Operations, Logistics and Supply Chain Management

Operations, logistics, and supply chains are essential enablers in a modern economy. At the same time, operational, logistics, and supply chain systems are changing fundamentally as a result of technological and societal developments, requiring both researchers as well as skilled professionals to rethink them and to incorporate new functionalities. This in turn poses new demands on the way vocational and academic learning, as well as on-the-job training programs for operations, logistics, and supply chain management are designed. This book is an attempt to serve students, researchers, and business practitioners by providing information and background material at various levels. In this introductory chapter, we discuss the scope and structure of the book. Reading this chapter is recommended to determine how to use the book in classroom lectures and seminars, gather background information or for studying specific topics. In each chapter, suggestions for further reading and resources for the growth of lateral and critical thinking are provided in order to spread the learning curve—sometimes even slightly beyond the operations, logistics, and supply chain management domain. Readers are encouraged to explore the additional material for their own development and to build general learning and research capacities.

In this chapter, we discuss major technological and societal developments that determine our lives to a large extent, not in the least the way we organize our resource needs and hence logistics and supply chains. After outlining these developments globally, we give some examples of truly disrupting business models that are fundamentally changing our logistics and supply chain operations. Next, we look in more depth at the manifestation of the digital revolution in manufacturing and supply chains, as well as the many opportunities that these technologies offer in addressing a number of major societal challenges.

Operations, logistics and supply chains are catalysts in any modern economy and therefore essential contributors to economic prosperity and societal welfare. This chapter briefly sketches the origins of the field and presents a case study on the importance of a balanced logistical organization from the 17th century, after which formal definitions and objectives are introduced. In addition, we discuss relations with other management areas as well as with other science domains such as law or social and political sciences. Topics and concepts in this chapter are discussed at an elementary level, aiming to provide an introduction to the topical field of operations, logistics, and supply chain management.

Purchasing is the function in a firm responsible for the professional management of a firm’s interface with the supply market, to ensure its supply with the necessary goods and services provided by other organisations, i.e. suppliers. Industrial firms spend more than half of their turnover on supplies, which is why the purchasing function has become a central success factor for modern firms. Purchasing can be distinguished into strategic sourcing (supply planning, supplier selection and contracting) and operative procurement (material ordering, expediting and paying). The activities of a purchasing department can be organised in a purchasing year cycle, which repeats on an annual basis. Next to ensuring a safe and timely supply, purchasing has the target to achieve good costs as well as to contribute to innovation and improve the strategic position of a firm. For that several tools have been developed, such as the Kraljiĉ-Matrix (which helps to develop sourcing tactics), the lever analysis (used to systematically achieve cost savings) or the preferred customer approach (used to achieve competitive advantages through smart purchasing).

This chapter starts with a basic definition of manufacturing and a brief history on how the discipline developed throughout time, from initial craftsmanship via mass production to flexible and digital manufacturing. In this chapter, we use the term manufacturing to describe the process of converting raw materials or purchased components into physical products. We discuss basic performance measures to assess a manufacturing company’s efficiency and effectiveness. A major part of this chapter is devoted to a categorization of functions that together constitute an organizational framework for manufacturing, with a brief treatment of the essential elements of each function (advanced). Finally, we discuss the future of manufacturing by means of a short review of some important innovations induced by either technology progress or societal demands (state-of-the-art). We do not discuss prominent manufacturing planning and control systems, for this the reader is referred to Chap. 12 of this volume.

Logistics and Supply Chain Management as a subfield of management science have their roots in the production and distribution of goods. In this chapter the basic objectives, principles and links about marketing and their relationship to logistics and supply chain management are outlined. The first—basic—part addresses the definition, logistics interaction, basic concepts, and a case study regarding marketing as a management philosophy and principle for corporate leadership. Here, “distribution channels” and “time to market” are two marketing topics particularly relevant to logistics. The advanced part of the chapter outlines detailed instruments for marketing strategies and market research. The final state of the art part of this chapter describes modern forecasting methods as well as innovation fields, including a further case study regarding future trends.

