Explain how big box retailers are logistical trendsetters

Paul R. Murphy Jr. I A. Michael Knemeyer

Contemporary Logistics

TWELFTH EDITION C

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Twelfth Edition

Contemporary LogistiCs

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Twelfth Edition

Contemporary LogistiCs

Paul R. Murphy, Jr.

A. Michael Knemeyer

New York, NY

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BRIEF CONTENTS Preface xv

PART 1 Overview of Logistics 1 Chapter 1 An Overview of Logistics 2 Chapter 2 Logistics and Information Technology 22 Chapter 3 Strategic and Financial Logistics 41 Chapter 4 Organizational and Managerial Issues in Logistics 54

PART 2 Supply Chain Management 77 Chapter 5 The Supply Chain Management Concept 78 Chapter 6 Procurement 96

PART 3 Elements of Logistics Systems 111 Chapter 7 Demand Management, Order Management,

and Customer Service 112 Chapter 8 Inventory Management 130 Chapter 9 Facility Location 149 Chapter 10 Warehousing Management 168 Chapter 11 Packaging and Materials Handling 185 Chapter 12 Transportation 204 Chapter 13 Transportation Management 224 Chapter 14 International Logistics 243 Glossary 272 Name Index 281 Subject Index 285

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vii

CONTENTS

Preface xv

Part I Overview of Logistics 1

Chapter 1 AN OVERVIEW OF LOGISTICS 2 Economic Impacts of Logistics 2

Logistics: What It Is 3

The Increased Importance of Logistics 5

A Reduction in Economic Regulation 5

Changes in Consumer Behavior 6

Technological Advances 7

Advances in Retailing 8

Globalization of Trade 8

The Systems and Total Cost Approaches to Logistics 8

Logistical Relationships within the Firm 10

Finance 10

Production 11

Marketing 11

Marketing Channels 13

Activities in the Logistical Channel 15

Customer Service 16

Demand Forecasting 16

Facility Location Decisions 16

International Logistics 16

Inventory Management 16

Materials Handling 16

Order Management 16

Packaging 16

Procurement 17

Reverse Logistics 17

Transportation Management 17

Warehousing Management 17

Logistics And Supply Chain Careers 17 Summary  19  •  Key Terms  18  •  Questions for Discussion and  Review  19  •  Suggested Readings  19

▶ CASE 1.1 KiddieLand and the Super Gym 20

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viii Contents

Chapter 2 LOGISTICS AND INFORMATION TECHNOLOGY 22 General Types of Information Management Systems 23

Office Automation Systems 24

Communication Systems 25

Transaction Processing Systems (TPS) 26

Management Information Systems (MIS) and Executive ­Information Systems­(EIS) 28

Decision Support Systems (DSS) 29

Enterprise Systems 31

The Internet’s Influence on Logistics 32

Online Retailing 32

Cloud Computing 34

Electronic Procurement 34

Internet of Things 35

Information Technology Challenges 36 Summary  37  •  Key Terms  37  •  Questions for Discussion and   Review  37  •  Suggested Readings  37

▶ CASE 2.1 To Invest or not to Invest? that is the question 38

Chapter 3 STRATEGIC AND FINANCIAL LOGISTICS 41 Connecting Strategy to Financial Performance 42

Basic Financial Terminology 44

Income Statement 44

Balance Sheet 45

Statement of Cash Flows 46

Reporting Requirements 46

Strategic Profit Model 47

Logistics Connections to Net Profit Margin 49

Logistics Connections to Asset Turnover 49

Balanced Scorecard 49

Logistics Activity Measures 50

Transportation Measures 50

Warehousing Measures 51

Inventory Measures 51

Design and Implementation of Measures 51 Summary  52  •  Key Terms  52  •  Questions for Discussion and  Review  52  •  Suggested Readings  53

▶ CASE 3.1 Brant Freezer Company 53

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Contents ix

Chapter 4 ORGANIZATIONAL AND MANAGERIAL ISSUES IN ­LOGISTICS­ 56 Organizing Logistics within the Firm 56

Organizational Structure for Logistics 57

Organizational Design for Logistics 58

Managerial issues in Logistics 59

Productivity 60

Quality 62

Risk 64

Sustainability 69

Complexity 71 Summary  72  •  Key Terms  72  •  Questions for Discussion and   Review  72  •  Suggested Readings  73

▶ CASE 4.1 Red Spot Markets Company 73

Part II Supply Chain Management 77

­ Chapter­5­THE­SUPPLY­CHAIN­MANAGEMENT­CONCEPT­ 78 Evolution of Supply Chain Management 78

Supply Chain Management Process Frameworks 80

Enablers of SCM Implementation 81

Understanding the Implications of Increased Customer Power 82

Establishing Appropriate Relationship Structures 83

Leveraging Technology for Enhanced Visibility and Communication 85

Use of Supply Chain Facilitators 86

Barriers to SCM Implementation 88

Regulatory and Political Considerations 88

Lack of Top Management Commitment 88

Reluctance to Share, or Use, Relevant Information 88

Incompatible Information Systems 89

Incompatible Corporate Cultures 89

Globalization Challenges 90

Supply Chain Integration 90 Summary  91  •  Key Terms  91  •  Questions for Discussion and   Review  92  •  Suggested Readings  92

