The handbook of logistics and distribution management

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

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

per-120 Pentonville Road 525 South 4th Street, #241 4737/23 Ansari Road

© 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

ii

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

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

195; Inventory and time 196; Analysing time and inventory 197; Inventory planning for manufacturing 199; Inventory planning for retailing 201;

Summary 206

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

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

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

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

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

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

2.3 Th e major functions of the diff erent planning time horizons 192.4 Some of the main logistics elements for the diff erent planning time horizons 20

2.6 Th e many ways in which logistics can provide an impact on an organization’s

2.7 Th e logistics implications of diff erent competitive positions 26

3.1 Core product versus product ‘surround’, illustrating the importance of the

3.2 Th e seven ‘rights’ of customer service, showing the main service classifi cations 323.3 Th e constituent parts of total order fulfi lment cycle time 343.4 A conceptual model of service quality: the basic elements 363.5 A conceptual model of service quality: the service gaps 363.6 An overall approach for establishing a customer service strategy 393.7 Diff erent types of customer service study 403.8 Th e advantages and disadvantages of diff erent survey approaches 403.9 Rating table for selected customer service factors 41

viii

3.11 Competitive benchmarking showing opportunities for improving service when comparisons are made with customer requirements and the performance of key competitors 433.12 A practical example of gap analysis 443.13 Th e relationship between the level of service and the cost of providing that

service 453.14 Radar gram showing the perfect order targets and achievements 484.1 Alternative distribution channels for consumer products to retail outlets 514.2 Typical channel of distribution, showing the diff erent physical and trading

4.3 ‘Long’ and ‘short’ distribution channels 574.4 Designing a channel structure – a formalized approach 584.5 Th e percentage share of the 3PL market in certain countries and regions 594.6 Logistics functions outsourced in Europe 2006 605.1 Th e major forces driving logistics 645.2 Fourth-party logistics, showing the main areas of service that could be provided 705.3 Th e diff erent characteristics that distinguish freight exchanges from each other 736.1 Pressures infl uencing logistics systems 846.2 Corporate strategic planning overview 856.3 PEST analysis: external infl uences 866.4 A framework for logistics network design 886.5 Eff ect of product volume to weight ratio on logistics costs 916.6 Eff ect of product value to weight ratio on logistics costs 916.7 Standard product life cycle curve showing growth, maturity and decline 94

7.2 Approach to process design or redesign 1037.3 A typical Pareto curve showing that 20 per cent of products represent

7.4 Relationship mapping: used to identify key departments and their

interrelationships 106

7.7 A time-based map illustrating the order to dispatch process broken down

into value and non-value added time 1087.8 Finding the cause of non-value added time using an Ishikawa diagram 1098.1 Segmentation by throughput and value density 1118.2 Segmentation by demand and supply characteristics 1129.1 Relationship between number of depots (ie storage capacity) and total

9.2 Relationship between the number of depots and total delivery costs 1229.3 Primary transport costs in relation to the number of depots 123

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

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

9.11 Map showing a representation of the demand for diff erent product groups

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 13910.1 Traditional organizational structure showing key logistics functions 14410.2 Functional structure showing logistics activities linked together 14510.3 Traditional silo-based functional organizational structure 14610.4 A customer-facing, process-driven organizational structure 14710.5 Mission management, which acts directly across traditional functional

boundaries 14810.6 Matrix management, which emphasizes both planning and operational

elements 14810.7 Buyer/seller relationships: a single versus a multiple linked approach 14910.8 Th e main types of payment mechanism, showing the relationship between

10.9 Hierarchy of payment schemes in relation to fi nancial incentives 15410.10 Th e extent of supervision required for diff erent payment schemes 15511.1 A bill of requirements for one product 16612.1 Inventory level showing input (order quantity) and output (continuous

demand) 17612.2 Inventory level with safety stock in place 176

12.5 Th e ‘bull whip’ or Forrester eff ect 183

12.8 Th e economic order quantity (EOQ) principle 18512.9 Th e EOQ formula with worked example 186

12.10 Th e moving average method (B) and the exponential smoothing method (A) of forecasting shown working in response to a step change in demand (C) 188

13.2 High inventory levels can hide other supply chain problems 19713.3 An example of a supply chain map showing inventory mapped against time 199

13.5 Th e virtuous circle of time compression 20113.6 Th e Benetton Group: initial quick response system 203

15.1 Typical warehouse functions in a stock-holding warehouse 230

15.3 Typical warehouse functions in a cross-dock warehouse 232

16.2 Counterbalanced fork-lift truck placing goods into a block stack (courtesy of

Linde) 24016.3 Drive-in racking, being served by reach truck (courtesy of Redirack) 24416.4 Push-back racking, being served by reach truck (courtesy of Redirack) 24516.5 Adjustable pallet racking, being served by reach truck (courtesy of Linde) 24716.6 Narrow-aisle truck, with automatic aisle changing (courtesy of FKI Logistex) 24916.7 Pallet live storage (courtesy of Link 51) 25116.8 AS/RS aisle-changing crane (courtesy of FKI Logistex) 253

17.2 Flow racks (courtesy of Link 51) 26017.3 Cutaway drawing of a vertical carousel (courtesy of Kardex) 26117.4 Miniload (courtesy of Jungheinrich) 26317.5 Shuttle-type retrieval system (courtesy of Knapp) 264

