Production and Logistics Lecture Notes

Introduction to Production and Logistics

  • KIT – Die Forschungsuniversität in der Helmholtz-Gemeinschaft (KIT - The Research University in the Helmholtz Association)
  • Focus areas: Ecology, Economy (€, CO2), Society, Technology, Politics (§).
  • Lecture: Production and Logistics - Part 1
    • Professor Dr. Frank Schultmann, Dr. Sonja Rosenberg

Learning Objectives

  • Students will be able to:
    • Define and exemplify the terms production, logistics, and value chains.
    • Understand the different sub-areas of production.
    • Comprehend the planning tasks and levels of production management and provide examples.
    • Understand current and future challenges in production and logistics and know selected examples.
    • Define sustainability and give examples of sustainability in value chains.
    • Recap essential content of the Circular Economy.

Overview of Topics

  • Industrial Production and Logistics
    • Motivation
    • Production in Value Chains
    • Planning Tasks and Levels
    • Sustainable Production – Circular Economy

Further Topics in the Series

  • Inventory Management Strategies
  • Inventory Management
  • Supplier Selection/Evaluation
  • Practical exercise: Introduction to Life Cycle Analysis (LCA)

Definition of Production

  • Production is defined as the combination of goods (Input, production factors) to create other goods (Output, operational services).
  • Source: Corsten (1994)
  • Elements of Production:
    • Factor Combination
    • Products
    • Equipment
    • Human Labor
    • Material
    • Energy
    • Information
  • Inputs → Production Process (Throughput) → Output

Role of Production in the Company

  • Company Cycle:
    • Procurement → Production → Sales → Disposal → Financing
    • Payment for Input Factors → Sales Revenue
    • Materials, Equipment, Labor → Products, Services
    • Waste
    • Procurement Market → Company → Sales Market
    • Environment
    • Profit Sharing, Interest, Fees, Taxes
    • Equity, Debt, Subsidies
    • Financial Market
    • Information Flow, Goods Flow, Money Flow

Definition of Logistics

  • Logistics (Management) is the planning, implementation, and control of efficient, effective forward and reverse flows and storage of goods, services, and information between the point of origin and the point of consumption in order to meet customer requirements.
  • Objective: To provide the customer with the right product, at the right place, at the right time, while optimizing a given performance criterion (e.g., minimizing total costs) and considering given requirements (e.g., service level) and constraints (e.g., budget).
  • Source: M. Goetschalckx, Supply Chain Engineering, (2011), International Series in Operations Research & Management Science, 161, Springer Science+Business Media, LLC 2011

Origin of the Term Logistics

  • Derives from the ancient Greek “logistikē” (“practical arithmetic”) and the French “logis” (“accommodation”).
  • During the Napoleonic Wars:
    • Administration, storage, and transport control of war-necessary goods; Napoleon had a Marechal de Logis (Supply General).
  • Initially used synonymously with “logic” (from “logos” – meaning, reason), then in the 20th century related to organization and administration.
  • Nowadays: all work-sharing economic systems where time-, cost-, and quantity-dependent distribution of goods and services is important.
  • The 3 “R”s of Logistics: the right product, at the right time, at the right place.
  • Extended to 7 “R”s: in the right quantity, of the right quality, with the right costs, with the right information.

Relationship Between Production and Logistics

  • Logistics includes the planning, implementation, and control of the flow of materials and information from suppliers to the company, within the company, and from the company to the customers.
  • Logistics is the link between different actors in a value chain/network.

Established Production Systems

  • Example: Tractor Manufacturing
    • Raw Materials → Parts Manufacturing → Gear Manufacturing → Axle Manufacturing → Assembly → Main Intermediate Storage → Outbound Logistics
    • External Manufacturing Sites (Motors, Wheels/Tires, Cabins)
    • ZL: Intermediate Storage
    • Raw Materials, Components, Assemblies, End Product
    • Multi-stage Production Process

Established Production Systems

  • Example: Iron and Steel Industry
    • Inputs: Iron Ore, Coal, Coke, Limestone, Natural Gas, Steel Scrap
    • Production Processes: Coking Plant, Blast Furnace, Electric Arc Furnace, Oxygen Converter, Secondary Metallurgy, Continuous Casting
    • Outputs: Pig Iron, Liquid Iron, Steel, Slag, Billets, Plates, Strips, Bright Steel

