1. Definition of Logistics and historic evolution

Question 1

The CSCMP: Council of Supply Chain Management Professionals, define logistics management as:

Answer 1

*Part of Supply Chain Management
*that plans, implement and controls
*the efficient and effective
*forward, reverse flow and storage
*of goods, services and information
*from a point of origine to a point of destination
*meeting with customer requirements
+and sustainable development goals.

Question 2

Define Efficiency

Answer 2

Use of resources to achieve goals

Question 3

Define Effectiveness

Answer 3

Achievement of right goals

Question 4

Logistics definition has evolved with time, how the radar chart explains it?

Answer 4

The radar chart explains the evolution split in the 4 main areas (axis) in which Logistics has evolved into what it is today.

The main areas are:
* Activity (y+ 4)
* System (y- 3)
* Product (x+ 4)
* Performance(x- 3)

In the exam:
+LM definition & areas description!

Question 5

Talking about the radar chart, explain the “Activity” axis.

Answer 5

The activity axis explains the evolution of LM in terms of “what was done”.

1.Execution: Physically moving goods.
2. Planning/Control: Managing the execution of LM as a core business function.
3. Process: Integrating LM as an input-process-output system interacting with other business areas and stakeholders.
4. Reverse Logistics: Managing the efficient return of goods.

execution-planning/control-process-reverse.

Question 6

Talking about the radar chart, explain the “Product” axis.

Answer 6

The product axis show the evolution in terms what is about to be stored, handled, transported and/or delivered in function of customers demand.

1. FG: emphasis in physical goods from end of the line to the customer.
2. Goods: from POO to POD. ex. RM
3. Information: needed to coordinate the SC
4. Services: intangible activities to meet customer needs. ex after sales

Question 7

Talking about the radar chart, explain the “System” axis.

Answer 7

The System axis explains the evolution starting from isolated processes to fully integrated and collaborative supply chains.

1. Distribution: product delivery from production to consumers.
2. Internal Supply Chain: Integrated processes within an organization
3. External Supply Chain: Expanded coordination between multiple organizations

Question 8

Talking about the radar chart, explain the “Performance” axis.

Answer 8

Logistics performance evolves by shifting priorities, aiming to meet objectives more comprehensively focusing on achieving specific goals while optimizing resources.
1. Efficient: minimizing costs and maximizing resource utilization.
2. Effective: Prioritizes meeting customer requirements.
3. Sustainable: Aims to balance economic, environmental, and social factors for long-term impact.

Question 9

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

1. Logistics performance indicators

Answer 9

Axis: Performance

From cost reduction to customer service and profit optimisation to sustainability.

Question 10

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

2. The 3 stacks of logistics management

Answer 10

Axis: Activity

From execution to planning to design

Question 11

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

4. Types of logistics

Answer 11

Axis: Product

From direct flow of products to info, money, services… till reverse flow.

Question 12

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

3. Integrated Logistics and Supply Chain Management

Answer 12

Axis: System

From the optimisation of single activities to an integrated function

Question 13

Logistics Performance Indicators:

What are the main costs related to activities?

Answer 13

1. Transportation
2. Warehousing
3. Administrative
   +Packaging
   +Poor Service

Question 14

Logistics Performance Indicators:
Cost related to the activity:

Transportation

Answer 14

Can be split in 2 mainly because of their cost drivers:
1. Primary transportation (saturation)
2. Secondary Transportation (time btw points/customers)

Question 15

Logistics Performance Indicators:
Cost related to the activity:
Transportation:

Primary transportation

Answer 15

Long-haul, full loaded, point-to-point

Long distance transportation, Aim is to use all the capacity of the transportation means, driver = saturation.

Question 16

Logistics Performance Indicators:
Cost related to the activity:
Transportation:

Secondary transportation

Answer 16

Last mile, less than full load, multi-point

Normally in the low part of the distribution network, it has to reach multiple points = customers. Real. constrain = time. How many customer I can reach in that period and how to increase that number.

Question 17

Logistics Performance Indicators:
Cost related to the activity:

Warehousing

Answer 17

Related to warehouses and factories.