International supply chains require the movement of goods across borders. While moving goods internationally is already operationally complex, the regulatory requirements that need to be met complicate this further. In this chapter, we explain how and why international regulatory issues enter the supply chain. At the basic level, we discuss in some detail concepts such as arm’s length trading, origin, customs declaration and the role of trade agreements. We then introduce, as part of the advanced level, the basic principles of customs supervision in supply chains. Most customs regulations contain principles that are designed to facilitate international business and allow for the postponement of duty and tax payment to the right time and place. In the supply chain literature, these concepts are virtually unknown, but they play an important role in the design of international supply chains in practice. We also introduce a new vision on customs enforcement that was developed as a spin off of several European research projects. In this vision, so-called trusted tradelanes are introduced as the next step in supply chain compliance. We end with the state of the art discussion on the design of trusted tradelanes and the necessary and sufficient conditions that need to be met to achieve this trusted tradelane status. Throughout the chapter, we have included case studies from practice to illustrate specific insights, or offer a basis for further discussion.

It is hard to envision the rapid globalization of industry and supply chains without a similar rapid advancement in information and communications technologies (ICT). The increase in organization size and complexity that occurred as businesses expanded their operations across the globe required ever more powerful computer systems to effectively manage operations. Similarly, the expansion of business supply chains needed more advanced communications technologies to enable organizations to manage them properly. With each advance in ICT and each expansion of business operations, the tight relationship between ICT and business growth has become even more important. This chapter provides an introduction to the various systems and technologies that are being used to manage modern global businesses and their supply chains. Since there are myriad different systems and technologies available to industry today, a single chapter does not provide sufficient space for an in depth discussion of any of them. What the chapter does attempt to do is introduce the reader to the various technologies that are currently being used by industry to manage their extended business (basic and advanced sections) and provide insights into some of the new and exciting technologies that will play an important role in the interaction between ICT, business and society in the future (state-of-the-art section).

Supply chain management offers companies a great opportunity to work with all three dimensions of sustainability—profit, planet and people. The level of achievement depends upon how well these three are addressed both up-stream towards the supplier base and down-stream together with customers and consumers (basic). Actionable sustainability requires managers to relate root causes to impact of sustainable performance, to engage relevant with actors, and to determine system boundaries for their actions (advanced). Further, converting goals into actions is likely to require logistics service innovations, which can range from ad hoc to radical innovations (state-of-the art).

Future innovations in logistics and supply chain management are driven by technological, regional, economic and social changes as well as sustainability and resource restrictions. They will not occur without sufficient attention for the human contribution, in particular the qualification, competence and motivation of the workforce in the logistics domain. Worldwide, about 50 million people—or the entire population of South Korea—are employed in the SCM, logistics and transportation sectors. Consequently, human resource and knowledge management plays an important role, more so when considering demographic developments (ageing, migration) and increasing globalization. Whereas in the past, many blue-collar jobs in logistics such as truck driving merely required a basic school education and rudimentary qualification levels, these jobs now require increased competences due to improved technology interaction, e.g., barcode and RFID systems, fleet management or toll and truck steering concepts and finally artificial intelligence applications. The same is true for many white-collar jobs in logistics, exemplified by the increasing number of university graduates employed in the sector. This is especially true for specific fields such as logistics information technology, contract logistics and supply chain innovation and design, which in turn leads to the question of how to assess qualitative and quantitative competence levels in the SCM and logistics sector. Such an analysis example is provided here with the Berufswertigkeit concept (reference framework for competence levels). This may lead to a new paradigm in HR and knowledge management for SCM and logistics: whereas past education was mainly driven by formal qualifications and therefore personnel groups (white-collar/blue-collar), future concepts may focus on an individual analysis of gaps and potentials based on elaborate evaluations. In addition, modern concepts like edugaming are outlined as examples for future qualification and training concepts for logistics personnel.

In this chapter, we discuss selected concepts and decision support models for inbound logistics. Inbound logistics comprises all activities that secure supply for manufacturing, assembly, and retail operations. The associated information and materials flow involve different strategic and operational decisions that will influence transportation, handling and inventory costs. They depend on various parameters, such as the variety and volumes of material requirements, the supplier base and respective locations. Section 11.1 introduces the basic concepts, key performance indicators, and problem parameters. Section 11.2 presents advanced decision support models for the design, implementation and operation of the concepts. Section 11.3 includes a case study. Selected state-of-the-art research and recent advances are discussed in Sect. 11.4.