Innovative Production Systems

  • Example: “Lignocellulose Biorefinery”
    • Biorefineries aim to utilize biomass as completely as possible.
    • Production of various intermediate and end products (e.g., raw materials for bioplastics, flavors).
    • Inputs are especially residues from agriculture and forestry (e.g., residual wood, bio-waste).
    • Biorefineries are a component of bio-based value chains.
    • Inputs: Beech Wood Chips
    • Production Processes: Cellulose, Organosolv Pulping, Hydrolysis, Separation + Purification, Separation Processes
    • Outputs: Hemicellulose, Crude Lignin, Glucose, Xylose, Lignin

Manufacturing Industry

  • The Manufacturing Industry (secondary sector, industrial sector) includes the areas:
    • Mining and extraction of stones and earths
    • Manufacturing
    • Energy supply and water supply
    • Construction industry
  • Trends in the Manufacturing Industry:
    • Order intake (selected industries)
    • Production index
    • Absolute numbers of companies and employees

Manufacturing Industry - Raw Materials as Industrial Business Risk

  • Percentage of companies surveyed (Data: dihk.de)

Current Research at IIP-PW

  • Example: THINKTANK Industrial Resource Strategies
    • Independent think tank for important trends and innovations in techno-strategic issues at national and international level regarding resource efficiency, conservation, raw material supply.
    • Strategic decision support for politics and industry
    • Duration: 5 years
    • Partners: Ministries in Baden-Württemberg and various industry partners
    • Ongoing project: Circular Economy for Plastics
    • Website: www.thinktank-irs.de

Leuchtturmprojekt „Kreislaufwirtschaft für Kunststoffe“

  • Techno-economic and ecological analysis of possibilities of plastic recycling
  • Comparison of recycling options for plastic-containing waste streams
  • Considered waste streams:
    • Light packaging,
    • Technical plastics from the automotive industry
  • Proof of the feasibility of chemical recycling for the mentioned waste streams
  • Comparison of chemical recycling with established recycling options (mechanical recycling, energy recovery)

THINKTANK Industrial Resource Strategies

  • Leuchtturmprojekt „Kreislaufwirtschaft für Kunststoffe“
  • Techno-economic and ecological analysis of possibilities of plastic recycling
  • Comparison of recycling paths
  • Determining the results for the impact indicators:
    • Greenhouse gas emissions
    • Primary energy consumption
    • Carbon efficiency
    • Specific costs
  • Support of the policy in the promotion and regulation of recycling possibilities for individual waste streams

Production as Value Creation

  • Value creation = Sales value of the output minus value for externally purchased goods and services.
  • Value chain: Sequence of all value-creating activities from the original sources of supply to the goods delivered to end customers, including services.
  • The value chain (often synonymous: Supply Chain, Value Chain) is a representation of the activities from the extraction of raw materials through manufacturing to distribution to the end customer.

Example Value Chain: “Lignocellulose Biorefinery”

  • Biomass Cultivation and Provision
    • Production (e.g., wood, straw, energy crops); Availability of residues
  • Raw Material Logistics
    • Harvest, Preparation, Transport (e.g., road, rail), Storage, Preparation (e.g., drying, shredding)
  • Extraction
    • Extraction of extract substances
  • Component Separation
    • Digestion of the raw material and separation of the ingredients (e.g., cellulose, lignin)
  • Further Processing
    • Product extraction (e.g., glucose, xylose, lignin)
  • Distribution
    • Delivery/Distribution

Production – Important Sub-Areas

  • Production Management: Concretization and implementation of the strategic guidelines of the company management in the area of operational service provision.
  • Production Planning: Systematic identification, evaluation and selection of courses of action with regard to the most optimal fulfillment of the strategic guidelines.
  • Production Control: Implementation of the production plans in the daily production process.

