day interactions with carriers, and overseeing shipments.
Fourth-Party Logistics Service Providers (4PL): System managers who organize the
whole network without owning assets for providing services themselves.
Small-package carriers: Use a combination of transport modes, eg FedEx, UPS, DHL
and parcel post.
Parcel Post: Low cost, wide geographical coverage, domestically and internationally.
Size and weight limitations, packages must deposited at a postal facility.
Air Express Companies: FedEx, UPS, TNT Worldwide, Airbone Express, DHL Airways

industrielogistik
Third-Party Logistics Study 2013
on Logistics Outsourcing Trends
65% shippers are rather increasing their use of 3PL
services than returning to insourcing (22%) 3PL
services.
58% shippers are reducing or consolidating the
number of 3PLs they use.
The global revenues of 3PL operators have risen by
13.7%. The gains are mostly recorded in Asia Pacific
Region (21.2%) and followed by North America (7.2%).
Latin America recorded impressive growth of (43.6%)
but on a low revenue level, this indicates increasing
trends of outsourcing.
http://www.3plstudy.com/
http://vijaysangamworld.wordpress.com/2013/07/17/logistics-outsourcing-trends-2013/

industrielogistik
Technology Enablers in Supply Chains FedEx
Market-/Customer-Driven Technology Innovations (FedEx)
1973: First air freight/parcel enterprise air/ground express industry
born
1979: The computer system COSMOS (Customers, Operations and
Service Master Online System) is brought on the market; packages,
weather scenarios, employee, routes etc. are planned and
accomplished "real time".
1980: First express enterprise with DADS (Digitally Assisted Dispatch
System): Communication system in delivery vans, pick-up immediately
feasible
1984: First automatic shipping system
1986: First hand bar code scanner the SuperTracker is introduced
1994: First company, which offers on-line tracking
1996: First company to allow customers to process package shipments
on the Internet with FedEx interNetShip
Wagner 2010

industrielogistik
E-Business Trends
from Direct Model to Net Market Model

sell buy sell market
market
market space-
Customer- net markets
B-to-B centered
storefronts procurement auctions,
quotations,
EDI-like, catalogs,
EDI seller-controlled
internet-based exchange
high transaction
one-to-one many-to-many
buyer-controlled costs
expensive high search costs Hosted private
proprietary one-to-one markets
one-to-one

industrielogistik
4. Logistics Systems Management
Logistics Facilities
Integrated Logistics
The Management of Product/Process Complexity
Logistics Technology
industrielogistik
Logistics Networks

industrielogistik
Complexity Risk or Opportunity?

industrielogistik
Complexity at Terex
10,841 suppliers have unique ID codes

325,000 unique parts only 1 % common between two or more
manufacturing sites
39 IDs for one large global supplier alone
Differing terms by region/market

industrielogistik
Challenges Complexity
Customer C Class Limousine

selects Engines 9
Drive (l/r) x2
Transmission x3
at ordering Country variants x3
=> 96 basic models
plus
x 80 Special features
until SOP 7 days x 14 Colors exterior
x5 Colors interior
x3 Textiles
SOP: Start of Production Fraunhofer IML

industrielogistik
A Simple Calculation
There are ways to choose k
elements from a set of n elements.
If the average customer chooses

15 out of 80 options, the possible
combinations are:
6.635.000.000.000.000
73,9975 mio. square km
102 times the surface of the earth

industrielogistik
Complexity (Structural System Features)
Complexity
Connectivity Variety
(Relational (Elements
Variety) Variety)
# Relations
Relation Types (Relational Element Types # Elements
Density)
Translated from Firchau 2002

industrielogistik
Increasing Variety of Products

industrielogistik
The Art of Choosing
(Sheena Iyengar, Psychologist at
Columbia Business School)
Is it possible to have too many choices?
In a now-classic study conducted at

Draeger's Market in Menlo Park, a store
well-known for the abundance of options
it offers customers, she conducted a field study in which
shoppers passing through the store either encountered
a tasting booth with six jars of jam or 24. In which case did
more people stop to sample the jam, and in which case
did people buy a jar?
http://www.columbia.edu/~ss957/book.shtml

industrielogistik
Jam Study 1995
To the surprise of most
people, those who
sampled one of the six
samples of jam were six
times more likely to buy
jam than those who tried
one of the twenty-four
flavors (the six samples
were included in the
twenty-four).
So it seems that there is
such a thing as "too much
choice."

