Agenda Key Teaching and Administration Staff...India can be made by ship or by air Maritime shipping...

MTT045 Lecture 1: Course IntroductionMTT045 Lecture 1: Course Introduction/Fundamentals of Physical Distribution

Kostas Selviaridis & Fredrik Eng Larsson

Lund University / Department of Industrial Management and Logistics

Learning Objectives

• Understand the aims, structure and content of the course

• Understand the case assignment aims and structure

U d d h d l f h i l di ib i d i• Understand the scope and role of physical distribution and transportation within Logistics/Supply Chain Management

• Understand and explain key functions, utilities and principles of transportation/distribution


Agenda

• Introduction to the course: Aims, Structure and Content• Introduction to the Case Assignment• Introduction to the Case Assignment • Definitions and Overview of Physical Distribution/Transport• Transportation Functions, Utilities and Principlesp p


Key Teaching and Administration Staff

• Kostas Selviaridis (Post-doctoral Researcher)- Course coordinatorCourse coordinator- Email: [email protected]

F d ik E L (PhD C did )• Fredrik Eng Larsson (PhD Candidate)- Email: [email protected]

• Hoda Davarzani (Post-doctoral Researcher)- Email: [email protected]

• Jessica Arwidsson (Divisional Secretary)- Course Administrator


- Email: [email protected]

W l MTT045 ’I i l Ph i lWelcome to MTT045 ’International PhysicalDistribution’

Purpose of the course

”To provide understanding as well as more advanced knowledge with regard to designTo provide understanding as well as more advanced knowledge with regard to design, planning and implementation of physical distribution and transport systems. The courseprovides a springboard for students interested in pursuing a bright career in transport and logistics!”g

We aspire that this will be a highly valuable relevant and interestingWe aspire that this will be a highly valuable, relevant, and interesting course for you!

With lots of fun!

But what about you?But what about you?

With lots of fun!


Beehive

• What do you expect from us and from the course?• Groups of 2Groups of 2• 2 min

Prepare to give an answer!Prepare to give an answer!


The aims of the course

• Furnish understanding of the role of physical distribution/transport in contemporary, extended supply chainsp y, pp y

• Address main theories, models, methods and tools to develop and evaluatephysical distribution solutionsphysical distribution solutions

• Convey the analytical skills required to formulate and solve transport-relatedbl d k i f d d i i di d i / l i f h i lproblems and make informed decisions regarding design/planning of physical

distribution systems

• Develop further students’ critical thinking/evaluation skills


The structure of the course

Infrastructure and Technology

Covers key technical aspects of physical distribution systems including performance objectives transport mode selection cargo handling facilities and terminals as well as

11objectives, transport mode selection, cargo handling facilities and terminals as well as intermodal transport solutions.

22Markets

Focus on both the demand and supply side of transport/logistics service markets covering issues such as the (out)sourcing process, transport buying behavior, the structure and h t i ti f th l i ti i d t d i i i

22characteristics of the logistics industry and pricing issues.

Operations33 p

Concerns strategic, tactical and operational decisions regarding the design and planning of physical distribution networks. Specific tools of shipment size, mode selection and transport planning will be addressed.

33


International Physical Distribution: The ’Red Thread’ of the Course

Vehicle routing

Shipment size & modal choice

Network design & planning

Systemic challenges/issues

Operations

& modal choice & planning

Road Airconsignees

Performance objectives

Logistics service providersRail Sea

Modes Security/risk issuesSustainability challengesInternational trade issuesHumanitarian aid distribution

MarketsInfrastructure

Intermodality Terminalsconsignors


Course Literature

Textbook

Lumsden K. (2007) ‘Fundamentals of Logistics’, Department of Technology 11

g p gyManagement and Economics, Chalmers Institute of Technology, Gothenburg, Sweden. Specific book chapters: 1-8, 18-21, 23

Li f di ( l d d h ’ b i )22 List of readings (uploaded to the course’s website)

To expand and/or complement the book’s material. Some readings are important since the book DOES NOT cover all topics addressed in the course.

22

Lecture slides and other hand-outs33Both the Lumsden book and the list of readings can be downloaded from the course’s website!Both the Lumsden book and the list of readings can be downloaded from the course’s website!


The course’s website

The course’s website will be continuously updated with lecture slide hand-outs, literature, assignments, past exam papers etc. You need to log in using the , g , p p p g gusername and password details given below to get access to all course-related material.

