MGT431 Exam 2

Reasons firms pursue sustainable logistics?

• Customers want it

• Job seekers prefer it

• Avoid fines/penalties

• The right thing to do

• May lead to improved efficiency/cost reduction

Reasons firms don’t pursue sustainable logistics?

• Cost/investment

• Lack of awareness

• Short-term focus (prioritize immediate financial gains)

• Lack of incentives to change

• Complexity of SC

Triple Bottom Line

Social, environmental, and economical implications of an action

How does the triple bottom line create tradeoffs?

• Sourcing decisions

• Supplier selection

• Evaluation of transportation modes

• Compliance/regulations

• Customer expectations

• Risk management

Positives of sustainability and ecommerce

• Less driving to stores

• Reduce waste of printed catalogs

• Reduce amount of retail space/energy associated with it

• Up-to-date inventory/tracking

• Allows customers to know item availability w/o driving to the store

Negatives of sustainability and ecommerce strategies

• Multiple deliveries to remote locations could be worse than one store trip

• More returns

• Damage during transit could create more waste

• Few DCs makes delivery distance longer = more pollution

Sustainability Rating: Rail

3 Cost, 3 Time, 3 GHG

Sustainability Rating: Motor

4 Cost, 2 Time, 4 GHG

Sustainability Rating: Ship

2 Cost, 4 Time, 2 GHG

Sustainability Rating: Air

5 Cost, 1 Time, 5 GHG

Sustainability Rating: Pipeline

1 Cost, 5 Time, 1 GHG

____, ______, and _____ increase environmental footprint

Speed, responsiveness, dependability

Ocean shipping generates less CO2, but it generates _____ & ______ pollution

Water & noise

Ways to reduce transportations environmental footprint

• Ship full loads

• Reduce weight and cube of packaging material

• Use intermodal transportation

Freight accounts for ___% of energy related CO2 emissions

8%

Distribution and materials handling accounts for another ___-___% of emissions

2-3%

Circular SC Management

A concept that aims to minimize waste and promote sustainability by reusing, refurbishing, recycling, or repurposing products and materials at every stage of the SC

Key Circular SC concepts

• Product design for sustainability

• Reverse logistics

• Reuse and manufacture

• Recycling and material recovery

Lifecycle Management

Encourages companies to take a big picture view of their environmental impact, evaluating tradeoffs to find the best product and Sc design to minimize environmental impact

Design for Environment (DfE)

Design a product to minimize its impact on the environment over its lifetime, including end-of-life

Scope 1

emissions your company directly produces

Scope 2

emissions from purchased energy, such as electricity or heating/cooling

Scope 3

Emissions from everything else in the organization and its SC. Ex: business travel/commuting, waste disposal, environmental impact of products sold, purchased transportation/logistics service

SmartWay

A program for improving the fuel efficiency and reducing GHGs and air pollution from the transportation SC industry

What SmartWay provides

• Programs for business

• Certifications

• Free emissions tracking tools

• Recognition

• Network/international outreach

• Technology reports

Costs associated with stockouts

• Lost Revenues

• Goodwill and reputation

• Follow-on business

Costs associated with overstock

• Opportunity cost: what would you have sold if money wasn’t tied up in a product that isn’t selling?

• Holding costs

• Markdown and disposal cost

Fill rate

% of customer orders a company can fulfill without running out of inventory

On-time delivery

% of orders that are delivered on time

Order cycle time

time it takes for a company to complete order fulfillment process

Complete orders

orders that have been fulfilled in their entirety and delivered to the customer as requested.

Inventory days’ supply

average amount of time in days that a company holds inventory before selling

Inventory turns

rate at which inventory stock is sold, used, or replaced

Inventory carrying cost

Total of all expenses related to storing unsold goods

Order Cycle: Step 1

Process inquiry and quote

Order Cycle: Step 2

Receive, enter, validate order

Order Cycle: Step 3

Reserve inventory and determine delivery date

Order Cycle: Step 4

Consolidate orders

Order Cycle: Step 5

Build orders

Order Cycle: Step 6

Route shipments

Order Cycle: Step 7

Select carriers and rate shipments

Order Cycle: Step 8

Receive product from source or make

Order Cycle: Step 9

Pick product

Order Cycle: Step 10

Pack product

Order Cycle: Step 12

Ship product

Order Cycle: Step 13

Receive and verify product (by customer)

Order Cycle: Step 14

Install product (if applicable)

Order Cycle: Step 15

Invoice

Importance of After-Sales support

Product support, spare sparts, returns

Integrated Business Planning

a formal process to help align supply and demand across function within a firm as well as trading partners

Internal IBP

S&OP

Sales & Operations Planning (S&OP)

Involves creating a plan that balances the demand for a product with the supply of that product. The goal is to ensure that a company can meet customer demand while optimizing resources, reducing costs, and improving overall efficiency.

