978-0134519258 Chapter 1 Solution Manual

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PART II

ANSWERS TO END-OF-CHAPTER QUESTIONS

CHAPTER 1: AN OVERVIEW OF LOGISTICS

1-1. Did it surprise you that logistics has such an important economic impact? Why or why not?

The answer to this question likely depends on the student’s prior exposure to logistics. A typical

student in an undergraduate, introductory logistics course likely has had limited exposure to and

1-2. 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

1-3. 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

1-4. How can a particular logistics system be effective but not efficient?

Effectiveness can be thought of as “how well a company does what it says it’s going to do;” efficiency

focuses on how well (or poorly) company resources are used to achieve what a company promises it

can do. There are a multitude of examples that would illustrate an effective, but inefficient, logistics

1-5. 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

1-6. 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

1-7. 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 capability to implement the tailored logistics approach in the sense that companies

1-8. 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

1-9. What are some ways in which technology has impacted logistics management?

Technological advances have influenced channel design by allowing companies to offer an alternate

distribution channel (or alternate distribution channels) to already existing channels. Technological

advances can also improve the productivity of the order picking process, which traditionally involved

1-10. Explain how big-box retailers are logistical trendsetters.

The logistics practices of big-box retailers are often viewed as barometers for emerging logistics trends.

Big-box retailers have also been trendsetters with respect to environmental and social issues in

1-11. 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 its major functional areas, such as marketing, production,

1-12. Distinguish between materials management and physical distribution.

Materials management refers to the movement and storage of materials into a firm while physical

distribution refers to the storage of finished product and movement to the customer.

1-13. Explain what is meant by the total cost approach to logistics.

The total cost approach to logistics is built on the premise that all relevant activities in moving and

storing products should be considered as a whole (i.e., their total cost) and not individually. Use of the

total cost approach requires an understanding of cost trade-offs. In other words, changes to one

1-14. Define what is meant by a cost trade-off. Do you believe that this concept is workable? Why or

why not?

A cost trade-off acknowledges that changing patterns or activities of distribution will result in some

costs increasing and other costs decreasing. The net effect, however, should be an overall cost decrease

for providing a given level of customer service.

1-15. What are several areas in which finance and logistics might interface?

The finance department is often in charge of capital budgeting decisions that would affect logistics,

such as materials handling and packaging equipment. Another potential area of finance and logistics

interface is with respect to inventory; finance tends to view inventory from a dollar perspective while

1-16. Discuss the postponement concept as it relates to the production and logistics interface.

Postponement refers to the delay of value-added activities such as assembly, production, and packaging

until the latest possible time. Some value-added activities, such as case packing and case labeling, that

1-17. Define what is meant by a landed cost and explain its relevance for pricing decisions.

Landed cost refers to the price of a product at its source plus transportation costs to its destination. On

the one hand, a selling price that is based on a product’s landed cost allows the seller to offer “free”

delivery of the product to prospective customers, because the transportation costs associated with

1-18. Discuss several possible interfaces between marketing and logistics in terms of product decisions.

One interface involves the marked increase in product offerings; marketers like this increase because it

allows for more customer choice, but these additional choices create logistical challenges in terms of

identification, storage, and tracking. Another interface concerns the amount of a particular item (SKU)

Students can also discuss product design and sustainable products.

1-19. Briefly discuss the ownership, negotiations, financing, promotion, and logistics channels.

The ownership channel covers movement of the title to the goods; the goods themselves might not be

physically present or even exist. The negotiations channel is the one in which buy and sell agreements

1-20. Discuss five activities that might be part of a company’s logistics department.

The chapter presents, and briefly describes, 12 separate activities that might be part of a company’s

logistics department. Any 5 of the 12 activities are acceptable for students to discuss.

PART III

CASE SOLUTIONS

CASE 1.1 KIDDIELAND AND THE SUPER GYM

Question 1: List and discuss the advantages and disadvantages of purchasing a two-wheel trailer for

each store to use for delivering the Super Gyms.

Because the stores are in a number of states, one would have to check the motor vehicle and insurance

requirements of each state. An advantage is that deliveries would be under the control of each store. A

Question 2: List and discuss the advantages and disadvantages of having local trucking companies

deliver the Super Gym from the retail stores to the customers.

There are probably no disadvantages to using a local trucking company to make the delivery. However,

a decision about how to handle the trucking firm’s charges would have to be made.

Question 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

One problem focuses on the size of equipment—large tractor–trailer combinations are not suited to

making home deliveries. The actual costs to KiddieLand of using trucks this way might be very high.

Question 4: List and discuss the advantages and disadvantages of charging customers for home

delivery if they are unable to carry home the Super Gym.

Perhaps the one advantage to charging for home delivery is that KiddieLand recoups the associated

Question 5: Which alternative would you prefer? Why?

The student can choose any alternative. However, the text of the case seems to prefer the use of a local

trucking company and charging the customer for home delivery.

Question 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 that is recommended in Question 5.

The brochure is intended for use in all stores, so whatever copy is prepared must be widely applicable.

A sentence might read: “The Super Gym comes unassembled and is packed in three boxes: One weighs

Question 7: At the first meeting, A.J. asked about SUVs, but there was no further mention of them.

How would you follow up on his query?

Anyone in the group could answer that SUVs have more carrying capacity than autos and many also