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Contents

Preface xiii Acknowledgments xv 1 Introduction to Logistics 1 Logistics: The Historical Perspective 1 Logistics: The Modern Perspective 2 Components of a logistics system 4 The role of logistics in the organization 7 Logistics as a Source of Competitive Advantage 8 Why Is Management Interest in Logistics Growing? 10 Trends in global trade 10 Customers are demanding greater value 10 Transportation privatization and liberalization 11 Transportation security 12 Environmental concerns 12 Changing view of inventory 13 Continuing advances in information technology 14 Electronic commerce 15 Logistics in the Global Organization 15 Conceptual Model and Statement of Purpose 17 Chapter Summary 18 Study Questions 19 2 Logistics in the Organization 21 Introduction 21 The Marketing/Logistics Partnership 22 Marketing and Logistics Channels 22 Alternative channel structures 22 Why do channels develop? 23 Channel flows 23 Designing effective channels 25 Environmental Issues 25 Marketing Issues 26 Channel management issues 31 Formal and informal channel relationships 32 Domestic versus global channels 33 Future trends in channel structures 35 Managing the Logistics System 36 Tradeoff Analysis 37 Enhancing Corporate Profitability with Logistics 39 Chapter Summary 41 Study Questions 42 3 Customer Service 44 Introduction 44 What Is Customer Service? 45 Elements of Customer Service 45 Customer Service in a Global Setting 49 How Much Service Should Be Offered? 50 Barriers to Quality Customer Service 52 Controllable factors 52 Uncontrollable factors 53 Improving Customer Service Performance 54 The Consequences of Poor Customer Service 55 Improving Customer Service in Comparison to its Costs 59 Customer Service and the Internal Customer 59 Chapter Summary 60 Study Questions 60 4 Inventory Management 62 Introduction 62 Inventory and Customer Service 63 Purposes of Inventory 64 Types of Inventory 64 Objectives of Inventory Management 65 Inventory costs 65 Managing inventory costs 66 Classic Inventory Models 66 Economic order quantity (EOQ) model 66 Modifications to the basic EOQ model 67 Model limitations 68 Fixed order point/fixed order quantity model 68 Fixed order interval model 68 Safety stock requirements 70 Inventory Management: Signs of Trouble 71 Improving Inventory Management 74 Materials Requirements Planning (MRP) 77 Distribution Resource Planning (DRP) 77 Just-In-Time (JIT) Inventory Management 77 Basic tenets of JIT 78 Advantages of JIT 79 Disadvantages of JIT 79 JIT II/vendor managed inventory (VMI) 80 The reality of JIT 81 Integrated Inventory Management: DRP, MRP, and JIT 82 Inventory Management in a Global Market 83 Chapter Summary 85 Study Questions 86 5 Global Transportation Systems 87 Introduction 87 The Five Modes of Transportation 88 Rail 89 Road transport 91 Pipelines 93 Air 93 Water carriage 94 Deregulation and Privatization of Transportation 97 Deregulation 97 Privatization 98 Future directions 99 Government's Role in Transportation 100 Direct control and regulation of transport firms 100 Provision of transport infrastructure 101 Promulgating and enforcing environmental, safety, and security laws 101 Transportation Security 102 Intermodal Transportation 103 Rail 104 Ocean transport 104 Air 105 Motor transport 105 Infrastructure issues 106 Concluding comments 106 Chapter Summary 106 Study Questions 107 6 Transportation Management Issues 109 Introduction 109 Developing Win/Win Shipper/Carrier Relationships 109 Transport Pricing 111 Market structure models 111 Relevant market area 112 Shipper demand 113 Carrier costs 113 Pricing in Practice 115 Price negotiation: the carrier's perspective 115 Price negotiation: the shipper's perspective 116 Private Transportation 116 Other Issues Affecting Transportation Cost and Service 117 Infrastructure availability and condition 117 Environmental and quality of life issues 121 Customs and cargo security 125 Carrier safety 125 Conclusions 126 Chapter Summary 126 Study Questions 127 7 Warehousing 129 Introduction 129 The Strategic Role of Warehousing in Logistics 131 Functions of Warehousing 132 Warehouse Roles 134 Warehouse Location Issues 135 Centralized versus decentralized warehouses 135 Selecting specific sites 137 Warehousing Alternatives 139 Private warehousing 139 Contract warehousing 139 Public warehouses 139 Warehousing Strategies 140 Warehousing Concerns in Overseas Markets 141 Chapter Summary 143 Study Questions 143 8 Materials Handling and Packaging 145 Introduction 145 Basic Warehouse Design 145 Manual Versus Automated Materials Handling Systems 146 Manual warehouses 146 Automated warehouses 147 Manual versus automated: making the choice 147 Trends in Materials Handling 150 Reliability 150 Total integration 151 Flexibility and modularity 151 Upgradeability 151 Automated identification 152 Ease of use 155 Maintainability 