International Journal of Physical Distribution & Logistics Management

Hyunwoo Lim; Narushige Shiode

2011 International Journal of Physical Distribution & Logistics Management

doi: 10.1108/09600031111166401

Purpose – The purpose of this paper is to study how cost efficiency and the reliability of a physical distribution network are affected by changes in online shopping demand and to suggest how logistics service providers can respond to such changes. Design/methodology/approach – Based on a discrete event simulation approach, possible adaptive measures to online shopping demand increase are tested at three levels of decision making in parcel distribution network: priority assignment in the main hub (operational), introduction of sub‐hubs (tactical), and increase in the hub‐terminal capacity (strategic). The feasibility of the simulation is tested with parameters adopted from the logistics service data of an existing major parcel carrier in South Korea. Findings – Findings from the simulation model suggest that the existing physical distribution network can improve its cost efficiency and service reliability by evolving into a more centralized network structure with increased capacity of transshipment facilities if the online shopping demand is expected to increase consistently over the long run. Practical implications – This research will help logistics service providers to have good insights into performances of their distribution networks at different levels of demand and to devise a plan for adaptation to meet future demand. Originality/value – This paper provides a framework to understand the complex relationship between network configurations, service levels, costs, and other decision‐making processes with respect to changes in online shopping demand based on a simulation approach.

Mary Margaret Rogers; William L. Weber

2011 International Journal of Physical Distribution & Logistics Management

doi: 10.1108/09600031111166410

Purpose – The purpose of this paper is to model the tradeoffs among fatalities, CO 2 emissions and value generated by the truck transportation portion of supply chains with the goal of determining if efforts to reduce CO 2 emissions increase transportation‐related fatalities. Design/methodology/approach – The joint production of CO 2 , fatalities, and truck transport value in the 50 US states during 2002‐2007 is modeled using data envelopment analysis. The directional output distance function is estimated under two assumptions: strong and weak disposability of CO 2 emissions. This provides the means of calculating shadow prices that estimate the cost of reducing CO 2 emissions. Findings – The authors' findings indicate that the transfer of resources to the reduction of CO 2 emissions will result in a statistically significant increase in fatalities and a statistically significant decrease in value of transport from truck transport. Research limitations/implications – The model presented is based on secondary data from the Federal Highway Statistics Series, the Fatality Analysis Reporting System, and the Bureau of Economic Analysis. Social implications – The model developed demonstrates tradeoffs among sustainability‐related variables. Originality/value – The model presented in the paper uses shadow prices to assess sustainability‐related tradeoffs in supply chains. While this method has been used in other fields, this is its first use in supply chain studies.

Chiara Gobbi

2011 International Journal of Physical Distribution & Logistics Management

doi: 10.1108/09600031111166429

Purpose – The purpose of this paper is to explore the impact of the product residual value (PRV) and the loss of value over time of returned products in the reverse supply chain configuration. It also examines whether or not the distinction of Fisher's functional and innovative products holds for the reverse supply chain. Design/methodology/approach – In order to identify the relevance of the Fisher model, the model needs to be recast in terms of PRV, which, in this context, is considered the independent variable in the reverse logistics arena. Products defined as innovative in Fisher's taxonomy correspond to disposed products with high residual value, whereas functional products correspond to disposed products with low residual value. Furthermore, the PRV and the speed at which returned products lose their value are considered in order to determine the configuration of the reverse supply chain that allows for recapturing most of the PRV. These notions have then been tested by analyzing two reverse supply chains with a case study research methodology. Findings – The findings show that low PRV is associated with second‐class recovery options (recycling and energy recovery) and that high PRV is associated with first‐class recovery options (reconditioning and remarketing). When the recovery option is recycling, time is not relevant, the primary objective is cost reduction (efficiency), the chain is centralized, and actors and phases of the reverse chain are determined by the specificity of the recycling process. When the recovery option is reconditioning, time is primarily relevant, tradeoffs between costs and time efficiency are necessary, the chain presents a centralized structure, and the presence of other types of actors and phases influences the structure of the reverse supply chain. Research limitations/implications – The focus is restricted to the industry of electrical and electronic products. Practical implications – Based on the outcome of the study, managers are able to determine the basic prerequisites for the design of their reverse supply chains. Originality/value – Previous literature suggests that when the PRV is high, early product differentiation is necessary, and the chain is therefore decentralized. The paper demonstrates that this is not confirmed in the case of low returned volumes and high reconditioning quality standards.

Matloub Hussain; Paul R. Drake

2011 International Journal of Physical Distribution & Logistics Management

doi: 10.1108/09600031111166438

Purpose – The purpose of this paper is to analyze the effect of batching on bullwhip effect in a model of multi‐echelon supply chain with information sharing. Design/methodology/approach – The model uses the system dynamics and control theoretic concepts of variables, flows, and feedback processes and is implemented using iThink ® software. Findings – It has been seen that the relationship between batch size and demand amplification is non‐monotonic. Large batch sizes, when combined in integer multiples, can produce order rates that are close to the actual demand and produce little demand amplification, i.e. it is the size of the remainder of the quotient that is the determinant. It is further noted that the value of information sharing is greatest for smaller batch sizes, for which there is a much greater improvement in the amplification ratio. Research limitations/implications – Batching is associated with the inventory holding and backlog cost. Therefore, future work should investigate the cost implications of order batching in multi‐echelon supply chains. Practical implications – This is a contribution to the continuing research into the bullwhip effect, giving supply chain operations managers and designers a practical way into controlling the bullwhip produced by batching across multi‐echelon supply chains. Economies of scale processes usually favor large batch sizes. Reducing batch size in order to reduce the demand amplification is not a good solution. Originality/value – Previous similar studies have used control theoretic techniques and it has been pointed out that control theorists are unable to solve the lot sizing problem. Therefore, system dynamic simulation is then applied to investigate the impact of various batch sizes on bullwhip effect.