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Case Study #4 All Indian Logistics Services (questions 1-5)check pages 182-185 in the book QUESTIONS1. With respect to the natural resources needed to make wickable shirts, is Patna or Lucknow the preferred location? Why?2. With respect to transportation considerations, is Patna or Lucknow the preferred location? Why?3. With respect to labor characteristics, is Patna or Lucknow the preferred location? Why?4. With respect to quality-of-life considerations, is Patna or Lucknow the preferred location? Why?5. Should AILS recommend that the manufacturing plant be located in Patna or Lucknow? Why?- plz do not use too many advanced words contemporary_logistics_12th.pdf Unformatted Attachment Preview Paul R. Murphy Jr. I A. Michael Knemeyer Contemporary Logistics TWELFTH EDITION Twelfth Edition CONTEMPORARY LOGISTICS This page intentionally left blank Twelfth Edition CONTEMPORARY LOGISTICS Paul R. Murphy, Jr. A. Michael Knemeyer New York, NY BRIEF CONTENTS Preface 17 PART 1 Overview of Logistics Chapter 1 Chapter 2 Chapter 3 Chapter 4 19 An Overview of Logistics 20 Logistics and Information Technology 40 Strategic and Financial Logistics 59 Organizational and Managerial Issues in Logistics PART 2 Supply Chain Management Chapter 5 Chapter 6 95 The Supply Chain Management Concept 96 Procurement 114 PART 3 Elements of Logistics Systems Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 74 129 Demand Management, Order Management, and Customer ­Service 130 Inventory Management 148 Facility Location 167 Warehousing Management 186 Packaging and Materials Handling 203 Transportation 222 Transportation Management 242 International Logistics 263 Glossary 290 Name Index 299 Subject Index 303 5 This page intentionally left blank CONTENTS Preface Part I 17 Overview of Logistics 19 Chapter 1 AN OVERVIEW OF LOGISTICS 20 Economic Impacts of Logistics 20 Logistics: What It Is 21 The Increased Importance of Logistics 23 A Reduction in Economic Regulation 23 Changes in Consumer Behavior 24 Technological Advances 25 Advances in Retailing 26 Globalization of Trade 26 The Systems and Total Cost Approaches to Logistics 26 Logistical Relationships within the Firm 28 Finance 28 Production 29 Marketing 29 Marketing Channels 31 Activities in the Logistical Channel 33 Customer Service 34 Demand Forecasting 34 Facility Location Decisions 34 International Logistics 34 Inventory Management 34 Materials Handling 34 Order Management 34 Packaging 34 Procurement 35 Reverse Logistics 35 Transportation Management 35 Warehousing Management 35 Logistics and Supply Chain Careers 35 Summary 36 • Key Terms 36 • Questions for Discussion and Review 36 • Suggested Readings 37 ▶ CASE 1.1 KiddieLand and the Super Gym 37 7 8 Contents Chapter 2 LOGISTICS AND INFORMATION ­TECHNOLOGY 40 General Types of Information Management Systems 41 Office Automation Systems 42 Communication Systems 43 Transaction Processing Systems (Tps) 44 Management Information Systems (Mis) and Executive ­Information Systems (Eis) 46 Decision Support Systems (Dss) 47 Enterprise Systems 49 The Internet’s Influence on Logistics 50 Online Retailing 50 Cloud Computing 52 Electronic Procurement 52 Internet of Things 53 Information Technology Challenges 54 Summary 55 • Key Terms 55 • Questions for Discussion and ­Review 55 • Suggested Readings 55 ▶ CASE 2.1 To Invest or not to Invest? That is the question Chapter 3 STRATEGIC AND FINANCIAL LOGISTICS 56 59 Connecting Strategy to Financial Performance 60 Basic Financial Terminology 62 Income Statement 62 Balance Sheet 63 Statement of Cash Flows 64 Reporting Requirements 64 Strategic Profit Model 65 Logistics Connections to Net Profit Margin 67 Logistics Connections to Asset Turnover 67 Balanced Scorecard 67 Logistics Activity Measures 68 Transportation Measures 68 Warehousing Measures 69 Inventory Measures 69 Design and Implementation of Measures 69 Summary 70 • Key Terms 70 • Questions for Discussion and Review 70 • Suggested Readings 71 ▶ CASE 3.1 Brant Freezer Company 71 Contents Chapter 4 