intermodals report

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Chapter 1 - Introduction

In-class exercises and discussion points

4 different perspectives

Figure 1.2 provides a good platform for student discussion. It outlines four different perspectives on the distinction between logistics and SCM:

· Traditionalist

· Re-labelling

· Unionist

· Intersectionist

As we note in the text, we adopt the unionist perspective in this book. Ask students whether they agree with this or not, and if not explain why (as we note above, there is no right or wrong answer).

Importance in both services and manufacturing contexts

As is noted in the chapter, we are witnessing increased and highly successful application of logistics and SCM principles in a services context also. Ask students to take a services context with which they are familiar – perhaps for example they may work part-time in a supermarket or at some stage have been a patient in a hospital – and ask them to outline where they think logistics and SCM principles can be best applied. Indeed most people can relate to medical / hospital examples (see the Triage caselet on page 14/15) and these can provide useful material for discussing how, with process improvements and other initiatives, better service can be delivered in hospitals, often at lower total cost.

Cost savings and service enhancements

Following on from the above, students can be asked to consider the issue of making cost savings while simultaneously enhancing service. In many students minds these two dimensions will be seen to be mutually exclusive (i.e. you can’t have both together at the same time). But of course as we outline in the text, you can! Ask them to give examples where this is possible - the IKEA caselet is useful in this regard.

Supply chain transparency

There is growing interest in this topic with governments and other stakeholders increasingly concerned that supply chains are not infiltrated by unethical and criminal practices – chapter 13 (SC vulnerability) touches on this topic too. Ask students to think of examples of such practices.

Size of the logistics sector in your economy

The caselet (‘The role of logistics in national economies’) on page 8 discusses the size and importance of logistics in the context of a national economy. Ask students to try and ascertain what the size of the logistics sector is in their country (it is usually the case that various industry bodies will collate such information and which should be easily found on the web). The ‘innovation race’, spurred on by developments at Walmart etc as outlined in the caselet, could prompt a useful further discussion around the role of logistics and SCM developments at individual large companies in a national economy context (this area may be more suited to more advanced students only given the nuances and data interpretation issues involved).

Answers to end of Chapter Questions

· Are logistics and SCM only of interest to manufacturers?

Clearly the answer to this is no! Expect students to outline service based examples (hospitals, shops, etc) in their answers.

· Explain the key developments behind the evolution of logistics and SCM.

These are the six developments as outlined in the chapter:

· reduced transport intensity of freight

· falling product prices

· deregulation of transport

· productivity improvements

· emphasis on inventory reduction

· changes in company structure

· How do logistics and supply chain management differ?

This question is perhaps not as straightforward as it first appears. We find that students typically think that just by defining both terms they have answered the question! However one should demand more in a good answer to this question. It should lead into a discussion around the four different perspectives (p13), with the student stating which particular perspective they concur with. As noted already, we adopt the unionist perspective (i.e. that logistics is part of the wider entity that is SCM). We also highlight on page 13 ‘…. SCM is a wider, intercompany, boundary-spanning concept, than is the case with logistics’.

· How can best practice logistics and SCM lead to both cost reduction and service enhancement?

Ideally students should cite cases (such as the Ikea case or the Dell case which comes at the end of Part 1 of the book) and / or other examples with which they are familiar to highlight their answer. In brief summary what we are stating is that smarter management of inventory and other resources can lower end to end supply chain costs, while adopting a supply chain view can also lead companies to do things differently and hopefully better.

· What are the benefits of deregulation of transport markets? Why does such deregulation sometimes not work out quite as planned?

If time permits, the subject of transport deregulation, although not the focus of our book, is worth exploring further in class.

As we note on page 5 ‘The essence of effective deregulation is that by removing unnecessary barriers to competition, markets become more contestable and (in theory at least) prices should come down and service should improve’. These then are the benefits of deregulation. Informed students should be able to cite examples to augment their answer, for example the revolution in air travel in Europe with the emergence of the so-called ‘low cost airlines’ following on from deregulation of the air transport sector in Europe.

