1.

Modern supply chain versus traditional distribution channels

Traditional distribution channel involves a chain starting from the producer to wholesaler
to retailer down to the customers. On the other hand, modern supply chain involves integrated
supplier, manufacturer, retailer and customers.
According to Reid and Sanders (2011), supply chain management involves the flow of
materials and information from suppliers to the final customers where everyone in the network is
working together to achieve better quality, service delivery and reduced cost. On the other hand,
according to Baker et al (2014), in early 1950s and 1960s, manufacturers manufactured and
retailers retailed showing unplanned and unformulated distribution system. There’s also no
relationship between various distribution functions and the goal is to make the product available
to the intended customers. From these concepts, it can be drawn that the goal of traditional
distribution channel is merely about distributing the products to the customers without attention to
the operations before that. In contrast, modern supply chain gears toward meeting the changing
customers’ needs as well as targeting operational efficiency and profitability. It is also obvious
that in early times traditional distribution channel involves less coordinated independent
businesses. Chain participants are operating individually with different business goals in mind. On
the other hand, modern supply chain has strong collaborative relationship among participants in
the network. They usually support each other’s businesses.
2. Role of logistics in supply chain operations
Supply chain operations involves conversion of raw materials into a finished products and
delivery to customers. Logistics vital role is in the management of materials and distribution as
part of the whole supply chain. Logistics positioning on making the correct materials and finished
goods available at the right time and at the right place is crucial in building customer relationships
and reducing cost.
This proposition is supported by Harrison and van Hoek (2008) who claimed that the
satisfaction of customers critically depends on the management of material and information flow
in the supply chain. When the right materials are purchased and converted to finished goods as
required by the customers then there will be customer satisfaction. When correct goods/parts are
distributed on time, then cost is reduced through efficiency. Any flaws in information flow
(logistics) will lead to waste (labor, inventory, time) and therefore loss of money. This means,
effective logistics control will significantly help in overall cost reduction. And, it will lead to a
better customer service.
3. Procurement, manufacturing and customer relationship performance cycles in logistics
perspective
Procurement performance cycle includes activities that ensures there is enough supply of
raw materials and parts in the manufacturing or distribution facilities at the right place and at the
right time. Unlike CRM, it deals with shipments inbound or from suppliers and involves large
shipments following EOQ or target safety stocks. On the other hand, manufacturing as related to
logistics involves movement of parts from raw materials to finished goods following production
schedule. In contrast to procurement and CRM, interaction is within the firm. Lastly, customer
relationship management as related to logistics involves activities such as processing orders and
delivering these orders to customers. It involves physical transfer or movement of finished goods
from firm’s manufacturing plant or distribution center to customer’s end. It manages great number
of outbound shipments. Also, there’s information flow from customer) to the company generated
from customers’ orders which is used in forecasting. The forecast is then used in production and
material scheduling.
According to Baker et al (2010) modern definition of logistics, it concerns on the efficient
transfer of goods from supplier for consumption of manufacturer in a cost-effective way and
providing acceptable customer service. He further stated the logistics focus on cost-effectiveness
and customer service in his book. This model is then supporting the proposition that procurement,
manufacturing and CRM involves flow of materials – inbound from suppliers, within the firm and
outbound to the customers. And that, the information flow from customer to the firm is being used
to design efficient production schedules and distribution. While procurement, manufacturing and
CRM includes many logistics activities, the time the cycle is done differs. For one, it is because of
the participants involve in the interaction. Supplier’s number is generally less than the number of
customers. Also, the inbound shipments require more time than outbound shipments. The cost of
maintaining procured materials is sometimes less that the cost of maintaining finished goods.
4. Transactional and relationship marketing
Transactional marketing is a marketing strategy that focuses mainly on sales or single point
of sale (POS) transactions while relationship marketing focuses on building up long term
relationship with the customers and other business stakeholders like suppliers, distributors etc. The
emphasis of logistics performance is anchored on this difference. For transactional marketing,
logistics performance will be attributed to indirect support such as ease of ordering, system
flexibility and etc. As for relationship marketing, emphasis of logistics performance will be on
direct support such as on-time delivery.
According to Kotler and Armstrong (2012), selling process is transaction oriented with the
goal of closing specific sale with a customer, while, company seeking to serve customer over a
long period of time uses mutually profitable relationship. This model supports the proposition that
transactional marketing focuses on single point of sale while relationship marketing aims at
building long lasting relationship. The goals also differ as to the nature of the strategy, transactional
marketing aims at increasing profit and revenues through promotion or sales. This tactic involves
relatively short term interaction with the customers. Since it focuses on sales, it involves
facilitating fast transactions to accommodate more sales. In contrast, relationship marketing’s goal
is earning and keeping loyal customers in able to gain market share and securing future sales. It
involves delivering superior customer value and quality service.