ORGANIZATIONAL AND MANAGERIAL ISSUES IN ­LOGISTICS 74 Organizing Logistics within the Firm 74 Organizational Structure for Logistics 75 Organizational Design for Logistics 76 Managerial Issues in Logistics 77 Productivity 78 Quality 80 Risk 82 Sustainability 87 Complexity 89 Summary 90 • Key Terms 90 • Questions for Discussion and ­Review 90 • Suggested Readings 91 ▶ CASE 4.1 Red Spot Markets Company Part II Supply Chain Management 91 95 Chapter 5 THE SUPPLY CHAIN MANAGEMENT CONCEPT 96 Evolution of Supply Chain Management 96 Supply Chain Management Process Frameworks 98 Enablers of Scm Implementation 99 Understanding the Implications of Increased Customer Power 100 Establishing Appropriate Relationship Structures 101 Leveraging Technology for Enhanced Visibility and ­Communication 103 Use of Supply Chain Facilitators 104 Barriers to Scm Implementation 106 Regulatory and Political Considerations 106 Lack of Top Management Commitment 106 Reluctance to Share, or Use, Relevant Information 106 Incompatible Information Systems 107 Incompatible Corporate Cultures 107 Globalization Challenges 108 Supply Chain Integration 108 Summary 109 • Key Terms 109 • Questions for Discussion and ­Review 110 • Suggested Readings 110 ▶ CASE 5.1 Johnson Toy Company 111 9 10 Contents Chapter 6 PROCUREMENT 114 Procurement Objectives 115 Supplier Selection and Evaluation 116 Procurement Portfolio Approach 118 Supplier Development (Reverse Marketing) 119 Global Procurement (Sourcing) 119 Sustainable Procurement 121 Social Responsibility 121 Investment Recovery 122 Supply Chain Finance 123 Summary 123 • Key Terms 124 • Questions for Discussion and ­Review 124 • Suggested Readings 124 ▶ CASE 6.1 Tempo Ltd. 125 Part III Elements of Logistics Systems 129 Chapter 7 DEMAND MANAGEMENT, ORDER MANAGEMENT, AND CUSTOMER SERVICE 130 Demand Management 130 Demand Forecasting Models 131 Demand Forecasting Issues 132 Order Management 132 Order Transmittal 133 Order Processing 133 Order Picking and Assembly 134 Order Delivery 136 Customer Service 137 Time 138 Dependability 138 Communication 138 Convenience 139 Managing Customer Service 139 Establishing Customer Service Objectives 139 Measuring Customer Service 141 Customer Profitability Analysis 142 Service Failure and Recovery 142 Summary 143 • Key Terms 143 • Questions for Discussion and Review 144 • Suggested Readings 144 ▶ CASE 7.1 SuperAuto Spare Parts Services 145 Contents Chapter 8 INVENTORY MANAGEMENT 148 Inventory Classifications 149 Inventory Costs 149 Inventory Carrying Costs 150 Ordering Costs 151 Trade-Off Between Carrying and Ordering Costs 151 Stockout Costs 152 Trade-Off Between Carrying and Stockout Costs 153 When to Order and How Much to Order 154 Economic Order Quantity 155 Conditions of Uncertainty 157 Inventory Flows 157 Inventory Management: Special Concerns 158 Abc Analysis of Inventory 158 Dead Inventory 159 Inventory Turnover 160 Complementary and Substitute Products 160 Contemporary Issues with Managing Inventory 161 Lean Manufacturing 161 Service Parts Logistics 163 Vendor-Managed Inventory 164 Summary 164 • Key Terms 165 • Questions for Discussion and ­Review 165 • Suggested Readings 165 ▶ CASE 8.1 Low Nail Company Chapter 9 FACILITY LOCATION 166 167 The Strategic Importance of Facility Location 168 Determining the Number of Facilities 169 General Factors Influencing Facility Location 170 Natural Resources 170 Population Characteristics—Market for Goods 172 Population Characteristics—Labor 172 Taxes and Incentives 174 Transportation Considerations 174 Proximity to Industry Clusters 176 Trade Patterns 176 Quality-of-Life Considerations 177 Locating in Other Countries 177 11 12 Contents Specialized Location Characteristics 178 Free Trade Zones 178 Finding the Lowest-Cost Location Using Grid Systems 179 Grid Systems 179 Facility Relocation and Facility Closing 181 Summary 182 • Key Terms 182 • Questions for Discussion and ­ Review 182 • Suggested Readings 183 ▶ CASE 9.1 All-Indian Logistics Services 184 Chapter 10 WAREHOUSING MANAGEMENT 186 The Role of Warehousing in a Logistics