Virtual Logistics

8/3/2019 Virtual Logistics

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Virtual logistics

Prof.dr.sc. Dragan ii

In memoriam to my friend and collegue

Prof. Paolo Inchingolo UniTs


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Logistics General perception

General perception in logistics that assetsGeneral perception in logistics that assetssuch as stock or vehicles need to existsuch as stock or vehicles need to existphysically, and need to be identifiable asphysically, and need to be identifiable as

discrete entities.discrete entities. By treating logistics systems in strict physicalBy treating logistics systems in strict physical

terms we impose constraints on them whichterms we impose constraints on them whichcan restrict their flexibility and can limit thecan restrict their flexibility and can limit theutilisation of resources.utilisation of resources.


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Virtual logistics

AssetsAssets areare treatedtreated inin termsterms ofof theirtheir availability,availability, notnottheirtheir identityidentity oror theirtheir physicalphysical formform..

ThisThis providesprovides muchmuch greatergreater flexibilityflexibility inin howhowsystemssystems areare designed,designed, howhow resourcesresources arearesourced,sourced, andand howhow assetsassets areare utilisedutilised..

VirtualVirtual logisticslogistics allowsallows logisticslogistics resourcesresources toto bebetreatedtreated asas commodities,commodities, inin aa similarsimilar wayway toto howhowcurrenciescurrencies areare treatedtreated byby banksbanks..

ThisThis meansmeans thatthat resourcesresources cancan bebe lent,lent, borrowed,borrowed,oror tradedtraded;; andand flexiblyflexibly consolidated,consolidated, apportioned,apportioned,

andand allocatedallocated.. ThisThis createscreates manymany powerfulpowerful newnew possibilitiespossibilities inin

thethe designdesign ofof logisticslogistics systems,systems, andand meansmeans thatthatmajormajor improvementsimprovements inin efficiencyefficiency becomebecomepossiblepossible..


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Financial system example

OnceOnce moneymoney inin circulationcirculation waswas inin thethe formform ofof preciouspreciousmetalsmetals suchsuch asas silversilver oror goldgold..

ByBy holdingholding theirtheir ownown assets,assets, theythey mightmight havehave achievedachievedgreatergreater security,security, butbut theythey incurredincurred aa highhigh notionalnotional oror

actualactual costcost duedue toto thethe factfact thatthat theythey neededneeded toto storestore andandguardguard theirtheir assets,assets, andand theythey riskedrisked losinglosing themthem duedue totoaccidents,accidents, damage,damage, oror thefttheft..

ThenThen paperpaper moneymoney waswas introducedintroduced andand banksbanks were,were, inineffect,effect, ableable toto createcreate moneymoney fromfrom nowhere,nowhere, byby lendinglendingmoremore moneymoney thanthan theythey hadhad asas reservesreserves..

Today,Today, wewe rarelyrarely holdhold anythinganything butbut modestmodest sumssums of ofmoneymoney physically,physically, andand thethe effectivenesseffectiveness ofof thethe bankingbankingsystemsystem cannotcannot bebe denieddenied..


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Financial system example

WhatWhat hashas happenedhappened isis thatthat moneymoney hashasbecomebecome oneone stagestage removedremoved fromfrom thethe physicalphysicalassetsassets itit representsrepresents (i(i..ee.. goldgold oror silver)silver);; thisthis

hashas ledled toto immenseimmense increasesincreases inin thethe efficiencyefficiencyofof financialfinancial transactions,transactions, andand hashas createdcreatednumerousnumerous newnew possibilitiespossibilities forfor purchasing,purchasing,sales,sales, andand financefinance..


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Virtual logistics systems

VirtualVirtual logisticslogistics resourcesresources maymay bebe tradedtraded ininmuchmuch thethe samesame wayway asas sharesshares andand foreignforeigncurrenciescurrencies areare tradedtraded byby banksbanks oror individualsindividuals..

ThroughThrough thethe useuse of of computercomputer applicationsapplicationsandand thethe Internet,Internet, itit becomesbecomes feasiblefeasible toto dodothisthis atat aa veryvery lowlow levellevel inin logisticslogistics operationsoperations..

SuchSuch resourcesresources couldcould bebe purchased,purchased, utilisedutilisedremotely,remotely, andand lentlent or or soldsold whenwhen surplussurplus totorequirementsrequirements..


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Design of virtual logistics systems

TreatmentTreatment ofof assetsassets inin termsterms of of functionfunction andandavailability,availability, ratherrather thanthan asas physicalphysical objectsobjects withwithparticularparticular identityidentity andand form,form, soso theythey cancan bebe treatedtreatedlikelike commoditiescommodities..

DissociationDissociation ofof ownershipownership andand controlcontrol ofof assetsassets fromfromtheirtheir physicalphysical location,location, soso theythey cancan bebe utilisedutilisedremotelyremotely..

