Globalization – process of interaction and integration among people, companies, and

governments of different nations, driven by international trade and investment and aided by
information technology. => increase in transport and logistics activity

The „ugly” –recession of 2009–2011.

The „bad” – the loss of manufacturing and service jobs in the last several decades.

The „good” – the lower prices, wider availability of goods, and new employment opportunities.

Key Enabler for globalization political will to open trade across the world
through organizations and agreements: European Union (EU); The North American Free Trade
Agreement (NAFTA) – 1994, United States, Canada, and Mexico; General Agreement on Tariffs and
Trade (GATT) – 1944; World Trade Organization (WTO) – superseded GATT in 1995, promote free
trade between member nations, reduce or remove tariffs, administer global trade agreements and
resolve disputes.

Manufacturing moving to low-cost economies Western businesses have seen the advantages of
moving their manufacturing to lower-wage economies.

Global brands and retailers focusing on establishing global brands. New products and Consumer
demand and the retailers.

Information and communication technology flows are faster, more secure, and more efficient.
(Availability of new ICT technologies, E-commerce development (B2B, B2C, B2G...), Big chances for
logistics and transportation)

Focus on inventory reduction re-engineering of the order-to-delivery cycle.

Logistics process of planning, implementing, and controlling the flow and storage of goods
and related information from the point of origin to the point of consumption.

Logistics Performance Index benchmarking tool to help countries identify the

challenges and opportunities they face in their performance on trade logistics and what they can do
to improve their performance. They rank countries in 6 dimensions:

 Efficiency of customs
 Quality of trade and transport infrastructure
 Ease of arranging competitively priced shipments
 Quality of logistics services—trucking, forwarding, and customs brokerage
 Ability to track and trace consignments.
 Frequency which shipments reach within scheduled or expected delivery times
(“Timeliness”).

Logistics service providers (LPS): external providers who manage

outsourced activities on behalf of the shippers or customers whose business processes they support.
3PLs.

Contract logistics: define the logistics activities that relate to warehousing, distribution and other
associated activities that are outsourced.
First Party Logistics (1PL): transport and logistics activities to third parties are carried out by the
company’s own departments.

Second Party Logistics (2PL): the manufacturer hires a carrier or warehouse manager as a
subcontractor for the operational execution of a clearly defined transport or logistics task. The
organization and follow-up remain the responsibility of the manufacturer. The relation supplier is
often only cost-driven and short-term, with the logistic actor doing what the client instructs, and
being paid accordingly.

Third-party logistics (3PL): External provider who manages outsourced activities on behalf of the
shippers or customers whose business processes they support. Including:

 warehousing;
 transportation;
 freight bill auditing/payment;
 customs brokerage;
 freight forwarding;
 customs clearance.

Fourth-party logistics (4PL): integrator that assembles the resources, capabilities and technology of
its own organization and other organizations to design, build and run comprehensive supply chain
solutions.

Fifth party logistics (5PL): guarantees the management of networks of supply chains. The industrial
actor hires third parties for the supply of strategic, innovative logistical solutions and concepts. A fifth
party logistics service provider develops and implements, preferably in close consultation with the
client, the best possible supply chains or networks. Fifth party logistics is often linked to e-business.

Logistics management definitions

1. that part of the supply chain which 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 to meet customers’ requirements.
2. the process of planning, implementing, and controlling the efficient, effective flow and
storage of goods, services, and related information from point of origin to point of
consumption for the purpose of conforming to customer requirements.

Objective: meet customer demand for guaranteed delivery of high quality and low cost with minimal
lead time.

System: group of objects joined together in some regular interaction or interdependence

toward the accomplishment of some purposes.

 Composed of parts that interact

 Externally observable behaviour
 A system has boundary which defines the extent of a system

Views of system

 static (or structural) properties

 dynamic behaviour
 functional behaviour
 temporal behaviour
Process – a totally or partially ordered set of interrelated actions, integrated with one another
through time, cost, progress and results of actions with a view to achieving objectives.

Logistics processes actual physical transport of products through individual phases of

the business activity: supplies, production and distribution.

Supply chain flow of materials and products through the process of procurement,
production, storage, distribution and disposal.

Supply chain management planning and management of all activities involved in sourcing and
procurement, conversion, and all logistics management activities. Integrates supply and demand
management within and across companies.

Bullwhip effect –related to the supply chain. Explains fluctuations in sales (demand),
production and deliveries. Deals with demand distortions that increase as we move up the supply
chain. Caused by inefficient information flow in the supply chain. EFFECT: collection of excess
inventory by individual supply chain partners. Main sources:

 uncertainty associated with lead time and processing information about the level of demand,
 batching of orders,
 rationing and shortage of products,
 promotion effect related to price fluctuation

Bill of Rights
Right Product customers demand products that meet tough performance specifications.

Right Quantity The right amount of goods delivered.

Right Source Dertiminating the lowest total cost of ownership (TCO) when considering alternative
supplier/sourcing locations - local, national and/or global.

Right Destination specify locations, as firms work on order and shipment consolidations among
supplier locations.

