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tHe HanDbooK of LOGISTICS & DISTRIBUTION

MANAGE

M ENT

5TH EDI

T ION AL AN RUSHT ON , PH I L C RO U C H ER P E T ER B A K

ER4th EDItION

E DI t ED by Al AN Rusht ON , Ph I l C RO u C h ER P E t ER bAkERLOGISTICSDISTRIBUTION MA N A G EME NT THE

HANDBOOK OF

&i

Publisher's note

Every possible efiort 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 p ublishers or any of the authors. First published in Great Britain and the United States in 1989 by Kogan

Page Limited

Second edition 2000

flird edition 2006

Fourth edition 2010

Fih edition 2014

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted 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 publishers, or in the case of reprographic repro

duction 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 addre sses:

2nd Floor, 45 Gee Street

London EC1V 3RS

United Kingdom

www.koganpage.com1518 Walnut Street, Suite 1100

Philadelphia PA 19102

USA4737/23 Ansari Road

Daryaganj

New Delhi 110002

India © Alan Rushton, Phil Croucher, Peter Baker, 2006, 2010, 2014 © Alan Rushton, John Oxley and Phil Croucher, 2000

© Alan Rushton and John Oxley, 1989

fle right of Alan Rushton, Phil Croucher, Peter Baker to be identied 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 6627 5

E-ISBN

978 0 7494 6628 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

Rushton, Alan.

fle handbook of logistics and distribution management : understanding the supply chain / Alan Rushton, Phil

Croucher, Peter Baker.

pages cm Revised edition of fle handbook of logistics & distribution management , 4th ed., published in 2010. ISBN 978-0-7494-6627-5 - ISBN 978-0-7494-6628-2 (ebook)

1. Physical distribution of goods-Management-

Handbooks, manuals, etc.

2. Business logistics. I. Croucher, Phil, 1954- II. Baker, Peter, 1950- III. Title.

HF5415.7.R87 2014

658.7-dc23

2013033897

Typeset by Graphicra Limited, Hong Kong

Printed and bound in India by Replika Press Pvt Ltd ii

Contents

List of figures

viii

List of tables

xv

Preface

xvi

Abbreviations

xxi

Part 1

Concepts of logistics and distribution 1

01

Introduction to logistics and distribution 3

Introduction 3; Scope and de?nition 4; Historical perspective 7; Importance of logistics and distribution 9; Logistics and supply chain structure 14; Summary 15 02

Integrated logistics and the supply chain 16

Introduction 16; ?e total logistics concept 16; Planning for logistics 19; ?e ?nancial impact of logistics 22; Globalization and integration 24; Integrated systems 25; Competitive advantage through logistics 27; Logistics and supply chain management 28; Summary 30 03

Customer service and logistics 32

Introduction 32; ?e importance of customer service 32; ?e components of customer service 34; Two conceptual models of service quality 37; Developing a customer service policy 39; Levels of customer service 46; Measuring customer service 47; ?e customer service explosion 50; Summary 51 04

Channels of distribution 52

Introduction 52; Physical distribution channel types and structures 53; Channel selection 57; Outsourcing channels 61; Summary 65 05 Key issues and challenges for logistics and the supply chain 66 Introduction 66; ?e external environment 68; Manufacturing and supply 71; Logistics and distribution 74; Retailing 81; ?e consumer 83; Summary 86

