The Handbook of Logistics and Distribution Management

664 Pages·2010·12.578 MB·English

by  Baker, Peter, Rushton, Alan, Croucher, Phil

i
THE HANDBOOK OF
LOGISTICS &
DISTRIBUTION
MANAGEMENT
(cid:27)(cid:59)(cid:47)(cid:3)(cid:44)(cid:43)(cid:48)(cid:59)(cid:48)(cid:54)(cid:53)(cid:3)
(cid:44)(cid:43)(cid:48)(cid:59)(cid:44)(cid:43)(cid:3)(cid:41)(cid:64)(cid:3)
(cid:40)(cid:51)(cid:40)(cid:53)(cid:3)(cid:57)(cid:60)(cid:58)(cid:47)(cid:59)(cid:54)(cid:53)(cid:19)(cid:3)(cid:55)(cid:47)(cid:48)(cid:51)(cid:3)(cid:42)(cid:57)(cid:54)(cid:60)(cid:42)(cid:47)(cid:44)(cid:57)(cid:19)(cid:3)(cid:3)
(cid:55)(cid:44)(cid:59)(cid:44)(cid:57)(cid:3)(cid:41)(cid:40)(cid:50)(cid:44)(cid:57)
ii
Publisher’s note
Every possible eff ort has been made to ensure that the information contained in this book is accurate at
the time of going to press, and the publishers and authors cannot accept responsibility for any errors or
omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or
refraining from action, as a result of the material in this publication can be accepted by the editor, the
publisher or any of the authors.
First published in Great Britain in 1989 by Kogan Page Limited
Second edition 2000
Th ird edition 2006
Fourth edition 2010
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as per-
mitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced,
stored or transmitted, in any form or by any means, with the prior permission in writing of the publish-
ers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the
CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the
undermentioned addresses:
120 Pentonville Road 525 South 4th Street, #241 4737/23 Ansari Road
London N1 9JN Philadelphia PA 19147 Daryaganj
United Kingdom USA New Delhi 110002
www.koganpage.com India
© Alan Rushton, Phil Croucher and Peter Baker, 2006, 2010
© Alan Rushton, John Oxley and Phil Croucher, 1989, 2000
© Alan Rushton and John Oxley, 1989
Th e right of Alan Rushton, Phil Croucher and Peter Baker to be identifi ed as the authors of this work
has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
ISBN 978 0 7494 5714 3
E-ISBN 978 0 7494 5935 2
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Typeset by Saxon Graphics Ltd, Derby
Printed and bound in India by Replika Press Pvt Ltd
iii
Contents
List of fi gures viii
List of tables xv
Preface xvi
Abbreviations xxi
Part 1 Concepts of logistics and distribution
1 Introduction to logistics and distribution 3
Introduction 3; Scope and defi nition 4; Historical perspective 7;
Importance of logistics and distribution 9; Logistics and supply chain
structure 13; Summary 13
2 Integrated logistics and the supply chain 15
Introduction 15; Th e total logistics concept 15; Planning for distribution
and logistics 18; Th e fi nancial impact of logistics 21; Globalization and
integration 23; Integrated systems 24; Competitive advantage through
logistics 25; Logistics and supply chain management 27; Summary 28
3 Customer service and logistics 30
Introduction 30; Th e importance of customer service 30; Th e components
of customer service 32; Two conceptual models of service quality 35;
Developing a customer service policy 37; Levels of customer service 44;
Measuring customer service 45; Th e customer service explosion 47;
Summary 48
4 Channels of distribution 50
Introduction 50; Physical distribution channel types and structures 51;
Channel selection 55; Outsourcing channels 59; Summary 61
5 Key issues and challenges for logistics 62
Introduction 62; Th e external environment 63; Manufacturing and supply
66; Distribution 69; Retailing 75; Th e consumer 76; Summary 79
iv Contents
Part 2 Planning for logistics
6 Planning framework for logistics 83
Introduction 83; Pressures for change 83; Strategic planning overview 85;
Logistics design strategy 87; Product characteristics 90; Th e product life
cycle 93; Packaging 94; Unit loads 94; Summary 95
7 Logistics processes 97
Introduction 97; Th e importance of logistics processes 97; Key logistics
processes 99; Approach 102; Tools and techniques 104; Summary 109
8 Supply chain segmentation 110
Introduction 110; Product segmentation 110; Demand and supply
segmentation 112; Marketing segmentation 114; Combined segmentation
frameworks 115; Implementation 116; Summary 116
9 Logistics network planning 117
Introduction 117; Th e role of distribution centres and warehouses 118;
Cost relationships 120; A planned approach or methodology 127; Initial