Planning Tasks of Production Management

  • (1) Strategic Production Management
    • Planning horizon: long-term (several years)
    • Strategies for creating and maintaining an efficient production
    • Ensuring the maintenance of competitiveness (despite changes in environmental conditions).
    • Research and development (products and processes)
    • Location planning (globalization, de-globalization, nearshoring)

Example: Recycling company Metal industry.

  • Where do residues occur?
  • What kind of residues will occur in the future?
  • What legal framework conditions apply?
  • Further development of the processes / New processes
  • New locations / Location closures / Location expansions
  • Material flows
  • Recycling materials

Planning Tasks of Production Management

  • (2) Tactical Production Management
    • Planning horizon: medium-term 1 - 2 years
    • Concretization of the strategies
    • Decisions about performance fields (output, production program).
    • Decision about the technologies (plant management, logistics)

Example: Recycling company Metal industry.

  • Which residues should be accepted?
  • Where should the residues be processed?
  • How should the residues be processed?
  • Supplier selection
  • Customers for the products
  • Technological decisions

Planning Tasks of Production Management

  • (3) Operative Production Management
    • Planning horizon: short-term < 1 year
    • Production program planning: Product and quantity selection
    • Materials management: Requirements planning (inputs), procurement, lot size planning
    • Process planning and sequencing: Throughput scheduling and capacity planning, determination of machine assignment
    • Production control: Order initiation and monitoring → optimal use of the existing production apparatus

Example: Recycling company Metal industry.

  • Raw material mixture?
  • Energy input?
  • Storage?
  • Additives?
  • Procurement
  • Mixing problem
  • Production control

Production, Logistics and Supply Chain Management

  • Supply Chain Planning-Matrix

    • Information flows
    • Goods flows
    • Source: Fleischmann et al. (2000), p. 63; Fleischmann et. al. (2008), p.87

  • Strategic, tactical, and operative levels for procurement, production, distribution, and sales. Each level involves different tasks such as:
    *Product program.
    *Location planning.
    *Distribution network.
    *Production system.
    *Material program.
    *Supplier selection.
    *Personal planning.
    *Material requirement planning.
    *Contracts.
    *Production program.
    *Capacity planning.
    *Distribution planning.
    *Tactical sales planning
    *Personal schedule planning.
    *Material call-offs.
    *Lot size planning.
    *Machine assignment.
    *Storage disposition.
    *Vehicle deployment.
    *Operative sales planning

Challenges of Production and Logistics

  • What tasks are coming next?
    • Sustainability
    • Digitalization
    • Infrastructure
    • Individualization
    • Resilient Supply Chains
    • Legal Framework
    • Skilled Workers
    • Production Networks

Current Research-Oriented Teaching at IIP

  • Example: Team project

    • Team project WS 2024/2025
    • The Supply Chain Manager of the Future
    • Research group: Risk management
    • Partner companies
    • Students
    • Lecturers

  • Companies must understand future developments in their supply chains in order to adapt proactively

  • A comparison/comparison and exchange between the expectations of the future specialists, the companies and the knowledge providers is necessary

  • Team project

    • Working i.a.: Conducting interviews with companies and lecturers; Creating and conducting a survey (target group students)

Examples of Current Situations

  • Various examples from news sources (n-tv.de, ndr.de, handelsblatt.com) illustrating current challenges in production and logistics.

The Concept of Sustainability

  • Hans Carl von Carlowitz (1713) on sustainability in forestry: “Live from the yields, not from the substance.”
  • Sustainability = sustainability → Sustainable development = sustainable development
  • Sustainable development: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
    • It contains within it two key concepts:
      • The concept of ‘needs‘, in particular the essential needs of the world's poor, to which overriding priority should be given; and
      • The idea of limitations imposed by the state of technology and social organization on the environment's ability to meet present and future needs.”
  • Source: Report « Our common Future » of the UN Commission for Environment and Development of the United Nations (1987)

Principles of Sustainability

  • Intergenerational Justice
  • Intragenerational Justice
  • Three Pillars of Sustainability
    • Economic Security
    • Ecological Balance
    • Social Justice
  • 3 P of Sustainability
    • Prosperity (Profit)
    • Planet
    • People
  • Triple-Bottom-Line

