PART II
ANSWERS TO END-OF-CHAPTER QUESTIONS
CHAPTER 1: AN OVERVIEW OF LOGISTICS
1. Did it surprise you that logistics can be such an important component in a country’s
economic system? Why or why not?
The answer to this question likely depends on a student’s prior exposure to logistics.
A “typical” student in an undergraduate basic logistics course likely has had limited
exposure to and knowledge about logistics and thus would likely be unaware as to
logistics’ impact on a country’s economic system. As such, she/he might be
pleasantly surprised to learn that logistics often accounts for at least 10% of a
country’s GDP and also is important for economic growth and development.
1. Distinguish between possession, form, time, and place utility.
Possession utility refers to the value or usefulness that comes from a customer
being able to take possession of a product and can be influenced by the relevant
payment terms. Form utility refers to a product’s being in a form that (1) can be
used by the customer and (2) is of value to the customer. Time utility refers to
having products available when they are needed by customers while place utility
refers to having products available where they are needed by customers.
2. How does logistics contribute to time and place utility?
Logistics contributes to time utility by recognizing that different products have
different sensitivities to time. For example, a three-day late delivery of bananas
likely has more serious consequences than a three-day late delivery of a box of
pencils. As for place utility, logistics facilitates products being moved from points of
lesser value to points of greater value.
,3. How can a particular logistics system be effective but not efficient?
Effectiveness can be thought of as “how well a company does what they say they’re
going to do;” efficiency focuses on how well (or poorly) company resources are used
to achieve what a company promises they can do. There are a multitude of examples
that would illustrate an effective, but not efficient, logistics system. For example,
some companies routinely use premium and/or expedited transportation—which
increase transportation costs—to meet customer delivery requirements. As such,
the company could be considered effective (meeting delivery deadlines) but
perhaps not efficient (increased transportation costs).
4. Explain the significance of the fact that the purpose of logistics is to meet customer
requirements.
One reason for this significance is that meeting customer requirements means that
companies must know—rather than assume—customer needs and wants. This
knowledge is facilitated by communication between companies and their customers.
Even today some companies are hesitant to communicate with customers. In
addition, meeting customer requirements means that a “one size fits all” approach
to logistics will result in some customers being overserved and others being
underserved. As a result, companies should consider a “tailored logistics” approach,
where groups of customers with similar logistical needs and wants are provided
with the appropriate logistical services.
5. Explain how an understanding of logistics management could be relevant to your
favorite charitable organization.
There are any number of examples that can be used. The textbook mentions the
Food Bank of New York City; from a logistical perspective, the Food Bank of New
York City is responsible for collecting, sorting, repacking, and distributing food from
its 90,000 square-foot warehouse. (The instructor could also look at the logistical
aspects associated with responses to natural disasters, such as earthquakes and
tsunamis.)
,6. How has a reduction in economic regulation contributed to the increased importance of
logistics?
Reductions in economic regulation in the United States allowed individual carriers
flexibility in pricing and service, and this flexibility was important to logistics for
several reasons. First, it provided companies with the ability to implement the
tailored logistics approach in the sense that companies could specify different
logistics service levels and prices could be adjusted accordingly. Second, the
increased pricing flexibility allowed large buyers of transportation services to
reduce their transportation costs by leveraging large amounts of freight with a
limited number of carriers.
, 7. Discuss the logistical implications associated with the increased emphasis on the
convenience associated with a family’s shopping experience.
This convenience is manifested in various ways to include extended store hours,
home delivery of purchased items, and ready-to-eat-ready-to-cook foods. From a
logistics perspective, extended store hours force retailers to address issues such as
the optimal delivery times for replenishment trucks and when to replenish
merchandise. A logistical challenge with home delivery is the coordination of
delivery times with the purchaser’s ability to receive the item(s). Finally, ready-to-
eat-ready-to-cook foods have different packaging requirements, such as reusable
bags.
8. Explain how power retailers are logistical trendsetters.
The logistics practices of power retailers are often viewed as barometers for
emerging logistics trends. In the 1990s, for example, Wal-Mart and Warner-
Lambert were the first two companies to explore collaborative planning,
forecasting, and replenishment (CPFR). Power retailers have also been logistical
trendsetters with respect to focusing on inventory turnover (the number of times
inventory sells in one year); suppliers are forced to be more efficient in the sense
that they should focus on providing the products that will be bought by consumers.
9. What is the systems approach to problem solving? How is this concept applicable to
logistics management?
The systems approach to problem solving suggests that a company’s objectives can
be realized by recognizing the mutual interdependence of the major functional areas
such as marketing, production, finance, and logistics. As such, decisions made by one
functional area can have important implications for the other functional areas. With
respect to logistics, the systems approach suggests that one should recognize the
mutual interdependence of the various activities that constitute the logistics
function. Thus, a transportation decision may impact inventory, warehousing, and
packaging, among others.
