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    Business Logistics/Supply Chain—A Vital Subject INTRODUCTION TT far bask as Wisty records, the Goods that pede wanted wore A hetorosucod wore toy wren iseonsune tien arrose bones ‘nove net aecesaibio when poorle wantod to consumo them, aod aoa thor commodities wore widely leporsea and wore only aveliable sbundance at certain moe of the year Eary Peoplos has the chokes of consuming goods at thelr immoctate lation or moving the Goods ea broterred sie and storing thorn for lotoruse. Howovor beswuse nowale Goveloped transportation and storage systema yor existed, the wove. mmont of goods was lnited to whet on individual Couls porscy ove, and storage of perishable commoritios was possible for any s short time, Ths limitad moverneniatorage sysiom onary eontrarea rook bis to ve close 10 tho Bourcos of production and to consume rather Tartu vange of soous Even today n some aroas of the world consumption and production take ploce only within ® very limited gougraphie ragion. Sekine scare Dies can stil bo observed in tho doveloping notions of iar South America, Australia, and africa, wihero some ofthe popultion ine In Shall solhsuttcient vilages, and most of the goose needed bY tho [Relar F Dracker, “Physical Distrbution: The Frontier of Modem Management” in Donald J Bowersox Fenavd |. Lalonde, 5 gsm Phyl Cisrbuton Manage (Sew Yorke Macml residents are produced or acquired in the immediate vicinity. Few gots eee ported from other areas. Therefore, production efficiency and he ar enome standard of living are generally low. In this type of economy. s wcledoveloped and inexpensive logistics system would encours0e Ef arenange of goods with other producing areas of the country. or ever, the world. —_— Example Suippose that consumers in the United States and South Korea buy OV 1D recorders. seacomputer software. In the coming year, about the same number of | eae) Satisfaction ‘alu! Proftatitty Competitive / ‘Ravanta ee Rescarch apa Develogiment Coordination Forecasting | 4 informacion (Tras, Production \ |) Ssonare. | Dependence, Logistics novors) aay ‘ fuses information Systems | Be Finance |] 4 Demand > | eee Forecasts “Suppliers Supplier <> Supplier +t Focal Firm "Rustomers Customer +> Customer eeeeer_Oom— Figure 1-1 A Mode! of Supply Chain Management Figaro ea -Detning Supply Chai Magee” rl f aun tin ol 22-No-2 8 Sour, Mentos th permission of the Council of Logistics Management this difficul, in a practical way, to separate business logistics managomen! rom supply chain management. In so many respects they promote the se mission To get the right goods or services to the right place tthe Fight ihe tp teefesired condition, while making the greatest contribution to the firm Some claim that supply chain management is just another name for integrated pus ogistics management (BLM) ani thatthe broad scope of supply CMe aaasneemteat has been promoted over the years, Conversely others sy (ha OBE aE SC, where SCM considers additional issues beyond those of pregene Feet nple, SCM may be concerned with product pricing and| manulschariNg velit Although SCM promotes viewing the supply channel wih he Pron eve he reality that firms do not practice this eal, Foweett and Nowe found eee panies that do practice supply chain integration limit thelr scape 1 one Te iragear and one fer dovmnsieam The focus seems to be concesned WHR SAE Part introduction and Planning seamless processes within their own companies and applying new information tech: nologies to improve the quality of information and speed of its exchange among channel members. The boundary between the logistics and supply chain manage, ment terms is fuzzy. For the purposes of this text, integrated business logistics man agement and SCM willbe referred to interchangeably. The focus will beon managing the product and service flows in the most efficient and effective manner, regardless of descriptive title. This includes integrating and coordinating with other channel members and service providers to improve supply chain performance when practi- «al to do so. THE SupPLy CHAIN Logistics /SC isa collection of functional activites transportation, inventory control, etc), which ate repeated many times throughout the chanel through which rave aterials are converted into finished products and consumer value is added. Because raw material sources, plants, and selling points are not typically located at {he same places and the channel represents a sequence of manufacturing steps, logis. tics activities recur many times before a product arrives in the marketplace. Even then, logistics activities are repeated once again as used products are recycled upstream in the logistics channel Asingle firm generally is not able to control its entire product flow channel from raw material source to points ofthe final consumption, although this is an emerging opportunity: For practical purposes, the business logistics for the individual firm hac 8 narrower scope. Usually, the maximal managerial control that can be expected is over the immediate physical supply and physical