Logistics Cost Optimization of Road Freight Shipments in a Consumer Goods Company

In the industry of the case company, transportation and warehousing costs account for more than 10% of the total cost which is more than on average. A Finnish company has an understanding that by sending larger shipments in parcels, they could save tens of thousands of euros annually in freight costs in Finland’s domestic shipments. To achieve these savings and optimize total logistics cost, company’s interest is to find out which is the cost efficient way of shipping road shipments of certain volumes; in parcel boxes or on pallets, and what should be the split volume determining the shipment type. Distribution center (DC) costs affect this decision and therefore they need to be also evaluated to determine the total logistics cost savings. Main results were achieved by executing activity-based costing-calculations including DC and road freight costs to determine the ideal split volume with which the total logistics cost is optimal. Calculations were done for Finland’s DC, separately for two main road freight destinations, Finland and Sweden, which cover 50% of road shipment spend. Data for calculations was collected both manually and automatically from various internal and external sources, such as the company ERP system and logistics service providers’ (LSP) reporting. DC processes were studied in practice and compared to model processes. Currently used freight rates were compared to existing pricing models and freight service tendering process was evaluated by participating in the process and comparing it to the models based on literature. The results show that the potential savings are not as significant as the company hoped for, mainly because of packing work increasing DC labor cost. Annual savings by setting ideal split volume per country would account for 0,4 % of the warehousing and transportation costs of shipments in scope of this thesis. Split volume should be set separately for each route, mainly because the pricing model for road freight is different in each country. For some routes bigger parcels should be sent but for some routes pallets should be used more. Next step is to do these calculations for remaining routes to determine total savings potential. Other findings show that the processes in the DC are designed well and the company could achieve savings by executing tenders more efficiently. Company should also pay more attention to parcel pricing and packing the shipments accordingly.

Development of Project Logistics in Engineering, Procurement and Construction Projects

The aim of this Master’s Thesis is to develop project logistics functions in large scale en-gineering, procurement and construction projects. The background of the research topic is compounded from two separate subjects; OPAL Program and case study of an actual EPC project. The purpose is to examine Project Logistics process in accordance with OPAL Program as well as logistics process in focus EPC project. Both entities are researched by using the case study research methodology. Logistics process of the focus EPC project is described as well as presented and in addi-tion, logistics related findings and observations are introduced. Significant findings and observations are found from logistics costs as well as shipment volume estimations in the early phase of the focus ECP project. A notable finding is also that because goods were transported as readily assembled as possible it caused expensive oversized cargo deliveries. From findings and observation of the focus EPC project it can be derived that logistics has to be involved in the early sales phase in order to receive more accurate logistics cost esti-mations for project deliveries. It is also noticed that in order to obtain savings in logistics costs, oversized deliveries must be avoided.

Optimization of Transportation System by Tailored Logistics Network: A Case Study in Automotive Industry

This thesis aims to redesign the supply chain system in an automotive industry in order to obtain space reduction in the inventory by using tailored logistics network. The redesigning process by tailored supply chain will combine all possible shipment methods including direct shipment, milk-run, milk-run via distribution center and Kanban delivery. The current supply chain system in Nissan goes rather well when the production volume is in moderate level. However, when the production volume is high, there is a capacity problem in the warehouse to accommodate all delivered parts from suppliers. Hence, the optimization of supply chain system is needed in order to obtain efficient logistics process and effective inventory consumption. The study will use primary data for both qualitative and quantitative approach as the research methods. Qualitative data will be collected by conducting interviews with people related to procurement and inventory control. Quantitative data consists of list of suppliers with their condition in several parameters which will be evaluated and analyzed by using scoring method to assign the most suitable transportation network to each suppliers for improvement of inventory reduction in a cost efficient manner.

Improving business processes in a globally dispersed make-to-order supply chain. Case study on outbound logistics in a Multinational Corporation

The purpose of this thesis is to find out how outbound logistics process can be improved by reducing unnecessary waste in a globally dispersed make-to-order (MTO) supply chain. The research problem was addressed by a multinational corporation that aims to find a solution for reducing unnecessary waste in their outbound logistics process. The focus is on customized products that are delivered via sea transportation. Theoretical framework for improving outbound logistics processes in globally dispersed MTO supply chain was created based on business process management, Porter’s value chain theory, value stream mapping and current reality tree. The empirical research was conducted by using constructive approach due to its ability to research a practical problem and to improve the existing practices. The data was collected from ten semi-structured interviews and three non-participant observations. By analysing the data and applying the theoretical framework, five types of waste were detected in the process that were seen to derive from six root causes. Practical solution was constructed to reduce the waste in the process by combining the existing literature with the ideas raising from empirical data. The results of this thesis suggest that a MNC with a globally dispersed MTO supply chain can improve its outbound logistics process by applying activities that enhance internal and external integration, collaboration and coordination, and increase predictability of the process. This research has practical relevance both for the case company as well as for other MNCs with globally dispersed MTO supply chains that aim to improve their outbound logistics processes. This research contributes to the BPM and CRA research by providing an evidence for their applicability in the new context.