Webpage: http://www.tlog.lth.se/utbildning/kurser/mtt045_international_physical_distribution/

Username idt t d tUsername: idt_studentPassword: fromatob


Course components

Lectures

- Theoretical background

Company Visit

- Experience the reality of physicalg- Industry guest lectures offer practicalinsights

p y p ydistribution operations- DHL Freight Terminal, Copenhagen-Malmö Port

Operations

Assignments based on caseQ&A Workshops

-Support with assignments and set


-Design and planning of the physicaldistribution network-Three hand-ins and a final report

questions-Any other content-related queries

All parts are equally important to the learningAll parts are equally important to the learning


Lectures schedule 1(2)

• Lecture 1: Introduction to the course/Fundamentals of physical distribution• Lecture 2: Transport infrastructure and modes p• Lecture 3: Transport mode choice and shipment size• Lecture 4: Purchasing transport services • Lecture 5: Terminals and facility localizationy• Lecture 6: ICA guest lecture - Buying transport services (Leyla Hedberg)• Lecture 7: Logistics service providers• Lecture 8: Long-haul transport planningLecture 8: Long haul transport planning• Lecture 9: SCANIA guest lecture - Network design/planning (Per Andersson & Fredrik

Magnusson)

…cont’d->…cont’d->


Lectures schedule 2(2)

• Company visit (6/2/2012, 13.00-17.00): DHL Freight, Copenhagen-Malmö Port• Lecture 10: Vehicle routingg• Lecture 11: Tax issues in international physical distribution• Lecture 12: McKinsey & Co guest lecture - Sustainable distribution (Christofer Kohn)• Lecture 13: International trade and physical distributionp y• Lecture 14: Security and risk in physical distribution• Lecture 15: ORTEC guest lecture - Vehicle routing software (Peter Bordum)• Lecture 16: Volvo Logistics guest lecture - Lead logistics providers (Christer Halvardsson)Lecture 16: Volvo Logistics guest lecture Lead logistics providers (Christer Halvardsson) • Lecture 17: Humanitarian aid distribution• Lecture 18: Course summary/closing


Q&A Workshops

• WS1: Q&A for Hand-in 1 (FE/KS/HD)

• WS2: Q&A for Hand-in 2 (FE/KS/HD)

WS3 Q&A f H d i 3 (FE/KS/HD)• WS3: Q&A for Hand-in 3 (FE/KS/HD)

• WS4: Q&A for Hand-in 4/final report (FE/KS/HD)p

• WS5: Group presentations (FE/KS/HD)

The workshops are there to help YOU with any problems you may have !The workshops are there to help YOU with any problems you may have !


There will also be a company visit

What: Visit to DHL Freight Terminal, Copenhagen Malmö Port

When: 6 February 2012, 13.00-17.00 (times to to be confirmed)

H F ili i i bi d i h lk f DHLHow: Facility visit combined with talks from DHL managers

You will need to sign up for the visit!You will need to sign up for the visit!


Agenda



Th ’Mi l O ’ b l i h bThe ’Miracle Ocean’ beauty lotion has been a world-wide success

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Th i f f i hThere are two options for manufacturing the beauty lotion

Swedish production site

• Located in Gothenburg close to port

Chinese contract manufacturer

• Located in Shanghai close to port

11 22• Located in Gothenburg, close to port

• Unit production cost of $2 (including overhead)

• Available capacity:15 000 000 units/year

Located in Shanghai, close to port

• Has agreed to sell finished products (of same quality as the Gothenburg plant) for $2/unit.

• Available capacity:15 000 000 units/year• Can allocate capacity for 8 000 000 units/year


T h d d d d l i k lTo hedge demand and supply risk at least onecentral warehouse will be setup in India

Kolkata

Mumbai

• Fixed cost: $2 000 000

• Fixed cost: $1 450 000

Any location can be setup to handle the full demand (20 000 000 units/year)A safety stock of 25% of demand has been requestedThe estimated value of a unit in stock is $3

Any location can be setup to handle the full demand (20 000 000 units/year)A safety stock of 25% of demand has been requestedThe estimated value of a unit in stock is $3


The estimated value of a unit in stock is $3The company uses a holding cost interest rate of 25%The estimated value of a unit in stock is $3The company uses a holding cost interest rate of 25%

Shi i f S d I di d ChiShipping from Sweden to India and China to India can be made by ship or by air

Maritime shipping

Route Shipment cost Capacity per Transit timep p y pshipment

China-Mumbai $ 3 600 190 000 units 12 daysChina-Kolkata $ 3 500 190 000 units 11 daysS d M b i $ 4 500 240 000 it 15 dSweden-Mumbai $ 4 500 240 000 units 15 daysSweden-Kolkata $ 4 600 240 000 units 16 days

Air freightAir freight

Route Shipment cost Capacity per shipment

Transit time

China-Mumbai $ 6 800 100 000 units 2 daysChina Mumbai $ 6 800 100 000 units 2 days

