ANSWERS TO END-OF-CHAPTER QUESTIONS
CHAPTER 1: LOGISTICS AND THE SUPPLY CHAIN
1. Did it surprise you that logistics can be such an important component in a country’s economic system? Why or why not?
The answer to this question likely depends on a student’s prior exposure to logistics. A “typical” student in an undergraduate basic logistics course likely has had limited exposure to and knowledge about logistics and thus would likely be unaware as to logistics’ impact on a country’s economic system. As such, she/he might be pleasantly surprised to learn that logistics often accounts for at least 10% of a country’s GDP and also is important for economic growth and development.
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 product’s being in a form that (1) can be used by the customer and (2) is of value to the customer. Time utility refers to having products available when they are needed by customers while place utility refers to having products available where they are needed by customers.
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 three-day late delivery of a box of pencils. As for place utility, logistics facilitates products being moved from points of lesser value to points of greater value.
4. How can a particular logistics system be effective but not efficient?
Effectiveness can be thought of as “how well a company does what they say they’re going to do;” efficiency focuses on how well (or poorly) company resources are used to achieve what a company promises they can do. There are a multitude of examples that would illustrate an effective, but not efficient, logistics system. For example, some companies routinely use premium and/or expedited transportation—which increase transportation costs—to meet customer delivery requirements. As such, the company could be considered effective (meeting delivery deadlines) but perhaps not efficient (increased transportation costs).
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 communication between companies and their customers. Even today some companies are hesitant to communicate with customers. In addition, meeting customer requirements means that a “one size fits all” approach to logistics will result in some customers being overserved and others being underserved. As a result, companies should consider a “tailored logistics” approach, where groups of customers with similar logistical needs and wants are provided with the appropriate logistical services.
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. Consider the Asian tsunami of late 2004. In a relatively short time, a variety of humanitarian organizations, with the help of private sector companies, were able to get relief supplies as well as food and medicine into the region and distribute them to the affected population.
7. Discuss three reasons for why logistics has become more important since 1980.
One reason for the increased importance of logistics involves a reduction in economic regulation. This allowed individual carriers flexibility in terms of pricing and service and provided them with an opportunity to break away from a “one size fits all” approach. Second, changes in consumer behavior, such as an increasing number of market segments, necessitate flexible rather than rigid logistics systems. Third, technological advances have allowed logisticians to make faster, more informed, and more accurate decisions. The chapter also discusses the growing power of retailers and globalization of trade as reasons for the increased importance of logistics.
8. Which reason for the increased importance of logistics do you believe is most important? Why?
There is no single answer here. Students can offer compelling support for any one of the five reasons—a reduction in economic regulation; changes in consumer behavior; technological advances; growing power of retailers; globalization of trade—presented in the chapter. For example, a reduction in economic regulation has allowed carriers to offer different pricing-service options to different customers, which is important because diffe