With regard to the second part of the question, as we note in the book (page 5) ‘We say ‘in theory’ because the reality in some deregulated markets has been somewhat different (with private monopolies sometimes replacing public ones) but, in general and over the long-run, deregulation has had a positive impact on many transport markets, leading to the provision of both more and cheaper services’. In essence what we are saying here is that markets, left to their own devices, can sometimes act and lead to outcomes which are not always in the best interests of the customer. Hopefully though in the long-run, and sometimes with necessary regulatory interventions, markets adapt in the best interests of both users and the vested business interests.

Extra essay style question

· Discuss the various flows in a typical supply chain.

There are 3 such flows (page 11):

· Physical flows of materials

· Flows of information that inform the supply chain

· Resources (especially finance, but also others such as people and equipment) which help the supply chain to operate effectively. Furthermore, not all resources in the supply chain are tangible, for example good quality inter-company relationships are often cited as a highly important ingredient of effective supply chains.

The key point here is that students recognise that supply chains encompass not just materials flows, but these other flows as well. While they can write about (both forward and reverse) materials flows, they should also discuss these other flows as well.

More questions

· What is meant by the transport cost sensitivity of freight?

· What are the various flows in a typical supply chain?

· Distinguish the upstream versus downstream parts of a supply chain.

· What is meant by the term ‘material substitution’

· Distinguish the terms ‘cargo’ and ‘freight’

· Distinguish the different container dimensions.

Good websites and video clips

· http://thenewlogistics.ups.com/ - useful to give students, especially those new to the subject, a flavour of the field of logistics.

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Chapter 2 – Globalisation & International Trade

In-class exercises and discussion points

Globalisation

This is a topic which always sparks lively debate, although be careful matters don’t get out of hand! Pages 26 onwards outline the various arguments as to whether globalisation is a force for good or not. Regardless of the position adopted, to conclude the debate students might be reminded to make the link between globalisation and logistics.

LSCI (Figure 2.3)

Ask students to consider the trends that are apparent in the LSCI and what are the reasons behind these trends. Also ask them to consider how these trends will continue into the future – behind these trends we are seeing larger vessels operating on hub-and-spoke networks, but there is obviously a limit as to how far this trend continues, at some point (c20,000 – 20,000 TEU?) vessels size maxes out. The diagram provides a useful basis for students to consider the issue of trade-offs.

LPI (Table 2.3)

Ask students to check their country’s ranking on the LPI and the reasons behind its relative position.

Answers to end of Chapter Questions

Identify examples of companies / products who attempt to think global and act local (‘glocalisation’).

This corresponds to geocentricity, also discussed in the next question below. The topic is explained on p28 of the book.

Differentiate ethnocentricity, polycentricty and geocentricity, and give examples of companies from your own country who you believe fit into each category.

These terms are clearly defined on p28. Obviously the choice of companies will depend on the country chosen – for example if the student’s home country is Canada then an ethnocentric company, from that perspective, might be for example a company such as Air Canada; a polycentric company might be a company such as General Electric (although GE is active in various sectors across a number of countries, it is still often regarded as ultimately an American company), and a geocentric company might be a company such as SAP (given the worldwide proliferation of SAP’s ERP systems it is difficult to associate the company with one country of origin).

Taking your own country as an example, identify freight routes where you believe directional imbalances exist.

Again this will depend on the country chosen. Obviously the data in Figure 2.4 gives the global macro flows. Advanced students may also evidence examples which contradict this global picture – for example perishable flowers from Africa into Europe.

Extra essay style questions

· You have been appointed to the position of international transport manager for a European based MNC. The company sells personal computers to customers in countries all over the world that it produces at a factory in Asia. What issues will you need to consider in the management of international freight movement?

