The handbook of logistics and distribution management pdf

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The handbook of. LOGISTICS and DISTRIBUTION MANAGEMENT 3rd edition. Alan Rushton Phil Croucher Peter Baker The Chartered Institute of Logistics and . THE HANDBOOK. OF LOGISTICS. AND DISTRIBUTION. MANAGEMENT STH EDITION Importance of logistics and distribution 9; Logistics and supply chain. Pre Order Free PDF The Handbook of Logistics and Distribution Management: Understanding the Supply Chain Books Online Original book.

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Importance of logistics and distribution 9; Logistics and supply chain structure 13 logistics 25; Logistics and supply chain management 27; Summary i THE The HANDBOOK OF Handbook of Logistics && Distribution Management MAnAgEMEnt 4th 5thEDItION EDITION EDItED Alan Rushton, by Croucher, Phil. DOWNLOAD PDF. Handbook of Logistics and Distribution Management Handbook of Logistics and Distribution Management Alan Rushton, John Oxley and.

These elements are reviewed in Chapter This is because logistics operations provide the means by which the product can reach the customer or end user, in the appropriate condition and required location. R87 This is because the high value of their goods tends to distort downwards the importance of the respective logistics costs. The key to achieving a successful customer service policy is to develop appropriate objectives through a proper framework that includes liaison with the customer, and then to measure, monitor and control the procedures that have been set up. One of the aims of many service level agreements is to try to achieve OTIF on time in full deliveries — a key objective of many logistics systems.

Published in: Full Name Comment goes here. Are you sure you want to Yes No. Be the first to like this. No Downloads. Views Total views. Actions Shares. Embeds 0 No embeds. No notes for slide. Understanding the Supply Chain 2. It explores all stages of the supply chain from raw materials through 3.

This handbook covers vital areas, including: Understanding the Supply Chain, click button download in the last page 5. You just clipped your first slide! Clipping is a handy way to collect important slides you want to go back to later. Now customize the name of a clipboard to store your clips. Visibility Others can see my Clipboard. Cancel Save. Finally, in this chapter, some of the main developments towards integration are discussed. Customer service is a major aspect within logistics, and this is considered in Chapter 3.


The components of customer service are described, and two models of service quality are introduced. An approach to developing a customer service policy is outlined. Chapter 4 concentrates on channels of distribution — the different types and different structures. A method of channel selection is considered.

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Also, the all-important question is introduced of whether to contract out logistics. The final chapter of this first part of the book reviews some of the main issues and challenges for logistics, from external influences 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 specific logistics design framework. The next chapter concentrates on one of the main aspects of this design framework — the planning of logistics processes. The 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 describes the important area of supply chain segmentation. 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 different cost relation- ships 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. The relationship with other corporate functions is considered. The need to develop more process-oriented organizational structures, rather than maintaining the tradi- tional functional perspective, is proposed. The specific role of the logistics and distribution manager is described. Some payment schemes and mechanisms that are common to the industry are outlined.

Chapter 11 is a new inclusion on multichannel fulfilment. This chapter considers the issues related to the distribution of goods that have been sold through a number of different sales channels. It reflects the challenges that arise for distribution and logistics as a consequence of the variety of new and old channels that are now available. The final chapter in this part of the book, Chapter 12, is concerned with manufacturing and materials management.

Manufacturing is rarely a function that is found directly within the auspices of logistics. It is, however, a major factor within the broader context of the supply chain and is a principal interface with logistics. Thus, some of the key elements in manufacturing and materials management are introduced in this chapter. Part 3 concentrates on those issues that are involved with procurement and inventory decisions. Chapter 13 covers basic inventory planning and management.

The reasons for holding stock are considered, and the different types of stock are outlined. The implications of stockholding on other logistics functions are described, and the use of different inventory replenishment systems is explained. Reorder quantity decisions are discussed, and the EOQ method is outlined. Simple demand forecasting is introduced. The important relationship of inventory and time is explored.

Key advances in inventory planning for manufacturing and for retailing are outlined. The final chapter in this part of the book, Chapter 15, covers some of the main principles concerned with procurement.

