Classroom Presentation

　　　　 050456 International 　　 Logistic Management

　　　　　　２０１４

To: Students

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How to proceed this class ?1) More discussions2) Questions and answers3) Practical knowledge4) Case studies5) Attendance and participation to the class –

get high point6) Reading assignment (text book)

050456 International Logistic (& Supply Chain)

Management

Yoshio Maki, Visiting ProfessorAugust ---December 2014

AT KKUIC

Now we are in a global society – one world. Economically and culturally, a world become

more smaller than ever by media, IT (information technology) and transportation.

WTO, ACEAN and FTA will integrate each market into one world market – no border.

Prologue

Competition is not just in domestic market but also, in international market.

1. Globalization of trade2. The growing power of retailers3. Technological advances

Competition is not just in domestic market but also, in international market.

1. Globalization of trade=International Trade2. The growing power of retailers

The Logistics is a key for the success in international trade.

This is the reason why we must study “Logistics”

World Logistics

World Bank reported world rank of “logistics” which is called LPI.

“Logistics Performance Index”

Movie

　　 http://www.youtube.com/watch?feature=player_embedded&v=WRxRNyNThvU

The LPI is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance. The LPI 2014 allows for comparisons across 160 countries.

Germany, Netherland and Belgium are the best 3. Japan is 10th , USA 9th , China 28th and Thai 35th among 160 countries. WB said the credibility of logistics would be more important than price and cost in international trade.

2014 IPL Ranking by World Bank

1) Germany 4.122) Netherlands 4.053) Belgium 4.044) United Kingdom 4.015) Singapore 4.00

6) Sweden 3.96 7) Norway 3.96 8) Luxembourg 3.95 9) United States 3.92 10) Japan 3.91 15) Hong Kong 3.83 19) Taiwan 3.72 25) Malaysia 3.59 28) China 3.53 35) Thailand 3.43

Thai LPI 35 Thailand 3.43 Customs 3.21 Infrastructure 3.40 International shipments 3.30 Logistics competence 3.29 Tracking & tracing 3.45 Timeliness 3.96

BOP Business

World Population is around 7billion. There are 4 billion people is on BOP which is less than US$3000 a year.

Base of Pyramid Business

Current situation of BOP population world population 7 billion

Annual income per capita

<$3000 4 billion

Background 1 1) Saturated market of developed

countries2) Size of population and population

growth rate 3) Economic growth rate 4) Rate of younger generation5) Aggressive acceptance of

developed technologies etc.

EXAMPLE 1) 1.6 billion 3rd world residents need

glasses, but less than 5% have. 2) Governments are preoccupied with life

threatening maladies and urban optical shops are inclined to sell high-end glasses.

The failure of both Government & Market

Number of Births and Birthrate, Japan

•+3.00 Reading Glasses

•

                     

SCOJO New York

SCOJO

SCOJO is a famous reading glasses company in USA which is selling very fashionable & high-end reading glasses US$ 42~US$112.

They started BOP business. Cost (producing & delivery) =$1 Wholesale price =$2 Retail price = $3

Back Ground 2

1) In BOP, there are many types of job, which can not be sufficiently carried out if your sight is not enough.

2) 1.6billion would need reading glasses.

Especially, 95% of 35~80 years old population needs reading glasses.

Scheme Business

(franchising)

Training of local entrepreneurs in BOP market

SCOJO

Local Entrepreneurs

BOP

Now we are in a global society – one world.

Economically and culturally, a world become more smaller than ever by media, IT (information technology) and transportation.

WTO, ACEAN and FTA will integrate each market into one world market – no border.

Prologue

Recent Happenings

1. The growing power of retailers 2. Technological advance 3. Globalization of trade = International Trade

Competition is not just in domestic market but also, in international market.

The Logistics & SCM is a key for the success in international trade.

This is the reason why we must study

“Logistics” & “Supply Chain Management”

Part 1. Concept of Logistics (& Supply Chain)

1) Logistics 2) Supply Chain Management

This is not so good idea to teach 　 just Logistics.

1) Logistics ① Origin The word Logistics comes from the

Greek logistiki , meaning accounting and financial organization. Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position.

② Definition by Council of Logistics Management

Logistics is that part of the supply chain process that plans, implements, andcontrols the efficient, effective forward &reverse flow and storage of goods, servicesand relate information between the point of origin and the point of consumption in order to meet the customers’ requirements.

What is customer’s requirements?needs & wants

Seller’s market Buyer’s market After world war II, seller’s

market was created because of mass-production.

Products had to be marketed not just produced and sold.

Needs are things people must have to live—food, clothing, and shelter.

Wants are things people would like to have but do not need in order to live.

Effective marketing converts needs to wants.

Video

　

www.mcwdn.org/ECONOMICS/NeedWant.html

Utility

Utility is the ability of something to satisfy needs or wants of consumers.

There are four types of Utility. Value of a products in fulfilling

customer needs and wants. Logistics contributes time & place

utility

Form utility The value given to a product by virtue of the

fact that the materials and components which comprise it have been combined to make the finished product.

Possession utility 　　 Additional consumer value created by

transferring a product's ownership

Time utility Enhancing a product's marketability

by making it available at a convenient time.

Place utility The value given to a product by

virtue of the fact that it is where it is wanted.

Why are diamonds so much expensive than water?

The apparently conflicting and perplexing observation that water, which is more useful than diamonds, has a lower price than diamonds. This paradox was proposed by economists in the 1800s as a means understanding the role utility plays in the demand price of a good by differentiating between total utility and marginal utility.

The key question that arises is: Why are diamonds so much more expensive than water?The diamond-water paradox poses the perplexing observations: Even though water is obviously important to human activity (life cannot exist without water), the price of water is relatively low.

Alternatively, diamonds are clearly much less important to human existence, but the price of diamonds is substantially higher. In other words, the utility obtained from water is obviously very great, while the utility obtained from diamonds is substantially less.

Total and Marginal Utility

Insight into, and clarification of, the diamond-water paradox results by differentiating between total utility and marginal utility. Total UtilityThis is the overall satisfaction of wants and needs obtained from consuming a good. That is, total utility is the accumulated amount of satisfaction, or the total value, generated by several units of a good.

Marginal Utility

This is the extra satisfaction of wants and needs obtained from consuming one additional unit of good. That is, marginal utility is the incremental satisfaction generated by, and the value of, a single unit of a good.

The diamond-water paradoxWater provides humans with an enormous amount of total utility. Water satisfies a lot of wants and needs for a lot of people. Water provides a high level of total utility because it is plentiful, water everywhere! However, because it is so plentiful, the marginal utility of water is relatively low. An extra ounce of water provides very little additional satisfaction.

In contrast, the total utility generated by diamonds is relatively limited. Diamonds do not provide much overall satisfaction of wants and needs, compared to water. Many humans spend their entire lives without achieving ANY satisfaction from diamonds. Diamonds have very little total utility because they are not nearly as plentiful as water. Most houses do not have hot and cold running diamonds

Most people do not drink eight glasses of diamonds a day. However, because they are less plentiful, the marginal utility of diamonds is relatively high. An extra ounce of diamonds provides a great deal of extra satisfaction.

Mass Production

The first “modern” mass-production system was Ford Type T assembly line (conveyer belt) at Highland Park Factory of Ford in 1914.

Many factories followed this system and especially, during WWII, mass-production system was developed for the armament industry in USA.

2) Supply Chain Management

① 　 Definition A supply chain is all activities associated

with the flow and transformation of goods from the raw material through to end user as well as the associated information flow. Coordinating not only within organizations but across organizations as well.

Change to new ideas1 NCPDM （ The National Council of

Physical Distribution Management ）was established in 1963.

2 NCPDM changed its name to CLM (Council of Logistics Management) in 1985.

3 CLM changed its name to CSCMP （ The Council of Supply Chain Management Professionals ） in 2005.

SCM is wider concept than Logistics

Logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of products and information through a business.

On the other hand, SCM (Supply Chain Management) builds upon this frame work and seeks to achieve linkage and co-ordination between the processes of other entities in the pipeline, i.e. suppliers and customers and the organization itself.

Thus, one goal of SCM might be to reduce or eliminate the buffers of inventory that exist between organizations in a chain through sharing information on demand and current stock.

Supply Chain Chart

Parts supplier

Parts supplier

Suppliersubassembly

Maki 　 Factory

Transporter

Retailer

End user

End user

End user

End User

Goods

information

End user

Warehouse

Wholesaler

Raw material supplier

Raw material supplier

Suppliersubassembly

Video

http://www.youtube.com/watch?v=_SPNu_il7eI&feature=player_detailpage

Bullwhip Effect The term "bullwhip effect" refers to the

magnification of demand fluctuations as orders move up the supply chain.

Improved forecasting techniques at any one level in the supply chain cannot eliminate the bullwhip effect and may worsen it if used improperly.

Information flow and coordination of orders across the supply chain offer the only hope of taming the bullwhip effect.

     Size of this preview: 800 × 600 pixels. Other resolutions: 320 × 240

                                                                                                                        

Video

http://www.youtube.com/watch?feature=player_detailpage&v=wLNdDSYqhNw

How can Logistics improve people’s life?

Logistics is often condescendingly being regarded as a necessary evil, which is intended for bringing two goods from one place to another. The general public even takes transport and logistics as synonyms, whereas logistics implies much more activities than just transport.

1) Logistics as an economic sectorIt is quite difficult to measure the economic and social impact of logistics, since logistics involves a lot of activities, spread around many sectors and companies. It seems quite evident that brokers, airports, terminals, etc. belong to logistic companies, but many other companies have a logistics, distribution or purchase department as well.

The logistics sector represents 7 to 14 percent of the GDP. If we take a look at a finished good, we notice that 10 to 15 percent of that cost is dedicated to logistics. To develop the logistics more and more, a well-balanced logistic infrastructure will have to be erected. Firstly. we think of roads, railways, ports and warehouses, but equally important are the information and communication infrastructure.

Also a thorough educational and training system will have to be installed to teach logistic principles.

2) Logistics as an employer

We can not only take a look at logistics from an economic perspective, but also from a social one.Logistics is employing 12 millions of people in EU. Above that, logistics recruits from everywhere: low-educated profiles are needed as well as high-educated people.

3) Logistics and sustainability

A first problem for the transport sector is the dependence of oil. The prices of oil will rocket, but also the demand for oil. While there are 750 million of vehicles on the world today, this number is expected to increase to 2.2 billion by 2050.

A second problem for the transport sector are the measures against the emission of greenhouse gases. By 2050, Europe wants to reduce the emission with 80 to 95 percent, compared to the emissions of 1990.In Europe the transport sector is responsible for about a quarter of all greenhouse gas emissions.