China-Kolkata $ 6 800 100 000 units 2 days

Sweden-Mumbai $ 7 700 120 000 units 2 days

Sweden-Kolkata $ 7 700 120 000 units 2 days


Th i k fThe company uses its own trucks for store delivery

Kolkata

• 18 stores• Delivery Tue, Thu, Sat

Delhi

• 12 stores• Delivery Mon Wed Fri y

• Demand: 5M units/year• Delivery Mon, Wed, Fri• Demand: 3M units/year

Mumbai

• 22 stores

Bangalore

• 15 stores• 22 stores• Delivery Tue, Thu, Sat• Demand: 8M units/year

• 15 stores• Delivery Mon, Fri• Demand: 4M units/year

Due to delivery time windows, each route needs a dedicated truckA delivery truck induces a fixed cost (deprication, wages, maintenance) of $ 50 000/yearA delivery truck can handle 33 000 units/trip

Due to delivery time windows, each route needs a dedicated truckA delivery truck induces a fixed cost (deprication, wages, maintenance) of $ 50 000/yearA delivery truck can handle 33 000 units/trip


A delivery truck can handle 33 000 units/tripDelivery 52 weeks per yearA delivery truck can handle 33 000 units/tripDelivery 52 weeks per year

Th k h hThe company wants to know how to setup the physical distribution

• The company also want you to produce a scientific report summarizing your findings and further discussing:g g

– Sustainability aspects– Security/risk challenges– International trade/tax issues

• The report will be presented to the Executive Board of the client company (28 Febr ar 2012 10 17)(28 February 2012, 10-17)

• There will be assistance available during the weekly workshops

Sign up your groups for a workshop slot during the break!Sign up your groups for a workshop slot during the break!


Overview of case assignment

• Hand-in 1: Mode choice and shipment size

• Hand-in 2: Network design

H d i 3 V hi l i• Hand-in 3: Vehicle routing

• Report & presentationp p

All hand-ins must be passedAll hand-ins must be passed


Evaluation methods 1(2)

• Case Assignmento Weight: 40% (40 points)o Weight: 40% (40 points)

• Written examo Weight: 60% (60 points)o Min of 30 points is required to pass the exam

• Final Gradeo (0.4 * Assignments Grade) + (0.6 * Exam Grade)


Evaluation methods 2(2)

Evaluation of case assignment (40 points)

Hand-ins 1, 2 and 3 are evaluated on a pass or fail basis. The aim is to check progress p p gtowards solving the case assignment and provide feedback. The final report is awarded 40 points.

The following rules apply for this course

• Successful completion of ALL HAND-INS AND THE FINAL REPORT is required in order to pass the course.

• For the final report a minimum of 20 points is required to pass:

• In case of unsatisfactory completion of the final report, students are asked to re-work andIn case of unsatisfactory completion of the final report, students are asked to re work and re-submit it within a week of the day that feedback is provided.


The written examination

Dates for the exams

ExamTuesday, 6 March 2012, 8-13. Venue: Vic: 2C and 2D

Make-up exam Monday, 27 August 2012, 8-13 (Venue TBA)

The second make-up exam is scheduled for January 2013 (exact date/venue TBA).The second make-up exam is scheduled for January 2013 (exact date/venue TBA).


L i l l d hi h d BlLearning levels and teaching methods: Blooms taxonomy

CreateCreateCreate

iii

EvaluateEvaluateEvaluate

Written report & presentationWritten report & presentationWritten report & presentation

AnalyseAnalyseAnalyse

Hand-ins 1-3Hand-ins 1-3Hand-ins 1-3

Guest lectures& company visitGuest lectures

& company visitGuest lectures

& company visit

U d t dU d t d

ApplyApply

U d t d

Apply Lectures & workshopsLectures & workshopsLectures & workshops

RecallRecall

UnderstandUnderstand

Recall

Understand

LiteratureLiteratureLiterature


Theory Practice

International Physical Distribution: The ’Red Thread’ of the Course

Shipment size & modal choice

Vehicle routing Network design & planning

Fundamentals

Operations

gplanning

Road Airconsignees

Performance objectives

Logistics service providersRail Sea

Modes Security/risk issuesSustainability challengesInternational trade issuesHumanitarian aid distribution


Intermodality Terminalsconsignors


Agenda



CASE: Volvo’s supply chain

GöteborgGöteborg

Göteborg, Sweden

area

Stockholm area

Malmö area

Dealers

Gent


Gent,Belgium

Beehive

• What do we mean with physical distribution? • What part of Volvo’s supply chain will we investigate?What part of Volvo s supply chain will we investigate?• Groups of 2• 2 min

Prepare to give an answer!Prepare to give an answer!


Definitions

• ”Logistics Management as that part of SCM that plans, implements and controls the effecient, effective forward and reverse flow and storage of goods, , g g ,services and related information between point of origin and point of consumption in order to meet customers’ requirements...