10. Distinguish between materials management and physical distribution.
ANSWERS TO END-OF-CHAPTER QUESTIONS
CHAPTER 1: AN OVERVIEW OF LOGISTICS
1. Did it surprise you that logistics can be such an important component in a country’s
economic system? Why or why not?
The answer to this question likely depends on a student’s prior exposure to logistics.
A “typical” student in an undergraduate basic logistics course likely has had limited
exposure to and knowledge about logistics and thus would likely be unaware as to
logistics’ impact on a country’s economic system. As such, she/he might be
pleasantly surprised to learn that logistics often accounts for at least 10% of a
country’s GDP and also is important for economic growth and development.
1. Distinguish between possession, form, time, and place utility.
Possession utility refers to the value or usefulness that comes from a customer
being able to take possession of a product and can be influenced by the relevant
payment terms. Form utility refers to a product’s being in a form that (1) can be
used by the customer and (2) is of value to the customer. Time utility refers to
having products available when they are needed by customers while place utility
refers to having products available where they are needed by customers.
2. How does logistics contribute to time and place utility?
Logistics contributes to time utility by recognizing that different products have
different sensitivities to time. For example, a three-day late delivery of bananas
likely has more serious consequences than a three-day late delivery of a box of
pencils. As for place utility, logistics facilitates products being moved from points of
lesser value to points of greater value.
,3. How can a particular logistics system be effective but not efficient?
Effectiveness can be thought of as “how well a company does what they say they’re
going to do;” efficiency focuses on how well (or poorly) company resources are used
to achieve what a company promises they can do. There are a multitude of examples
that would illustrate an effective, but not efficient, logistics system. For example,
some companies routinely use premium and/or expedited transportation—which
increase transportation costs—to meet customer delivery requirements. As such,
the company could be considered effective (meeting delivery deadlines) but
perhaps not efficient (increased transportation costs).
4. Explain the significance of the fact that the purpose of logistics is to meet customer
requirements.
One reason for this significance is that meeting customer requirements means that
companies must know—rather than assume—customer needs and wants. This
knowledge is facilitated by communication between companies and their customers.
Even today some companies are hesitant to communicate with customers. In
addition, meeting customer requirements means that a “one size fits all” approach
to logistics will result in some customers being overserved and others being
underserved. As a result, companies should consider a “tailored logistics” approach,
where groups of customers with similar logistical needs and wants are provided
with the appropriate logistical services.
5. Explain how an understanding of logistics management could be relevant to your
favorite charitable organization.
There are any number of examples that can be used. The textbook mentions the
Food Bank of New York City; from a logistical perspective, the Food Bank of New
York City is responsible for collecting, sorting, repacking, and distributing food from
its 90,000 square-foot warehouse. (The instructor could also look at the logistical
aspects associated with responses to natural disasters, such as earthquakes and
tsunamis.)
,6. How has a reduction in economic regulation contributed to the increased importance of
logistics?
Reductions in economic regulation in the United States allowed individual carriers
flexibility in pricing and service, and this flexibility was important to logistics for
several reasons. First, it provided companies with the ability to implement the
tailored logistics approach in the sense that companies could specify different
logistics service levels and prices could be adjusted accordingly. Second, the
increased pricing flexibility allowed large buyers of transportation services to
reduce their transportation costs by leveraging large amounts of freight with a
limited number of carriers.
, 7. Discuss the logistical implications associated with the increased emphasis on the
convenience associated with a family’s shopping experience.
This convenience is manifested in various ways to include extended store hours,
home delivery of purchased items, and ready-to-eat-ready-to-cook foods. From a
logistics perspective, extended store hours force retailers to address issues such as
the optimal delivery times for replenishment trucks and when to replenish
merchandise. A logistical challenge with home delivery is the coordination of
delivery times with the purchaser’s ability to receive the item(s). Finally, ready-to-
eat-ready-to-cook foods have different packaging requirements, such as reusable
bags.
8. Explain how power retailers are logistical trendsetters.
The logistics practices of power retailers are often viewed as barometers for
emerging logistics trends. In the 1990s, for example, Wal-Mart and Warner-
Lambert were the first two companies to explore collaborative planning,
forecasting, and replenishment (CPFR). Power retailers have also been logistical
trendsetters with respect to focusing on inventory turnover (the number of times
inventory sells in one year); suppliers are forced to be more efficient in the sense
that they should focus on providing the products that will be bought by consumers.
9. What is the systems approach to problem solving? How is this concept applicable to
logistics management?
The systems approach to problem solving suggests that a company’s objectives can
be realized by recognizing the mutual interdependence of the major functional areas
such as marketing, production, finance, and logistics. As such, decisions made by one
functional area can have important implications for the other functional areas. With
respect to logistics, the systems approach suggests that one should recognize the
mutual interdependence of the various activities that constitute the logistics
function. Thus, a transportation decision may impact inventory, warehousing, and
packaging, among others.
10. Distinguish between materials management and physical distribution.