To deal with both problems, transport needs to consume less and cleaner energy. For instance by train or inland waterways for long distances. Technology will have to help to implement intelligent advanced systems which reduce emission and energy consumption. Advanced information and communication systems are indispensable in this matter.

But there are also other steps in the good direction, for instance by redesigning vehicles. The 2WIN, a trailer with two floors, is a good example. All electric vehicle and A hydrogen vehicle is a vehicle that uses hydrogen as its onboard fuel for motive power.

It is very clear that the logistics sector fulfils an important task, both economically, socially and ecologically.

2WIN concept>40% less CO2 emission

Part 2. Why Logistics & SCM ?

1) Economic impact of logistics Logistics cost in GDP is increasing year by

year but logistics as a percentage of GDP is decreasing year by year.

Logistics cost is more than 10% of GDP and one of the most important components in a country’s economy. Logistics also, play an important role in economic growth and development.

2) Competitive Advantage

Logistics & SCM can provide a major source of competitive advantage.

Successful companies either have a cost advantage or they have a value advantage, or combination of two.

① Cost advantage Not just, production cost by economy of

scale (achieving bigger sales volume and/or improving market share),

Logistics & SCM can provide a multitude of ways to increase efficiency and productivity and hence contribute significantly to reduce unit cost.

② Value advantage Market have become more service-

sensitive. Not just a product itself but also delivery service, after sales services, financial packages, technical support and etc.

Customers are looking for reduced lead time, just-in-time delivery and value-added services.

Logistics & SMC supports cost reduction & service enhancement.

③ Customer satisfaction

Logistics also plays a critical role in Customer Satisfaction.

Many services organizations make the mistake of focusing the vast majority of their customer service and satisfaction activities on external issues, often to the exclusion of key internal issues such as inventory management and logistics.

However, these key internal issues can also play an important role in facilitating desired levels of customer service and satisfaction.

A services organization should focus not only externally, at its direct customer interface and interaction, but also internally, at its global inventory management and logistics activities as well - especially as they might impact a multinational customer base.

3) The best example 1 Manufacturer-TOYOTA

Logistics started military supply system and the supply chain idea started from Toyota. 　

Toyota is one of the biggest and the most profitable car manufacturers in the world. Toyota “Kanban” and “ JIT (Just in Time) system” is the one of the best examples of Supply Chain.

Partnership with each company is the key to success of the supply chain.

They must disclose and share the necessary information each other. As a team, these companies to save cost, time and energy to achieve the target of the team.

What is Kan-ban?　 More than 20 years ago, Kanban

System was developed , by Mr. Taiichi Ohno, a vice president of Toyota.

Kanban scheduling systems operate like supermarkets. A small stock of every item sits in a dedicated location with a fixed space allocation.

Video

http://www.youtube.com/watch?v=bK78YS9j51k&feature=player_detailpage

http://www.youtube.com/watch?feature=player_detailpage&v=ZIv2e61SH1A

http://www.youtube.com/watch?v=fGDUjD-eDFw&list=PL1B594CEE155440D3&feature=player_detailpage

　 A Kan-ban (means signboard or billboard in Japanese ） is a card containing all the information required to be done on a product at each stage along its path to completion and which parts are needed at subsequent processes.

　

Customers come to the store and visually select items.

An electronic signal goes to the supermarket's regional warehouse detailing which items have sold. The warehouse prepares a daily replenishment of the exact items sold.

These cards are used to control work-in-progress , production, and inventory flow. A Kan-ban System allows a company to use Just-In-Time (J.I.T) Production and Ordering Systems that allow them to minimize their inventories while still satisfying customer demands.

A Kan-ban System consists of a set of these cards, with one being allocated for each part being manufactured, that travel between preceding and subsequent processes

Taiichi Ohno

We come across problems in all sorts of situations in life, but, according to Taiichi Ohno, pioneer of the Toyota Production System in the 1950s, "Having no problems is the biggest problem of all." Ohno saw a problem not as a negative, but, in fact, as "a kaizen (continuous improvement) opportunity in disguise

“ Whenever one cropped up, he encouraged his staff to explore problems first-hand until the root causes were found. ”Observe the production floor without preconceptions,“ he would advise. ”Ask ‘why’ five times about every matter.“ 　

We should follow Ohno's advice: Go directly to the source and Keep asking, "Why?" By never becoming complacent and always seeking to innovate, Toyota will be ready to overcome any challenges it may face in the future.

Discussion1. Please define Supply Chain and

Logistics respectively.2. Why logistics can be such an important

component in country’s economy?3. How does Logistics contribute to time

and place utility?4. Explain the significance of the fact that

the purpose of logistics is to meet customer requirements.

List of reference books

1) Logistics & Supply Chain Management 4th edition by Martin Christopher (Pearson Education Limited)2) Essentials of Supply Chain Management 3rd edition by Michael Hugos (John Wiley &Sons)3) International Logistics 3rd edition by Pierre David & Richard Stewart (Cengage Learning)

4) Logistical Management by Donald Bowersox & David Closs (McGraw-Hill)5) Contemporary Logistics by Paul Murphy & Donald Wood (Pearson Education)

1 SUBWAY® US A Sandwich & Bagel

2 McDonald's US A Fast Food

3 KFC US A Chicken Franchises

4 Burger King USA Fast Food

5 7 Eleven US A Convenience Store

Top 10 Global Franchises Rankings

6 Pizza Hut US A Pizza Franchises

7 GNC Live Well U S A Wellness Products &

Services

8 Wyndham Hotel Group USA Hotel Franchises

9 Dunkin' Donuts US A Bakery & Donut

10 DIA Spain Convenience Store

4) The Best Example 2 Retailer 7-Eleven

One of the most advanced products distribution systems in retail industry is 7-Eleven.

We should study this company as one of the best case studies.

Number of Franchising stores 7Eleven 53,516 stores Subway 36,900 McDonald 33,000 KFC 20,200 KFC begins franchising in 1952 and

would be the first franchising company in the world

Special studyThe biggest franchising system in the world.

７ -ELEVEn

World Top 7 retail Companies Million US$

1 Wal-Mart Stores U.S. 488,964 2 Carrefour France 116,268 3 Costco Wholesale U.S. 108,318 4 Tesco U.K 106,058 5 Kroger U.S. 97,975 6 Schwarz Germany 92,127 7 Seven & I Japan 86,038

Number of Franchising Stores

　　 7Eleven 　 53,516 stores　　 Subway 　 42,347　　 McDonald 　 35,000　　 KFC 　 20,200

KFC begins franchising in 1952 and would be the first franchising company in the world

Seven & i Holdings 7-Eleven is a part of Seven & i

group in Japan. This company group started as Ito-Yoka Do, super market chain stores. Ito-Yoka Do bought out 7-Eleven (convenience store), Seibu and Sogo (Department stores) and many other retailers.

Now Seven & i group is the biggest retail company in Japan and Asia.

7 & i is the 7th biggest retailer in the world with sales US$9.5Trillion. (Walmart is the largest retailer in the world. and is also the biggest private employer in the world with over two million employees.)

Number of Convenience stores in Japan 7-Eleven Japan 16,664 as of Aug 2014

Lawson 11,653 Family Mart 10,327 Circle K Sunkus 6,303 Other CVS 5,654 ================================== Nationwide Total 50,601

1. What is 7-Eleven?

１） 7-Eleven is an international franchiser, licensor, and operator of a chain of convenience stores.

２） It is also, since March 2007, the largest chain store in any category, beating Subway & McDonald's by 10,000 stores.

３）　 Its stores are located in more than eighteen countries, with its largest markets being Japan, the United States, Thailand, Korea, Taiwan and Malaysia.

Store Network of Seven & i Holdings

Global : approx. 53,516 stores Japan : approx. 16,664 stores Number of Customer Store-Visits per Day

Global : approx. 48 million Japan : approx. 17 million

2 Convenience store & Franchising system

1）What is a convenience store? Small centrally located store featuring ease

of access, late-night hours, and a limited line of merchandise designed for the convenience shopper. Convenience stores charge above-average prices compared to large supermarkets that generate large-volume sales.

2 ） Difference 　 CS vs Super Market like Big C　 CS vs Wholesale Club like Makro

7-Eleven Japan Franchise system

1) Type of ownership a. Land and buildings Franchisee

provides b. 7-Eleven Japan provides

2) Sales equipments, computers, etc.

Seven-Eleven Japan provides 3) Contract period 15 years Utilities 7-Eleven Japan 80%; Franchisee 20%

4) Seven-Eleven charge (royalty) 43% of gross profit An amount calculated on a sliding

scale based on gross profit 5) 5-year incentives and 15-year

contract renewal incentives (reductions in franchise fee are offered)

Market Concentration Strategy

7-Eleven’s fundamental strategy is market concentration, whereby a high concentration of stores is positioned within one region.

Effects of area market concentration strategy

1) Greater familiarity with customers

2) Efficient construction of production bases

3) Effective sales promotions

4) Efficient construction of distribution structure

5) Improved efficiency in guiding franchised stores

6) Preventing entry by competitors

3. 7-Eleven History from Wikipedia

7-Eleven has its origins in 1927 in Dallas, Texas, USA.

　 When an employee of Southland Ice Company started selling milk, eggs and bread from an ice dock.

　 Although small grocery stores and general merchandisers were present in the immediate area, the managers of the ice plant discovered that selling "convenience items" such as bread and milk were popular. Eventually, several locations would open up in the Dallas area.

　 Initially, these stores were open from 7 a.m. to 11 p.m., The company began to use the 7-Eleven name in 1946.

By 1952, 7-Eleven opened its 100th store. In 1962, 7-Eleven first experimented with

a 24-hour schedule in Austin, Texas. In 1963, 24-hour stores were established

in Las Vegas, Fort Worth and Dallas.

In the 1980s the company ran into financial difficulties and was rescued from bankruptcy by Ito-Yokado, its largest franchisee.

The Japanese company gained a controlling share of 7-Eleven.

5. 7-Eleven Thailand

The franchise in Thailand is the Charoen Pokphand Group. Their name was changed to CP ALL.

There are 7,816 7-Eleven stores in Thailand, of which more than 1,500 are in Bangkok, making Thailand have the 3rd largest number of stores after Japan and US.

Number of 7-11 stores in the world (as of August 19, 2014)

　 Japan 　　　　　 16,664　 U.S.A. 　　　　 8,170 Thailand 7,816 Taiwan 5,001 South Korea 7,055 China 1,337 Total 53,516

6. 7-11 Regional Distribution Center 1) RDC Regional Distribution Center For 7-Eleven, RDC in KK was the pilot

distribution center and this size of Distribution Center would be more cost efficient compared with their big distribution center.