18.1 Pick carts, used with voice technology (courtesy of Dematic) 27518.2 Low-level order picking truck (courtesy of Linde) 27518.3 Totes-to-picker system (courtesy of Knapp) 27718.4 A-frame dispenser (courtesy of Knapp) 27918.5 Cross-belt sorter (courtesy of Vanderlande) 28118.6 Pick by light system (courtesy of Vanderlande) 28519.1 Automated loading/unloading system (courtesy of Joloda) 29519.2 Pallet scissor lift tables (courtesy of FKI Logistex) 29519.3 Raised dock loading bays (courtesy of Stertil) 296

20.2 Pareto diagram, for throughput (sales) and inventory 306

xii List of fi gures

20.3 Time profi le of warehouse operations 30720.4 Decision tree to identify possible storage systems 30921.1 Control centre, showing equipment control systems (courtesy of Knapp) 322

21.3 Vehicle appointment scheduling screen of a WMS (courtesy of Manhattan

Associates) 32321.4 Automatic bar code scanning of plastic tote box (courtesy of Swisslog) 32622.1 Freight transport in the main EU-15 by mode 33222.2 Freight transport modal share by country (percentage of tonne kilometres) 332

23.1 One of the locks on the Panama Canal (courtesy of the Panama Canal Authority) 36023.2 Th e Emma Maersk: the largest cellular container vessel in the world, capable of

24.1 Air cargo pallets being loaded on to an air freighter (courtesy of Cargolux) 26924.2 A Cargolux air freighter being loaded through the side door (courtesy of

Cargolux) 37025.1 Spine wagons being loaded by a reach stacker equipped with a grappler

(courtesy of John G Russell (Transport) Ltd) 38325.2 Gantry crane moving ISO containers 38425.3 Reach stacker handling an ISO container 38525.4 Foreign and coastwise unitized traffi c through UK ports: 1995–2005 38625.5 Freight traffi c to and from mainland Europe through the Channel Tunnel:

1995–2005 38926.1 An articulated vehicle comprising a tractor and semi-trailer (courtesy of

refrigerated (courtesy of Mercedes-Benz UK Ltd) 40826.9 A platform or fl at bed rigid vehicle with drop sides, which in this case is fi tted

with its own crane to assist loading and unloading (courtesy of Mercedes-Benz

26.10 A curtain-sided trailer giving ease of access for loading (courtesy of

26.11 A rigid vehicle fi tted with a high cubic capacity body for high volume/low

weight cargo, which in this case are household goods (courtesy of

26.12 A car transporter (courtesy of Mercedes-Benz UK Ltd) 41227.1 Depreciation – straight-line method 42227.2 Th e reducing balance method of depreciation 423

27.4 Vehicle running (variable) costs 42727.5 A comparison of vehicle costs, emphasizing the diff erence in importance of

some of the main road freight vehicle costs 43228.1 Typical road freight transport operations consist of ‘primary’ and ‘secondary’

28.8 Bar charts showing the recommended routes (courtesy of Paragon Soft ware

Systems, www.paragon-soft ware.co.uk) 45729.1 Th e planning and control cycle 466

29.3 Balanced scorecard: typical measurements 46929.4 SCOR: typical performance metric development 47029.5 Integrated supply chain metric framework 471

29.8 Hierarchy of needs showing the diff erent information requirements at the

diff erent levels of an organization 47829.9 Hierarchical structure of a measurement system used by a household goods

30.3 Quality audit for a wines and spirits manufacturer using a contractor 507

xiv List of fi gures

32.1 Continuum of logistics outsourcing, showing some of the range of physical

functions and services that might be outsourced 52132.2 Th e key trade-off s between dedicated and multi-user distribution emphasizing the diff erent cost and service advantages and disadvantages 52632.3 Annual demand, showing that the fl eet should be resourced between average

or average plus 10 to 20 per cent and so some transport should be outsourced

32.5 Critical factors in deciding which 3PL to use 53933.1 Key steps of the contractor selection process 542

33.3 Typical distribution data requirements 54733.4 Th e fi nal stages of contractor selection 553

34.2 Potential pitfalls that might adversely impact the successful implementation

34.3 An overall approach to outsourcing management 56836.1 Carbon dioxide (CO2) emissions by mode: UK 1970–2004 595

List of tables

1.1 Logistics costs as a percentage of sales turnover 11

16.2 Space utilization examples (including location utilization) 25616.3 Palletized storage attributes matrix 25620.1 Examples of fl exible design options 31324.1 Common cargo-carrying aircraft types and their carrying capacities 37127.1 A practical example of whole life costing 43227.2 Typical operating cost breakdown showing the relative cost diff erence for

28.1 Demand data for the FMCG distribution company 45228.2 Major vehicle routeing and scheduling packages 458

30.2 Allocation matrix with costs (all product groups) 50232.1 A breakdown of the broad third party transport types showing some of the

33.1 Example of approach to structured assessment 552

Th e prime objective for writing the fi rst edition of this book was to provide an up-to-date text

at a reasonable cost We also felt that there was a signifi cant gap in the literature for a book that off ered a broad strategic framework as well as a clear and straightforward description of the basic functions and elements related to logistics and distribution

