ACADEMY OF ECONOMIC STUDIES OF MOLDOVA INTERNATIONAL [628064]
ACADEMY OF ECONOMIC STUDIES OF MOLDOVA INTERNATIONAL
ECONOMIC RELATIONS INTERNATIONAL ECONOMIC RELATIONS
DEPARTMENT
COSTIUC ALEXANDRU
OBJECTIVES AND ELEME NTS OF INTERNATIONAL
LOGISTICS: GLOBAL AN D NATIONAL PRACTICE
GRADUATION PAPER
SPECIALIZATION: WORL D ECONOMY AND IER
Admitted to final presentation Author :
Head of IER Chair: Student: [anonimizat]. EMREI -145
Dr hab .,univ.prof BORIS CHISTRUG A COSTIUC ALEXANDRU
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__||___||______20__ Scientific coordinator :
Dr hab .,univ.prof ., NICOLAE TAU
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CHISINAU 2017
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CONTENTS
DECLARATIE PE PROPRIA RASPUNDERE…………………………………………… …3
ABREVIATION LIST ………………………………………………………………………………………….…… ..4
INTRODUCTION……………………………………………… ………………… ……….…..5
CHAPTER I : FUNDAMENTAL BASE O F LOGISTICS: DEFINIT ION, EVOLUTION,
STRUCTURE… …………………………………………………… …………… ……………..7
1.1 Logistics concept: definition and evolution ……… ………………………………………..7
1.2 The structure of Logistics system, characteristics of supply chain ……………………….10
1.3 Measuring logistics cost and performance ………………………………………………..19
CHAPTER II: GLOBAL AND NATIONAL LOGISTICS: OBJECTIVES, STRATEGIES
AND CHALLENGES …………………………………………………………………… .….25
2.1 Objectives and strategies of national and global logistics …………………………………25
2.2 Challenges faced by logistics at both national and global levels ………………………….30
2.3 Logistics in the Republic of Moldova: Key problems and main companies …………… ..34
CHAPTER III: MANAGING THE SUPPLY CHAIN OF THE FUTURE. NEW
SOLUTION FOT THE REPUBLIC OF MOLDOVA ………………………………… …41.
3.1 Managing the supply chain of the future ……………………………………………… …..41
3.2 The Republic of Moldova’s next step to a successful Logistics ……………………… ….53
CONCLUSION…………………………………… ……………………………… ..…… ..…66
BIBLIOGRAHPY………… …………………………………………………………… …….69
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Declarația pe propria răspundere
Subsemnatul (a),___________________________________________________________
absolvent: [anonimizat] _________________________________________ al Academiei de Studii
Economice din Moldova, specialitatea ____________________________________________,
declar p e propria răspundere că teza de licență pe tema _______________________________
_____________________________________________________________________________
_____________________________________________________________________________
____ ________________ _________________________________________________________
a fost elaborată de mine și nu a mai fost prezentată niciodată la o altă facultate sau instituție de
învățământ superior din țară sau din străinătate, iar exemplarul prezentat și înregistrat la cate dră
corespunde integral cu varianta electronică plasată în sistemul Anti -plagiat. De asemenea, declar
că sursele utilizate în teză, inclusiv cele din Internet, sunt indicate cu respectarea regulilor de
evitare a plagiatului: – fragmentele de text sunt repr oduse întocmai și sunt scrise în ghilimele,
deținând referința precisă a sursei; – redarea/reformularea în cuvinte proprii a textelor altor autori
conține referința precisă; – rezumarea ideilor altor autori conține referința precisă a originalului.
Numele Premulele
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Semnătura
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ABBREVIATIONS
1. ICD-Inland Container Depots ;
2. EBRD -The European Bank for Reconstruction and Development ;
3. CFM -Central Freight M anagement ;
4. DHL -International shipping, courier and packaging service;
5. UPS -United Parcel Service;
6. WB-World Bank;
7. EIB-European Investment Bank;
8. KPI-Key Performance Indicator;
9. IFI-International Financial Institutions;
10. TMS -Transportation Management System;
11. GDP – Gross Domestic Product;
12. SCM – Supply Chain Management
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INTRODUCTION
Discovered by economy from the ancient time and confirmed by contemporary economy,
logistics seems to be not only the heart of the company’s strategy but also the root of the
performance in the operational actions of the contemporary activities. Companies are obliged to
find original and efficient solutions for managing the flows of goods and ser vices from the inner
phase until the final destination. The exegeses of a hardly competition environment impose a
redefinition and organizing of all functions of the logistical chain. From the point of organizing
the supply chain, companies are facing doub le challenges made by industrial reconfiguration and
the evolution of distribution chains. The pertinence of logistical solutions and the management
of the demand are dependent of the informational system of logistics that provides information in
both si des. A considerable development of these technologies will offer a huge bonus for those
managers that will know that .
Any successful business leader will acknowledge the crucial importance of effectively
organized logistics. They understand that i mplementing seamless logistics is a key element in
keeping pace with customer demands and outperforming competitors. It does not matter what
size is your company or how much you want to grow or to expand your activity, logistics will to
cut out your costs and time you spend to move products from one point to another.
If you look at effective transport to be right, you will get such a feeling that it seems to be
simple. It actually requires a lot of special knowledge, skills and professional management of
logistics in order to m ake this look effortless. Do not let the result of good logistics to fool you;
it will takes a lot of specialized assistance to get it to flow smoothly. Effective improvements in
the transportation service helps logistics to reach it s global objective to decrease or to avoid
totally the waste of materials and time. This helps supply chain professionals to transport
products and deliver them in the right place at the right time, which is a priority for any
successful participants in logistics business.
In my opinion logistics now a day the logistics domain represents one of the main
braches of each economies in the world. Logistics is one of the most important and dynamic
sector just because it is one of the first sectors that shows cha nges every single day. This flexibly
of the logistics stimulates the competition, increase the quality of services and reduce the costs of
operation.
The main goal of this paper is to analyze the real value of logistics in the contemporary
econo my, its structure, evolution and the main goals of it. In order to get this analyses be worthy
it is directed to following objectives:
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To distinguish and to understand the concept of logistics, to understand the area of its
action;
To understand the princ iple of calculating the cost of logistics and the way to reduce
it;
To identify main goals and strategies for a successful logistic company;
To highlight the main challenges that a modern logistics face;
To assess the role and problems of national logistic s of Republic of Moldova;
To determine main strategies or ways to improve logistics in both national and global
logistics.
The accomplishment of these objectives allowed to structure the present paper into three
chapters, each of the treating a certain ar ea of the researched topic.
First chapter: FUNDAMENTAL BASE OF LOGISTICS: DEFINITI ON, EVOLUTION,
AND STRUCTURE attempts to emphasize the theoretical moments regarding the term logistics
by showing different definitions, concepts and their evolution. In addition, it helps us to
understand the cost and efficiency of logistics activity in day -by-day activity.
Second part named GLOBAL AND NATIONAL LOGISTICS OBJECTIVES;
STRATEGIES AND CHALLENGES elucidates the way that logistics mangers implement
different ty pes of strategies that helps logistics to develop itself and the economy as well. Also
pointing main objectives shows us the tendency of logistics to bet getter and better. In the same
way, it will help us to understand the way that logistics works in our country and its main
problems.
Third Chapter: MANAGING THE SUPPLY CHAIN OF THE FUTURE. NEW SOLUTION
FOT THE REPUBLIC OF MOLDOVA shows us the ways that we have to take into
consideration in order to improve the efficiency of our logistics, on both levels gl obal and
national. A specific attention is given to logistics in the Republic of Moldova, and specially the
remarks that have to be taken into consideration in order to give it a change to reach another
level of profitability and development.
Degree of re search: The term of logistics, represent an important part of the world economy.
That is way this concept was a central point of different researches in both national and
international levels, in publications of different intentional organizations such as World Bank
and a well spread theme for different thesis. At the international level, this concept was and it is
still discussed by Michel M. Hugo, Charles C. Poirier, and Martin Christopher and so on.
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CHAPTER 1: FUNDAMENTAL BASE OF LOGISTICS: DEFINITIO N, EVOLUTION,
STRUCTURE.
1.1 Logistics concept: definition and evolution
The term of logistics was used for the first time in military. In the beginning of XX
century, logistics was considerate that branch of the war art, that were responsible for moving
and maintaining weapons.
During the Second World War II, all the participating countries elaborated and used
different model of logistics system for delivering all necessary tools and equipment in the right
place, at the right time. In present, the t erm logistics is widely used for defining the activity of
material, technical and medical insurance of army, here including and transporting them.
The importance of military logistics operation are almost every time important. For
example, during the war in Iraq, an armored subdivision of the US army had used 5000tone of
ammunition every day, approximatively 2.1 million liters of fuel and more than 80 thousands
portions of food daily. Also in army’s environment, the term of logistics is used also for
choos ing all the members of it.
After the Second World War, the concept and methods of logistics where stopped for a
while on a global prospective, on a background of an economic development. All productive
companies had their goal to deal with a high demand of goods on postbellum period. The success
in the business was due to suppling the market with all necessary goods, mainly in quantitative
branch. The economic recession during 50’s and the minimizing companies’, profit made all
businesspersons take care of controlling all expenses in order to make their business more
efficient. Due to this, a big part of them started to take into consideration all their physic
potential of distribution. The concept of physical distribution, were widely used during d ecades,
until the term Logistics started to be used more and more in the university and business’s
vocabulary.
The concept of logistics had couples of names during years, which was used:
Distribution
Physical distribution
Technical and material s upply
Marketing logistics
Logistic distribution
Management of materials
Supply chain management
Industrial logistics
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Business logistics [2; p.4]
Systematically, the term Logistics expanded in the economic activity and in other braches
too. In 80’s of XX century, for example in Utopia, efforts for diminishing hunger, forced
government to use Logistical principles for food distribution. A good proof is the manual named
“Getting it there – A Logistics Handbook for Relief and Development “, edited in 1987 by World
Vision International.
The American Association of Marketing had propose since 1948 a definition for physical
distributing witch consist in “manipulating and moving goods from the place of making them to
the place where they are consumed”.
In the USA, National Council of Physical Distribution Management (NCPDM) a
professional association played a huge role in defining physical distribution. For example, as
1972’s version, physical distribution it is a term that describes an activity o f efficient controlling
the way of row materials and finished goods from the factory to the final destination. The
definition says that this term covers a wide range of activity like type of service that is provided,
the manipulation of goods, overview of orders, stock control, choosing the right place for new
factories, building and controlling a warehouse, transportation of goods, type of transportation
and much more of them.
Logistics had evaluated and is still evaluating, and from the moment whe n it put a base
on working principles of science, it gain a world recognition, spread as religion. It is to be
understand that logistical management under economic aspect; it shows the art of pacification
and conducting the logistics in the process of prod uction, starting from the selection of suppliers,
indoor moving of goods in the company and the distribution itself.
Understanding of this domain, into a company means the knowing of buying behavior of
company, the management of stocks, planning and con trolling the merchandise, management of
transport and distribution.
Logistics represents science and effort optimization tools in different braches as:
transports, hospitals, conquering cosmic space, business negotiations, from company’s logistics
to national logistic, form national to European one and until global one. It became an important
component of management. The main logic of Logistics shows us the principle in which the sum
of national optima is not equal with global ones.
AFNOR (As sociation Francais de Normalisation) defines logistics as a function of witch
aim is satisfaction of needs, expressed in the best economic conditions for company, at a
determinant level.
CEE/ONU and CEMT (Conceil Europeen des Ministres des Transpo rts): Logistics is a
management process of supply chain in the most general meaning. This chain can include supply
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of row material necessary for production, delivery to warehouse and distribution centers,
manipulation, and final distribution at consumption point.
In the opinion of Transport Department of the USA, logistics is the planning process,
implementing and controlling of flows and efficient and effective storing of goods and services
and relative information from the origin point until the cons umption point, in the scope of
satisfactions of customer’s needs.
According to the British Encyclopedia [21] logistics, imply coordination of a separate
number of activities. In 1991, The Council of Logistics management of the USA had defined
logist ics as a process of pacification and flow controlling, efficient, and effective storing of
goods and services. In some companies, all these activities are placed in the only one logistics
department (responsible for management, control and pacification, th e company would contact
with another company in executing logistical services, known as Third party Logistics). What is
for business logistics, these are associated with firms, which moved a big quantity of goods, as
are producers of electronics or retail chain markets.
The explicative dictionary of Romanian language defines logistics in two types:
1. Ensemble of movement activities, of organization and supply witch permit the function
of army
2. Methods of functional organization of a company.
In English language, Logistics defines the art and science of managing and controlling the
flows of goods, energy, information and other resources form the source of production to the
market. It implies the integration of information, transport, storing and manipulat ion of materials
and packaging.
Oxford English (8) dictionary defines logistics as following: a branch of military science
that has as its intention to buy, maintain and transport all the goods and personnel. So here, we
can distinguish two funda mental forms of logistics: one is trying to optimize a fluent flow of
goods through a system of transport and stocking nodes and the second one is the coordination of
resources for doing this. Generalizing, Logistics is an activity that offers services for
administration the flow of goods that use all the necessary resources.
In this meaning, Logistics includes all activities that harmonize the time and the goods
properly by groping them. Therefore, Logistics is defined through integral planning, organiz ing
and controlling all flow of goods, information from the suppliers (from creation) to the final
consumer, also recycle and throwing them away.
The specialty literature defines logistics through 6P or 7P that means the right quantity
(potrivit) in the right goods (potrivite), at the right time with the right quality at a right price, in
the right place with the right information.
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The term of logistics in the specialty literature was also used as distribution, physical
distribution, industrial logistics, supply management and logistics management. Most often used
terms in the last years for defining logistics are logistics, physical distribution and logistics
management.
One of the main definition of logist ics belong to M. Christophe r [3] (1992). “Science that
concerns with strategic organization of supplying, distributing and storing goods, choosing the
most efficient way for marketing that should bring the maximum profit at the minimum costs.
As Ph. Kotler [4; p.13] said: “plannin g, implementation and controlling all physical flow
of goods from the production mode to final destination, so that all the client requirements will be
satisfied and it will be profitable”. The goal of logistics is to create supply chains that means
physic al flows of goods from suppliers to customers, with small costs as possible; it is know that
the weight of this in the final price is about 40 -50 %.