I would like to visit RDC in this class.

Definition of ABC AnalysisAn analysis of a range of items that have different levels of significance and should be handled or controlled differently. It is a form of Pareto analysis in which the items (such as activities, customers, documents, inventory items, sales territories) are grouped into three categories (A, B, and C) in order of their estimated importance.

'A' items are very important, 'B' items are important, ‘C' items are marginally important. An analysis of a range of items that have different levels of significance and should be handled or controlled differently.

For example, the best customers who yield highest revenue are given the 'A' rating, are usually serviced by the sales manager, and receive most attention. 'B' and 'C' customers warrant progressively less attention and are serviced accordingly.

ABC ANALYSIS(ABC = Always Better Control)

This is based on cost criteria. It helps to exercise selective control when confronted with large number of items it rationalizes the number of orders, number of items & reduce the inventory.

About 10 % of materials consume 70 % of resources

About 20 % of materials consume 20 % of resources

About 70 % of materials consume 10 % of resources

‘A’ ITEMSSmall in number, but consume large amount of resourcesMust have:•Tight control•Rigid estimate of requirements•Strict & closer watch•Low safety stocks•Managed by top management

‘B’ ITEMIntermediateMust have:

•Moderate control•Purchase based on rigid

requirements•Reasonably strict watch & control•Moderate safety stocks•Managed by middle level

management

‘C’ ITEMSLarger in number, but consume lesser amount of resourcesMust have:

•Ordinary control measures•Purchase based on usage estimates•High safety stocks

ABC analysis does not stress on items those are less costly but may be vital

CONCLUSION

Material management is an important management tool which will be very useful in getting the right quality & right quantity of supplies at right time, having good inventory control & adopting sound methods of condemnation & disposal will improve the efficiency of the organization.

Also make the working atmosphere healthy any type of organization, whether it is Private, Government ,Small organization, Big organization and Household.

Even a common man must know the basics of material management so that he can get the best of the available resources and make it a habit to adopt the principles of material management in all our daily activities

The Global Competitiveness 2014

.

Launched in 1979 by Klaus Schwab, Founder of the World Economic Forum, the Global Competitiveness Report has evolved over more than three decades into one of the Forum’s greatest and most unique contributions. It catalyzes constructive policy dialogue among policy-makers, business leaders and other members of civil society.

The Global Competitiveness Report 2014-2015 assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. The report remains the most comprehensive assessment of national competitiveness worldwide, providing a platform for dialogue between government, business and civil society about the actions required to improve economic prosperity.

Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy.

Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy

Note: See the appendix for the detailed structure of the GCI. 

VIDEO

http://www.youtube.com/watch?v=eVq9MBhWEmE&feature=player_embedded

5) Logistics activity ① 　（ Raw ） Material

Management Raw materials, component parts

etc. brought from outside organizations (70% of defects from non-quality materials from outside organizations).

② Order processing Between the time a customer

places an order and the time it is received and paid by the customer.

Operational elements Communication elements Credit & payment elements

　 ③　 Packaging　　 Consumer packaging and

Industrial packaging. Industrial packaging is protective packaging that prepare a products for storage and transit.

　 ④　 Transportation The actual physical movement of

goods from one place to another.

　

⑤ Inventory Stock of goods that are

maintained for a variety of purposes such as for resale to others as well as support manufacturing. (mass production-too much products-too much inventory)

⑥ Warehousing Places where inventory can be

stored for a particular period of time.

⑦ Material handling　 Short distance movement of

products within factory, warehouse.

⑧ Customer service Keeping existing customers happy Five Rights Right products Right place Right time Right condition Right cost

６ ) Factors driving logistics improvement

a. Globalization of the economy & market

b. Government deregulation c. Transportation technology change d. Information technology change

7) Other activities

a. Demand forecasting b. Parts & service support c. Reverse Logistics d. Communication – To avoid

Bullwhip Effect

8) Reverse Logistics We refer to the term "reverse logistics" as all

activity associated with a product/service after the point of sale, the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money and environmental resources.

Forward Logistics vs. 　　　　　　　　　　　　 Reverse Logistics Supply Chain vs. AfterMarket SC

The chart below shows how ReverseLogistics™ comes into play in the Supply Chain.

                                                                                             

RMA managementIn recovering value from scrap materials received through the product returns, reverse logistics function helps identify hidden value through our return materials warranty evaluation process.During the return material authorization (RMA) management screening process, each component is tested and inspected to identify materials that currently fall under manufacturer warranty for credit recovery.

What is Reverse Logistics?by Karen Hawks, VP Supply Chain Practice, Navesink

Logistics is defined by The Council of Logistics Management as: The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.

Reverse logistics includes all of the activities that are mentioned in the definition above. The difference is that reverse logistics encompasses all of these activities as they operate in reverse.

Reverse logistics is more than reusing containers and recycling packaging materials. Redesigning packaging to use less material, or reducing the energy and pollution from transportation are important activities, but they might be secondary to the real importance of overall reverse logistics

Therefore, reverse logistics is: The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.

More precisely,

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.

Importance of Reverse Logistics

If no goods or materials are being sent "backward", the activity probably is not a reverse logistics activity. Reverse logistics also includes processing returned merchandise due to damage, seasonal inventory, restock, salvage, recalls, and excess inventory. It also includes recycling programs, hazardous material programs, obsolete equipment disposition, and asset recovery.

Conclusions

Reverse logistics practices vary based on industry and channel position. Industries where returns are a larger portion of operational cost tend to have better reverse logistics systems and processes in place. In the book industry, where great change in the industry structure has occurred in the last few years, returns are a major determinant of profitability.

In the computer industry where life cycles are nearly as short as grocery life cycles, the speedy handling and disposition of returns is now recognized as a critical strategic variable.

Successful retailers understand that managing reverse logistics effectively will have a positive impact on their bottom line. Industries that have not had to spend much time and energy addressing return issues are now trying to make major improvements. Now, more than ever, reverse logistics is seen as being important.

Recycling　BMW

Even at the earliest stages of vehicle development and production, BMW considers what will happen at the end of the vehicle's service life, laying the foundations for environmentally-friendly and efficient recycling of the materials used in the vehicle.

BMW ensures that wherever possible, different materials can be easily separated for efficient recycling. Right from the start, every BMW is built for minimal environmental impact.BMW follows a philosophy of minimizing negative effects on the environment through intelligent technological solutions.

This extends from the earliest phases of product development to the final reprocessing and reuse of materials at the end of the vehicle's service life.During the development of new vehicles, BMW engineers ensure that each component is designed for maximum environmental-friendliness and sustainability.

Raw materials and energy are used as efficiently as possible, and waste is kept to an absolute minimum. Following the "design for recycling" principle, designers give preference to materials that can be produced cleanly and efficiently, and that can later be reused and recycled.

Recycling vehicles at the end of their service life is most efficient when components and materials can be separated and reused directly. For example, some components can be reused for their original purpose in a different vehicle: engines, transmission systems and other large components can be reconditioned and made available as spares. This is known as "high-value recycling".

By contrast, "material recycling" separates different types of materials - glass, polycarbonates or aluminum for example - and processes these to form the raw recycled material; this can be used as sources of energy or in manufacturing new products.

For example, the inner wheel housing of new vehicles is comprised of recycled synthetics.BMW's comprehensive approach to recycling is one of the reasons that BMW occupies a leading place on the Dow Jones Sustainability Group Index, a financial index comprised of companies with proven commitment to sustainability in their operations

Video

http://www.youtube.com/watch?v=vNgAHOIofpI&feature=player_detailpage

History of transportation　 When freight first had to be moved,

human hands, shoulders, hips, and heads were all gainfully employed. When the capacity of the unaided human was exceeded, the solid stick

was the obvious tool to use, first to transfer the load to the shoulders and then to allow it to be shared as a yoke between two people.

For less coherent loads, the technology expanded to include wicker baskets hung from the shoulders by rope or carried on the head. Such human-powered freight techniques are still in quite effective use today in parts of Asia and Africa.

Experienced porters can carry 25 kg whilst travelling at 25 km/day. For shorter distances, loads of about half body-weight are common, and peak loads over very short distances can exceed 175 kg. The Chinese have used laborers carrying slings and bamboo poles to move loads of up to 1000 kg distributed at about 25 kg per bearer.

When the loads to be carried demanded greater strength or power than could by supplied by humans, the humans innovated by using their domesticated feed animals as beasts of burden, transferring the wicker baskets from human shoulders to the backs of cattle to produce the first pack animals.

The domestication of large animals initially to provide humans with a secure source of food. Their use to provide transport power was a convenient secondary development. For most of its history the world's roadway system has operated with domesticated animals as its sole source of motive power.

Humans, cattle, donkeys, dogs, goats, horses, camels, elephants, buffaloes and etc. are some of the species that have found useful transport employment.

Human & Animal powered transportation Human-powered transportation has the

longest history and is the transport of goods using human muscle-power, in the form of walking, running and swimming. Animal-powered transport is the use of working animals for the movement of goods. For carrying goods, we used them as pack animals or harness them, alone or in teams, to pull sleds or wheeled vehicles.

After, human-powered transportation, the world's second major transport development was the use of animals, initially as beasts of burden and subsequently for pulling ploughs and sleds. The invention of the wheel was a much later development. The following Photos from wikipedia

Part 3. Mode of Transport Preface

Transportation services has changed dramatically during the last 25 years. Freight rates were relatively fixed by Government regulations until early 1980s.

There was very little differentiation among suppliers of transportation in terms of either quality or price.

　 Deregulation allowed pricing flexibility for carries and also significantly reduced restrictions on transportation services and relationships.

　 Today, a wider range of transportation alternatives exists for product or raw material movement than ever before. For example, a firm may consider for hire-transportation, private transportation or variety of contractual arrangement with different transport specialists.

1) Principles

There are two principles guiding transportation management and operations.

　① Economy of scale　 Transportation cost per unit of weight

decreases when the size of the shipment increases.

② Economy of distance Transportation cost per unit of distance

decreases as distance increases.

2) Transport Functionality Transportation functionality provides

two major functions :

Movement & Storage　① Product Movement Since transportation utilizes temporal,

financial and environmental resources, it is important that items should be moved only when it enhances product value.

② Product storage

Although the major objective of transportation is to move product from an original location to a prescribed destination, there is a less common function: storage.

Product storage in transportation can be costly. 　 However, it may be justified from a total cost or performance perspective when loading & unloading costs, or the ability to extend lead times are considered.

3 ） Shipper, Carrier & Consignee The Shipper and the Consignee have the

common objective of moving goods from origin to destination with in a prescribed time at the lowest cost.

Today, wide range of transportation alternatives exist for product movement. The Carrier and the shipper have the flexibility to negotiate responsibility and cost for all transportation services.

Shipping Chart

ETD Sept 16 ETA Oct. 10 Bangkok Tokyo

Carrier

Shipper Consignee

４ ) Five Modes of Transports

① Motor Carriers② Railroads③ Air Carriers④ Water Carriers⑤ Pipelines

The 6th Mode of Transport

⑥ 　 Electronic Transport This is the fastest and the newest mode

of transport. Advantage flexible and cost efficient Disadvantage be used only for data, music, pictures,

book, electric energy

Invention of wheeled transport

The next stage of transport development was probably associated with the enhancement of the sled and travois. Small rollers between the pole ends of the travois or under a sled would have usefully reduced the dragging friction.

A number of societies used such devices which were commonly called truck or truckle carts.

For many years, goods traveled to their destinations by way of horse drawn wagons. This mode of moving freight was slow and often dangerous

Many types of goods travel back and forth across America by truck. Clothing, food, cars, tools, and heavy machinery are just a few examples of the commercial goods transported by trucks. During the 1930s, business owners began to deliver their goods by truck.

At that time, automobiles were becoming popular and, as a consequence, the roads were being paved over and improved. The introduction of the Interstate Highway System in the mid-20th century allowed the trucking industry to experience tremendous growth. Today, trucks are responsible for a large percentage of the commercial shipping activity that occurs in the United States.

Before motor trucks, railroads controlled inland transport of goods and services in the nineteenth century. The powerful railroad industry was the focus of technological innovation in an era when intermediate transportation needs were largely met by vehicles drawn by pack animals.

http://www.youtube.com/watch?v=8SaarDiQ-7w&feature=player_detailpage

① Motor Carriers Highway transportation has expanded

rapidly since the end of WWII. Motor carriers have flexibility because

they are able to operate on all types of roadway.

Motor carries favor manufacturing and distributive trades, short distance, high value products.

Compared to railroads, motor carriers have relatively small fixed investments in terminal facilities and basically maintenance of roads and highways are operated publicly.

Advantage of Motor Carriers

1. Speed 2. Door to Door Service 3. Extensive Road Network 4. High Competition 5. Low Damage

Disadvantage of Motor Carriers

1. High Cost 2. Low Capacity 3. Weather Sensitive

②　 Railroads

Railroads had handled the largest number of cargos in USA before WWII. Japan and European countries had the same tendency.

However, railroad share of revenues and ton-miles is declining because of the extensive development of roads and highways for motor carriers.

The Union Pacific in USA is using new information technology and improves their service to customers, and started intermodal service with truckload carriers.

Thai railroad is operated by The State Railway of Thailand.

Because of development of Bus transportation which is more economical and punctual operation than railroad, railroad transportation is not so popular in Thailand.

In December 2010, following Chinese plans to extend their (standard gauge) network to Xishuangbanna on the China-Laos border and further into Laos, the Thai government agreed to start negotiations on building a standard-gauge network.

This would initially involve two lines: from Bangkok to the Lao border, and a longer line from Bangkok along the peninsula to the Malay border.

Topics 5 　 Standard gauge

Rail gauge is the distance between the inner sides of the heads of the two load bearing rails that make up a single railway line. Sixty percent of the world's railways use a standard gauge of 4 ft 8½ in (1,435 mm).

Traces the origin of the 4 ft 8½ in gauge even further back than the coalfields of northern England, pointing to the evidence of rutted roads marked by chariot wheels dating from the Roman Empire.

We can see the evidence of 1435mm chariot wheel marked roads at Pompeii and Ercolano, Italy.

City of Pompeii

The city of Pompeii is a partially buried Roman town-city near modern Naples in the Italy . Along with Herculaneum, Pompeii was partially destroyed and buried under 4 to 6 m (13 to 20 ft) of ash and pumice in the eruption of Mount Vesuvius in AD 79.

Advantage of Railroads

1. Capacity 2. Capability 3. Low cost 4. Reliability & Safety

Disadvantage of Railroads

1. Low Accessibility 2. Few Operators 3. Limited Network 4. Long Transit Time 5. Double Handling

③ 　 Air Carriers A very new mode of transport is

airfreight. The first consignment of cargo carried

by air was transported between London and Paris in 1924. Since this first cargo, flight the carrying capacity and efficiency of aircraft has developed and increased dramatically.

. The movement of cargo by air is a highly specialized business, which is, in many respects, very different from moving cargo by sea or overland. It is subject to restrictions that arise from the nature of the aircraft itself. Its significant advantages lies in the speed, and the biggest disadvantage is the high cost.

However, this can be traded off for high speed which allows other elements of logistical design such as warehousing and inventory. Two major changes have taken place over recent years in many manufacturing industries and it is due to these changes that air freight is becoming a popular choice for transporting products internationally.

The reason for this increase is: The growing volume of technology-

based products, these products are becoming lighter and smaller while their value is becoming greater justifying the expense of air freight

The second is the rapidly increasing trend in many industries towards "just-in-time" (JIT) inventories. JIT is the most effective tool where the goods in question can be moved by air. The benefits of JIT ordering are: –A substantial reduction in capital

requirements –A substantial reduction in stockholding

Advantage of Air Carriers 1. Speed　 2. Low Inventory Cost 3. Reliable Service 4. Low Damage 5. High Frequency

Disadvantage of Air Carriers

1. High Cost 2. Limited Accessibility 3. Weather Sensitive

④ Pipeline

Pipelines are significant part of the US transportation system.

In addition to petroleum, natural gas, manufacturing chemicals, cement, flour and water.

Pipelines operate on 24 hours ,7days a week.

Pipelines are the highest fixed cost and lowest variable cost.

Advantage of Pipe line 1. 24 HR operation 2. Low variable cost

Variable and fixed costs

All the costs faced by companies can be broken into two main categories:

fixed costs and

variable costs.

Fixed costs are costs that are independent of output. These remain constant throughout the relevant range and are usually considered sunk for the relevant range (not relevant to output decisions). Fixed costs often include rent, buildings, machinery, etc.

Variable costs are costs that vary with output. Generally variable costs increase at a constant rate relative to labor and capital. Variable costs may include wages, utilities, materials used in production, etc.

Disadvantage of Pipe line 1. Low Accessibility 2. Few Operators 3. Limited Network 4. Highest fixed cost

.

History of Water Transportation Transporting Freight by Ship

Before the introduction of the steamboat in the early nineteenth century, many types of goods were moved by flatboat or raft.

It was risky to move freight by these basic modes of transportation as well as time-consuming.

In addition, flatboats, rafts, and similar watercraft had to be paddled by crew members. Steamboats transported goods in a faster, more efficient way. Today, we have cargo ships that are able to transport heavy machinery, pipes, huge rolls of wire, and even foods packed into special refrigerated compartments.

In addition, there are containerships that carry cargo in large containers that can be moved easily on and off a ship. These containers may house foods, electronics or textiles along with a variety of other commercial goods.

⑤ Water Carriers

Water is the oldest and the most important mode of transportation.

The original sailing vessels were replaced by steamboats in early 1800s and by diesel power in 1920s.

The main advantage of water transportation is the capacity to move extremely large shipments. The main disadvantage of water transport are the limited range of operation and speed.

Advantage of Water Carriers

1. Huge Capacity 2. Low Cost 3. Safe 4. Pollution

　 Disadvantage of Water Carriers 1. Slow 2. Limited Accessibility 3. Weather Sensitivity 4. Low frequency

Air vs. Ocean It is said that 99.7% of international

trade used ocean transportation in Japan in terms of volume base.

Mitsui OSK told that 99.5% of international trade between North America and Japan used ocean transportation in terms of volume base.

Transportation Modal Shares of World Trade

1. By volume (millions of metric tons) Seaborne 89.79% Airborne 0.25% Overland/Other 9.96% 2. By value (billions of dollars) Seaborne 72.71% Airborne 12.97% Overland/Other 14.32%

5) Types of Containers

① Dry storage container

The most commonly

used shipping containers;

they come in various

dimensions standardized by ISO. They are used for shipping of dry materials and come in size of 20ft, 40 ft and 10ft.

40" Dry Freight Container (L 40' x W 8' x H 9,6')

Interior Dimension L 12,052m x W 2,352m x H 2,390m

Door Opening W 2,340m x H 2,280mTare Weight 8.265 lbs – 3.750 kgCubic Capacity 2,390 cuft – 67,7 cbmPay Load 63.385 lbs – 28.750 kg

20" Dry Freight Container (L 20' x W 8' x H 8,6')

Interior Dimension L 5,898m x W 2,352m x H 2,393m

Door Opening W 2,340m x H 2,280m

Tare Weight 5.070 lbs – 2.300 kg

Cubic Capacity 1,172 cuft – 33,2 cbm

Pay Load 62.130 lbs – 28.180 kg

40" High Cube Dry Container(L 40' x W 8' x H 9,6')

Interior Dimension L 12,032m x W 2,352m x H 2,698m

Door Opening W 2,340m x H 2,585m

Tare Weight 8.605 lbs – 3.940 kg

Cubic Capacity 3.045 cuft - 86 cbm

Pay Load 61.025 lbs - 27.860 kg

45" High Cube Dry Container(L 45' x W 8' x H 9,6')

Interior Dimension L 13,556m x W 2,352m x H 2,698m

Door Opening W 2,340m x H 2,585m

Tare Weight 10.625 lbs - 4.820 kg

Cubic Capacity 3,045 cuft - 86 cbm

Pay Load 61.025 lbs - 27.960 kg

② Flat rack container

With collapsible sides, these are like simple storage shipping containers where the sides can be folded so as to make a flat rack for shipping of wide variety of goods.

③ Open top container

With a convertible top that can be completely removed to make an open top so that materials of any height can be

shipped easily.

④ Tunnel container

Container storage units provided with doors on both ends of the container, they are extremely helpful in quick

loading and unloading of materials.

and unloading of materials.

           

                                 

⑤ Refrigerated ISO containers

These are temperature regulated shipping containers that always have a carefully

controlled low temperature. They are exclusively used for shipment of perishable substances like fruits and vegetables over long distances.

⑥ Car carriers

Car carriers are container storage units made especiallyfor shipment of cars over long distances. They come with collapsible sides that help a car fit snugly inside the containers without the risk of being damaged or moving from the spot.

⑦ Tanks Container storage units 　 used mostly for transportation of liquid materials, they are used by a huge proportion of entire shipping

industry. They are mostly made of strong steel or other anti corrosive materials providing them with long life and protection to the materials.

6) Containerization History of Containerization

Modern container shipping will celebrate its 60th anniversary in 2016. Almost from the first voyage, use of this method of transport for goods grew steadily and in just six decades, containerships would carry about 60% of the value of goods shipped via sea.