distribution channels, as shown in Figure 1-2. The physical supply channel refers to the time and space gap between 4 firm's immediate material sources and its processing points. Similarly, the physical distribution channel refers to the time and space gap between the fiem’s processing Points and its customers. Due to the similarities in the activities between the tive channels, physical supply (more commonly referred to as materials management) and physical distribution comprise those activities that are integeated into business Topistics. Business logistics management is now popularly referred to as supply chain management.” Others have used terms such as valve iets, value stream, and hay Sities te describe a similar scope and purpose, The evolution of the management of product flows toward SCM is captured in Figure 1-3. Although it is easy to think of logistics as managing the flow of products from the points of raw material acquisition to end customers, for many firms there is a ‘eeerse logistics channel that must be managed as well. The life of a product, from logistics viewpoint, does not end with delivery to the customer. Products become Shsolete, damaged, or nonfunctioning and are returned to thelr source points for [Pair or disposition. Packaging materials may be returned to the shipper due to agement ince pricing within ts scope, Busines logistics mane Chapter 1 Business Logistics/Supply Chain—A Vital Subject —a -- Po - at Transporation raneportation \waranousiog ‘customers t va | = | flows Factor t ! — Warehousing Figure 1-2. The Immediate Supply Chain for an Individual Fem al regulations or because it makes good economic sense fo reuse He Nnnel may utilize ail or a portion of the forward logistics ‘ign. The supply chain terminates with the channel must be considered to be within The reverse logistic: channel or it may require a separate des final disposition of a product. The reverse aisties planning and control. Example The reverse logistics channel comes into pl jie. The customer takes the toaster homme lay when a customer buys a toaster from ‘and finds it defective. The customer ior, who gladly refunds the purchase price. The retailer now has hwentory. The retailer sends it to a central return center Product Code (UPC) is scanned for identifica The database determines that the toaster has a Teo retai returns it go the refail a defective toaster in in-store i EI Upon receipt, the toaster’s Universal fion in the return centers database rutpvendor disposition. The database credits the store inventory for the to. reates a charge back to the the cast of the toaster. The toaster mufactun rade a cost recovery for Unis nufacturer for The retailer he: and 5 shipped back to the 4 ee Part | introduction and Planning Activ aamntton a8) Acari 060. 00 oman feecasing — Purcsing —\ een \ Purchasing Materale eerie eat pT NER VA Woes = Sr 7 LZ \ eae Packaging — Tansponation Strategie planning Marketing/soles Financ Figure 1-3 Evolution of Logistics Toward Supply Chain No Sihy 2p Soca et Buty» Ui Network," este Sup nage, Vt No.5 hay 2002). 50 Gvth madi tes, Slefective asset. The toaster is received at the manufacturer's return center. The man: uecfurer scans the toaster into its database and determines thet it ec relurbish dis cranutachane, (286e" is Fepaired and sent for resale on the secondary ethos The ‘manufacturer has now gained value for this defective asset! THE Activity Mix ‘The activities to be managed that make up business logistics (supply chain process) manage rm to firm, depending on a firm's particular onpaneenion t structure, managem = Ronest differences of opinion about what constitutes the supply chug ‘orlts business, and the importance of individual activities tc te operations. Fallow ez Rector and Herbert 8, Sheng “Reverse Logistic Pipeline ‘Sam Diego, CA: Conn of Logistics Managemen Ceteher sheet Chapter 1 Business Loistcs/Supply Chain—A Vital Subject ure 1-4 Logistics Activities in a Firm's Immediate Supply Chain usiness Logistics Physieai Supply Physica Distribution {Materials management) Transportation + Transportation ‘inventory maintenance “Inventory maintenance + Order processing + Order processing + Acquistion “Product scheduling { Protaative packaging + Protective packaging + warenausing + Warehousing {Materials handling * Materials hanaling “Infosmnation maintenane® “information maintenance {Supply scheduling along the supply chain as shown in Figure 1-2 and note the important activites that take place, Again, according to the CLM: “The components of typical logics system are: customer service ema orccnting, distribution communications, inventory conti, material handing Seder processing, pats and service support, plant and warehouse site seleston Ragttyn analyst), purchasing, packaging, retum goods handling, salvage and Scrap disposal, trafic and transportation, and earehousing and storage Figure 14 organizes these components, or activities, according to Where they are Treat Tikely to take place in the supply channel. The list i further dived ints ey ad support activities, along with some of the decisions