Product Review Operating Issues

• Product profitability

• Volume

• Penetration

• Portfolio value effect

Demand Review Operating Issues

• Demand Planning

• Forecast review economic analysis

• Promotion planning

• Consensus forecasting

Supply Review Operating Issues

• Production scheduling

• Order management

• Inventory planning

• Logistics planning

• Expediting

Benefits of S&OP

• Balance supply & demand in org

• Smarter and faster production decisions

• Focus on new products

• Minimize stockouts

• Reduce excessive inventory

• More efficient procurement

• Shorter customer lead times

• Optimized transportation and other logistics costs

External IBP

CPFR

Collaborative, Planning, Forecasting, and Replenishment (CPFR)

Collaborate with major customers. Detailed sharing of information leads to lower inventory and higher service levels

Four collaborative activities of CPFR

• Strategy and planning

• Demand and supply management

• Execution

• Analysis

Mode Ratings: Cost (Least expensive to most expensive)

Pipeline, Water, Rail, Motor, Air

Mode Ratings: Time (Least to Most)

Air, Motor, Rail, Water, Pipeline

Mode Ratings: Reliability (Most to Least)

Motor, Rail, Air, Water

Mode Ratings: Capability (Most to least)

Rail, Motor, Air, Water, Pipeline

Mode Ratings: Accessibility (Most to Least)

Motor, Rail, Air, Water, Pipeline

Mode Ratings: Security (Most to Least)

Air, Motor, Rail, Water

Truck Transportation Advantages

• Speed

• Flexibility

• Accessibility

• Reliability

Truck transportation disadvantages

• Cost

• Limited capacity: up to 45000lbs

• Infrastructure requirements

Rail transportation advantages

• Low cost-per-ton-mile compared to trucking

• High capacity: single rail car holds up to 100tons

• Economies of Scale: large volumes over long distances

Rain transportation disadvantages

• Limited reach

• Right of way: high costs associated with companies maintaining their railroad network vs trucking company using public roads

Water transportation advantages

Economies of scale: LARGE volume of goods for long distance. Lowest cost-per-ton-mile than any other general mode

Water transportation disadvantages

• Accessibility

• Speed

Air transportation advantages

• Speed- fastest

• Global reach

Air transportation disadvantages

• Cost- most expensive

• Capacity

• Susceptible to delays

Intermodal transportation

the practice of combining transportation modes while moving products

Reasons to go intermodal

1. Necessity

2. Economics: finding creative ways to increase speed and decrease costs

A freight weight above ~45000lbs would ____

weight out

TL Costing: Weight

Carriers dedicate an entire trip to a single customers freight, so they charge a flat rate for a given distance.

LTL Costing: Weight

Carriers use capacity to handle multiple customers freight, so they charge a variable rate based on how much your shipment weighs. Start with a flat minimum charge, once you exceed that minimum, your price increases at a decreasing rate.

If your trailer is maxed out on volume, it has _____

cubed out

TL Costing: Volume

charge a flat rate because you are buying the entire trailer

LTL Costing: Volume

Charge a a variable rate because they’re concerned with how much space you take up. Charge minimum fee for small shipments, once the amount of space your require surpasses a minimum, the price increases at a decreasing rate.

TL Costing: Distance

charge a flat minimum rate for short distances. As distance increases, price increases at a decreasing rate

LTL Costing: Distance

charge a flat minimum rate for short distances. As distance increases, price increases at a decreasing rate

Zone-based Small Package: Distance

charge in stepwise as distance increases

Conventional Parcel: Distance

charge flat rate, regardless of distance

Standard shipping terms

FOB Origin, FOB Destination

FOB Origin

The buyer is responsible for choosing and paying for the transportation and bares all the risks once the shipment leaves the supplier

FOB Destination

The seller is responsible for choosing and paying for the transportation and bares all the risks once the shipment leaves the supplier

Modified terms

Prepaid, collect, charged back, allowed

Responsible party: prepaid

Seller

Responsible party: collect

Buyer

Responsible party: charged back

buyer

Responsible party: allowed

seller

Incoterms

Standardized international commercial terms that define obligations, costs, and risks of goods from the seller to the buyer. These terms help facilitate trade by clarifying key aspects of the transaction

Additional costs/considerations in global transpo

• Aging infrastructure

• Congestion

• Driver shortage

Tariffs: duty

the amount of a tax an importer must pay to import goods into a country, is calculated based on: classification, valuation of goods, country of origin

Duty is calculated based on:

• Classification

• Valuation of goods

• Country of origin

Tariff rate is the

% that the importer will be charged, based on the three elements.

Foreign Trade Zones (FTZ)

An area within a country that the government considers outside that country. Certain types of merchandise can be imported into a zone without going through formal customs entry procedures or paying import duties

Advantages of FTZ

• Can modify, change, or add value

• Delay to pay duty

• Duty exemption re-export

• Security

• Reduction in total tariffs

• Improve cash flow