As Ph. Kotler thinks [5], logistics besides the activity of moving goods, consists in other
activities as:
Planning the production and the level of stocks:
Programming the production;
Supplying
Outside storing
As a tool of marketing, logistics tries to supply the right goods, in the right quantity, at
the right place, at the right moment with minimal co sts that means maximization the level of
service and minimization of costs for physical distribution. None of all physical distribution
flows cannot meet both goals simulatiously. It is known that a high level of logistics service
includes: big stocks of goods, high quality transport, more warehouses and so on, with a direct
link with high costs. A minimum cost of distribution means: cheap transportation costs, small
stocks, small level of warehouses.
A point of view accepted in specialty literatur e considers that logistics includes
distribution of goods and services and goods management. The concept of logistics also mean
the process of planning and controlling of physical distribution, of row materials and stocks of
goods. This point of view ident ify logistics with flow of goods and information that passes
through all goods form their initial stage to their final customer. The management of goods in
this case represent all the inflows in the productive firm, while the distribution represent all
flows from the final point of production to the customer.
1.2 The structure of Logistics system and the supply chain characteristic
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Logistic system is made of an assembly of activities being in a strong connection, all of
the should contribute for reaching the marketing policy, in between these activities, packaging,
reception and sending goods.
Managing this system and its successful integration in the process of reaching the goals
represents a complex task and it is hard to achieve. All activities conn ected with logistics are
extremely different; they are realized in different moments and places in the lifecycle of the
product.
The decision making process in logistics have to take in consideration some important
elements. Firstly, activities from logistic chain wanted to insure an efficient flow form the origin
to the final destination. For example, making an order for suppling with goods seems not to have
anything in common with transporting it, but both of them wants to deliver goods in time , in
required quantity to the right place requested by customer. Secondly, a decision that strikes a
specific domain of logistics, automatically can affect another decision regarding physical
distribution. A decision made in logistical branch can be felt o n the other functional department
of the company. Just a systematic point of view can insure the connection of all components of
physical distribution in one single process.
From all activities, that makes the logistical system, the most known are t he following:
transportation, storing, sorting, expedition and receiving goods, and the flow of information.
Below we will characterize some of them:
a) The transportation of goods is considered the most important part of logistics. Therefore,
it holds almost 2/3 from all costs. Choosing the most efficient way to transport goods
takes in consideration some factors like: availability of cars in the required zone, costs of
transportation, time of transportation, all the criteria that a good has.
b) Decision regarding the stacking goods it is also important in logistics, as this decision
has the second weight in the total costs.
c) Another important factor in the logistic chain is storing goods. In real life, not all
companies has its own warehouse, of ten they just rent spaces from other agents that
activates in such domains.
d) Physical manipulation makes a huge impact on efficiency of logistics. Decisions like
determination of optimal quantity of goods, allocation of required space for storing and
so on characterize the manipulation
e) Informational flows is also an important component of logistical efficiency (all
informati on about the distribution [6];
The most important logistical activities are:
a) Goods transportation – the most important component.
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The transportation means the following activities:
Choosing the best means of transport
Choosing the most suitable transport company
Choosing the transport way
Programming goods
b) Managing stocks of goods includes:
Making policies for stocks of row materials, materials and final goods
Choosing the mix of goods
Determining the security stock and the way of re -suppling.
c) Main activities of storing goods are:
Choosing warehouse place
Determining the number of warehouses
Storing goods in warehouse
d) The objectives of good manipulation are:
Minimization of manipulation cost by efficient use of warehouse space, using the
pallets and containers for example
e) The packaging activities are:
The required design for packaging
The resistance of packaging during transportation a nd using the product
Supply – is the process of acquisition of row materials, space parts and so on, needed for
achieving logistical goals. The component of logistic system, supply, represents the relations
established with clients. Supply does not mean on ly buying process, but also transport activities,
the management of stocks and so on.
The contribution of logistics in in the production process is to insuring the companies
with all needed materials in the required time for production.
Physical distribution – this component of logistical system includes activities that gives
the quantity of goods needed, at the right time, in the right place.
The efficiency of logistics means the correlations of supplying, physical distribution and
the activities inside and outside the company, relations with customers. The integration of these
three areas it is possible through informational flow. The information exchange within the
company and outside of it allows the daily planning and controlling of activities.
In the vision of Michel Porter, the value chain includes two categories of activities:
Primary
Supporting ones
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Therefore, the primary activities are grouped in the following way:
Indoor logistics – receiving, stocking, and distribution of goods
Production – transforming inputs in final goods
Outdoor logistics – delivering the goods
Marketing and sales levels
Service – maintain the goods
From the theory value chain, we can distinguish the role of logistics within a company; it
includes two ou t five primary activities that add value to the product or service.
Corresponding to Porter’s classification, supporting activities are:
Supplying, respectively buying new resources
Technological development (research and development )
Human resource mana gement
The infrastructure of company (all departments)
The concept of value chain can be used for identification of competitive advantage in the
middle of growing of market competition.
Through its control, value chain can give solutions for redu cing costs in inflows and
outflows.
The task of each company is to analyze its costs and performances regarding each activity
of value creation and to find possibilities of improvement, analyzing and competitive
competition.
In the ca se when costs are situated in the inflow zone, the company can use some of these
measures:
Negotiating of some smaller prices with suppliers or changing then
Using similar resources at smaller costs
Saving in transportation process
In the situation when costs are higher in the production zone are required some measures as:
Improvement of production technology
Re- projecting the goods
In addition, in the situation when the costs are high in outflow zone, the measures are:
Negotiating some better conditions for delivery
Choosing favorable distribution chain
Promoting new products through new strategies
Through the analyzing the cost of these activities and of the value, it can be obtained
solutions for increasing competitive advantage. The concept of value c hain is useful for logistical
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managers from transportation domain and storing, if they can contribute on these activities.
For identifying of specialized domain of distribution, logistics of goods in the context of
the general logistics of a company it is required the examination the concept of product logistics
and supporting logistics.
The product logistics is the total physical and informational flow of goods associated to
the whole cycle of production and distribution from the suppling with row material to the
stocking goods at resellers.
The domain on logistics has the following activities:
1. Services for clients
The research had examine the services for clients in big companies and defines, “as a
philosophy towards the client, which include the analyses of all marketing mix and their
connection with logistical activities, to obtain the optimal cost”.
Marketing experts, often evaluates the level of client service, in the channels of distribution,
helped with following parameters: accessibility, c ommand cycle, the communication between
customer and the seller
The accessibility represents the most important measure of client service. It refers to the stock
that made the object for a command cycle. The accessibility of stocks is expressed by following
indicators:
The number of outflow to the number of total goods
The number of goods delivered to the number of goods ordered
The value of transported goods (%), to the total value of goods ordered
The number of completed orders, to the number of o rders
Command cycle refers to the time duration between the creation of orders and the delivery
moment.
Communication refers to the ability of the company to provide prompt information regarding
the content of the order, transportation, return co nditions, product substitution and the needed
information for customer.
2. The command process and the delivery preparation
The elements of command process are grouped in the following way:
Operational elements, arranging the order, preparing the stocks and I nvoices
Communication elements – modification of orders, sending goods and check and
correct all the appeared mistakes
The element of credit and income, finding the most convenient way for discounting.
3. Communication distribution
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Nowadays, the success in business activities requires a complex system of communication.
Communication should be placed between:
Company, suppliers and customers
Major functional components – marketing, production, logistics, finance and
accounting.
The variety of logistical activities as services for clients, transportation, storing.
Different components of logistical activity (flow control)
4. Inventory and controlling
5. Demand prognosis – estimation of quantity of products in different markets
6. Transpo rt. A major component for a logistic process is the process moving goods form
producer to final customer.
7. Storing. Products should be stocked and stored.
8. Choosing the place for factory and storing. Strategical location of factories and
warehouses as close r as possible to markets, can contribute to reduce costs for
transportation.
9. Manipulation , related to flow of row materials and technology of transportation.
10. Acquisition , procurement of all necessary things for logistical process
11. After -sale services , all t he processes related to maintenance of products and so on.
12. Packaging , two main activities: logistical and marketing functions.
13. Waste elimination ;
14. Goods refund
Logistics follows the integrity of goods flow controlling in the company’s strategy. In this
way, the logistics can cause:
The growth of company, for example the strategy implies a perfect control of
logistical problems
The control of costs, it can be obtained through a better knowing of costs of products
when a company holds an integrated logistics.
The possibility to internationalize some activities of the company, the analyses of
logistics allows the company to point it attention on main activities
Optimizing the flow of goods, through putting standards
Diversification of the activity of the firm, the control of logistical chain allow the
entity to enlarge its activity;
The flexibility of the company due to the evolution and modernizing of the whole
activity of the company.
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As logistics is a growing domain, so we are assists to a change of logistic s to a tactical
activity. In this way, logistics expands its activity outside of company and to highlight t he
concept of supply chain. [7].
Supply chain it is known in literature as provision chain, delivery chain, which implies all
activities that has a product lifecycle. This concept of logistic chain beside suppliers, customers
and specialized companies and Forth party logistic providers. It has evolutinated in a supply
chain management, which consists in strategical coordination of all tradi tional activities within a
company and in between companies in logistical chain, in the aim of improving the long -term
perfor mances of logistics in general.
The transition of logistics from internal part of a company to an external one, in the top of
it with the concept of supply chain, was influenced by some factors as:
The evolution of ratio between industry and commerce
The evolution of informational technology
The intensification of competition
The extensi on of globalization process [8]
Supply chain management (SCM) was defined as:” a process oriented in buying,
producing and delivering products and services. It has a large domain, which includes sub –
suppliers, suppliers, and internal operations. The term on SCM was invented by consulting
compa ny “Booz Allen Hamilton in 1990”. (Arnold Kransdorff)
SCM is an important source of improving the efficiency of the company due to the
integration of logistics in the company, managing the supply chains of the partners with the aim
to create a value a dded for final clients .
Scheme 1.1 : The edifice of SCM
Source : Florea N., Clipa C., 2005
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The roof is the main scope of SCM – competitiveness and the ways – services for clients.
Competitiveness can be improved in many ways like reducing costs, offering the highest quality
of products and services. It is based on two pylons: integration of a circuit of organization and
the coordination of information and the financial flows.
A simple example of SCM can be made of five main parts:
Plan, it is a s trategic part of SCM for administrating resources witch are necessary for
products and services;
Source – choosing the suppliers from which will be obtained goods and services
needed for creating the good, price formation and delivery process
Product – it is the step of production, planning of all necessary activities for
production, packaging and delivery preparation
Delivery – this part contains receiving order creation form customers, development
of warehouse networks, choosing curriers.
Refund – implies the creation of a service for receiving damaged goods and support
for clients that have problem with bought goods. The collaboration in supply chain
and in extended supply chain is important.
SCM consists in improving in administration of flows that starts from the “supply of
supplier” until the client client. Between the partners that compose the logistic chain are three
categories of flows:
Physical flows – oriented form the bottom to the top.
Informational flows – that circulates in both sides, f ollowing physical and financial
flows;
For fully using the supply, chain is to be controlled five elements essential of configuration:
The strategy of operations
The strategy of outsourcing
Distribution strategy
The strategy of offered services
Assets st rategy
Decisions regarding these elements will determine the global logistic strategy. These
elements compose an assembly that can make out of logistic a strategic advantage. Choosing the
mode of obtain of goods determine the strategy of operations. This determine the needs of
human resources, the way of operating the factories, warehouses and the management of
receiving order. There are more possibilities of selling goods: stock production, order production
and order configuration and the concept of order .
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We can speak about two -management system for supply chain and mainly: “Lean supply
chain management” and “Agile supply chain management”.
Table 1.1 Alternative supply chain
Lean Supply chain
management Agile Supply chain
management
Main goal Satisfaction of demand in the
efficiency conditions at a
small costs Rapidly response to
unforeseen ord er in the sense
of minimization of stocks,
risks of not selling
Production strategy Maintaining the high medium
rate of productivity To produce in the limits of
security stocks
Stock strategy Made a big turnover and
minimization the stock level Insuring the security stock
though the un assembled
parts and not for finished
goods
Time reply for a order Cut it until it doesn’t affect
the cost Aggressive investing in
reducing stocks
Selection of distributors It means the cost and the
quality of services Means the speed, flexibility
and the quality of services
Source: Adaptarea dupa Harsi son, Chistropher si VanHoek
A supply chain includes all activities associated with the transfer and the movement of
goods form the stage of row material t o the final customer. It includes a variety of companies
form that that process row material and to that that are selling. In addition, SC includes all types
of companies hired in transport, warehousing, processing of information and materials. A supply
chain can be managed in two ways: integrated and fragmented.
An integrated supply chain management is concentrated on the relations, on the flow of
information and the flow of materials, for reducing costs and improve the flows. Firms that adopt
supply c hain management are seeking for integrate its logistics, supplying, operations and the
functions of marketing with other member of SC for materials, information to have a smooth
flow. SCM is based on partnership and cooperation. Without these it will not b e possib le the
integration of efforts.
For reaching the real potential of supply, chain management is needed of integration not
only in the company, but al so with the external partners.
The scope of SCM is to satisfy customer needs, reachi ng a high performance and to
identity all, the ways through witch companies continue to learn and to grow.
19
The objectives of supply chain management is to reduce the waste, time compressing,
flexibility and reducing the unit cost. All organizations that seeks to compete with industry
leaders have to improve their mode of measuring performance.
SCM is an important source of improving the firm efficiency through insuring integration
of logistics between firms. SCM includes all the networks and develop s trategies to invest and to
deal with suppliers.
Advantages of implementing of logistic chain are:
Material are presented just where it is needed and the necessary quantity;
Reducing stock level and the storing cost;
Rationalization of transports;
Improving the planning of orders.
Disadvantages of implementing of logistic chain can appear:
In the existence of a high number of small suppliers;
In the existence of a big number of small customers.
Logistics represent a dynamic domain that faced a lot o f transformation caused by
economic environment. A supply chain represent a network of suppliers. Production companies,
warehouses and distribution channels organized for acquisition of row material for transforming
it in products and to deliver it to the customer. Planning at a strategic level of a supply chain
implies decisions of configuration of network, number, placement, capacity. Planning at the
tactical level of operations from logistical chain implies decision referring to acquisition,
processing a nd the distribution of goods.
Companies are looking for creation a supply chain more competitive with the
improvement of value, to reduce the global costs. The objective that rules all the efforts in a
logistical chain it is the growth of competitiv eness through insuring some services accepted by
clients at a minimum cost.
The improvement of services can be done in two ways:
Development of organization’s integration and elimination of useless activities
Better coordination of flows
Supply chain mana gement have a task to integrate the organizational unities, to coordinate
all the necessary flows for meeting the customer requirements, with the aim to improve the
competitiveness of the chain, as a whole.