In this chapter, we discuss essentials of the best-known manufacturing planning and control systems. Each of these systems has its merits but each one also requires a number of conditions to be fulfilled in order to perform near-optimally, often without being explicit about these conditions. The focus of this chapter will be on discrete manufacturing planning and control with limited attention to process industries. We begin the discussion at a basic level with the most elementary result of efficiency-driven production, the Economic Production Quantity, and an extension to non-stationary deterministic demand. Next, we continue with an introduction to Materials Requirements Planning (MRP) and Manufacturing Resources Planning (MRP II), followed by a discussion of capacity oriented Hierarchical Production Planning (HPP). On a more advanced level, we introduce an entirely different approach based on the adoption of the Just-in-Time (JIT) and Lean Manufacturing (LM) philosophies. JIT and LM are more than just other planning models; they propose an entirely different approach to organizing manufacturing and assembly processes. A case study on the Toyota production system helps to understand key concepts of Lean Manufacturing. We continue with the concepts of Workload Control and the Theory of Constraints, which can be seen as means to keep internal lead times stable and hence predictable. Finally, we provide a glimpse on state-of-the-art and future developments, with a focus on digital and cloud manufacturing.

The chapter discusses the important role of packaging as part of a company’s market and operations management. Packaging has been evolving for centuries and continues to do so, forcing consumers to change their habits. From simple protection tools to safeguarding carried items, packaging has become a marketing and communication instrument as important as contents. E-commerce and online-retailers growth change again the packaging role during purchasing, bring it back as mere logistics and protection tool. In the first basic section, a brief history of packaging is described. Starting from the most important steps, which characterize packaging from the very beginning, in prehistory, followed by the commercial discoveries of the Middle Ages, the industrial revolution, until the present day with the newest and most ingenious packaging solutions. With a focus on marketing, design, logistics, environmental impact, and costs, a complete reference framework underlining how each of these aspects change along the supply chain steps is presented. The advanced and second section of the chapter presents case studies, models and methods for packaging costs evaluation and unit load design. Logistics and packaging are fundamental business leverages for a modern company, therefore any improvements can represent opportunities and generate profits. The chapter ends with a discussion about state-of-the-art research in packaging: the last decade showed a strong development of the e-commerce market, and the central role of packaging changed. Furthermore, the evolution of technologies, materials and Internet Communication Technologies in the last few years have improved the packaging world as well creating, for example, intelligent packaging that can communicate with consumers or interact with products, allowing the traceability of a single item within the entire supply chain. Packaging is a fundamental resource for end-customers and all actors involved in the entire supply chain.

Distribution and outbound processes are important for many companies because they directly connect them with the customers in a value chain. Market and customer demands relative to quality, speed as well as information and service orientation of logistics processes matter in terms of overall evaluation and satisfaction. At the same time, there are significant cost advantages or disadvantages. In the trade and retail sector, this operational field is especially of high strategic importance and closely connected to e-commerce or multi-channel strategies. It can be said that all the excellence as well as product and service quality built up throughout the value chain can be delivered or destroyed within these last miles of distribution, point of sale, and customer contact. This chapter outlines the core definitions and objectives for outbound logistics and distribution management (Sect. 14.1) before providing an extensive case study for this specific topic (Sect. 14.2). It then provides the operational concepts for distribution in Sect. 14.3 (basic level). In Sect. 14.4 (advanced level), it describes differentiations in terms of multi-echelon inventory models and multi-objective concepts (service levels, cost optimization, batch and emergency deliveries etc.). Current trends and developments such as sharing economy and customer integration concepts as well as cooperation and new technologies are elaborated in Sect. 14.5 (state-of-the-art). Future topics for distribution management research are discussed briefly and further reading materials are listed in Sect. 14.6.

In this chapter, topics of interest in the design, analysis, management, and operations of warehouses are discussed. An overview of how warehouses have been in use since the dawn of civilization and how they have changed recently is first provided. Then, the basic elements of a warehouse are discussed and illustrations of the elements of a warehouse, including the materials-handling systems currently used in warehouses are presented. A simple model for determining the warehouse footprint is discussed. A case study involving a consumer goods manufacturer, followed by advanced models for allocating products to a warehouse (and thereby determining the size of the main functional areas in a warehouse), storage policies, corresponding models for the two policies, as well as routing strategies for order pickers are also presented. The chapter is concluded by providing a discussion of state-of-the-art topics in warehousing.

