Logistics and Forwarding. 01 Basic Theory on Logistics 02 Forwarding and Physical Distribution Systems 03 Subsystems and Activities in Logistics

Freight and Commodity

Consultants LLCLogistics and Forwarding

01 Basic Theory on Logistics 02 Forwarding and Physical Distribution Systems

03 Subsystems and Activities in Logistics

04 Information System and Future Issues

01 Basic Theory on Logistics

What is logistics on your fist thought?◦ Process of goods moving from origin to

destination What kinds of activities do logistics have?

◦ Inbound: demand forecasting, purchasing, manufacturing, assembling, warehouse & inventory

◦ Outbound: load and unload, transport, picking and sorting, packing, distribution, delivery, reverse logistics, customer services

◦ Two way: information system, strategy and business model, supply chain.

Understanding Logistics – Management instead of Transport

Who’s doing Logistics?◦ Supplier / Manufacturer / Distributor / Retail /

Customer ◦ 3PL, logistics centers, freight centers,

warehouses, distribution centers, express delivery◦ Shipper / FF / Port Authority / Port Terminal

Operator / Carrier / Consignee

Understanding Logistics – Management instead of Transport

DOUG LAMBERT, 1998◦ The process of planning, implementing and

controlling the efficient, effective flow and storage of goods, services, and related information from point of origin of consumption for the purpose of conforming to customer requirements.

Definitions of Logistics

CSMP◦ Logistics management is part of the supply chain

process that plans, implements, and controls the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption in order to meet the consumers requirements (1998)

◦ Logistics management is that part of supply chain management that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements. (2001-2010)


SHAPIRO and HESKETT, 1985◦ Getting the right product to the right customer, in

the right quantity, in the right condition, at the right place, at the right time, and at the right cost.

◦ This actually tell us logistics is: Not just about moving of the goods Not just about transport and warehousing Not just about information system No just about forwarding

But also the whole process of right management of the goods flow


CSCMP, 2010◦ Supply chain management encompasses the

planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

Definitions of Supply Chain

Beginning Stage (1910 – 1950)◦ Scholar named ARCH SHAW put forward the

concept of modern logistics – Physical Distribution, which was the foundation of discipline history;

◦ During World War II, the United States military employed a system of supplier activities, which called LOGISTICS.

Brief History of Logistics & SCM

Preliminary Stage (1950 – 1960)◦ It was agreed that logistics should be regarded as

the a strategy of enterprises and countries in the 26th Boston marketing conference.

◦ In 1956, “Trade-off (antinomies)” theory was put forward to describe the relationship between logistics functions;

◦ Logistics substituted Physical Distribution as the formal concept, and also the formation of systematical theories and methodologies, made logistics as a new discipline began to established.


Development Stage (1960 – 1980)◦ In 1961, DONALD BOWERSOX wrote the world’s

first textbook on logistics management – logistics management.

◦ In 1960’s, Two universities, the Michigan State University and Ohio State University, opened the course of Logistics Management respectively, and become the world’s first logistics education in the undergraduate and graduate level academic education system.


In 1962, renowned management Professor Peter Ducker published a paper of “The Economy’s Dark Continent”, put logistics as the “dark continent” of the economic cost;

Council of Logistics Management was founded in 1963 in USA;

Toyota Corporation created far-reaching “JIT production”


Deepen and Transformation Stage (1980 – Today)◦ In 1990’s The concept of supply chain

management achieved great development; ◦ American and Japanese government began to

formulate and implement national level logistics planning and strategy;

◦ The theoretical framework of logistics discipline was build up, including the theories of customer service, supply chain management, global logistics etc.


On January 2005, the Council of Logistics management was renamed as the Council of Supply Chain Management Professionals (CSMP), a brand new stage of supply chain was opening;

Today◦ Logistics as a academic discipline remains immature.

The gap of theory and practice; Two optimization direction; Many optimization factors;


Cultivate pillar industry◦ Brief economic history of Hon Kong

Port – Freight Center – Commerce Center – International Financial, Trade and Shipping Center.

◦ Memphis (1973) FEDEX started its operations.