analysis and option defi nition 129; Logistics modelling 134; Matching
logistics strategy to business strategy 138; Site search and considerations
139; Summary 141
10 Logistics management and organization 142
Introduction 142; Relationships with other corporate functions 142;
Logistics organizational structures 144; Organizational integration 145; Th e
role of the logistics or distribution manager 149; Payment schemes 151;
Th e selection of temporary staff and assets 155; Summary 158
11 Manufacturing and materials management 159
Introduction 159; Just-in-time 161; Manufacturing resource planning
(MRPII) 163; Material requirements planning (MRP) 163; Th e MRP
system 164; Flexible fulfi lment (postponement) 167; Th e eff ects on
distribution activities 168; Summary 169
Part 3 Procurement and inventory decisions
12 Basic inventory planning and management 173
Introduction 173; Th e need to hold stocks 173; Types of stock-holding/
inventory 175; Th e implications for other logistics functions 177; Inventory
costs 179; Inventory replenishment systems 180; Th e economic order
quantity 183; Demand forecasting 187; Summary 190
13 Inventory and the supply chain 192
Introduction 192; Problems with traditional approaches to inventory
planning 192; Diff erent inventory requirements 193; Th e lead-time gap
Contents v
195; Inventory and time 196; Analysing time and inventory 197; Inventory
planning for manufacturing 199; Inventory planning for retailing 201;
Summary 206
14 Purchasing and supply 208
Introduction 208; Setting the procurement objectives 209; Managing the
suppliers 216; Collaborative planning, forecasting and replenishment 219;
Factory gate pricing 220; E-procurement 220; Summary 221
Part 4 Warehousing and storage
15 Principles of warehousing 225
Introduction 225; Th e role of warehouses 226; Strategic issues aff ecting
warehousing 228; Warehouse operations 229; Costs 233; Packaging and
unit loads 233; Summary 235
16 Storage and handling systems (palletized) 236
Introduction 236; Pallet movement 236; Pallet stacking 237; Palletized
storage 242; Palletized storage – comparison of systems 255; Summary 256
17 Storage and handling systems (non-palletized) 258
Introduction 258; Small item storage systems 259; Truck attachments 264;
Long loads 265; Cranes 267; Conveyors 268; Automated guided vehicles
269; Hanging garment systems 269; Summary 270
18 Order picking and replenishment 271
Introduction 271; Order picking concepts 271; Order picking equipment
273; Sortation 280; Picking area layout 282; Slotting 283; Pick routes 283;
Information in order picking 284; E-fulfi lment 286; Picking productivity
287; Replenishment 288; Summary 289
19 Receiving and dispatch 290
Introduction 290; Receiving processes 290; Dispatch processes 291;
Cross-docking 292; Equipment 293; Layouts 297; Summary 299
20 Warehouse design 300
Introduction 300; Design procedure 300; Summary 315
21 Warehouse management and information 317
Introduction 317; Operational management 317; Performance monitoring
318; Information technology 321; Data capture and transmission 324;
Radio data communication 326; Summary 327
vi Contents
Part 5 Freight transport
22 International logistics: modal choice 331
Introduction 331; Method of selection 333; Operational factors 334;
Transport mode characteristics 338; Consignment factors 342; Cost and
service requirements 344; Aspects of international trade 344; Summary 350
23 Maritime transport 352
Introduction 352; Structure of the industry 352; Common shipping terms
353; Surcharges 356; Documentation 357; Vessel classifi cation 359;
Common ship types and their cargoes 361; Ports and cargo handling 363;
Other factors 364; Summary 366
24 Air transport 367
Introduction 367; Structure of the industry 367; Air cargo handling 368;
Types of air freighter 370; Documentation 372; Air hubs and spokes 372;
Airfreight pricing 373; Air cargo security 376; Summary 378
25 Rail and intermodal transport 379
Introduction 379; Intermodal equipment 380; Intermodal vehicles 384;
Intermodal infrastructure 388; Mode shift grant schemes 389; Rail
transport 391; Summary 393
26 Road freight transport: vehicle selection 395
Introduction 395; Main vehicle types 396; Types of operation 398; Load
types and characteristics 405; Main types of vehicle body 408; Th e wider
implications of vehicle selection 412; Vehicle acquisition 413; Summary
415
27 Road freight transport: vehicle costing 416