1.3 Measuring logistics cost and performance
Many pro blems at the operational level in logistics management arise because all the impacts of
specific decisions that are not taken into account throughout the corporate system. Too often
20
decisions taken in one area can lead to unforeseen results in other areas. For example, changes in
production schedules that aim to improve production efficiency may lead to fluctuations in
finished stock availability and thus affect customer service. The problems associated with
identifying the total system impact of distributi on policies are immense. Logistics implies the
management assembly of the physical and informational flows associated from the supply to
distribution of the final goods, including the management of refunds, mobilize the transports
means, stocks, and necess ary human resources for circulation of material flows.
An important problem for managing the companies represents logistical costs. Starting
from the idea that logistics is a sector of activity that implies costs, it necessary to reduce all the
costs to generate productivity reserves. The reducing of costs assume knowing and analyzing the
costs and understanding the impact of each logistical activity realized in the total costs. A reduce
by 1 % of these costs can increase an extra earning form a forth to a third for a company. In
general, transports represents almost a half of the logistics cost, and storing almost a forth form
this.
Logistical cost shows an increase tendency determined by the expand of logistical ways and the
rise of the price of petrol . The logistical costs vary form a sector of activity to another, even form
a company to another in the same branch, and form different reasons such as:
Logistical configuration and situations are different as for companies in the same
sector;
The level of integration or of subcontracting of logistical operations can be different;
The distribution channel, even for the same products can have different costs;
There is not any specific rules for allocation of logistical costs due to delivery terms
of goods, of the methods of stabilizing the value of stocks.
The index of logistical costs represent an instrument of trimestral measurement of
evolution of cost of logistical activities, except the transport cost. In France, the Transport and
Logistical Federation calculates this index in the base of three sub -indexes:
The stock index (building costs, maintenance expenses, security and taxes);
Performance index (materials/equipment for manipulation, direct personnel costs);
Support index (structural expenses), whic h are higher than general expenses.
The index has the role of reference for providers in the contractual clauses. It is
calculated in the base of information given by a panel of companies that holds more than 800
thousands square meters of storing space. R egarding the transports, the repartition of costs with
this activity is the following:
The salary for drivers – 32%;
21
Petrol expenses – 22%;
Tires changes – 4%;
Maintenance expenses – 6%;
Other expenses – 36% ;
Types of logistics costs depends on various supply logistics tasks performed within the
company. Each task performed in the logistic system incur cost. Strict cost calculat ion in the
logistics systems allows distinguishing them from the overall costs of the company .
Main types of logist ics cost are:
direct costs (transport, storage, inventory, handling, communications) and indirect
costs,
fixed and variable costs,
the cost of supply, production and distribution,
tangible and intangible costs,
the cost of the development of logistics and projects recommended by the logistics,
Strictly, logistics costs.
Logistics costs are expressed: in money , consumption of human labor, financial expenses and
other negative effects of events. They are caused by the flow of material goods in the enterprise
and between enterpri ses, as well as during maintaining inventories. [22]
Logistics costs appears at the following stages of production:
acquisition of materials, intermediates and other products from suppliers,
storage of materials and waste,
external and internal transport,
production planning ,
storage of semi -finished products ,
stora ge of finished products,
Transfer of finished products to customers .
Strategic segmentation and logistics costs
For the purposes of strategic management, we distinguish between the analyses of separate
market segments:
Operating costs of transport – freight forwarding and movement,
The cost of maintenance and operation of the warehouse,
Cost of maintaining the inventory ,
Costs of unavailability – depletion of stocks and costs of inefficient operation,
Administrative costs.
Logistics costs reflect the consumption of enterprise assets, caused by the planned and
unplanned events, implementation and control of technological processes involving moving
22
various materials in time and space.
The costs of satisfying customer are not always fully understood by organizations. One
reason for this is that traditional accounting systems tend to be focused around understanding
product costs rather than customer costs. Whilst logistics costs will vary by company and by
industry, across the economy as a whole that total cost of logistics. However, logistics activity
does not just generate cost, it also generates rev enue through the provision of availability – thus
it is important to understand the profit impact of logistics decisions. At the same time, logistics
activity requires resources in the form of fixed working capital and so there are financial issues
to be c onsidered too.
As it is known, logistics activity has a direct effect on accounting, and mainly on some
perspectives as:
Balance sheet – by examining each element of the balance sheet in turn it will be
seen how logistics variables can influence its final shape:
Scheme 1.2 Logistics management and the balance sheet
Source: Logistics & Supply Chain Management , Martin Christopher, 2016
Cash and receivables – logistics variables have a direct impact on this part of the
balance sheet. For example, the shorter the order cycle time, the sooner the invoice
can be issued. Likewise, the order completion rate can affect the cash flow if the
invoice is not issued un til after all the goods are sent.
Inventories – Logistics is concerned with all inventory within the business from raw
materials, sub -assembly or bought -in components, through work -in-progress to
finished goods.
Property, plant and equipment – depots and warehouses that form the logistics
network, represent a substantial part of total capacity employed (assuming that they
are owned rather than rented or leased). Materials handling equipment, vehicles and
23
other equipment involved in storage and transport ca n also add considerably to the
total sum of fixed assets.
Current liabilities – From the logistics point of view the key elements are accounts
payable for bought -in materials, components. [9, p.56]
Now you may be asking, “What are the Key Performance Indicators (KPIs) I should
measure to improve my supply chain? Weber Logistics works with its customer to develop
specific KPIs best suited to measure different scopes of work. To get you started we have
provided you with five essential logistics KPIs and the benefits they offer.
Transportation
On-Time Final Delivery – shows the carriers ability to deliver successfully on time to
their scheduled required arrival date or to the appointment time. Having an accurate on –
time delivery is critical for your clien t to avoid fees, as they may be subject to fees from
big box retailers if the date is missed. If the report is below 98% then operations should
review and look for process improvement and efficiencies.
Cost per Pounds – measures gross net with total weig ht moved each month/quarter to
show the buying and usage patterns to customers. This KPI will help your customer
continue to buy well. These trends can help them save money but not over or under
buying product.
Warehouse
Inventory accuracy – measures th e accuracy of warehouse workers when preparing
product. You want high accuracy to ensure the correct products are going to the correct
customers. Low inventory accuracy can create angry customers and create additional
costs to fix orders.
Dock to Stock – measures the cycle time from the start of a receipt to the time it is put
away. This is important to track the efficiencies of inbound activities and to ensure your
product is available for orders as quickly as possible.
On-Time Shipping – shows the perce ntage of shipments that left the warehouse on time.
All items have tight deliveries with small windows. If a shipment is missed, your client
may be hit with delays and late fees.
Order Accuracy – shows the accuracy of orders filled. Not only do managers wa nt to
know how many orders they can fill an hour, but how many accurate orders can they fill.
When orders are filled incorrectly, more headaches and costs will be incurred later. [23]
In recent years, organizations have begun to appreciate the importance o f logistics, and
recognize that it is an essential function, which clearly affects wider performance. So the best
24
way to approach logistics for your business is to understand the goal. You want to get the fastest,
cheapest and safest delivery of goods with the least headache and opportunity for things to go
wrong. Put simply, you want to balance performance and cost and get the most of the former
with the least of the latter. Logistics management is the organized use of information, analysis
and techniques to eliminate bottlenecks and cost in order optimize this process. In logistics,
knowledge is power and small businesses achieve cost savings by understanding the components
of cost and time in inbound and outbound shipments. This includes understanding pos tal rates
and shipping times, and if shipping internationally, any import duties that might ap ply at the
destination countries
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CHAPTER II : GLOBAL AND NATIONAL LOGISTICS: OBJECTIVES, STRATEGIES
AND CHALLENGES
2.1 Objectives and strategies of national and global logistics
All organizations move materials to support their operations. These materials are both
tangible (such as raw materials, components, finished goods, and spare parts) and intangible
(predominantly information). Logistics is t he function responsible for these movements; it
manages the transport and storage of goods.
When a company creates a logistics strategy it is defining the service levels at which its
logistics organization is at its most cost effective. Because supply chains are constantly changing
and evolving, a company may develop a number of logis tics strategies for specific product lines,
specific countries, or specific customers. To adapt to the flexibility of the supply chain ,
companies must develop and impleme nt a formal logistics strategy. This will allow a company
to identify the impact of imminent changes and make organizational or functional changes to
ensure service levels are not reduced.
A company can start to develop a logistics strategy by looki ng at four distinct levels of
their logistics organization:
Strategic : by examining strategic supply chain decisions , the logistics strategy should
review how the logistics organization contributes to those high -level objectives.
Structural : examine the structural issues of the logistics organization, such as the
optimum number of warehouses or what products should be produced.
Functional: how each separate function in the l ogistics organization is to achieve
functional excellence.
Implementation: how it is to be implemented across the organization. The plan for
implementation will include development or configuration of an information system,
introduction of new policies .
When examining the four levels of logistics organization, all components of the operation should
be examined to certain potential benefits that can be achieved. There are different components:
Transportation ;
Outsourcing ;
Logistics Systems ;
Competitors ;
Information ;
Strategy Review .
26
A successfully implemented logistics strategy is important for companies who are
dedicated to keeping service levels at the highest levels possible despite changes that occur in the
supply chain. [24]
Some of the dec isions in logistics clearly have a strategic importance – such as the design
of supply chains, sourcing policies, alliances with suppliers, methods of procurement, relations
with customers, modes of transport, location of facilities, size of operations, le vels of
automation, recycling policies, and a whole range of other decisions. We can consider these in a
‘logistics strategy’, which consists of all the long -term decisions, policies, plans and culture
relating to an organization’s supply chains. This logi stics strategy sets the context for all tactical
and operational decisions about the supply chain, so it must be designed carefully, paying
particular attention to the competing demands of:
higher strategies , which set the organization’s overall goals and context for logistics;
the business environment , which includes all the factors that affect an organization, but
that it cannot control, including customers, market conditions, technology, economic
conditio ns, legal restraints, competitors, shareholders, interest groups, social conditions,
and political conditions;
distinctive competence that sets the organization apart from competitors, and is defined
by the factors that are under the control of the organiz ation, such as customer relations,
employee skills, finances, products, facilities, technology used, suppliers, and resources
available.
Each organization designs its own logistics strategy to balance these three factors, but they
often follow similar path s.
There are many other generic strategies for logistics, including:
Time -based strategies (which deliver products quickly to customers);
High -productivity strategies (which use resources as fully as possible);
Value -added strategies (which concent rate on adding customer value);
Diversification or specialization strategies (which s et the width of product ranges);
Growth strategies (which aim for economies of scale and improved service of larg e
operations);
Globalization strategies (which buy, store and move materials in a single, worldwide
market);
Environmental protection strategies (which focus on sustainable operations,
renewable resources, recycling).
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So now, to understand better a way in which a logistics strategy (national one) should have
impact on national economy, I would like to show some national strategy of Germany:
Strategy P1 – Talent Management is Essential for Embracing Complexity – Having
high-qualified people in the organization is very important because this helps th e
company to grow, to be able to act in difficult and unexpected situations. “The most
important thing is to work on the capabilities of our people and increasing the
competencies. We have to hire people who are highly educated in terms of mastering
comple xity and being global in their thinking”. (Germany Automotive Company). In
transportation and logistics, we have a stable people structure and no so many people are
coming and going. In certain specific capabilities like material handling and
warehousing, we see higher fluctuation rates. We also lunched another program, where
we recruit a lot of engineering graduates, not from technical collages, but from the next
level of colleges and we provide them with a two year program focused on supply chain
manageme nt, trends and techniques so that they are developed into a supply chain
specialists.”
Strategy P2 -Rapid Decision -Making – Many companies prefer to hire people who have
analytical capacities, which is one of the most important characteristics. In additio n,
recruiters are looking for people who have knowledge in a specific domain and who can
quickly act in a specific logistics situation, to apply necessary analysis, to think rationally
about the situation and finally to bring a clear and perfect solution f or that situation. [15]
The National Strategy for Sea and Inland Ports in Germany – adopted by the Federal
Cabinet on 20 January 2016 and is designed to assist all players in tackling the challenges
of the future and provide them with a common framework fo r action. Overall, the
National Ports Strategy comprises seven ends of action with 155 individual measures that
are to be implemented by the Federal Government, the federal states and the ports sector.
The overarching objectives of the National Ports Strategy are:
1. to ensure that ports continue to be able to master the economic and logistical
challenges;
2. to further enhance the competitiveness of seaports and inland ports as hubs of
domestic and international trade and central freight distribution cente rs;
3. to support a shift of freight trap to the railways and waterways;
4. to contribute towards achieving the Federal Government‘s climate change and
environmental protection targets . [16]
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A logistic entity provides services like transportation, distributi on and warehousing in
order to help different companies to control the flows of materials in the supply chain system.
The main objective of logistics is reducing costs. This process helps a company to obtain a profit
from clients.
Another impo rtant objective for logistics is represented by customer service. It involves
the ability to manage business’s transportation in a perfect way that in the future will create the
logistic company’ s reputation. For a logistic firm is very important to have a good reputation in
the industry for qualitative services, for gaining a high position in competitive industry. It can
activate just in one branch of economy like electronic manufacturing just to impose itself as a
field expert. Also can become knowledgeab le in the detail of transporting and warehousing
delicate electronic equipment and parts in and out of the country. An objective also can be
named continuous improvement. A continuous improving such as Total Quality Management
will help logistics to achiev e its goals. A constant improvement will seek to reduce costs,
eliminate inefficiencies and improve customer services.
For the supply chain to be effective in a multichannel operation, it is necessary for management
to meet four goals:
Increased efficiency
Improved customer service
Increased sales
Improved relationships
Each of these goals includes definitive and specific objectives required within an operation :
Increase efficiency – company must develop cost -effective transportation rates while
reducing overhead, total inventory, and overall cost -per-order processing. Therefore,
you can make it better through working closely with transportation provider. Making
two-way relation with a carrier to share best practices to be implemented. To improve
logistical efficiencies, is to consider having the vendor perform value -added services
such as packaging, marking, and quality inspections. This improves the chance of
errors being caught at the source; source -based services speed product flow t hrough
the warehouse. Also it is important to choose the most suitable carrier for performing
the business, depending on the product type and turnaround time. Another major
advantage of controlling inbound freight is the ability to combine inbound, outboun d,
and reverse logistics to get higher discounts. This needs to be balanced with the issue
of putting all eggs in one basket. Carriers have areas of strength and weakness. Select
vendors for their strengths. Approximately one -third of companies are using m ultiple
carriers — a growing trend.
