Logistics is concerned with getting the products and services where they are needed when they are desired. It is difficult to accomplish any marketing or manufacturing without logistical support. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging.
The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible
The formal definition of the word ‘logistics’ is: – it is the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.
In order to understand the concepts of logistics in terms of practical usage and to glimpse into the how a real company or organization uses logistics as a formidable tool to gain customer satisfaction, reduce overall cost and increase efficiency we selected “DHL” the worlds leading courier service company. But DHL is multi faceted and offers myriad types of services.
History and background of DHL
DHL are the first letters of the last names of the three company founders, Adrian Dalsey, Larry Hillblom and Robert Lynn.
In 1969, just months after the world had marveled at Neil Armstrong’s first steps on the moon, the three partners took another small step that would have a profound impact on the way the world does business.
The founders began to personally ship papers by airplane from San Francisco to Honolulu, beginning customs clearance of the ship’s cargo before the actual arrival of the ship and dramatically reducing waiting time in the harbour. Customers stood to save a fortune.
With this concept, a new industry was born: international air express, the rapid delivery of documents and shipments by airplane.
The DHL Network continued to grow at an incredible pace. The company expanded westward from Hawaii into the Far East and Pacific Rim, then the Middle East, Africa and Europe. By 1988, DHL was already present in 170 countries and had 16,000 employees.
At the beginning of 2002, Deutsche Post World Net became the major shareholder in DHL. By the end of 2002, DHL was 100% owned by Deutsche Post World Net.In 2003, Deutsche Post World Net consolidated all of its express and logistics activities into one single brand, DHL
The world’s largest express and logistics Network
DHL is the global market leader in international express, overland transport and air freight. It is also the world’s number 1 in ocean freight and contract logistics. DHL offers a full range of customised solutions – from express document shipping to supply chain management.
Below are the global facts and figures that show you the scale of the world’s largest express and logistics network.
Global Facts and Figures
Number of Employees: around 285,000
Number of Offices: around 6,500
Number of Hubs, Warehouses & Terminals: more than 450
Number of Gateways: 240
Number of Aircraft*: 420
Number of Vehicles: 76,200
Number of Countries & Territories: more than 220
Shipments per Year: more than 1.5 billion
Destinations Covered: 120,000
The reason for the success of DHL is due to its very effective and efficient way of carrying out the process of project management. The basic steps in it are as follows:
Project Management
DHL manages projects according to a six-step process:
Initiation: The formal start of the project
Design: The formal agreement on how to approach the project and its deliverables
Planning: Following agreement, a detailed plan is created
Execution: After detailed planning and preparation, the project goes ‘live’
Closing: Gradually phase out and prepare for handover of the deliverables
Handover: The formal end of the project
INTEGRATED LOGISTICS
Logistics is viewed as the competency that links an enterprise with its customers and suppliers. Information from and about customers flows through the enterprise in the form of sales activity, forecasts and orders. As products and materials are procured, a value added inventory flow is initiated that ultimately results in ownership transfer of finished products to customers. Thus the process is viewed in terms of two inter-related efforts, inventory flow and information flow.
Inventory Flow
Suppliers
Physical distribution
Manufacturing support
Procurement
Customers
Information Flow
Inventory Flow
The management of logistics is concerned with the movement and storage of materials and finished products. From the initial purchase of a material or component, the logistical process adds value. By moving inventory when and where needed. Thus the material gains value at each step.
For a large manufacturer, logistical operations may consist of thousands of movements, which ultimately culminate in the delivery of the product to an industrial user, wholesaler, dealer or customer.
In order to understand logistics it is useful to divide it into three areas:
Physical distribution
Manufacturing support
Procurement
For DHL:
DHL is completely service oriented therefore it does not have its own material movement but that of the customers both the sender, the receiver and also the intermediateries. That means it only involves physical distribution and procurement. Procurement also includes the material needed for packaging such as paper, moulded trays and boxes, wooden crates, standard containers wraps, plastic inlays etc. The materials or the goods collected from the senders (including papers, documents, physical goods like clothing, household good, chemicals, exotic animals etc) are weighed, checked for condition, and depending upon its various characteristics it is packed. The goods are then dispatched to their destinations. There is no value addition to the material itself but it is done to the service which is provided ( eg if there has to be a certain package delivered from India to UK the normal services would take about 2 days whereas as a super fast delivery would be done in about 9 hours)
Information flow
Information flow identifies specific locations within a logistical system that have requirements. Information also integrates the three operating areas. The primary objective of developing and specifying requirements is to plan and execute integrated logistical operations.