Public-private partnership investments in dry ports – Russian logistics markets and risks

The investments have always been considered as an essential backbone and so-called ‘locomotive’ for the competitive economies. However, in various countries, the state has been put under tight budget constraints for the investments in capital intensive projects. In response to this situation, the cooperation between public and private sector has grown based on public-private mechanism. The promotion of favorable arrangement for collaboration between public and private sectors for the provision of policies, services, and infrastructure in Russia can help to address the problems of dry ports development that neither municipalities nor the private sector can solve alone. Especially, the stimulation of public-private collaboration is significant under the exposure to externalities that affect the magnitude of the risks during all phases of project realization. In these circumstances, the risk in the projects also is becoming increasingly a part of joint research and risk management practice, which is viewed as a key approach, aiming to take active actions on existing global and specific factors of uncertainties. Meanwhile, a relatively little progress has been made on the inclusion of the resilience aspects into the planning process of a dry ports construction that would instruct the capacity planner, on how to mitigate the occurrence of disruptions that may lead to million dollars of losses due to the deviation of the future cash flows from the expected financial flows on the project. The current experience shows that the existing methodological base is developed fragmentary within separate steps of supply chain risk management (SCRM) processes: risk identification, risk evaluation, risk mitigation, risk monitoring and control phases. The lack of the systematic approach hinders the solution of the problem of risk management processes of dry port implementation. Therefore, management of various risks during the investments phases of dry port projects still presents a considerable challenge from the practical and theoretical points of view. In this regard, the given research became a logical continuation of fundamental research, existing in the financial models and theories (e.g., capital asset pricing model and real option theory), as well as provided a complementation for the portfolio theory. The goal of the current study is in the design of methods and models for the facilitation of dry port implementation through the mechanism of public-private partnership on the national market that implies the necessity to mitigate, first and foremost, the shortage of the investments and consequences of risks. The problem of the research was formulated on the ground of the identified contradictions. They rose as a continuation of the trade-off between the opportunities that the investors can gain from the development of terminal business in Russia (i.e. dry port implementation) and risks. As a rule, the higher the investment risk, the greater should be their expected return. However, investors have a different tolerance for the risks. That is why it would be advisable to find an optimum investment. In the given study, the optimum relates to the search for the efficient portfolio, which can provide satisfaction to the investor, depending on its degree of risk aversion. There are many theories and methods in finance, concerning investment choices. Nevertheless, the appropriateness and effectiveness of particular methods should be considered with the allowance of the specifics of the investment projects. For example, the investments in dry ports imply not only the lump sum of financial inflows, but also the long-term payback periods. As a result, capital intensity and longevity of their construction determine the necessity from investors to ensure the return on investment (profitability), along with the rapid return on investment (liquidity), without precluding the fact that the stochastic nature of the project environment is hardly described by the formula-based approach. The current theoretical base for the economic appraisals of the dry port projects more often perceives net present value (NPV) as a technique superior to other decision-making criteria. For example, the portfolio theory, which considers different risk preference of an investor and structures of utility, defines net present value as a better criterion of project appraisal than discounted payback period (DPP). Meanwhile, in business practice, the DPP is more popular. Knowing that the NPV is based on the assumptions of certainty of project life, it cannot be an accurate appraisal approach alone to determine whether or not the project should be accepted for the approval in the environment that is not without of uncertainties. In order to reflect the period or the project’s useful life that is exposed to risks due to changes in political, operational, and financial factors, the second capital budgeting criterion – discounted payback period is profoundly important, particularly for the Russian environment. Those statements represent contradictions that exist in the theory and practice of the applied science. Therefore, it would be desirable to relax the assumptions of portfolio theory and regard DPP as not fewer relevant appraisal approach for the assessment of the investment and risk measure. At the same time, the rationality of the use of both project performance criteria depends on the methods and models, with the help of which these appraisal approaches are calculated in feasibility studies. The deterministic methods cannot ensure the required precision of the results, while the stochastic models guarantee the sufficient level of the accuracy and reliability of the obtained results, providing that the risks are properly identified, evaluated, and mitigated. Otherwise, the project performance indicators may not be confirmed during the phase of project realization. For instance, the economic and political instability can result in the undoing of hard-earned gains, leading to the need for the attraction of the additional finances for the project. The sources of the alternative investments, as well as supportive mitigation strategies, can be studied during the initial phases of project development. During this period, the effectiveness of the investments undertakings can also be improved by the inclusion of the various investors, e.g. Russian Railways’ enterprises and other private companies in the dry port projects. However, the evaluation of the effectiveness of the participation of different investors in the project lack the methods and models that would permit doing the particular feasibility study, foreseeing the quantitative characteristics of risks and their mitigation strategies, which can meet the tolerance of the investors to the risks. For this reason, the research proposes a combination of Monte Carlo method, discounted cash flow technique, the theory of real options, and portfolio theory via a system dynamics simulation approach. The use of this methodology allows for comprehensive risk management process of dry port development to cover all aspects of risk identification, risk evaluation, risk mitigation, risk monitoring, and control phases. A designed system dynamics model can be recommended for the decision-makers on the dry port projects that are financed via a public-private partnership. It permits investors to make a decision appraisal based on random variables of net present value and discounted payback period, depending on different risks factors, e.g. revenue risks, land acquisition risks, traffic volume risks, construction hazards, and political risks. In this case, the statistical mean is used for the explication of the expected value of the DPP and NPV; the standard deviation is proposed as a characteristic of risks, while the elasticity coefficient is applied for rating of risks. Additionally, the risk of failure of project investments and guaranteed recoupment of capital investment can be considered with the help of the model. On the whole, the application of these modern methods of simulation creates preconditions for the controlling of the process of dry port development, i.e. making managerial changes and identifying the most stable parameters that contribute to the optimal alternative scenarios of the project realization in the uncertain environment. System dynamics model allows analyzing the interactions in the most complex mechanism of risk management process of the dry ports development and making proposals for the improvement of the effectiveness of the investments via an estimation of different risk management strategies. For the comparison and ranking of these alternatives in their order of preference to the investor, the proposed indicators of the efficiency of the investments, concerning the NPV, DPP, and coefficient of variation, can be used. Thus, rational investors, who averse to taking increased risks unless they are compensated by the commensurate increase in the expected utility of a risky prospect of dry port development, can be guided by the deduced marginal utility of investments. It is computed on the ground of the results from the system dynamics model. In conclusion, the outlined theoretical and practical implications for the management of risks, which are the key characteristics of public-private partnerships, can help analysts and planning managers in budget decision-making, substantially alleviating the effect from various risks and avoiding unnecessary cost overruns in dry port projects.