In Part 4, consideration is given to those factors that are concerned with warehousing and storage. Chapter 16 introduces the main warehousing principles and also provides an outline of the main warehouse operations. Palletized storage and handling systems are considered in Chapter 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 18 concentrates on the many different non-palletized handling systems and equipment types that are used. In Chapter 19, order picking and replenishment are reviewed in some detail.

The main principles of order picking are explained, and the various order picking methods are outlined. In Chapter 20 another key warehouse function is considered: The major factors are outlined within the context of overall warehouse operations. An approach to warehouse and depot design and layout is described in Chapter The methods described here are an essential guide to ensuring that a warehouse or depot is designed to be effective in the light of the logistics operation as a whole.

Part 5 concentrates on those areas of logistics and distribution specifically related to freight transport. Chapter 23 considers international logistics and the choice of transport mode. Initially, the relative importance of the different modes is reviewed. A simple approach for modal choice selection is then proposed, including operational factors, transport mode characteristics, consignment factors and cost and service requirements. Finally, there is a brief review of some key aspects of international trade.

Chapters 24, 25 and 26 provide an overview and description of the major modes of international transport: 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 26, the use of intermodal transport is also discussed. The remaining chapters in this part of the book are concerned with aspects of road freight transport.

Vehicle selection factors are described in Chapter Included here are the main types of vehicle and vehicle body, different operational aspects, and load types and characteristics. In Chapter 28, vehicle and fleet costing is considered. The main transport costs are indicated, and whole life costing is described. The final chapter of Part 5 of the book, Chapter 29, concentrates on the planning and resourcing of road freight transport operations.

This includes the need for planning, and the important use of vehicle routing and scheduling to aid this process.

The main objectives of routing and scheduling are indicated, and the different types of problem are described.

Examples of both manual and computer routing and scheduling methods are outlined. The final part of the book, Part 6, considers a number of aspects related to the operational management of logistics and distribution. This begins with Chapter 30, where cost and performance monitoring of logistics and distribution operations is discussed. A description of a formal approach to logistics monitoring and control is outlined.

Several different means of measurement are introduced, and a number of areas of best practice are considered. Examples of detailed key performance and cost indicators are given. Chapter 31 describes the use 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 32 considers the different information systems that can be used in the supply chain. There have been, and continue to be, many major advances in informa- tion communication and technology. This chapter serves to provide an overview of some of those elements that are particularly important to logistics and the main components of distribution. The question of whether or not to outsource logistics was introduced in Chapter 4.

In Chapter 33 the various operations and services that are offered by third-party companies are reviewed and the main advantages and disadvantages of outsourcing are discussed. The actual process of selection is described in Chapter 34, including a step-by-step guide. In Chapter 35 the importance of managing an outsourced contract is explained and the key factors required in managing a successful relationship are examined. Chapter 36 covers a very important area of responsibility in logistics — that of security and safety.

Many aspects that are relevant to logistics planning and operations are discussed. Another important consideration is the impact of logistics operations on the environment as well as the environmental regulations that impose on logistics operations.

These elements are reviewed in Chapter The final chapter, Chapter 38, is a new addition that looks at humanitarian logistics.

The Handbook of Logistics and Distribution Management

The chapter provides an overview of humanitarian logistics and highlights some of the main differences between this field and commercial logistics. Once again, we hope that this new edition of The Handbook of Logistics and Distribution Management will continue to serve as a useful aid to understanding this wide-ranging and increasingly important business area. This 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. The main reason that this recognition has only been relatively recent is the nature of logistics itself.

It is a func- tion made up of many sub-functions and many subsystems, each of which has been, and may still be, treated as a distinct management operation. Both the academic and the business world now accept that there is a need to adopt a more holistic view of these different operations in order to take into account how they interrelate and interact with one another.

The appreciation of the scope and importance of logistics and the supply chain has led to a more scientific approach being adopted towards the subject.

This approach has been aimed at the overall concept of the logistics function as a whole but, importantly, includes the interrelationship of the individual subsystems as well. Much of this approach has addressed the need for, and means of, planning logistics and the supply chain, but has necessarily considered some of the major operational issues.