Logistical information involves two major types of flows:
Coordination flows
Operation flows
1. Planning and coordination flows
Coordination is the backbone of the overall information system.
Strategic objectives:
Strategic objectives detail the nature and location of customers, which are matched to the required products and services to be performed.
For DHL
It implies estimating the time requires for collecting the goods from the door step of the sender and then estimating the time for the goods to reach the final customer.
Forecasting
Forecasting utilizes historical data, current activity levels, and planning assumptions to predict future activity levels. Logistical forecasting is generally concerned with relatively short -term predictions.
The overall purpose of information planning/coordination flow is to integrate specific activities within a firm and to facilitate overall integrated performance.
For DHL
DHL’s whole business is dependent on the vital point of timely delivery. Based on the distance to the final receiver, the accessibility, the documentations and procedures that need to be handled etc they have fine tuned the process of delivery. They can accurately gauge how much time it will take for the goods to reach its end destination.
2. Operational flows
The second aspect of information requirements is concerned with directing operations to receive, process, and ship inventory as required supporting customer and purchasing orders. Operational requirements deal with
Order management
Order processing
Distribution operations
Inventory management
Transportation and shipping
Procurement
For DHL:
DHL owns its success for the efficiency with which the operations are carried out. Here not only the company but the sender and sometimes the receiver can track the goods through their information center. They are given a certain password which they can use to trace via online or their customer service helpline.
DHL WEB SHIPPING is the on-line express shipping tool that helps customers prepare documents, book pick-ups, store contact details and track their deliveries. Ideal for busy office managers, business travelers or receptionists, DHL WEB SHIPPING needs no special software or training.
Purpose of DHL Web Shipping:
DHL WEB SHIPPING’s new, simplified navigation guides customers, quickly and easily, through the entire process. So they can respond to any shipping request within minutes.
With a click of a mouse customers can:
Select the right shipping and value-added services for each shipment
Prepare air waybills and customs documentation on-line
Get the latest service bulletins and customs information
Book collections and track shipments on-line
Save up to 300 customer addresses
Access shipment records for 99 days
Alert recipients and other interested parties
DHL WEB SHIPPING is also perfect for telecommuters. You can order a pick-up, check service availability or track your shipments from any location, in real time, direct from your wireless laptop.
Supply Chain Management
Definition for supply chain management
“Supply chain management is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.”
Explanation:
The supply chain is the network of organizations that are involved through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of ultimate consumer.
For DHL:
Supply Chain Optimisation
Good design is at the heart of an effective supply chain solution. DHL has developed a reputation for consistently developing innovative solutions that streamline operations and improve control. Their in-house teams have contributed to the solutions design of some of the world’s leading brands and enabled to win key contacts.
DHL solutions design team offers a wide portfolio of expertise and services, from logistics network strategy, transport design, warehouse design and simulation, through to operational improvement and inventory analysis.
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DHL’s international supply chain management solutions are focused on helping customers take increased control of international inbound supply chain to maximise the value of international and global sourcing.
DHL helps customers :
Give visibility of the upstream supply chain, and enable earlier decision making
Create a more agile supply chain, better able to respond to changes in consumer demand
Reduce lead times, inventories, and associated storage costs
Customer-focused solutions are built up from the following core services:
Origin management, including: vendor management; supplier collections; customs brokerage; consolidation services and value-added services
Global forwarding, including: air/ocean/road/rail freight forwarding and management; European managed transport
Destination management, including: port and demurrage management; customs brokerage; de-consolidation and pre-retail services; port to distribution centre transportation; direct store delivery (US only)
Supply chain visibility and management, including: purchase order management; RFID product tracking; exception management; planning and forecasting; inventory management.
Global forwarding services are provided across all major routes.
Logistical services that are offered.
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DHL’s reverse logistics solutions help customers plan, implement and control flow of materials and manage related information, back up the supply chain to recapture values and ensure the safe disposal of goods. Items include the recovery of obsolete or non-operational white goods such as refrigerators, plus the removal of old furniture on delivery of new or replacement products.