• ”Logistics management typically include inbound and outboundtransportation activities...”

• ”Physical Distribution is the movement and storage functions associated with finished goods from manufacturing plants to warehouses and to customers”.


Source: Council of Supply Chain Management Professionals (www.cscmp.org), 2010

Ph i l Di ib i d T i hPhysical Distribution and Transport in the context of Logistics and SC Management

Evolution of Supply Chain (SC) Management

Physical distribution concerns finished goods logisticsPhysical distribution concerns finished goods logistics


A k i f / h i lA network view of transport/physicaldistribution systems

Network components

Nodes: points within the transport networkwhere goods stop (e.g. production plant, warehouse, cross-dock facility).

Links: represent movement/flow of goodsLinks: represent movement/flow of goodsbetween nodes (transport with any availablemode) Node

i kGateways: incoming and outcoming points where goods either enter or leave the network(inbound and outbound gateways)

Link

Gateway

Source: Lumsden 2007 (p 12 13)

Throughout this course we will often rely on a network view of distributionThroughout this course we will often rely on a network view of distribution

Source: Lumsden, 2007 (p. 12-13)


CASE: Volvo

GöteborgGöteborg

Göteborg, Sweden

area

Stockholm area

Malmö area

Dealers

Gent


Gent,Belgium

I f fl d i lInfrastructure, transport flows, and material flows are connected through markets

Transport users: manufacturers, retailers etc. Material flow

Transport Market

Transport providers: carriers, forwarders, shipping lines etc.

Transport providers: carriers, forwarders, shipping lines etc

Transport flow

Transport Market

Traffic Market

Infrastructure: roads, railroads, ports, airports

Infrastructure


Source: adapted from Wandel et al, 1992 [compare with Lumsden, 2007, pp. 22-23]

CASE V l i l flCASE: Volvo – material flow versus transport flow

Material flow (Possible) Transport flow

Göteborg area

Göteborg, Sweden

Stockholm area

Sweden

Malmö area

You should be careful about what system is under studyYou should be careful about what system is under study

area


Agenda



Transport Functions and Utilities

• Functions- Product movement (forward and reverse flows)Product movement (forward and reverse flows) - Product storage (in-transit inventory e.g. trailers, ISO containers)

• Utilities- Place (product where it is needed...)p- Time (...when it is needed...)- Orderliness (...in the order it is needed)

S L d 2007 ( 16)S L d 2007 ( 16)


Source: Lumsden, 2007 (p. 16)Source: Lumsden, 2007 (p. 16)

Measures of transport work

• Ton kilometer: [ton] x [km]

• Volume kilometer: [m³] x [km]

• Truck bed kilometer: [m] x [km]

Product valuenot considered

• Truck bed kilometer: [m] x [km]

• C it l fl t [SEK] [k ]• Capital flow = resource movement: [SEK] x [km]

• Tied up capital in time = resource time: [SEK] x [hour]


Source: Lumsden, 2007 (p. 21)

Th diff f i iThere are different types of consignments in physical distribution networks

• Full loads (W≥5 tons) e.g. container shipmentsg p

• Part loads (1 ton≤W≤5 tons) e.g. EUR-pallet shipmentM

oreM

oreM

ore

Reduced n

Reduced n

Reduced n

• General Cargo (100kg≤W≤1 ton) e.g. air freight cargo

e competitiv

e competitiv

e competitiv

need for haneed for haneed for ha

• Parcels (1kg≤W≤100kg) e.g. package delivery service

• Light goods (W≤1 Kg) e g Mail and express delivery

ve pricesve pricesve prices

andlingandlingandling

Light goods (W≤1 Kg) e.g. Mail and express delivery


Source: Lumsden, 2007 (p.58-)

Transport traffic types

• Line traffic: fixed routes and timetables (standardised network with consolidation services))

• Dedicated: customised service to one customer with large and stable flows• Dedicated: customised service to one customer with large and stable flows(contracts often used)

• Customer-ordered: traffic ordered by specific customer but may not be stableor large (one-off service)



Transport transfer types

Vertical

Require lifts and other equipment to transfer goods from onelevel to another (e.g. cranes, lift-trucks)

Horizontal

Require no lifts or other equipment and are oftenRequire no lifts or other equipment and are oftencheaper (e.g. road transport, Ro-Ro vessels)

We will come back to different types of transport modes later in the course!We will come back to different types of transport modes later in the course!



Thank you for your attention!!Thank you for your attention!!

Kostas Selviaridis & Fredrik Eng Larsson

Email: [email protected]: 046-2224878

F 046 2224615Fax: 046-2224615


Agenda Key Teaching and Administration Staff...India can be made by ship or by air Maritime shipping...

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