Logistics and Economy

Upgrading traditional transport, warehousing and forwarding industries◦ From functional service providers to integration service

providers◦ Information, Transparent supply Chain

Upgrading traditional retailing industry◦ Chain store, by 3rd party common delivery◦ Ecommerce, by express delivery

Upgrading traditional manufacture industries ◦ Supply chain management: value chain coordination◦ Lean production, Agile production, cooperation with

sales companies

Logistics and Industries

Industrial Products◦ Efficient production logistics, inventory management,

sales logistics, forwarding service, intelligent logistics technology improving manufacture distribution channel and sales.

Agricultural Products ◦ Shorten Market channel, optimize operation

management, lower the waste Due to the immature of cold chain system, China’s a fruits

and vegetables suffered a post-harvest loss rate as high as 20% up to 100 millions tons agro-products (75 billion Yuan) were lost in the logistics process.

The rate in advance countries ( USA, Germany, Japan ) was about 5%.

Improving distribution efficiency: faster, safer, less waste

Logistics are always part of enterprises strategy◦ Competition phase theory for modern enterprises◦ Logistics was one of the key factors to the

transition of competition phase◦ Phase 4: business model base competition◦ Phase 3: Fast changing; small lot size;

personalized demand. Time based competition. ◦ Phase 2: Consumerism; Information; Rational

demand. Service based competition. ◦ Phase 1: Marketing; Promotion; Mass demand.

Price and cost based competition.

Logistics and enterprise competitiveness

Many divergent tasks in logistics services◦ Take an example of transport service

Model: water transport (ocean, river), road transport, railway transport, airway transport, pipeline transport, multimodal / intermodal transport.

Scope: trunk line transport, branch line transport, city express, last mile delivery

Special goods: bulk products, light bulky/heavy cargo, cold chain large shape product, dangerous goods

Trade contract requirement: C.K.D; S.M.D; Cross border: customs clearance; inspection and

quarantine; booking etc.

Divergent Tasks in Logistics

Specialization trend in logistics in China – leading by ecommerce◦ Truckload to LCL transport ◦ Storage warehouse to storage-sorting integration

warehouse◦ Distribution center to logistics center network◦ Normal transport to express delivery ◦ Last mile was noticed

Will internet change the operations model of forwarding?◦ Cross border ecommerce

Direction of Logistics Divergent Tasks

02 Forwarders and Physical Distribution

System

Categories of forwarders (mainly international forwarders)◦ Business field

Airfreight forwarders: Sinoair, DHL, UPS, Panalpina, Kuehne & Nagel etc.

Railway/Highway forwarders: COSCO, CRCT, CREF, BRLB

Ocean freight forwarders / NVOCC: Sinotrans, COSCO, Fedex, DHL

Ocean freight agency: Penavico, Singoagent Freight Carrier: UPS, Fedex, CSCL, Maersk; Evergreen,

APL; China Airline, Huayu, Debang 3PL: Fedex, UPS, Schenker, DHL, EXEL

Forwarders in Supply Chain Process

Structure of property rights ◦ State-owned◦ Private◦ International◦ Joint Stock


Activities of forwarders◦ Agent Service

Take orders, shipping, warehousing, yard, cargo, concentration, customs clearance, inspection, transshipment, booking broker.

◦ NVOCC (Work as a shipper) Sing contract, issue B/L, charge expenses,

consolidation Assume liabilities, undertake obligations and risks

◦ 3PL (Agent service and carrier) Moderate possession of carrier function with

integrated logistics


Differences between logistics and forwarding in international trade◦ Functions – integration as a trend

Logistics: emphasis operation of physical distribution and management

Forwarding: emphasis agent and broker service Field – Logistics is closer to supply chain

◦ Logistics: includes manufacture, inventory etc. inner-enterprises fields, and distribution, retailing channel etc. between – enterprises supply chain fields.

◦ Forwarding: mainly trade issues, between enterprises


Space – Forwarding serve more on international trade◦ Logistics: nation-wide, global, all included◦ Forwarding: more on international trade, less

inland physical distribution Demand – supply agent platform 3PL as a important role on inland forwading

Forwarding is Supply Chain Process

Theoretically, forwarder can serve each type of logistics activities in SC Process…◦ Agent and logistics operator on international trade

Traditional agent services and carrier, warehouse operator etc.