The idea of using some type of shipping container was not completely new.

In 1955, Malcom P. McLean, a trucking entrepreneur from North Carolina, USA, bought a steamship company with the idea of transporting entire truck trailers with their cargo still inside.

He realized it would be much simpler and quicker to have one container that could be lifted from a vehicle directly on to a ship without first having to unload its contents. His ideas were based on the theory that efficiency could be vastly improved through a system of "inter-modalism. Containerization had built up intermodal transport.

Inter-modalism; The same container, with the same

cargo, can be transported with minimum interruption via different transport modes during its journey. Containers could be moved seamlessly between ships, trucks and trains.

This would simplify the whole logistical process and, eventually, implementing this idea led to a revolution in cargo transportation and international trade over the next 60 years.

Containerization is contributing greatly to international transportation and international trade.

Ideal-X The revolution began quietly. On April 26, 1956, at a backwater

terminal at Port Newark, N.J., a company owned by former trucker Malcom McLean loaded 58 specially strengthened truck trailers on the spar deck of the tanker Ideal X for a coastwise voyage to Houston. Transportation would never be the same as before.

Many others were slow to recognize the impact that containerized shipping would have. A few days after the Ideal X first sailed with containers, New York port officials announced plans for a new pier at the foot of Houston Street in Manhattan to handle break-bulk cargo and passengers

Executives of traditional ship lines said inter-modalism would never have more than limited application. They cited regulatory hurdles and operational difficulties: Who would want to ship whisky in containers? some carriers asked.

Ideal-X

Sea-Land　 Sea-Land Service, Inc. was a

pioneering shipping and containerization company founded by American entrepreneur Malcom McLean in 1960, out of the operations of the Pan-Atlantic Steamship Company, which McLean acquired in 1955.

It existed under various changes of ownership (passing from R. J. Reynolds to CSX Corporation, until it was split by CSX into two liner companies and a terminal operator. The international liner company and Sea-Land name was acquired by, and formally incorporated into, the operations of the A. P. Moller-Maersk Group in December 1999.

Sea-Land became notable for its instrumental role in the U.S. military in the Vietnam War, delivering as many as 1,200 containers a month to the Indochina peninsula; total revenues from the U.S. Defense Department would amount to $450 million between 1967 and 1973

By the end of the 1960s, Sea-Land had 27,000 trailer-type containers, 36 trailer ships and access to over 30 port cities.As the advantages to McLean's container system became apparent, competitors quickly developed. They built bigger ships, larger gantry cranes and more sophisticated containers. Sea-Land needed cash to stay competitive.

McLean sold Sea-Land to Reynolds Tobacco Company. Reynolds agreed in January 1969 to buy Sea-Land for $530 million in cash and stock.McLean made $160 million personally and got a seat on the company’s board.

1 APM-Maersk 2,807,169 15.1%

2 Mediterranean S. Co 2,505,990 13.5%

3 CMA CGM Group 1,612,505   8.7%

4 Evergreen Line 936,622   5.0%

5 COSCO Container L. 819,202   4.4%

6 Hapag-Lloyd 745,389   4.0%7 CSCL 674,679   3.6%8 Hanjin Shipping 598,325   3.2%9 MOL 584,550   3.1%10 APL 565,281   3.0%

World Top 10 containership Company

Mayaguez incident　 The Mayaguez incident, which took place

between Cambodia and The US from May 12–15, 1975, less than a month after the Khmer Rouge took control of the capital Phnom Penh ousting the U.S. backed Khmer Republic. May 12, 1975, as the American container ship SS Mayaguez, owned by Sea-Land Service Inc., passed nearby Poulo Wai island en route to Sattahip, Thailand, in waters claimed as 12 nautical miles of territorial waters by Cambodia.

It was the last official battle of the Vietnam War.The Mayaguez, the containership which was owned by Sea-Land Service, was carrying 107 containers of routine cargo, 77 containers of government and military cargo, and 90 empty containers, all insured for $5 million.

The Khmer Rouge never inspected the containers, and exact contents have not been disclosed, but the Mayaguez had loaded containers from the U.S. Embassy in Saigon nine days before the fall of Saigon. The captain had a U.S. government envelope only to be opened in special circumstances, which he destroyed.

Rescue Forces by US Marine To rescue crews of Mayaguez, USA used airports

in Thailand and Japan without any consent from the both countries.

The Mayaguez incident had a direct effect on the political situation in Thailand and Japan. As news of the operation reached Bangkok and Tokyo, protests began outside the U.S. Embassy.

The U-Tapao and Okinawa air base had been used by U.S. rescue forces despite an explicit refusal of permission by the Thai and Japan government.

The first purpose-built container ship　 The world's first purpose-built

container ship was the Clifford J. Rodgers, built in Montreal in 1955 and owned by the White Pass and Yukon Route. Its first trip carried 600 containers between North Vancouver, British Columbia and Skagway, Alaska, on November 26.,1955.

Following the construction of the Clifford J. Rodgers container ship, this rail network became an integral aspect connecting the marine-road-rail cargo operational network between the Alaskan province of Skagway and the Yukon district in Canada.

The Clifford J. Rodgers

Video

http://www.youtube.com/watch?v=Gn7IoT_WSRA&feature=player_detailpage

7) Intermodal Transport Intermodal Transport is using more

than two modes of transportation (rail, ship, air and truck), without any handling of the freight itself when changing modes.

The method reduces cargo handling, and so improves security, reduces damages and loss, and allows freight to be transported faster.

Two modes of transport 1. Sea-Rail Link 2. Sea-Road Link 3. Sea-Air Link Multi- Modes 1. Road –Sea –Air Links 2. Rail-Sea-Road Links 3. Air-Sea-Rail Links

International Multimodal Transport International Multimodal Transport is

operated by one carrier using more than two modes of transportation.

Operator issues one single transport document to cover more than two modes of transportation and take a responsibility for all modes of transportation.

Thailand has Multimodal Transport Act 2005 .

Example

Thailand manufacturers can send their products from Bangkok to Seattle by Sea and then send them to Chicago by truck.

International Multimodal transport operator issues one bill of lading to cover Bangkok to Chicago.

Discussion

1. Describe the five modes of transportation. (Also, 6th mode)

2. What is the most advantage and disadvantage of each mode of transportation.

3. What is intermodal transportation?4. Why is Motor Carrier Freight

Transportation the most preferred method of product shipment?

8) Evaluating the suitability of transport modes

The exporter & importer involves the process of deciding which is the most ideal mode(s) of transport.

The ultimate selection can vary seasonally and by quantity.

Some services vary considerably from summer to winter due to market demand and climate conditions.

Moreover, the dispatch of a small quantity, urgently required may be ideal for airfreight, but a larger consignment, needed less urgently for later dispatch may be suitable for a deep-sea container and LCL schedule under consolidation arrangements.

FCL = Full Container Load FCL is the abbreviation for a “Full Container

Load” used in the International shipping Industry for Exporting and Importing sea freight cargo.

This term is commonly used to describe an international sea freight service that is designed for ocean freight shipments of cargo where an exporter or importer has exclusive use of a dedicated sea freight container (normally a 20ft or 40ft container).

LCL = Less than Container Load

When you don’t have enough cargo for a full container (FCL), you need LCL (less than container load) service. This is a sea freight service which groups a number of customers shipments together into a container load and gets your shipment moving without delay.

TEU=twenty-foot equivalent unit

　　Standard unit for describing a ship's cargo carrying capacity, or a shipping terminal's cargo handling capacity.

A standard forty-foot (40 x 8 x 8 feet) container equals two TEUs (each 20 x 8 x 8 feet).

Container ship 　

Maersk Triple E class

The Maersk Triple E class is a family of large, fuel-efficient container ships, designed as a successor to the Maersk E-class.

The name "Triple E" is derived from the class's three design principles: "Economy of scale, Energy efficient and Environmentally improved".

MAJESTIC MAERSKThe World’s Largest Containership

Video

http://www.youtube.com/watch?feature=player_detailpage&v=Fb6hY_tZMI0

The result of Mid-Term Test I am very sorry for my two typo errors

and one bad question. I would like to give 5 points up for all

students to cover my mistakes. However, the result was very bad,

unfortunately. Students less than 49 points should do presentations at the class on 12th November.

There are 23 students who could not get more than 50 percent.

I will give 10 points if you do presentation at this class on November 12th. I need five groups.

1. Air freight calculation method

2. Ocean Freight calculation method

3. 4key factors to decide the mode of transportation

4.What is BAF and why carriers impose BAF?

5.What is CAF and why carriers impose CAF?

1

Part 4. Freight

Freight is the reward payable to the carrier for the carriage of goods.

Now, International Transportation is one of the most important factors in Logistics.

In many cases, we must get raw materials, parts, finished goods from foreign countries. There are several modes of transport like as vessels, air, tracks, railroads, pipelines and a combination of these modes of transport.

1) Basic idea of freight The most basic is the decision of what

kind of transport to use: air freight or ocean freight.

When you would like to ship the good to overseas, deciding whether to go with ocean freight or air freight is an important choice.

There are four key factors you should consider when making this decision.

Four key factors to decide the mode of shipment

① Cost

② Speed

③ Reliability

④ Environmental Impact

① Cost

Airlines bill you by what is called a chargeable weight.

Chargeable weight is calculated from a combination of the weight and size of a shipment.

Sea carriers charge you by container rates for shipping in standard containers (20’ and 40’ are the most common sizes). While weight can factor into the price from sea carriers, their charge tends to be based more on the size of a shipment.

If you are shipping less than a container load, your price is often determined by cubic meter.

With larger and heavier shipments, it is often much cheaper to ship by sea.

As a shipment gets smaller, the margin between the prices gets smaller and sometimes air will even end up less expensive.

② Speed When it comes to speed, there is no

question that air freight is usually much faster. Since time is money, this factor could more than make up for a higher cost of flying cargo.

　 Many sea shipments can take around a month to arrive while an air shipment takes a day or two. For most business shipping, faster is better.

③ Reliability

Air freight shipping has a much shorter history than ocean freight shipping, yet air freight tends to win the battle of reliability.

Flights get delayed by weather and other factors, but airlines tend to be very on top of their schedules.

Ocean carriers are notorious for being bad about this. It is not uncommon for ships to be off schedule.

For many, a day or two here or there doesn’t hurt; however, for many businesses, a day or two could have serious cost effects.

With airlines, there are usually daily flights back and forth between major cities around the world. Because of this, missing a flight doesn’t cause much of a delay for a cargo shipment.

Ocean lines tend to have weekly schedules. Missing the cutoff at a seaport means a longer delay.