This first chapter of the book provides an introduction to some of the very basic aspects of distribution, logistics and the supply chain. Initially there is a review of the scope and definition of distribution, logistics and the supply chain.

Next is a discussion 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. Amongst the many different names can be found: Every industry has its own characteristics, and for each company in that industry there can be major variations in strategy, size, range of product, market coverage, etc. Logistics is, therefore, a diverse and dynamic function that has to be flexible and has to change according to the various constraints and demands imposed upon it and with respect to the environment in which it works.

Thus, these many different terms are used, often interchangeably, in literature and in the business world. One quite widely respected definition also helps to describe one of the key relationships. This is as follows: This includes the supply of raw materials and components as well as the delivery of products to the final customer.

It should also be noted that logistics and the supply chain are concerned not only with physical flows and storage from raw material through to the final distribution of the finished product, but also with information flows and storage. This shows the key components, the major flows and some of the different logistics terminology importance of information as well as physical flows and storage.

An additional and very rele- vant factor is that of reverse logistics — the flow of used products and returnable packaging back through the system. Figure 1. The question of what is the most appropriate definition of logistics and its associated name- sakes is always an interesting one. There are a multitude of definitions to be found in textbooks and on the internet. A selected few are: Logistics is Hesket, Glaskowsky and Ivie, Logistics is the management of the flow of goods and services between the point of origin and the point of consumption in order to meet the requirements of customers.

Chartered Institute of Logistics and Transport UK , It is interesting to detect the different biases — military, economic, academic, etc. An appropri- ate modern definition that applies to most industry might be that logistics concerns the efficient transfer of goods from the source of supply through the place of manufacture to the point of consumption in a cost-effective way while providing an acceptable service to the customer.

This focus on cost-effectiveness and customer service will be a point of emphasis throughout this book. A more critical consideration of the difference between logistics and the supply chain is given at the end of Chapter 2.

It is developed using some of the ideas that are discussed in that chapter. For most organizations it is possible to draw up a familiar list of key areas representing the major components of distribution and logistics. These will include transport, warehous- ing, inventory, packaging and information.

Some typical examples are given in Figure 1. A number of questions need to be asked and decisions made. The different 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 function.

In addition, the total system interrelationships and the constraints of appropriate costs and service levels will be discussed. Historical perspective The 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 economic environment. The role of logistics has developed such that it now plays a major part in the success of many different operations and organizations. In essence, the underlying concepts and rationale for logistics are not new. They have evolved through several stages of development, but still use the basic ideas such as trade-off analysis, value chains and systems theory together with their associated techniques.

There have been several distinct stages in the development of distribution and logistics. Manufacturers manufactured, retailers retailed, and in some way or other the goods reached the shops.

There was little positive control and no real liaison between the various distribution-related functions. This 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 effectively.

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-offs could be planned and managed to provide both improved service and reduced cost. One major change was the recognition by some companies of the need to include distribution in the functional management structure of an organization.

The decade also saw a change in the structure and control of the distribution chain. There was a decline in the power of the manufacturers and suppliers, and a marked increase in that of the major retailers. The larger retail chains developed their own distribution structures, based initially on the concept of regional or local distribution depots to supply their stores.

With this professionalism came a move towards longer-term planning and attempts to identify and pursue cost-saving measures. These measures included centralized distribution, severe reductions in stockholding and the use of the computer to provide improved information and control. The growth of the third-party distribution service industry was also of major significance, with these companies spearheading developments in information and equip- ment technology.

The concept of and need for integrated logistics systems were recognized by forward-looking companies that participated in distribution activities. Late s and early s In the late s and early s, advances in information technology enabled organizations 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.

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 effective logistics strategy. This became known as supply chain management see Figure 1.

Thus, for example, manufacturers and retailers should act together in partner- ship to help create a logistics pipeline that enables an efficient and effective flow of the right products through to the final customer.