associated with each activity Key Activities 4, Customer service standards cooperate with marketing to: 4 Determine customer needs and wants for logistics customer service >. Determine customer response to service &. Set customer service levels 2, Transportation ‘a, Mode and transport service selection b. Freight consolidation c. Carrier routing, ‘Cae ‘Oak Brook tL: Coun of Logistics Management, p.3. Part] Introduction and Planning d. Vehicle scheduling . Equipment selection £ Claims processing, & Rate auditing . Inventory management a Raw materials and finished goods stocking policies b, Short-term sales forecasting © Product mix at stocking points . Number, size, and location of stocking points ©. Justin-time, push, and pull strategies Information flows and order processing a. Sales order-inventory interface procedun ©. Order information transmittal methods ©. Ordering rules Pport Activities Warehousing a. Space determination , Stock layout and dock design <. Warehouse configuration d. Stock placement . Materials handling a. Equipment selection b. Equipment replacement policies ©. Onder-picking procedures d. Stock storage and retrieval turchasing 2. Supply source selection b. Purchase timing. c. Purchase quantities ‘otective packaging designed for landling Storage © Protection from loss and damage * Cooperate with production/operations to: 2. Specify aggregate quantities &, Sequence and time production output © Schedule supplies for production / operations 6. Information mainienance 2 pafermation collection, storage, and manipulation b. Data analysis, © Control procedures Chapter | Business Logistics Supply Chain A Vital Subject 2 Figure 1-5 The Critical Customer Service Loop Customer order processing (and wansmital customers laventory maintenance ‘or supply Key and support activities are separated because certain acbv 8s will generally take place in every logistics channel, whereas others wil ak place, depending on take plac tances, within a particular firm, The key activities are on fhe “critical” Toop within firms immediate physical distribution channel as shown in Figure 1-5. ‘Thay contribute most tothe total cost of logistics or they are fessential to the effective coordination and completion of the logistics task. etn rgetvice standards st the Level of output and degree of reaciness ahigh ae logistics system must respond. Logistics costs increase in proportion fe the reas Feustomer service provided, such that setting the standards for Saree also vere Ole Togsticn costs fo support that level of service, Setting very high service vequirements can Force logistics costs to exceedingly high levels “Transportation and inventorys maintenance are the primary: cost-absorbing logistics activities Experience has shown that each wil present one-half to two- TB Ss tal logistics costs. Transportation add place value to products and ser- ‘pees, whereas inventorys maintenance adds time value. “Feanoportation is essential because no modern firm can operate Withon" PY id ing for the movement ofits raww materials or its Finished products This importance is, 2a or ored by the financial strains placed on many firms by such GISisie™™ 2 & underscovsoad strike ot independent truckers’ refusal to move gous bectlus of mae disputes In these circumstances, markets cannot be serves and products back tp inthe logistics pipeline to deteriorate or become cbsolets Oa Ego eavential to logistics management because it is usually POF possible or practical to provide instant production or ensue delivery times to cus- aoa They serve as buffers between supply and demand so that need product toe lity cnay be maintained for customers while providing flexibility for prosuc: sel gists in seeking efficient methods for manufacture and distbution of the product. Cider processing is the inal Key activity, Its costs usally aze no compared to trarportafion or inventory maintenance costs. Nevertheless, order processing © TRapertant element inthe total time that i akes for a customer 'o SSE goods a importa isthe activity triggering product movement and service delivery “although support activities may be as critical as the key activities many particular circamstanee, they are considered here 2s contributing to the logistics mission: In. Parti Introduction and Planning put, that is raw materials are transfor Mes Hat finished goods, Logistics controls the pce values in products, mainly through ransportation, information ows, ana inventories. Pessession value is offer, cansidered the responsibility of marketing, gineering, and finance, where the valle eeated by helping customers acquire the product through such mechanisms 98 avertising (information), technical Supe port, and terms of sale (pricing and +e ie availabilty). To the extent that SCM Port doe production, three out of the our values AY ‘be the responsibility of the iogistics/supply chain manager SETI Fin Na Oa or ee reac Roce,” Wal tet url tdi 9 ee Sata Kt inane fe one Sy Merck. "ENE va Help Prcpitate Kmart Presiden’ Departure,” Wal osm January 18,2002, Bt {thnsoduction and Planning eee Example When discount houses