Logistics

An Introduction to Supply
Chain Management

Donald Waters
 Contents

List of Figures ix 4 Implementing the Strategy 82

Preface xi Relating Strategy to Lower Decisions 83
Areas for Decisions in Implementation 85
PARTI Managing Change 95
Discussion Questions 103
Introduction 1
References 103
1 The Context of Logistics 3
5 Locating Facilities 104
Introduction 4
Importance of Location 105
Definitions 4
Choosing the Geographic Region 109
The Supply Chain 7
Infinite Set Approaches 113
Activities of Logistics 12
Feasible Set Approaches 119
Aims of Logistics 17
Network Models 126
Importance of Logistics 19
Location Planning 130
Discussion Questions 25
Discussion Questions 136
References 26
References 136
Further Reading 26
Further Reading 136
2 Integrating the Supply Chain 27
6 Planning Resources 137
Progress in Logistics 28
Types of Planning 138
Current Trends in Logistics 30
Capacity Planning 139
Integrating Logistics Within an
Adjusting Capacity 144
Organisation 34
Tactical Planning 150
Integration Along the Supply Chain 39
Short-term Schedules 158
Achieving Integration 43
Discussion Questions 165
Discussion Questions 53
References 165
References 54
Further Reading 165

PART II 7 Controlling Material Flow 166

Planning the Supply Chain 57 Material Requirements Planning 167
Extending the Role of MRP 174
3 Logistics Strategy 59 Principles of just-in-time 178
Strategic Decisions 60 Achieving just-in-time Operations 183
Logistics Strategy 62 Extending JIT Along the Supply Chain 189
Strategy Options 66 Discussion Questions 194
Designing a Logistics Strategy 73 References 194
Discussion Questions 80 Further Reading 195
References 80
VIM CONTENTS

8 Measuring and Improving 11 Warehousing and Material

Performance 196 Handling 282
Measuring Performance 197 Purpose of Warehouses 283
Comparing Performance 207 Activities Within a Warehouse 285
Analysing a Supply Chain 209 Ownership 290
Improving Performance 215 Layout 292
Discussion Questions 222 Materials Handling 297
References 223 Packaging 302
Further Reading 223 Discussion Questions 306
References 306
PART III Further Reading 307
Activities in the Supply Chain 225 12 Transport 308
Introduction 309
9 Procurement 227
Mode of Transport 310
Definitions 228
Intermodal Transport 319
Choosing Suppliers 232
Ownership of Transport 321
Procurement Cycle 236
Routing Vehicles 325
Types of Purchase 242
Discussion Questions 331
Discussion Questions 249
References 331
References 249
Further Reading 331
Further Reading 250
13 Global Logistics 332
10 Inventory Management 251
International Trade 333
Reasons for Holding Stock 252
Problems with International Logistics 338
Economic Order Quantity 259
Organising International Operations 342
Uncertain Demand and Safety Stock 267
Discussion Questions 349
Periodic Review Systems 270
References 349
Effort of Stock Control 274
Further Reading 349
Discussion Questions 280
References 281 Index 350
Further Reading 281
 List of Figures

