SUPPLY
CHAIN
6. LOGISTICS IN THE 21ST CENTURY
6.1 INTRODUCTION
For many centuries, the importance of logistics was diminished and most entrepreneurs
considered it a secondary resource. However, as we have already said, in times of war
it played a crucial role in a number of military campaigns whose success lies in the
efficient task of the supply chain or logistics rather than in the intelligence of the
commander or the bravery of his troops.
Civilizations prospered because they managed to find a way to efficiently obtain the
resources they needed, while the cause of the extinction of others can be found in
practical factors such as the inability to obtain resources for their survival, that is to say,
logistics suitable for their needs.
Logistics goes beyond having a good transport service for finished products. Its real
purpose is to, at the right time, make the entire distribution chain, from the supply of
raw materials to the final delivery of the goods or services, work synchronously and
predict all the possible difficulties.
66
Page 66
SUPPLY CHAIN
Nowadays, when technology has radically transformed the lifestyle and culture of
consumers, logistics has modified the traditional relationship between concepts such as
customer satisfaction and fulfilment of a company’s goals.
The evolution of these services leads to the emergence of intelligent logistics, which is
capable of adapting to permanent changes in the environment for the sake of business
development and growing expectations for progress in the export of goods.
6.2 CURRENT INTERNATIONAL LOGISTICS
International logistics has become one of the key sectors in the current global economic
environment as it serves a vital function in the movements of international economic
globalization, foreign trade, new technologies such as the Internet and models of
support for industrial activity. Just in time logistics implies that an adequate
international logistics infrastructure is an essential element for the positioning of any
country in the international economic landscape.
The study of the international logistics movements is said to be one of the most
important factors when it comes to the understanding of the international economic
situation and the insertion of various countries into the globalized world economy.
The significance of this study lies in the strategic nature of the logistics flows which is
explained below:
▪ The logistics sector accounts for a significant percentage of the gross domestic
product of national economic activity, implying that everything related to its
management, regulation and promotion, would directly affect the economic
situation of any country.
▪ The logistics sector is within the tertiary activities, largely within the industrial
sector.
▪ The logistics sector is the path by which new marketing systems appear, through
the innovative economy of products offered on the Internet, which means that
a fast, safe and efficient logistics infrastructure is necessary for this new
67
Page 67
SUPPLY CHAIN
marketing system to reach such a dimension that it truly revolutionises the
international economic structure.
▪ Economic globalization, through offshoring, expansion of the large multinational
groups or large areas of economic integration, gives rise to the need for new
logistics concepts that can meet the requirements of the new landscape of
economic globalization.
In the context of strategic importance of international logistics, possible competitive
advantages and disadvantages at the national level are set in order to establish what the
current perspectives and future approaches in this sector are. The key elements that
define the current logistics and mark the trends that will be followed in the immediate
future are as diverse as physical infrastructures; the application of new technologies,
the application of information as a critical factor in the logistics process, the relationship
between logistics and the society or the alteration of the traditional production chain.
6.3 CARGO CONTAINERS
The use of containers, which has led to economic globalization on an international level,
is one of the most outstanding advances in the fast evolution of international logistics
in recent years.
Cargo containers are available in various shapes or sizes; standard, general-purpose
containers that withstand harsh sea conditions, or High Cube containers, which are
often used for lightweight and high-volume loads.
68
Page 68
SUPPLY CHAIN
High Cube Container
Standard Container
Other containers are shown below. The Open Top container has a tarpaulin which allows
easy loading and unloading. It is waterproof. On the right is the Refrigerated container,
which permits transporting goods at a controlled temperature: fruit, meat or dairy
products.
Open Top Container Refrigerated Container
The Flat Rack container is used for heavy loads. Its walls are folding and it has no roof,
which makes it ideal for oversized cargo. Finally, we have the Tank container. Although
the external structure is rectangular (it makes the stacking of various containers
possible), liquids and gases can be transported.
69
Page 69
SUPPLY CHAIN
Flat Rack Container Tank Container
When you want to move some merchandise by sea, you must calculate the demand
forecast with the help of the commercial department, which has the estimated sales
volume for a given period. Moreover, it is necessary to know and calculate the volume
of containers, both full and empty, that will arrive at that port in order to check if that
quantity can satisfy the demand. If the amount meets the expectations, it is said that
the stock is balanced. But, if the quantity is too great, it is said that the stock has a
"Surplus", which has to be dealt with by emptying containers and sending them to
another destination where they might be required.
The advantages of using containers:
▪ Variety: this transport is very flexible, so you can transport anything from raw,
manufactured to frozen products.
▪ Lower cost: due to an improvement in transit times, the merchandise
operational handling is reduced and one can also save on insurance costs due to
a decrease in the risk of theft.
▪ Speed: faster handling in ports, and as a result, vessels stay in port less time.