29
Improved customer service – partnership is a three -legged stool — without all three
legs the stool cannot stand. Fulfillment operations’ inbound and outbound
transportation is key to delivering marketing’s promise to the customer to get the
shipment delivered on time and in good condition. In logistics, customer service must
be balanced with costs. First cost is related to the cost of acquiring customer. Second
element to consider is the high cost of being backorder. Ano ther element is the
erosion of gross demand by customer returns and customer and company
cancellations. The higher the fashion nature of the product, the higher the return rate
tends to be. Getting efficient inbound logistics systems and vendor compliance in
place is the first priority.
Increased sales – companies become leaner, transportation is more important to meet
sales goals. The logistics of delivering can hurt sales if the customer’s expectations
are not met .. If the customer doesn’t want the product that arrives, returns increase the
cost of operation. Conversely, logistics can factor into a company’s marketing plan if
transportation costs are under control. According to BizRate Research, 79% of e –
commerce companies were planning to offer free shipping and handling during the
past holiday season. Free shipping has proven to increase sales and average order
sizes. Most marketers don’t want to give up this source of revenue, though, or they
offer it only to their best customers or higher -average order buyers. If your
company’s transportation costs are out of control, you’re going to be less willing to
offer shipping promotions.
Building relationship – The single -carrier vs. multicarrier philosophy is one of the
primary issues you need to address w ith regard to carrier relations. Using one charter
allows a higher volume of shipments, which result in small negotiated rates. The
downside is total dependence on the carrier and possible problems if there is a carrier
service interruption. A good relati onship with your carrier representative is vital.
Inevitably there will be issues that must be addressed. Trust and a positive attitude
can influence how those issues are resolved. [25]
The importance of logistics strategies and setting the right obje ctives are vital for
each organization. Implementing the right strategy will allow your company to grow
on the new step level of development. It is not so important what kind of strategy do
any company implement, it is important how it will be implemented and the way the
company will work on its working process. The importance of setting the right
objective on the both short -term and long -term will allow all com panies to have a
sustainable growth.
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2.2 Challenges faced by logistics at both national and global levels
Starting from the meaning of the work challenge that means something new and difficult
which requires great efforts and determination. As in each part of economy, Logistics has its own
challenges on both national and global levels.
Spea king globally, companies face a number of logistical challenges. Effectively
planning, controlling, and managing the movement and storage of goods and services as they
extend over international boundaries — from raw -material suppliers to end customers — poses
several logistics challenges that companies should contemplate before going global.
Unknown supply -chain risks and volatility – the longer the supply chain, the more
exposure to risk and potential disruption. To manage global supply -chain risk,
compani es must identify and assess the potential issues, work through various what -if
scenarios, and gain transparency into their own suppliers' operations by assessing the
financial stability.
Greater supply -chain variability – Within the supply chain, deviatio n from planned
production, supply, and transit times can increase variability. Rather than invest in
large buffer inventories to cover those gaps, companies should closely examine their
supply -chain capabilities and then determine how well those competenci es translate
into the global environment.
Less supply -chain visibility – maintaining good supply -chain visibility — tracking
shipments as they move around the world — becomes difficult when multiple
carriers, third -party logistics providers, and modes are used to transport goods
overseas. Poor visibility can lead to shipment delays, supply -chain disruptions, and
revenue losses that can severely affect a global business. To reduce the business and
supply -chain risk associated with visibility, organizations are using collaborative
processes like data sharing and demand planning across departments and business
partners. Going global adds time, complexity, distance, and new risks to the logistics
equation. As the global marketplace continues to expand, those companies that assess
their skills and capabilities now — and look to par tners with the expertise and
infrastructure to help — will be well positioned to support both existing and future
global business initiatives.
Global logistics is such a diverse topic that it is almost impossible to narrow down the
possible issues into fiv e. However below issues are the most common ones that I have
experienced throughout the years:
Ever changing customer needs – Nowadays, logistics solutions must be tailored
to each customer. Full transparency of orders, visibility from raw material stage t o
31
final goods sale, and reverse logistics have almost become standard for some
commodity groups. With too many variables in global logistics and many
different parties getting involved, keeping above level of service might be
challenging at times.
On time delivery – Vessels that usually takes about two weeks to arrive from
Asia wouldn’t discharge for almost a month. At some point, the average container
pick up time from the terminal was 15 days. This is just one small example of
how it becomes more and more challenging to keep on time delivery rates high. A
strike in India, war risk in Middle east, piracy in Somalia and even Chinese New
Year Holiday are all contributing factors to this problem one way or another. As
we become more and more interconnected, we will see these problems will
increase in the future.
Infrastructure – In the age of mega alliances, one major problem stands out: the
infrastructure. With thousands of vessels already serving the major trade lanes
around the globe, the problem of lack of infrastructure has become clearer
recently. Most of the terminals are still trying to complete their set up to accept
such large vessels and service them. This is causing congestion problems at some
terminals. In addition, Panama Canal expansion is still u nderway and although it
is expected to be completed by next year, we will still see some issues in the
beginning. Although cost effective, less carbon emission and makes more
economical sense for the steam ship lines. Without the infrastructure to
accommod ate these vessels, we will see the congestion issues to continue.
Capacity – Overcapacity in ocean shipping and tightening capacity in domestic
shipping in the US are both affecting the logistics world in a different way.
Security – Security is growing concern in logistics industry due to goods are
being passed from provider to provider. Shippers book the cargo with local
truckers in origin, who deliveries the cargo to local warehouse for handling. The
warehouses then load the cargo to trucks which deliv er the containers to
ports. [26]
In developing countries, where shifting politics, unstable economies, lack of basic
infrastructure, and limited application of enterprise management technologies are the norm,
companies face a crucial decision.
Every company, and every market, is different, so organizations must deal with the real,
rather than the ideal. They need to think about each developing country as an independent
ecosphere .
32
There are couple of stages of localization maturity that dep ends on the current level of
investments or economic conditions within particular countries, organizations seeking to enter
new emerging markets may find themselves at one of four stages of global localization maturity:
1. Entry Level – the organization reli es exclusively upon local partners. It has no local
employees, and no in -country management. Instead, regional management oversees
operations in a cluster of emerging market countries. The organization at this stage
has made no investment in local infrast ructure.
2. Direct sales – organizations have established a sales force of the company’s own
employees. However, there is a continued reliance upon local partners for most
operational aspects of doing business, including providing the necessary
infrastructu re.
3. Operational footprint – companies begin direct investment or at a minimum long –
term agreements with partners for local operational infrastructure, including
manufacturing and logistics and transportation.
4. Decentralized operations – companies had reac hed c ritical mass, with fully
decentralized local sales and operations.
To support successful global expansion, companies need to create the right platform for
each market.
First, organizati ons define the gaps they want to fill across operations. The operating
model can also reflect the business models. Key questions for each market include:
What unique market characteristics drive customer demand for which we need to
adapt?
What capabilities are critical to delivering our customer value proposition and
achieving differentiation in target markets?
How can we leverage our existing or shared capabilities to serve new markets?
Where can we improve to become more competitive, with the ultimate goal of
becoming a market leader?
Once a structural design has been created, companies need to determine how to
implement each required capability.
Companies cannot rely on sourcing key talent from their home countries to drive success
in foreign markets. Rather, t hey must have comprehensive strategies in place to build and retain
talent, both at home and overseas. These strategies often rely upon global best practices, mixed
in with home country traditions. Other concerns include the degree of process standardizati on or
customization needed, and the governance structure required to manage operations in emerging
markets. In working with companies planning expansion into BRIC or emerging markets, we use
33
a seven -point checklist to review strategy and the company’s own plans for dealing with key
issues:
Governance – the company generally relies upon local decision -making authority.
Reliance on local talent – the company entering new market reliance on local hiring and
local leadership.
Local partnerships – partners w ith local knowledge and experience can be critical to
increasing the likelihood of success, especially in the early stages of expansion. As
mentioned, the characteristics of each country will determine whether reliance on local
partnerships will increase o r decrease over time.
Multipurpose infrastructure – including a distribution network, warehousing
operations, multi -mode transportation, which supports “tap on tap off” capability,
enabling flexibility and responsiveness, are among the key attributes of a successful
emerging market operation.
Low visibility and low touch – companies may have to accept a lower level of visibility.
Reliance on manual processes and frequent touch -points – manual processes will
prevalent in emerging markets. We believe that the emphasis from the beginning should
be upon the integration of people and partners rather than the integration of systems.
Reduction of complexity without sacrificing localization – scaled efficiency may not
be attainable, but reduction of complexity ac ross products and services is essential at
every stage from entry to critical mass .[27]
Now we will analyze some challenges faced by logistics at national level. Here at
national level, we can say some problems at general but it is better to understand th em on the
example of a specific country. In our case I have choose the United Kingdom.
Employing more than 1.8 million people across the UK and servicing nearly every other
commercial sector, transport and logistics firms continue to be very important t o the nation’s
growth. Confidence remains optimistic in the sector with continuing government support
however, operators remain acutely aware of the challenges ahead.
Below, you will find characterized some challenges of a national logistics:
Changing cus tomer demands – As more and more sales are made online there is an
increasing demand for vans to service home delivery. This has implications for the way
in which transport and logistics firms structure their fleets and is making some re -think
their models. Today’s transport and logistics customers demand even greater flexibility
and this presents opportunities for the sector to increase activity over the year ahead.
34
Cyber security and data protection – Advances in technology and improvements of online
networks across the transport and logistics sector are creating some very exciting opportunities,
reducing costs and improving speed and operational efficiency. Whilst these are great for
consumers (and operators), inevitably, with a greater relianc e on technology the issue of cyber
security is not going away, and attacks are becoming more sophisticated. Cyber security is
relevant to transport and logistics firms and, as with physical threats, cyber threats need to be
taken very seriously. Now might be the time to review your data protection procedures and
implement appropriate changes.
Skills shortage – In short, the UK is not attracting enough drivers and engineers to the
sector and, as we have spoken about before, this is one of, if not the, bigges t threat to
transport and logistics firms today.Many other sectors are experiencing skills shortage,
including manufacturing and technology, but the transport and logistics sector has been
particularly affected. Much is being done to bridge the skills gap in the sector, but with
no immediate remedy in sight and the age profile of the sector continuing on an upward
trend, the skills gap may well continue to hamper economic growth.
Wage rate increases and low profit margins – transport and logistics firms wor k with a
number of suppliers who do employ large numbers of staff working on the National
Minimum Wage, so the impact could well be indirectly passed onto increases in supplier
prices in the coming years and months. [28]
Globalization is changing the way c ompanies view and use their supply chains to
compete and gain market share. Global companies are managing multiple supply chains, and
they’re counting on those operations to not only deliver goods on time, but to respond to
divergent customer and supplier expectations regarding pricing and packages. To do that, supply
chain operators need the capability to personalize offerings for multiple customer segments.
Among the challenges facing today’s supply chain are many that link directly to
monetization. Mark et volatility, economic contractions and modest recovery cycles affect the
way companies manage distribution, manufacturing, invoicing and materials sourcing.
Expansion into new markets introduces complex taxation, invoicing and localization burdens.
And d ispersed market segments demand different pricing models and services. With so many
critical functions in flux, enterprises need to optimize their supply chains simply to remain
competitive.
2.3 Logistics in the Republic of Moldova: Key problems and main c ompanies
Republic of Moldova is a strategic border between the EU and Eastern Europe and can
become a transport hub for the region. Its existing road and rail network structure is generally
well suited to deal with traffic demand and the objectives of dome stic and international
35
connectivity. Lack of maintenance of the transport infrastructure and high logistics costs
however hinder the development of the transport industry in Moldova.
Our country have four main logistic network:
Road – north -south and east -west roads crossing Chisinau. In addition, it is a
transport corridor between Scandinavian countries with Balkan countries;
Rail – connection with Ukraine and CIS countries. Recent developments include new
railway lines between Chisinau and Southern Moldov a, to the Giurgiulesti terminal;
Air – air lines connection with different European countries, some airline like: Air
Moldova, Turkish Airlines, Austrian Airlines;
Giurgiulesti International Free Port – a regional logistics hub situated in the South
of Moldova, on the Danube River. Access to road and railroad networks to Europe
and Russia, to the Danube River and to the Black Sea.
Table2.1: Merchandise and Passengers moved a month thousand
2014 2015 2016
Absolute value Absolute value Absolute value
Mercahise, tones
Total 1304 1100,8 1241,2
Rail 376,6 298,1 390,0
Auto 908,7 794,4 840,6
Waterborne 18,6 8,2 10,5
Air 0,1 0,1 0,1
Paasenger s,
Total 8925,4 9097,5 9012,1
Rail 304.4 223,8 159,5
Auto 8536,1 8795,0 8758,9
Waterbone 8,8 10,1 8.5
Air 76,2 68,6 85,2
Source : www. Statistica.md; Raport: Transportul lunar de marfuri si pasageri, pe moduri de
transport, 2 006-2016
The logistics sector of the Republic of Moldova is both privately and state owned with
the road transport sector dominated by private enterprises, the rail sector 100% state owned, the
aviation sector being mixed privately and state owned and fin ally, the inland waterway sector
mainly privately owned, with the exception of Ungheni River Port, which is a State Owned
Enterprise . Our country currently has sufficient amount of infrastructure, related to the area and
36
number of people: one main international airport, one main international maritime port, 10,544
km of roads, and 1,156 km of railroad tracks.
Table2.2 : Roads in the Republic of Moldova km,
2012 2013 2014 2015
Total Roads
Country Total roads 9352,2 9352,2 9360,1 10544
Local roads 6016,2 6016,2 6020,8 6867
Nation al roads 3336,0 3336,0 3339,3 3677
Source: www.statistica.md ; Raport: Lungimea drumurilor, pe categorii de drumuri si pe tipul de
imbracaminte, in profil teritorial, la sfirsitul anului, 2008 -2015
Road sector: The public roads network of the Republic of Moldova constitutes 10.544 km,
including: national roads – 3,677 km, local – 6,867 km. Currently, the Ministry of Trans port and
Road Infrastructure is managing 9,344 km of roads, of which 3,336 km of national roads and
6,008 km of local roads . Since 1995 the freight transport was privatized 98%, and passenger
transport about 95%. Currently on the transport market there ar e about:
1824 business entities providing freight and passenger transport services on
national and international directions, of which:
1250 passenger transport operators (about 29,000 vehicles);
574 freight transport operators (about 6,000 vehicles, of wh ich: 863 are compliant
with euro requirements -0; 44 – euro-1; 1361 – euro-2; 1762 – euro-3; 220 – euro-
4; and 1916 – euro-5).