industrielogistik
Cost Effects of Complexity
Development Procurement Production Distribution Service

Before zustzliche Zustzliche Zustzliche Zustzliche Zustzliche Kunden-
Konstruktions- Lieferantensuche/- Werkzeuge Mitarbeiterschulung dienstunterlagen
zeichnungen, auswahl Zustzliche Aufwndigere Zustzliche
Stcklisten, Arbeitsplne Preissetzung Mitarbeiterschulung
Versuche
Market Anpassung der Bestellmengen fr Aufwndigere hhere Fertig- Verminderung der fr

Varianten an spezifisches Material/ Fertigungssteuerung erzeugnisbestnde Kundenzufriedenheit
Cycle technische oder Komponenten sinken: Hhere Rstkosten/ zur Herstellung der wichtigen Fix-it-right-
sonstige Mengennachlsse Anlaufverluste Lieferbereitschaft first-time-Quote
nderungen knnen nicht genutzt Hhere Material-/ Grere
werden Unfertigerzeugnis- Fehlerhufigkeit bei
Potentiell interessante bestnde Auftragsbearbeitung
Anbieter (z.B. aufwndigere
Sdostasien) fallen Qualittssicherung
mglw. aus
After Zustzliche Aufwndigere Betriebsmittel-/ Aufwendigere Ersatzteilbevorratung

Datenbereinigung Auslaufplanung Werkzeugentsorgung Auslaufplanung oft ber 5-10 Jahre
nach Produktauslauf
Source: Adapted from Franke/Hesselbach/Huch/Firchau (2002)

industrielogistik
The Cost of Complexity
Volume distribution
Fairly distributed yesterday
costs
Price
Volume distribution
Profit
today
Exots Standard Exots

Schuh (1993), Wiendahl/Gerst/Keunecke (2004)
industrielogistik
Market Variety vs. Engineering Complexity
Market Variants
Endogeneous (Internal)
= product variety
Variety
Complexity in processes
Increases average cost
per unit
Bad Complexity
Building Variants
= complexity of structures and processes
Exogeneous (External) Variety
Potentially creates customer value
Good Complexity

industrielogistik
The Failure of Traditional Methods of Planning and
Forecasting

industrielogistik
From Mass Production to Mass Customization
Mass Customization is the ability to design and manufacture customized products

tailored to meet a customers needs at mass production costs and speed.
(Ramani et al. 2004)

industrielogistik
Mass Customization
and Postponement
Different product configurations contain a majority
of shared components and features to accommodate
volume and variety
Enabled by postponement - reconfiguration of product and process design
so as to allow final product customization as far downstream as possible
Not only applied to manufacturing,
e.g. packaging postponement is
delaying final packaging of products
until customer orders are received
Early differentiation Late differentiation

Unfavourable configuration Favourable configuration
of production process of production process

industrielogistik
The Taco Configurator
http://www.machajewski.com/taco.html

industrielogistik
Product Configurator (Dell Computers)
a highly successful
business model,
but

industrielogistik
1.
Product Structures
1. Part similarity: similar parts used in diverse
2.
products
2. Building blocks: products composed of blocks
that can be combined in different ways to
create variants
3. Modules/systems: perform a defined function. 3.
Modules (as opposed to systems) form a
physical unit
4. Platforms: common core for various products
4.
Building Blocks
Modules/Systems
Flexibility
Potential Cost
Complexity
Reduction
Savings
Similar Parts
Platforms
Source: Wildemann (2008)

industrielogistik
Example: Volkswagen

industrielogistik
6 Types of Mass Customization
http://replicatorinc.com/blog/2009/04/6-types-of-mass-customization/
Modified from: William J. Abernathy and James M. Utterback, Patterns of Industrial Innovation, Technology Review, June/July 1978