ContentsContents iiiList of ?gures viiiList of tables xvPreface xviAbbreviations xxiConcepts of logistics and distribution 1Introduction to logistics and distribution 3Introduction 3Scope and de?nition 4Historical perspective 7Importance of logistics and distribution 9Logistics and supply chain structure 14Summary 15Integrated logistics and the supply chain 16Introduction 16?e total logistics concept 16Planning for logistics 19?e ?nancial impact of logistics 22Globalization and integration 24Integrated systems 25Competitive advantage through logistics 27Logistics and supply chain management 28Summary 30Customer service and logistics 32Introduction 32?e importance of customer service 32?e components of customer service 34Two conceptual models of service quality 37Developing a customer service policy 39Levels of customer service 46Measuring customer service 47?e customer service explosion 50Summary 51Channels of distribution 52Introduction 52Physical distribution channel types and structures 53Channel selection 57Outsourcing channels 61Summary 65Key issues and challenges for logistics and the supply chain 66Introduction 66?e external environment 68Manufacturing and supply 71Logistics and distribution 74Retailing 81?e consumer 83Summary 86Planning for logistics 87Planning framework for logistics 89Introduction 89Pressures for change 89Strategic planning overview 91Logistics design strategy 94Product characteristics 96?e product life cycle 99Packaging 100Unit loads 101Summary 101Logistics processes 103Introduction 103?e importance of logistics processes 103Logistics process types and categories 105Approach 108Tools and techniques 110Summary 116Supply chain segmentation 117Introduction 117Product segmentation 117Demand and supply segmentation 119Marketing segmentation 121Combined segmentation frameworks 122Implementation 123Summary 124Logistics network planning 125Introduction 125?e role of distribution centres and warehouses 126Cost relationships 128A planned approach or methodology 136Initial analysis and option de?nition 138Logistics modelling: logistics options analysis 143Evaluate results: matching logistics strategy to business strategy 147Practical considerations for site search 148Summary 150Logistics management and organization 151Introduction 151Relationships with other corporate functions 151Logistics organizational structures 153Organizational integration 155?e role of the logistics or distribution manager 158Payment schemes 160?e selection of temporary sta? and assets 164Summary 167Multichannel ful?lment 168Introduction 168Issues 169Food retailing 170Non-food retailing 172Summary 175Manufacturing logistics 176Introduction 176Typology of operations 177Just-in-time 180Manufacturing resource planning (MRPII) 183Material requirements planning (MRP) 183?e MRP system 184Flexible ful?lment (postponement) 187?e e?ects on distribution activities 188Future developments 189Summary 190Procurement and inventory decisions 191Basic inventory planning and management 193Introduction 193?e need to hold stocks 194Types of stockholding/inventory 195Stockholding policy implications for other logistics functions 197Inventory costs 199Reasons for rising inventory costs 200Inventory replenishment systems 201?e reorder point and safety stock 203?e bullwhip e?ect 205?e economic order quantity 206Demand forecasting 210Summary 216Inventory and the supply chain 217Introduction 217Problems with traditional approaches to inventory planning 217Di?erent inventory requirements and the 'decoupling point' 218?e lead-time gap 220Inventory and time 221Analysing time and inventory 223Inventory planning for manufacturing 224Inventory planning for retailing 227Summary 233Procurement and supply 234Introduction 234?e procurement cycle 235?e scope of procurement 236Setting the procurement objectives 236Managing the suppliers 243Expediting 246Procurement performance measures 247Collaborative planning, forecasting and replenishment 247Factory gate pricing 248E-procurement 248Corruption 250Summary 251Warehousing and storage 253Principles of warehousing 255Introduction 255?e role of warehouses 256Strategic issues a?ecting warehousing 258Warehouse operations 259Costs 263Packaging and unit loads 263Summary 265Storage and handling systems (palletized) 266Introduction 266Pallet movement 266Pallet stacking 268Palletized storage 272Palletized storage - comparison of systems 286Summary 288Storage and handling systems (non-palletized) 290Introduction 290Small item storage systems 291Truck attachments 295Long loads 296Cranes 299Conveyors 299Automated guided vehicles 300Hanging garment systems 301Summary 302Order picking and packing 303Introduction 303Order picking concepts 303Order picking equipment 305Sortation 313Picking area layout 315Slotting 316Pick routes 316Information in order picking 317E-ful?lment 320Picking productivity 320Replenishment 321Packing 322Summary 324Receiving and dispatch 325Introduction 325Receiving processes 325Dispatch processes 326Cross-docking 327Returned goods 329Receiving and dispatch equipment 329Layouts 332Summary 335Warehouse design 336Introduction 336Design procedure 336Summary 352Warehouse management and information 353Introduction 353Operational management 353Performance monitoring 355Information technology 358Data capture and transmission 360Radio data communication 362Truck management 363Summary 363Freight transport 365International logistics: modal choice 367Introduction 367Relative importance of the main modes of freight transport 368Method of selection 370Operational factors 371Transport mode characteristics 375Consignment factors 379Cost and service requirements 380Aspects of international trade 381Summary 387Maritime transport 389Introduction 389Structure of the industry 389Common shipping terms 391Surcharges 393Documentation 395Vessel classi?cation 396Common ship types and their cargoes 398Ports and cargo handling 401Other factors 402Summary 404Air transport 405Introduction 405Structure of the industry 405Air cargo handling 407Types of air freighter 409Documentation 410Air hubs and spokes 411Air freight pricing 411Air cargo security 414Summary 416Rail and intermodal transport 417Introduction 417Intermodal equipment 418Intermodal vehicles 426Intermodal infrastructure 428Mode shi? grant schemes 429Rail transport 429Summary 432Road freight transport: vehicle selection 433Introduction 433Main vehicle types 434Types of operation 435Load types and characteristics 443Main types of vehicle body 446?e wider implications of vehicle selection 452Vehicle acquisition 453Summary 455Road freight transport: vehicle costing 456Introduction 456Reasons for road freight transport vehicle costing 456Key aspects of road transport costing 458Vehicle standing costs 460Vehicle running costs 464Overhead costs 466Costing the total transport operation 467Whole life costing 468Vehicle cost comparisons 471Zero-based budgets 472Summary 473Road freight transport: planning and resourcing 474Introduction 474Need for planning 475Fleet management 476Main types of road freight transport 478Transport resources: requirements and optimization 480Vehicle routeing and scheduling issues 482Manual methods of vehicle routeing and scheduling 488Computer routeing and scheduling 495Other road-freight transport information systems applications 500Summary 501Operational management 503Cost and performance monitoring 505Introduction 505Why monitor? 506Di?erent approaches to cost and performance monitoring 508What to measure against? 513A logistics operational planning and control system 516Good practice 517In?uencing factors 521Detailed metrics and KPIs 522?e presentation of metrics 525Summary 527Benchmarking 529Introduction 529Why should an organization engage in benchmarking? 530How to conduct a benchmarking exercise 530Formal benchmarking systems 536Benchmarking distribution operations 538Summary 547Information and communication technology in the supply chain 548Introduction 548Basic communication 548Supply chain planning 551Warehousing 553Inventory 553Transport 554Other applications 556Trading using the internet - e-commerce 557Summary 559Outsourcing: services and decision criteria 560Introduction 560Outsourcing operations 560Di?erent service types 571Value added services 577Drivers and drawbacks of outsourcing 580What are the critical factors of choice? 586Summary 588Outsourcing: the selection process 589Introduction 589Approach 589Detailed steps 591Summary 610Outsourcing management 611Introduction 611?e need for management 612Managing the relationship 612Implementation planning 616Monitoring an outsourced logistics operation 618Summary 622Security and safety in distribution 624Introduction 624International security measures 625Strategic security measures 626Tactical security measures 627Safety in the distribution centre and warehouse 634Summary 637Logistics and the environment 638Introduction 638?e European Union and environmental legislation 639Logistics and environmental best practice 644Alternative fuels 654Summary 658Humanitarian logistics 659Introduction 659Key di?erences 660Performance measurement 663Key terms 665Pre-positioning of resources 666Assessment and planning 667?e cluster approach 668Distribution 669Summary 670Further reading 671

