Industry Studies 1

Make, Take and Sell Challenge: Learning Logistics

Topic Number: 4

One of the most complex and expensive costs that are incurred by organisations is that of transporting their goods to serve different markets. Here we see both a challenge of logistics but also ensuring that the product remains intact and maintains quality.

Here we will take an in-depth look at the various distribution strategies one could opt for as well as highlighting any obstacles you may encounter. We will also look at product packaging strategies as a fine balance must be sought between over and under packing for both cost and environmental reasons.

Finally, we will look to understand how we can gauge the quantity to transport given various market conditions.

Overview

• Critically evaluate and articulate the various distribution strategies that are available and apply it to your product

• Articulate the various challenges with transporting products across borders

• Describe the transportation implications on packaging products

• Be able to assess and forecast market demand for your product

Learning outcomes for these workshops

A logistical marvel: The Mumbai Dabbawala

The 5,000 or so dabbawalas in the city have an astounding service record. Every working day they transport more than 130,000 lunchboxes throughout Mumbai, the world’s fourth-most-populous city. That entails conducting upwards of 260,000 transactions in six hours each day, six days a week, 52 weeks a year (minus holidays), but mistakes are extremely rare.

Source: HBR, 2012

To re-cap… lets understand the logistics…

Source: Uppsala

So if at the beginning you export to minimise risk; what are the key considerations?

How much to

transport?

How to transport?

What ‘other’

obstacles?

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What distribution strategies can you

use?

How to transport? A logistical nightmare?

Map out exactly how

you intend on getting your

product to the host country

2 models to consider…

Hub and Spoke Point to Point

Lets look at Walmart the world’s largest retailer… pioneer of hub and spoke

How it works…

• Centralised distribution system, pioneering the retail hub-and-spoke system.

• Under the system, goods were centrally ordered, assembled at a massive warehouse, known as ‘distribution center’ (hub), from where they were dispatched to the individual stores (spoke).

• The hub and spoke system enabled Wal-Mart to achieve significant cost advantages by the centralized purchasing of goods in huge quantities..

Consider your going on holiday to Singapore flying with Emirates

Most long haul airlines use a hub and spoke model

However, Boeing is thinking differently: point to point logistics

The Boeing 787 offers breakthrough technology which enables longer point-to-point routes throughout the world. Employing a lighter fuselage, constructed from composite material, the B787 can fly further with a full load and faster than any other aircraft of its size.

Point to point

Point-to-point transit refers to a transportation system in which a plane, bus, or train travels directly to a destination, rather than going through a central hub. This differs from the spoke-hub distribution paradigm in which the transportation goes to a central location where passengers change to another train, bus, or plane to reach their destination.In the airline industry,

Southwest Airlines in the United States is a prominent example of an airline that uses the point-to-point transit model. For example, there is a route between Jacksonville International Airport in Jacksonville, Florida, and Norfolk International Airport in Norfolk, Virginia.

View video: http://www.kval.com/news/local/Prof-Truckers-should-ditch-convoy-go-for-hub-and-spoke-system-220440521.html?tab=video&c=y

A comparison of Hub & Spoke and Point to Point

Tracking & packaging

your product

Issues with inventory

Late shipments

Breakage Theft

Two key areas to solve these issues…

RFID Technology

Packaging

Overview of RFID

View video: https://www.youtube.com/watch?v=4Zj7txoDxbE

Advantages of RFID

• An RFID smart card-based fare collection system may reduce operation costs in the long run.

• Public transportation authorities will be able to monitor ridership in real-time and will minimize delays by committing extra resources (buses or trains) to specific congested routes.

• RFID does not require line of sight. The reader can communicate with the tag via radio waves. An individual can potentially be identified and charged the right fare by simply carrying the RFID smart-card in his/her pocket.

• RFID equipment damage occurs much less frequently than is the case with magnetic strips or bar codes present on CharlieTickets.

• The combination of all above mentioned advantages will result in improved convenience and boost public transportation ridership.

Source: RFID Introduction

Disadvantages of RFID

• In the short run, costs of diffusion and implementation for an RFID smart card-based fare collection system can be rather high.

• An RFID-based fare collection system has the potential of seriously invading people's privacy. Check out the Potential Misuses section of the site to obtain specific examples of this threat.

• RFID technology ultimately involves software that allows each user to be identified by a central database. This infrastructure will certainly be under attack by hackers.

• Poor read rate can occur if the reader and receiver are not properly aligned.

• In cases when multiple tags and readers are at work simultaneously, double charges may occur.

Source: RFID Introduction

Packaging Sustainably: Key Reasons to Consider

Physical protection The objects enclosed in the

package may require protection from, among other

things, mechanical shock, vibration, electrostatic

discharge, compression, temperature etc.

Barrier protection A barrier from oxygen, water

vapor, dust, etc., is often required. Permeation is a

critical factor in design. Some packages contain desiccants or oxygen absorbers to help

extend shelf life.

Information transmission Packages and labels

communicate how to use, transport, recycle, or dispose of the package or product.

Security Packaging can play an

important role in reducing the security risks of

shipment. Packages can be made with improved

tamper resistance to deter tampering

Packaging Sustainably: Different Materials

Packaging Sustainably: Different Materials

Packaging reduction at Unilever

Forecasting demand

and quantities

Demand Measurement and Forecasting

• Raise cash for investment and operations

• Establish capacity and output levels

• Acquire right amount of supplies

• Hire the necessary number of workers

Marketing is responsible for preparing the sales forecasts

Estimating Current Demand

Total Population

Income on Food

Income on beverages

Income on alcohol

Income on beer

Source: Kotler et al (2012)

End of Workshop

Note: This recording is for your personal use only and not for further distribution or wider review.

© Pearson College 2013