This chapter provides an overview of concepts within the field of closed loop supply chain management. First, using some qualitative frameworks we categorize and characterize the many different closed loop supply chains that are found in practice. Then, we identify key processes and potential bottlenecks that need to be addressed for efficient and effective management. Several modeling approaches are presented, moving from very basic via more advanced to state-of-the-art models that make complex trade-offs and generate more refined insights. The mathematical models presented are meant as simple illustrations of broader concepts. Hence, this chapter is certainly not meant as a comprehensive review of the logistics and operations management literature within the field. Rather, we hope that it can inspire newcomers to the field and specialists who would like to broaden their view.

This chapter begins with a basic taxonomy of facility location models. This is followed by the formulation of five classic facility location models: the set covering model, the maximum covering model, the p-median model, the fixed charge location model and the p-center problem. Advanced: Computational results on a new set-covering problem instance with 880 nodes representing 880 population centers in the contiguous United States are provided and a few counter-intuitive results are outlined. This is followed by a state of the art discussion of multi-objective problems in location analysis and the importance of multiple objectives in designing distribution networks. Models that integrate inventory planning into facility location modeling are then outlined. Finally, the chapter ends with a discussion of reliability in facility network planning.

Process planning plays a fundamental role within modern industrial facilities in that it is devoted to select the manufacturing processes and parameters and the sequences that are needed to convert a part from the initial to the final form. Evaluating the quality of a process plan from both a technological and an economic perspective becomes vital. Indeed, a valid process plan not only ensures the required quality of manufactured parts, but also reduces the production cost. The present chapter is aimed at presenting the essential concepts and the historical evolution of the process planning approaches, starting from a general point of view and then introducing the most important and recent real-world applications. In addition, it introduces the fundamental aspect regarding the interactions between process planning and production scheduling, pinpointing the strengths and weaknesses of the available proposed solutions. Doing so, it addresses students, researchers as well as practitioners.

In this chapter, we present algorithms for a number of functions of the production planning framework presented in Chap. 5 . We focus on models for integrated Capacity and Master Production Planning, Job Planning and Resource Group Loading, and Shop Floor Scheduling and Control. At the Master Production Planning level, we exploit a simple Linear Programming formulation to set appropriate capacity levels and in particular to decide whether a temporary expansion of capacity is needed (e.g., through overtime work). With the same formulation, we decide what end-items are to be produced in which period. By applying the lead time offset procedure that is the heart of Materials Requirements Planning, and using the Bill of Materials information, the same is done on the level of part manufacturing (basic level). Essential in the above procedure are two parameters, the effective overall capacity of each manufacturing shop and the final assembly department, often indicated as the maximum throughput, and the lead times needed to complete a part or product in each department. A significant portion of these lead times may in fact be waiting times in front of individual workstations that are busy. To minimize these waiting times, workload control norms are often used which in turn may influence the effective capacity. An essential question then is what these workloads should be in order to match a desired throughput and production lead time. That question is answered by exploiting a Closed Queueing Network approach that explicitly determines the relation between a preset work-in-process level, throughput and the resulting lead times (advanced level). Finally, we exploit a detailed shop floor scheduling procedure, called the Shifting Bottleneck approach, that basically serves to ascertain that internal due-dates, following from the above defined internal manufacturing lead times are indeed met (state-of-the-art).

We discuss inventory systems in an independent demand setting, where demand over time is modeled as a stationary stochastic process. We begin with some basic notions and definitions on inventory management, followed by a discussion of well-known (and applied) control systems. Under periodic review and a linear cost structure, it is known that the optimal control policy has a critical level structure, hence we analyze such critical level policies in detail. After that, in an advanced section, we turn to multi-echelon or multi-stage systems. We present a complete analysis of the decomposition result proven initially by Clark and Scarf, and its analogue in distribution systems, i.e., systems with an arborescent instead of a linear structure (state-of-the-art). Computational aspects are briefly discussed after which we close with some guidelines for further reading.