Rail sector: Today the national railway system of Moldova consists of 1,045.4 km of non –
electrified main lines (about 40 km of which are double -track) with 90 stations and 648.5
kilometers of station loops and sidings. 1,013.1 of the main lines have 1,520 mm gauge, and 32.3
km in stations have 1,435 mm gauge, which are located in the border -crossing areas of Ungheni
and Giurgiules ti.
Air sector: Air travel to and from Moldova is characterised by limited choice and high cost. The
price of a ticket from and to Chisinau is around twice as high as the same distance travel from
Kiev or Bucharest. With an annual growth rate of about 13%, passenger transportation has
tripled in the last ten years. In 2011 the passenger number in Chisinau International Airport
reached 1,046,086, an increase of 11.6% over the previous year. The peak months were June
with 121,993 passengers, August – 131,653 and September – 115,335 passengers. In 2011
aircraft movements at the airport amounted to 13,065.
Waterborne sector: The International Free Port of Giurgiulesti has of 120 ha. The entire
territory has a status of a free economic zone until 2030. Danube Logistics currently occupies an
area of 55 ha, which is divided into six functional areas:
37
Refined oil terminal;
Vegetable oil terminal;
Grain terminal;
Dry bulk cargo terminal;
General cargo and container terminal;
Business Park.
The port handled in 2011 a little over 380,000 tons of cargo. The main activities in Giurgiulesti
port include grain and vegetable oil export, oil import, import of gravel and sand, and container
import and export. The share amongst Giurgiulesti International Free Port and t he state
passenger and freight terminal is about 84% to 16% of the total handling volume.
Also regarding these sectors there are couple problems related to them that does make a hard
time for logistics to develop faster in our country. Below it will be me ntioned some of them.
Road problems:
Technical standards and norms do not meet the current requirements;
Poor state of about 74% of the national roads and 78% of the local roads;
Legal restrictions for the provision of transport services.
Rail problems:
The safety standards are not aligned to the European ones ;
The international cargo transport operations are not liberalized;
There is no competition on the national market of cargo transport;
The gauge of the Moldovan railways do not allow free travel to Romania and there; is
not any terminal to provide cargo transfer from the rail with a 1520 mm gauge to the
1435 mm.
Air problems:
The aviation market needs to be liberalized;
The regulatory framework in civil aviation needs to be adjusted to the EU regulations;
There isn’t any cargo air terminal to provide services at the level of international
standards;
Waterborne problems:
Private operators do not have access to ports operation;
Insufficient implementation of the national and international reg ulations;
The commercial maritime vessels of the Republic of Moldova continue to be
included in the black list of the Paris Memorandum of Understanding; [1; p.5 -20]
38
The interest regarding logistics is mainly determined by a development of competition on
the service market in the Republic of Moldova.
An important premises for logistic application is the expand the retail commerce, its
adaptation on the customer needs. Logistics represent a mechanism that require standard actions
and well o rganized from human resources.
Together with the development of technical -scientific progress are created and started to
be widely used work methods with in formational and material flows.
An important part for developing the logistics has the automation of conducting the
logistical process.
Below you will find some problems regarding the development of logistics in Republic of
Moldova:
The lack of logistical connections between parties in the flow of goods;
The reduced level of technical supply of companies;
Insufficient informational technologies, the absence of system for collection, stocking
and the modeling of information;
The medium development of logistical intermediaries;
The medium development of competition on the merchandise market, a high level of
added taxes and the result is a small interest of participants in logistics;
Lack of experience for organizing the flow of goods in logistics and lack of
experienced personnel.
Once in two years World Bank does a report that follow the performan ce of logistics for
world countries. This indicator helps us to measure the performance in logistics that is named
Logistics Performance Index. It reflects to us the following most important aspects of logistics
medium:
The efficiency of customs procedures (speed and the predictability of customs
procedures);
The quality of transport and commercial infrastructure (roads , railways);
The easiness and quality of logistical services at competitive price;
The ability of controlling the stocks;
The real time of d elivery in comparison with the planned tine;
39
Chart 2.1: Logistics Performance Index
Source: www.koema.com
The recent study of LPI was made in 2014. If we can see on the chart, that Moldova has
2.61 that puts it on the 102 place. On the same classification, Romania got 56 place and Ukraine
99. In the major constraint that do not allow the economic development and require the
sustainable investments. More than that, an adequate auto infrastructure is a stimulation for a
good regional development and the access of population to public services. In the reason of
creating, the free economic zone between Moldova and European Union the road infrastructure
is a very important for the revaluation of the local producer’s poten tial.
Here in Republic of Moldova we have a lot of logistical companies that activates .As far
as we analyze this subject we will understand that these companies are managed both my both
government and private persons, or both private and public sector.
Below we will find some top companies by each branch: road, rail, water, air and
waterborne one.
Top companies are:
Î. S. Calea Ferată din Moldova ( 100% state owned, rail transpor);
SRL Imperator (rail, water, road logistics);
Orbico SRL (road transport mainly);
Air Moldova (air transport);
H.Essers (road transport);
BOEKESTIJN Transport services (road transport);
Acvila Group (road transport);
DHL Express (roar , air transport);
40
Delamode Logistics (road transport);
AutoInterbBus (passenger trans port).
About logistics in Republic of Moldova, we can say that our logistics is not so bad. Due
to the access to the river Danube, being a corridor between two parts of the Europe, having
access to European Union and CSI markets and being situated in a fav orable part of the Europe
give as good conditions to develop a good infrastructure for logistics. In addition, here in
Moldova many big European logistical countries opens subsidiaries just because we have the
possibility to give a smaller wages for employ ees and lower fiscal taxes. Beside all opportunities,
we have firstly to work on our bad sides of logistics. Mainly we have to work on the road
infrastructure on all sides: road, air, rail and water. This is our first global issue. The fact that we
are a d eveloping country and our volume of imports exceeds exports we also have to increase the
level of transparency at borders, the infrastructure of all warehouses and all the customers’
procedures.
Logistics in Moldova is at a medium level beside a ll obstacles that it faces during its
evolution starting from 1991.We have to develop this part of our economy because it is growing
day by day, and we have a favorable country position on the map that with proper management
will make our national logistic s one of the most powerful in the Europe even in the world.
41
CHAPTER III : MANAGING THE SUPPLY CHAIN OF THE FUTURE. NEW
SOLUTION FOR THE REPUBLIC MOLDOVA
3.1 Managing the supply chain of the future.
The best companies around the world are discovering a powerful new source of competitive
advantage. It is called supply -chain management and it helps to bring product to market and
create satisfied customers. The supply chain management program integrates topics from
manufacturing operations: purchasing; transportation and physical distribution into a unified
program.
Successful supply chain management, then, coordinates and integrates all of these
activities into a seamless process. Within the or ganization, the supply -chain refers to a wide
range of functional areas. These include supply chain management –related activities such as
inbound and outbound transportation, warehousing and inventory control. Sourcing, procurement
and supply management fa ll under supply chain umbrella, too. Forecasting, production planning
and scheduling, order processing and customer service all are part of the process as well.
If company makes a product from parts purchased from suppliers and those products are
sold to c ustomers then you have a supply chain. Some supply chains are simple, while others are
rather complicated. The complexity of the supply chain will vary with the size of the business
and the intricacy and numbers of items that are manufactured. To ensure th at the supply chain is
operating as efficient as possible and generating the highest level of customer satisfaction at the
lowest cost, companies will have adopted supply chain management.
Supply chain management is a business process which although st ill evolving has been in
existence for many years. It has a strategical role to play with the organization. Supply chain
management is necessary to the foundation and infrastructure within societies. SCM within a
well-functioning society creates jobs, decr eases pollution, decreases energy use and increases the
standard of living. Also SCM has three levels of activities that different parts of the company
will focus on: strategic; tactical and operational . [29]
Strategic: management will be looking to high -level strategic decisions concerning the
whole organization, such as the size and location of manufacturing sites, partnerships
with suppliers.
Tactical: decisions focus on adopting measures that will produce cost benefits such as
using industry best practi ces, developing a purchasing strategy with favored suppliers,
working with logistics companies to develop cost effect transportation.
Operational: Decisions at this level are made each day in business that affect how the
products move along the supply chai n. Operational decisions involve making schedule
42
changes to production, purchasing agreements with suppliers, taking orders from
customers, and moving products in the warehouse.
If a company expects to achieve benefits from their supply chain management process, they
will require some level of investment in technology. The backbone for many large companies
has been the vastly expensive Enterprise Resource Planning (ERP) suites, su ch as SAP and
Oracle. These enterprise software implementations will encompass a company’s entire supply
chain from purchasing of raw materials to warranty service of items sold. The complexity of
these applications does require a significant cost, not onl y a monetary cost, but the time and
resources required to successfully implement and enterprise -wide solution. The goal of supply
chain management is to produce and distribute in the right quantities, to the right locations and at
the right time in order t o minimize total system cost and to satisfy customer service
requirements.
Firms practicing supply chain management start with key suppliers, move on to other
suppliers, customers and shippers and integrate second tier suppliers and customers. (Definition:
second tier refers to the customer’s customers and the supplier’s suppliers.)
SCM contains four important elements:
Purchasing -supplier alliances, supplier management, strategic sourcing;
Operations -demand management, MRP, ERP, JIT, TQM;
Distribution -transportation management, customer relationship management, network
design, service response logistics;
Integration -coordination/integration activities, global integration problems, performance
measurement.
Purchasing:
Long term relationships
Supplier management -improved performance through :
-supplier evaluation (determining supplier capabilities and performance);
-supplier certification (third party or internal certification to assure product quality and
service compliance);
Strategic partn ership (successful and trusting long term relationships with top –
performing suppliers).
Operations:
Demand management -match demand to available capacity;
Linking buyers and suppliers via MRP and ERP systems;
Use JIT to improve the pull of materials to reduce inventory levels;
43
Employ TQM to improve quality compliance among buyers and suppliers.
Distribution:
Transportation management – tradeoff decisions between cost and timing of delivery or
customer service via trucks , rail, water and air;
Customer re lationship management – strategies to ensure deliveries, resolve
complaints, improve communications and determine service requirements.
Integration:
Supply chain performance measurement -crucial for firms to know if procedures are
working.
Supply chain mana gement becomes a tool to help accomplish corporate strategic objectives:
Reducing working capital;
Taking assets off the balance sheet;
Accelerating cash -to-cash cycles;
Increasing inventory turns, and so on.
Supply chain principles/methodology/solutions
1. Segment customers based on service needs. Companies traditionally have grouped
customers by industry, product, or trade channel and then provided the same level of
service to everyone within a segment.
2. Customize the supply chain management network. Compani es need to focus intensely
on the service requirements and profitability of the customer segments identified.
3. Listen to signals of market demand and plan accordingly . Sales and operations
planning must open the entire chain to detect early warning signals of changing demand
in ordering patterns, customer promotions and so forth.
4. Strategically manage the sources of supply . By working closely with their key
suppliers to reduce the overall costs of owning materials and services, supply chain
management leaders enhance margins both for themselves and their suppliers.
5. Develop a supply chain technology strategy. As one of the cornerstones of successful
supply chain management, information technology must support multiple levels of
decision making. It also should a fford a clear view of the flow of products, services and
information.
Supply chain management can be implemented to all firms (manufacturing firms, retailers,
services, etc.) and politic organizations that satisfy the following criteria:
Minimum number of employees: 20 (at least 4 in management positions).
Strong management commitment to new ways of working and innovation.
44
Implementation procedure:
Steps/actions/phases
Subsequent actions to implement the supply chain agenda should be carried out by
individu al project teams typically fall into these broad categories: [ 30, p. 15]
Designing the long term supply chain structure to position the company in the right roles
in the right supply chains with the right customers and suppliers.
Re-engineering supply chain processes to streamline product, information and funds
flow internally and externally.
Reinforcing the supply chain’s functional foundation by improving quality and
productivity within operational areas such as warehousing, tran sportation and fleet
management.
Customer orientation
Supply chain extends only from the very raw material suppliers to the retailer (if that’s the
last link in the supply chain before the end -consumer).
There are number of fundamental reasons to support this argument: [31]
1. All supply chain supplies and every number of the supply chain supplies, but the
consumer DON’T, it demands instead of supply. Supply chain’s existence is based on the
existence of the demand from the consumer. Supply chain treats consumer as the object
which it serves. If a supply chain contains the consumer within itself, then it will have no
object to serve and no recipient to take the supply and it will lose its purpose of existence.
2. A supply chain adds value to the product or transformed inputs, but the consumer -don’t.
Consumer consumes the product and depletes its market value. Used goods are always
cheaper than the new ones. A supply chain and every number in it have the irrefutabl e
duty to add values to the material flow and they must learn how to improve the business
and its management. Consumers don’t need to do that. Their job is to use the money to
vote which supply chain best satisfy their demand.
3. A supply chain is always spec ialized and a consumer is always general. A computer
manufacturing supply chain only produces computers, while a consumer will have to buy
food, clothing and automobile as well as computers. Due to the extremely divers nature
of consumer’s purchasing, to p ut the consumer as part of a supply chain will not be
helpful in understanding the nature of a supply chain and may cause considerable
confusion theoretically and logically.
Another difficulty in understanding and defining supply chain and supply chain man agement
is that is never stand still and the subject has been continuously evolving since its inception in
the early 1980s. There are a number of early development trends that can be observed evidently.
45
From functional to process perspective . Business mana gement used to see and take
action on the functional silos in the business. It was understandable that naturally the
function is what seen to be the delivery part of the business. But, today with supply chain
management concept managers can see their probl ems more from the process
perspective, understanding that functions can only make sense if it is perceived from a
supply chain process perspective.
From operational to strategic viewpoint . At early years of applying chain management
concept, managers tend s to see it as another operational tactics that will help to reduce
operational cost, such as purchasing function improvement and optimizing the logistics
operations. Gradually, more and more managers realized that the effective changes can
only be achieve d if the operational issues are addressed from the supply chain wide
strategic viewpoint.
From single enterprise to extended enterprise . Enterprise management in now
arguably displaced by the supply chain management, where the supply chain is by
definition the extended enterprise. Management thinking over the extended enterprise
produces a great deal ideas that single enterprise alone cannot.