In the second edition of the book, published in 2000, we provided a signifi cant revision of the original text Th e continued high rate of development and change in business and logistics necessitated a third edition, published in 2006, and now this fourth edition, both of which have included some major revisions and some new material

In this fourth edition, we have added a chapter on supply chain segmentation and have nifi cantly developed the content concerning logistics outsourcing with two new chapters Also, the transport element has been expanded to include chapters on maritime, air and rail transport Some of the major revisions include re-writes for the warehousing chapters and we have excluded the chapter on road freight transport legislation because this varies such a lot in diff erent parts of the world

sig-Th e scope of logistics has continued to grow rapidly, and this is refl ected in the content of the book We have included key aspects of supply chain philosophy and practice, but have tried to retain the focus on distribution and logistics that was a feature of the fi rst edition Th e objec-tives of the original book are thus unchanged: to provide a text with both simplicity of style and relevance of context

As with the previous editions of the book, it has not been possible to cover all of the associated functions in the depth that we might have liked Shortage of space has necessitated this com-promise Th us, such elements as manufacturing and pro curement are featured, but only at a fairly superfi cial level and only in-depth when there is a relevant interface with distribution and logistics In addition, it should be noted that we have attempted to refl ect the general prin-ciples of logistics and distribution that can be applied in any country throughout the world Clearly, for some aspects, there are diff erences that can only be generalized with diffi culty Where this is the case we have tended to use the European model or approach as our founda-

xvi

tion, but we have included some international material Within the scope of a book of this size,

it is impractical to cover all issues from a world perspective

Some of the content of the book is based on material that has been developed for the various Master’s courses in logistics and supply chain management at the Cranfi eld Centre for Logis-tics and Supply Chain Management, Cranfi eld School of Management, with which we have been involved at various times We undoubtedly owe our colleagues and our graduates many thanks – and apologies where we have included any of their ideas in the book without directly acknowledging them Other content is drawn from the research that we have undertaken, from company training courses that we have run, from a multitude of consultancy assign-ments and from the managing of logistics operations

Th e logistics industry continues to change radically and to grow in importance Th e quality of logistics managers and staff has also developed with the growth in responsibility and scope that a job in logistics entails We hope, once again, that this book will help in logistics manag-ers’ quest to improve service and reduce cost, as well as keeping them aware of the many dif-ferent facets of logistics and the supply chain It should be of interest to practising managers and supervisors, to candidates undertaking examinations for the various professional insti-tutes, and to undergraduate and graduate students who are reading for degrees in logistics, distribution and supply chain management or where these subjects are an integral part of their course It should also provide strong support for those participating in web-based training in logistics

Th is edition of the book is, once again, divided into six distinct parts, each covering a key subject area in logistics Th ese are:

1 Concepts of logistics and distribution;

2 Planning for logistics;

3 Procurement and inventory decisions;

4 Warehousing and storage;

5 Freight transport;

6 Operational management

Part 1 considers the key concepts of logistics and distribution Th e fi rst chapter of the book vides an introduction to the subject area and some defi nitions are given Th e main elements and functions are reviewed, together with a brief look at the historical development of distri-bution and logistics up to the present day Some statistics are introduced that indicate the importance of logistics to both companies and economies Chapter 2 concentrates on the inte-grated nature of logistics and the supply chain Th e traditional, but still very relevant, total logistics concept is explained, and typical trade-off s are considered A planning hierarchy for

fi nal chapter of this fi rst part of the book reviews some of the main issues and challenges for logistics, from external infl uences to consumer-related developments.

Part 2 covers the ways and means of planning for logistics Chapter 6 begins with an overview

of the strategic planning process and then considers a specifi c logistics design framework Th e next chapter concentrates on one of the main aspects of this design framework – the planning

of logistics processes Th e key logistics processes are described, and then an approach to process design or redesign is proposed Some of the main tools and techniques are explained Chapter 8 is a new chapter that describes the important area of supply chain segmentation

Th is is used to ensure that the many diff erent service and cost needs of the market place are addressed in a coordinated framework In Chapter 9 the planning of physical distribution activities is considered, including the more traditional pastures of depot location decisions A discussion on the role of depots and warehouses is followed by a detailed assessment of the diff erent cost relationships that are fundamental to the physical distribution planning process

A planned approach to designing an appropriate strategy is included

Chapter 10 is concerned with the way in which logistics and distribution are organized within the company Th e relationship with other corporate functions is considered Th e need to develop more process-oriented organizational structures, rather than maintaining the tradi-tional functional perspective, is proposed Th e specifi c role of the logistics and distribution manager is described Some payment schemes and mechanisms that are common to the indus-try are outlined

Th e fi nal chapter in this part of the book is concerned with manufacturing and materials agement Manufacturing is rarely a function that is found directly within the auspices of logis-tics It is, however, a major factor within the broader context of the supply chain and is a principal interface with logistics Th us, some of the key elements in manufacturing and ma-terials management are introduced in this chapter

man-Part 3 concentrates on those issues that are involved with procurement and inven tory

deci-sions Chapter 12 covers basic inventory planning and management Th e reasons for holding stock are considered, and the diff erent types of stock are out lined Th e implications of stock-holding on other logistics functions are described, and the use of diff erent inventory replen-ishment systems is explained Reorder quantity decisions are discussed, and the EOQ method

is outlined Simple de mand forecasting is introduced Chapter 13 describes some of the recent

develop ments in inventory planning, particularly the way that inventory is viewed across the supply chain as a whole Th e important relationship of inventory and time is explored Key advances in inventory planning for manufacturing and for retailing are outlined Th e fi nal chapter in this part covers some of the main principles concerned with procurement Th is is another area within the supply chain that has a signifi cant interface with logistics, so a broad overview of key elements is described.

In Part 4, consideration is given to those factors that are concerned with ware housing and

storage Chapter 15 introduces the main warehousing principles and also provides an outline

of the main warehouse operations Palletized storage and handling systems are considered in Chapter 16 Included here are the principles of storage as well as descriptions of the various types of storage systems and storage equipment that are available Chapter 17 concentrates on the many diff erent non-palletized handling systems and equipment types that are used In Chapter 18, order picking and replenishment are reviewed in some detail Th e main principles

of order picking are explained, and the various order picking methods are outlined

In Chapter 19 another key warehouse function is considered: receiving and dispatch Th e major factors are outlined within the context of overall warehouse operations An approach to warehouse and depot design and layout is described in Chapter 20 Th e methods described here are an essential guide to ensuring that a warehouse or depot is designed to be eff ective in the light of the logistics operation as a whole Chapter 21 explores the operational manage-ment of warehouses, the associated performance measures, and the latest information tech-nology available to support these activities

Part 5 concentrates on those areas of logistics and distribution specifi cally related to freight

transport Chapter 22 considers international logistics and the choice of transport mode

Ini-tially, the relative importance of the diff erent modes is reviewed A simple approach for modal choice selection is then proposed, including operational factors, transport mode characteris-tics, consignment factors and cost and service requirements Finally, there is a brief review of some key aspects of international trade Chapters 23, 24 and 25 provide an overview and description of the major modes of international transport: maritime, air and rail For each of these, the basic infrastructure of the industry is reviewed, together with a variety of other aspects such as equipment, safety, pricing, security and documentation In Chapter 25, the use

of intermodal transport is also discussed

Th e remaining chapters in this part of the book are concerned with aspects of road freight transport Vehicle selection factors are described in Chapter 26 Included here are the main types of vehicle and vehicle body, diff erent operational aspects, and load types and character-istics In Chapter 27, vehicle and fl eet costing is considered Th e main transport costs are indi-cated, and whole life costing is described Th e fi nal chapter of Part 5 of the book, Chapter 28, concentrates on the planning and resourcing of road freight transport operations Th is includes the need for planning, and the important use of vehicle routeing and scheduling to aid this process Th e main objectives of routeing and scheduling are indicated, and the diff erent types

xx Preface

of problem are described Th e basic characteristics of road transport delivery are discussed, and they are related to broad data requirements Examples of both manual and computer routeing and scheduling methods are outlined

Th e fi nal part of the book, Part 6, considers a number of aspects related to the operational

management of logistics and distribution Th is begins with Chapter 29, where cost and mance monitoring of logistics and distribution operations is discussed A description of a formal approach to logistics monitoring and control is outlined Several diff erent means of measurement are introduced, and a number of areas of best practice are considered Examples

perfor-of detailed key performance and cost indicators are given Chapter 30 describes the use perfor-of benchmarking as a major technique for identifying best practice in logistics As well as an overview of benchmarking procedures, a detailed approach to benchmarking distribution activities is outlined Chapter 31 considers the diff erent information systems that can be used

in the supply chain Th ere have been, and continue to be, many major advances in tion communication and technology Th is chapter serves to provide an overview of some of those elements that are particularly important to logistics and the main components of distri-bution

informa-Th e question of whether or not to outsource logistics was introduced in Chapter 4 In Chapter

32 the various operations and services that are off ered by third party companies are reviewed and the main advantages and disadvantages of outsourcing are discussed Th e actual process

of selection is described in Chapter 33, including a step-by-step guide In Chapter 34 the importance of managing an outsourced contract is explained and the key factors required in managing a successful relationship are examined Chapter 35 covers a very important area of responsibility in logistics – that of security and safety Many aspects that are relevant to logis-tics planning and operations are discussed Another important consideration is the impact of logistics operations on the environment Th is is reviewed in Chapter 36

We all hope that this new edition of Th e Handbook of Logistics and Distribution Management

will continue to serve as a useful aid to understanding this wide-ranging and increasingly important business area

Alan Rushton

NB: Th is section is designed to clarify and demystify many of the more common abbreviations and acronyms used in the industry Most, but not all, of these appear in the text Readers may consult this section quite independently

3D three-dimensional

3PL third-party logistics

4D four-directional

4PL fourth-party logistics

ABC activity-based costing

ABC curve Pareto or ABC inventory analysis

ADR Accord Dangereux Routier (European agreement regarding the road

transport of dangerous goods)AFRA average freight rate assessment (system)

AGV automated guided vehicle

AMR Advanced Manifest Regulations

APR adjustable pallet racking

APS advanced planning and scheduling

artic articulated (vehicle)

