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CONTENTS Preface 13
Parti
Overview of Logistics
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Chapter 1 AN OVERVIEW OF LOGISTICS
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Economic Impacts of Logistics 20 Logistics: What It Is 22 The Increased Importance of Logistics 24 A Reduction in Economic Regulation 24 Changes in Consumer Behavior 25 Technological Advances 26 The Growing Power of Retailers 26 Globalization of Trade 27 The Systems and Total Cost Approaches to Logistics 27 Logistical Relationships within the Firm 30 Finance 30 Production 31 Marketing 31 Marketing Channels 33 Activities in the Logistical Channel 35 Customer Service 36 Demand Forecasting/ 36 Facility Location Decisions 36 International Logistics 36 Inventory Management 36 Materials Handling 36 Order Management 37 Packaging 37 Procurement 37 Reverse Logistics 37 Transportation Management 37 Warehousing Management 37 Logistics Careers 37 Summary 38 • Questions for Discussion and Review 38 • Suggested Readings 39 Case ,1-1 KiddieLand and the Super Gym 39 Appendix 1: Logistics Professional Organizations
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Contents
Chapter 2 LOGISTICS AND INFORMATION TECHNOLOGY
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General Types of Information Management Systems 44 Office Automation System 44 Communication System 45 Transaction Processing System (TPS) 46 Management Information System (MIS) and Executive Information System (EIS) 48 Decision Support Systems (DSSs) 49 Enterprise System 53 The Internet's Influence on Logistics 54 Online Retailing 54 On-Demand Software 55 Electronic Procurement 56 Information Technology Challenges 57 Summary 58 • Questions for Discussion and Review 58 • Suggested Readings 58 Case 2-1 Just-in-Time in Kalamazoo
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Chapter 3 STRATEGIC AND FINANCIAL LOGISTICS Connecting Strategy to Financial Performance Basic Financial Terminology 64
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Income Statement 64 Balance Sheet 65 Strategic Profit Model 66 Logistics Connections to Net Profit Margin 68 Logistics Connections to Asset Turnover 68 Balanced Scorecard 68 Common Logistics Measures 69 Transportation Measures 69 Warehousing Measures 70 Inventory Measures 70 Design and Implementation of Measures 70 Summary and Review
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Questions for Discussion •
Suggested Readings 71
Case 3-1 Brant Freezer Company
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Chapter 4 ORGANIZATIONAL AND MANAGERIAL ISSUES IN LOGISTICS 74 v
Organizing Logistics Within the Firm 74 Organizational Structure for Logistics 75 Organizational Design for Logistics 76 Managerial Issues in Logistics 79 Productivity 79 Theft and Pilferage 82
Contents
Logistics Social Responsibility
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Managing Reverse Logistics 85 Lessening the Impact of Terrorism on Logistics Systems 86 Summary 89 • Questions for Discussion and Review 89 • Suggested Readings 89 Case 4-1 Red Spot Markets Company 90
Part II
Supply Chain M a n a g e m e n t
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Chapter 5 THE SUPPLY CHAIN MANAGEMENT CONCEPT Evolution of Supply Chain Management 97 Attributes Affecting SCM Implementation 99 Customer Power 101 Long-Term Orientation
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Leveraging Technology 102 Enhanced Communication Across Organizations Inventory Control 104 Interorganizational Collaboration
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Supply Chain Facilitators 105 Barriers to SCM Implementation 106 Regulatory and Political Considerations
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Lack of Top Management Commitment 107 Reluctance to Share, or Use, Relevant Information Incompatible Information Systems 108 Incompatible Corporate Cultures 108 Globalization 109 Supply Chain Integration 109 Summary 110 • Questions for Discussion and Review 110 • Suggested Readings 111 Case 5-1 Johnson Toy Company 111
Chapter 6 PROCUREMENT
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Procurement Objectives 116 Supplier Selection and Evaluation 117 Supplier Development (Reverse Marketing) Quality Issues in Procurement 119
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Global Procurement (Sourcing) 121 Investment Recovery 122 Socially Responsible Procurement 123 Summary 124 • Questions for Discussion and Review 124 • Suggested Readings 125 Case 6-1 Tempo Ltd. 125
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Contents
Part III
Elements of Logistics Systems
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Chapter 7 DEMAND MANAGEMENT, ORDER MANAGEMENT, AND CUSTOMER SERVICE 130 Demand Management 131 Demand Forecasting Models 131 Demand Forecasting Issues 132 Order Management 133 Order Transmittal 134 Order Processing 134 Order Picking and Assembly 136 Order Delivery 137 Customer Service 138 Time 139 Dependability 139 Communication 140 Convenience 140 Managing Customer Service 141 Customer Profitability Analysis 141 Establishing Customer Service Objectives 141 Measuring Customer Service 143 Service Failure and Service Recovery 145 i w
Summary 146 • Questions for Discussion and Review 146 • Suggested Readings 147 Case 7-1 Handy Andy, Inc. 147 Appendix 7-A
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Chapter 8 INVENTORY MANAGEMENT
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Inventory Classifications 152 Inventory Costs 153 Inventory Carrying Costs 153 Ordering Costs 155 Trade-Off between Carrying and Ordering Costs 155 Stockout Costs 155 Trade-Off between Carrying and Stockout Costs 157 When to Order 157 How Much to Order 158 Economic Order Quantity 158 Conditions of Uncertainty 160 Inventory Flows 160 Inventory Management: Special Concerns 161 ABC Analysis of Inventory 162 Dead Inventory 162
Contents
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Inventory Turnover 163 Complementary and Substitute Products 164 Contemporary Approaches to Managing Inventory Lean Manufacturing (Lean) 165 Service Parts Logistics 167 Vendor-Managed Inventory (VMI)