The first point to note is the impact of the directional imbalance (more freight moves out of, than into, Asia, especially containerised freight (Figure 2.4)) on freight rates and available capacity for freight out of Asia. This will obviously impact freight movements from the factory in Asia to the customers all over the world. The question does not make reference to the source or movement of raw materials but these obviously would need to also be considered, thus in turn raising the issue of backhaul freight flows. The seven dimensions of the Logistics Performance Index (LPI) also provide a good insight into the issues behind the ease (or difficulty) in moving freight between countries, and students could use these dimensions on which to base discussion. Other issues which could be considered include the impact of rising fuel prices (the possibility for hedging rates with freight carriers) and the availability of logistics providers (the potential for doing a global deal with a logistics service provider could also be raised).

· Critically discuss growth of international trade, the reason for it and the future of international trade.

Students should offer a critical essay that demonstrates an appreciation of the rapid growth of international trade as a consequence of globalisation. Increasing consumerism in developed and developing nations, low cost economies, technological advances and resource availability should all be discussed to produce conclusions that should critically question the sustainability of this growth. Tensions between resource depletion and (excessive) global consumer demand should be identified by students to ask what the ultimate outcome(s) might be.

More questions

· Outline the main reasons why companies decide to offshore.

· Obtain the Global LPI score for your country. Evaluate the score and identify areas where improvements could be made.

· Discuss the key trends within the LSCI.

Good websites and video clips

· http://www.maerskline.com/ar-ae/shipping-services/dry-cargo/our-network/triple-e-card-cascading - great time lapse video re building a large container ship.

· www.sourcemap.com – illustrates how diverse global sources leads to extended, global supply chains.

· http://news.bbc.co.uk/2/hi/business/7600180.stm - great website that details an ambitious and unique year-long project for BBC News to tell the story of international trade and globalisation by tracking a standard shipping container around the world. Lots of information (videos, articles, lessons) on both globalisation and containerisation.

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Chapter 3 – Supply Chain Relationships

In-class exercises and discussion points

Growth in international trade

On page 35 we list the manufacturing, logistics and supply chain trends that have emerged from globalisation. This should provide the basis for a class discussion on the effects of globalisation, the criticality of international trade and the adaptation of manufacturing and service organisations. Select a product students are familiar with (e.g. a mobile/cellular telephone, or clothing) and ask them to critically consider where and how it was manufactured, why they think it was manufactured there, and how it reached them. This discussion should draw out each of the points listed.

Outsourcing and offshoring

Pages 36 onwards discuss outsourcing and offshoring. Following on from the globalisation discussion above, get students to consider a leading OEM that they are familiar with (e.g. Ford Motor Co., Rolls-Royce, Toyota, etc.). Ask them to list the various business functions within those organisations (e.g. Finance, Operations, Logistics, etc.) and consider which are core and non-core. Having made these distinctions, have the students consider which they would outsource, to whom and where. And if they choose to offshore certain functions, ask them why (e.g. labour costs, etc.). This simple exercise should help students to contextualise these now fundamental strategic decisions.

Supply chain collaboration

Roleplay the Prisoner’s Dilemma (page 47) with students. Ask for two volunteers to be prisoners and at least one to be the detective/interrogator(s). One of the prisoners must leave the room (and cannot be allowed to hear the proceedings in class). The other is then questioned and advised to make a choice between the presented options. They are then swapped and the process repeated. When the second prisoner has made his/her choice, the other prisoner should be brought in and the outcome revealed. Our experience has shown that roleplay can bring this game theoretic to life for students. It is also a lot of fun.

Answers to end of Chapter Questions

· Cost pressures are driving manufacturers to increasingly go offshore to low cost economies. This in turn is increasing international trade and freight movements. Referring to the world map in this book, how does this impact the major logistics hubs in the world, and will there be a need for more hubs?

This question is about the growth of trade and the scale of global logistics activities. Students should consider port operations such as those at Hong Kong, Singapore and Rotterdam and the fact that they have limited scope for expansion. Meanwhile newer ports in the Pearl River Delta, for example, are growing rapidly. Have them consider competition in port operations and the consolidation of the major operators. This should raise more questions than answers, but should draw out discussion about issues of scale, complexity and power in these important international trade gateways.