▪ Track: each container has an identification code that allows monitoring a large
number of goods through a simple registration, which facilitates the operations
70
Page 70
SUPPLY CHAIN
when it comes to intermodal transport while permitting the owner to assign
criteria of priority or urgency to the goods he or she wants.
▪ Internalization: widespread use all over the world.
6.4 THE MONITORING AND LOCALIZATION OF GOODS
Various information technologies, developed and improved in recent years, have
contributed to the change of traditional management styles of organizations, to the
extent that they provide more powerful tools that facilitate the collection, access,
processing and analysis of information, enabling its users to monitor, plan, forecast and
make quick and more accurate decisions. Additionally, they allow greater control over
the resources of the company and its integration with the entire value chain.
The transport of goods has not been unaffected by this technological evolution; on the
contrary, it has progressively included new technologies in their processes contributing
to the objectives of the fleet management: optimizing the use, efficiency and the
operation of vehicles that provide a transport service.
In general terms, the role of technology within fleet management has focused on the
improvement of the communication, control and safety of operations, represented in a
wide variety of information systems and tools that simplify the traceability and tracking
of goods transport vehicles. The technology applicable to fleet management is:
▪ RFID Technology - Radio Frequency Identification
Radio Frequency Identification is an automatic data transmission technology that uses
radiofrequency to communicate information between a reader and an electronic tag (e-
tag), using electromagnetic waves to send information from the tag to the reader. This
system allows the capture of data without the need for establishing a contact between
the reader and the tag, thus eliminating direct visual contact.
71
Page 71
SUPPLY CHAIN
The advantages presented by RFID are:
✓ Radio frequency identification can be used to identify a vehicle in different
stages of the transport process, through strategically located reading points at
the loading, destination or intermediate stations, such as a toll station.
✓ Reduction of errors in information about the products or objects identified.
✓ Accurate records of the entry or exit of the identified objects at strategic points.
✓ Improvement of the response time of all agents.
With the RFID technology it is possible to connect all phases of the supply chain in real
time, boosting the traceability and quality, making delivery more efficient and reducing
management and operation costs.
6.5 ROUTE PLANNING SYSTEMS
Another very important aspect that should be taken into account when we want to
move the goods is to plan the route we need to follow so as to get to the final
destination. This planning also includes aspects such as vehicles intended for delivery
operations and/or collection of customer orders.
The factors that should be considered in order to calculate the optimal route are:
driver's fees, vehicle capacity, preferred and maximum route length, multiple
warehouses and distribution centres, traffic at rush hour, the address and location of
the client.
Good planning has very important advantages such as:
✓ Significant reduction of kilometres, vehicles and overtime.
✓ Better management of vehicle capacity.
✓ Optimization of re-routing (meaning days, not months).
✓ Significant reduction in the time of routing.
72
Page 72
SUPPLY CHAIN
✓ Improvement in customer service.
✓ Reduction in the loading time.
✓ Delivery Management Solution: It provides the driver with an application to view
daily stop lists, and keep an eye on departure / arrival times and delivery service
times. It also allows the user to send new stops or route changes.
✓ Obtaining reports quickly and easily.
▪ GPRS fleet management systems
GPRS technology helps to control vehicles of the same company as it focuses on the
traceability of transport. Once vehicle location, direction and speed are determined
from GPS/GPRS, tracking capabilities transmit this information to the fleet manager
software information. The great advantage is that vehicles can be traced from any place
in the world that has access to the Internet. Each user is identified, and then a map
appears and shows where he/she can locate managed elements, mainly vehicles.
This system aims to control vehicles, people, machines and tools, allowing us to know
with utmost precision their working time and location through a GPRS/GPS unit installed
and connected to the Internet.
The most important advantages of this technology are:
✓ Reducing costs and improving efficiency.
✓ Increased productivity.
✓ Discipline and responsibility on the part of the worker, since it implies that the
lack of punctuality is detected at all times.
✓ Confirmation of the work done by each worker.
73
Page 73
SUPPLY CHAIN
✓ Information about working hours of both, the worker and the vehicle.
✓ Help with the distribution of work.
✓ Preventing the use of the vehicle outside working hours and at the weekends.
✓ Reduction of fuel consumption and management/administration costs.
▪ Portable terminals (enterprise mobility)
It is a solution integrated in next-generation portable terminals that allows taking
advantage of the most innovative technologies related to capturing and accessing the
information as well as communication (voice, data, GPS, Internet access, email, reading
of bar code and capturing images and signatures).
In short, it could be said that many of the tasks and processes that could previously only
be carried out from the central administrative offices and that required the use of paper,
are transferred to that external environment. These next-generation portable terminals
are the size of a personal agenda and integrate a barcode reader, wireless
communications for closed environments or public telephone networks, digital camera,
push-to-talk technology, signature capture and voice recognition.