◦ Representative of shipper and in charge of the logistics function On behalf of shipper, in charge of total process of

import and export◦ Integration service provider on whole international

trade process (via global network) Whole trade program integrator, financial, exhibition,

consultant


Forwarders in Each Phase / Echelon of enterprises supply chain (including inland logistics service for enterprises, total Supply Chain Service Provider)◦ Value – added Service in total logistics and supply

Chain process Business ecological platform builder in

foreign trade◦ Like Alibaba in Ecommerce


Alibaba from ecommerce◦ Inland Retail

Taobao, Tmall◦ Inland Wholesale

Alibaba◦ Mid model

Ju.taobao ◦ International export

Ali express◦ International Import

G.taobao; tmall.hk◦ Payment and settlement

Alipay◦ Finance: Aliloan◦ Advisement: Alimama◦ Logistics: Cainiao

Business Ecological Platform

Customs agents to freight forwarders◦ Agent function integration on international trade

FF to 3PL◦ Carrier function integration on logistics ◦ Transport carrier and warehousing may as the first

level◦ Exhibition and finance as the following

FF to shipper◦ Commerce function integration on international trade◦ As a exhibition organizer or a importer / exporter as

the first level◦ Sorting and ERP matching as the following

Common Integration Evolving Route

Single logistics provider…◦ Single provider – Emergency backup◦ Relationship management – Alliance of companies

and logistics providers Case Study

◦ Vancl and Rufengda Logistics◦ Alliance and Emergency

Jingong Supermarket and Tianyuntong◦ Chain store crisis◦ Community store and logistics common delivery◦ Tianyuntong

Provision of Logistics system

Special services in logistics and supply chain◦ Special services in logistics and supply chain

Cold Chain: Perishable goods, medicine Import customs clearance Finance Information system

◦ Cold chain in Central Asia Network Spatial imbalance Trunk line and warehousing vs. city delivery Technology and infrastructure Demand and opportunity

Providers of Special Services

Network Providers◦ Logistics / Distribution Center◦ Cargo transportation◦ Warehouse

Logistics / Distribution Center◦ Logistics / distribution Centers in Asia◦ Property management type to incubation type

Integration of truck line◦ Transfar Logistics Group◦ Debon Logistics

Network Providers

Information system◦ ERP, SAP: Logistics Ltd.

Supply demand match platform◦ Emerging fast in China

KXTX Logistics platform ◦ Truck operator; Fleet companies◦ Shipper, consignee◦ Forwarders◦ Logistics/Transport Centers◦ Warehouse

System Providers

03 Subsystems and Activities in Logistics

Production/Manufacture logistics:◦ Production logistics is the physical movement of materials,

WIP, semi-finished goods, finished goods within the manufacture enterprises.

◦ Start from demand forecasting, purchasing and terminated by finished goods entering the warehouse.

Main process of production logistics ◦ Reserve process (materials, work in process, finished goods,

buffer)◦ Transfer process (load and unload, transfer, inner-distribute)◦ Physical fabrication process (manufacture, assembly)◦ TQM, Inspection process and remanufacture◦ Queuing and Waiting process◦ Other actions

Production Logistics

We will go through some key concepts:◦ Organization of Manufacture◦ JIT & Lean Production◦ BOM & MRP

Production Logistics

Organization of manufacture◦ Design the products: modularization◦ Design the process: pull / push Model◦ Assemble to order, ATO;◦ Fabrication to order, FTO;◦ Purchase to order, PTO;◦ Engineer / Design to order; ETO;◦ Develop to order, DTO

Examples◦ Postponement ◦ Process reengineering in Benetton Company◦ C2B Ecommorce: Made.com

Key concepts of modern production logistics

Push/pull design Postponement Products feature of a pharmaceutical

factory◦ Same pill, different package◦ From storing finished goods to storing WIP◦ Hold more WIP inventory while less finished goods

inventory◦ Improve packing power

Case Study: ATO/postnement

Start up at 2010; Due to a Furniture shopping; Sales growth; 700% in 2011 3-4 40 feet container per day; Voting crowd-funding model; Opportunities for logistics service

◦ “We would like to become another Idea via Internet”

◦ “Logistics is the key factor for ours innovation and excellence”.

