Part I Introduction
6.2 Future Trends in Some Logistics Sectors
stakeholders such as suppliers, customers, and some competitors. They use modern technologies and share information and knowledge in an effort to create a collabora- tive supply chain. Such a dynamic and collaborative supply chain is capable of com- peting if not leading a special industry. Today, managing supply-chain activities is supported by different kinds of information flows within and between parties.
Examples such as material requirements planning (MRP), manufacturing resource planning (MRPII), and enterprise resource planning (ERP) are new information sys- tem developments in IT, improving logistics and supply-chain management [10].
In recent years, advanced technologies such as RFID, wireless and mobile tech- nology, and GPS have been applied extensively in logistics systems especially in retail sectors. At the same time, they have also resulted in mixed performances in a supply chain because of large data input, analysis, and reporting in short intervals.
Ketikidis et al. [10] point to the following advantages: tracking product logistics is much easier, information processing is done more efficiently, security is improved, and counterfeit reports are reduced. Fast-track ordering, improved customer rela- tionships, and better control of supplies are other rewards. However, Ketikidis et al. emphasize that advantages have been reported more often in more-developed countries because the required infrastructure is provided there.
Electronic data interchange (EDI) has been used widely to transfer information between suppliers and customers in a supply chain. Bar coding is still extensively utilized to track products. Such long-established technologies as EDI and bar cod- ing, although they provide lower capabilities, are not as expensive as RFID when we consider how quickly they can be implemented at any level in a supply chain.
The reader standard and compatibility with suppliers’ systems seems to be a con- straint for RFID-integrated application in a supply chain, although RFID setup and utilization costs are decreasing [10].
Smith argued that RFID should be viewed not only as a technological innovation but also as a transformational event. It is supposed that the use of RFID-based tech- nology by some leading and progressive enterprise (e.g., WalMart) should revolu- tionize and popularize inventory-tracking methods with other enterprises [11].
Like some other emergent technologies, RFID technology raises some worries from a security perspective. Kelly and Erickson [12] examined this problem and concluded that RFID technology provides enormous economic benefits for both business and consumers, while potentially being one of the most invasive surveil- lance technologies to threaten consumer privacy. However, most believe RFID’s smart technology advantages in counteracting theft are larger than any possible threats to consumer privacy. Nonetheless, methods to resolve the security anxieties of end users should be followed to minimize the disadvantages of monitoring tech- nologies such as RFID.
concepts, methods, and technologies have brought changes in different sectors of the logistics industry. Major changes that are expected to become more influential over time form trends. For this purpose, three important sectors in logistics—
including inventory management, transportation management, and warehousing—
have been studied from the viewpoint of recent changes, today’s global issues, and new strategies. This section mainly refers to Ailawadi and Santish’s bookLogistics Management[13].
6.2.1 Future Trends for Inventory Management
The global marketplace, higher product variety, shorter product life cycles, poor forecast accuracy, demand for more customized yet financially manageable pro- ducts, and premium customer service are increasing logistics and supply-chain com- plexity. Along with these challenges, supply-chain inventory strategies are evolving to find new methods to meet customers’ needs in new situations and also to benefit from new opportunities arising in the changing environment. For example, operating with minimal inventories while still meeting customer expectations is one key dimension of new inventory strategies [13], which are referred to as JIT strategies.
Postponement
Ailawadi and Santish [13] define postponement strategies as those that “combat increasing fulfillment costs associated with both geographically dispersed markets and the expansion of product variety.” Postponement is conceptually based on delaying production and delivery costs until cost fulfillment is necessary.
Geographic and product form postponements are increasingly applied in global supply chains.
Geographic postponement proposes to hold inventory centrally and to delay its commitment to target market areas as long as possible, often until customer orders are received. A simple example is accumulating spare parts inventories from regional warehouses into a central distribution center. However, there is a trade-off between holding inventory centrally and increasing delivery lead times. Central inventorying reduces inventory costs but increases the probability of damaging the level of customer service. Today, leading third-party logistics providers such as FedEx and UPS, with the aim of electronic order processing, provide distribution services that offer the advantages of geographic postponement and a premium delivery service [13].
The other form of postponement is product form postponement. It proposes to delay production of final goods with various appearances and functions as late as possible—until a customer’s needs are known. Stocking products in their more generic form allow them to be inventoried in their least expensive and most flexible forms. The final manufacturing or assembly steps will be performed as soon as a customer’s exact orders are known [13].
There are good examples for product form postponement such as stocking only white dishwashers including color panels instead of producing different colored
dishwashers. Customers will select and insert their favorite color panels, so there is no need to stock different colored machines.
Quick Response
Quick response (QR) depends entirely on shortening manufacturing and distribution lead times of specific products. It acquires initial real data about market needs first and then begins the production phase. Supply chains thus should plan to enter a seasonal sales period with a small initial inventory distributed to retailers, monitor early sales patterns, generate a renewed demand distribution, and then choose the replenishment method. In this way, the manufacturer or supplier receives early sales data and utilizes them to update production schedules to better match output with demand [13].