The main advantages of this system are:
✓ Cost savings due to greater efficiency of different operating processes.
✓ Higher levels of service quality and/or customer satisfaction.
✓ The use of paper decreases and the manual input of data is eliminated.
✓ The daily activity of the distributor can be transmitted in real time to central
systems. Therefore, the company can be up-to-date with the status of its
distribution network, incidents, services performed, etc.
74
Page 74
SUPPLY CHAIN
✓ It enables solving unexpected problems and, if necessary, reallocating tasks and
resources along the way thanks to the push-to-talk voice technology and GPS.
6.6 BENEFITS FOR THE CLIENT
The improvement in the transport service described above, which results in reduced
times and costs, guarantees lower rates and shorter order cycles for the final customer.
Insofar as there is better fleet management, the customer can count on a more reliable
and efficient transport service.
If the transport company has better communication and monitoring systems of their
vehicles, the following benefits can be obtained:
✓ Greater agility and efficiency in the search for a vehicle and its allocation when
it comes to responding to a service request.
✓ The possibility of knowing in real time the location and occupation of vehicles
implies greater control over their operations, and a more efficient use of the
fleet.
✓ Permanent monitoring of transport operation and the registration of its
associated information allows detecting problems.
Currently, some countries are still underdeveloped when it comes to the use of
information technologies as tools for traceability and collaboration with the aim of
integrating fleet information and transport services.
75
Page 75
SUPPLY CHAIN
6.7 LOGISTICS AND ECOLOGY
In a world of finite resources and waste disposal, the recovery of products and materials
is key to supporting population growth and increasing consumption levels. The
reduction of waste has started to be very important for industrialized countries,
therefore the concept of material cycles has gradually changed the perception of the
economy.
It is increasingly common that the companies are expected to minimize the
environmental impact generated by their products and processes.
Moreover, legislation that extends the responsibility for products has become a crucial
element in public environmental policies.
At the same time, companies have recognized the opportunities to combine
environmental protection with the existing financial benefits to save production costs
and access new market segments.
Among the environmental measures that can be highlighted are:
▪ Controlling or reducing emissions.
▪ Improving energy efficiency.
▪ Using alternative fuel: today there are still few types of alternative fuels in the
market because of the difficulty of supplying them.
▪ Changing transport system: high emissions are caused by the use of air transport.
That is why the main transport system should be changed to a less polluting one.
▪ Designing more efficient transport routes: as we have seen in this topic there are
new technologies that help to achieve a more efficient design of transport
routes. It is especially of great importance in cities with traffic and emissions
problems. The technologies help to improve the routes and, consequently,
reduce the emissions as well as the saturation of certain areas of the city.
76
Page 76
SUPPLY CHAIN
▪ Locating warehouses: the optimal location of storage centres entails a direct
reduction in the logistic flows of the company.
6.8 REVERSE LOGISTICS
Reverse logistics aims to collect, dismantle and then disassemble used items and
components, as well as elements of a different kind, in order to destroy or take
advantage of them though recycling, for the purpose of safeguarding the environment
and protecting natural resources. It is also in charge of the recovery and recycling of
containers and packages, as well as hazardous waste issues. There are companies that
use reverse logistics when dealing with returning overstock merchandise, refunds to
customers or obsolete and seasonal products.
Return
Return of the
Final use
product
Sustituction of
Packages
Reverse materials
Return
logistics Debit/ credit notes
Scrap
Recyling
The causes that generate the need for reverse logistics:
▪ Defective goods.
▪ Returning overstock merchandise.
77
Page 77
SUPPLY CHAIN
▪ Customer returns.
▪ Obsolete products.
▪ Seasonal inventories.
▪ Non-compliance with specifications.
However, reverse logistics presents a number of disadvantages when compared to the
ordinary logistics system:
▪ The requested services are random and unpredictable.
▪ Distribution is not done from a centre to multiple consumers, but the other way
round, from various scattered points to a manufacturer.
▪ A lack of uniformity in the packaging that is used in this type of shipments might
be common.
▪ Unlike conventional logistics, the speed is not considered a priority.
▪ The management of these stocks is quite complex because of what has been
mentioned in the previous points.
In conclusion, reverse logistics is a recent issue and many countries are still not familiar
with it. However, its importance should not be underestimated as it helps to preserve
the environment by recycling materials that endanger the terrestrial ecosystems. In
order to implement a system of reverse logistics efficiently, one should raise awareness
and encourage full cooperation among all stakeholders: suppliers, human resources,
distribution, transport and end-users.
78
Page 78
SUPPLY CHAIN
The consequence of what is described in this section is clear; in the coming years reverse
logistics will revolutionise the business world and will probably become one of the
fastest growing businesses at the beginning of the third millennium.
79
Page 79