ASEAN Association of South East Asian Nations

ASME American Society of Mechanical Engineers

ASN advance shipping notice

AS/RS automated storage and retrieval system

ATA Air Transport Association of America

ATP Accord relative aux transports internationaux de denrées périssables

(European agreement regarding the international transport of perishable goods)

AWB air way bill

BAF bunker adjustment factor

B2B business to business

B2C business to consumer

BL bill of lading

xxii Abbreviations

BOM bill of materials

BS British Standard

BSI British Standards Institution

CAD computer-aided design

CAF currency adjustment factor

CASS cargo accounts settlement system

CB truck counterbalanced fork-lift truck

CBFLT counterbalanced fork-lift truck

CBP United States Bureau of Customs and Border Protection

CCTV closed circuit television

CDC central distribution centre

CFR cost and freight

CFS container freight station

CIF cost, insurance, freight

CILT(UK) Th e Chartered Institute of Logistics and Transport (UK)

CIM computer integrated manufacturing; Convention internationale

concernant le transport des marchandises par chemin de fer (European agreement regarding the international transport of goods by rail)CIP carriage and insurance paid to…

CIPD Chartered Institute of Personnel and Development

CIPS Chartered Institute of Purchasing and Supply

CM category management

CMI co-managed inventory

CMR Convention relative au contrat de transport international de marchandises

par route (European convention regarding international transport contracts of goods by road)

CNG compressed natural gas

CO certifi cate of origin

COD cash on delivery

COI cube per order index

CPFR collaborative planning, forecasting and replenishment

CPT carriage paid to

CRM customer relationship management

CRP continuous replenishment programme

CSCMP Council of Supply Chain Management Professionals

CSI Container Security Initiative

CT community transit

C–TPAT Customs–Trade Partnership against Terrorism

DAF delivered at frontier

dB (a) decibel

DC distribution centre

DCF discounted cash fl ow

DCM demand chain management

DDP delivered duty paid

DDU delivered duty unpaid

DEQ delivered ex-quay

DERV diesel-engined road vehicle

DES delivered ex-ship

DfT Department for Transport

DMAIC defi ne, measure, analyse, improve and control

DME dimethyl ether

DPP direct product profi tability

DRP distribution requirements planning

DWT deadweight ton

EAN European article number

EBQ economic batch quantity

EC European Commission

ECR effi cient consumer response

ECS equipment control system

EDI electronic data interchange

EEE electrical and electronic equipment

EFTA European Free Trade Area

ELA European Logistics Association

EOQ economic order quantity

EPOS electronic point of sale

ERP enterprise resource planning

ES exponential smoothing

ETA estimated time of arrival

ETD estimated time of departure

FAS free alongside ship

FAST Free and Secure Trade

FCA free carrier

FCL full container load

FCPA Foreign Corrupt Practices Act (USA)

FCR forwarder’s certifi cate of receipt

FEM Fédération Européenne de la Manutention (European federation of

material handling)

xxiv Abbreviations

FEU forty feet equivalent unit

FG fi nished goods

FGI fi nished goods inventory

FGP factory gate pricing

FIBC fl exible intermediate bulk container

FIFO fi rst in fi rst out

FILO fi rst in last out

FLT fork-lift truck

FMCG fast-moving consumer goods

FMS fl exible manufacturing systems

FOB free on board

FOC fi re offi cer’s committee; free of charge

FOT free on truck

FRES Federation of Recruitment and Employment Services

FTA Freight Transport Association

FTL full truck load

GA general average (maritime shipping insurance)

GATT General Agreement on Tariff s and Trade

GCC Gulf Cooperation Council

GDP gross domestic product

GIS geographic information systems

GMOs genetically modifi ed organisms

GPS global positioning system

GRI general rate increase

GRN goods received note

GSM global system for mobiles

GTIN global trade item number

GVW gross vehicle weight

HAWB house air way bill

HGV heavy goods vehicle

HS harmonised system (customs)

HSE Health and Safety Executive; health, safety and environment

HSWA Health and Safety at Work Act

IATA International Air Transport Association

IBC intermediate bulk container

I2M inbound to manufacturing

ICT information, communication and technology

IGD Institute of Grocery Distribution

IJPDLM International Journal of Physical Distribution and Logistics Management

IMDG International Maritime Dangerous Goods Code

IMF International Monetary Fund

ISO International Standards Organization

IT information technology

ITS intelligent transport system

ITT invitation to tender

IWW inland waterways

JIC just-in-case

JIT just-in-time

KD knocked down (dismantled)

KPI key performance indicator

LC letter of credit

LCL less than container load

LED light-emitting diode

LGV large goods vehicle

LIFO last in fi rst out

LLOP low-level order picking truck

LNG liquefi ed natural gas

LOLO lift on lift off

LPG liquefi ed petroleum gas

LPN license plate number (eg on pallet)

LSP logistics service provider

LTL less than truck load

MAM maximum authorized mass

MAWB master air way bill

MBO management by objectives

MHE materials handling equipment

MIS management information systems

MOU memorandum of understanding

MPG miles per gallon

MPS master production schedule

MRO maintenance, repair and overhaul

MRP materials requirements planning

MRPII manufacturing resource planning

MSDS material safety data sheets

NAFTA North American Free Trade Association

NCPDM National Council of Physical Distribution Management

NDC national distribution centre

NPV net present value

NVOCC non vessel operating common carrier

OCR optical character recognition

OEM original equipment manufacturer

xxvi Abbreviations

OSD over, short, and/or damaged (upon delivery)

OTIF on time in full

P & D pick up and deposit station

PCs personal computers

PEST analysis political, economic, socio-cultural and technological analysisPLC product life cycle

PM particulate matter

POD proof of delivery

POE point (or port) of entry

POS point of sale

PPE personal protective equipment

PPT powered pallet truck

PRC People’s Republic of China

PSI pounds per square inch

PSS peak season surcharge

QA quality assurance

QC quality control

QFD quality function deployment

QR quick response

R & D research and development

RDC regional distribution centre; radio data communicationRDT radio data terminal

RF radio frequency

RFI request for information

RFID radio frequency identifi cation

RFP request for proposal

RFQ request for quotation

RFS road-friendly suspension

RH&D receipt, handling and dispatch

RM raw materials

ROCE return on capital employed

RofW rest of world

ROI return on investment

ROL reorder level

RORO roll on roll off

ROS return on sales

SAD single administrative document

SCEM supply chain event management

SCM supply chain management

SCOR model supply chain operations reference model

SCP supply chain planning

SED shipper’s export declaration

SEM Single European Market

SEMA Storage Equipment Manufacturers’ Association

semi semi-trailer (articulated truck trailer)

SFI Secure Freight Initiative

SKU stock-keeping unit

SLA service level agreement

SLI Shipper’s letter of instruction

SLSC Shipper’s load, stow and count

SOP sales order processing

SOW scope of work

SRM supplier relationship management

SSAP 21 Statement of Standard Accounting Practice 21

STC said to contain

STGO special types general order

SWL safe working load

SWOT strengths, weaknesses, opportunities and threats

tare weight unladen or empty weight

TEU twenty feet equivalent unit

THC terminal handling charge

TIR Transport International Routier (international road transport convention)

TLC total logistics concept

TQM total quality management

TUPE Transfer of Undertakings (Protection of Employment)

ULCC ultra large crude carrier

ULD unit load device

UN/EDIFACT United Nations/Electronic Data Interchange for Administration,

Commerce and TransportUPC universal product code

VAS value added services

VAT value added tax

VIN vehicle identifi cation number

VLCC very large crude carrier

VMI vendor-managed inventory

VNA very narrow aisle

WEEE waste electrical and electronic equipment

WIP work-in-progress

WMS warehouse management system

xxviii

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Part 1

Concepts of logistics and

distribution

2

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Th e appreciation of the scope and importance of logistics and the supply chain has led to a more scientifi c approach being adopted towards the subject Th is approach has been aimed at the overall concept of the logistics function as a whole and also at the individual sub-systems Much of this approach has addressed the need for, and means of, planning logistics and the supply chain, but has also considered some of the major operational issues.

Th is fi rst chapter of the book provides an introduction to some of the very basic aspects of tribution, logistics and the supply chain Initially there is a review of the scope and defi nition

dis-of distribution, logistics and the supply chain Next is a discussion dis-of the key elements that are fundamental to the logistic function A description of the historical growth of distribution and logistics is followed by an assessment of its importance throughout the world Finally, a typical distribution and logistics structure is described and discussed

4 Concepts of logistics and distribution

Scope and defi nition

Parallel to the growth in the importance of distribution, logistics and the supply chain has been the growth in the number of associated names and diff erent defi nitions that are used Some of the diff erent names that have been applied to distribution and logistics include:physical distribution;

and there are several more

Th ere is, realistically, no ‘true’ name or ‘true’ defi nition that should be pedantically applied, because products diff er, companies diff er and systems diff er Logistics is a diverse and dynamic function that has to be fl exible and has to change according to the various constraints and demands imposed upon it and with respect to the environment in which it works

Th ese many terms are used, oft en interchangeably, in literature and in the business world One quite widely accepted defi nition that uses some of these terms also helps to describe one of the key relationships Th is is as follows:

Logistics = Materials management + Distribution

An extension to this idea helps to illustrate that the supply chain covers an even broader scope

of the business area Th is includes the supply of raw materials and components as well as the delivery of products to the fi nal customer Th us:

Supply Chain = Suppliers + Logistics + Customers

Logistics and the supply chain are concerned with physical and information fl ows and storage

from raw material through to the fi nal distribution of the fi nished product Th us, supply and materials management represents the storage and fl ows into and through the production process, while distribution represents the storage and fl ows from the fi nal production point through to the customer or end user Major emphasis is now placed on the importance of information as well as physical fl ows and storage, and an additional and very relevant factor is that of reverse logistics – the fl ow of used products and returnable packaging back through the

system Figure 1.1 illustrates these diff erent elements and fl ows, as well as indicating how some of the associated logistics terminology can be applied.

packaging

distribution centres unitization

finished goods inventory warehouse

customers logistics

Key Physical outbound Process & information Physical inbound/reverse

Figure 1.1 Here is a fl ow representation of logistics – an example for an FMCG

manufacturer

Th e question of the most appropriate defi nition of logistics and its associated namesakes is always an interesting one Th ere are a multitude of defi nitions to be found in textbooks and on the internet A selected few are:

Logistics is the management of all activities which facilitate movement and the ordination of supply and demand in the creation of time and place utility.

co-(Hesket, Glaskowsky and Ivie, 1973)

Logistics is the art and science of managing and controlling the fl ow of goods, energy, information and other resources.