These partnerships or alliances should also include other intermediaries within the supply chain, such as third-party contractors. This led to the develop- ment of many new ideas for improvement, specifically recognized in the redefinition of business goals and the re-engineering of entire systems. Logistics and the supply chain finally became recognized as an area that was key to overall business success. Indeed, for many organizations, changes in logistics have provided the catalyst for major enhancements to their business.

Thus, the role and importance of logistics continued to be recognized as a key enabler for business improvement. 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. Importance in the economy Logistics is an important activity making extensive use of the human and material resources that affect a national economy.

Due to the difficulty of data collection, only a limited number of studies have been undertaken to try to estimate and compare the extent of the impact of logistics on the economy. Indeed, in recent years it has been very difficult to locate a study that provides this information in any detail. A recent study by Capgemini Consulting found that total logistics expenditure as a percentage of sales revenues was the same for the three major trading regions of North America, Europe and Asia-Pacific — at 11 per cent; for Latin America it was 14 per cent.

Another study, undertaken by Armstrong and Associates , was able to present similar data at a country level, which indicated that for major economies logistics represented somewhere between 8 and 21 per cent of the gross domestic product GDP of that country. This information is summarized in Figure 1.

Armstrong and Associates Figure 1. For developing countries this range was higher at around 12 per cent to 21 per cent — with India at about 17 per cent and China at 21 per cent. These 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 generally those where the importance of logistics was recognized relatively early and where there has been time to create more efficient systems. It is to be expected that the logistics costs of developing countries will decrease over the next few years as these countries are able to benefit from improvements. About 25 years ago, if the same statistics had been available, these percentage elements would undoubtedly have been a lot higher in all of these countries.

In the UK, records go back for about 30 years, and logistics costs were then around the 18 to 20 per cent mark. However, since percentage costs have marginally increased.

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This was due to the global financial crisis and the increase in the cost of fuel. A useful discussion paper presented at the International Transport Forum provides some specific figures for the measurement of national level logistics cost and performance for certain individual countries and can be used for further information. Importance of key components The breakdown of the costs of the different elements within logistics has been addressed in various surveys.

The survey also produced a pan-European cost breakdown. In both studies the transport cost element of distribution was the major constituent part, often due to high fuel costs.

US transport costs are especially affected by the long distances travelled, so the transport cost element is markedly higher there than it is in Europe. Importance in industry The statistics described in the previous section are useful to provide a broad perspective on the importance of the relative logistics components. When looking at industry and company level, however, it is essential to be aware that the above costs are average figures taken across a number of companies.

The relative make-up of these costs can vary quite significantly between different industries. Listed in Table 1. There are some quite major variations amongst the results from the various companies and there can be a number of reasons for this. One of the main reasons for these cost differences is that logistics structures can and do differ quite dramatically between one company and another, and one industry and another.

Channels can be short ie very direct or long ie have many intermediate stocking points. Supply chains may be operated by different players: For example, cement is a low-cost product as well as being a very bulky one! Spirits whisky, gin, etc are very high-value products, so the relative logistics costs appear very low. This is principally because large companies can benefit from economies of scale.

This is because the high value of their goods tends to distort downwards the importance of the respective logistics costs. These and other associated aspects are discussed in subsequent chapters. A series of studies undertaken by Datamonitor indicate that the global logistics market including all in-house and outsourced logistics operations is dominated by retail logistics services This applies globally and is reflected in all key markets see Table 1.

The retail sector has been at the forefront of some of the most advanced and innovative devel- opments in logistics and supply chain thinking. Table 1. The fundamental characteristics of a physical distribution structure, illustrated in the first part of Figure 1. This flow is usually some form of transportation of the product.

The stationary periods are usually for storage or to allow some change to the product to take place — manufacture, assembly, packing, break-bulk, etc. This simple physical flow consists of the different types of transport primary, local delivery, etc and stationary functions production, finished goods inventory, etc. The importance of this distribution or logistical cost to the final cost of the product has already been highlighted. As has been noted, it can vary according to the sophistication of the distribution system used and the intrinsic value of the product itself.

