21 C H A P T E R T W O Logistics Chapter Outline The Logistics of Business Is Big and Important The Logistical Value Proposition Service Benefits Cost Minimization Logistics Value Generation The Work of Logistics Order Processing Inventory Transportation Warehousing, Materials Handling, and Packaging Facility Network Design Logistical Operations Inventory Flow Information Flow Logistical Integration Objectives Responsiveness Variance Reduction Inventory Reduction Shipment Consolidation Quality Life Cycle Support Logistical Operating Arrangements Echelon Direct Combined Flexible Structure Supply Chain Synchronization Performance Cycle Structure Performance Cycle Uncertainty Summary No other area of business operations involves the complexity or spans the geography of logistics. All around the globe, 24 hours of every day, 7 days a week, during 52 weeks a year, logistics is concerned with getting products and services where they are needed at the precise time desired. It is difficult to visualize accomplishing any marketing, manufacturing, or international commerce without logistics. Most consumers in highly developed industrial nations take a high level of logistical competency for granted. When they 22 Part One Supply Chain Logistics Management purchase goods—at a retail store, over the telephone, or via the Internet—they expect product delivery will be performed as promised. In fact, their expectation is for timely, error-free logistics every time they order, even during the busiest periods. They have little or no tolerance for failure to perform. Although logistics has been performed since the beginning of civilization, implementing 21st-century best practices is one of the most exciting and challenging operational areas of supply chain management. Because logistics is both old and new, we choose to characterize the rapid change taking place in best practice as a renaissance. Logistics involves the management of order processing, inventory, transportation, and the...