industrielogistik
Technology Enablers in Supply Chains
Market-/Customer-Driven Technology Innovations (FedEx)
1973: First air freight/parcel enterprise air/ground express industry
born
1979: The computer system COSMOS (Customers, Operations and
Service Master Online System) is brought on the market; packages,
weather scenarios, employee, routes etc. are planned and
accomplished "real time".
1980: First express enterprise with DADS (Digitally Assisted Dispatch
System): Communication system in delivery vans, pick-up
immediately feasible
1984: First automatic shipping system
1986: First hand bar code scanner the SuperTracker is introduced
1994: First company, which offers on-line tracking
1996: First company to allow customers to process package
shipments on the Internet with FedEx interNetShip
Wagner 2010

industrielogistik
From Many-to-Many to Many-to-One
Standard Message Formats
Open Applications Group 2000

industrielogistik
Identification - Technologies & Standards
Automated Identification (Auto-ID) in material flows
Barcode (EAN128, consumer goods)
Barcode (2D-Code, e.g. Datamatrix, QR)
Letter Post Standard
OCR (Optical Character Recognition)
Biometry
Iris-Scan
Fingerprint Scan
Palm Scan (Hand)
RFID (Radio-Frequency Identification)
Chip Cards/Magnetic Cards
Electronic Product Code (EPC)
Speech Recognition

industrielogistik
Identification
1D Barcode
PDF417 (stacked bar)
Industrielogistik
2D Codes

industrielogistik
Barcode EAN/GTIN
An eight- or thirteen-digit code to uniquely identify themselves and their
products worldwide
Fixed length numeric only code
EAN (European Article Number), UPC (Universal Product Code) joined in 2009
-> GTIN (Global Trade Item Number)
Country
Manufacturer Check digit
Code
EAN contains an extra digit as part of the identification of the country

where the product originated

industrielogistik
GTIN Global Database
GEPIR GS1 Germany
(http://www.gepir.de/v31_client/gtin.aspx?Lang=de-DE)
Options:
Search GTIN
Search GLN (Global Location
Number), first part of GTIN, identifies
supplier
Sear NVE (number of packing unit)
Mobile search, using mobile phone
as barcode scanner

industrielogistik
Identification Next Generation(s)
4D
3D

industrielogistik
RFID What is it?
Radio-Frequency Identification Device

Holds unique data a serial number or other unique attribute of the
item
The data can be read from a distance no contact or even line of
sight necessary
Enables individual items down to a can of beans to be
individually tracked from manufacture to consumption!
EPC Code, eg 613.23000.123456.123456789
Product manufacturer
Product type
Serial Number Unique ID for that product item

industrielogistik
RFID Tags
Passive RFID Tags Active RFID Tags

Used in retail security applications Battery Powered tags
Tag contains an antenna, and a small chip much greater range 100m
that stores a small amount of data much more information
Tag is powered by the electromagnetic field sensing technology (temperature)
generated by the antennas Can signal at defined time
Price will come down from $0.80 to $0.05 in Used for higher value items
the next 2 years. Shipping containers
Babies
Electronic assets
Cost $20 to $40 per item

industrielogistik
Other Auto-ID Standards
Name Bezeichnung Anwendung Norm

GRAI Global Returnable Asset Item Reusable Packaging
IMEI International Mobile Equipment Identity Mobil phones
ISBN International Standard Book Number Books ISO 2108:2005
ISIN International Securities Identification Number Bonds etc.
ISMN International Standard Music Number Music ISO 10957:1993
ISRC International Standard Recording Code Music ISO 3901:2001
ISSN International Standard Serial Number Newspapers ISO 3297:1998
MIC Machine Identification Code Prints, copies
NVE Nummer der Versandeinheit Transport
PZN Pharmazentralnummer Medication
VIN Vehicle Identification Number Vehicles ISO 3779:1983
WMI World Manufacturer Identifier Vehicle Manufacturers ISO 3780:1983
WPMI World Parts Manufacturer Identifier Vehicle Parts ISO 4100:1980

industrielogistik
Additive Manufacturing (3D Printing)

industrielogistik
Additive Manufacturing (3D Printing)

industrielogistik
Modular Conveyors and Autonomous Transport Units
Double Skids (www.tlb.de)
Flexfrderer (www.ifl.kit.edu)
Transport System KARIS

(www.rsm.kit.edu)

industrielogistik
Augmented Reality
Cyber-Physical Systems: Integration of real (physical) objects and processes with

virtual objects and processes using open connected information networks

industrielogistik
Industry 1.0 to Industry 4.0 From 1st to 4th Industrial
Revolution

industrielogistik
Industry 4.0
includes
Cyber-Physical Systems
Internet of Things
Cloud computing
Smart Factory
Cyber-physical systems monitor physical processes, create a virtual copy of the

physical world and make decentralized decisions.
The Internet of Things (IoT) is the network of physical devices, vehicles, buildings
and other items embedded with electronics, software, sensors, actuators, and
network connectivity that enable these objects to collect and exchange data
Cloud Computing is a kind of Internet-based computing that provides shared
processing resources and data to computers and other devices on demand.

industrielogistik
Selected Bibliography
Ballou, R. H. : Business Logistics Management

Planning, Organizing, and Controlling the Supply Chain,
Prentice-Hall 2003
Christopher, M.: Logistics & Supply Chain Management,
4th Edition, 2010
Ghiani, G.; Laporte, G.; Musmanno, R.: Introduction
to Logistics Systems Management, Wiley 2013
Grant, D. B.; Lambert, D. M. et al.: Fundamentals of Logistics,
McGraw-Hill 2005
Mangan , J.; Lalwani, Ch.; Butcher, T.: Global Logistics
and Supply Chain Management, Wiley 2008
Zsifkovits, H. E.: Logistik, UTB 2012

industrielogistik
Helmut E. Zsifkovits
Prof. of Industrial Logistics, Montanuniversitaet Leoben
Member of the Board, European Certification Board for Logistics (ECBL)
Vice-President, BVL (Austrian Logistics Association)
President, Logistik Club Leoben
Education:
Studies at University of Graz, AT: Business Administration, Languages (Engl/Span)
Professional Career:
1982-97 Senior Researcher, Institute of Business Administration, University of Graz
1988-94 Head of Department IT/Logistics, Austrian Academy of Management
1989-96 Managing Director, Bundesvereinigung Logistik sterreich (BVL)
1995-99 Managing Director, Systemlogistik GmbH&Co KG
1997-2000 Manager Information Office, UBG/DaimlerChrysler
2001-05 Head of Unit eLogistics, evolaris eBusiness Competence Center
Projects, Presentations:
Project manager in various projects (IT, Organization, Logistics, TQM)
Speaker in management seminars on IT Management, Project Management, Quality Management
Presentations in conferences in Austria, Germany, Spain, USA, UK, Australia
Publications:
Author of books; Logistik (2012), Executive Information Systems (with E. Tiemeyer, 1995), DV-Werkzeuge
fr das Projektmanagement (with H. Karnovsky, 1995)
Editor of books: Management logistischer Informationsflsse (2015), Logistische Modellierung (2014),
Logistics Systems Engineering (2013), Markterfolg durch Qualitt, Total Quality Management,
Erfolgsfaktor Servicequalitt
Publications in various journals

industrielogistik
Contact
Prof. Dr. Helmut E. Zsifkovits

Montanuniversitt Leoben
Franz-Josef-Strasse 18
AT-8700 Leoben
Austria/Europe
Email: helmut.zsifkovits@unileoben.ac.at
Tel.: ++43-3842-402-6020

industrielogistik
Wipers Case:
Management of Product Complexity
Helmut Zsifkovits

Montanuniversitt Leoben,
Austria
industrielogistik
The Case
Wipers: leading European automotive supplier for windscreen wipers.