Logistics service provider's strategy renewal

Tässä diplomityössä tutkitaan strategian määrittämistä. Tutkimus keskittyy logistiikkapalvelualan yrityksen strategian uudistamiseen ja strategiatyön kehittämiseen. Tutkimus pyrkii selvittämään miten yritys pystyy parhaiten saavuttamaan strategiset tavoitteensa. Lisäksi pyritään selvittämään miten yritys pystyy luomaan ja ylläpitämään kilpailuetua. Tutkimus toteutetaan tutkimalla ensin strategiaa, strategiaprosessia ja logistiikkapalvelualan liiketoimintaa kirjallisuudessa. Empiirinen osuus toteutetaan pääosin yrityksen johtoryhmän jäsenten kanssa strategiatyöpajoissa. Yrityksen hallitus asettaa strategiset tavoitteet ja myös hyväksyy projektin eri vaiheiden tulokset. Strategisissa analyyseissä otetaan huomioon sekä ulkoinen että sisäinen näkökulma, jotta saadaan kattava kuva yrityksen liiketoimintaympäristöstä sekä yrityksen vahvuuksista ja heikkouksista. Analyysejä hyödynnetään strategisten vaihtoehtojen muodostamisessa sekä yritys- että liiketoimintatasolla. Strategiset valinnat tehdään sen perustella, miten eri strategiset vaihtoehdot tukevat asetettuja strategisia tavoitteita. Tutkimuksen tuloksena määritellään yrityksen strategia, joka myös dokumentoidaan. Lisäksi luodaan strategisen suunnittelun ja johtamisen prosessi, joka mahdollistaa reagoinnin liiketoimintaympäristössä tapahtuviin nopeisiin muutoksiin.