Vendor-Managed Inventory
When logistics is studied between two or more companies, the concept of coordina- tion becomes very crucial. Lack of coordination between partners occurs when they have incomplete or incorrect information such as what happens in the bullwhip effect. Lack of coordination between effective factors decreases overall efficiency and imposes different costs on the system.
One method gaining popularity for coordinating inventory decisions is vendor- managed inventory (VMI). This collaborative initiative authorizes suppliers to manage the buyer’s inventory of stock-keeping units. It operationally integrates suppliers and buyers by using ITs. Buyers can share real-time information of sales and inventory with suppliers, and suppliers can then use this information to plan production and delivery decisions and set their inventory levels at the buyer’s ware- houses [14].
6.2.2 Global Transportation Issues
Today, transportation is an important part of the logistics system, and efficient sup- ply chains rely on fast, responsive, and dependable transportation. For example, consider the following points expected in future US freight transportation [15]:
G The demand for freight transportation will nearly double by 2035. It will press the capac- ity of the nation’s transportation system.
G There will be new pressures on freight carriers to deliver goods reliably and cost-effec- tively because business will move to create on-demand supply chains and replenish what customers consume as soon as it is sold.
G Businesses trade relationships with suppliers and customers will be more global, so trans- portation will become more necessary.
G Business will become more dependent on carefully timed and reliable freight transporta- tion because of more intensive connectivity between members of the supply chain. When the freight transportation system fails to satisfy commitments, hundreds of members (including shippers, carriers, and worldwide markets) are affected.
Ailawadi and Santish identify two key global issues that may lengthen transit times, create more frequent and unpredictable delays, and consequently raise trans- portation costs: capacity constraints and increased transportation security [13].
Transportation Capacity Issues
Capacity constraints arise when demand for transportation exceeds a transport sys- tem’s ability to meet demand efficiently, which results in a higher cost or a lower service level [13]. Transportation capacity constraints, particularly at domestic points of entry, now afflict several areas in the world as the practice of global sourcing increases.
Transportation capacity issues are complex because of the multiple dimensions and the integrated nature of transportation systems. In addition, the public sector has a very large and multifaceted impact on transportation capacity. The following are among the ways to address capacity problems, according to Ailawadi and Santish [13]:
G Existing transportation capacity can be used more efficiently through improved govern- ment pricing of transportation infrastructure (e.g., congestion tolls or peak and off-peak pricing differentials).
G Social regulations such as those addressing safety, labor, environment, and energy should be optimized (e.g., balanced social and economic objectives) in order to better use the existing transportation capacity.
G Technology plays a major role in alleviating capacity constraints. Two important exam- ples are equipment and shipment tracking and the use of intelligent transportation systems (ITSs) for road traffic management.
In addition, the US Chamber of Commerce [15] emphasizes the integration of various modes into cohesive and efficient national and global networks to improve the efficacy of the transportation system, although it needs planning and funding for intermodal transportation and forms a broader geographic perspective.
Transportation Security Issues
The heightened security efforts and military actions undertaken after the terrorist attacks on the United States in 2001 have posed a potential disruption to the smooth flow of freight and have added to the congestion of transportation networks at critical points [13]. In addition, intensified security requirements in special situa- tions have imposed huge costs on transportation.
6.2.3 Future Trends for Warehousing
Many researchers used to believe we should anticipate the demise of the warehouse because it was considered to be only a simple repository for goods. It was supposed that all companies would plan to eliminate inventory, so warehouses could not pos- sibly play much of a role in future global supply-chain network. But as Rankin et al. [16] point out, the warehouse is still alive, playing key roles in traditional
supply-chain networks as well as assuming a pivotal place in most e-commerce operations.
Rankin et al. believe we will witness a wider variety of warehouse types in the future, including (1) long and narrow warehouses with multiple dock doors to support cross-docking operations and (2) high and properly designed warehouses ready to accommodate automated storage and automated retrieval systems. Other segments of inventory management will engage in satisfying small orders of individual items required in the e-business environment. This large number of small-sized demands will present a challenging task. Warehouses will have a strategic and important role in controlling total supply-chain cost and in meeting service requirements in a dynamic environment [16].
As stated before, postponement strategies are being used more because of the emphasis put on responding to individual consumer needs in today’s business atmo- sphere. Consequently, postponement results in significant savings in inventory, transportation, and reduced inventories of obsolete products. As a result, borders between warehousing, assembly, and retail operations are disappearing. Thus, the warehouse will be the place where final assembly, blending, labeling, and packag- ing, in addition to traditional stocking, will be done. Advantages for allocating this role to warehouses are closeness to markets, low labor cost, and effective systems for managing the processes of assembly, labeling, and packaging [16].
Finally, Ailawadi and Santish [13] predict the warehouse will play an important role in bringing manufacturers together to collaborate in creating consolidated shipments to major markets. Also, new technologies such as RFID will facilitate the movement and location of goods in the warehouse as soon as they become commercially viable.