(Wikipedia, 2006)

eff ective forward and reverse fl ow and storage of goods, services and related tion between the point of origin and the point of consumption in order to meet cus- tomer requirements.

informa-(CSCMP, 2006)

6 Concepts of logistics and distribution

Logistics is the positioning of resource at the right time, in the right place, at the right cost, at the right quality.

(Chartered Institute of Logistics and Transport (UK), 2005)

It is interesting to detect the diff erent biases – military, economic, academic, etc An appropriate

modern defi nition that applies to most industry might be that logistics concerns the effi cient transfer of goods from the source of supply through the place of manufacture to the point of con- sumption in a cost-eff ective way whilst providing an acceptable service to the customer Th is focus

on cost-eff ectiveness and customer service will be a point of emphasis throughout this book.For most organizations it is possible to draw up a familiar list of key areas rep resenting the major components of distribution and logistics Th ese will include transport, warehousing, inventory, packaging and information Th is list can be ‘ex ploded’ once again to reveal the detailed aspects within the diff erent components Some typical examples are given in Figure 1.2

Storage, warehousing andmaterials handling

Informationandcontrol

Packagingandunitization

location of warehouses number and size of distribution depots type of storage

materials handling equipment

unit load protective packaging handling systems

design of systems

control procedures

forecasting

what to stock where to stock how much to stock

mode of transport

type of delivery operation

load planning

route schedule

Figure 1.2 Th e key components of distribution and logistics, showing some of the

associated detailed elements

All of these functions and sub-functions need to be planned in a systematic way, in terms both

of their own local environment and of the wider scope of the distribution system as a whole

A number of questions need to be asked and deci sions made Th e diff erent ways of answering these questions and making these decisions will be addressed in the chapters of this book as consideration is given to the planning and operation of the logistics and supply chain func-tion In addition, the total system interrelationships and the constraints of appropriate costs and service levels will be discussed

Historical perspective

Th e elements of logistics and the supply chain have, of course, always been fundamental to the manufacturing, storage and movement of goods and products It is only relatively recently, however, that they have come to be recognized as vital functions within the business and eco-nomic environment Th e role of logistics has changed in that it now plays a major part in the success of many diff erent operations and organizations In essence, the underlying concepts and rationale for logistics are not new Th ey have evolved through several stages of develop-ment, but still use the basic ideas such as trade-off analysis, value chains and systems theory together with their associated techniques

Th ere have been several distinct stages in the development of distribution and logistics

1950s and early 1960s

In this period, distribution systems were unplanned and unformulated Manu facturers factured, retailers retailed, and in some way or other the goods reached the shops Distribu-tion was broadly represented by the haulage industry and manufacturers’ own-account fl eets

manu-Th ere was little positive control and no real liaison between the various distribution-related functions

1960s and early 1970s

In the 1960s and 1970s the concept of physical distribution was developed with the gradual

realization that the ‘dark continent’ was indeed a valid area for managerial involvement Th is consisted of the recognition that there was a series of interrelated physical activities such as transport, storage, materials handling and packaging that could be linked together and managed more eff ectively In particular, there was recognition of a relationship between the various functions, which enabled a systems approach and total cost perspective to be used Under the auspices of a physical distribution manager, a number of distribution trade-off s could be planned and managed to provide both improved service and reduced cost Initially

8 Concepts of logistics and distribution

the benefi ts were recognized by manufacturers who developed distribution operations to refl ect the fl ow of their product through the supply chain

1970s

Th is was an important decade in the development of the distribution concept One major change was the recognition by some companies of the need to include distribution in the func-tional management structure of an organization Th e decade also saw a change in the structure and control of the distribution chain Th ere was a decline in the power of the manufacturers and suppliers, and a marked increase in that of the major retailers Th e larger retail chains developed their own distribution structures, based initially on the concept of regional or local distribution depots to supply their stores

1980s

Fairly rapid cost increases and the clearer defi nition of the true costs of distribution uted to a signifi cant increase in professionalism within distribution With this professionalism came a move towards longer-term planning and attempts to identify and pursue cost-saving measures Th ese measures included centralized distribution, severe reductions in stock-hold-ing and the use of the computer to pro vide improved information and control Th e growth of the third-party distribution service industry was also of major signifi cance, with these compa-nies spearhead ing developments in information and equipment technology Th e concept of and need for integrated logistics systems were recognized by forward-looking companies that participated in distribution activities

contrib-Late 1980s and early 1990s

In the late 1980s and early 1990s, and linked very much to advances in information ogy, organizations began to broaden their perspectives in terms of the functions that could be integrated In short, this covered the combining of materials management (the inbound side) with physical distribution (the outbound side) Th e term ‘logistics’ was used to describe this concept (see Figure 1.1) Once again this led to additional opportunities to improve customer service and reduce the associated costs One major emphasis made during this period was that informational aspects were as important as physical aspects in securing an eff ective logistics strategy

(see Figure 1.1) Th e supply chain concept gave credence to the fact that there may be several diff erent organizations involved in getting a product to the marketplace Th us, for example, manufacturers and retailers should act together in partnership to help create a logistics pipe-line that enables an effi cient and eff ective fl ow of the right products through to the fi nal cus-tomer Th ese partnerships or alliances should also include other intermediaries within the supply chain, such as third-party contractors.

