Chapter 1  •  An Overview of Logistics

37

Suggested Readings
Day, Jamison M., Steven A. Melnyk, Paul D. Larson, Edward W. Davis, Perego, Alessandro, Sara Perotti, and Ricardo Mangiarcina. “ICT for
and D. Clay Whybark. “Humanitarian and Disaster Relief Supply Logistics and Freight Transportation: A Literature Review and
Chains: A Matter of Life and Death.” Journal of Supply Chain Man- Research Agenda.” International Journal of Physical Distribution &
agement 48, no. 2 (2012): 21–36. Logistics Management 41, no. 5 (2011): 457–483.
Fawcett, Stanley E. and Matthew A. Waller. “Designing the Supply Ravi, V. and Ravi Shankar. “Survey of Reverse Logistics Practices in
Chain for Success at the Bottom of the Pyramid.” Journal of Busi- Manufacturing Industries: An Indian Context.” Benchmarking: An
ness Logistics 36, no. 3 (2015): 233–239. International Journal 22, no. 5 (2015): 874–899.
Lin, Yong, Saara Pekkarinan, and Shihua Ma. “Service-Dominant Stank, Theodore, Chad Autry, Patricia Daugherty, and David Closs.
Logic for Managing the Logistics-Manufacturing Interface: A “Reimagining the 10 Megatrends That Will Revolutionize Supply
Case Study.” International Journal of Logistics Management 26, no. 3 Chain Logistics.” Transportation Journal 54, no. 1 (2015): 7–32.
(2015): 195–214. Tan, Vinh V. “Competency Requirements for Professionals in Logis-
Lutz, Heather and Laura Birou. “Logistics Education: A Look at the tics and Supply Chain Management.” International Journal of Logis-
Current State of the Art and Science.” Supply Chain Management: An tics: Research and Applications 15, no. 2 (2012): 109–126.
International Journal 18, no. 4 (2013): 455–467. Winter, Marc and A. Michael Knemeyer. “Exploring the Integration
McGinnis, Michael A., Jonathan W. Kohn, and John E. Spillan. “A of Sustainability and Supply Chain Management: Current State
Longitudinal Study of Logistics Strategy: 1990–2008.” Journal of and Opportunities for Future Inquiry.” International Journal of Physi-
Business Logistics 31, no. 1 (2010): 217–235. cal Distribution & Logistics Management 43, no. 1 (2013): 18–38.

CASE
CASE 1.1  KIDDIELAND AND THE SUPER GYM
KiddieLand is a retailer of toys located in the Midwest. One morning in late January, while Don was review-
Corporate headquarters is in Chicago, and its 70 stores are ing the new year’s merchandising plan, he discovered that
located in Minnesota, Wisconsin, Michigan, Illinois, Indi- starting in March, KiddieLand would begin promoting the
ana, Ohio, Iowa, and Kentucky. One distribution center Super Gym Outdoor Children’s Exercise Center. Don was
is located in Columbus (for Kentucky, Indiana, Michigan, particularly interested that the new set would sell for $715.
and Ohio) and one in Chicago (for Illinois, Iowa, Minne- In addition, the Super Gym is packaged in three boxes
sota, and Wisconsin). weighing a total of 450 pounds. “Holy cow!” thought Don.
KiddieLand markets a full range of toys, electronic “The largest set we have sold to date retails for $159 and
games, computers, and play sets. Emphasis is on a full line weighs only 125 pounds.”
of brand-name products together with selected items sold “There must be some mistake,” thought Don as he
under the KiddieLand brand. KiddieLand’s primary com- walked down the hall to the office of Olga Olsen, Kid-
petitors include various regional discount chains. A com- dieLand’s buyer for play sets. Olga was new to her job and
prehensive product line, aggressive pricing, and ­self-service was unusually stressed because both of her assistant buyers
have been key to KiiddieLand’s success. had just resigned to seek employment on the West Coast.
Donald Hurst is KiddieLand’s logistics manager. He As soon as Olga saw Don, she exclaimed, “Don, my
is responsible for managing both distribution centers, for friend, I have been meaning to talk to you.” Don knew
transportation management, and for inventory control. right then that his worst fears were confirmed.
Don’s primary mission is to make sure all stores are in The next morning Don and Olga met with Randy
stock at all times without maintaining excessive levels of Smith, Don’s transportation manager; A. J. Toth, ­general
inventory. manager for KiddieLand’s eight Chicago stores; and ­Sharon
(continued  )
38 Part I  •  Overview of Logistics

