CONTENTS
Preface xiii
Part I Overview of Logistics 1
Chapter 1 AN OVERVIEW OF LOGISTICS 2
Economic Impacts of Logistics 2
Logistics: What It Is 4
The Increased Importance of Logistics 6
A Reduction in Economic Regulation 6
Changes in Consumer Behavior 7
Technological Advances 8
The Growing Power of Retailers 8
Globalization of Trade 9
The Systems and Total Cost Approaches to Logistics 9
Logistical Relationships within the Firm 12
Finance 12
Production 13
Marketing 13
Marketing Channels 15
Activities in the Logistical Channel 17
Customer Service 18
Demand Forecasting 18
Facility Location Decisions 18
International Logistics 18
Inventory Management 18
Materials Handling 18
Order Management 19
Packaging 19
Procurement 19
Reverse Logistics 19
Transportation Management 19
Warehousing Management 19
Logistics Careers 19
Summary 20
Questions for Discussion and Review 20
Suggested Readings 21
Case 1-1 KiddieLand and the Super Gym 21
Appendix 1: Logistics Professional Organizations 23
Chapter 2 LOGISTICS AND INFORMATION TECHNOLOGY 25
General Types of Information Management Systems 26
Office Automation System 26
Communication System 27
Transaction Processing System (TPS) 28
Management Information System (MIS) and Executive Information System (EIS) 30
Decision Support Systems (DSSs) 31
Enterprise System 35
The Internet’s Influence on Logistics 36
Online Retailing 36
On-Demand Software 37
Electronic Procurement 38
Information Technology Challenges 39
Summary 40
Questions for Discussion and Review 40
Suggested Readings 40
Case 2-1 Just-in-Time in Kalamazoo 41
Chapter 3 STRATEGIC AND FINANCIAL LOGISTICS 44
Connecting Strategy to Financial Performance 45
Basic Financial Terminology 46
Income Statement 46
Balance Sheet 47
Strategic Profit Model 48
Logistics Connections to Net Profit Margin 50
Logistics Connections to Asset Turnover 50
Balanced Scorecard 50
Common Logistics Measures 51
Transportation Measures 51
Warehousing Measures 52
Inventory Measures 52
Design and Implementation of Measures 52
Summary 52
Questions for Discussion and Review 52
Suggested Readings 53
Case 3-1 Brant Freezer Company 53
Chapter 4 ORGANIZATIONAL AND MANAGERIAL ISSUES IN LOGISTICS 56
Organizing Logistics Within the Firm 56
Organizational Structure for Logistics 57
Organizational Design for Logistics 58
Managerial Issues in Logistics 61
Productivity 61
Theft and Pilferage 64
Logistics Social Responsibility 66
Managing Reverse Logistics 67
Lessening the Impact of Terrorism on Logistics Systems 68
Summary 71
Questions for Discussion and Review 71
Suggested Readings 71
Case 4-1 Red Spot Markets Company 72
Part II Supply Chain Management 77
Chapter 5 THE SUPPLY CHAIN MANAGEMENT CONCEPT 78
Evolution of Supply Chain Management 79
Attributes Affecting SCM Implementation 81
Attributes Affecting SCM Implementation
Customer Power 83
Long-Term Orientation 83
Leveraging Technology 84
Enhanced Communication Across Organizations 85
Inventory Control 86
Interorganizational Collaboration 86
Supply Chain Facilitators 87
Barriers to SCM Implementation 88
Regulatory and Political Considerations 89
Lack of Top Management Commitment 89
Reluctance to Share, or Use, Relevant Information 89
Incompatible Information Systems 90
Incompatible Corporate Cultures 90
Globalization 91
Supply Chain Integration 91
Summary 92
Questions for Discussion and Review 92
Suggested Readings 93
Case 5-1 Johnson Toy Company 93
Part III Elements of Logistics Systems 111
Chapter 7 DEMAND MANAGEMENT, ORDER MANAGEMENT, AND CUSTOMER SERVICE 112
Demand Management 113
Demand Forecasting Models 113
Demand Forecasting Issues 114
Order Management 115
Order Transmittal 116
Order Picking and Assembly 118
Order Delivery 119
Customer Service 120
Time 121
Dependability 121
Communication 122
Convenience 122
Managing Customer Service 123
Customer Profitability Analysis 123
Establishing Customer Service Objectives 123
Measuring Customer Service 125
Service Failure and Service Recovery 127
Summary 128
Questions for Discussion and Review 128
Suggested Readings 129
Case 7-1 Handy Andy, Inc. 129
Appendix 7-A 131
Chapter 8 INVENTORY MANAGEMENT 133
Inventory Classifications 134
Inventory Costs 135
Inventory Carrying Costs 135
Ordering Costs 137
Trade-Off between Carrying and Ordering Costs 137
Stockout Costs 137
Trade-Off between Carrying and Stockout Costs 139
When to Order 139
How Much to Order 140
Economic Order Quantity 140
Conditions of Uncertainty 142
Inventory Flows 142
Inventory Management: Special Concerns 143
ABC Analysis of Inventory 144
Dead Inventory 144
Inventory Turnover 145
Complementary and Substitute Products 146
Contemporary Approaches to Managing Inventory 147
Lean Manufacturing (Lean) 147
Service Parts Logistics 149
Vendor-Managed Inventory (VMI) 151
Summary 151