2000 to 2010

Business organizations faced many challenges as they endeavoured to maintain or improve their position against their competitors, bring new products to market and increase the profi t-ability of their operations Th is led to the development of many new ideas for improvement, specifi cally recognized in the redefi nition of business goals and the re-engineering of entire systems

Logistics and the supply chain fi nally became recognized as an area that was key to overall business success Indeed, for many organizations, changes in logistics have provided the cata-lyst for major enhancements to their business Leading organizations recognized that there was a positive ‘value added’ role that logistics could off er, rather than the traditional view that the various functions within logistics were merely a cost burden that had to be minimized regardless of any other implications

Th us, the role and importance of logistics continued to be recognized as a key enabler for ness improvement

busi-2010 and beyond

Th e key future issues to be faced in distribution, logistics and supply chain management are reviewed and discussed in Chapter 5

Importance of logistics and distribution

It is useful, at this point, to consider logistics in the context of business and the economy as a whole Logistics is an important activity making extensive use of the human and material resources that aff ect a national economy Several investigations have been undertaken to try to estimate the extent of the impact of logistics on the economy

Importance in the economy

One such study indicated that about 30 per cent of the working population in the UK are ated with work that is related to logistics Another study undertaken by Armstrong and Associ-

associ-10 Concepts of logistics and distribution

ates (2007) found that, for the main European and North American economies, logistics represents between about 8 per cent and 11 per cent of the gross domestic product of each country For developing countries this range is higher at around 12 per cent to 21 per cent – with India at about 17 per cent and China at 21 per cent Th is is summarized in Figure 1.3 Th ese numbers represent some very substantial costs, and serve to illustrate how important it is to understand the nature of logistics costs and to identify means of keeping these costs to a minimum Countries with the lowest costs are those where there has been a longer recognition of the impor-tance of logistics It is to be expected that the logistics costs of developing countries will decrease over the next few years About 25 years ago, if the same statistics had been available, these per-centage elements would undoubtedly have been a lot higher in all of these countries In the UK, records go back for 25 years, and logistics costs were then around the 18 to 20 per cent mark

Importance of key components

Th e breakdown of the costs of the diff erent elements within logistics has also been addressed

in various surveys One survey of US logistics costs undertaken by Establish/Herbert Davis (2008) indicated that transport was the most important element at 50 per cent, followed by inventory carrying cost (20 per cent), storage/warehousing (also at 20 per cent) customer service/order entry (7 per cent) and administration (3 per cent)

Th is survey also produced a pan-European cost breakdown Th is placed transport at about 40 per cent, warehousing at about 32 per cent, inventory carrying cost at about 18 per cent, cus-tomer service/order entry at about 5 per cent and administration at about 5 per cent of overall costs In both studies the transport cost element of distribution was the major constituent part, particularly due to high fuel costs US transport costs are especially aff ected by this due

to long distances travelled

Germany Japan France U.S.

U.K.

Canada Italy Venezuela Argentina Spain Brazil Mexico India China

Source: Armstrong and Associates (2007)

Figure 1.3 Logistics costs as a percentage of GDP for selected countries

Importance by industry sector

It must be emphasized, however, that the fi gures in the previous section are average ones Th e relative make-up of these costs can vary quite signifi cantly between diff erent companies and, particularly, between diff erent industries Listed in Table 1.1 are some examples of logistics costs from diff erent companies Th ese are taken from an industry cost audit carried out in the

UK by Dialog Consultants Ltd Th ere are some quite major diff erences amongst the results from the various companies One of the main reasons for these cost diff erences is that logistics structures can and do diff er quite dramatically between one company and another, and one industry and another Channels can be short (ie very direct) or long (ie have many intermedi-ate stocking points) Also, channels may be operated by manufacturers, retailers or, as is now becoming increasingly common, specialist third-party distribution companies In the exam-ples shown in Table 1.1, the relative importance of logistics is, of course, measured in relation-ship to the overall value of the particular products in question Cement is a low-cost product (as well as being a very bulky one!), so the relative costs of its logistics are very high Spirits (whisky, gin, etc) are very high-value products, so the relative logistics costs appear very low

Th ese and other associated aspects are discussed in subsequent chapters

A series of studies undertaken by Datamonitor (2008) indicate that the global logistics market (including all in-house and outsourced logistics operations) is dominated by retail logistics services (63.9 per cent) Th is applies globally and is refl ected in all key markets (see Table 1.2)

Th e retail sector has been at the forefront of some of the most advanced and innovative opments in logistics and supply chain thinking

devel-Table 1.1 Logistics costs as a percentage of sales turnover

Cost as Percentage of Turnover Main

Company

Business

Transport Cost

Warehouse/

Depot Cost

Inventory Investment/

Holding Cost

Administration Cost

Overall Logistics Cost