· Explain the distinction between outsourcing and offshoring

For our answer to this, refer to page 39.

· What are the most frequently reported problems in outsourcing?

Refer to figure 3.1, page 40.

· Explain what factors would typically be considered in contingency planning in outsourcing arrangements.

Refer to figure 3.2, page 42. Have the students work through the flow chart with a case study of your choosing.

· Explain the distinction between integration and outsourcing.

While integration between supply chain partners will enhance an outsourcing arrangement, it is not essential. Outsourcing should be understood as a business relationship (see bulleted list on pages 42 to 43). Whereas integration should be understood as a way to communicate across that relationship.

· How might a response to a humanitarian disaster be improved through vertical and horizontal collaboration between the various actors?

Refer to figures 3.6, 3.7 and 3.8. Distinctions between vertical and horizontal collaboration are illustrated in figure 3.6. The actors in humanitarian logistics are defined in figure 3.7. And Kovács’ (2007) framework is provided in figure 3.8. Between these three representations, students should be able to produce an answer that considers how the various actors might collaborate and how that could improve disaster preparedness, response and reconstruction. For example, integrated communications (vertical and/or horizontal) or shared storage and supply operations (horizontal) might be such solutions. You could further ask what issues might prevent such collaboration.

More questions

· How are outsources selected?

· What is the difference between integration and collaboration?

· What is supply base rationalisation and why is important to improving collaboration?

· From the SupplyAero case (pages 51 to 53), what other methods can be used to improve supply chain collaboration?

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Chapter 4 – Supply Chain Strategies

In-class exercises and discussion points

Production Strategies

Ask students to identify where in their opinion is the optimum position, other things being equal, on Figure 4.3. We suggest it is the top right-hand corner where maximum output variety (i.e. giving the customer whatever they want) and maximum output volume (where economies of scale are maximised) are both achieved.

Dell (in the Part One Case Studies Section)

Depending on the circumstances, you may choose to do the Dell case live in class. This tends to work very well in longer class sessions (2 to 3 hours) – our experience is, allowing for reading time, small group discussion and wider / plenary group discussion, the entire case exercise can take about an hour. This allows the remainder of the class to focus on discussion of the wider logistics and supply chain strategy issues covered in Chapter 4.

Zara

Many students will be familiar with the Spanish clothing retailer Zara who have pioneered the concept of ‘fast fashion’. You may even choose to set a homework task whereby students visit their local Zara store ! The caselet on p70 can be read quite quickly in class and usually provides a good platform for some class discussion.

Supply chains and not firms / products compete

This is an important topic to ask students to consider and discuss, and can sometimes lead to some insightful debate.

Solutions to end of chapter questions

· What are the three typical levels of firm strategy?

Figure 4.1 – corporate level strategy, business unit strategy and functional strategy. High quality answers may note that logistics strategy should not be restricted to just functional strategy and that it can make a significant contribution to wider firm strategy and success.

· Outline the various stages in the evolution of manufacturing.

Figure 4.3 – ideally students should note that the ‘optimum’ position on the chart is the top right hand corner.

· Explain how mass customisation works.

Students here should both give examples (the book cites Dell as well as a number of other examples) and draw a diagram (such as Figure 4.4) to show how mass customisation works. It is important that they show an understanding of the decoupling point (the point in the production process at which we move from the base product to the customised product) and postponement. Advanced answers may note other names for postponement such as delayed product configuration, delayed product differentiation, and late stage customisation.

· Outline the various scenarios in which we can use combined logistics strategies.

Firstly students should discuss both lean and agile strategies before considering the case for combined logistics strategies. A truly combined logistics strategy is what we have termed leagile (p69). Ideally students should draw the Christopher et al taxonomy (Figure 4.5) which shows the use of leagile in particular under conditions of long lead time and unpredictable demand.

· Outline how some of the principles outlined in the Toyota Production System could be applied in a services context

Firstly students should outline the key elements of the TPS (p62/63) and its origins in the Toyota manufacturing context. Pages 63 & 64 outline, via the recent work of Womack and Jones, applications to the services context; students should ideally discuss this work and be able to easily outline their own examples (e.g. banks, hospitals, etc).