　④ Environmental Impact

While the social awareness of environmental issues can change the way the public looks at a company and affect its bottom line, we all have a responsibility of taking care of the planet on which we live.

　 It would seem that ocean freight wins this category.

CO2 emissions are much higher in air freight transport than ocean freight transport.

　 This causes cargo shipping by air to have a much larger carbon fingerprint than cargo shipping by sea.

However, considering oil spills and the water ecosystems affected by ocean freight, gives pause. Perhaps the jury is still out on this final factor.

Pollution　 Reducing Air Pollution from

International 　 Transportation

　 Because of their reliance on petroleum-based fuels and their dramatic growth rates in recent decades, air and sea transport are responsible for significant emissions of both traditional (criteria) air pollutants (e.g. sulfur oxides (SOx), nitrogen oxides (NOx) and greenhouse gases (e.g. carbon dioxide (CO2).

　

International seaborne and airborne transportation are estimated to produce perhaps more than 7% of total global CO2 emissions from the combustion of fossil fuels at present. But compared to other transport modes, these have few options for transitioning to other fuels in the near- to medium-term.

CNGV CNGV is an alternative fuel vehicle

that uses compressed natural gas (CNG) as a clean alternative to other fossil fuels. Worldwide, there were 14.8 million CNGV by 2011.

Compressed Natural Gas Car in Thailand is popular now.

　 1. Clean energy and cost efficient

2. Thailand found a source of natural gas in the Gulf of Thailand in 1981. It allows the country to depend on domestic energy sources.

Benefits of NGVs 85-99% Methane

Clean burning

Exhaust emissions from NGVs are much lower than those from equivalent gasoline-powered vehicles.

Reduced greenhouse gas emissions

Noise reductions

Lower cost

2) Factors determining Freight Rate

Like as all other products, prices of freight would be determined by supply and demand.

So, the pricing of air and sea transport services, usually in combination with land transport services, is dependent on the forces of supply and demand.

① 　 Nature of commodity

Ex. Dangerous Goods

Class 1: ExplosivesClass 2: GasesClass 3: Flammable Liquids Class 4: Flammable SolidsClass 5: Oxidizing Substances & Organic Peroxides

Class 6: Toxic and Infectious Substances Class 7: Radioactive MaterialClass 8: Corrosive SubstancesClass 9: Miscellaneous Dangerous Substances & Articles

② 　 Value of commodities Ad Valorem (“at value”)

An ad valorem freight rate (Ex. 3~5% of cargo value) is one where the freight is based on the value of the goods.

An ad valorem bill of lading is one where the value of the goods is shown on the face of the document.

The value on the face of document becomes the carrier’s limit of liability, in return for this increased liability the carrier will charge an addition to the sea freight

③ The origin & destination 　　　 of commodity ④ The nature of packaging 　　 & convenience of

handling ⑤ The load-ability of transport unit

⑤ The susceptibility of the cargo to damage & pilferage ⑥ The need heavy lift, strong

room, live stock facilities, etc. ⑦ The mode of transport

３ ) Ｏｃｅａｎ Ｆｒｅｉｇｈｔ　Ｒａｔｅ

　① Ｆｒｅｉｇｈｔ Ｐｒｉｃｉｎｇ　---- Base rate 　　　　　 Base rate + Surcharges　　 More than 20~30years ago, each freight conference

has a published class rate, commodity rate etc. They are very strict and must use their published

rate if we use the first class carriers.

Because of deregulation in USA in 1984 and 1998 , conferences are very weak, they do not publish tariffs.

　Each shipping company negotiates with each customer who wants to use a vessel for transport.

Base rate is negotiable now.

　 Big companies like Sony are

doing a bid every year for their transport of goods for several thousand of containers.

For LCL customers, ship-owner company do not collect cargos from customers.

Freight forwarder is doing this business on behalf of them.

Minimum freight rate

LCL Sea freight rate always has a minimum charge on shipment.

Example: $125 per CBM / $125 minimum

charge. It is often less expensive to dispatch

small consignments by air than by sea.

Cubic Meter

A cubic meter is something 1 meter long by 1 meter wide by 1 meter high 1m x 1m x 1m = 1 CUBIC METER

Technically cubic meter could be any combination of lengths as long as all three dimensions multiplied together equals

0.5m x 0.5m x 4m = 1 CUBIC METER

Revenue ton For calculation of freight, if cargo is

rated as weight or measure, whichever produces the highest revenue will be considered the revenue ton.

Weights are based on metric ton and measures are based on cubic meter.

Ocean shipment 1M3 = 1,000kgs

② Fees and surcharge

a) B/L Charge Minimum Bill of Lading Charges: Ex. L C L Cargo: US$ 100 Full Container Load Cargo :

General Dry Cargo US$ 350 Refrigerated Cargo US$ 500 Hazardous Cargo US$ 500 All Other Cargo US$ 350

b) Freight surcharge Freight surcharge is other than freight base rate like as BAF & CAF.

Currency Adjustment Factor (CAF)

This arises when freight rate is related to floating currency such as YEN.

YEN Appreciation Surcharge=YAS

If the rate were based on US dollar, then Japanese yen rate of exchange in June 2012 would go up or down, CAF ( Currency surcharge) is imposed to minimize loss of ship owners.

Bunker Adjustment Factor (BAF)

　 Fuel cost is a substantial proportion of direct voyage cost. Ship-owners are not prepared absorb the variation in fuel prices.

If fuel prices increase, ship-owners impose BAF (Bunker surcharge)

Ocean Freight Rate in case of LCL Cargo

BASE ： US$50 W/M

BAF ： US ＄ 8.00/RTN

CFS CHARGE : US$ 50/RTN

THC ： US$35/RTN

DOC ： US$35/BL

Less than 3RTN 0 - 1 RTN : US$ 20/BL minimum charge 1 - 2 RTN : US$ 15/BL 2 - 3 RTN : US$ 10/BL

4-10RTN : US$8/BL

Questions Please calculate the freight charge for

the following cargo in case of ocean shipment.

1) Furniture 3 cubic meter /1250kg

3,000kg>1250kg revenue ton is 3M3

2) Material handling machine

5 cubic meter/7500Kg

5,000kg<7,500kg revenue ton is 7.5M3

1) AnswerBASE ： US$50 W/M 50 x 3 = US$150

BAF ： US ＄ 8.00/RTN 8 x 3 = 24

CFS CHARGE : US$ 50/RTN 50 x 3 = 150

THC ： US$35/RTN 35 x 3 = 105

DOC ： US$35/BL = 35

less than 10RTN 0 - 1 RTN : US$ 20/BL 1 - 2 RTN : US$ 15/BL 2 - 3 RTN : US$ 10/BL 10

4-10RTN : US$8/BL

---------------------------

US$474

2) AnswerBASE ： US$50 W/M 7.5 RTN 50 x 7.5 = US$375

BAF ： US ＄ 8.00/RTN 8 x 7.5 = 60

CFS CHARGE : US$ 50/RTN 50 x 7.5 = 375

THC ： US$35/RTN 35 x 7.5= 262.5

DOC ： US$35/BL = 35

less than 10RTN 0 - 1 RTN : US$ 20/BL 1 - 2 RTN : US$ 15/BL 2 - 3 RTN : US$ 10/BL

4-10RTN : US$8/BL 8

　　　　　　　　　　 ------------------------

US$1,115.5

4) Air freight Airline freight rates are based on a

"chargeable weight", because the volume or weight that can be loaded into an aircraft is limited.

The chargeable weight of a shipment will be either the "actual gross weight" or the "volumetric weight", whichever is the highest.

Airfreight calculation

Chargeable weight x Freight rate

+

Fuel Surcharge (& Other surcharge)

The chargeable weight

The chargeable weight is calculated as follows:

1,000g = 6,000CM3

1 metric ton = 6 M3

Airfreight charge is calculated on the basis of actual weight or volumetric weight, which ever is higher.

Air shipment Product is 8Kg and 60,000 CM3

　 1kg = 6,000CM ³

30cm Ｘ 40cm Ｘ 50cm÷6,000 ＝ 10kg

Weight ： 8kgs ＜ Volume weight ：10kg → 　 Chargeable weight is 10kgs

Fuel surcharge Example

Thailand/All Destinations (except where indicated below) 39.00 THB/CW

Thailand/Asia (except Southwest Pacific)

20.00 THB/CW

Thailand/Latin America 80.37 THB/CW

Thailand/Mexico 65.03 THB/CW

Question 1

Product size and weight

L : 120cm

W : 80cm

H : 60cm

Actual weight 123Kg

Freight rate US$5 per C/W

Answer 1First step120 x 80 x 60 = 576,000 cm3

576,000 ÷6000 = 96 kg

Second step96kg < 123 kg ----chargeable weight is 123kg

Third step 123kg x US$5 = US$625 \--Air freight charge

Question 2Product size and weight

L : 100cm

W : 50cm

H : 50cm

Actual weight 41.10Kg

Freight rate US$7 per C/W

Answer 2

First step100 x 50 x 50 = 250,000 cm3

250,000 ÷6000 = 41.67kg

Second step41.10kg < 41.667 kg

chargeable weight is 41.667kg

Third step 41.667kg x US$7 = US$291.67

--Air freight charge

Question 3

Gross weight =750kgs

Measurement of cargo

102cm X 98cm X 106cm

1 box 80cm X 65cm X 103cm

3 boxes

Freight rate US$11 per C/W

Answer 3 First step

Total volume & Volumetric weight

1,059,576 +(535,600X3) = 2,666,376 cm3

2,666,376 ÷ 6000 = 444.396kgs

Second Step

750kgs > 444.396kgs.

Chargeable weight is 750kg

Third Step 750 x US$11=US$8,250

--Air freight charge

Question 4

Gross weight

850kgs

Measurement of cargo

120cm X 160cm X 115cm

2 boxes

75cm X 130cm X 125cm

2 boxes Freight rate US$7.5 per C/W

Answer 4

First Step （ Total volume &C/W ） 4,416,000 + 2,437,500 =6853500 cm3

6853500 ÷ 　 6000 = 1142.25kg

Second Step

850kgs < 1,142.25kg

Third Step 1,142.25kg x US$7.5 = US$8,566.88

Question 5

Gross weight : 950kgs.

Measurement of cargo

1 meter X 1.05 meter X 0.85 meter

2 boxes 0.7 meter X 1.50 meter X 0.60 meter

3 boxes

Fright Rate US$10 per C/W

Answer 5

First Step

Total volume & chargeable weight

(0.8925 X 2) + ( 0.63 X 3) 1.785 + 1.89

= 3.675 m3

Total chargeable weight

3.675m3 ÷0 .006 = 612.50kgs

Second Step 950kg > 612.50kg

Chargeable weight is 950kg

Third Step612.50 kg x US$10 = US&6,125.00

Preface

What is a warehouse?