1.1 Spectrum of products 5 4.5 Capacity of a supply chain set by the

1.2 Operations creating outputs 5 bottleneck 92
1.3 Cycle of supply and demand 6 4.6 Summary of logistics at Ralston
1.4 The role of logistics 6 Energy Systems s.r.o. 93
1.5 Outline of the supply chain for paper 8 4.7 Deming wheel 97
1.6 Activities in a supply chain 9 4.8 Rate of performance improvement 100
1.7 Supply chain around a manufacturer 9
5.1 Break-even analysis for location of
1.8 Using intermediaries to simplify the
Warwick Supplies 108
supply chain 12
5.2 Hierarchy of decisions for locations 109
1.9 Examples of organisational structure 16
5.3 Alternative choices of location 114
1.10 Influence of logistics on ROA 21
5.4 Variation in transport cost with
2.1 Summary of logistics activities 35 location 115
2.2 Three levels of logistics integration 40 5.5 Calculation of centre of gravity 116
2.3 Varying demand 40 5.6 Locations for van Hendrick Industries 117
2.4 Spectrum of relationships 46 5.7 Weakness of the centre of gravity
2.5 Different levels of vertical integration 49 method 117
5.8 Map for Bannerman Industries 120
3.1 Types of strategic decision 61 5.9 Comparison of sites 121
3.2 Role of logistics managers in strategic 5.10 Variation in transport cost with
decisions 63 number of facilities 121
3.3 Different amounts of input from 5.11 Finding the optimal number of
logistics managers 63 facilities 122
3.4 Factors in the design of a logistics 5.12 Map of Ian Bruce's problem 127
strategy 74 5.13 Spreadsheet of calculations for
Ian Bruce 127
4.1 Levels of decision in logistics 86
5.14 Road network showing travel time
4.2 Structure of a supply chain 87
in minutes between locations 129
4.3 Different shapes of supply chain 88
5.15 Solution to the covering problem 129
4.4 Simplified supply chain for
5.16 Network for Problem 6 135
distributing shoes 89
 LIST OF F I G U R E S

6.1 An approach to planning logistics 1 38 9.1 Relative power of a customer and

6.2 The bottleneck of a supply chain a supplier 234
limits the capacity 140 9.2 Outline of steps in a procurement
6.3 Capacity of distribution at J&R cycle 237
Softdrinks 142 9.3 Some arrangements for delivery 246
6.4 Alternative timing of capacity
10.1 Aggregate stock as a percentage
expansion 144
of GDP for the UK 253
6.5 Alternative size of capacity expansion 145
10.2 Types of stock 255
6.6 A typical learning curve 147
10.3 Repeated pattern of stock cycles 259
6.7 Cost of maintenance 148
10.4 Variation of cost with order size 260
6.8 An iterative approach to planning 152
10.5 Using a reorder level to time orders 263
6.9 Graphical approach to planning -
10.6 Order patterns when lead time is
plotting cumulative demand and
longer than stock cycle 263
supply 155
10.7 The cost curve is shallow around
6.10 Revision of plans during cycles 156
the economic order quantity 265
6.11 Spreadsheet to help with planning
10.8 Safety stock raises the average
in Piotr Hucek 158
stock level 267
7.1 Comparison of stock levels 168 10.9 Alternative approaches to ordering 271
7.2 Part of a bill of materials for a table 169 10.10 Order placed at A has to cover
7.3 Summary of MRP procedure 170 demand until В 272
7.4 A closed-loop MRP system 175 10.11 Typical results for an ABC analysis 274
7.5 Enterprise resource planning 177 10.12 Original supply chain for Nalco/
7.6 Stock levels with different types of Exxon 276
control 180
11.1 Using warehouses to reduce
7.7 The simplest form of message for JIT 185
transport costs 287
7.8 A two-card kanban system 186
11.2 Meeting demand with a mixture
8.1 Capacity and utilisation in a supply of private and public warehouses 291
chain 199 11.3 Break-even analysis for public/
8.2 Structure of the UK frozen food private warehouses 292
industry 206 11.4 Basic layout of a warehouse 293
8.3 Steps in benchmarking 208 11.5 Schematic of a common warehouse
8.4 An informal process chart 210 layout 293
8.5 Format for a process chart 211 11.6 Layout of paint in worked example 296
8.6 Part of a process chart for deliveries 11.7 Choice of automation and
at a supermarket 211 warehouse size 300
8.7 Precedence diagram, with activity 11.8 Outline of Handemann Group's
В following activity A 212 warehouse 301
8.8 Precedence diagram for worked
12.1 Freight moved by transport mode
example 213
in the UK 311
8.9 Example of a multiple activity chart 213
12.2 Transporting coal across Canada 318
8.10 Multiple activity chart for worked
12.3 The travelling salesman problem 326
example 214
12.4 Solution to routing problem 328
8.11 Part of a simulation for Ed's Drive-
through Bottle Shop 221