This chapter provides an introduction to transportation management. In Sect. 21.1 we describe the basic elements of transportation network design, comprising the selection of modes, transportation units, loading units, and the timing of transportation. A brief introduction to intermodal transportation is used to illustrate the relevance of transportation management in modern logistics. With Sect. 21.2 we move to the advanced topic of orchestrating transportation via intermodal networks by introducing the concept of synchromodal transportation. Furthermore, it highlights several issues specific to contemporary long-haul transportation and last-mile transportation. Section 21.3 presents various state-of-the-art research trends related to the management of transportation in integrated networks. We discuss applications of multi-criteria analysis, multi-agent simulation, and conclude with research directions for the construction of the Physical Internet.

Capital goods, such as manufacturing equipment, trains, and industrial printers, are used in the primary processes of their users. Their availability is of key importance. To achieve high availability, maintenance is required throughout their long life cycles. Many different resources such as spare parts, service engineers and tools, are necessary to perform maintenance. In some cases, e.g. for trains, also maintenance facilities are required. Maintenance service logistics encompasses all processes that ensure that the resources required for maintenance are at the right place at the right time. In a broader sense, it also includes maintenance planning and design-for-maintenance. We first discuss capital goods and the requirements that their users have, which leads us to basic maintenance principles and the structure of typical service supply chains. Next, various relevant decisions and supporting theories and models are discussed. Finally, we discuss the latest developments within maintenance service logistics.

Additive Manufacturing (AM) is rapidly gaining interest as a highly innovative manufacturing technology, having many advantages over more conventional manufacturing methods. These advantages include the ability to produce very complex structures that are relatively easily customized to specific user requirements. The fact that AM services become affordable for small companies or even for consumers offers possibilities for decentralized manufacturing, downstream in the supply chain. In addition, AM allows for high degrees of flexibility, both in product design and manufacturing, as a result of using smart CAD systems that may be based on accurate scanning technologies. The ability to work with low setup times and costs and to largely eliminate work in progress inventories while maintaining a high degree of supply chain responsiveness makes AM a promising alternative for low-volume, high-value items. In this chapter, we outline the basics of AM technologies, after which we discuss at a more advanced level its impact on the supply chain. Next, we turn to spare parts delivery in after-sales service supply chains; these slow moving parts are often mentioned as ideal candidates for AM. In a state-of-the-art report, we provide a methodology for the identification of spare parts that may appear promising candidates for the application of AM. We conclude with a field study conducted at a service provider in the aerospace industry.

This chapter describes future technologies in Intralogistics and Material Handling. Starting from a description of today’s material handling systems (including two case studies) and an analysis of their shortcomings we derive desirable properties for future material handling systems (basic section). The necessary functions for these systems are explained and samples of modern material handling systems are presented which at least partially implement these properties (advanced section). The state of the art of the challenging functions is explained and references for further reading are given.

In this chapter, we introduce supply chain security and describe how governments as well as the logistics industries, shippers and manufacturing industries attempt to safeguard supply chains against theft, pilferage, terrorist attacks or unforeseen events that harm the seamless, reliable and efficient flow of goods. We define the concept of supply chain security and describe the context (basic part). Next, we elaborate how organizations manage corresponding supply chain risks by using models, methodologies and common practices (basic). Then, we discuss the government perspective and describe how supply chain security is embedded in laws and regulations and how business and government collaborate in joint supply chain security programs (advanced). In addition, we describe innovative control and supervision models that maximize the potential of collaboration with trustworthy supply chain partners that are in control of activities across their supply chains (state-of-the-art). This chapter ends with an elaboration of the digitization of global trade and concomitant cyber security threats (state-of-the-art).

Over the last decade e-commerce has grown to a multi-billion business. “Online-shopping” and “Electronic payment” are typical expressions that are associated with e-commerce but they only describe the non-material communication between buyer and seller. The manufacturing and transportation process from raw materials in production facilities to a finished product at the customer location cannot be accomplished via the internet. It requires the solid handling of goods. E-commerce technologies can support the administration that goes alongside with this process but they do not replace the required physical treatment. This chapter takes a look the interdependencies of logistics, supply chain management and e-commerce. The first section explains how e-commerce, supply chain management and logistics are linked whereas the second section provides an overview of advanced technologies that enable the transportation of goods along the supply chain. A selection of state-of-the-art business and technology trends is presented in the third section.