　 Warehouse is a storage structure constructed for the protection of the quality and quantity of the stored produce. The need for a warehouse arises due to the time gap between production and consumption of products. Warehousing or storage refers to the holding and preservation of goods until they are despatched to the consumers.

They are usually large plain buildings, equipped with loading docks to load and unload consignment from trucks.

In simple words, warehouse is a facility where the supply chain holds or stores goods, until they are needed by the customers.

Warehouse can be owned by manufactures, wholesalers, retailers to store the goods.

Many years ago, individual households functioned as self-sufficient economic units.

Consumers performed storage and accepted the attendant risks.

Meats were kept in smokehouses, and perishable products were protected in underground food cellars.

Transportation capability developed, it become possible to engage in economic specialization.

Product storage was shifted from households to retailers, wholesalers, and manufacturers

So, the warehouse initially viewed as a storage facility.

Now we have a public warehouse as a business to store the goods for customers.

And the warehouse has more functions as a switching facility in logistics and SCM systems.

Economic Specialization

Specialization is when a nation or individual concentrates its productive efforts on producing a limited variety of goods. It often times has to forgo producing other goods and relies on obtaining those other goods through trade.

Reference Book

Part 5 Management of Warehouse of this presentation is mainly from the following book;

Supply Chain Logistic Management by Donald J. Bowersox, David J. Closs, M.

Bixby Cooper, and John C. Bowersox

4th edition published by McGraw-Hill

Part 5 Management of Warehouse

　　　　　　A warehouse is a typically view as a place to store inventory.

This perspective of storage created a tendency

to consider warehouse as “a necessary evil”

that added costs to the distribution process.

　　

Companies seeking to operate effectively between points of procurement, manufacturing and consumption gave little attention to internal warehouse operations.

However, by changing requirement of the retail environment, we could gain through reductions in warehousing more than through manufacturing improvements in many cases.

Strategic warehousing from the point of view of Logistics and Supply chain Management has a new function as a switching facility, not just a storage facility.

The focus on warehousing shifted from passive storage to strategic inventory assortment.

The term “Distribution Center” became widely used throughout industry to capture this dynamic development in traditional warehousing.

Strategic Warehousing

Storage Facility

Switching Facility

1) History of Warehousing Individual households are self-sufficient

units. Consumers performed storage by themselves.

Transportation capability developed

Economic specialization

Product storage was shifted to retailers, wholesalers and manufacturers.

Warehousing's roots go back to the creation of granaries to store food, which was historically available for purchase during times of famine.

　

Granary

As European explorers began to create shipping-trade routes with other nations, warehouses grew in importance for the storage of products and commodities from very far away places. Ports were the major location for warehouses.

World War II impacted warehousing in several ways, including the need to increase the size of warehouses and the need for more mechanized methods of storing and retrieving the products and materials.

As mass production grew throughout manufacturing, the needs of efficient and effective warehousing capabilities grew with it.

Mass- production

Too much Products

Need efficient

Warehousing capabilities

Warehousing Management

http://www.youtube.com/watch?feature=player_detailpage&v=ho8U-T5mBhk

2) Warehouse Benefits

Economic benefits of warehousing result when overall logistical costs are directly reduced by utilizing one or more facilities.

It is not difficult to quantify the return on investment of an economic benefit because it is reflected in a direct cost-to-cost trade-off.

When total cost reductions are achievable, the warehouse is economically justified.

Four basic economic benefits are:

① 　 Storage

② 　 Interface

③ 　 Sorting

④ 　 Reverse logistics

3) Four Basic Economic Benefits

A warehouse was a place to store inventory. (=storage facility)

However, now it is a very important to understand as a switching facility in a logistics and a supply chain management.

①　Storage

Toys and Christmas cakes are seasonable products and sell in a very short period, but manufacturing them all year round.

In contrary, agricultural products are harvested at specific times, with distribution and consumption occurring throughout the year.

　 Both situations require inventory storage to support marketing efforts. Storage provides an inventory buffer, which allows production efficiencies within the constraints imposed by material sources and consumers.

This is the reason why warehouses for storage is still very important factor.

Accounting terms of warehousing

There are two evaluation systems of inventory stock.

1) FIFO

2) LIFO

1) FIFO

First In, First Out. FIFO accounting is a common

method for recording the value of inventory. A firm records the last units purchased as inventory value.

2) LIFO Last In , First Out LIFO accounting, a historical

method of recording the value of inventory, a firm records the first units purchased as inventory value.

② Interface

Warehouse is a point of interconnection between parts suppliers and factory or between factories and customers.

a. Consolidation b. Break Bulk

a. Consolidation

The benefits of consolidation are the realization of the lowest possible freight rate, timely and controlled delivery, and reduced congestion at a customer’s receiving dock.

The consolidation enables both the inbound movement from origin and the outbound movement to destination to be consolidated into a larger shipment, which generally results in lower transportation charges per unit and most often quicker delivery.

A warehouse receives and consolidates products from a number of manufacturing plants destined to a specific customer on a single transportation shipment.

Consolidation

Customer

Meiji Milk

CoCa Cola

SinghaWater

Consolidation Warehouse

b. Break bulk

Economy of scale is achieved by transporting the larger shipment from origin to destination. The break-bulk warehouse or terminal sorts or splits the larger shipment into individual orders for customer delivery.

A break-bulk operation receives a single large shipment from a manufacturer and arranges for delivery to customers-multiple destinations.

Break bulk

PepciCola

Break bulkWarehouse

CustomerA

CustomerB

CustomerC

Retail warehouse logistics picking system for supermarket delivery

http://www.youtube.com/watch?v=kW-zPmP69nc&feature=player_detailpage

③ Sorting

The basic benefit of sorting is to reconfigure freight as it is being transported from origin to destination. Three types of assortment are widely performed in logistical systems.

a. cross-docking

b. mixing

c. assembly

a. Cross-Docking

The term cross docking refers to moving product from a manufacturing plant and delivers it directly to the customer with little or no material handling in between.

Cross docking not only reduces material handling, but also reduces the need to store the products in the warehouse.

In most cases the products sent from the manufacturing area to the loading dock has been allocated for outbound deliveries.

In some instances the products will not arrive at the loading dock from the manufacturing area, but may arrive as a purchased product that is being re-sold or being delivered from another of the companies manufacturing plants for shipment from the warehouse.

The objective of cross-docking is to combine inventory from multiple origins into a customized assortment to meet the needs of a specific customer. Retailers make extensive use of cross-dock operations to replenish fast-moving store inventories.

7-Eleven is doing this operation very effectively.

http://2.bp.blogspot.com/_2mOtf320OcM/S62dhlWQ90I/AAAAAAAAALI/8KpzyxYOh_g/s1600/tes2.jpg

Cross docking Video

• http://www.youtube.com/watch?feature=player_detailpage&v=OS5CrureJoE

b. Mixing or Blending

Mixing is usually performed at an intermediate location between shipment origin and destination. In a typical mixing operation, carloads or truckloads of products are shipped from origin to mixing facilities. These inbound shipments are planned to minimize inbound transportation cost.

Upon arrival at the mixing warehouse, shipments are unloaded and sorted into the combination desired by each customer.

During the mixing process, inbound products can be combined with others regularly stocked at a warehouse.

Product A

Product B

Product c

Mixing Warehouse

Product D

Customer Z AB

Customer YABC

Customer XABCD

Customer WABCD

c. Assembly The most common use of assembly is to

support manufacturing operations. Products and components are assembled from a variety of second-tier suppliers at an assembly facility located in close proximity to the manufacturing plant.

While manufacturing organizations have traditionally performed assembly, it has become common to utilize value-added services performed by an integrated service provider to sort, sequence, and deliver components when needed in manufacturing.

Vendor A

Vendor B

Vendor C

Supplier Distribution

Center Factory

③ Production Support To steady supply various parts and

components to a factory as they need. =JIT

④ Marketing Support To supply various products at one

time for customer needs.

④ 　 Reverse Logistics

Reverse logistics includes the activities to support:

(1) returns management,

(2) remanufacturing and repair

(3) remarketing

(4) recycling

(5) disposal

　 Returns management is designed to facilitate the reverse flow of product that did not sell or to accommodate recalls.

Remanufacturing and repair facilitates the reverse flow of product following its initial use for revitalization.

Return products typically require significant manual sortation and inspection to determine appropriate disposal.

However, the opportunity to recover cost by reimbursement and recycling is significant.

Because of the growing importance of reverse logistics some integrated service providers have developed lucrative businesses by specializing in related services.

4) Value-added service

A value-added service is any work that creates a greater value for customers.

Strategic warehousing has more economic benefits than four basic benefits.

a. Packaging & Labeling b. FRM

① Packaging & Labeling

Once a specific customer order is received, the warehouse can complete labeling and finalize packaging.

There are two kinds of packaging which are consumer packaging and Industrial Packaging. Industrial packaging is protective packaging that prepare a products for storage and transit.

② FRM

FRM (Floor-Ready Merchandise) started from Apparel industry and merchandise is ready to floor of retailer with hanger, labels and price tag. So that retailers could display it at their store within few minutes.

③ 　 Production Economies

④ 　 EOQ

( Economic Order Quantity)

⑤ Quantity Discount

Cash Discount / Seasonal Discount / Trade Discount

The above ~ are from ③ ⑤economies of scale.

⑥ Customer Service Policy

Service benefits gained through warehouses in a logistical system may or may not reduce costs.

A warehouse improve in the time and place capability of the overall logistic system.

⑦ Minimizing Total Cost

To reduce total cost is one of the most important objectives in logistics & SCM system.

By adding a warehouse to a logistical system will reduce overall transportation cost by an greater amount than the cost of the warehouse, then total cost reduced.

For example, if adding a warehouse to a logistical system will reduce overall transportation cost by an amount greater than the fixed and variable cost of the warehouse, then total cost reduced.

Changing requirements of the retail environment more than offset any reduction in warehousing gained from through manufacturing improvements. The retail store, faced with the necessity of stocking an increasing variety of products, was unable to order sufficient quantity from a single supplier to enjoy the benefits of consolidated shipment.

The cost of transporting small shipments made direct ordering prohibitive. This resulted in a need to utilize warehouses to provide timely and economical inventory assortments to retailers.

At the wholesale level of the channel of the distribution, the warehouse become a support unit for retailing.

Part 6Type of Warehouse

1 . GPW & Distribution Center As a business warehouse,

General Purpose Warehouse was popular before.

Because of retailers demand, Distribution Center is quite popular now.

