-
28 PART I OverrielV of Logistics
QUESTIONS
1. Assume that you are Frank Johnson's assistant.
and he asks you to look into various scheduling
problems that might occur. List and discuss them.
2. What packaging problems. if any. might there be?
3. Many firms selling consumer goods are concerned
with problems of product liability. Does
the dish offer present any such problems? If so.
what are they? Can they be accommodated?
4. Should the exterior of the Sudsy Soap package
be altered to show what dish it contains'? If so.
who should pay for the extra costs?
5, Assume that you are another one of Johnson's
assistants and your principal responsibility is
managing the inventories of all the firm's inputs,
finished products. packages, and outbound inventories.
What additional work will the dish proposal
cause for you?
6, You are Beever. Your staff has voiced many
objections to the dish tie-in proposal. but you
believe that much of the problem is your staffs
reluctance to try anything innovative. Draft a
message to the dish company that. although not
accepting their proposal. attempts to clarify
points that may be subject to misinterpretation
and also takes into account some of your staffs
legitimate concerns.
CASE 1-2 KIDDIELAND AND THE SUPER GYM
KiddieLand is a retailer of toys located in the
Midwest. Corporate headquarters is in Chicago.
and its 70 stores are located in Minnesota.
Wisconsin. Michigan. Illinois. Indiana. Ohio.
Iowa. and Kentucky. One distribution center is
located in Columbus (for Kentucky. Indiana.
Michigan. and Ohio) and one in Chicago (for
lIlinois, Iowa. Minnesota. and Wisconsin).
KiddieLand markets a full range of toys,
electronic games. computers. and play sets.
Emphasis is on a full line of brand-name products
together with selected items sold under the
KiddieLand brand. KiddieLand's primary competitors
include various regional discount
chains. The keys to KiddieLand's success have
been a comprehensive product line. aggressive
pricing. and self-service.
Donald Hurst is KiddieLand's logistics manager.
He is responsible for managing both distribution
centers. for traffic management. and for
inventory control. Don's primary mission is to
make sure all stores are in stock at all times without
maintaining excessive levels of inventory.
One morning in late January. while Don was
reviewing the new year's merchandising plan. he
discovered that starting in March. KiddieLand
would begin promoting the Super Gym Outdoor
Children's Exercise Center. Don was particularly
interested that the new set would sell for
$715.1n addition. the Super Gym is packaged in
three boxes weighing a total of 450 pounds.
"Holy cow!"' thought Don. "'The largest set we
have sold to date retails for $159 and weighs ", ,
only 125 pounds."
"'There must be some mistake."' thought
Don as he walked down the hall to the office of
Olga Olsen. KiddieLand's buyer for play sets.
Olga was new on her job and was unusually
stressed because both of her assistant buyers ,,
had just resigned to seek employment on the
West Coast.
As soon as Olga saw Don. she exclaimed, ,'.
"'Don. my friend, I have been meaning to talk to
you."' Don knew right then that his worst fears
were confirmed.
The next morning Don and Olga met with
Randy Smith. Don's traffic manager; A. J. Toth,
general manager for KiddieLand's eight Chicago
stores: and Sharon Rabiega. Don's assistant for
distribution services. Because the previous year
had been unusually profitable. everyone was in a
good mood because this year's bonus was 50 percent
larger than last year's.
Nevertheless. A. J. got to the point: "'You
mean to tell me that we expect somebody to
stuff a spouse. three kids, a dog, and 450 pounds
of Super Gym in a small sedan and not have a
conniption?"
Randy chimed in, "Besides, we can't drop
ship Super Gyms from the manufacturer to the
consumer's address because Super Gym ships
only in quantities of 10 or more."
Olga was now worried. "We can't back out
of the Super Gym now." she moaned. "1 have
alreadv committed KiddieLand for 400 sets, and
the spring-summer play set promotion went to
press last week. Besides, I am depending on the
Super Gym to make my gross margin figures."
"What about SCVs'?" asked Toth. "They
make up half the vehicles in our parking lots.
Will the three packages fit inside them?"
By now the scope of the problem had become
apparent to everyone at the meeting. At 3 P.:"!'
Don summarized the alternatives discussed:
1. Purchase a two-wheeled trailer for each
store.
2. Find a local trucking company that can
haul the Super Gym from the KiddieLand
store to the customer.
3. Stock the Super Gym at the two distribution
centers and have the truck that
makes delivery runs to the retail stores
also make home deliveries.
4. Charge for delivery if the customer cannot
get the Super Gym home.
S. Negotiate with the Supcr Gym manufacturer
to ship directly to the customer.
When the meeting adjourned, everyone
agreed to meet the following Monday to discuss
the alternatives. On Thursday morning a recordbreaking
blizzard hit Chicago: everyone went
home early. KiddieLand headquarters was
closed on Friday because of the blizzard. By
Wednesday. the same group met again.
