DSM2306Integrated Transport and Distribution

Management in Shipping

2. The components of logistical systems

2.1 Inter-organisational distribution channels

2.2 Typical integrated logistical & shipping systems: Echelon system, Direct system, Flexible systems and Voyager Estimate System (VES)

2.3 Introduction to geo market differentials total logistical channels: production, handling, distribution and shipping

Components of Logistics Management

Logistics System

• Goals of Logistics system• Provide a Targeted Level of Customer Service at the Least Cost• Maximize Profits, Not Sales

Distribution Cost

• Cost or expense incurred in moving goods from the point of production to the point of consumption.

• (e.g. advertising, selling, transport costs, storage expense, etc)

• any cost incurred by a wholesaler, retailer, or distributor

Customer Service Levels Distribution Costs

Nodes and Links in a Logistics System

Nodes and Links in a Logistics System (con’t)

• Links represent the transportation network and connect the nodes in the logistics system. The network can be composed of individual modes of transportation (rail, motor, air, ocean or pipeline).

2. The components of logistical systems

2.1 Inter-organisational distribution channels

Inter-organisational distribution channels

2. The components of logistical systems

2.2 Typical integrated logistical & shipping systems: Echelon system, Direct system, Flexible systems and Voyager Estimate System (VES)

Logistical Systems

• Three widely utilized structures are

• Direct is designed to ship products directly to customer’s destination from one or a limited number of centrally located inventories

• Echelon (traditional) is a linear flow from origin to destination through buffers or warehouses/distribution centers

• Combined is a combination of Echelon and Direct, depending on the product, market, or customer

Direct System (Zero Level Distribution)

• A logistical systems designed to ship products direct to customer’s destination from one or a limited number of centrally located inventories.

• Direct distribution typically uses the expedited services of premium transport combined with information technology to rapidly process customer orders and achieve delivery performance.

• Examples of direct shipments are plant-to-consumer truckload shipments, direct store delivery, and various forms of direct-to-consumer fulfillment required to support e-commerce shopping.

Echelon System

• The flow of products typically proceeds through a common arrangement of firms and facilities as it moves from origin to final destination.

• Echelon systems utilize warehouses to create inventory assortments and achieve consolidation economies associated with large volume transportation shipments. Inventories positioned in warehouses are available for rapid deployment to meet customer requirements.

• Typical echelon systems utilize either break-bulk or cosolidation warehouses. A break-bulk facility typically receives large-volume shipments from a variety of suppliers. Inventory is sorted and stored in anticipation of future customer requirements. Food distribution centers operated by major grocery chains and wholesalers are examples of break-bulk warehouses. A consolidation warehouse operates in a reserve profile.

Echelon Structured Logistics System

Combined System

• More risky or costly items are stocked in a central location for direct delivery to customer

• Fast-moving products are stored in forward warehouse

• Dependent on competitiveness of industry

• Satisfy customer expectations at a lowest attainable total cost

Combined Echelon and Direct System

Flexible Systems

• Flexible operations are preplanned contingency strategies to prevent logistical failures • For example, a warehouse is out of an item so a contingency policy assigns

the total order to another warehouse

• The structure appears the same as a combined arrangement, but with the ability to change the logistical structure to suit the service need

• Different approaches for different situations

• Very common with “factory-less” companies like Nike and Best Buy

Flexible Systems (cont’)

• The customer-specified delivery facility might be near a point of equal logistics cost or equal delivery time from two different logistics facilities• The first is when a customer is at an equal spot between two logistic facilities.• It is important to have a system than utilizes system capacity by balancing

workloads while protecting customer service levels.

• The size of a customer’s order creates improved logistical efficiency if serviced through an alternative channel arrangement• The next is the size of a particular customers order. A particular order is too large

or too small, compared to most orders to go through traditional transportation channels. i.e. instead of using FEDEX which you do for small order, actually contract with a 3rd party to ship a truckload to the customer.

Flexible Systems (cont’)

• Decision to use a selective inventory stocking strategy• The next flexible logistics structure is the ability to stock certain types of

inventory at particular locations. The master facility may stock everything, but the satellite facilities may only stock the things that move the most. They would have to direct ship from the master facility and local facility. The company would have to decide if they want to split the shipments, or consolidate customer orders for same time delivery.

• Agreements between firms to move selected shipments outside the established echeloned or direct arrangements• The last example is movement of shipments outside established echelon or

direct arrangements.

Flexible Echeloned and Direct Delivery

Main Types of Charter Party

• The Voyage Charter:• The hire contract for a vessel for one or a specified number of voyages to carry specified

cargo/es at stipulated freight rates (or lumpsums) between designated load and discharge ports and/or regions.

• The Vessel Owner will pay port charges and for the operation of the vessel whilst the Charterer pays freight passed on vessel capacity or cargo loaded.

• Time Charter: • Two types: A Time Charter (TC) In is the hire (temporary) of a vessel for a specified period of

time, whilst a TC Out Contract handles the letting (regular) of a vessel for a particular time period.

• The charterer has the use of the vessel at a specified hire rate/day and provides and pays for fuel, port costs, and pilotage.

• The Vessel Owner remains in control of the vessel

Enterprise Resource Planning (ERP)

• Video on ERP

Types of ERP• SAP• Oracle• Microsoft

Enterprise Resource Planning (ERP)

• Financial Modules: Financial Accounting (FI), Controlling (CO), Investment Management (IM), Treasury (TR), Enterprise Control (EC).