1) General Purpose warehouse

General Purpose warehouse (GPW) facilities provide storage capabilities, warehouse operations space and administration space used to support logistics .

Functional spaces generally include bulk storage area, shipping, receiving, administrative offices, and a customer service area. Product storage for some time is one of main objects of GPW.

2) Distribution Center

There are some warehouses where product storage is considered a very temporary activity. These warehouses serve as points in the distribution system at which products are received from many suppliers and quickly shipped out to many customers.

In some cases, such as with distribution centers handling perishable food, most of the product enters in the early morning and is distributed by the end of the day.

2.Warehousing Alternatives We have three options of public, private and contract

warehouse.

It is very important to decide to have our own

warehouse, rent the space at a public warehouse or get

specially tailored warehousing services from a contract

warehouse .

1) Public Warehouse

A public warehouse is operated as an independent business offering an range of service like as storage, handling and transportation. Public warehouse are used extensively in logistical systems. Almost any combination of services can be arranged with the operator either for a short term or over a long duration.

Classification of Public warehouse

a. 　 General merchandize

b. 　 Refrigerated

c. Special commodity

d. Bonded

e. Household & furniture

a. Advantage of Public Warehouse

① Lower variable cost-lower 　　　　　 Pay scale, better productivity

② Greater operating 　　 & management expertise

　 ③　 Financial Flexibility ④ 　 Flexibility to change location, size and number of facilities ⑤ 　 Economies of Scale

Variable & Fixed Costs

All the costs faced by companies can be broken into two main categories: fixed costs and variable costs.

Variable costs

Variable costs are costs that vary with output. Generally variable costs increase at a constant rate relative to labor and capital. Variable costs may include wages, utilities, materials used in production, etc

Fixed costs

Fixed costs are costs that are independent of output. These remain constant throughout the relevant range and are usually considered sunk for the relevant range (not relevant to output decisions). Fixed costs often include buildings, machinery, etc.

b. Disadvantage

of Public Warehouse ① Space Availability

cannot expect to get a space any time

② Specialized Service

cannot expect to accept easily specialized service like as a private warehouse

③ Communication

cannot expect better communication like as a private warehouse

2) Private Warehouse

Private warehouse is operated by the company owning the product. However, actual facilities maybe owned or leased.

a. Advantage of Private warehouse

① 　 Control

　　 The company has a decision making authority.

　　②　 Flexibility

　　 The company can adjust customers’ special needs.

③ 　 Cost

　　 Less cost than public warehousing because of no profit markup.

④ 　 Market Presence

7-eleven RDC in Khon Kaen is more responsive to local customers in this area for quick response and delivery

b. Disadvantage of Private Warehouse

① 　 Investment

　 big investment for land, facilities and material handling equipments

② 　 Flexibility

　 No flexibility to change location, size etc. No financial flexibility

3) Contract Warehouse

Contract warehousing combines the best characteristic of both private and public operations.

　 ① long term relationships

② To share risks

③ lower cost than

public warehouse

④ Expertise, flexibility,

Economies of scale

2. Special Purpose Warehouse

1) 　 Refrigerated Warehouse

2) 　 Chilled Warehouse

3) 　 Flammable Storage Warehouse

4) 　 Bonded Warehouse

5) 　 Silo

Warehouse picking systems, automated picking with S-Pemat. Warehouse logistics solutions

Film

4. Warehouse Operations

① 　 Receiving

② 　 Identifying & Sorting

③ 　 Storage

④ 　 Damage Protection

⑤ Order picking

⑥ 　 Packing

⑦ 　 Shipping &Transportation

⑧ 　 Inventory Checking

⑨ 　 Reporting

Part 7MODERN ISSUES

The warehouse industry found itself recovering from a recession at the start of the twenty-first century, partially brought on by the hype of the dot-com bubble and the excess production created after it burst.

It also coped with new methods of distribution, such as just-in-time (JIT) manufacturing—where warehousing is unnecessary because products are shipped directly to customers.

Warehousing companies are now striving to become more than simply storage facilities.

They are transforming themselves into "third-party logistics providers" or "3PLs" that provide a wide array of services and functions

In addition to packing and staging pallets, contemporary warehousing facilities offer light manufacturing, call centers, labeling, and other non-storage options.

3PL

Third party logistics refers to outsourced tasks for businesses which help them manage their supply chain, such as warehousing, picking, packing, shipping and inventory management. Some 3PLs might also help with the administrative side of these tasks, such as invoicing and accounts receivable.

4PL

Fourth party logistics companies serve as consultants who manage the relationship between the principal company and one or more 3PLs to make sure all operations are running smoothly.

They can carry various levels of responsibility, from advice on choosing the best companies, right up to the day-to-day management of essential logistical tasks being performed for the principal company.

Future of warehousing

We are looking at how warehousing will be transformed into a highly automated environment. There would be no labor required in the first place, in fact they will be no space for humans to walk (except for service engineers).

There will be rails and tracks all around on which automated pick Robots would move to pick and put away pallets and cases around the warehouse.

These robots would move on horizontal and vertical tracks and can reach every location within each zone where they operate. There will be sensors all over the warehouse to guide robots, round the clock.

Part 9Global Logistics

Why global logistics become more and more important now?

1) Domestic and Global

Whereas an effective logistics system is important for domestic operations.

Domestic logistics focuses on performing value-added services in a relatively controlled environment.

Global logistic operations must accommodate all domestic requirements and also deal with increased uncertainties associated with distance, demand, diversity, and documentation.

2) Localized focus and global production

For more than 20 years, there has been a steady trend towards the worldwide marketing of products under a common brand umbrella --- like Apple, Coca-Cola, IBM, Toyota, Sony etc.

At the same time, the global company has revised its previously localized focus; manufacturing and marketing its products in individual countries, and now instead will typically source on a worldwide basis for global production and distribution.

The global company seeks to grow its business by extending its markets whilst at the same time seeking cost reduction through “scale of economies” in purchasing and production and through focused manufacturing and/or assembly operations.

In this direction, we have two challenges.

a. World markets are not homogeneous.

b. We need a high level of co-ordination the complex logistics of managing global supply chains which may result in higher cost and extended lead times.

How to mange the links in the global chain from sources of supply through to end user?

There is a danger that some global companies in their search for cost advantage may take too narrow a view of cost and only see the purchasing or manufacturing cost reduction that may be achieved through using low cost supply sources.

In reality, it is a total cost trade-off where the costs of longer pipelines may outweigh the production cost saving. The trend towards global organization of both manufacturing and marketing is highlighting the critical importance of logistics and supply chain management as the key to profitability.

Localized Focus Sourcing Worldwide

Management of Logistics & Supply chain is critical.

Mfg. Cost Reduction > Logistic Cost

3) Globalization in the supply chain

To remain competitive in this new global environment, companies will have to seek ways in which costs can be lowered and service enhanced, meaning that supply chain efficiency and effectiveness will become evermore critical.

What degree of centralization is appropriate in terms of management , manufacturing and distribution, and how can the needs of local market s be met at the same time, as the achievement of economies of scale through standardization.

Three ways are implemented as their global logistics strategies.

① Focused Factories

By limiting the range and mix of products manufactured in a single location, the company can achieve considerable economies of scale. The global business will treat that the world as one market and produce fewer products in volume.

The nationally oriented business will have “local for local” production.

However, a number of crucial logistics trade-offs maybe overlooked.

a. The most obvious trade-offs is the effect on transport costs and delivery lead times. The cost of shipping products , often of relatively low value, across greater distances may erode some or all of production cost saving.

b. Similarly the longer lead times involved may need to be countered by local stockholding, again possibly offsetting the production cost advantage.

c. The needs for local packs with labeling in different languages or even different brand names and packages for the same products.

d. 　 No flexibility to produce “variety “ of products at focused factories where volume and economies of scale are critical issues.

Sony decided to bring back assembly line of digital camera and camcorders to Japan. Sony was producing these products in China to seek lower labor cost.

② 　 Centralization of inventories

There is a key issue relative to managing inventories at companies with multiple warehouses or stocking branches. Do you let each of the locations manage their own inventories, or do you create restocking purchase orders centrally for each location with only a minimum of input from the separate locations?

Advantages of Centralization

Stronger, more professional inventory managers may be employed who furthermore are removed from day-to-day events that cause reactionary actions. These individuals can be thoroughly trained in both the general principles of inventory management and the particular system being used to drive the ordering process

Finally, special buying opportunities can be more effectively explored since all the information resides in one location and the individual is taking a total company view.

Disadvantages of Centralization

Problems can develop unless some mechanism is created to make the central planners aware of local events. Finally local management can feel disenfranchised by not having control of their inventories.

Advantages of Localization

　 The key advantage to having inventory decisions take place locally is that personnel are aware of local factors and upcoming events. They are in a position to anticipate special promotions that may be strictly local in nature.

　 Additionally, they may be aware of unique input regarding the plans of major customers. Finally, allowing the local management to control and manage their inventory fosters a sense of ownership and control that can be desirable.

Disadvantages of Localization

　 The biggest disadvantage to local control is that local personnel may lack inventory management skills and operate on a highly subjective basis, even when fairly sophisticated tools are available.

There is a tendency to over react to events which are transient in nature. Finally, local management has a strong bias for high inventories being visually present. That is, they fail to take advantage of the inventory that is in the pipeline or which exists in the central warehouse.

③ 　 Postponement & Localization

In response to the increasing customer demands for variety and rapid delivery at acceptable cost, companies decentralize their final manufacturing into their distribution centers to serve customer

　 A reconfiguration of supply chain may be needed to implement postponed manufacturing, it has interactions with marketing and manufacturing.

　

④Thinking global & acting local

In a business environment which is simple to operate within and static, organizations tend to gear themselves towards operational efficiency by standardizing operations and management practices. This whole approach is bureaucratic, suited only to mass production companies.

At the beginning of the 80s Morgan Crucible abandoned its mass market activities, such as metal melting, in order to focus upon highly specialized niche markets and products.

This changing emphasis required a different way of managing the business. It meant running the business through global product divisions with a shift away from centralized control

We call this tendency as “Global Localization”. In this global age, Localization is also very important same as Globalization.

Not just management of big companies, all of us should think GLOBALLY and act LOCALLY.

Internship To Japan

1) One month April ～May 2015

2) At Maki Corporation Tokyo, Japan

3) Number of Student

Hopefully 2 boys or 2 girls Maximum 3 (2or4)boys & 3(2or4) girls

4) Cost supported by Maki

Hotel or Meal Help (25%) & Commuter fee (100%) and 5 free lunch or dinner

5) Cost for student

Airfare B30,000 & Meal B30,000

6) Application dead line is November 11, 201 ４

VISA to Japan could get in Khon Kaen?