From transactional to relationship based engagement . Business engagement between
firms in the past was predominantly transaction based and cost driven. The merit of any
purchasing and procurement of externally sourced materials and services was judged by
the transactional measures such as price, volume and delivery terms . But what’s now
more of the practices in working with external organizations within the supply chain is so
called relationship based engagement . This relationship approach does not abandon the
transactional activities but put its decision baking on much wider consideration of
knowledge exchange, long -term commitment, incentives and reward.
From local to regional and from regional to global. Connections of supply network
have over the last two decades grown from local to regional and to global. Hardly any
major enterprise and supply chain is not connected to same part of the world. You need to
get out before you get up. This trend is spurred by the lower cost of labor and materials in
many parts of the world, as well as first mover advantages in setting up global market
presence.
The trends of supply chain development are not always positive and encouraging. There is
now enough evidence to support that supply chain risks are not continuously growing to the level
that is higher than ever before. Supply chain integration still remains as the major management
shortfall across all industrial sectors.
The task of managing and improving supply chain performances across all industrial sectors
46
is only becoming tougher not easier. This calls for deeper and more thorough understanding of
the challenges supply c hains are facing. [3]
Supply Chain Configuration is about how a supply chain is constructed from all its
participating firms. This includes how big is the supply base for OEM (original equipment
manufacturer); how much of the OEM’s operations are outsource d; how the downstream
distribution channel is designed; and so on. It is also known as supply chain architecture.
Supply Chain Relationship is about inter -firm relationships across the supply chain
albeit the key focus of relationship is often around the O EM and its first tier suppliers and first
tier customers and the relationship in between. The type and level of the relationship is
determined by the contents of inter -organizational exchanges. The relationship is likely to be
“arm’s length” if they only e xchanged the volume and price of the transaction; on the other hand,
the relationship would be regarded as close partnership if the parties exchanged their vision,
investment planning, NPI process and detailed financial information.
Supply Chain Coord ination refers mainly to the inter -firm operational coordination
within a supply chain. It involves the coordination of continuous material flows from the
suppliers to the buyers and through to the end -consumer in a preferably JIM manner. Inventory
managem ent throughout the supply chain could be a key focal point for the coordination.
Production capacity, forecasting, manufacturing scheduling, even customer services will all
constitute the main contents of the coordination activities in the supply chain.
Supply chain management requires a change from managing individual functions to
integrating activities into key supply chain processes. The key supply chain processes identified
by members of The G lobal Supply Chain Forum are: [32 ]
Customer relationship management;
Customer service management;
Demand management;
Order fulfillment;
Manufacturing flow management;
Supplier relationship management;
Product development and commercialization;
Returns management.
Managing the supply chain cannot be left to chance. For this reason, executives are
striving to interpret and determine how to manage the company’s supply chain network, and the
potential of supply chain management. Managing the supply chain involves thr ee closely inter –
related elements: the supply chain network structure; the supply chain business processes and the
47
management components. The structure of activities within and between companies is vital for
creating superior competitiveness and profitabil ity. Successful supply chain management
requires integrating business processes with key members of the supply chain. A prerequisite for
successful supply chain management is to coordinate activities within the firm. One way to do
this is to identify the k ey business processes and manage the using cross -functional teams.
Relationship and Integration [10, p. 97]
Supply relationship can be defined as the cross organizational interaction and exchange
between the participating members of the supply chain.
Lamming (1993) proposed a nine factors model to summarize the key success factors of the
close partnership between supplier and buyer, which could be helpful as a benchmark for supply
relationship development:
1. The nature of completion
-global operation and local presence;
-based upon contributions to product technology;
-dependent upon alliance/collaboration;
2. Basis of sourcing decision
-small supply base;
-supplier selection not just on bid price;
-single and dual sourcing;
-earlier involvement of established suppliers;;
3. Role of information exchange
-True transparency: cost;
-Two ways: discussion of cost and volumes;
-Technical and commercial information exchange;
4. Management of capacity
-synchronized capacity;
-flexibility to work with fluctuations;
5. Delivery practice
-just in time delivery;
-local, distance and international JIT;
6. Dealing with price changes
-price reductions based on cost reduction;
-join efforts form a key part of information exchange in lean supply;
7. Attitude to quality
-mutual agree ments on quality targets;
48
-perfect quality as a goal;
8. Role of R&D
-integrated assembler and supplier;
-long term development of components system;
9. Level of pressure
-Very high for both (customer and supplier).
Close relationship between members of the supply chain is an indispensable part of the
supply chain integration and supply chain integration is an indispensable part of business
success. A firm needs to develop effective coordination within and beyond its boundaries in
order to maximize the potential for converting competitive advantage into profitability. That
basically is what supply chain integration is all about. Conceptually, supply chain integration
means that the legally independent participating fir ms coordinate together as if they one
company in order to achieve the common goal. An integrated supply chain will coordinate the
order fulfillment to match actual consumption at the end of the supply chain and synchronize the
supplier’s production to ensu re the timely delivery of the products to the right place, at the right
time and with the right price.
The future of supply chain management is the future of the business management when
there will be no business that is no part of supply chain. The p aradigm of business management
will soon be converged to the paradigm of supply chain management. Is useful to identify and
explore some chall enges that we better to know: [33 , p. 133]
– Creating Customer Centric Supply Chain
The first challenge that the sup ply chain managers are facing is to transform the supply
chains from supplier -centric to customer -centric. Traditionally, supply chains have been
developed from factory outwards so that the company’s business model may be
continued without major change. Th e management emphasis was on how to ensure the
production process could be most efficiently run and products could be most cost
effectively distributed. The marketing is to find the customer that fit to the products
rather than to make the products that fi t to the market. The strategic aim of the supply
chains must be on the higher levels of customer responsiveness. The supply chain must
be designed to get the customer on the driving seat. Coordination and operational
integration of the supply chain members must be significantly strengthened to counter –
balance the increased volatility of market behavior.
– Managing Supply Networks
The second challenge is to take on the whole supply network and manage it as an integral
entity. Developing the shared information system for the network management is another
49
challenge. Forecasting information, capacity information, and production information can
all be collectively managed to reduce inventory levels and achieve shorter lead -time and
JIT delivery. As supply network complexity and uncertainty becomes more persistent, the
challenges also ripple out the supply chain risks management. The emerging future model
of risk management for supply chains cannot be a scheme of buying an insurance policy.
Companies that aspire for the supply chain leadership position in the future will be those
who will make less sever the risk by building various forms of reserves, including
inventory; capacity; redundant suppliers but in the meantime, maintaining a competitive
strength in busines s efficiency and responsiveness.
– Watch the Dynamics
The third challenge is how to survive the dynamics of the never ending supply chain
evolution. The future of supply chain will face unprecedented dynamics in terms of
structural, technological and relati onship dynamics. From a system dynamics point of
view, the flow structure of a supply chain is a typical dynamic system with lows and
stock; there are feedbacks and delays. From managerial experience perspective it is even
more: there are fluctuations of d emand, overproduction, high inventory, backlogs of
unfulfilled orders, delayed delivery and so on.
The Triple -A supply chain model is a useful blueprint to survive the supply chain dynamics:
[34, p. 151]
– Agility. This is a supply chain capability that handles the unexpected external disruptions
smoothly and cost effectively. It enables the supply chain to survive the impact of the
external dynamics and be able to recover from any initial shocks.
– Adaptability. It differs from the agility in that it deals with more long -term and fundamental
changes in the overall external environment which is often irreversible. Adaptability calls
for organization and its supply chain to embark on major strategic changes in technology,
market positioning, radical skill upg rading and competence shift. It helps the supply chain to
survive the long waves of external dynamics.
– Alignment. It is a supply chain capability that coordinates and balances the interests of all
members. It addresses the supply chain’s internal dynamics and ensures the supply chain to
remain as a stable and cohesive whole. It also means to support all the complementary
resources and opt imize the operational effectiveness and relationship to deliver the
competitive advantage.
Characteristics of the Future Supply Chain: [13, p. 57]
50
The future model will be based on multi -partner information sharing among key stakeholders:
consumers (the originators of the demand signal, either from home or from a store), suppliers,
manufacturers, logistics service providers and retailers.
After production the products will be shipped to collaborative warehouses in which multiple
manufacturers store thei r products.
Collaborative transport from the collaborative warehouse will deliver to city hubs and to
regional consolidation centers.
Warehouse locations on the edge of cities will be reshaped to function as hubs where cross –
docking will take place for fi nal distribution.
Non-urban areas will have regional consolidation centers in which products will be cross –
docked for final distribution.
Final distribution to stores, pick -up points and homes in urban and non -urban areas will take
place via consolidated deliveries using efficient assets.
The future supply chain is expected to provide clear benefits for our society, for the industry,
for individual companies, and ultimately for consumers and shoppers. While individual examples
of these concepts already ex ist, the key to their broader implementation across the industry will
be improved collaboration. Improving such collaboration demands new ways of working
together in the physical supply chain. When we look ahead, we see a number of external trends
that wil l shape the industry in the coming 10 years, which are largely outside the control of the
industry. But retailers and consumer products companies must consider the impact of these
external forces on their business and determine how best to respond to the c hanges that will be
brought about as a result of their impact.
Solution Areas and Leading Practices All of the solution areas focus on physical supply chain
innovation. Examples of real -world leading practices help illustrate the achievable benefits in
each solution area. Applying these solutions and leading practices to example supply chains will
help identify potential improvement opportunities: [9, p. 23 -27]
1. In-Store Logistics.
Solutions in this area involve improvements within the store and focus on adding value to
the consumer and reducing business costs. These solutions encompass products entering the store
at the back and products picked by or for the consumer in the store.
An example is in-store visibility . RFID technology can be us ed to enable real -time
insight into inventory, with alerts via computer when supplies are running low or when theft is
detected. Another example is shelf -ready products, which arrive as a merchandise unit that is
easy to identify, easy to open and can easi ly be put on the shelf. Shelf -ready products aim to
improve shelf replenishment and enhance visibility. Shopper interaction is another in -store
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logistics solution and requires improved availability of consumer data for both the manufacturer
and retailer. P OS data should be available and used to build a data warehouse, which provides
analysis and reports that fit to the KPIs of the manufacturer and retailer.
2. Collaborative Physical Logistics.
This solution area is defined as the sharing of physical infras tructure such as warehouse
storage and transportation vehicles in order to simplify the overall physical footprint, and to
consolidate flows to improve service and asset utilization. Sharing and collaboration can take
place both between and across various nodes of competitive supply chains and it can apply to
existing infrastructure or to newly built collaborative infrastructure.
Examples include:
Shared transport: A collaborative approach between manufacturers, between retailers, and
between manufact urers and retailers and possibly a third -party logistics provider to share
transport; it involves sharing load planning and truck capacity.
Shared physical infrastructures: Manufacturers, retailers and possibly third -party logistics
providers collabo rate to share warehouses and distribution centers for activities such as storing
goods or cross -docking.
Shared information: Sharing information to manage flows among manufacturers, retailers
and third -party logistics providers in order to combine deliveries from more than one source
towards multiple stores via a warehouse or distribution center. As an example of collaborative
physical logistics, ECR Europe has set up a project with the objective to help companies in the
supply chain reduce the environmental impact of transport in a way that is economically and
socially sustainable. The project will deliver a practical roadmap and self -assessment tool, which
will allow organizations to identify, plan and measure improvements in their transpor t
operations. Ultimately such collaborative sustainable transport efforts will be measured in fewer
and friendlier miles. These solutions can benefit from efficient asset solutions, for example green
buildings and more fuel efficient transport.
3. Reverse Log istics.
This is defined as logistics designed to reprocess assets, materials, packaging, products or
other components that can be recycled, reused or remanufactured. Solutions include traditional
backhauling, product recycling, packaging reuse and packag ing recycling. Reverse logistics
solutions encompass the reuse of assets in the supply chain that are not directly product related,
such as pallets and crates. For example, an automatic pallet labelling solution may incorporate
“Flag Tag,” a feature that m akes it possible to tag all pallets with one type of tag, such as an
RFID chip.
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The future supply chain architecture requires a structural change combining individual
improvement solutions and integrated collaboration concepts.
The following four col laboration concepts are at the heart of the overall future supply chain
architecture:
Information sharing – driving the collaborative supply chain;
Collaborative warehousing ;
Collaborative city distribution, including home delivery and pick -up;
Collabor ative non -urban distribution, including home delivery and pick -up.
Collaborative Warehousing Collaborative warehousing, with concepts that go far beyond the
warehouse collaborations that exist today, is a core component of the future supply chain
architect ure. The key element is that both retailers and manufacturers must be part of such
collaborative warehouse concepts; they should not just encompass warehouse sharing by
manufacturers alone. For example, collaborative warehouses in carefully selected locat ions will
collect (possibly combined) shipments from a number of manufacturers, and from there
combined shipments will be made to distribute to one or more retailers covering different modes
of transport ownership, formats and channels (via new urban and n on-urban distribution models).
This implies that store picking can be done from the shared warehouse.
A repositioning of warehouses is likely to be required to improve the new supply chain KPIs.
This will be important in order to shorten the chain and increase flexibility in allocating
inventory to demand.
Collaborative warehousing should improve several KPIs : [9, p.19]
Capacity utilization of the total warehouse;
Transport optimization through shared delivery from the warehouse;
CO2 and energy reduc tion through the use of the latest technologies (such as energy –
efficient buildings and fuel -efficient trucks).
To succeed, this concept will require high levels of trust and commitment among manufacturers,
retailers and logistics service providers, but i t is a crucial enabler for realizing integrated
sustainability improvements.
There are numerous stakeholders across the physical supply chain and in order to change the
chain, it is important to not only have a shared perspective of what needs to be done, but also to
consider the individual perspectives and unique challenges facing each stakeholder:
– Consumers and shoppers increasingly value sustainability aspects in their choices. But
they are less willing to pay extra for it. Consumers want to be better informed about the
sustainability impact of their shopping.
53
– Retailers are mot ivated to serve shoppers in the most optimal way, in order to be
profitable and achieve sustainable growth. Retailers welcome collaboration and
standardization, but only if this does not impact their ability to differentiate themselves
towards shoppers.
– The ambition of manufacturers and suppliers is to manufacture market and supply the
products that consumers need and want in a cost -efficient manner. They are motivated to
improve the sustainability of their supply chain, but their ability to achieve substa ntial
improvements requires close (and standardized) collaboration with retailers and shoppers.
– Logistics service providers facilitate the distribution process from supplier to consumer.