This is a more positive view of logistics and is a useful way of assessing the real contribution and importance of logistics and distribution services. The added value element varies considerably from one product to another. Summary In this initial chapter, a number of concepts and ideas have been introduced. These will be expanded in subsequent chapters of the book. The rather confusing number of associated names and different definitions was indicated, and a few of the very many definitions were considered.

The recent history of distribution, logistics and the supply chain was outlined, and a series of statistics served to illustrate how important logistics and the supply chain are to the economy in general and to individual companies. The breakdown between the constituent parts of distribution and logistics was given. The basic structure of the supply chain was described, and the concepts of material and information flow and the added value of logistics were introduced.

It was shown that the various logistics and supply chain functions are part of a flow process operating across many business areas. In this chapter, the emphasis is on the integration of the various logistics components into a complete working structure that enables the overall system to run at the optimum.

Some key aspects of planning for logistics are reviewed, and the financial impact that logistics has in a business is described. Finally, a number of key developments in logistics thinking are put forward, including the impact of the globalization of many companies, integrated planning systems, the use of logistics to help create competitive advantage and the development of supply chain management.

The total logistics concept The total logistics concept TLC aims to treat the many different elements that come under the broad category of distribution and logistics as one single integrated system. Thus, the total system should be considered and not just an individual element or subsystem in isolation.

An understanding of the concept is especially important when planning for any aspect of distribution and logistics. A simple, practical example helps to emphasize the point: These boxes are packed on to wooden pallets that are used as the basic unit load in the warehouse and in the transport vehicles for delivery to customers. A study indicates that the cardboard box is an unnecessary cost because it does not provide any significant additional protection to the quite robust plastic toys and it does not appear to offer any significant marketing advantage.

Distribution and logistics the management pdf of handbook

Thus, the box is discarded, lowering the unit cost of the toy and so providing a potential advantage in the marketplace. One unforeseen result, however, is that the toys, without their boxes, cannot be stacked on to wooden pallets, because they are unstable, but must be stored and moved instead in special trays. These trays are totally different to the unit load that is currently used in the warehouse and on the vehicles ie the wooden pallet.

The additional cost penalty in providing special trays and catering for another type of unit load for storage and delivery is a high one — much higher than the savings made on the product packaging. This example illustrates a classic case of sub-optimization in a logistics system. It shows that if the concept of total logistics is ignored, this can be a significant cost to a company.

As the product packaging costs have been reduced, those concerned with this company function will feel that they have done their job well. However, the overall effect on the total logistics cost is, in fact, a negative one. The company is better served by disregarding this potential saving on packaging, because the additional warehouse and transport costs mean that total costs increase.

This simple example of sub-optimization emphasizes the importance of understanding the interrelationships of the different logistics elements. A more positive action would be to measure and interpret these and other interrelationships using a planned approach to identi- fying and determining any cost trade-offs.

This approach will be a benefit to the logistics system as a whole. Such a trade-off may entail additional cost in one function but will provide a greater cost saving in another. The overall achievement will be a net gain to the system.

Free PDF The Handbook of Logistics and Distribution Management: Under…

This type of trade-off analysis is an important part of planning for logistics. Four different levels of trade-off can be identified: Within logistics components: One example would be the decision to use random storage locations compared to fixed storage locations in a depot. The first of these provides better storage utilization but is more difficult for picking; the second is easier for picking but does not provide such good storage utilization. Between logistics components: To reverse the earlier packaging example, a company might increase the strength and thus the cost of packaging but find greater savings through improve- ments in the warehousing and storage of the product ie block stacking rather than a requirement for racking.

Between company functions: This is illustrated in Figure 2. One example is the trade-off between optimizing production run lengths and the associ- ated warehousing costs of storing the finished product. Long production runs produce lower unit costs and thus more cost-effective production but mean that more product must be stored for a longer period which is less cost-effective for warehousing.

Between the company and external organizations: These types of trade-offs are thus at the heart of the total logistics concept. For the planning of distribution and logistics, it is important to take this overall view of a logistics system and its costs. The other side of the equation is, of course, the need to provide the service level that is required by the customer. This balance of total logistics cost and customer service level is essential to successful logistics.