• Logistics Modules: Material management (MM), Sales & distribution (SD), Production, Planning & Control (PP), Product Data Management (PDM), Quality Management (QM), Plant maintenance (PM), Service management(SM), Project systems (PS)

• Human resource management Module: Personnel Management, Organizational Management, Payroll Accounting, Time Management, Personnel Development, Training & Event Management

• Cross Application Module: Workflow (WF), SAP Office.

Voyager Estimate System (VES)

• The Voyage Estimate module is a versatile, single interface voyage calculator, able to perform an unlimited number of quick, accurate, simple or complex charter party calculations (or estimates).

• The module allows for the calculation and automatic analysis of potential revenues and cost for any combinations of for example vessels, cargoes (or parcels), ports, loads, discharges, terms, freight rates, relets, etc.

Features for Voyage- and Time Charter

• The Voyage Estimate module provides different interfaces for Voyage Charter (VC) and Time Charter (TC) calculations (or estimates) respectively, each interface specifically designed for their assigned purpose.

• Each calculation is identified by a unique number and can be shared, copied and if needed, retrieved at a later date.

• Each calculation can, however, only be edited by the user who initiated them.

• The estimates are auto-saved and several can be open in different tabs simultaneously at any one time.

• All estimates can be frozen and transferred to the Bookings & Operations module for execution, thereby becoming Actual Voyages (or fixtures).

Module > Voyage Estimate

Module > Voyage Estimate

• Performing voyage estimate calculations requires the entry of the Master Data prerequisite:• Vessel Administration: A minimum of one vessel must be entered to enable system utilisation.

• To enhance the versatility and accuracy of the module it is recommended to complete the modules:• Vessel Type• Business Partners• Commodity• Laytime Terms• Various Text

Videos

• ShipNet Voyage Estimator - ShipNet Voyage Estimator helps charterers and cargo owners who need to make the right chartering decisions and make optimal use of the fleet. It provides a quick and intuitive system to plot out different chartering scenarios and fix the most profitable voyages.• https://www.youtube.com/watch?v=hWSyokR8jIs

• Netpas Estimator. Let's learn about Netpas Estimator - Netpas Estimator is voyage estimation and charterbase calculation tool.• https://www.youtube.com/watch?v=YQjEquh_s3I

2. The components of logistical systems

2.3 Introduction to geo market differentials total logistical channels: production, handling, distribution and shipping

Market Segmentation

• Companies that want to gain an advantage over their competitors need to understand their customers and their unique requirements.

• By servicing their customers at a higher level than their customers, businesses are able to maintain a competitive advantage and target new customers.

• Market segmentation is the identification of parts of the market that are different.

• Segmentation gives a company a greater ability to better satisfy the needs of its customers. However, not all customers are the same and each has unique characteristics and requirements that may not be found in any other customer.

Requirements Of Market Segmentation

• Some companies ignore market segmentation and just treat customers the same. When marketing to their customers, these companies do not target specific groups or market segments, but just have one message.

• For companies to be able to target their marketing, they must identify unique segments. To identify the segments companies must determine what makes up a market segment.

• There are several criteria that can be used such as accessibility, homogenous, differentiable and measurable. Good market segmentation will result in segment where customers are similar as possible within the segment, and as different as possible between segments.

Types of Market Segmentation

• Geographic Segmentation

• Businesses can market segment based on geography. Geographical segmentation is very beneficial to any business. It helps a company to identify and segregate the market into segments based on language, population, climate and lifestyles.

• When segmenting industrial customers, the location of a customer can be used to define a segment. This may be important create a for shipping and deliveries. Customers within a certain geographical region may have similar requirements.

Types of Market Segmentation

• Demographic Segmentation• Demographic segmentation consists of dividing the market into groups based on

variables such as age, gender family size, income, occupation, education, religion, race and nationality.

• Customers can be segmented by the type of company. For example, segments can be created based on company size, type of industry or purchasing criteria.

• Psychographic Segmentation• Psychographic segmentation divides the market into groups based on social class,

lifestyle and personality characteristics. It is based on the assumption that the types of products and brands an individual purchases will reflect that persons characteristics and patterns of living. Activities, interests, and opinions surveys are one tool for measuring lifestyle.

Types of Market Segmentation (con’t)

• Behavioral Segmentation• Behavioral segmentation is based on the actual customer knowledge of

particular products, their uses of products, and their responses to certain products. This has the advantage of using variables that are closely related to the product itself.

• The buying characteristics of customers can define a segment. Characteristics such as purchasing volume or purchasing history.

• Industrial Market Segmentation• Unlike retail consumers, industrial consumers can be segmented based on fewer

characteristics. Industrial markets might be segmented on characteristics such as location, company type and buying characteristics.

Supply Chain Segmentation

• There is no such thing as a one-size-fits-all supply chain

• Most firms/business units operate multiple supply chains

• Different supply chains require different methods for: • Forecasting• Demand Planning• Inventory Planning• Transportation • Purchasing / Procurement• Inventory Control• Warehousing• Materials Handling• Order Management• Transportation• Customer Service

How many segments? (Rules of thumb)

• Homogenous - items within the segment are all similar

• Heterogeneous - items between segments should be very different

• Critical Mass - the segment should have enough number to make it worthwhile

• Pragmatic - the dimensions should be useful and communicable

Segmentation in Supply Chain Management

Dependent on:

• Customer, Product, Supplier

• Combinations of these

How can I segment my customers/vendors?

• Lead time requirements • Service level requirements • Purchase History • Order Size and Volume • Geographical • Demographic • Sales Trends • Channel Segmentation

How can I segment my products?

• Physical characteristics• Demand characteristics• Supplier characteristics

Segmentation Tools

• Segmentation: ABC Analysis (video)• Segmentation: The Long Tail (video)

Video on Market Segmentation