International Sustainable Development Goals

  • Agenda 2030: Sustainable Development Goals (SDG)
  • 17 goals including:
    • No Poverty
    • Zero Hunger
    • Good Health and Well-Being
    • Quality Education
    • Gender Equality
    • Clean Water and Sanitation
    • Affordable and Clean Energy
    • Decent Work and Economic Growth
    • Industry, Innovation, and Infrastructure
    • Reduced Inequalities
    • Sustainable Cities and Communities
    • Responsible Consumption and Production
    • Climate Action
    • Life Below Water
    • Life on Land
    • Peace, Justice, and Strong Institutions
    • Partnerships for the Goals

International Sustainable Development Goals

  • European Green Deal – becoming the first climate-neutral continent
  • European Green Deal will comprehensively change production, logistics and energy management in the coming decades
  • Goals of the European Green Deal include:
    • Greenhouse gas neutrality by 2050
    • Reduction of greenhouse gas emissions by 55 % by 2030 compared to 1990
  • Tightened amendment to the Federal Climate Protection Act (12.05.2021)
    • Greenhouse gas neutrality by 2045
    • Reduction of greenhouse gas emissions by 65 % by 2030 compared to 1990

Greenhouse Gas Emissions in Germany

  • Status of target achievement (interim target 2030 – Green Deal)
  • Source: German Environment Agency
  • Savings: 1990 to 2022
    • Total  40%

„reFuels“-Demo: Kraftstoffe neu denken

  • Techno-economic Analysis and Life Cycle Assessment of process chains for the production of regenerative liquid fuels
  • Regeneratively produced fuels – so-called reFuels – have the same energy density as fossil fuels and are a promising way to CO₂-neutral mobility
  • Evaluate processes for the production and use of reFuels holistically
  • Preparation of the scaling and implementation of regenerative synthetic fuels

Herstellung von reFuels ist möglich…

  • … aus kohlenstoffhaltigen Reststoffen der Land- und Forstwirtschaft (Biomass-to-X)
  • … aus Industrie- und Siedlungsabfällen (Waste-to-X)
  • … durch direkte Umwandlung von CO2 und regenerativ erzeugter Wasserstoff (Power-to-X)
  • reFuels“ Webauftritt: www.refuels.de

REF4FU: Erneuerbare Kraftstoffe aus Grünen Raffinerien der Zukunft

  • Analysis of novel refinery concepts based on methanol, Fischer-Tropsch Crude and Pyrolysis oil
  • Overarching Goal of the Project: The development, validation and evaluation of sustainable refinery concepts to cover the future demand for renewable liquid fuels can be covered.
  • “REF4FU“ Webauftritt: Refineries for Future

REF4FU IIP-spezifisch

  • Techno-economic analysis and optimization of novel refinery concepts based on methanol, Fischer-Tropsch Crude and Pyrolysis oil
  • Use of the infrastructure of a refinery…
    • promotes energetic and material transfer opportunities and thus savings
    • CO2 can be used as a material and reFuels can be produced
    • Sectors that are particularly difficult to electrify, such as aviation and shipping, can benefit from this
  • “REF4FU Internet presence: Refineries for Future

Abstract Representation of a Production System

  • Input → Throughput → Output
    • Materials, Energy, Information → Transformation Process → Marketable Services

Production System with Ecological Effects

  • Input → Throughput → Output
    • Materials, Energy, Information → Transformation Process → Marketable Services, Emissions, Residuals
  • Ecological Effects:
    • Air Pollution
    • Water and Groundwater Pollution
    • Vibrations, Heat, Noise
    • Groundwater, Air, and Landscape Pollution; Landfill Space Shortage

Examples of Industrial By-Product Production Processes

  • Electric steel production
  • Demolition of buildings

From Linear Economy to Circular Economy

  • Linear Economy: Resource Extraction → Production → Product Use → Disposal
  • Circular Economy aims to close the loop:
    • Avoidance/recycling of industrial waste for recycling

Circular Economy Strategies

  • Avoiding/Reducing Airborne Emissions
  • Processing of Components/Spare Parts, Assemblies, Parts
  • Redistribution, Disassembly, Recycling
  • Refurbishment