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CHAPTER

LOGISTICS AND THE SUPPLY CHAIN

Special logistics staffs handle the mO\'cIllent of items and displays for trade shows and special events. This sleek Mercedes racer is being loaded aboard a KLM Boeing 747. Photo KLM-Ro\'a! Dutch Airline, Photo Archi\es. Reproduced with permission,

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CHAPTER 1 Logistics and the Supply Chain

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Key Terms
• Channel intermediaries • Phantom freight • Place utility • Possession utility • Postponement • Power retailer • • Reverse logistics Stock-keeping units (SKUs) • Cost trade-offs • Economic utility • FOB destination pricing • FOB origin pricing • Form utility • Freight absorption • Inbound logistics • Landed costs • Logistics • Mass logistics • Materials management

• Stock outs • Systems approach • Tailored logistics • Time utility • Total cost approach

Learning Objectives
• To learn the definition of logistics • To understand the economic importance of logistics • To learn of recent events and their int1uences on logistics practices • To gain an understanding of logistics practices within a firm • To learn different pricing policies • To know about logistics careers

ECONOMIC IMPACTS OF LOGISTICS
At this point. you may have limited awareness of. and knowledge about, logistics- the subject matter of this textbook. However. if that is the case. you 're really not very different from lots of other people who inhabit this planet. and it might come as a surprise to you that logistics tends to have significant economic impacts. From a macroeconomic perspective. Table 1-1 summarizes U.S. logistics costs in relation to gross domestic product (GOP) for five-year time periods between 1960 and 2005. Note that logistics as a percentage of GOP has declined from approximately 15 percent in 1960 to less than 10 percent in 2005 and that annual aggregate logistics costs now approach $1.2 trillion. Although absolute

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