Rabiega, Don’s assistant for distribution services. Because adequate selection of bumper hitches, and an additional
the previous year had been unusually profitable, everyone $50 per year per store for licensing and insurance. Unfortu-
was in a good mood because this year’s bonus was 50 per- nately, bumpers on the newest autos cannot accommodate
cent larger than last year’s. trailer hitches.”
Nevertheless, A. J. got to the point: “You mean to “Oh, no,” moaned Olga, “we only expect to sell 5.7
tell me that we expect somebody to stuff a spouse, three sets per store. That means $368 per Super Gym for de-
kids, a dog, and 450 pounds of Super Gym in a small sedan livery,” she continued as she punched her calculator, “and
and not have a conniption?” $147 in lost gross margin!”
Randy chimed in, “Besides, we can’t drop ship Su- Next, Randy Smith summarized the second option.
per Gyms from the manufacturer to the consumer’s ad- “So far we can get delivery within 25 miles of most of
dress because Super Gym ships only in quantities of 10 our stores for $38.21 per set. Actually,” Randy continued,
or more.” “$38.21 is for delivery 25 miles from the store. The rate
Olga was now worried. “We can’t back out of the would be a little less for under 25 miles and about $1.50 per
Super Gym now,” she moaned. “I have already committed mile beyond 25 miles.”
KiddieLand for 400 sets, and the spring–summer play set A. J. Toth chimed in, “According to our marketing
promotion went to press last week. Besides, I am depend- research, 85 percent of our customers drive less than 25
ing on the Super Gym to make my gross margin figures.” minutes to the store, so a flat fee of $40 for delivery would
“What about SUVs?” asked Toth. “They make up probably be okay.”
half the vehicles in our parking lots. Will the three pack- Randy continued, “Most delivery companies we talk-
ages fit inside them?” ed to will deliver twice weekly but not daily.”
By now the scope of the problem had become ap- Sharon continued, “The motor carrier that handles
parent to everyone at the meeting. At 3 p.m. Don summa- shipments from our distribution centers is a consolidator.
rized the alternatives discussed: He said that squeezing an 18-wheeler into some subdivi-
sions wouldn’t make sense. Every time they try, they knock
1. Purchase a two-wheel trailer for each store.
down a couple of mailboxes and leave truck tracks in some
2. Find a local trucking company that can haul the
homeowner’s lawn.”
Super Gym from the KiddieLand store to the
Olga added, “I talked to Super Gym about shipping
customer.
direct to the customer’s address, and they said forget it.
3. Stock the Super Gym at the two distribution centers
Whenever they have tried that,” Olga continued, “the cus-
and have the truck that makes delivery runs to the
tomer gets two of one box and none of another.”
retail stores also make home deliveries.
“Well, Olga,” Don interrupted, “can we charge the
4. Charge for delivery if the customer cannot get the
customer for delivery?”
Super Gym home.
Olga thought a minute. “Well, we have never done
5. Negotiate with the Super Gym manufacturer to
that before, but then we have never sold a 450-pound item
ship directly to the customer.
before. It sounds like,” Olga continued, “our choice is to
Everyone agreed to meet the following Monday either absorb $40 per set or charge the customer for de-
to discuss the alternatives. On Sunday evening a record- livery.”
breaking blizzard hit Chicago. KiddieLand headquarters “That means $16,000 for delivery,” she added.
was closed Monday and Tuesday because of the blizzard. “One more thing,” Don said. “If we charge for ship-
The group finally met again on Wednesday. ping, we must include that in the copy for the spring–sum-
Don started the meeting. “Okay,” Don began, “let’s mer brochure.”
review our options. Sharon, what did you find out about Olga smiled. “We can make a minor insert in the copy
buying trailers for each store?” if we decide to charge for delivery. However,” she contin-
“Well,” Sharon began, “the best deal I can find is ued, “any changes will have to be made to the page proofs—
$1,800 per trailer for 70 trailers, plus $250 per store for an and page proofs are due back to the printer next Monday.”
 Chapter 1  •  An Overview of Logistics 39

QUESTIONS 4. List and discuss the advantages and disadvantages of charg-

ing customers for home delivery if they are unable to carry
1. List and discuss the advantages and disadvantages of pur- home the Super Gym.
chasing a two-wheel trailer for each store to use for deliver- 5. Which alternative would you prefer? Why?
ing the Super Gyms. 6. Draft a brief statement (catalog copy) to be inserted in
2. List and discuss the advantages and disadvantages of having the firm’s spring–summer brochure that clearly explains to
local trucking companies deliver the Super Gym from the potential customers the policy you recommended in ques-
retail stores to the customers. tion 5.
3. List and discuss the advantages and disadvantages of stock- 7. At the first meeting, A. J. asked about SUVs, but there was
ing Super Gyms at the distribution centers and then having no further mention of them. How would you follow up on
the truck that makes deliveries from the distribution center his query?
to the retail stores also make deliveries of Super Gyms to
individual customers.