System 186 Public, Private, Contract, and Multiclient Warehousing 188 Public Warehousing 188 Private Warehousing 190 Contract Warehousing 191 Multiclient Warehousing 191 Design Considerations in Warehousing 191 General Considerations 191 Trade-offs 192 Fixed versus Variable Slot Locations for Merchandise 192 Build Out (Horizontal) versus Build Up (Vertical) 193 Order-Picking versus Stock-Replenishing Functions 193 Two-Dock versus Single-Dock Layout 193 Conventional, Narrow, or Very Narrow Aisles 193 Degree of Warehouse Automation 194 Other Space Needs 194 Warehousing Operations 195 Warehousing Productivity Analysis 195 Safety Considerations 195 Hazardous Materials 198 Warehousing Security 198 Cleanliness and Sanitation Issues 199 Summary 200 • Key Terms 200 • Questions for Discussion and ­ Review 200 • Suggested Readings 201 ▶ CASE 10.1 Fresh Produce Cross-docking Facility 201 Chapter 11 PACKAGING AND MATERIALS HANDLING Product Characteristics 203 Packaging Fundamentals 204 Functional Tradeoffs 205 Package Testing and Monitoring 206 203 Contents Labeling 206 Issues in Packaging 208 Environmental Protection 208 Metric System 210 Identifying Packaging Inefficiencies 210 Packaging’s Influence on Transportation Considerations 211 Unit Loads in Materials Handling 213 The Unit Load Platform 214 Beyond the Unit Load 215 Materials Handling 215 Materials Handling Principles 218 Materials Handling Equipment 218 Summary 219 • Key Terms 220 • Questions for Discussion and ­Review 220 • Suggested Readings 220 ▶ CASE 11.1 The Adelaide Dairy Company Chapter 12 TRANSPORTATION 221 222 Comaparing and Contrasting Transportation Infrastructure 223 Transportation Modes 224 Airfreight 224 Motor Carriers 225 Pipelines 227 Railroads 228 Water 228 Intermodal Transportation 229 Transportation Specialists 231 Transportation Regulation 233 Environmental Regulation 233 Safety Regulation 234 Economic Regulation 234 Legal Classification of Carriers 235 Summary 237 • Key Terms 237 • Questions for Discussion and ­Review 237 • Suggested Readings 238 ▶ CASE 12.1 HDT Truck Company 238 Chapter 13 TRANSPORTATION MANAGEMENT Rate (Pricing) Considerations 243 Rate Determination 243 Rate and Service Negotiations 246 Modal and Carrier Selection 252 Documentation 253 242 13 14 Contents Bill of Lading 253 Freight Bill 255 Freight Claims 255 Making and Receiving Shipments 256 Consolidating Small Shipments 256 Demurrage and Detention 258 Routing 258 Tracking and Expediting 259 Transportation Service Quality 259 Summary 260 • Key Terms 260 • Questions for Discussion and ­ Review 261 • Suggested Readings 261 ▶ CASE 13.1 Chippy Potato Chip Company Chapter 14 INTERNATIONAL LOGISTICS 262 263 Macroenvironmental Influences on International Logistics 264 Political Factors 264 Economic Factors 266 Cultural Factors 267 International Documentation 269 Terms of Sale 269 Group 1: Terms That Apply to Any Mode of Transport 270 EXW (ExWorks) 270 FCA (Free Carrier) 270 CPT (Carriage Paid To) 270 CIP (Carriage and Insurance Paid To) 270 DAT (Delivered at Terminal) 270 DAP (Delivered at Place) 271 DDP (Delivered Duty Paid) 271 Group 2: Terms That Apply to Sea and Inland Waterway ­Transport Only 271 FAS (Free Alongside Ship) 271 FOB (Free on Board) 271 CFR (Cost and Freight) 271 CIF (Cost, Insurance, and Freight) 271 Methods of Payment 271 International Trade Specialists 273 International Freight Forwarders 273 Nonvessel-Operating Common Carriers 274 Export Management Companies 274 Export Packers 275  Contents Transportation and Inventory Considerations in International ­Logistics 275 Ocean Shipping 276 Shipping Conferences and Alliances 277 International Airfreight 278 Surface Transport Considerations 278 International Trade Inventories 279 Logistics Performance Index 280 Summary 281 • Key Terms 282 • Questions for Discussion and ­ Review 282 • Suggested Readings 282 ▶ CASE 14.1 Nürnberg Augsburg Maschinenwerke (N.A.M) Glossary 290 Name Index 299 Subject Index 303 283 15 This page intentionally left blank PREFACE This edition of Contemporary Logistics reflects a business