Extra essay style question

· You have been appointed to the position of supply chain manager for a retailer with shops in Europe and sources of supply in Asia. How would you go about developing a supply chain strategy for this company?

The first point to note here is the emphasis in the question is on how to develop the strategy, the emphasis is not on what the strategy should actually be. The logical starting point then is to outline a process where key facts and data are gathered and the context within which the company and its suppliers operate is understood. Issues discussed in Chapter 4, such as the ability of logistics strategy to contribute to wider firm strategy should also be developed in the answer. In terms of what the strategy / strategies might look like, reference could be made to lean, agile and combined strategies, however as noted the focus is not on the strategy per se but on how the strategy could be developed, so the key then is to consider issues such as lead times and predictability of demand (which are key determinants of such strategies). Higher quality answers may develop related themes such as the impact of trade imbalances (Chapter 2) on getting material from Asia to Europe and issues of risk with regard to security of continuous supply (a topic dealt with in detail later in Chapter 13).

More questions

· Explain how in some instances logistics and SCM actually drive firm strategy.

· What are the various different wastes identified in the classic Toyota Production System?

· Discuss the application of lean principles in a services context.

· What is the decoupling point?

· Discuss Christopher & Holweg’s concept of ‘structural flexibility’ in the supply chain.

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Chapter 5 – Transport in Supply Chains

In-class exercises and discussion points

Determining freight rates

Before looking in detail at Figures 5.1 and 5.2 (which consider various freight rate relationships) students could be asked to generally consider (i) what factors influence freight rates and (ii) what types of relationships (linear, non-linear) do they think exist between those factors and freight rates.

International Transport Networks

Ask students to refer to the map at the start of the book – how do they think the network of international nodes and links will evolve into the future. You could for example divide students into groups by geographical region or transport mode.

(You could link this question too to the first end of chapter question in Chapter 3 which looked at offshoring and evolving logistics hubs).

Solutions to end of chapter questions

· In your view, does transport add value in the supply chain?

A starting point here might be to introduce the concept of derived demand’ (p103) – in order for supply chains to function, transport is necessary to move freight (except for example in the case of products such as software). The key then is to ensure that the transport employed is organised as efficiently as possible, and this in turn allows the student to bring in issues such as factory gate pricing. Students can also point out in their answers that transport efficiency can be significantly impacted by the strategies pursued in the supply chain. Finally, a link to the discussion on the Toyota Production System (p62) could be made where one of the issues discussed was adding value to products during transportation and you may recall examples of physical value adding during transportation were cited (ripening bananas and sterilising medical devices).

· What is volumetric charging?

As explained on page 104, this is charging on the basis of the dimensions of a consignment, which is often done with bulky or difficult to handle shipments. Students can cite examples (such as an awkward to handle roll of carpet) and note that this pricing mechanism is used to compensate for lost capacity as a result of carrying this bulky shipment.

· What is the tare weight of a container?

As explained on page 112, this is the weight of an empty container. Good answers would then consider maximum container weight and cubing out (as per the previous question on volumetric charging).

· Outline some of the reasons why freight may need to be transloaded?

Firstly explain what transloading is (transferring freight from one type of loading unit to another) and then outline the various reasons as per Table 5.4 / Page 113.

· What are the key characteristics of the five principal modes of transport?

These are outlined in detail on Table 5.1 (p105).

· Why do we say that transport is a derived demand?

People or freight do not travel for the sake of making a journey, they travel for some other reason (in the case of people to for example go on a business or vacation trip, in the case of freight to go to a market or to another factory for further processing).

· What is factory gate pricing?

The use of an ex-works price for a product plus the organisation and optimisation of transport by the purchaser to the point of delivery. Students might note that the concept was first popularised in particular by the big retailers who sought to make their inbound supply chains more efficient.

More questions

· What is a consolidated shipment?