Made.com

Organization of Manufacture◦ Optimize the flow and action; JIT◦ Lean Production

JIT ◦ Eliminate Waste◦ Continual improvement

Examples◦ Kanban management◦ One piece flow


JIT not always suitable for various types of company

Depends on products structure and the operations management

From JIT to Lean Production◦ Action management◦ POKA YOKE◦ Kaizen (Continual Improvement)◦ 5S / 5C


MRP is a computer-based system which is designed to:◦ Release production and purchase orders to meet

the production schedule◦ Ensure the availability of materials for planned

production ◦ Maintain minimum levels of dependent demand

items.

MRP: Material Requirement Planning

From MRP to MRP II, ERP, DRP◦ MRP: Material Requirement Planning◦ MRP II: Manufacturer Resource Planning

Including cost, financial, order handling etc. modules, managing total manufacturer resources

◦ ERP: Enterprises Requirement Planning Including Plan, procurement, manufacture and cost,

managing total resources of the enterprise◦ DRP: Distribution Requirement Planning

Including distribution, warehousing etc. process, managing downstream supply chain.


From reorder point to MRP◦ BOM (Bill of Materials)

The basis of MRP Split product into parts Low level coding MPS: Master Production Schedule Base on safety stock, lot size, lead time, to plan

purchase Opportunities for Logistics Service

◦ Sorting for product line


Procurement Logistics◦ Demand Forecasting◦ Purchasing Material & ERP◦ Supplier selection, evaluation alliance (SRM)◦ Negotiation and contract management ◦ Procurement Integration Warehousing ◦ Global procurement & Internet procurement

We will go through some key concepts◦ Forecasting ◦ VMI & CPFR◦ Global procurement

Procurement Logistics

It will never be totally accurate for demand forecasting Different forecasting methods for different types of

goods under different market situations ◦ A type of beer that have steady demand, what’s the volume

next month?◦ The cooperation with invest a new type of car, what’s the

demand?◦ The company invest a new type of pen, what’s the demand?◦ Ready to eliminate a bookshelf product line, unexpectedly got

a big order, what’s the materials procurement plan next month?

◦ The ecommerce department of the company designed a new promotion plan, and promise 1 hour arrival after making order, what would logistics department do?

Demand Forecosting

VMI and JMI (Joint managed inventory)◦ From reorder point to VMI◦ Postpone of ownership transfer◦ Logistics provider: integrated service on transport

/ warehousing ◦ Supplier: risk and cost increment vs. sales

increment Case Study

◦ Wal-Mart (Retailer leading)◦ Western Publishing (Supplier leading)

VMI, Vendor-managed Inventory

Collaborative Planning, Forecasting and Replenishment ◦ Start from Wal-Mart in 1195◦ Warner-Lamber, SAP and other 3 supplier setup a

workgroup for Wal-Mart supply chain◦ Using information system to improve the

relationship between retailer and his supplier, realized collaborative planning for purchase and inventory replenishment

CPFR was procurement alliance through information system

CPFR

Sales Logistics◦ Distribution channel / network design ◦ Transportation◦ Distribution and delivery◦ Retail inventory◦ Reverse logistics

We will go though some key concepts ◦ Distribution channel / network design◦ Transportation ◦ Express delivery

Sales Logistics

Divergent distribution channel ◦ HP, Dell, Acer/Gateway◦ Apple◦ Wal-Mart, 7-11, Costco◦ P&G, Texas Instrument◦ Amazon, Taobao, Ymatou◦ MI, Chu Orange

Distribution Channel

Retail network design – Cost vs. Performance ◦ Performance

Order fulfilling time (response time) Product diversity Availability (service level) Customer experience Time to market Order visibility Return convenience

◦ Cost Setup cost and inventory cost, Proportional to number of

nodes Transportation cost, U shape relationship with number of

nodes

Distribution Channel

Emerging distribution Channel◦ City square and shopping mall◦ Vertical Ecommerce◦ O2O