They are motivated to become a proactive partner in the consumer good s business for
mutual sustainable growth, but this requires longer -term contracts and common processes
and data standards.
Strong leaders are important to any business function, but logistics management demands
unique leadership capabilities. Because logistics represents a large investment for most
companies, a strong leader must develop innovative solutions, and optimize logistics and supply
chain strategy and operations to gain competitive advantage. Successful supply chain leaders get
involved with industry organizations and follow current events to help stay up to date on issues
affecting the logistics sector. To be successful today, managers have to look at the whole supply
chain, and fine -tune the operation, secure better services, reduce costs, a nd make partnership
agreements work to their company's advantage. Knowing the latest technology systems is also
critical, because the entire industry has become more technology dependent.
3.2 Republic of Moldova’s next step to a successful logistics
Located strategically, Moldova is becoming a future border between the European Union and
Eastern Europe. Moldova’s transport sector could become a hub for the region, where it not for
its deteriorating infrastructure in comparison to neighboring countries. The existing transport
infrastructure in Moldova has been poorly maintained and no infrastructure has been added to
address the needs for changing trade patterns, while reform of the transport sector management
and financing has been slow. As a consequenc e, the poor quality of the transport infrastructure
(roads, trucks, railways) is a significant impediment to expanded trade by imposing additional
costs on exporters and importers. Goods are damaged in transit and delays are caused because of
damage to tru cks in -route. Leasing arrangements for trucks are not very well developed, due to
the high cost of finance and small demand. There are similar problems with the railway and air
transportation. Railway rolling stock is antiquated. Air services in Moldova ar e largely limited to
passenger traffic. Recent interventions by the state have determined the industry and limited
private sector and foreign involvement.
54
Moldova’s economy is largely based on agriculture and agro -industry. Approximately, 70%
of the Moldovan export is made of agricultural products. It is therefore highly depend on a well –
functioning road transport industry and a solid road infrastructure; otherwise products have high
transportation costs and lose their competitiveness on the intern ational market. Many Moldovan
farmers are unable to commercialize a part of their products due to inability to access domestic
market places. Exports, agricultural exports in particular are also affected by the absence of a
modern whole sale distribution s ystem, including transportation services, sorting, storing and
packaging.
Moldova has extensive transport infrastructure; however, most roads are in dire need of
repair, while road signs are totally missing at times. Road and rail are the two mo st important
modes of transport. Investment in Moldovan transport infrastructure has been insufficient.
Virtually no major financing was made over the last 15 years, except for a few EU and EBRD –
backed projects of road rehabilitation and the Chisinau airpo rt modernization.
Moldova’s transportation and logistics services market is at an early stage of development.
The market is fully in private hands, except for the state railway monopoly CFM and one state –
run air company, Air Moldova. By international stan dards the range of services offered is narrow
and the quality of these services is often low. For any company that is in the business of
providing a variety of products and services to customers, it is very important to the health of
that business to imple ment a logistics strategy that will keep service levels at their highest at all
times. A World Bank report cites as reasons the small size of the Moldovan logistics services
market, unpredictable public administration procedures and often corrupt practices . DHL and
UPS, which have been present in Moldova for some time, have only recently started to provide
limited freight forwarding services for shipments by air and sea in addition to their core business
of express mail delivery. [10, p. 1 -2]
There are basically two types of shipping and freight forwarding companies in Moldova. On
one hand, the forwarding companies whose business is strictly freight forwarding, dispatching
and booking space for shipments on carrier companies. This type of companies s pecializes in just
one mode of transport, either air or rail. A few of them would combine their core business with
trucking by contracting private carriers or running their own truck fleet. A lower number of
companies would also have sea freight forwarding by carriers operating at the nearby ports of
Ukraine and Romania. Some forwarding companies combine all four modes of transport, but
have just one mode of transport as its core business. As of recent, many Moldovan forwarding
companies have also become pr oviders of customs brokerage services. On the other hand, there
are the carriers, most of them trucking companies. Some of them would combine to some degree
goods haulage (trucking) with freight forwarding by other modes of transport, usually railway or
55
sea.
A few forwarding companies are known to provide warehousing services. However,
warehousing services are generally separated from the forwarding or transportation business. A
distributor will have to consider the warehousing aspect separatel y from the other links in the
supply chain. The available warehouses are old Soviet -type facilities that do not fit Western
storage standards, often lacking proper heating, ventilation or humidity control. A few underwent
some type of modernization. Chisin au also has a number of specialized warehouses for frozen
products. Such warehouses as a rule are run by specialized companies, such as meat processors,
that provide overcapacities for rental. By some accounts, the warehouse space currently available
in Ch isinau is insufficient. Even though there are transportation companies and drivers that can
be hired to provide transportation of goods, Moldovan companies tend to keep their own fleet of
trucks for distribution or supply of goods.
Moldova is a rel atively small market, without challenging terrain and therefore, does not need
extensive investment in developing the distribution logistics. According to a World Bank report,
nearly 40 percent of Moldovan firms use their own transport for distribution. Th e high share
reflects the low quality of services available and the low initial investment in own equipment and
transport staff. Many firms complain that on -time delivery and flexibility are the “weak links” in
the supply chain as these services are rarely provided by Moldovan transportation companies.
Investments are needed in the electrification of Moldovan railway and modernization of
rolling stock and railway trucks. In order to increase the volume of transited good, there is need
to develop capacitie s for processing containers and other cargo types. [10, p8]
Moldova is a strategic border between the EU and Eastern Europe and can become a transport
hub for the region. Its existing road and rail network structure is generally well -suited to cope
with traffic demand and the objectives of domestic and international connectivity. Lack of
maintenance of the transport infrastructure and high logistics costs however hinder the
development of the transport industry in Moldova.
The development of the tra nsport and logistics sector is seen as a key issue by the Moldovan
government (priority in the Moldova 2020 strategy) and donors (EU, WB, EBRD, EIB). It will
be achieved through public investment and the increase of the private sector and foreign
involveme nt. The Land Transport Infrastructure Strategy for 2008 -2017 mainly aims at [11]:
Improving mobility conditions for citizens and freight;
Facilitating trade operations in domestic and international markets;
Re-integrating Moldova in the main international transport routes crossing Europe.
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For this small and landlocked country, integration into global markets is crucial. As such,
Moldova’s National Development Strategy, “ Moldova 2020 ”, calls for prioritizing the expansion
of exports of goods and services. To boost exports, the country needs to join regional and global
value chains, to become more efficient in what it already produces, and to innovate. Attracting
investment, both forei gn and domestic, is also a key.
Using firm -level data from Moldova and other countries in the region, we investigate the
effects of investment climate and backbone services on firm productivity. The productivity of
firms in the country is negatively affected by insufficient financial, electricity, infrastructure and
connectivity services. And these obstacles vary by region in Moldova. Firms in larger cities such
as Chisinau and Balti perceive the provision of services as less of an obstacle than in ot her cities
and regions in the country.
In addition, it is necessary to improve the quality and reliability of transport and logistics
services, through the implementation of Moldova’s Transport and Logistics Strategy and the
development of nation al public investment programs –all very important for a landlocked country
like Moldova. This will also help facilitate trade via better roads, railways, and airports. [12]
The Transport and Logistics Strategy 2022 approved by the government of the Republic of
Moldova focuses on investments in transport infrastructures with funds in the railway sector
being directed to the rehabilitation of the railway network, the modernization of the fleet of cars
and locomotives and the increase of freight and passenger traffic flow. The implementation of
the strategy’s program of investments will determine the optimization of accessibility and
capacity in order to increase freight volumes and the number of carried passengers. Estimated
investments are worth EUR 2.4 Billio n and programs are to be implemented in three phases:
short -term, by 2015, medium -term, by 2018 and long -term, by 2022. The railway and road
infrastructure in the Republic of Moldova benefits from external funds for modernization and
rehabilitation and inv estments will be carried out according to the Transport and Logistics
Strategy for 2022, a document approved by the Moldovan Government.
“The Transport and Logistics Strategy is an important document that will guide our transport
investors in the next 10 years”, declared Chaim Poran, head of the joint investors team for
Moldova. [13]
Table3.1 MOLDOVA TRANSPORT SECTOR SWOT ANALYSIS
Existence of well -developed
infrastructure network (Rail/Road)
from ex -USSR; Poor condition of infrastructure assets;
Absence of coordinated Transport and
Trade Strategy;
Some monopolistic situations exist;
57
Education and training levels in
transport sector;
Existing trade and transport operators;
Potential for foreign direct investments;
Overall sustained recent traffic growth;
Lack of in formation and data for
decision making;
Incompatibility of the legal framework
add costs for transport operators;
Development of rural areas remain low
resulting in low levels of infrastructure
provision;
Existence of transport demand sectors;
Gateway between EU and CIS
countries;
Establishment of new financing
mechanisms;
Shortage of external financial support;
leads to insufficient finance available
for needed improvements;
Failure to make sectoral reforms means
that there is no transparent basis for
investment;
Source: [14, p18]
Transportation is a very key element of the logistics process and supply chain which runs
from vendors through you to your customers. It involves the movement of product, service -speed
and cost which are three of the five key issues of effective logistics.
The strategy should recognize:
Customer requirements. The supply chain involves continuous and efficient movement
of product from vendor to manufacturer -to customer. The transportation program must
reflect and meet the customer’s needs. The time and serv ice aspects of transportation are
vital.
Shipments must move timely. Customers demand their shipments be delivered as they
require -on the date needed; by the carrier preferred and in the proper shipping packaging
method. We must be able to have a transpor tation program which can do this provides
customer satisfaction and can give your company a competitive advantage.
Flexibility . Change is happening. It is not a question of whether or not it happens. The
only question is how quickly it occurs. Your strat egy has to be ready to change. New
customers. New products. New businesses. New suppliers. Keep an open ear and mind to
other modes and carriers.
Transportation is critical to logistics and supply chain effectiveness. It impacts throughout the
key issues of logistics effectiveness and the global supply chain. To meet the dynamic
58
requirements of the supply chain, we must have a dynamic strategy. It must be responsive, both
as to service and cost demands of our customers and our companies.
To ensure a su stainable development in the future, the Republic of Moldova must ensure an
efficient transport system, which could meet the citizens’ needs for mobility and facilitate the
trade on domestic and international markets, which will become attractive and facil itate
investments. Industry Development Strategy until 2015 approved by Government Decision
No. 1149 of 5 October 2006 identified the following branches of the industrial sector, which
could develop to the country’s economic development:
– Food and beverage industry;
– Nonmetallic materials industry;
– Light industry;
– IT industry;
– Machinery industry;
– Chemical industry.
To foster these export -oriented sectors, efficient transport infrastructure should be developed
as well as trade facilitation and logistics services will need to be established and provided in the
Republic of Moldova.
The Land Transport Infrastructure St rategy for the years 2008 -2017 approved by the
Government Decision No. 85 of 1 February 2008 served as a framework for the development of
the road and rail subsectors. The Transport and Logistics Strategy for 2013 -2022 also covers
roads, railways, road and rails transport, as well as trade facilitation, settlement of problems
related to customs, border crossing, airports/air transport, ports and maritime/inland waterway
transport. This Strategy focuses on making the transport and logistics sector an enablin g factor
for the development of Moldova’s economy and export trade, and support the on -going process
of harmonizing Moldova’s transport system.
General Policy Objective
The overall objective to be achieved through the implementation of the Strategy is: “an
efficient transport and logistics system that supports citizens’ needs for mobility and which
facilitates trade in domestic and international markets, with a strong vie w of the role Moldova
can play as a link between EU and CIS countries”.
Specific objectives of the stra tegy [17 , p21]:
Guide the Government’s actions towards the creation of an adequate legal, institutional
and physical environment for the transport and l ogistics sector of the country to facilitate
sustainable economic development in the Republic of Moldova;
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Provide an enabling framework for each transport mode contributing to the economic
development of Moldova with specific focus on the development of e xternal trade;
Provide a framework for transparent resource allocation decisions in relation to
infrastructure investment and expenditures, and to establish a basis for agreements with
Moldova’s external partners such as IFI’s and the donor community;
Guide the process of EU integration and the implementation of international
commitments in the transport sector as well as in relation to Border Crossing Facilitation.
Improve the process pf obtaining documents:
– Eliminate order No. 288 – allowing exporting com panies to send trucks to an ICD of their
choice;
– Creating harmonious working hours between private industry and border control agencies
and chambers of commerce;
– Extend office hours of Phytosanitary Service to avoid truck congestion at ICDs;
– Provide legisl ative and regulatory framework, and information exchange;
– Eliminate redundant documentation requirements;
Moldova’s economy depends on agriculture and agro -industry. About 70% of the exports of
the Moldova are the agricultural products. The major objecti ve of the Government regarding
agriculture is to improve the access of the agricultural producers and suppliers to the market. As
a result, the country’s economy imposes the creation of a transportation industry and a well –
developed road and railway networ k. Improving the investment climate in transport sector and
efficient administration of the infrastructure might release the limited resources and transform
the traditional sectors of the company’s economy, by facilitating their competitiveness.
The main purposes of the Sectorial Strategy are: [18 , p.22]
In the economy: growth of GDP and revenues to the state budget by lowering the
operational expenses in the transport branch, a fact that will positively influence other
branches of the national economy; A lso decreasing the losses and profits omitted as a
result of unsatisfactory technical state of roads;
In the social sphere: increasing the living and cultural standards of the population by
satisfying the demands on transport and traffic, lowering the good s and services’ costs by
lowering the transport expenses of using the roads, decreasing the time of passengers in
traffic; diminishing the social tension in the society by creating additional jobs in the road
sector; decreasing the number of accidents and diminishing the negative impact on the
environment by improving the traffic conditions on roads.
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Infrastructure’s and especially transport’s developing contribute to poverty reduction, especially
by increasing the economic efficiency, by lowering the cost s and prices and by increasing the
opportunities.
The strategies of accomplishing the sectorial policy objectives are:
To rehabilitate the present transport infrastructure;
To develop regional transport links;
To offer paid services and to privatize the public transport activities;
To create an adequate managing and administrating structure;
To upgrade the informational transport systems and to improve the planning of this
sector;
To cooperate actively with international financial institutions in order to bring in
investments in the sector.
The Concept for National Network of International Transport Corridors outlines the
development of the transport sector in Moldova. The Concept does not assign any particular
priority to any transport mode, underlining o nly the importance of .
Water transport in terms of cost and safety of transportation;
Rail transport, long -distance and majority of cargo (oil, fuels, ores, etc.) transportation;
Road transport, small shipments, especially of valuable and perishable goods.