Introduction 416; Reasons for road freight transport vehicle costing 416;
Key aspects of road transport costing 418; Vehicle standing costs 420;
Vehicle running costs 425; Overhead costs 427; Costing the total transport
operation 428; Whole life costing 429; Vehicle cost comparisons 431;
Zero-based budgets 433; Summary 434
28 Road freight transport: planning and resourcing 435
Introduction 435; Need for planning 435; Fleet management 436; Main
types of road freight transport 438; Transport resources requirements and
optimization 440; Vehicle routeing and scheduling issues 441; Data
requirements 445; Manual methods of vehicle routeing and scheduling 448;
Computer routeing and scheduling 455; Other information system
applications 458; Summary 459
Contents vii
Part 6 Operational management
29 Cost and performance monitoring 465
Introduction 465; Why monitor? 466; Diff erent approaches to cost and
performance monitoring 468; What to measure against? 473; An
operational planning and control system 476; Good practice 477;
Infl uencing factors 481; Detailed metrics and KPIs 482; Th e presentation of
metrics 486; Summary 488
30 Benchmarking 490
Introduction 490; Why should an organization engage in benchmarking?
491; How to conduct a benchmarking exercise 491; Formal benchmarking
systems 497; Benchmarking distribution operations 498; Summary 507
31 Information and communication technology in the supply chain 508
Introduction 508; Basic communication 508; Supply chain planning 511;
Warehousing 513; Inventory 513; Transport 514; Other applications 515;
Trading using the internet – e-commerce 516; Summary 519
32 Outsourcing: services and decision criteria 520
Introduction 520; Outsourcing operations 520; Diff erent service types 526;
Value added services 531; Drivers and drawbacks of outsourcing 533; What
are the critical factors of choice? 538; Summary 540
33 Outsourcing: the selection process 541
Introduction 541; Approach 541; Detailed steps 541; Summary 558
34 Outsourcing management 559
Introduction 559; Th e need for management 560; Managing the
relationship 560; Implementation planning 564; Monitoring an outsourced
logistics operation 566; Summary 570
35 Security and safety in distribution 571
Introduction 571; International security measures 571; Strategic security
measures 573; Tactical security measures 574; Safety in the distribution
centre and warehouse 582; Summary 584
36 Logistics and the environment 585
Introduction 585; Th e European Union and environmental legislation 586;
Logistics and environmental best practice 591; Alternative fuels 601;
Summary 604
References 605
Index 608
viii
List of fi gures
1.1 Here is a fl ow representation of logistics – an example for an FMCG manufacturer 5
1.2 Th e key components of distribution and logistics, showing some of the associated
detailed elements 6
1.3 Logistics costs as a percentage of GDP for selected countries 10
1.4 A typical physical fl ow of material from suppliers through to customers, showing
stationary functions and movement functions, linked to a diagram that refl ects
the ‘value added’ nature of logistics 14
2.1 Some potential trade-off s in logistics, showing how diff erent company functions
might be aff ected 17
2.2 Logistics planning hierarchy 18
2.3 Th e major functions of the diff erent planning time horizons 19
2.4 Some of the main logistics elements for the diff erent planning time horizons 20
2.5 Th e planning and control cycle 21
2.6 Th e many ways in which logistics can provide an impact on an organization’s
return on investment 22
2.7 Th e logistics implications of diff erent competitive positions 26
2.8 Supply chain integration 28
3.1 Core product versus product ‘surround’, illustrating the importance of the
logistics-related elements 31
3.2 Th e seven ‘rights’ of customer service, showing the main service classifi cations 32
3.3 Th e constituent parts of total order fulfi lment cycle time 34
3.4 A conceptual model of service quality: the basic elements 36
3.5 A conceptual model of service quality: the service gaps 36
3.6 An overall approach for establishing a customer service strategy 39
3.7 Diff erent types of customer service study 40
3.8 Th e advantages and disadvantages of diff erent survey approaches 40
3.9 Rating table for selected customer service factors 41
3.10 Customer service targets 42
List of fi gures ix
3.11 Competitive benchmarking showing opportunities for improving service when