Market leader in Europe, a minor share in other markets.
Distribution channels: Original Equipment Manufacturers (OEM), repair
centers (spare parts) and general retail (gas stations, supermarkets).
Increasingly competitive environment, with new low-cost suppliers
entering the market. Wipers is focussing on high-quality innovative
solutions for its customers.
Products range: 820 variants annually. 28 different profiles in 28 different
lengths ranging from 280 to 1000 millimetres.
Further features that drive variety: rubber blade, the wiper arm holding
the blade, a spring linkage (adapters for different cars), wiper pivots,
blade frame, links between the claws, drillings in the wiper

industrielogistik
The Product Windscreen Wipers
Rubber blade with

metal tension spring
Links
Drillings
Claws (arms)

industrielogistik
Profiles and Tension Spring Technology

industrielogistik
Variants and Volumes
Number of Units produced

Product Variants [Mill. Units]
Product
variants
Units
produced
Length [mm]

industrielogistik
Technical Features
Technical Characteristics: Old

1. Wiper arm
- links low/medium/high quality
- drilling rectangle, oval, drop-shaped
2. Rubber
- production technology sprayed, extruded, pressed
- material 1 / 2 materials
- # of profiles 28
- # of lengths 26
3. Blade frame
- tension spring 2, external
- material aluminium

industrielogistik
Task
1. Define strategic goals for the new product program of Wipers.

2. Suggest actions to be taken in order to achieve the goals defined in 1.
3. Analyze the effects on:
the product program (use Table: Product program)
the relation between variants and units produced (use the figure below)

industrielogistik

HZ 2017 Handout 1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

HZ 2017 Handout 1

Uploaded by

Copyright:

Available Formats

International Logistics

Chair of Industrial Logistics

International Logistics - Helmut Zsifkovits 3

Evolution of Logistics and Supply Chain Concepts and

the right product

from the supplier to the customer?

International Logistics - Helmut Zsifkovits 5

International Logistics - Helmut Zsifkovits 6

International Logistics - Helmut Zsifkovits 7

Deliver Source Make Deliver Source

International Logistics - Helmut Zsifkovits 8

International Logistics - Helmut Zsifkovits 9

1970 Transport Transport

1990 Order Management

Development Procurement Production Distribution Flow Logistics

International Logistics - Helmut Zsifkovits 10

International Logistics - Helmut Zsifkovits 11

1. Globalization The World is Flat

International Logistics - Helmut Zsifkovits 12

International Logistics - Helmut Zsifkovits 13

Global transport Goods production

China factory of the world

International Logistics - Helmut Zsifkovits 14

Malcom Purcell McLean (* 14.11.1913 in Maxton, North Carolina, USA; 25.5.2001 in

International Logistics - Helmut Zsifkovits 15

Maersk Mc-Kinney Mller (18.300 TEU)

JadeWeserPort (JWP) in Wilhelmshaven.

International Logistics - Helmut Zsifkovits 16

Reebok Li & Fung Ltd. ()

International Logistics - Helmut Zsifkovits 17

International Logistics - Helmut Zsifkovits 18

Problem for transport networks:

International Logistics - Helmut Zsifkovits 19

International Logistics - Helmut Zsifkovits 20

Steady Lean 1980

Homogeneous Low- Heterogeneous

Sources: Adapted from Mangan et al. 2008 and

International Logistics - Helmut Zsifkovits 21

Ship to Stock F/Q S S F

International Logistics - Helmut Zsifkovits 22

Plan Plan Plan Plan

Deliver Source Make Deliver Source Make Deliver Source

Return Return Return Source Make Deliver Return Return Return

Supplier Customer Customers

International Logistics - Helmut Zsifkovits 23

International Logistics - Helmut Zsifkovits 24

Plan P1 Plan Supply Chain

P2 Plan Source P3 Plan Make P4 Plan Deliver P5 Plan Returns

Source Make Deliver

S2 Source MTO Products D2 Deliver MTO Products

S3 Source ETO Products M3 Engineer-to-Order D3 Deliver ETO Products

International Logistics - Helmut Zsifkovits 26

Internal Problems Tendencies

International Logistics - Helmut Zsifkovits 27

40 % of trucks run empty

International Logistics - Helmut Zsifkovits 28

International Logistics - Helmut Zsifkovits 29

International Logistics - Helmut Zsifkovits 30

International Logistics - Helmut Zsifkovits 31

Source: World Economic Forum: The Global Competitiveness Report 2012-2013

International Logistics - Helmut Zsifkovits 32

Connecting to Compete 2016 - Trade Logistics in the Global Economy

International Logistics - Helmut Zsifkovits 34

International Logistics - Helmut Zsifkovits 35