155 Conclusions 155 Product Packaging 156 Types of packaging 156 Organizational influences on packaging 156 The role of packaging 157 Logistics packaging materials 157 Environmental issues 158 Packaging for global markets 159 Bar coding 160 Developments in packaging 161 Tradeoffs with other components of the logistics system 161 Chapter Summary 163 Study Questions 163 9 Managing Logistics Information 166 Introduction 166 The Order Processing System 167 Logistics Information Systems 168 Environmental scanning 169 LIS and information management 169 Forecasting Methods 170 Qualitative forecasts 170 Time-series methods 170 Causal methods 171 Forecasting logistics needs 172 Selecting the right forecasting technique 172 Using Information to Link a Global Logistics System Together 172 Electronic data interchange (EDI) 172 Impediments to global implementation of EDI procedures 178 Developments in Logistics Information Systems 178 The Internet and electronic commerce 179 Open-systems computer networks 180 Wireless communication 180 Multidimensional bar codes 180 Radio frequency identification (RFID) technology 180 Other advances in communications 182 Chapter Summary 182 Study Questions 183 10 Inbound Logistics and Purchasing 185 Introduction 185 The Growing Importance of Inbound Logistics 186 Inbound Logistics Activities 187 Customer service 187 Transportation 187 Inventory management 187 Warehousing and storage 188 Maintenance 188 Information management 188 Salvage and waste disposal 189 Production 189 Summary 189 Purchasing 190 Goals of purchasing 191 Purchasing tasks 191 Improving purchasing productivity 194 Organize for enhanced productivity 197 Management Techniques for Improving Materials Management 200 Chapter Summary 200 Study Questions 200 11 The Global Logistics Environment 203 Introduction 203 The Global Supply Chain 204 Changing Market Opportunities 205 Emerging nations 205 Multilateral trade organizations 205 Global sourcing 208 Cultural Issues in Logistics 208 Alternative Global Distribution Strategies 209 International Documentation 211 Customs Regulations 212 Foreign Trade Zones 214 Logistics Intermediaries and Facilitators 215 Third-Party Logistics Providers 217 Controlling the Global Logistics System 219 Chapter Summary 220 Study Questions 221 12 Logistics Strategies 224 Introduction 224 Corporate Strategic Planning 225 Formulating Logistics Strategy 226 Integrating the Logistics Channel 230 Implementing Logistics Strategies 232 Centralization of logistics activities versus decentralization 233 Third-party service providers 234 Logistics strategy and improved corporate performance 237 Future Issues That Will Affect Logistics 237 Implications for Logistics Managers 241 Chapter Summary 242 Study Questions 242 13 Developing High-Quality Logistics Systems 245 Introduction 245 Basic Quality Concepts: The Internal Perspective 246 Leadership 247 Cooperation 247 Learning 248 Process management 248 Employee outcomes 248 Organizational performances 248 Basic Quality Concepts: The External View 249 The Service Quality Model 250 Total Quality Management (TQM) in Logistics 253 Developing a Formal Quality Process 254 Quality Process Success Factors for Logistics Management 256 ISO 9001:2000 The International Quality Standard 259 The Cost of Quality 260 Chapter Summary 260 Study Questions 261 14 Improving Logistics Performance 263 Introduction 263 Improving Organizational Performance 264 Continuous and breakthrough improvements 265 Basic Tools for Improving Logistics Performance 266 Process analysis tools 266 Statistical analysis tools 268 Benchmarking 268 Activity-based costing 270 Effecting Meaningful Change 274 Logistics service quality 274 Productivity 275 Process effectiveness 276 Impediments to Improved Logistics Performance 276 Failure to adopt the customer's viewpoint 276 Lack of requisite cost data 277 Lack of broad-based management skills 278 Failure to think of logistics as a system 278 Need for cultural change within the organization 279 Creating a World-Class Logistics System 279 Chapter Summary 281 Study Questions 282 15 Organizing for Logistics Effectiveness 284 Introduction 284 Overview of Logistics Organizations 285 Building an Effective Logistics Organization 288 Centralization 288 Scope of responsibility/span of control 289 Formalization 289 Integration 289 The Role of Logistics in the Firm 289 Inter-organizational effectiveness 290 Variables Influencing Organizational Structure 291 Organization size 292 Corporate structure 292 Corporate strategy 292 The importance of logistics 293 Corporate information technology 293 Environmental uncertainty 293 Environmental heterogeneity 294 Summary 297 Reconciling Intra- and Inter-Organizational Issues 298 Moving Towards the "Best" Organizational Structure 299 Chapter Summary 299 Study Questions 300 Index 303

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