selling computer software through Web sites, catalogs, and magazine advertisements wished to compete with local retailers, they had 2 price advantage due to the economies of scale that they could achieve. Operations were centralized at one location where lower-cost warehouse space rather than higher. Good logistics performance was obvious. The first wave of 200,000 troops and their equipment was deployed in a month and a half, whereas troop deployment took nine months in the Vietnam conflict. In addition, the application of many good logistics concepts was evident, Take customer service, for example: We believed that if we took care of our troops, the objectives would be accomplished no matter whatever else happened. The soldiers are our cus- tomers. Itis no different than a determined, single focus on customers that many successful businesses have. Now, you take care of your soldiers not only by providing them cold sodas, and burgers, and good food: you make sure they have the ammunition on the front line, so that when they go fight the war they know they have what they need.2* This meant that when 120 mm guns rather than 105 mm guns were desired on tanks, they were changed. When brown vehicles were preferred over the traditional cam- ouflage green, they were repainted at the rate of 7,000 per month. Environment Population growth and resultant economic development have heightened our awareness of environmental issues. Whether it is recycling, packaging materials, transporting hazardous materials or refurbishing prodiicts for resale, logisticians are involved in a major way. After all, the United States alone produces more than 160 million tons of waste each year, enough for a convoy of 10-ton garbage trucks seaching halfway to the moon.” In many cases, planning for logistics in an environ ‘mental setting is no different from that in manufacturing or service sectors. However, sis ls Combat Power ekinsey Quarety, No.3 (1990), pp. 3-21 fuller, “The Greening of Logistics,” Distributes Jamaary 199}, Chapter 1 Business Logistics/Supply Chain—A Vital Subject 23 in afew cases adlitional complications aise, such 28 governmental regulations that rake the logistics for a product more costly PY ‘oxtending the distribution channel. __ : Example Tr Germany, the goverment requires retail grocers t0 cSt cereal boxesat the point tn Germ ly, consumers pay forthe product then ops ‘box and empty the oa retainers they brought from home, and pul Whe CoE ‘boxes into col- content ea eller has the responsibilty either for rgovery CF *RE spent materi- te hele repackaging and reuse oF for their dispose) » Business Loaistics/SC IN THE FIRM Trhacbecn the wadition in many fms to organize around marketing and production ae es Typically, marketing means selling somelh ns ‘and production means seine something, Although few business People would agree that their organiza- tran ig'so simple, the fact remains that many business® ‘emphasize these functions renting other activities, such as traffic, purchasing ‘accounting, and engineer jag, a8 support areas. Such an attitude is Wustified to a degree, because if a firm’s products cannot be produced and sold title else matters. However, such a pattem is angerously simple for many firms to folows that it fails to recognize the impor dan eeny the activities that must take place between Points ‘and times of production or purchase and the points and times of anand, These ace the logistics activities, and Parca the esfiiency and effectiveness ofboth marketing and production. oo eee Example General Motors (GM) hopes improving customer SSS will boost sales of Ceiiacs, which have been squcezed as buyers Sit (6 ‘other US. cars as well as to Smnports Catia loses substantia sles when susoners put off by lengthy deliv try times, Research shows that 10 percent TT percent of sales aze lost simply Poxause the ears are not available ina timely manner “A production and distribution program was tested in Florida, a major market for Caditifes, Under the program, about 1500 Cadillacs wert sh regional distribu aa enter in Orlando, Florida, where they would be Uelivered to dealers state-wide efhin 24 hours. In some areas of Florida, many Pus ors wait two days for popularly cquipped cars. Additionally, GM's Cadillac Jaco ‘Detroit increased production dt specially ordered Caditlacs as wells ing shipping time. Custom Cadillacs se SEacapane Logics Changes harp” Aerie Sper May W999) BS 24 Part{ Intoduction and Planning. arrived at dealerships in about three weeks, compared with the usual 8 to 12 weeks Under this program, GM expected dealership inventories to decline by about 50 percent? Scholars and practitioners of both marketing and production have not neglected the importance of logistics. In fact, each area considers logistics within its scope of action. For example, the following definition of marketing management includes physical distribution: Marketing (management) is the process of planning and executing the co ception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges with target groups that satisfy individual and organiza- tional objectives.” eting’s concern is to place its products or services in convenient distribution channels to facilitate the exchange process. The concept of production ‘operations management often includes logistics activities. For example, “operations manage- ment has the esponsibility for the production and delivery of physical goods and services.”*! Production /operations, on the other hand, is likely to be most interested in those activities that directly affect manufacturing and its primary objective of pro- ducing at the lowest unit cost: Now, viewing product flow activities as a process to be coordinated, product flow aspects within marketing, production, and logistics are collectively managed to achieve customer service objectives The difference in operating objectives (maximize revenue versus minimize cost) for marketing and production/ operations may lead to. fragmentation of interest in, and responsibility for, logistics activities, as well as a lack of coordination among logistics activities as a whole. This, in turn, may lead to lower customer service levels or higher total logistics costs than are necessary. Business logisties represents a regrouping, either by formal organizational structure or conceptually in the minds of management, of the move-stote activities that historically may have been partially under the control of marketing and production / operations. it logistics activities are looked upon asa separate area of managerial action, the ‘elationship of logistics activities to those of marketing and production /operations would be as shown in Figure 1-7. Marketing would be primarily responsible for mar- ket research, promotion, sales-force management, and the product mix, which create Possession value in the product. Production/operations would be concerned with the creation of the product or service, which creates form value in the product, Key responsibilities would be quality control, production planning and scheduling, job mapproved bythe Amercen Martin as paraphrased in Palip Kotler Marketing Plas, Analysis, np ard Cont, Okie Upper Sadat River NS Prentice Bilbo O. McClain and L joseph Thomas, Operations Manegersnts Praucton of Gans and le River, Nf Preis Fal, 1085) pd Chapter L Business LogisticsSupply Chain—A Vital Subject 25 Froton Seven: [irtce Operations Semple activites: aeksting Samp sctivities = Promotion "Marke research Product mix + Sales force management Intertace STronsoort activities: activities “imwentory [+Customer sualty contol | Product Vower | service * Detaled eroduetion |" schaguiing] processing | standards geheduling Plant +Materiate | Pricing Equipment location handing |+Packaging maintenence | Purchesin Retail = Capacity planning i das Work maasurement Production logistics ‘Marketing logistics interteco interface Figure 1-7 LoaisticsiSC Interfaces with Marketing and Production design, capacity planning, maintenance, and work measurement and standards Lomietics would be concerned with those activities (previously defined) that give pric or service time and place value. This separation ofthe activities of the om vet three groupings rather than two is not always necessary of advisable to achieve eee ivortnation of logistics activities that is sought. Marketing and Moduction operations, when broadly conceived and coordinated, can do an eee; tive job of managing logistics out creating an additional organizational eerie. buen if a separate functional area is created for logistics within the firm 50 2 achieve effective control of the firms immediate logistics activities, logisticians * need to view their responsibility as one of coordinating the entire supply chain process rather than being just local logistics activity adenistator. To do other eee ice substantial opportunities for cost reduction and logistics customer service improvement Figg 17 aso shows activities that ace at the interface of marketing and logistics sod production operations an logistics within the immediate fim. An interlace a cig is one that cannot be managed c#fectively within one functional area. The inter~ aaaee created by the arbitrary separation of a firm’ activities into a limited number of sae onal areas, Managing the interface activities by one function alone can Tead fo suboptimal performance forthe frm by subordinating broader company goals 1 inl aera nnchoral goals--a potential danger resulting fom the departmental form of Sigenizational structure 30 common in companies today. To achieve interfunction@! crBtGination, some measurement system and incentives for cooperation among fhe 26 Part introduction and Planning Figure 1-8 Scope of the Modern i ‘Supply Chain Company [Supatiers Customersi Aequirs —————* Convert —» Distribute functions involved need to be established. This is equally true of the interorganiza tional coordination requized to manage procluct flows across company boundaries. It is important to note, however, that establishing a third functional group is not without its disadvantages. Two functional interfaces now exist where only one en marketing and production /operations previously existed. Some