Within a Multi-Agent System (MAS), multiple autonomous agents negotiate, cooperate, and perform actions based on the goals and preferences of the (real-world) entities they represent. This chapter provides an introduction into MASs. In Sect. 27.1, on the basic level, we introduce the concept of agents and MASs, address their history, formally define MASs, and provide an overview of associated design methodologies. We illustrate one of these design methodologies using a case study of the use of Automated Guided Vehicles (AGVs) for trailer docking at a distribution centre. Next, we specifically focus on the use of MASs for manufacturing and logistics. First, in Sect. 27.2, on the advanced level, we discuss MASs for controlling the logistics processes within a company. We provide the motivation for using MASs in these environments, briefly review the literature on this topic, and present a case study on MAS control of AGVs in an industrial bakery. Next, in Sect. 27.3, on the state-of-the-art level, we focus on MASs to align the processes between different companies. We provide a brief overview of existing applications, describe the main challenges involved in inter-company MASs, and present a case study on MASs in the Port of Rotterdam.

Automation, machine learning and predictive analytics all adhere to the same objective: improvement of operations, logistics, and supply chain processes by means of enhanced information technology applications and machines. This chapter outlines definitions and connections to operational and strategy questions in supply chain and logistics management for this new and evolving field of research as well as business application. Therefore, first basic developments and definitions of AI applications are described after which a case study is provided. Subsequently, applications of AI in intralogistics as well as core conceptual issues and problems are outlined (basic level). Applications in transportation and elaborate concepts and interactions with other management areas are discussed at a more advanced level. Finally, AI applications in supply chain design as well as an outlook for AI developments relating to logistics are described (state-of-the-art level), followed by suggestions for future topics and further reading material.

Green Logistics is no longer just a temporary fashion, but a topic that has been discussed by experts for many years. What is new is, on the one hand, the increased social and political awareness and, on the other hand, the transfer of green core statements to entrepreneurial problems. Not least the economic crisis that began at the end of 2008 reinforced the change in attitude towards a more sustainable economy. As a result of the crisis, the cost situation but also the competitive environment has intensified for companies, which are now also concentrating on areas such as waste disposal logistics, which had previously not been taken into account. Concrete climate protection strategies, for example, to prevent CO2 emissions, are therefore being actively pursued by industrial companies, particularly by companies with high transport volumes. For the transport industry as such, which is strongly affected by rising fuel prices, more efficient transports mean not only a reduction of CO2 emissions, but also cost savings in economic terms. Accordingly, the basic methods and principles of Green Logistics and their relationship to Logistics Social Responsibility and Sustainable Supply Chain Management are outlined in this chapter. The advanced part of the chapter describes detailed instruments for Green Logistics strategies and coordination as well as provides a technical overview regarding latest green transportation developments, including a case study regarding green waste disposal logistics. The final state of the art part of this chapter discusses Green Logistics strategies as integral part of sustainable business models, including a further case study and further reading advice.

This chapter explains some basics of identification and some common methods already integrated into the industry for automatic identification. After a fundamental description of coding, a very brief explanation of barcode systems is presented. Radio Frequency Identification as the focus of this chapter is described afterwards. The basic structure of this technology and its working principle is explained. Different components of RFID systems are described in more detail. Furthermore, RFID technologies are classified based on the transponder type and frequency range. Fields of application of RFID systems are reviewed. Then, a simple guideline for the selection of a proper RFID system is mentioned. In the last part of this chapter, some challenges that RFID system designers are facing such as the use of on-metal and chipless tags are reviewed. Finally, some aspects which are currently on the edge of technology and therefore the focus of much research, are discussed.

The Physical Internet is a new paradigm inspired by the Digital Internet. The aim of the Physical Internet is, like the Digital Internet, to interconnect heterogeneous network services. The three main motivations for such a system are to better serve the new fragmented demand while increasing efficiency up to an order of magnitude and resilience at the same time. A case study illustrates the basic principles and concludes the basic sections. In the advanced sections, the required changes are described. Such a breakthrough in performance will not be achieved without major changes of components of current supply chains. New building blocks such as containers, information protocols, open hubs and marketplaces are described to illustrate the end vision. We already have several business cases from start-ups in line with limited but genuine implementation of the Physical Internet principles. In the state of the art sections, the potential unleashed by interconnected networks is explained with two main examples: container routing and decentralized inventory management.