DissociationDissociation ofof informationinformation movementsmovements fromfrom physicalphysical

movements,movements, soso thatthat changechange ofof ownershipownership oror changechangeofof applicationapplication doesdoes notnot necessitatenecessitate physicalphysicalmovementmovement.


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Design of virtual logistics systems

DissociationDissociation ofof physicalphysical resourcesresources fromfromspecificspecific operationsoperations oror processesprocesses..

Shared,Shared, public,public, accessaccess toto logisticslogistics resourceresource

informationinformation throughthrough InternetInternet applicationsapplications.. ComputerComputer basedbased tradingtrading ofof logisticslogistics resourcesresources

betweenbetween supplierssuppliers andand usersusers.. IntegrationIntegration ofof warehousing,warehousing, transport,transport, andand

productionproduction forfor thethe purposespurposes ofof maintainingmaintainingproductproduct availabilityavailability andand controllingcontrolling stockstock..


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Concepts in virtual logistics systems

virtualvirtual stockholdingstockholding;; virtualvirtual warehouseswarehouses;; virtualvirtual supplysupply chainschains;; virtualvirtual stockstock controlcontrol;;

virtualvirtual tradingtrading;; virtualvirtual deliveriesdeliveries andand thethe substitutionsubstitution ofof tradingtrading forfor transporttransport;; virtualvirtual productionproduction;; virtualvirtual logisticslogistics servicesservices;; virtualvirtual marketsmarkets;;

virtualvirtual growthgrowth;; virtualvirtual organisationsorganisations.


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Virtual stockholding

(1) Stockholding costs would be(1) Stockholding costs would be

lower since less stock wouldlower since less stock wouldneed to be held.need to be held.(2) Warehousing costs would be(2) Warehousing costs would be

lower since less space wouldlower since less space wouldbe required for storage.be required for storage.

(3) Stock turnover would be(3) Stock turnover would behigher.higher.

(4) Obsolescence cost would be(4) Obsolescence cost would bereduced.reduced.

(5) There would be opportunities(5) There would be opportunitiesfor savings through increasedfor savings through increasedcentralisation, specialisation ofcentralisation, specialisation ofstorage and handlingstorage and handlingmethods, increasedmethods, increasedwarehouse space utilisation,warehouse space utilisation,and economies of scale.and economies of scale.

Virtual stock


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Virtual warehouses

(1) There is much more flexibility in the size of(1) There is much more flexibility in the size of

warehouses employed. The constraints thatwarehouses employed. The constraints thatwalls impose are, in effect, removed.walls impose are, in effect, removed.(2) There is potential for much greater(2) There is potential for much greater

warehouse capacity since the constraint onwarehouse capacity since the constraint oncapacity is total available warehousecapacity is total available warehouseresource, not just locally available warehouseresource, not just locally available warehouseresource.resource.

(3) There is potential to support a much larger(3) There is potential to support a much largercatalogue size.catalogue size.

(4) There is potential to support products with(4) There is potential to support products withmore diverse handling characteristics.more diverse handling characteristics.

(5) The geographically dispersed nature of thestockholding means there could be animproved chance of finding a stockholdingpoint close to the point of demand.

(6) There is potential for stock to reside atmanufacturers sites and, thereby, increasesupply chain efficiency by saving on handlingand transport.

(7) The risk associated with holding stock at onlyone site may be reduced.


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Virtual supply chains

AnAn alternativealternative toto holdingholding stockstock asas finishedfinishedgoods,goods, however,however, wouldwould bebe toto definedefine thethesupplysupply chainchain throughthrough whichwhich thethe stockstock cancan bebe

mademade available,available, andand toto securesecure thethe requiredrequiredcapacitycapacity andand resourcesresources withinwithin thatthat supplysupplychainchain..

TheThe stockstock couldcould thenthen bebe suppliedsupplied throughthrough

productionproduction ratherrather thanthan throughthrough stockholdingstockholdingandand thethe needneed forfor safetysafety stockstock could,could, thereby,thereby,bebe greatlygreatly reducedreduced..


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Virtual supply chains

((11)) TheThe shelfshelf lifelife ofof rawraw materialsmaterials isis generallygenerally greatergreaterthanthan thatthat ofof finishedfinished goodsgoods since,since, beingbeing inin aa moremorebasicbasic form,form, theythey areare lessless proneprone toto deteriorationdeterioration..

((22)) RawRaw materialsmaterials cancan generallygenerally bebe storedstored withwith aa higherhigher

volumetricvolumetric utilisationutilisation thanthan finishedfinished goodsgoods asas theytheytendtend toto bebe heldheld inin aa moremore compactcompact formform..((33)) RawRaw materialsmaterials generallygenerally havehave aa lowerlower obsolescenceobsolescence

costcost thanthan finishedfinished goodsgoods asas theythey tendtend toto havehave aawiderwider rangerange ofof potentialpotential applicationsapplications..