Right Condition products ready for use or sale with no loss or damage.

Right Time guaranteed right time must be set by buyer, seller and 3PLs to meet the schedules for use
or sale.

Right Documentation documents prepared and correctly filled out to satisfy business and regulatory
requirements. parties must cooperate in making sure information is passed among parties securely.

Right Cost lowest cost - product costs, order and shipment documentation preparation, possible
inspections, and transportation from initial origin to ultimate destination between buyers and sellers.

Logistics activities
 Transportation – physical movement or flow of goods
 Storage – inventory management and warehousing
 Packaging – affected by product and transportation
 Materials handling – movement to, from, and within a warehouse,company, factory.
 Order fulfillment – completing customer orders, affects lead time
  Forecasting – predicting inventory necessary to fulfill customerdemand
 Production planning – product necessary to cover market
 Purchasing – procurement of supplies, affects transportation

Forecasting future demand belongs to the major decisions in logistics and SCM. Good
forecasting is vital for any business planning. The estimates are too high – a company over-produces
goods that cannot be sold. The underestimetes can result in shortages and lost business
opportunities and a potential loss of customers who could not be served. Forecasts are almost
always wrong, as operations are rather complex.

Forecasting process and methods

Logistical decisions
Strategic level deals with decisions that have a long-lasting effect on the firm. includes decisions
regarding the number, location and capacities of warehouses and manufacturing plants, or the flow
of material through the logistics network

Tactical level decisions that are updated anywhere between once every quarter and once every year.
This includes purchasing and production decisions, inventory policies and transportation strategies
including the frequency with which customers are visited.

Operational level day-to-day decisions such as scheduling, routing andloading trucks.

Example areas of logistic management

 Demand planning: reduce forecast error and to suggest buffers considering demand
variability. In order to improve accuracy of forecasting, collaborative forecasting is essential.
 Master planning based on the material, capacity, transportation and other constraints,
simultaneously.
 Procurement Constraints such as vendor capacities, costs and lead times can be modelled as
part of supply chain resulting in superior plans.
 Transportation consider dynamic transportation requirement and generate optimising
transportation plan.

Transport: important for an industrial society because impacts a country’s economy. All raw
materials must be conveyed from the land to a place of manufacture or usage, and all goods must be
moved from the factory to the market place and from the staff to the consumer.

Transportation in the national economy plays a role

 giver transport meets the tasks( instrument for the exchange of goods and services, share
GDP 5%)
  recipient transport is a consumer of goods (ex: fuel and energy, labor, machinery)

Transport management – the management of transport operations of all types.

Transport planning –producing necessary information to determine the most cost-effective strategy
for improving the performance of the transportation system. Can occur on different levels.

Transport chains must be established to service global flows which reinforce the importance of
international transportation modes and terminals at strategic locations.

Components of international transportation

 Transport infrastructure: Efficiencies or defeciencies in physical infrastructures will either
promote or inhibit international trade.
 Transport services set of services involved in the international circulation of passengers and
freight.
 Transactional environment: legal, political, financial and cultural setting. It includes exchange
rates, regulations, quotas and tariffs, but also consumer preferences.

1. Transport is an undesirable element – from the point of view of the sender

2. On the other hand, it is difficult to imagine the world economy, especially in its globalization.

Transportation as a service Impossibility of warehousing, Consumption

inextricably linked with the production, Manufactur in close cooperation with the customer, Lack of
„own” demand,The lack of intrinsic value (the value conditioned by the existence of a client).

Transportability of freight capability of an item or material to be moved by any

means such as towing, self-propulsion, or carriage.

Carriage includes the period during which the cargo remains on or in the mean of transport,
are both in motion, as well as when stationary. The primary means of transport are: car, rail, ship,
aircraft and barge

Classification of transports
 subject of transport: passenger transport, freight transport
 environment: inland transport, water transport)
 availability: public transport industrial transport

Transport policy – program of activities towards the transformation of the transport

system adapted to the requirements of market economy and new conditions for economic
cooperation in Europe. EX: reduce travel/transport demand; reduce the levels of car use and road
freight; favour less energy-hungry modes of transportation....

Transport system set of entities E and a set of relationships R between them and a set
of processes TP, which process flow of cargo and passengers term the demand for transport services
to the stream out of the system. TS =< E, R,TP >
Classification criteria of the transport system: branch-oriented, territorial, object-oriented transport
infrastructure, means of transport, staff, regulations

Elements of transport systems:

 Infrastructure (supply): way, terminals and supporting elements

 Carrying unit (demand) Planes, trains, auto, buses, ships, trucks, etc.
 Operators/users (somewhat unique) Drivers, pilots, freight, passengers, etc.

Transport systems structure:

Properties:

 complexity –resulting from the large number of components and interconnections

 randomness – inability to predict all phenomena and relationships occurring during the
transport process (probability of events)
 ability to self-control(limited) – it means that it works unreliably and not being provided
with means and ability to self-repair any deviations.
 dynamics – changes, changes, changes..., it results of human interference in its
functioning, in a certain time and space and possibilities adapt to new conditions