of the most difficult administrative problems arise from the interiunctional conflicts that occur when one is attempting to manage interface activities. Some of this potential conflict may be dissipated if a new organizational arrangement is created whereby produc- tion /operations and logistics are merged into one group called supply chain. Just as managers are beginning to understand the benefits of interfunctional logistics management, interorganizational management is being encouraged Supply chain management proponents who view the area more broadly than some logisticians have been strongly promoting the need for collaboration among supply channel members that are outside the immediate control of a company’s logistician, that is members who are legally separate companies. Collaboration among the channel members that are linked through buyer-seller relationships is essential to achieving cost-service benefits unable to be realized by managers with strictly an internal view of their responsibilities. Supply chain managers consider themselves. to have responsibility for the entize supply channel of the scope as illustrated in Figure 1-8. Managing ia this broader environment is the new challenge for the contemporary logistician OBvectives oF BUSINESS Locistics/SC Within the broader objectives of the firm, the business logist suppiy channel process goals that will move the firm toward its ove Specificall levelop a logistics activity mix that will ble vest impact of the logistics syster sR in Seeks to achieve HI obje result in the high- See over time. There are two dimensions to this svenue contribution, and (2) the design on the 8 operating cost and capital requirements of the design, UREN Chapter! Business Logisties/Supply Chain—A Vial Subject 27 P i Ideally the logistician should know how much additional revenue would be generated through incremental improvements in the quality of customer service pro- Fences rover such revenues nat generally known with great accuracy: Ofer, the ease er sarvice level is set at a target vale, usually one that is acceplable 16 8: customtine sales function, or other concerned parties. At this poi the ioglstrs spective may become one of minimizing costs subject to meeting the desired service evel rather than profit maximization or feturn on investment Larne revobue, logistics costs usually can be determined as accurately a accounting practice will allow and are generally of two types: operating C= and capital costs. Operating costs aze those that recur periodically &f those that vary sreiily with variation in activity levels. Wages, public warehousing expenses, and aire five and certain other overhead expenses are examples of operating cos Capital costs are the onetime expenses that do not change with normal variations in cai evels, Examples here are the investment in a private trucking fleet the Come act eget of a company warehouse, and the purchase of materials handling ‘equipment. Free cgumed that there is knowledge ofthe effect of logistis activity levels OF revenues of the firm, a workable financial objective for logistics can be expressed in The eatio known as ROLA (return on logistics asses). ROLA 38 defined a8 nova = Senribution to \oistios operating costs logistics assets, rie contribution to revenue refers to the sales resulting from the logistics SyS107 design. Logistics operating costs are the expenses incurred to provide the level of Toxietics customer service needed to generate sales. Logistics asec See the capital ee ements made inthe logistics system. ROLA is to be maximized over time The value of money is high, maximizing the present value of cash flows oF 0 imsizing the internal rate of return is a more appropriate statement of Ihe objective, Ntaietzing the cumulative tur on investment overtime js the single most i™mPOr tone objective to enstire the long-run survival ofthe firm. APPROACH TO THE STUDY OF Loaistics/SC Sonat y background of definition and significance has been provided, we co Dain our stady ofthe management of Yogistics in a systematic wa: Two Theres 2 ea eee text they follow what management does and the skills needed fo Per te ina technically complex wos. First, the work of management can Be. looked tapon as performing the tasks of planning, organizing, and controlling to achieve the Bective of the frm, Planning refers to deciding on the goals forthe fet organizing Seer alecting and positioning the resources of firm to accomplish the compen “f contrafiig refers to measuring company performance and taking cor” sehen performance i notin line with goals. Because these are central © Introduction and Planning, what management does, each will be discussed within the various chapters of this book, Second, managers, whether at entry level or top level, spend a great deal of time: in the planning activity. To do effective planning, it is useful to have a vision of the goals of the firm, to have concepts and principles for guidance on how to get thete, and to have tools that help to sort among altemative courses of action. Specifically for logistics management, planning follows