Within a warehouse two types of costs can be
distinguished:

1.Handling (driver: flows)
2. Inventory related (driver: inventory level)

Main difference = drivers

Question 18

Logistics Performance Indicators:
Cost related to the activity:
Warehousing:

Handling cost

Answer 18

Driver: flows

Cost related to movements of the products within the nodes of the chain.

Question 19

Logistics Performance Indicators:
Cost related to the activity:
Warehousing:

Inventory-related cost

Answer 19

Driver: inventory level

Cost to keep inventory within the nodes of a chain.

Question 20

Define flow when talking about handling

Answer 20

how many IU enters/exit the system

Question 21

Logistics Performance Indicators:
Cost related to the activity:

Administrative costs

Answer 21

Network management and information flows.
Order to payment cycle.

1. Logistics accounting (inventory control, planning, order & invoice)
2. Information systems

Question 22

Logistics Performance Indicators:
Cost related to the activity:

Packaging costs

Answer 22

Packaging influences the transportation and warehouse

Hierarchy…
Primary packaging: connected to the product
Secondary: ex. carton
Tertiary: (pallet for instance)

Question 23

Logistics Performance Indicators:
Cost related to the activity:

+Impact of production costs

Answer 23

Set up costs: lot size & freq

Question 24

Logistics Performance Indicators:
Cost related to the activity:

+Poor service cost

Answer 24

Lost sales, Obsolescence
If no inventory, no sales

Question 25

If we talk about: Target Service Level Complexity of Logistics' Process What they refer to?

Answer 25

Main drivers of logistics cost

Question 26

How do we calculate the Incidence of logistics cost in a company (equation)

Answer 26

Is the ratio between the Logistics cost divided the Revenues. LC/R

Question 27

There are two drivers that makes the Logistics Costs and Revenues variate:

Answer 27

1. Complexity and Target Service Level 2. Value density

Question 28

LC/R If Complexity and target SL increases:

Answer 28

L increases R slight increase Incidence ... increases

Question 29

LC/R If value density increases:

Answer 29

R increases L slight increase Incidence ... decreases

Question 30

Importance of LM, cost depends on 3 reasons:

Answer 30

Non-dicretionary activities Costs between 5-15% Rev Impacts the assets

Question 31

In terms of LM cost incidence, rank some examples

Answer 31

<5 luxury & pharma >5 fashion E-commers 10 food 15 water RM >15 ecommers of food

Question 32

True or false: External factors should be considered when looking at logistic costs. Like production factors and reduction of capacity

Answer 32

True

Question 33

How is the incidence of Logistic costs in a Supply chain

Answer 33

Is the sum of the incidence of the manufacturers portion over the Transfer price of the manufacturer and the portion of the transfer price of the retailer. Being TPM

Question 34

In the objective function of logistics other than cost we have:

Answer 34

customer service

Question 35

List the indicators related to Customer service:

Answer 35

Time related (OCT, punctuality, frequency) Availability (order fill rate, Item fill rate, completeness) Accuracy/compliance/quality (order, packaging, documents)

Question 36

This indicators has to be with speed in punctuality in relation to customers expectations and promises made

Answer 36

Time related

Question 37

Time related: Speed perceived by the customer, from order to delivery.

Answer 37

Order Cycle Time OCT

Question 38

Time related: Supply Chain lead time = OCT

Answer 38

No. There is a decoupling point were forecasting and ordering is divided. the OCT is about the order side of the chain.

Question 39

Time related: Related to the ability to deliver compliant UL in the time window.

Answer 39

Punctuality / on time

Question 40

Time related: number of deliveries planned in a reference window

Answer 40

Frequency

Question 41

they measure the capability of the supplier to satisfy the request through inventory inhand

Answer 41

Availability (filtrate) A=on hand/ demand

Question 42

Availability indicators

Answer 42

Order Fill Rate OFR= all items 100%, missing 0% Order completeness = 100% lines Item Fill Rate IFR= How many lines available OFR= IFR elevado N if IFR=99% N lines = 10 OFR=90%

Question 43

Give me an example of a compound indicator for customer service

Answer 43

DIFOT Delivered InFull InTime

Question 44

Sustainability Indicators

Answer 44

Sustainability related goals (ONU) GHG Materials Energy Water Emissions Waste

Question 45

3 stacks: If we say transportation, handling, storage, physical transformation

Answer 45

Execution

Question 46

3 stacks: Getting the supply chain aligned and tuned plans for the adjustment of operations and executions linking the demand and supply side

Answer 46

Planning

Question 47

3 stacks: Logistics network structure Transportation modes MVB decisions aligned with overall company

Answer 47

Design

Question 48

What is the heart of logistics

Answer 48

Integration Interconnection of activities on order to influence/impact/improve performances

Question 49

Why is wrong to consider only transportation cost to select a transportation mode

Answer 49

The objective function of logistic cost is: LC= Transportation + Inventory (CS + IT)

Question 50

Define Supply Chain Management

Answer 50

Integration of business process along the supply chain.

Question 51

What means IFR = 95%

Answer 51

5 out of 100 times that a customer wants a product, the product is not available

Question 52

True or False ISC < IManufacturer + IRetailer

Answer 52

True Example Vendor Managed Inventory VMI Where manufacturer manages the inventory directly at the retailers facilities and they get to have insights about customers demand collaboration is fundamental

Question 53

Types of logistics, list them. From direct flow to reverse logistics

Answer 53

Focused on systems Materials Other flows (information)

Question 54

Compare direct vs reverse flow in terms of: Flow shape Items Transformation

Answer 54

Direct: Flow shape - divergent Items: identified Transformation: might need Reverse: Flow shape - convergent Items: non identified Transformation: Needed

Question 55

Which models can we use to understand: 1. What is the connection between logistics strategy and corporate strategy? 2. What are the possible approaches to logistics strategy?

Answer 55

a) ROA Model - IMPACT: Analyzes the return on assets, a measure of the company's profitability. b) Supply Chain Strategy Model - STRATEGY: Examines the overall strategy for managing the flow of goods and services.

Question 56

Explain the profit optimization approach

Answer 56

Graph 1: Profit Optimization This graph shows how to maximize profit by balancing service level and costs. X-axis: Service Level (from 85% to 100%). This represents how well the distribution network meets customer needs (e.g., on-time delivery). Y-axis: Euros per year (€/year). This represents the monetary value of costs and profits. Gross Margin (Purple Line): This is the overall revenue minus other non-logistic costs (like manufacturing). It generally increases with better service levels (as happy customers buy more). Notice it flattens out towards the highest service levels, meaning the extra cost to achieve perfect service may not yield much additional revenue. Logistic Costs (Orange Line): This is the cost of operating the distribution network (warehousing, transportation, etc.). It increases with higher service levels because providing faster and more reliable delivery requires more investment (more warehouses, faster shipping options). Margin (Gap between the lines): The space between the Gross Margin and Logistic Costs curves represents the actual profit. The biggest gap shows the optimal service level for maximum profit (indicated by MMAX on the graph). In this example, it's somewhere between 95% and 99%. Pushing for 100% service might not be the most profitable strategy, as the logistic costs rise sharply.

Question 57

Explain the cost of poor service and total cost optimization

Answer 57

Graph 2: Total Cost Optimization This graph shows how the total cost changes with different service levels. X-axis: Service Level (from 85% to 100%) Y-axis: Euros per year (€/year) Logistic Costs (Purple Line): Same as before – cost of the distribution network. It goes up with higher service levels. Cost of Poor Service (Orange Line): This is the cost associated with not meeting the desired service level. This includes lost sales due to late deliveries, customer service expenses for handling complaints, etc. This cost goes down as service level improves. Total Cost (Green Line): This is the sum of Logistic Costs and the Cost of Poor Service. The goal is to find the lowest point on this curve, which represents the most cost-effective service level. In this example, the optimal point is again somewhere around 95%. This shows that balancing the cost of logistics with the cost of unhappy customers is key to minimizing total costs.