Don started the meeting. "Okay." Don began.
"let's review our options. Sharon. what did you
find out about buying trailers for each store?"
"Well." Sharon began."the best deal I can find
is $L800 per trailer for 70 trailers. plus $250 per
store for an adequate selection of bumper hitches.
and an additional $50 per year per store for licensing
and insurance. Unfortunately. bumpers on the
newest autos cannot accommodate trailer hitches."
CHAPTER I Logistics and the SlIpply Chain 29
"Oh. no." moaned Olga. "we only expect to
sell 5.7 sets per store. 111at means $368 per Super
Gym for delivery:' she continued as she punched
her calculator. "and $147 in lost gross margin!"
Next. Randy Smith summarized the second
option. "SO far we can get delivery within 25
miles of most of our stores for $38.21 per set.
Actually." Randy continued. "$38.21 is for deliverv
25 miles from the store. The rate would be a
little less for under 25 miles and about $1.50 per
mile beyond 25 miles."
A. 1. Toth chimed in. "According to our marketing
research. 85 percent of our customers
drive less than 25 minutes to the store. so a flat
fee of $40 for delivery would probably be okay."
Randy continued. "Most delivery companies
we talked to will deliver twice weekly but
not daily."
Sharon continued. "The motor carrier that
handles shipments from our distribution centers
is a consolidator. He said that squeezing an 18wheeler
into some subdivisions wouldn't make
sense. Every time they try. they knock down a
couple of mailboxes and leave truck tracks in
some homeowner's lawn."
Olga added, "I talked to Super Gym about
shipping direct to the customer's address, and
they said forget it. Whenever they have tried
that." Olga continued, "the customer gets two of
one box and none of another."
"WelL Olga," Don interrupted. "can we
charge the customer for delivery?"
Olga thought a minute. "WelL we have
never done that before. but then we have never
sold a '+SO-pound item before. It sounds like,"
Olga continued. "our choice is to either absorb
$40 per set or charge the customer for delivery:'
"That means $16.000 for delivery." she added.
"One more thing," Don said. "If we charge
for shipping. we must include that in the copy
for the spring-summer brochure."
Olga smiled. "We can make a minor insert in
the copy if we decide to charge for delivery.
However." she continued. "any changes will have
to be made to the page proofs-and page proofs
are due back to the printer next Monday." •
30 PART I Overview of Logistics
QUESTIONS
I. List and discuss the advantages and disadvantages
of purchasing a two-wheeled trailer for
each store to use for delivering Super Gyms.
2. List and discuss the advantages and disadvantages
of having local trucking companies deliver the
Super Gym from the retail stores to the customers.
3. List and discuss the advantages and disadvantages
of stocking Super Gyms at the distribution
centers. and then having the truck that makes
deliveries from the distribution center to the
retail stores also make deliveries of Super Gyms
to individual customers.
..,
4. List and discuss the advantages and disadvantages
of charging customers for home delivery if
they are unable to carry home the Super Gym.
S. Which alternative would you prefer? Why?
6. Draft a brief statement (catalog copy) to be
inserted in the firm"s spring-summer brochure
'.
that clearly explains to potential customers the
policy you recommended in question S.
7. In the first meeting. A. 1. asked about SUYs. but
there was no further mention of them. How
would you follow up on his
APPENDIX
LOGISTICS PROFESSIONAL ORGANIZATIONS
APICS-The Association for
Operations Management
(www.apics.org)
APICS "builds operations management excellence
in individuals and enterprises through superior
education and training. internationally recognized
certifications. comprehensive resources. and
a worldwide network of accomplished industry
professionals." APIeS offers three certification
programs: Certified in Integrated Resource
Management (CIRM). Certified in Production
and Inventory Management (CPIM). and
Certified Supply Chain Professional (CSCP).
American Society of Transportation
and Logistics (AST&.ll (www.astl.org)
AST&L was founded by industry leaders "to
ensure a high level of professionalism and promote
continuing education in the field of
transportation and logistics." It offers one certification
program. Certified in Transportation
and Logistics (CTL). and has added a
new entry-level designation. Professional
Designation in Logistics and Supply Chain
Management (PLS).
Council of Supply Chain
Management Professionals
(www.cscmp.org)
Formerly known as the Council of Logistics
Management. the CSCMP is a nonprofit
professional organization "that helps supply
chain managers connect and collaborate ... and
become more effective professionals."
Delta Nu Alpha (DNA)
(www.deltanualpha. org)
DNA is an "international organization of professional
men and women in all areas and at all
levels of transportation and logistics." Its primary
focus is on education.
International Society of Logistics
(SOLE) (www.sole.org)
The International Society of Logistics. formerly
the Society of Logistics Engineers. is a "non-profit
international professional society composed of
individuals organized to enhance the art and science
of logistics technology. education and management."
It has one certification program:
Certified Professional Logistician (CPL).