comparisons are made with customer requirements and the performance of key
competitors 43
3.12 A practical example of gap analysis 44
3.13 Th e relationship between the level of service and the cost of providing that
service 45
3.14 Radar gram showing the perfect order targets and achievements 48
4.1 Alternative distribution channels for consumer products to retail outlets 51
4.2 Typical channel of distribution, showing the diff erent physical and trading
routes to the consumer 54
4.3 ‘Long’ and ‘short’ distribution channels 57
4.4 Designing a channel structure – a formalized approach 58
4.5 Th e percentage share of the 3PL market in certain countries and regions 59
4.6 Logistics functions outsourced in Europe 2006 60
5.1 Th e major forces driving logistics 64
5.2 Fourth-party logistics, showing the main areas of service that could be provided 70
5.3 Th e diff erent characteristics that distinguish freight exchanges from each other 73
6.1 Pressures infl uencing logistics systems 84
6.2 Corporate strategic planning overview 85
6.3 PEST analysis: external infl uences 86
6.4 A framework for logistics network design 88
6.5 Eff ect of product volume to weight ratio on logistics costs 91
6.6 Eff ect of product value to weight ratio on logistics costs 91
6.7 Standard product life cycle curve showing growth, maturity and decline 94
7.1 Th e process triangle 101
7.2 Approach to process design or redesign 103
7.3 A typical Pareto curve showing that 20 per cent of products represent
80 per cent of sales value 105
7.4 Relationship mapping: used to identify key departments and their
interrelationships 106
7.5 A matrix process chart 107
7.6 Value/time analysis 108
7.7 A time-based map illustrating the order to dispatch process broken down
into value and non-value added time 108
7.8 Finding the cause of non-value added time using an Ishikawa diagram 109
8.1 Segmentation by throughput and value density 111
8.2 Segmentation by demand and supply characteristics 112
9.1 Relationship between number of depots (ie storage capacity) and total
storage cost 121
9.2 Relationship between the number of depots and total delivery costs 122
9.3 Primary transport costs in relation to the number of depots 123
x List of fi gures
9.4 Combined transport costs (delivery and primary) in relation to the number
of depots 123
9.5 Inventory holding costs in relation to the number of depots 124
9.6 Information system costs in relation to the number of depots 124
9.7 Th e relationship between total and functional logistics costs as the number
of depots in a network changes 125
9.8 Trade-off analysis showing that a change in confi guration can lead to a
reduction in total logistics cost whilst some cost elements increase and
others reduce 126
9.9 An approach to logistics and distribution strategy planning 128
9.10 Logistics network fl ow diagram, showing some examples of major fl ows
and costs 130
9.11 Map showing a representation of the demand for diff erent product groups
in diff erent geographic areas 133
9.12 Logistics modelling: the main steps for a DC location study 138
9.13 Example of part of a qualitative assessment used for a European study 139
10.1 Traditional organizational structure showing key logistics functions 144
10.2 Functional structure showing logistics activities linked together 145
10.3 Traditional silo-based functional organizational structure 146
10.4 A customer-facing, process-driven organizational structure 147
10.5 Mission management, which acts directly across traditional functional
boundaries 148
10.6 Matrix management, which emphasizes both planning and operational
elements 148
10.7 Buyer/seller relationships: a single versus a multiple linked approach 149
10.8 Th e main types of payment mechanism, showing the relationship between
performance and pay 152
10.9 Hierarchy of payment schemes in relation to fi nancial incentives 154
10.10 Th e extent of supervision required for diff erent payment schemes 155
11.1 A bill of requirements for one product 166
12.1 Inventory level showing input (order quantity) and output (continuous
demand) 176
12.2 Inventory level with safety stock in place 176
12.3 Periodic review 181
12.4 Fixed point reorder system 182
12.5 Th e ‘bull whip’ or Forrester eff ect 183
12.6 Th e EOQ balance 184
12.7 Reorder quantities 184
12.8 Th e economic order quantity (EOQ) principle 185
12.9 Th e EOQ formula with worked example 186