In this section, the various planning horizons with their associated logistics decisions are described. In Chapter 6, a more formalized planning framework will be discussed.

This will be developed in subsequent chapters into a more practical and detailed approach to logistics planning. Planning should be undertaken according to a certain hierarchy that reflects different planning time horizons. These are generally classified as strategic, tactical and operational. They are represented on the left side of Figure 2. There is an overlap between the different levels, which emphasizes that there are some factors that can be considered at different stages in this planning hierarchy.

The relative importance of these various elements can differ between one company and another. For example, the choice of transport mode might be a strategic decision for a company that is setting up a new global logistics operation, but might just be a tactical decision for another company that is principally a supplier to a locally based market and only occasionally exports over long distances.

Choice of transport mode could even be an initial strategic decision and also a subsequent tactical decision for a single company. Both of these different elements are essential to the running of an effective and efficient logistics operation.

Handbook of Logistics and Distribution Management, 2nd edition

One way to envisage the difference between these two concepts is as follows: Most elements need to be planned correctly in the first place, and then subsequently they need to be monitored and controlled to ensure that the operation is running as well as it should be.

The practical means of monitoring and controlling logistics are described in Chapter Some of the major aspects and differences between the three time horizons are summarized in Figure 2. The importance and relevance of these different aspects will, of course, vary according to the type and scale of business, product, etc.

It is helpful to be aware of the plan- ning horizon and the associated implications for each major decision that is made. As already indicated, these may vary from one company to another and from one operation to another. Some of these — in no particular order — are as indicated in Figure 2. In addition, they underline the need for appropriate planning and control.

Distribution and logistics are not merely the transportation of goods from one storage point to another. There are many and varied elements that go together to produce an effective distribution and logistics operation.

These elements interrelate, and they need to be planned over suitable time horizons. The planning and control of an operation can also be described within the context of a broader planning cycle.

This emphasizes the need for a systematic approach, where continual review takes place. This is a particularly important concept in logistics, because most operations need to be highly dynamic — they are subject to continual change, as both demand and supply of goods and products regularly vary according to changes in customer requirements for new products and better product availability.

One example of a fairly common framework is shown as the planning and control cycle in Figure 2. The key stages in the cycle are as follows: This might be through a regular information feedback procedure or through the use of a specific logistics or distribution audit. The second stage is to determine the objectives of the logistics process, to identify what the operation should be trying to achieve. These objectives need to be related to such elements as customer service requirements, marketing decisions, etc.

The third stage in the cycle is the planning process that spans the strategic and operational levels previously discussed.

Finally, there is a need for monitoring and control procedures to measure the effective- ness of the distribution operation compared to the plan. This should be undertaken on a regular weekly, monthly and annual basis. Where are we now? This allows for the dynamic nature of logistics, the need for continual review and revision of plans, policies and operations.

This must be undertaken within a positive planning framework in order to ensure that continuity and progress are maintained. Logistics has traditionally been seen as an operational necessity that cannot be avoided; however, a good logistics operation can also offer opportunities for improving financial performance.

For improved business performance, this ratio needs to be shifted to increase profits and reduce capital employed. There are many different ways in which logistics can have both a positive and a negative impact on the ROI.

These are outlined in Figure 2. This shows ROI as the key ratio of profit and capital employed, with the main elements broken down further as sales revenue less cost representing profit and inventory plus cash and receivables plus fixed assets representing capital employed. One of the aims of many service level agreements is to try to achieve OTIF on time in full deliveries — a key objective of many logistics systems.

On the other hand, costs can be minimized through efficient logistics operations. There are a number of ways that this might happen, including: For example, there are many different types of inventory held by companies, including raw materials, components, work-in-progress and finished goods.

The key logistics functions impact very significantly on the stock levels of all of these. This impact can occur with respect to stock location, inventory control, stockholding policies, order and reorder quantities and integrated systems, amongst others. Cash and receivables are influenced by cash-to-cash and order cycle times — both of these being key logistics processes. Finally, there are many fixed assets to be found in logistics operations: