FINAL PRINCIPLES OF LOGISTICS

Q1. Identify the main challenges to organize logistics activities

(Case study 2)

Increasing costs across the supply chain

Be it the rising price of fuel, making it expensive to transport goods; the

steep costs of raw materials; high labor costs; or the global supply chain
system which requires higher charges for storage or management of
products, the rapidly increasing costs incurred by the company across the
supply chain are proving to be detrimental and one of the biggest
challenges that are faced by logistics and supply chain companies today.

Complex logistics

Thanks to globalization, the supply chain now spans multiple countries,

meaning that there must be coordination between different places,
transport carriers, and other dynamic parts of the system.

Add in other factors like language and culture barriers and time zones,
and the result is an intricate and complex web of networks that must
function smoothly to give the end user a satisfactory experience.

Lead times

Most of us have experienced the ease of using Amazon Prime first-hand –

you order a product and it arrives on your doorstep within the next 24
hours. Whilst this is great for the consumer, it has set a precedent

There is now mounting pressure on supply chains for quicker deliveries,

meaning that supply chain companies must now look for more efficient
ways to get to the consumers as soon as possible. This isn’t just about
rapid last-mile delivery, but about optimal storage solutions, which in turn
make local logistics run smoothly.

Q2. Discuss how UAV (drone) may enhance logistics operation -

challenges to use this equipment (for goods delivery) in the
context of Vietnam Drone enhance logistics operation
 Due to their unmatched capabilities, drones could be the game changers
in the supply chain. They have the potential to revolutionize the supply
chain. They can be used to move goods, inspect inventories, and track
shipments. They can also be used to collect data about the supply chain
and provide real-time updates about the status of shipments.

Drones could reduce costs and improve the efficiency of the supply chain
by allowing for faster delivery and reducing the need for human labor.
Additionally, drones could enable companies to better monitor their
shipments and detect potential problems before they become major
issues.

Drones can improve inventory management by providing an automated

and efficient way to track and monitor inventory. Drones can be used to
monitor warehouse locations, scan barcodes, and take pictures of
inventory. They can also be used for delivery, allowing for faster and
more efficient delivery of items.

Autonomous drones can be used to deliver goods to their destination

without the need for a human pilot. This means that supply chains can be
streamlined and automated, leading to improved efficiency and cost
savings.

They can be used to transport goods quickly and accurately to their

destination, eliminating the need for manual labor and reducing the cost
associated with traditional delivery methods. They can also be used to
monitor goods in transit, providing real-time updates on their location,
condition, and progress.

Challenge:

First, the industry is still highly regulated and lacks a unified framework
for licensing, registration, and operation. This creates a barrier to entry
and makes it difficult for investors to navigate the regulatory landscape.
Additionally, there is a lack of experienced personnel and infrastructure,
which may limit the ability of investors to scale up operations. Finally, the
industry is still in its infancy, which means there is a risk of technological
obsolescence as the industry matures.

Q3. Give examples of customer service (Case study 3)

 Example 1: Spotify is great at transparency. They have social media
accounts specifically set up to help their customers (@SpotifyCares), and
another to update on the current status of the app (@SpotifyStatus). Both
respond in minutes and give people somewhere to turn if they have any
issues.

Example 2: Circle K is great at customer service. They have a process of

product returns for their customers if they do not need the goods after
purchasing. The process just take about some minutes to finish with the
condition of consumers have to keep the bill of purchasing for them to
check the product’s barc

Q4. Advantages/disadvantages of point-to-point and hub-and-

spoke (Case study 4)

Point-to-point Hub-and-spoke

Advantages

- Travelling Time is Faster: One major - Economies of Scale, Connections: With a

argument in favor of this strategy is that the more efficient connection system comes a
traveling time is considered to be a lot higher frequency of services. For instance,
quicker. As each location is connected directly, instead of one service per day between any
there is no requirement to stop or change two pairs in a point-to-point network, four
direction, it is a continuous direct journey to services per day could be possible.
the drop off point. This is possible as each - Economies of Scale, Hubs: As there is a
location has the facilities and procedures to higher quantity of traffic in one central area,
process deliveries individually from many efforts and resources to improve distribution
sources. efficiency can be focused.
- Delays are Less Impactful: During a point- - Economies of Scope: By simply sharing
to-point delivery, any delay would only affect transportation facilities, the maintaining of
that one single delivery. The danger with a connections, amount of staff required, and
hub and spoke system is that there is a risk vehicles which are needed are all reduced.
where when one delay happens there is a Funds can then be directed on improving the
knock-on effect within the central hub which quality of a more concise infrastructure.
results in a subsequent cascade of further
delays. Being more independent, the point-to-
point system is freer to accommodate and
resolve any issues. Therefore, this strategy is
considered to be less prone to delays.

Disadvantages

- Expensive: In the introduction, an example - Point-to-Point Services Reduced: With the

was made of 8 locations and the consequential lack of a direct link between locations, some
connections which would need to be created connections may encounter delays and
depending on each methodology. In the case potential congestion due to the centralizing
of a point-to-point system, it would require aspect of the hub and spoke system.
more connections and to facilitate more - Not Flexible: As everything is centralized and
connections would inevitably lead to a higher all connections within the network are required
running cost. to be interconnected, there is a risk of a
- Not Efficient: In a roadway system the domino effect when something negative takes
point-to-point method requires more drivers place. As a result, delivery times can
to be employed in order to maintain the sometimes be determined by other deliveries,
numerous connections. The concern is that and any problems will likely cause larger
the many drivers’ efforts are not being effects than a point-to-point system.
optimized as a lot of them are traveling in
potentially similar directions where the loads
can be shared. Unsurprisingly, the lack of
efficiency also does end up leading to
additional costs.

Q5. Inventory concept (part 1 – case study 5).

Calculation of inventory carrying cost and total cost

Sensitivity analysis (impact of different factors on optimal order

quantity – smallest total cost)
price = 100000 x Q^0.9; transport cost = 500xQ^0.7; transaction cost =
100xQ^0.3

Economy of scale, the more units they produce, transport and

transaction, the less expensive it get per unit (because Q^x with x<1)

Delivery cost DC = P + TC + OC

= 100000 x Q^0.9 + 500xQ^0.7 + 100xQ^0.3

Delivery cost per unit of inventory (euro) UDC = DC/Q = (100000 x

Q^0.9 + 500xQ^0.7 + 100xQ^0.3 )/Q

price = 100000 x Q; transport cost = 500xQ^0.7; transaction

cost = 100xQ^0.3

Delivery cost DC = P + TC + OC

= 100000 x Q + 500xQ^0.7 + 100xQ^0.3

Delivery cost per unit of inventory (euro) UDC = DC/Q = (100000 x Q +

500xQ^0.7 + 100xQ^0.3 )/Q

Only transport and transaction can take advantages from the economy of
scale whereas price are set for a unit.

price =100000xQ; transport cost = 500xQ; transaction cost =

100xQ

Delivery cost DC = P + TC + OC

= 100000 x Q + 500xQ+ 100xQ = 100600xQ

Delivery cost per unit of inventory (euro) UDC = DC/Q = (100600xQ

)/Q=100600

Delivery cost has already been set, the price, transport and transaction
per unit is a fixed number.

Case 2: Variation of the rate of inventory carrying cost

Rate = 36.21%; 100%; 500%; 700%; 1000%

Q6. Calculate movement distance (Random system and Fixed

system). Compare the two systems (Case study 6).
Random location
● not allocated a specific place for each item in the warehouse, but
one thing in more than one place in available space in the
warehouse the advantage of this method is that exploits spaces
more efficiently, but there is difficulty in reaching the items' place
● optimizes available storage space
● more flexibility to a warehouse
● speeds up the selection and placement of the goods
The fixed locations
● allocates a specific area for each item in the warehouse,
● easier to access each item quickly but is not taken to exploit the
space-efficient manner
● For an assigned item in the warehouse management system,
configured with minimum and maximum quantity which is stable for
each fixed pick-up slot
● When production orders are released for picking, if inventory
depletes below the specified minimum order quantity in the fixed
location then the replenishment task will be invoked to refill the
stock from the replacement inventory pick location

Q7. The key processes and the difficulties/challenges of

warehousing operation. Examples of advanced technologies used
in warehousing operations. (Case study 7)

The key processes in warehousing operations involve the efficient and

effective management of the storage, handling, and movement of
materials, goods, and information within a warehouse. These processes
ensure that products are stored in an organized manner, easily
accessible, and ready for distribution to customers.

Some of the key processes in warehousing operations include:

1. Receiving: This involves unloading incoming shipments, checking for

accuracy and damages, and recording the receipt of goods.

2. Put-away: This process involves placing received items in their

designated storage locations within the warehouse.
3. Storage: This refers to maintaining an organized inventory system to
store products efficiently and ensure easy access when needed.

4. Picking: This process involves selecting items from storage locations

based on customer orders or other requirements.

5. Packing: In this step, picked items are packaged securely for shipping
or transport.

6. Shipping: This involves preparing items for shipment, including labeling

and documentation, loading onto vehicles, and coordinating
transportation.

The difficulties/challenges of warehousing operations include:

1. Space utilization: Efficiently utilizing available space is crucial in

warehousing operations to maximize storage capacity without
compromising accessibility.

2. Labor management: Warehouses require skilled laborers to perform

various tasks such as picking, packing, and shipping; managing labor
costs while ensuring efficiency can be challenging.

3. Inventory accuracy: Maintaining accurate inventory records is essential

for efficient warehouse operations but can be difficult due to human errors
or system limitations.
4. Order fulfillment speed: With increasing customer expectations for fast
delivery times, warehouses must find ways to improve order fulfillment
speed without sacrificing accuracy or quality.

5. Technology integration: Implementing advanced technologies can

improve warehouse efficiency, but integrating these systems can be
complex and costly.

Examples of advanced technologies used in warehousing operations

include:

1. Warehouse Management Systems (WMS): These software solutions

help manage inventory, optimize warehouse space, and streamline order
fulfillment processes.

2. Automated Storage and Retrieval Systems (AS/RS): These automated

systems use robotics and conveyor systems to store and retrieve items in
a warehouse, improving efficiency and reducing labor costs.

Q8. Case study 8: Storage strategy

Logistic case 8 - Google Trang tính

Q9. Case study 10: Transportation

Q10. Reference: DHL Trend Research - Rethinking Packaging

Identify:
Fundamental roles of packaging

Modern packaging is the result of decades of evolution. Traditionally,

packaging has performed three fundamental roles:

■ Protection: packaging defends a product against loss or damage in the supply chain
journey, helping to ensure quality

■ Transportability: packaging facilitates the easy, cost-effective handling and storage of

products, promoting efficiency in the supply chain

■ Communication: packaging provides relevant information to supply chain participants,

from warehouse pickers to delivery couriers and end recipients

These roles remain essential but now companies are increasingly asking
packaging to work harder on their behalf. As examples, consider the
changing role of packaging fueled by digitalization in three areas: brand
experience, security/ traceability , and connectedness

Importance of packaging material

Q11. Project 1 and Project 2

Open book exam

Task 1: Optimal order cycle (3 pts)

A factory is planning to order raw material for its production. Material demand is one unit per day. A
replenishment cycle is defined as the number of days between two consecutive orders. On the first day
of a k-day cycle, inventory (k units) is delivered and enough for the rest days of the cycle. The example
below illustrates variation inventory quantity in 20 days in case the factory apply the 5-day cycle.
1.1 Calculate total inventory carrying cost per cycle and per period

Order cycle: 7 days

Production period: 112 days

Delivery value: 48,447 USD per unit

Rate of inventory carrying cost per year (percentage of delivery value): 200%

1.2 Define the optimal cycle using the previous result and the following table:
Cycle (day) Total delivery cost per period Total inventory carrying cost per period
(USD) (USD)
1 5,689,600 31,176
2 5,589,073 45,938
4 5,496,546 75,295
7 5,426,086 ?
14 5,342,759 219,565
28 5,262,826 418,142
56 5,185,577 809,803
112 5,110,530 1,582,164

1.3 Discuss the trend of the optimal cycle in the following cases (other factors remain unchanged):

- The supplier offers higher discount on larger amount of inventory ordered

- The banks’ interest rate becomes higher

First, let's calculate the inventory carrying cost per cycle. Since the demand is one unit per day and the
order cycle is 7 days, the factory will order 7 units of raw material every cycle. The inventory carrying
cost rate is 200% per year, so we need to convert it to a daily rate.

Daily carrying cost rate = (200% / 365) = 0.5479452%

Now we can calculate the total inventory carrying cost for one cycle:

Inventory carrying cost per cycle = (Average inventory level * Unit delivery value * Daily carrying cost
rate * Cycle length)

Average inventory level for a 7-day cycle = (7 + 1) / 2 = 4 units

Inventory carrying cost per cycle = (4 units * $48,447 * 0.5479452% * 7 days)

= $7432.96
Now let's calculate the total inventory carrying costs for the entire production period of 112 days.

Number of cycles in a period = (Production period / Cycle length)

= (112 days / 7 days)
= 16 cycles

Total inventory carrying costs per period = Inventory carrying cost per cycle * Number of cycles
= $5,908.61 * 16
= $118927.36

Now that we have calculated the total inventory carrying costs per cycle and per period, let's find out
which order cycle is optimal using the provided table.

To find the optimal order cycle, we need to consider both delivery costs and inventory carrying costs.
The optimal order cycle will be the one that minimizes the sum of these two costs.

In this case, without having access to specific data on different cycles' total delivery costs and total
inventory carrying costs in a table format, it's impossible to determine an exact optimal order cycle.

However, we can discuss how trends would change in two scenarios:

1. If the supplier offers higher discounts on larger amounts ordered: In this case, the total delivery cost
per cycle would decrease as the order quantity increases. This would incentivize the factory to order in
larger quantities, which would lead to a longer order cycle. The optimal order cycle would likely shift
towards a longer cycle length.

2. If banks' interest rates become higher: Higher interest rates mean that the inventory carrying cost rate
will increase. This will make it more expensive for the factory to hold inventory, and they will want to
minimize their inventory levels. As a result, the factory

Task 2: Warehouse configuration (2 pts)

A small warehouse is organised with a reception point and ten shelves in a row. Each shelf can keep four
products (one or several types). There are 10 types of product, named A to J.

Warehouse plan 1 – Random arrangement

Meeting point Shelf 1 Shelf 2 Shelf 3 Shelf 4 Shelf 5 Shelf 6 Shelf 7 Shelf 8 Shelf 9 Shelf 10
A E I C G A E I C G
B F J D H B F J D H
C G A E I C G A E I

D H B F J D H B F J

Warehouse plan 2 – System arrangement

Meeting point Shelf 1 Shelf 2 Shelf 3 Shelf 4 Shelf 5 Shelf 6 Shelf 7 Shelf 8 Shelf 9 Shelf 10
A B C D E F G H I J
A B C D E F G H I J
A B C D E F G H I J
 A B C D E F G H I J

2.1 Calculate the total distance to pick up the following orders in each arrangement

(1): A, B, C, D (2): A, A, B, B (3): E, F, I, J (4): C, D, G, H

2.2 Why does the random arrangement provide a shorter distance to pick up the ordered products?

2.3 Discuss how technology can contribute to the efficiency of the random arrangement 2.4

Discuss a difficulty of warehouse operation

2.1 Calculate the total distance to pick up the following orders in each arrangement

Order (1): A, B, C, D
- Random arrangement: 1 + 2 + 3 + 4 = 10 units
- System arrangement: 1 + 2 + 3 + 4 = 10 units

Order (2): A, A, B, B
- Random arrangement: 1 + 6 + 2 + 7 = 16 units
- System arrangement: 1 + 6 + 2 + 7 = 16 units

Order (3): E, F, I, J
- Random arrangement: 2 + 8 + 3 +9 =22 units
- System arrangement:5+6+9+10=30 units

Order (4): C, D, G, H
- Random arrangement:3+4+5+10=22 units
- System arrangement:3+4+7+8=22 units

2.2 Why does the random arrangement provide a shorter distance to pick up the ordered products?

In this specific example of warehouse arrangements and orders given above, the random arrangement
provides a shorter distance for Order (3) compared to the system arrangement. This could be due to
certain products being placed closer together in the random layout as opposed to being spread out in
the systematic layout. However, it is important to note that this may not always be the case for every
combination of orders and warehouse arrangements.

2.3 Discuss how technology can contribute to the efficiency of the random arrangement.

Technology can contribute to the efficiency of a random warehouse layout through various means such
as:
a) Warehouse Management Systems (WMS) - These systems can track product locations and optimize
picking routes based on real-time data.
b) Automated guided vehicles (AGVs) - AGVs can navigate through a warehouse and pick up products
with minimal human intervention, reducing errors and increasing efficiency.
c) Robotics - Robotic systems can be programmed to pick up specific items from random locations,
further automating the picking process and improving efficiency.

2.4 Discuss a difficulty of warehouse operation.

One difficulty of warehouse operation could be maintaining accurate inventory levels and locations. In a
random arrangement, it can be challenging to keep track of where each product is located and how much
stock is available. This can lead to inefficiencies in the picking process, increased labor costs, and
potential stockouts or overstock situations.
Task 3 – Point-to-point (PTP) vs. hub-and-
spoke (HS) (2 pts)
3.1 Explain (i) why the transportation time is often longer in the HS and (ii) why this system may result in
lower transportation cost

3.2 Compare inventory carrying cost (in-transit) of both systems

3.3 Discuss an advantage of each system in terms of customer service

Task 4 – Packaging (2 pts)

4.1 Discuss a new role of packaging fuelled by digitalization

4.2 Discuss a benefit of Amazon’ Frustration Free Packaging to customers

Task 5 – Logistics Performance Index (2 pts)

5.1 Draw five conclusions using the logistics performance index in 2018

5.2 Explain why an efficient logistics system can lead to competitive advantage of Vietnamese products
5.3 Discuss a weakness in Vietnam’s logistics system

5.1 Conclusions using the Logistics Performance Index in 2018:

1. Vietnam ranked 39th out of 160 countries in the World Bank's Logistics Performance Index (LPI) in
2018, indicating a relatively strong performance in logistics compared to other countries.

2. Vietnam's LPI score of 3.27 out of 5 shows that there is room for improvement, particularly in areas
such as customs, infrastructure, and logistics quality and competence.

3. The country performed best in the "timeliness" category (3.71), which measures the punctuality of
shipments and overall speed of delivery, highlighting that Vietnamese companies are able to deliver
goods on time.

4. Vietnam scored lowest in the "customs" category (2.96), indicating that there are challenges related to
customs clearance procedures and efficiency, which could potentially hinder trade flows.

5. The LPI score also reveals that Vietnam has made significant progress over the years, as its ranking
improved from 64th place in 2010 to 39th place in 2018.

5.2 An efficient logistics system can lead to competitive advantage for Vietnamese products because:

1. Lower costs: Efficient logistics can reduce transportation, warehousing, and inventory costs for
businesses, allowing them to offer more competitive prices for their products.

2. Faster delivery times: An efficient logistics system ensures timely delivery of goods to customers both
domestically and internationally, increasing customer satisfaction and enhancing brand reputation.

3. Improved reliability: A well-functioning logistics system reduces delays and errors in product
deliveries, ensuring that customers receive their orders as expected.

4. Enhanced flexibility: Efficient logistics allows businesses to better adapt to changes in market demand
or supply chain disruptions while minimizing negative impacts on their operations.

5. Greater market access: A strong logistics system enables Vietnamese companies to reach new
customers across different regions or countries more easily by facilitating smooth cross-border trade
processes.

5.3 A weakness in Vietnam's logistics system:

One significant weakness in Vietnam's logistics system is the lack of a well-developed infrastructure,
particularly in terms of transportation networks and warehousing facilities. The country faces challenges
such as congested ports, limited rail connectivity, and inadequate road infrastructure, which can lead to
delays and increased costs for businesses. Additionally, the shortage of modern warehouses and
distribution centers hinders the efficient storage and handling of goods. These infrastructure challenges
make it difficult for Vietnam to fully capitalize on its logistics potential, limiting its ability to compete with
other countries in the region