((44)) StockStock covercover forfor rawraw materialsmaterials cancan generallygenerally bebelowerlower thanthan thatthat for for finishedfinished goodsgoods asas theythey cancannormallynormally bebe securedsecured moremore quicklyquickly..


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Virtual stock control

With conventional logistics stock control is quite aWith conventional logistics stock control is quite astraightforward processstraightforward process

If stock is in the warehouse it is considered to beIf stock is in the warehouse it is considered to be

available, if it is not, it is considered to beavailable, if it is not, it is considered to beunavailable.unavailable. Stock is held in the form of cycle stock for knownStock is held in the form of cycle stock for known

demand and safety stock for unknown demand.demand and safety stock for unknown demand. If high levels of service are to be met then highIf high levels of service are to be met then high

levels of safety stock need to be retained sincelevels of safety stock need to be retained sincedemand can be very variable.demand can be very variable.

The cost of holding safety stock,however, can beThe cost of holding safety stock,however, can bevery high, and some safety stock might never getvery high, and some safety stock might never get

used.used.


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Virtual stock control

AnAn alternativealternative toto holdingholdingsafetysafety stock,stock, however,however,wouldwould bebe toto holdhold virtualvirtualstockstock..

SomeSome virtualvirtual stockstock couldcouldexistexist physicallyphysically butbut atatanotheranother location,location, andandotherother virtualvirtual stockstock couldcould

bebe securedsecured throughthrough aavirtualvirtual supplysupply chain,chain,therebythereby betterbetter integratingintegratingstockstock controlcontrol withwithproductionproduction controlcontrol..


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Virtual deliveries


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Virtual deliveries


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Substitution of trading for transport


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Virtual organisations

TheThe assetsassets ofof logisticslogistics organisationsorganisations generallygenerallyconsistconsist ofof distinctdistinct physicalphysical resourcesresources suchsuch asasvehicles,vehicles, warehouses,warehouses, stock,stock, factories,factories, andand

machinesmachines.. HavingHaving thethe ownershipownership ofof suchsuch resourcesresources

providesprovides thethe organisationorganisation withwith thethe meansmeans ofofensuringensuring theirtheir availabilityavailability andand alsoalso ensuringensuringtheythey cancan bebe accessedaccessed atat anan acceptableacceptable levellevelofof costcost..


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Virtual organizations


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Making virtual logistics a reality

Development of Internet applications whichDevelopment of Internet applications whichallow for shared public access to logisticsallow for shared public access to logisticsresource information.resource information.

There will need to be effective standardisationThere will need to be effective standardisationof logistics resources so there is a highof logistics resources so there is a highdegree of consistency among particular userdegree of consistency among particular usergroups, and so it becomes practical to makegroups, and so it becomes practical to makeshared use of logistics resources amongshared use of logistics resources amongdifferent organisations.different organisations.


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Systems will need to be put in place whichSystems will need to be put in place whichmonitor quality, control quality, and ensuremonitor quality, control quality, and ensurethe accuracy, reliability, and availability ofthe accuracy, reliability, and availability of

logistics resources.logistics resources. Regulations will need to be put in place whichRegulations will need to be put in place which

limit the liability of users of logistics services.limit the liability of users of logistics services.

Regulations will need to be put in place whichRegulations will need to be put in place whichlimit the liability of users of logistics services.limit the liability of users of logistics services.


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StandardizationStandardization

ModularizationModularization

Globalisation and growth in the size ofGlobalisation and growth in the size ofregional markets.regional markets.

Time phased synchronisation of logisticsTime phased synchronisation of logisticsactivitiesactivities.


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Virtual Logistics Medical applications


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Virtual stockholding

Stocks in hospitals Medical stocks in a region

Stockholding costs would be lower since less stockStockholding costs would be lower since less stockwould need to be heldwould need to be held

Warehousing costs would be lower since less spaceWarehousing costs would be lower since less spacewould be required for storagewould be required for storage

Obsolescence cost would be reducedObsolescence cost would be reduced

There would be opportunities for savings throughThere would be opportunities for savings throughincreased centralisation, specialisation of storage andincreased centralisation, specialisation of storage and

handling methods, increased warehouse spacehandling methods, increased warehouse spaceutilisation, and economies of scale.utilisation, and economies of scale.


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Virtual stock controll

safetysafety stock,stock, virtualvirtual stockstock

virtualvirtual stockstock couldcould existexist physicallyphysically butbutatat anotheranother locationlocation

securedsecured throughthrough aa virtualvirtual supplysupply chain,chain,therebythereby betterbetter integratingintegrating stockstock controlcontrolwithwith productionproduction controlcontrol..


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Virtual organizations

Virtual hospitals

Virtual Logistics

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