In particular, the Concept indicates the following development priorities:
In railway transport
Rehabilitation of existing border crossing stations;
Railways electrification;
Renewal and upgrade of rolling stock.
In road transport:
Identification of clear priorities for the rehabilitation and maintenance of existing roads;
Upgrading technical characteristics of national roads to international requirements;
Improving conditions for transport operation along existing roads, including new road
facilit ies, increased safety and reduced transport costs;
In inland water transport:
Upgrading inland waterways infrastructure along Dniester and Prut Rivers to
international requirements;
Carrying out the construction of an oil terminal in Giurgiulesti port;
Construction of port facilities for passenger and cargo traffic in the estuary of the Prut
River.
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In air transport:
Upgrading airport facilities to meet international requirements.
In combined transport:
Establishing cargo processing and storage capacities, including multimodal transport
terminal, which will provide a complete package of custom clearance and cargo handling
services;
Establishment of national intermodal transport operators capable of providing a full set of
services based on through rates and control cargo shipments along the whole route.
Companies that do everything themselves have much higher expenses, which must be passed
on to customers. An outside provider’s cost structure and economy of scale can give to firm an
important advantage. Outs ourcing no longer means subtracting operations from an organization
and handing it over to third -party location -which often relinquishes control and creates risks.
This is a new approach to logistics outsourcing . This low or no cost strategy allows
organiz ations to add talent, scale technology to drive down costs, improve efficiency and
enhance customer satisfaction. With additive outsources, shippers maintain strategic control and
visibility. They add resources with limited fixed costs or new capital inves tment.
Collaborative outsourcing is producing exceptional results in transportation networks. In a
collaborative model, shippers are based on outsources providers to handle execution in a
transportation network -freeing up internal staff to focus on more s trategic assignments further up
to supply chain. Using Transportation Management System technology, outsource providers
give shippers access to real time, mission -critical intelligence so they can make better informed,
more profitable business decisions. C ollaborative outsourcing offers more than traditional
outsource models. With a collaborative model, shippers can drive down costs short term and
build smarter, stron ger supply chains long term. [14 , p 221]
A side by side comparison of traditional and colla borative models clearly shows the additional
benefits achieve through a collaborative approach.
Successful outsourcing is outcome -based therefore key performance indicators (KPIs) need to
be established for criteria throughout the supply chain. Typical KPIs include efficiency gains in
the manufacturing process, on time performance, improved service l evels, overall savings, time
to market in new geographies and ultimate customer satisfaction levels. Understanding the
differences between high, moderate and minimal control is the first step in deciding what is right
for a firm’s needs.
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1. High strategic co ntrol -if transportation is a fundamental part of a brand it will want high
strategic control. An outsource relationship should provide it with firm control of its
transportation strategy.
2. Moderate strategic control -if customer relationships depend heavily on firm’s freight
network’s effectiveness -but transportation isn’t necessarily an element of the brand that
we should consider retaining moderate strategic control.
3. Minimal strategic control -if you simply want to cut costs and offload day to day
manageme nt of part of your freight network, minimal strategic control might be best for
you.
Sustained savings in your supply chain [20, p13]
An effective outsources deployment will deliver more than initial savings. It should provide your
enterprise with:
Immedi ate cost avoidance . Achieve immediate savings primarily through benchmarking
and route optimization.
Sustained cost avoidance. Apply process engineering, TMS technology and best
practices for long term savings.
Access to technology. Utilize advanced techno logy implementation, operating and
maintenance with no direct costs to you.
Industry expertise. Years of experience and broad customer base allows for application
of best practices across many industries.
Human capital. Add transportation department bandwidth without incurring additional
payroll, benefits or training costs.
Obtaining the most from a logistics outsources requires a strong provider who not only
understands your need, but can also execute them. Look for providers that deliver:
Performanc e Metrics;
Expertise of staff;
Process improvement;
Advanced TMS technology;
Ready access to best practices;
Financial stability;
Multimodal expertise;
Global coverage;
Account management.
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Success in today’s increasingly complex and competitive markets requires continuous
improvement. Create innovative with a provider that easily makes the transition from national to
international shipping as your business grows. The role of the logistics industry is transforming.
Product shipping has evolved to meet the needs of online retailers and consumers. Purchased
items are no longer confined to specific shelves in a store, but rather need to have the mobility to
go from anywhere to anywhere else, and to do so quickly. The success of strong logistics
programs provi des some insight into how other companies and logistics employees can thrive in
this growing industry.
The top focuses of industry high performers
Flexibility is one of the top business models of thriving logistics groups. There are a lot of
changes happe ning quickly in the industry. Retailers are constantly trying to find the best and
newest deal to offer their customers. The responsibilities then fall quickly to the warehouses,
distribution centers and transportation staff to make those fulfillment promi ses come through. As
such, logistics groups have to be flexible and accommodating in order to gain a reputation for
being a reliable service.
Another key focus for logistics is using the right technology . New programs that streamline
ordering, inventory and shipping options make many aspects of the job easier than ever before.
Finding integrated software that can best enhance all of a facility's operations will give
administrators better control of the processes in their warehouses.
How employee s can succeed in logistics
The success of a logistics company doesn't only come from how its facilities are r . Warehouse
employment plays a huge role in how well a company is able to perform. Managers in this
industry must have a unique set of leadership skills to run successful operations.
"Logistics covers a broad area. Good leaders must be able to address executives at a
boardroom level just as well as they talk to truck drivers and warehouse workers," said Don
Firth, a career recruiter.
Logistics managers must have strong people skills and be able to think well under pressure.
When changes need to be made at a moment's notice, strong logistics leaders are able to come up
with creative solutions and implement them. Understanding the big picture of the supply chain
makes it easier for them to see where their operations fit in. Logis tics and transport management
are mainstream management careers where individuals will be faced with the full range of
management challenges. Those with the right skill set are likely to be in great demand.
The essential skills are: [14 , 2-3]
Commercial awareness;
Numeracy;
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Good problem solving skills;
Ability to think quickly, logically and analytically.
Excellent written and verbal skills are required supported by the ability and to present thoughts
clearly and convincingly. There are certain personal q ualities that can be broadly grouped into
technology -related, people -related and general management skills.
Technology skills
Information technology plays a key role in the management of the supply chain and is an equally
important tool to those involved i n transport management and transport planning. These skills
are therefore essential to all managers.
IT literacy is the very minimum requirement for any manager today. Managers must be
able to understand how information systems and technology can improve o perational
efficiency and competitiveness.
Management information systems – all organizations use information technology to
store data and information. What employers would not expect you to be writing programs
but rather to apply your analytical skills to get the best from the system to make the
operations run smoothly.
People skills
People management is no less important to the success of an operation. Changes in union
relations, new legislation, new patterns of working and the constant drive for higher p roductivity
make enormous demands on managers.
Leadership -taking people with you, by being consistently clear on objectives, valuing
the contributions of staff and colleagues and gaining their respect.
Communication -ensuring that those you deal with always understand what you mean
and importantly that you listen to what others says. One of the biggest areas of conflict is
ineffective communication.
Team -building – motivating and developing people to work effectively together to
achieve the desired result, including effective communication, full participation and
maximum delegation with appropriate support and guidance.
Interpersonal skills -these are always high on the professional agenda and skills, and
qualities that are especially important are enthusiasm, energy, drive, perceptiveness,
analytical ability, calm, tenacity, adaptability and resilience.
General management skills
The moder n workplace is a demanding environment that requires people to think on their feet to
meet the daily challenges that come their way. This requires strong skills in the following areas:
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Numeracy -the need for numeracy becomes more essential and whilst not ne cessarily
looking for a mathematics graduate, the ability to understand and analyze data is very
important.
Problem -solving – the ability to analyze the hard facts and arrive at a logical/workable
conclusion.
Decision -making -having the ability to take ofte n vital decisions is essential to any
management role, and this depends on quick and effective appraisal of relevant data,
empathy and judgement. Failing to take decisions is never acceptable.
Project management -such skills are of growing importance across both logistics and
transport as people increasingly work in cross -functional teams.
Without a doubt, for a successful logistic system we need perfect skills and knowledges that
will help to implement all our ideas and generate the best result for a compa ny, for a system, for
a country. Beside these, we need the Government help, who can manage the policies and find
new strategies that will maintain Moldavian’s logistics level as high as possible and will offer the
opportunity to extend all over the world. Nowadays we have a lot of possibilities to develop our
country, but we can’t do it by our own. To facilitate the whole process, many countries from EU
are welcome to help us and to give lots of advices in order to make our little country to grow.
There are a lot foreign logistics companies working with Moldova and they are very satisfied and
proud of. Working with foreign companies we put Moldova on a level higher than it can be
without foreign “advertising”. In Moldova, logistics is not as developed as it should be. That’s
because of road problems which need a lot of financial resources and unfortunately, Moldova is
not able to change this situation without any foreign help. Also, we have transportation
problems, because as we know the basic branch in Moldo va is agriculture and in rural sector we
have a very low logistics system. It is characterized by producers who use their own cars to
transport goods to the customers and are not using special trucks to do it. This is happening just
because this sector is still in a difficult situation and needs investments and projects that will
facilitate the transport services and will satisfy customer’s needs. To make Moldavian logistics
system more professional, profitable and successful we need to cooperate with devel oped
countries that can help us to grow and maintain our position at a high level. Through cooperating
we can learn some top trips from successful companies and to implement them in our logistics
system. Also, there are a multiply strategies of development that will keep Moldova informed
about innovations, new technologies that can be applied in logistics system.
66
CONCLUSION
Speaking about the logistics in the context of global economy, we can understand its
huge role and impact that it has on it. Logistics is often condescendingly being regarded as a
necessary evil, which is intended for bringing two goods from one place to another. The public
even takes transport and logistics as synonyms, whereas logistics implies much more activities
than just t ransport. Logistics is making an economic, ecological and social effort striving for a
better world. Logistics is the management of the flow of information and the transportation of
goods. Effective logistics management is integral to the success of manufa cturers and resellers
that must constantly hold and move inventory. Continuous improvement is a culture or emphasis
on constantly upgrading technology, people and processes. In logistics, evolution is constant, so
you must often improve to keep up.
Thinkin g back from the world war period, logistics term started its evolution on the world
level. It gained its share in local and global economy fast. Nowadays all companies are equipped
with a good infrastructure and record keeping that is in a continuous devel opment and
improvement in technologies. During years, the importance of logistics have raised, in fact this
rise has brought factors such as warehousing and other facilities closer to large towns and cities.
It has a direct effect on business within towns, bringing more jobs into these locations. In
addition, logistics has a mission to control the effective forward and reverse flow of goods and
services in the right place at a right time. This means that logistics has an impact on the shipment
of goods and how quickly they can get to the customer again adding a competitive edge to other
businesses.
In recent years, organizations have begun to appreciate the importance of logistics, and
recognize that it is an essential function, which clearly affects wider p erformance. Therefore, the
best way to approach logistics for your business is to understand the goal. Simply, you want to
balance performance and cost and get the most of the former with the least of the latter. Logistics
management is the organized use o f information, analysis and techniques to eliminate
bottlenecks and cost in order optimize this process. In logistics, knowledge is power and small
businesses achieve cost savings by understanding the components of cost and time in inbound
and outbound shi pments.
The importance of logistics strategies and setting the right objectives are vital for each
organization. Implementing the right strategy will allow your company to grow on the new step
level of development. It is not so important what kind of strat egy do any company implement, it
is important how it will be implemented and the way the company will work on its working
67
process. The importance of setting the right objective on the both short -term and long -term will
allow all companies to have a sustain able growth.
Logistics is the management of the flow of information and the transportation of goods.
Effective logistics management is integral to the success of manufacturers and resellers that must
constantly hold and move inventory. Continuous improvement is a culture or emphasis on
constantly upgrading technology, people and processes. In logistics, evolution is constant, so you
must often improve to keep up.
About logistics in Republic of Moldova, we can say that our logistics is not so bad. Due to the
access to the river Danube, being a corridor between two parts of the Europe, having access to
European Union and CSI markets and being situated in a favorable part of the Europe give as
good conditions to develop a good infrastructure for logis tics. In addition, here in Moldova many
big European logistical countries opens subsidiaries just because we have the possibility to give
a smaller wages for employees and lower fiscal taxes. Beside all opportunities, we have firstly to
work on our bad sid es of logistics. Mainly we have to work on the road infrastructure on all
sides: road, air, rail and water. This is our first global issue. The fact that we are a developing
country and our volume of imports exceeds exports we also have to increase the lev el of
transparency at borders, the infrastructure of all warehouses and all the customers’ procedures.
There are a lot foreign logistics companies working with Moldova and they are very
satisfied and proud of. Working with foreign companies, we put Moldo va on a level higher than
it can be without foreign “advertising”. In Moldova, logistics is not as developed as it should be.
That is because of road problems which need many financial resources and unfortunately,
Moldova is not able to change this situati on without any foreign help. In addition, we have
transportation problems, because as we know the basic branch in Moldova is agriculture and in
rural sector, we have a very low logistics system. It is characterized by producers who use their
own cars to tr ansport goods to the customers and are not using special trucks to do it. This is
happening just because this sector is still in a difficult situation and needs investments and
projects that will facilitate the transport services and will satisfy customer’ s needs. To make
Moldavian logistics system more professional, profitable and successful we need to cooperate
with developed countries that can help us to grow and maintain our position at a high level.
Through cooperating, we can learn some top trips from successful companies and to implement
them in our logistics system. In addition, there are a multiply strategies of development that will
keep Moldova informed about innovations, new technologies that can be applied in logistics
system.
Lookin g ahead to a new millennium, business logistics and supply chain managers will be
faced with an accelerating demand to deliver better products faster and cheaper on a global basis.
68
There will be opportunities as well as challenges. Logistics managers will be called on to
maintain supply and keep up with deliveries in an electronically linked international business
community. And they will be performing in a rapidly changing business environment as the pace
of business change accelerates over the next decade . Meeting the demands for faster cycle times
will require close cooperation throughout each business's supply chain, as companies come to
rely on more partners to achieve their logistics goals . New technologies will play an increasingly
important role in b usiness logistics, if th ey aren't already. New software tools will provide
managers with better ways to analyze the performance of logistics networks. Internet
applications will open up internal information to all participants in the supply chain. The demand
for speed will result in companies taking inventory out of their systems, with technology
providing much of the ability to meet the demands for speed and sim plicity. The ultimate, though
perhaps unattainable, goal of logistics will be zero inventory and immediate availability.
69
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