a primary decision triangle of location inventory, and transportation, with customer service being the result of these deci, sions (see Figure 19}, Although the logistics’ planning triangle isthe primary orga. nizational theme for this book, additional topics that relate to it will also be diss cussed, We begin with, an overview of a strategy for logistics planning and the information systems and technology that support the strategy. A chapter follows on the customer, who drives all logistics decision making, Chapters covering trar portation, location, and inventory, which form the comerstones of the logistis” plan ning triangle, are all included. Finally, chapters on organization and control round out the planning, organizing, and control theme. Contemporary issues such as global logistics, service industry logistics, quality, collaborative logistics, and reverse logic- ties are important, but are recognized as extensions ofthe basic ideas presented in the text, Therefore, their discussion is integrated throughout the text. Numerous exam ples are given to illustrate how the concepts and tools for good logistics/supply Chain management apply to the problems actually encountered in the real world From just about every standpoint—wwhether cost, value to customers, or strategic importance to a firm’s mission—logistics/SC is vital. However, only in recent yesrs have businesses on a broad scale begun to manage supply chain activities in an Figure 1-9 The Planning Triangle in Relation to the Principal Activities of Logistics/Supply Chein Management Inventory Strategy + Forecasting + Inventory decisions Transport Strategy + Purchasing and supply anspor fundamentals sehoduling decisions “Transport decisions + Storage furdamamtaie Storage decisions ‘ Logisties service + Order processing information systems Location Strategy + Location decisions + The network planning process Business Logistics/Supply Chain—A Vital Subject 29 integeated way—that is to think abot products and services lowing seamlessly pees ihe sources of raw Materials 10 &Be Fre consumers. Moreover in recent nS from ove must incluce backward movemen’ the supply channel, oF reverse 1OBiS" tee, The economic forces—mainly orereased workdwvide deregulation of bus hia proliferation of ree trade agseerne reseed foreign competition, increased BIO?” Pigation of industries, and increased equirements for faster and more cer logis: tice performance—Rave all Been S44 roe ntal in elevating logistics to a high level of importance in many firms. New “opportunities for logistics managemen” ‘brought ‘Mbput by growth in the service S61 ea ental issues, anc information Behe ‘ology, Will continue to support the OFT nature of logistics for many years to Core ‘The primary emphasis ofthis txt #5 a roward dealing effectively with the managerial problems associated with MONT vend storing goods throughout the Sup ply chain by business firms, The ne ay be producing either goods oF Series Pf will have profit-making objectives This texts organized around the three PANTY tasks of management: planning, organizing, and controling, Usually Tee Pet aifficult ofthese is planning, het the identification of, and selection among ternative courses of action, Therefore, rer emphasis will be given t0 this PPES® Gf management. Iris the approach of tis Tent to describe logistics problems 25 vieaply as possible and to apply detiny'h rer pedotogy in solving ther that has proven! toe of practical value in real applica Trane itis a decision-making approach. QuesTIONs AND PROBLEMS [what is supply chain management? Contast Tvith business logistics manage” ment 9, Denaibe business logistics, as you would expect to be practiced in the follow" jing counteies oF Tegions United States Japa European Union ‘Australia South Attica China Brazil 5, Samunarize the factors and forces (hat 81° logistics importance among other anctional areas (marketing, finance ‘production) of a firm. 4, Discuss the similarities and differences Between Jopistics management of a ma facturing firm and sfacmarvice firm (batik, hospital, et) aa rolt onganization (9YmPRONY oFCRESTE art museum, etc.) the military 6G, Ptailng firm (general merchandise 1 food, ete.) 5, Discuss the role that efficient and effective Topistics systems play in encouraging a high level of foreign trade, part Inteodvetlon and Planning Woy is it that both marketing and production may claim some or all of logistics activities as part of their area of responsibilit . What are the key activities of the business logistics function? Discuss their exis- tence and importance to the management of a. a TV manufacturer (Sony) b. a touring musical group (Berlin Philharmonic) © ahospital (Massachusetts General) 4d. a city government (New York City) ©. fast-food chain (McDonald’s) How do you think international logistics differs from logistics for a firm with global operations? Suggest some products that benefit significantly from increased time and place value. Establishing logistics as a separate area for management within a business firm

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