5. JIT and logistics performance
Just-In-Time (JIT) system requires the goods (raw material, semi-finished or finished
goods) to be available right when it is needed. Because of this, logistics performance plays a vital
role in able for JIT system to be successful. Logistics enable the movement of material up to end-
customer.
This proposition is supported by Baker et al (2014) in his Logistics and Distribution
Management book that explains the objectives of JIT, that is, the production of perfect quality
goods that the customer wants when the customers want while practicing elimination of waste
throughout the production and distribution. Logistics, being the network synchronizing the flow
of materials and the flow of information across the supply chain, any delay in materials and
information will hamper the operation of JIT. Logistics inefficiencies will destroy the goal of JIT
to provide the requirements on time. Inaccurate material or information will result to waste (over
production, waiting time, processing and etc) which is major enemy of JIT. Also, as JIT is a pull-
system, accurate logistics signal is needed to control movement of materials. Lastly, JIT requires
configured logistics structures in able to cater variety of service and products to produce.
6. Demand change, service level, uncertainty, safety stock and order quantity.
 Variation comes from many aspects of supply chain. In this case, there is variation in
demand or sudden change in demand that will hit backwards – distributor, manufacturer and
suppliers – in the form of shortage in materials or finished goods and rush production schedule
affecting manufacturing resources such as labor, capacity and money.
Demand uncertainty is driving the need for safety stock to cover the unpredictable demand
fluctuations. Safety stock facilitates rise in customer service level by making the products available
when customers need it. Meanwhile, order quantity is the regular quantity ordered by manufacturer
to suppliers. This is determined by forecasting customer requirements taking into account safety
stock and frequency of ordering. The customer demand is affected by service level.
According to Baker et al (2010) demand variation can lead to stock-outs and it may be
prevented by having safety stock. Further, he stated that demand forecasting error leads to too
much or too little inventory. This then supports the proposition that change in demand at the retail
level will cause material shortages and resources to distributors, manufacturers and suppliers. If
the change is increase in demand, impact will be more on shortages. If the change is decrease in
demand, then the impact will most likely be on excess inventory. It can be drawn from here that
service level somehow alleviates demand uncertainty. When demand certainty is lessen, then it
will reduce the safety stock or and inventory cost.
7. Consolidation solutions and strategies to achieve on-time distribution and delivery.
In this case the manufacturer can use break-bulking method or the load consolidation
through third-party logistics strategy.
According to Sanders (2014), manufacturer can send truckload (TL) deliveries to distant
warehouse and break it down for less-than-truckload (LTL) deliveries to local customers. On the
other hand, transportation crossdocking involves consolidation of shipments form LTL or small
package industries. These theories supported the argument of using break-bulking method and load
consolidation through third party to gain economies of scale and reduced transportation cost. In
break-bulking, the manufacturer ships in Full Truckload (FTL) to warehouse (break-bulking
facility) situated near the sales location or the customers, and then break the shipments using Less
Truck Load (LTL) for local delivery. By making the product stored in warehouse near or in the
local market, the delivery time to customers is reduced because of the proximity of distribution
origin to the destination. With the reduced delivery time and consolidated big shipment to
warehouse, reduced cost then follows. As for load consolidation through third party, the
manufacturer ships in less-than-truckload to a near third party (shipper) offering consolidation
services, and then the third party ships in FTL the sorted products according to destination. This
way, waiting time to make FTL on the part of the manufacturer is avoided, and the delivery time
is quicker since third party shipper is using load consolidation per destination.
8. Future of transportation modes
No, with the progress of technology, it is foreseeable that new modes of transportation will
immerse.
According to Heizer and Render (2011), five basic modes of transportation/distribution are
truck (road) transportation, railroads, airfreight, waterways and pipelines. From here, it can be
drawn that the five basic modes are the most straightforward means of transporting
freight/passengers. While it will always be via land, water and air, modes of transportation will
continuously evolve in the future. This is because of the continuous drive of companies to gain
competitive advantage. As noted by Christopher (2011), one way of gaining competitive advantage
is through delivering superior customer value wherein elements of time, service, cost and quality
requires continuous innovation. This ofcourse includes transportation. As we enter the era of
automation (industry 4.0), artificial intelligence (AI) and internet of things (IoT), there are many
innovation possibilities like smart cars, driverless cars etc. One of the interesting development seen
in the internet is the discovery of Hyperloop technology. It is a new form of transportation – pods
carrying passenger/freight – that looks like hybrid of rail and road transportation modes. It does
not have wheels like the traditional train, but it travels through tubes or tunnels free of air resistance
which makes it at high speed ~ travelling up to 750 miles per hour.