References

672Index 675

iii iv Contents

Part 2

Planning for logistics 87

6

Planning framework for logistics 89

Introduction 89; Pressures for change 89; Strategic planning overview 91; Logistics design strategy 94; Product characteristics 96; ?e product life cycle 99; Packaging 100; Unit loads 101; Summary 101 7

Logistics processes 103

Introduction 103; ?e importance of logistics processes 103; Logistics process types and categories 105; Approach 108;

Tools and techniques 110; Summary 116

8

Supply chain segmentation 117

Introduction 117; Product segmentation 117; Demand and supply segmentation 119; Marketing segmentation 121; Combined segmentation frameworks 122; Implementation 123; Summary 124 9

Logistics network planning 125

Introduction 125; ?e role of distribution centres and warehouses 126; Cost relationships 128; A planned approach or methodology 136; Initial analysis and option denition 138; Logistics modelling: logistics option analysis 143; Evaluate results: matching logistics strategy to business strategy 147; Practical considerations for site search 148; Summary 150 10

Logistics management and organization 151

Introduction 151; Relationships with other corporate functions 151; Logistics organizational structures 153; Organizational integration 155; ?e role of the logistics or distribution manager 158; Payment schemes 160; ?e selection of temporary sta? and assets 164; Summary 167 11

Multichannel ful?lment 168

Introduction 168; Issues 169; Food retailing 170; Non-food retailing 172;

Summary 175

12

Manufacturing logistics 176

Introduction 176; Typology of operations 177; Just-in-time 180; Manufacturing resource planning (MRPII) 183; Material requirements planning (MRP) 183; ?e MRP system 184; Flexible fullment (postponement) 187; ?e e?ects of distribution activities 188; Future developments 189; Summary 190

Part 3

Procurement and inventory decisions 191

13

Basic inventory planning and management 193

Introduction 193; ?e need to hold stocks 194; Types of stockholding/ inventory 195; Stockholding policy implications for other logistics functions 197; Inventory costs 199; Reasons for rising inventory costs 200; Inventory replenishment systems 201; ?e reorder point and safety stock 203; ?e bullwhip e?ect 205; ?e economic order quantity 206;