Integration of Logistics Systems across Companies’ Borders

The growth of the companies working in the Logistics area has raised the need for using several Logistics systems that can meet the increased requirements in business processes. Different companies may use one or more Logistics systems internally and may use different Logistics systems that other collaborated companies use. Furthermore, these Logistics systems are required to communicate with each other in order to process and manage the flow of the information. Integrating the Logistics systems is beneficial as it allows interaction between the whole systems and services instead of the need to replace them. In addition, it improves the efficiency, lowers the possible errors in the supply chain, reduces the costs and facilitates the access of suppliers and customers to the information. This in turn leads to better relationships with both suppliers and customers. Usually local integration of several Logistics systems is not very difficult, especially that mostly the companies buy their system from a single source. However, the case is different for integrating several logistics systems across the companies’ borders. In this case, there are many factors play major roles in limiting the integration, such as using different systems and different output. This thesis highlights these factors and challenges, demonstrates some solutions for the logistics inter-organizational integration from the perspective of information systems and presents some approaches for integrating these systems. There are many studies about the integration inside a company but fewer studies focused about the technical side and the information systems integration across company’s borders or what is called inter-organizational integration. This study is a literature review that aims at illustrating the challenges, the requirements and some approaches in inter-organizational logistics information systems integration of logistics systems across the companies’ borders.

Effectiveness of personal planning for residents re-entering the community during the facility initiative in Ontario

This paper reports on the relocation of people with intellectual disabilities (ID) from large-scale provincially run institutions that took place in Ontario as part of the Facility Initiative. Three case studies were examined in order to report on this process as experienced by those who lived and worked through it. Specifically, the planning process conducted by the Ministry of Community and Social Services (MCSS) to assist each person with hislher transition to community living was examined using the current standard of practice in person- centered planning approaches. Effectiveness was evaluated as the ability to apply a person-centered approach across settings and people, as well as what factors facilitated or hindered its application. Results show that, in general, the personal plans do not appear to reflect the pre-transition experience of the person. Also, the transitional planning process did not appear person-centered nor facilitate further person-centered planning in the community.

Personal Support Workers' Experience of Collaboration in a Long-Term Care Facility in Rural Ontario

The growing complexity of healthcare needs of residents living in long-term care necessitates a high level of professional interdependence to deliver quality, individualized care. Personal support workers (PSWs) are the most likely to observe, interpret and respond to resident care plans, yet little is known about how they experience collaboration. This study aimed to describe PSWs’ current experiences with collaboration in long-term care and to understand the factors that influenced their involvement in collaboration. A qualitative approach was used to interview eight PSWs from one long-term care facility in rural Ontario. Thematic analysis revealed three themes: valuing PSWs’ contributions, organizational structure, and individual characteristics and relationships. Collaboration was a difficult process for PSWs who felt largely undervalued and excluded. To improve collaboration, management needs to provide opportunities for PSWs to contribute and support the development of relationships required to collaborate.

A comparative study of the resilience of coal logistics chains in Australia, South Africa and Canada

Au cours des dernières années l'industrie du charbon a connu un essor important. L'importance du charbon dans l'économie mondiale provient d'une demande mondiale soutenue et de niveaux de production en hausse constante. De ce fait, le nombre élevé d'importateurs et d'exportateurs est à l'origine d'un système d'échange complexe où la compétition est féroce. En effet, un nombre grandissant de pays importateurs se partagent les sources d'approvisionnement tandis qu'un nombre limité de pays exportateurs s'efforcent de répondre à la demande tout en essayant de s'accaparer le plus de parts du marché mondial. L'objectif de cette recherche s'inscrit dans ce contexte en démontrant les bénéfices associés aux chaînes logistiques résilientes pour tout acteur de l'industrie soucieux de devancer la compétition. Une analyse de la logistique de l'industrie du charbon permet entre autres de se pencher sur les questions suivantes: Comment les infrastructures influencent-elles la résilience d'une chaîne logistique? Quels risques est-ce que les catastrophes naturelles présentent pour une chaîne logistique? Comment la gouvernance influence-t-elle la résilience d'une chaîne logistique? Une chaîne logistique représente le trajet effectué par un bien ou produit au cours de son cycle de vie, du point d'origine au point de consommation. Ceci étant dit, le meilleur moyen de régler les problèmes inhérents aux chaînes logistiques est de maintenir de hauts niveaux de résilience. Cette recherche évaluera donc la résilience de chaînes logistiques du charbon des industries australienne, sud-africaine et canadienne. Pour ce faire, trois variables seront étudiées: les infrastructures, les catastrophes naturelles et la gouvernance. La comparaison des trois cas à l'étude se fera par un nombre défini d'indicateurs (12 au total) pour chacune des variables étudiées. Les résultats de cette recherche démontrent que la résilience des trois cas à l'étude se ressemble. Cependant, certaines chaînes logistiques détiennent des avantages comparatifs qui améliorent grandement leur résilience et leur compétitivité. Plusieurs sujets de recherche pourraient être utilisés pour compléter cette recherche. L'analyse comparative pourrait être appliquée à d'autres chaînes logistiques pour vérifier la viabilité des résultats. Une analyse semblable pourrait également être entreprise pour le secteur en aval de la chaîne logistique. Finalement, une méthodologie basée sur des interviews pourrait ajouter un regard différent sur les questions abordées.