landscape that is characterized by-geopolitical tensions in various parts of the world, steadily increasing trade among countries and across continents, supply chain vulnerabilities caused by severe natural disasters, and an unabated pace of technological advancement. Although these and other events present both challenges and opportunities for logistics managers, the logistics discipline still remains fun, exciting, and dynamic—characteristics that are reflected in our revision. What’s NEW IN THIS EDITION? This edition reflects input from reviewers, adopters, and other interested parties in terms of structure, presentation, and content. Specific modifications include the following: • This edition welcomes a new coauthor, A. Michael Knemeyer, currently Associate Professor of Logistics at the Fisher College of Business, The Ohio State University. Mike’s impressive blend of practical, academic, and consulting experience in logistics and supply chain management provides this edition with fresh insights and perspectives. • This edition contains several new end-of-chapter cases, such as Cases 9.1 (“All-Indian Logistics Services”), 10.1 (“Fresh Produce Cross-docking Facility”), and 11.1 (“The Adelaide Dairy Company”). In addition, some content has been changed in Case 14.1 (“Nürnberg Augsburg Maschinenwerke (N.A.M.)”). • Each chapter in this edition has been revised and incorporates new examples and references. For example, Chapter 1’s discussion of the globalization of trade reports the average growth rate of world trade between 1991 and 2011 (as opposed to between 1997 and 2007 in the tenth edition). As another example, Chapter 14’s discussion of Incoterms reflects the revisions associated with Incoterms 2010, which were effective at the beginning of 2011. • New content has been added throughout this edition. For example, Chapter 1 now includes a d­ iscussion of the rapidly emerging topic of humanitarian logistics. In addition, the “Logistics Activity Measures” section in Chapter 3 contains an expanded discussion of warehousing and inventory management performance measurements. Chapter 6 has added a subsection, “Procurement Portfolio Approach,” that highlights Kraljic’s Portfolio Matrix. • Tables and figures containing country and industry data have been either revised or updated. Examples include Table 1-1, “The Cost of the Business Logistics System in Relation to a Country’s Gross Domestic Product”; Figure 10-3, “2012 Liberty Mutual Workplace Safety Index Findings”; and Table 12-1, “Infrastructure Statistics in Several Countries.” • The list of Key Terms at the end of each chapter has been modified, and each key term is defined in the Glossary. New Key Terms in this edition include humanitarian logistics, big data, Logistics Uncertainty Pyramid Model, near sourcing, and total cost of ownership, among others. • The end-of-chapter Suggested Readings in the eleventh edition have been revised and over 60 ­percent of them have been published since 2009. 17 18 Preface INSTRUCTOR SUPPLEMENTS Supplements are available for adopting instructors to download at www.pearsonglobaleditions.com/ murphy. Registration is simple and gives the instructor immediate access to new titles and new editions. Pearson’s dedicated technical support team is ready to help instructors with the media supplements that accompany this text. The instructor should visit support.pearson.com/getsupport for answers to frequently asked questions and for toll-free user support phone numbers. Supplements include the following: • Instructor’s Manual • PowerPoint Slides The current edition of Contemporary Logistics has been prepared by Paul Murphy and Mike Knemeyer, and they welcome your comments and suggestions at drmurphy@jcu.edu (Paul) and ­knemeyer.4@osu.edu (Mike). Paul and Mike gratefully acknowledge the important contributions that the late Donald F. Wood, James C. Johnson, and Daniel L. Wardlow made to earlier editions. Global Edition Acknowledgments Pearson would like to thank the following people for their work on the content of the Global