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Summary 169 • Questions for Discussion and Review 169 • Suggested Readings 170 Case 8-1 Low Nail Company
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Chapter 9 DISTRIBUTION CENTER, WAREHOUSE, AND PLANT LOCATION 172 The Strategic Importance of Facility Location
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Cost Considerations 175 Customer Service Expectations 175 Location of Customer or Supply Markets 175 Determining the Number of Facilities 176 General Factors Influencing Facility Location 178 Natural Resources 178 Population Characteristics—Market for Goods Population Characteristics—Labor
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Taxes and Incentives 181 Transportation Considerations 181 Proximity to Industry Clusters 182 Trade Patterns 182 Qua I ity-of-Life Considerations
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Locating in Other Countries 185 Specialized Location Characteristics 185 Free Trade Zones 186 Finding the Lowest-Cost Location Grid Systems 186
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Facility Relocation and Facility Closing
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Summary 190 • Questions for Discussion and Review 190 • Suggested Readings 191 Case 9-1 Aero Marine Logistics 191
Chapter 10 WAREHOUSING MANAGEMENT
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Public, Private, Contract, and Multiclient Warehousing Public Warehousing 198 Private Warehousing 199 Contract Warehousing 200 Multiclient Warehousing 200
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Design Considerations in Warehousing General Considerations Trade-Offs
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Fixed versus Variable Slot Locations for Merchandise 202 Build Out (Horizontal) versus Build Up (Vertical)
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Order-Picking versus Stock-Replenishing Functions 202 Two-Dock versus Single-Dock Layout
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Conventional, Narrow, or Very Narrow Aisles 203 Paperless Warehousing versus Traditional Paper-Oriented Warehousing Operations 203 Other Space Needs 203 Warehousing Operations
Warehousing Security 208 Cleanliness and Sanitation Issues 210 Summary 210 • Questions for Discussion and Review 211 • Suggested Readings 211 Case 10-1 Minnetonka Warehouse
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Chapter 11 PACKAGING A N D MATERIALS HANDLING ' Product Characteristics 214 Packaging Fundamentals 215
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Promotional and Protective Functions of Packaging 216 Package Testing and Monitoring Labeling
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Issues in Packaging
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Environmental Protection
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Metric System 222 Identifying Packaging Inefficiencies 223 Packaging's Influence on Transportation Considerations Unit Loads in Materials Handling The Unit Load Platform
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Beyond the Unit Load 228 Materials Handling 229 Materials Handling Principles 231 Materials Handling Equipment
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Summary 232 • Questions for Discussion and Review 233 • Suggested Readings 233 Case 11-1 Let There Be Light Lamp Shade Company
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Contents
Chapter 12 TRANSPORTATION •
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Overview of Transportation Infrastructure Transportation Modes 237 Airfreight
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Motor Carriers 239 Pipelines 241 Railroads 241 Water 242 Intermodal Transportation 243 Transportation Specialists 246 Transportation Regulation 248 Environmental Regulation
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Safety Regulation 248 Economic Regulation 249 Legal Classification of Carriers 250 Summary 252 • Questions for Discussion and Review 252 • Suggested Readings 252 Case 12-1 HDT Truck Company
Rate and Service Negotiations 264 Modal and Carrier Selection 266 Documentation 267' Bill of Lading 267 Freight Bill
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Freight Claims 270 Making and Receiving Shipments
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Consolidating Small Shipments 271 Demurrage and Detention 273 Routing 274 Tracing and Expediting 275 Transportation Service Quality 276 Summary 277 • Questions for Discussion and Review 277 • Suggested Readings 277 Case 13-1 Chippy Potato Chip Company
Chapter 14 INTERNATIONAL LOGISTICS
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Macroenvironmental Influences on International Logistics Political Factors 280 Economic Factors 283 Cultural Factors 284
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International Documentation Terms of Sale 287
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EXW (Ex-Works) 287 FCA (Free Carrier) 287 FAS (Free Alongside Ship) 288 FOB (Free on Board) 288 CFR (Cost and Freight) 288 CPT (Carriage Paid To) 288 CIF (Cost, Insurance, and Freight) 288 CIP (Carriage and Insurance Paid To) 288 DES (Delivered Ex Ship) 288 DEQ (Delivered Ex Quay) 288 DAF (Delivered at Frontier) 289 DDP (Delivered Duty Paid) 289 DDU (Delivered Duty Unpaid) 289 Methods of Payment 289 International Trade Specialists 290 International Freight Forwarders 291 Nonvessel-Operating Common Carriers 292 Export Management Companies
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Export Packers 294 Transportation Considerations in International Logistics 295 Ocean Shipping 295 Shipping Conferences and Alliances 297 International Airfreight 298 Surface Transport Considerations 298 International Trade Inventories 300 Logistics Performance Index 301 Summary 302 • Questions for Discussion and Review 302 • Suggested Readings 303 Case 14-1 Nurnberg Augsburg Maschinenwerke (N.A.M.) 303 Glossary 307 Name Index 315 Subject Index 319