Demand forecasting 210; Summary 216

Contents v

14

Inventory and the supply chain 217

Introduction 217; Problems with traditional approaches to inventory planning 217; Di?erent inventory requirements and the 'decoupling point' 218; ?e lead-time gap 220; Inventory and time 221; Analysing time and inventory 223; Inventory planning for manufacturing 224; Inventory planning for retailing 227;

Summary 233

15

Procurement and supply 234

Introduction 234; ?e procurement cycle 235; ?e scope of procurement 236; Setting the procurement objectives 236; Managing the suppliers 243; Expediting 246; Procurement performance measures 247; Collaborative planning, forecasting and replenishment 247; Factory gate pricing 248;

E-procurement 248; Corruption 250; Summary 251

Part 4

Warehousing and storage 253

16

Principles of warehousing 255

Introduction 255; ?e role of warehouses 256; Strategic issues a?ecting warehousing 258; Warehouse operations 259; Costs 263; Packaging and unit loads 263; Summary 265 17

Storage and handling systems (palletized) 266

Introduction 266; Pallet movement 266; Pallet stacking 268; Palletized storage 272; Palletized storage - comparison of systems 286; Summary 288 18

Storage and handling systems (non-palletized) 290

Introduction 290; Small item storage systems 291; Truck attachments 295; Long loads 296; Cranes 299; Conveyors 299; Automated guided vehicles 300;

Hanging garment systems 301; Summary 302

19

Order picking and packing 303

Introduction 303; Order picking concepts 303; Order picking equipment 305; Sortation 313; Picking area layout 315; Slotting 316; Pick routes 316; Information in order picking 317; E-fullment 320; Picking productivity 320;

Replenishment 321; Packing 322; Summary 324

20

Receiving and dispatch 325

Introduction 325; Receiving processes 325; Dispatch processes 326; Cross-docking 327; Returned goods 329; Receiving and dispatch equipment 329; Layouts 332; Summary 335 21

Warehouse design 336

Introduction 336; Design procedure 336; Summary 352 22

Warehouse management and information 353

Introduction 353; Operational management 353; Performance monitoring 355; Information technology 358; Data capture and transmission 360; Radio data communication 362; Truck management 363; Summary 363 vi Contents

Part 5

Freight transport 365

23

International logistics: modal choice 367

Introduction 367; Relative importance of the main modes of freight transport 368; Method of selection 370; Operational factors 371; Transport mode characteristics 375; Consignment factors 379; Cost and service requirements 380; Aspects of international trade 381; Summary 387 24

Maritime transport 389

Introduction 389; Structure of the industry 389; Common shipping terms 391; Surcharges 393; Documentation 395; Vessel classication 396; Common ship types and their cargoes 398; Ports and cargo handling 401; Other factors 402;

Summary 404

25

Air transport 405

Introduction 405; Structure of the industry 405; Air cargo handling 407; Types of air freighter 409; Documentation 410; Air hubs and spokes 411; Air freight pricing 411; Air cargo security 414; Summary 416 26

Rail and intermodal transport 417

Introduction 417; Intermodal equipment 418; Intermodal vehicles 426; Intermodal infrastructure 428; Mode shi grant schemes 429;

Rail transport 429; Summary 432

27

Road freight transport: vehicle selection 433

Introduction 433; Main vehicle types 434; Types of operation 435; Load types and characteristics 443; Main types of vehicle body 446; ?e wider implications of vehicle selection 452; Vehicle acquisition 453;

Summary 455

28

Road freight transport: vehicle costing 456

Introduction 456; Reasons for road freight transport vehicle costing 456; Key aspects of road transport costing 458; Vehicle standing costs 460; Vehicle running costs 464; Overhead costs 466; Costing the total transport operation 467; Whole life costing 468; Vehicle cost comparisons 471;

Zero-based budgets 472; Summary 473

29
Road freight transport: planning and resourcing 474 Introduction 474; Need for planning 475; Fleet management 476; Main types of road freight transport 478; Transport resources: requirements and optimization 480; Vehicle routeing and scheduling issues 482; Manual methods of vehicle routeing and scheduling 488; Computer routeing and scheduling 495; Other road-freight transport information systems applications 500; Summary 501

Contents vii

Part 6

Operational management 503

30

Cost and performance monitoring 505

Introduction 505; Why monitor? 506; Di?erent approaches to cost and performance monitoring 508; What to measure against? 513; A logistics operational planning and control system 516; Good practice 517; Inuencing factors 521; Detailed metrics and KPIs 522; ?e presentation of metrics 525; Summary 527 31

Benchmarking 529

Introduction 529; Why should an organization engage in benchmarking? 530; How to conduct a benchmarking exercise 530; Formal benchmarkingquotesdbs_dbs14.pdfusesText_20

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