Services include:
Roll in Management: de-installation of finished goods at the customer’s site
Returns Management: receiving, sorting, verifying and managing returned products
Express Delivery: Exchange of Dead On Arrival products
Service logistics
Service and replacement parts
DHL’s service and replacement parts service involves the management of manufacturers’ replacement parts delivered to and from customers according to pre-defined service levels or warranty agreements on a one-, two-, four- or eight-hour and next-day basis, 24 hours a day, seven days a week.
DHL works closely with customers to overcome common issues such as:
Poor parts availability
High inventory investment
Long lead times, accentuated by global sourcing
High levels of customer returns
Poor visibility, reporting and control
Cost control of the demand chain
Key services include:
International freight forwarding
Domestic and regional inbound deliveries
Inventory planning, forecasting, procurement and analysis
Distribution centre operations
Outbound delivery
The entire process is underpinned by a web-enabled electronic order processing and order monitoring tool.
Inbound to Manufacturing
Inbound to manufacturing is the complete end-to-end logistics management of inventories, facilities and labour associated with the inbound flow of materials from vendors and supplier origins to consumption points in manufacturers production lines.
The service encompasses:
Network, transportation and facility design
Inventory optimisation
Supplier management
Transportation management
In-plant services
Key to the service is integrating manufacturers’ forecasting, order management and supply chain execution processes with their component suppliers. DHL implements warehouse management and supply chain event management systems to manage just-in-time deliveries and allow supply chain participants to exchange forecast requirements in real time.
Value is created for manufacturers and component suppliers throughout the world by:
Enabling a robust and cost-effective supply chain
Providing the necessary visibility so that the location of all components within the supply chain is known to all supply chain participants
Reduce inventory and investment costs
Improve delivery times
Co-ordinate multiple components more efficiently
Medical Device Distribution
DHL country-based warehouses for a number of manufacturers to service a local customer base. This includes the receipt of product from local or global manufacturing sites and downstream distribution to hospitals.
Distribution to stores management
DHL distribution to store services are focused on helping retailers create efficient and flexible supply chains to deliver product to retail outlets at high levels of service.
These solutions are built from several core services: reverse logistics collections; sortation; processing; repair/refurbishment; value recovery; disposal and compliance.
Engineering Response
Through our Engineering Response services, we manage the materials supply chain from works planning and inbound goods through to on-site works, delivering stock out to engineers, builders and construction workers in the field.
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DHL not only provides physical logistics services but also manages other enhanced supply chain services, improving efficiencies and reducing costs.
Order Management
Receipt, management, execution, sequencing and dispatch of orders in a timely manner.
Call Centre Management
A Call Centre manages orders, monitors sales activities, provides customer services and functions as a Help-desk.
Global Inventory Management
DHL gives the customer a global view of inventory, thus enabling informed decisions regarding the disposition of stock.
Consolidated Billing Services
The creation of a consolidated and categorized invoice, based on all services performed in a specific time-period by more than one service provider, made available in an agreed format.
Freight & Customs Solutions
DHL’s many years of experience with international trade requirements and formalities, combined with the European Competence Centre and country expertise, gives customers the leading edge in service, quality and management in cross border transactions.
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Implementation and Project Management
Implementation starts by defining project aims, setting the targets and describing the deliverables in detail. The major topics in implementation include business processes, engineering, real estate, IT systems, migration, HR, finance and legal considerations.
Quality Management
Total Quality Management is a management strategy that integrates quality orientation into the whole structure and workflow of a company by using methods and techniques of quality management
Corporate Policy for Quality, Environment, Health and Safety (QEHS) is based on five corporate values:
Customer satisfaction: Providing our customers and their customers with excellent, high value logistics solutions
Employee motivation: Building on the know-how and stimulation of individual potential in multi-cultural teams
Operational excellence: Continuous improvement of processes and services to fulfil or exceed expectations
Corporate citizenship: Acting as a responsible corporate citizen in all countries
Shareholder reward: Developing a sustainable business to provide increasing shareholder value
Globally, DHL management systems are certified according to the international standard for quality management systems ISO 9000 in almost every operating unit.
Performance Management :
Performance management is a key part of the supply chain. Measured elements are reviewed as a system, as each component interacts with all the other parts around it. Performance measuring not only records historical performance but also provides early indication of any service slippage. In this second role, the measures provide a valuable contribution to DHL’s Continuous Improvement Programme.
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Outsourcing involves DHL taking over and managing previous in-house logistics operations, including:
Distribution centres
Transport operations
Back-office functions
Supply chain management functions
After sales services
Innovative Supply Chain Development
Supply Chain Management services are delivered across industry sectors and provide expertise, knowledge and resources in terms of personnel and supply chain tools. All services are targeted at optimising logistical operations in both process and strategy, and are aligned to the client’s commercial expectations.
The services are as follows:
Strategic Logistics Consulting
Lead Logistics Provider
Consulting and providing Transport optimisation: Route-Pro and Trans-Pro
Consulting and providing Supply Chain Design
Consulting and providing Transportation
Engineering, optimisation and re-engineering
Implementation and Project Management
Process Management
Outsourcing
DHL’s consulting services also offer re-organisation of customer facilities, project management for customers, implementation of new IT Systems, creation of tender documents and tender processing.
Supply Chain Re-engineering
DHL works with customers to review supply chain efficiencies. One of the main tasks is to evaluate cost efficiency to ensure that costs are being driven down throughout the contract duration. Data analysis allows DHL to provide customers with ‘what if modeling’ or the impact of changing the business rules.
After Sales Optimisation
Optimising return logistics and spare parts logistics as well as maintenance and repair services.
Vehicle Management Services
Our vehicle management services focus on the management of sales and marketing support programmes for automotive manufacturers. Combining a range of services and systems to deliver a global response, we help you overcome challenges at the end of the automotive supply chain.
Distribution to Stores Management
DHL’s distribution to store solutions are focused on helping retailers create efficient and flexible supply chains to deliver product to retail outlets at high levels of service.
These solutions are built from several core services including reverse logistics:
logistics network strategy
warehouse design and simulation
transport modelling.
After Sales Optimisation
Optimising return logistics and spare parts logistics as well as maintenance and repair services.
Vehicle Management Services
Our vehicle management services focus on the management of sales and marketing support programmes for automotive manufacturers. Combining a range of services and systems to deliver a global response, we help you overcome challenges at the end of the automotive supply chain.
Distribution to Stores Management
DHL’s distribution to store solutions are focused on helping retailers create efficient and flexible supply chains to deliver product to retail outlets at high levels of service.
These solutions are built from several core services including reverse logistics:
logistics network strategy
warehouse design and simulation
transport modelling.
TRANSPORTATION
Transport Functionality
Transportation is one of the most visible elements of logistics operations. Transportation provides 2 major functions: product movement & product storage.
Product Movement
Whether the product is in the form of materials, components, assemblies, work-in-process, or finished goods, transportation is necessary to move it to the next stage of the manufacturing process or physically closer to the ultimate consumer. A primary transportation function of product movement is moving up and down the value chain. Since transportation utilizes temporal, financial, and environmental resources, it is important that items be moved only when it truly enhances the product value.
Transportation involves the use of temporal resources because product is inaccessible during the transportation process. Such product, commonly referred to as in-transit inventory, is becoming a significant consideration as a variety of supply chain strategies such as just – in – time and quick response practices reduce manufacturing and distribution center inventories.
Transportation uses financial resources because internal expenditures are necessary for private fleets or external expenditures are required for commercial or public transportation.
Transportation uses environment resources both directly and indirectly.
In direct terms, it is one of the largest consumers of energy (fuel and oil) in the domestic United States economy. In fact, it accounts for close to 67% of all domestic oil use.
Indirectly, transportation creates environmental expense through congestion, air pollution and noise pollution.
The major objective is to move product from an origin location to a prescribed destination while minimizing temporal, financial and environmental resource costs. Loss and damage expenses must also be minimized. At the same time the movement must take place in such a manner that meets customer demands regarding delivery performance and shipment information availability.
Principles
There are two fundamental principles guiding transportation management and operations. They are economy of scale and economy of distance.
Economy of scale refers to the characteristic that transportation cost per unit of weight decreases when the size of the shipment increases.
E.g. truckload shipments cost less per pound than less-than-truckload shipments. It is also generally true that larger capacity transportation vehicles such as rail or water are less expensive per unit of weight than smaller capacity vehicles like motor or air. Transportation economies of scale exist because fixed expenses associated with moving a load can be spread over the load’s weight. The fixed expenses include administrative costs of taking the order; time to position the vehicle for loading or unloading, invoicing and equipment cost. These costs are fixed because they do not vary with shipment volume.
E.g. suppose the cost to administer a shipment is $ 10.00. Then the 1-pound shipment has a per unit of weight cost of $10.00, while the 1,000 pound shipment has a per unit of weight cost of $0.01. Thus, it can be said that an economy of scale exists for the 1000-pound shipment.
Economy of distance refers to the characteristic that transportation cost per unit of distance decreases as distance increases.
e.g. a shipment of 800 miles will cost less than two shipments (of the same combined weight) of 400 miles. Transportation economy of distance is also referred to a se tapering principle since rates or charges taper with distance. The rationale of distance economies is similar to that for economies of scale.
Longer distances allow the fixed expenses to be spread over more miles, resulting in lower overall per mile charge.
These principles are important considerations when evaluating alternative transportation strategies or operating practices. The objective is to maximize the size of the load and the distance that is shipped while still meeting customer service expectations.
Transport Infrastructure
Transportation infrastructure consists of the rights-of-ways, vehicles, and carrier organizations that offer transportation services on a for-hire or internal basis. The nature of the infrastructure also determines a variety of legal and economic characteristics for each mode or multimodal system. A mode identifies the basic transportation method or form.
RAIL NETWORK
Since olden times, railroads have handled the largest number of ton-miles. As a result of the early establishment of a comprehensive rail network connecting almost all the cities and towns, railways dominated the intercity freight tonnage till World War II and in some cases of Europe, Asia and Africa they even connected the countries. This early superiority enabled railways to transport large shipments very economically.
MOTOR CARRIERS
Highway transportation has increased rapidly since the end of World War II. This is because Motor carrier industry results from door-to-door operating flexibility and speed of intercity movement. They are even flexible because they can operate on each and every kind of roadways.
In comparison to railroads, motor carriers have relatively small fixed investments in terminal facilities and operate on publicly maintained highways. Although the cost of license fees, user fees, and tolls are considerable, these expenses are directly related to the number of over-the-road units and miles operated.
The variable cost per mile for motor carriers is high because a separate power unit and driver are required for each trailer or combination of tandem trailers. Labor requirements are also high because of driver safety restrictions and the need for substantial dock labor. Motor carriers are best suited to handle small shipments moving short distances.
WATER TRANSPORT
It is the oldest mode of transportation. First it was the sailing vessels, which was replaced by steamboats in early 1800’s and by diesel power in the 1920’s.
Domestic water transportation – involves the Great Lakes, canals, and navigable rivers. In every country, fewer system miles exist for inland water than any other transportation mode.
The main advantage of water transportation is the capacity to move extremely large shipments. Water transport employs 2 types of vessels. Deep-water vessels, which are generally designed for Ocean and Great Lakes use, & are restricted to deep-water ports for access. In contrast, diesel-towed barges, which generally operate on rivers and canals, have considerably more flexibility.
Water transport ranks between rail and motor carrier in the fixed cost aspect. Although water carriers must develop and operate their own terminals, the right-of-way is developed and maintained by the government and results in moderate fixed costs as compared to railways and highways.
The main disadvantage of water transport is the limited range of operation and speed. Unless the origin and destination are adjacent, supplement haul by rail or truck is required. The capability to carry very high cargo at an extremely low variable cost places this mode of transport in demand when low freight rates are desired and speed of transit is a secondary consideration.
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AIR TRANSPORT
Air transport is the newest and the least utilized mode of transport. Its major advantage being its speed, which is accompanied by high costs. A coast-to-coast shipment via air requires only a few hours contrast to days taken by other mean of transportation. The high cost of transport can be traded off for high speed, which allows other elements of logistical design, such as warehousing, inventory to be reduced or eliminated. But still air transport remains more of a potential opportunity than a reality because it is very much under utilized.
The high cost of jet aircraft, coupled with erratic nature of freight demand, has limited the assignment of dedicated planes to all-freight
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