O2O in China, fast emerging and evolving◦ Online sales for offline ◦ Offline sales for online◦ Build O2O experience ◦ Fans economy and reputation marketing◦ Go online for traditional offline services

Emerging Distribution Channe

Pallet pool system; container pool system Intermodal transport

◦ Spatial seamless Transshipment in an acceptable distance

◦ Time seamless Transshipment within a acceptable waiting

◦ Information seamless Quickly and easily obtain information

◦ Service seamless Route Integration

Sales Logistics – Transportation Issues

Growth with ecommerce◦ City level transportation network◦ Door to door◦ From document delivery to ecommerce package

delivery◦ 50% volume generated from EC

Outsourcing condition in China◦ JD.com; self-operation◦ Amazon.com; regional self0operation◦ Vip.com; outsourcing ◦ Taobao, Tmall; outsourcing

Express Delivery

Growth rapidly in volume and revenue Value added service

◦ COD (cash on delivery); furniture assembly; in-store pickup etc.

Specialized service◦ Cold chain express delivery

O2O and last mile delivery Cross border transshipment

◦ New challenger for forwarding companies

Mega Trends for Express Delivery

04 Information System and Future

Issues

Identification technology◦ Obtaining large number of real-time data in logistics operation ◦ Bar Code, RFID

Tracking technology◦ Obtaining and tracking the information of position, time status

of logistics units◦ GPS, GIS

Information sharing and handling system◦ EDI, POS◦ Customs clearance system, Inspection system◦ Order fulfillment system, WMS◦ ERP

Intelligent Logistics technology◦ The Internet of Things

Categories of Information System in Logistics

Big data era Ecommerce accumulating more data What’s the good use for customer centered

data?◦ Business decision◦ Products design – especially service products

design◦ Marketing and sales campaign◦ C2B; logistics and supply chain services◦ Crowd-fundnig, P2P

Big data – Customer centered data

Paperless customs clearance system◦ Single window system

Connect forwarders, carriers, 3 PL, Customs, Inspection and quarantine, Tax departments of government, Port companies, Port Authority, banks etc.

Automatically get information (exchange rate, tax rates, products clearance process) you need, track the procedure of declaration progress

Log and enter data once for the whole process

Data sharing System for customer and forwarder

Inner land (dry port) system◦ Local declaration and port clearance ◦ Expand hinterland◦ Clearance after Release◦ Chances in the new model of clearance◦ FTZ

Data sharing System for customer and forwarder

IOT◦ Total Sensing◦ Reliable transfer◦ Intelligent processing

Application◦ Intelligent city◦ Intelligent transport◦ Intelligent tracking◦ Intelligent logistics◦ Intelligent industries

Logistics ◦ Transparent ◦ Convenient ◦ Automatic

3rd time Information Revolution

Future Issues: Intelligent Logistics

Provide a catch up solution for developing countries◦ Where low industrial concentration economy◦ Where multi-echelon agent distribution system◦ Where information cost were extremely high◦ Where international market were hard to reach◦ Where small business were hard to implement

Mobile ecommerce and platforms◦ Consumer are awakening

Logistics Change

Future Issues: Ecommerce

Revenues of Global logistics industries concentrated to Europe, Asia and North America

Asia: from global manufacture center to Global logistics center

9 out of 10 largest container ports of the world in the Asia in 2013

Future Issues: Asian Logistics

From 3Pl to LLP (Lead Logistics Provider)◦ Integrated logistics and supply chain service◦ Business ecological service provider◦ Specialization in one field◦ Specialization for one time / products

Future Issues: Logistics Integration and Specialization

Products◦ Shape design for logistics ◦ Package design for logistics ◦ Production line design for logistics

Business model◦ C2B design

Future Issues: Design for Logistics

Green Logistics Global logistics Emergency Logistics City Logistics Logistics Finance ……

Other future Issues

THANK YOU

Freight & Commodity Consultants LLC

Documents

Logistics and Forwarding. 01 Basic Theory on Logistics 02 Forwarding and Physical Distribution Systems 03 Subsystems and Activities in Logistics