Questions for Discussion and Review 151
Suggested Readings 152
Case 8-1 Low Nail Company 152
Chapter 9 DISTRIBUTION CENTER, WAREHOUSE, AND PLANT LOCATION 154
The Strategic Importance of Facility Location 156
Cost Considerations 157
Customer Service Expectations 157
Location of Customer or Supply Markets 157
Determining the Number of Facilities 158
General Factors Influencing Facility Location 160
Natural Resources 160
Population Characteristics—Market for Goods 161
Population Characteristics—Labor 161 Taxes and Incentives 163
Transportation Considerations 163
Proximity to Industry Clusters 164
Trade Patterns 164
Quality-of-Life Considerations 166
Locating in Other Countries 167
Specialized Location Characteristics 167
Free Trade Zones 168
Finding the Lowest-Cost Location 168 Grid Systems 168
Facility Relocation and Facility Closing 171
Summary 172
Questions for Discussion and Review 172
Suggested Readings 173
Case 9-1 Aero Marine Logistics 173
Chapter 10 WAREHOUSING MANAGEMENT 177
Public, Private, Contract, and Multiclient Warehousing 179
Public Warehousing 180
Private Warehousing 181
Contract Warehousing 182
Multiclient Warehousing 182
Design Considerations in Warehousing 183
General Considerations 183
Trade-Offs 183
Fixed versus Variable Slot Locations for Merchandise 184
Build Out (Horizontal) versus Build Up (Vertical) 184
Order-Picking versus Stock-Replenishing Functions 184
Two-Dock versus Single-Dock Layout 185
Conventional, Narrow, or Very Narrow Aisles 185
Paperless Warehousing versus Traditional Paper-Oriented Warehousing Operations 185
Other Space Needs 185
Warehousing Operations 186
Warehousing Productivity Analysis 186
Safety Considerations 187
Hazardous Materials 189
Warehousing Security 189
Cleanliness and Sanitation Issues 191
Summary 192
Questions for Discussion and Review 192
Suggested Readings 193
Case 10-1 Minnetonka Warehouse 193
Chapter 11 PACKAGING AND MATERIALS HANDLING 195
Product Characteristics 196
Packaging Fundamentals 197
Promotional and Protective Functions of Packaging 198
Package Testing and Monitoring 199
Labeling 201
Issues in Packaging 203
Environmental Protection 203
Metric System 204
Identifying Packaging Inefficiencies 205
Packaging’s Influence on Transportation Considerations 206
Unit Loads in Materials Handling 207
The Unit Load Platform 209
Beyond the Unit Load 210
Materials Handling 211
Materials Handling Principles 213
Materials Handling Equipment 214
Summary 214
Questions for Discussion and Review 215
Suggested Readings 215
Case 11-1 Let There Be Light Lamp Shade Company 216
Chapter 12 TRANSPORTATION 217
Overview of Transportation Infrastructure 218
Transportation Modes 219
Airfreight 220
Motor Carriers 221
Pipelines 223
Railroads 223
Water 224
Intermodal Transportation 225
Transportation Specialists 228
Transportation Regulation 230
Environmental Regulation 230
Safety Regulation 230
Economic Regulation 231
Legal Classification of Carriers 232
Summary 234
Questions for Discussion and Review 234
Suggested Readings 234
Case 12-1 HDT Truck Company 235
Chapter 13 TRANSPORTATION MANAGEMENT 239
Rate (Pricing) Considerations 240
Rate Determination 240
Rate and Service Negotiations 246
Modal and Carrier Selection 248
Documentation 249
Bill of Lading 249
Freight Bill 251
Freight Claims 252
Making and Receiving Shipments 253
Consolidating Small Shipments 253
Demurrage and Detention 255
Routing 256
Tracing and Expediting 257
Transportation Service Quality 258
Summary 259
Questions for Discussion and Review 259
Suggested Readings 259
Case 13-1 Chippy Potato Chip Company 260
Chapter 14 INTERNATIONAL LOGISTICS 261
Macroenvironmental Influences on International Logistics 262
Political Factors 262
Economic Factors 265
Cultural Factors 266
International Documentation 268
Terms of Sale 269
EXW (Ex-Works) 269
FCA (Free Carrier) 269
FAS (Free Alongside Ship) 270
FOB (Free on Board) 270
CFR (Cost and Freight) 270
CPT (Carriage Paid To) 270
CIF (Cost, Insurance, and Freight) 270
CIP (Carriage and Insurance Paid To) 270
DES (Delivered Ex Ship) 270
DEQ (Delivered Ex Quay) 270
DAF (Delivered at Frontier) 271
DDP (Delivered Duty Paid) 271
DDU (Delivered Duty Unpaid) 271
Methods of Payment 271
International Trade Specialists 272
International Freight Forwarders 273
Nonvessel-Operating Common Carriers 274
Export Management Companies 274
Export Packers 276
Transportation Considerations in International Logistics 277
Ocean Shipping 277
Shipping Conferences and Alliances 279
International Airfreight 280
Surface Transport Considerations 280
International Trade Inventories 282
Logistics Performance Index 283
Summary 284
Questions for Discussion and Review 284
Suggested Readings 285
Case 14-1 Nürnberg Augsburg Maschinenwerke (N.A.M.) 285
Glossary 289
Name Index 297
Subject Index 301