Edition: Contributors: Shao Hung Goh, Singapore University of Social Sciences V.G. Venkatesh, Waikato University Abraham Zhang, Auckland University of Technology Reviewers: Niniet Arvitrida, Sepuluh Nopember Institute of Technology Yash Daultani, Atal Bihari Vajpayee-Indian Institute of Information Technology and Management, Gwalior Shao Hung Goh, Singapore University of Social Sciences Yong Lin, University of Greenwich Donato Masi, University of Warwick PART I OVERVIEW OF LOGISTICS P art 1 of Contemporary Logistics introduces the many dimensions of the complex and dynamic ­subject of logistics. Chapter 1 presents an overview of logistics and introduces you to what logistics is and why it is important. The chapter covers the economic impact of logistics and discusses how logistics interacts with other functions, such as marketing, in an organization. Chapter 2 provides an overview of the general types of information management systems that are applicable across each business function, and it provides examples of how these general types of information systems are specifically applied in logistics management. Chapter 2 also explores the Internets influence on logistics and looks at some of the challenges associated with information technology. Chapter 3 discusses the strategic financial outcomes influenced by logistics decisions. It uses the ­strategic profit model to highlight how logistics activities influence the key corporate financial measures of net income, capital employed, and return on capital employed. Chapter 4 examines organizational and managerial issues in logistics. The chapter begins by looking at organizational structure and organizational design for logistics. Chapter 4 also discusses select managerial issues in logistics such as productivity, theft and pilferage, and the impact of terrorism on logistics systems. 19 1 An Overview of Logistics Learning Objectives 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Learning ­Objective 1.1 To discuss the economic impacts of logistics To define what logistics is To analyze the increased importance of logistics To discuss the systems and total cost approaches to logistics To expose you to logistical relationships within the firm To introduce you to marketing channels To provide a brief overview of activities in the logistics channel To familiarize you with logistics careers ECONOMIC IMPACTS OF LOGISTICS Although the logistics discipline today is vastly different from what it was like when the first edition of this book was published in the 1970s, one thing that remains constant is the economic impact of logistics. Before defining what logistics is, we believe it is important to discuss the economic aspects of logistics; you might be surprised at its significant economic impact. From a macroeconomic perspective, Table 1.1 presents logistics costs in relation to gross domestic product (GDP) for a select group of countries. Although absolute and relative logistics costs in relation to GDP vary from country to country, logistics is most definitely an important component in any country’s economy. More specifically, logistics can play an important role in a nation’s economic growth and development. For example, relatively high logistics costs (as a percentage of GDP) in the People’s Republic of China (China) continue to restrict the country’s economic development; in particular, the high costs of highway transportation have severely constrained the growth of China’s e-commerce market.1 In a similar fashion, the growth of e-commerce sales in India is challenged by logistical inefficiencies to include poor roads and inferior transportation equipment.2 Apart from the previous examples of macrolevel economic impacts, the economic impacts of logistics can affect individual consumers such as you. These impacts can be illustrated through the concept of economic utility, which is the value or usefulness of a product in fulfilling customer needs or wants. The four general types of economic utility are possession, form, t ... Purchase answer to see full attachment