▶ CASE 5.1 Johnson Toy Company 93

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­ Chapter­6­PROCUREMENT­ 96 Procurement Objectives 97

Supplier Selection and Evaluation 98

Procurement Portfolio Approach 100

Supplier Development (Reverse Marketing) 101

Global Procurement (Sourcing) 101

Sustainable Procurement 103

Social Responsibility 103

Investment Recovery 104

Supply Chain Finance 105 Summary  105  •  Key Terms  105  •  Questions for Discussion and   Review  106  •  Suggested Readings  106

▶ CASE 6.1 Tempo Ltd. 107

Part III Elements of Logistics Systems 111

Chapter 7 DEMAND MANAGEMENT, ORDER MANAGEMENT, AND CUSTOMER­SERVICE­ 112 Demand Management  112

Demand Forecasting Models 113

Demand Forecasting Issues 114

Order Management 114

Order Transmittal 115

Order Processing 115

Order Picking and Assembly 116

Order Delivery 118

Customer Service 119

Time 120

Dependability 120

Communication 120

Convenience 121

Managing Customer Service 121

Establishing Customer Service Objectives 121

Measuring Customer Service 123

Customer Profitability Analysis 124

Service Failure and Recovery 124 Summary  125  •  Key Terms  125  •  Questions for Discussion and  Review  126  •  Suggested Readings  126

▶ CASE 7.1 Handy Andy, Inc 127

x Contents

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­ Chapter­8­ INVENTORY­MANAGEMENT­ 130 Inventory Classifications 131

Inventory Costs 131

Inventory Carrying Costs 132

Ordering Costs 133

Trade-Off Between Carrying and Ordering Costs 133

Stockout Costs 134

Trade-Off Between Carrying and Stockout Costs 135

When to Order How Much to Order 136

Economic Order Quantity 137

Conditions of Uncertainty 139

Inventory Flows 139

Inventory Management: Special Concerns 140

ABC Analysis of Inventory 140

Dead Inventory 141

Inventory Turnover 142

Complementary and Substitute Products 142

Contemporary issues with Managing Inventory 143

Lean Manufacturing 143

Service Parts Logistics 145

Vendor-Managed Inventory 146 Summary  146  •  Key Terms  146  •  Questions for Discussion  and  Review  147  •  Suggested Readings  147

▶ CASE 8.1 Low Nail Company 148

­ Chapter­9­FACILITY­LOCATION­ 149 The Strategic Importance of Facility Location 150

Determining The Number of Facilities  151

General Factors Influencing Facility Location 152

Natural Resources 152

Population Characteristics—Market for Goods 154

Population Characteristics—Labor 154

Taxes and Incentives 156

Transportation Considerations 156

Proximity to Industry Clusters 158

Trade Patterns 158

Quality-of-Life Considerations 159

Locating in other Countries 159

Contents xi

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Specialized Location Characteristics 160

Free Trade Zones 160

Finding the Lowest-Cost Location using grid systems 161

Grid Systems 161

Facility Relocation and Facility Closing 163 Summary  164  •  Key Terms   164  •  Questions for Discussion  and  Review  164  •  Suggested Readings  164

▶ CASE 9.1 All-Indian Logistics Services 166

­ Chapter­10­WAREHOUSING­MANAGEMENT­ 168 The Role of Warehousing in a Logistics System 168

Public, Private, Contract, and Multiclient Warehousing 170

Public Warehousing 170

Private Warehousing 172

Contract Warehousing 173

Multiclient Warehousing 173

Design Considerations in Warehousing  173

General Considerations 173

Trade-offs 174

Fixed versus Variable Slot Locations for Merchandise 174

Build Out (Horizontal) versus Build Up (Vertical) 175

Order-Picking versus Stock-Replenishing Functions 175

Two-Dock versus Single-Dock Layout 175

Conventional, Narrow, or Very Narrow Aisles 175

Degree of Warehouse Automation 176

Other Space Needs 176

Warehousing Operations 177

Warehousing Productivity Analysis 177

Safety Considerations 177

Hazardous Materials 180

Warehousing Security 180

Cleanliness and Sanitation Issues 181 Summary  182  •  Key Terms  182  •  Questions for Discussion  and  Review  182  •  Suggested Readings  183

▶ CASE 10.1 Minnetonka Warehouse 183

­ Chapter­11­PACKAGING­AND­MATERIALS­HANDLING­ 185 Product Characteristics 185

Packaging Fundamentals 186

Functional Tradeoffs 187

Package Testing and Monitoring 188

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Labeling 188

Issues in Packaging 190

Environmental Protection 190

Metric System 192

Identifying Packaging Inefficiencies 192

Packaging’s Influence on Transportation Considerations 193

Unit Loads in Materials Handling 195

The Unit Load Platform 196

Beyond the Unit Load 197

Materials Handling 197

Materials Handling Principles 200

Materials Handling Equipment 200 Summary  201  •  Key Terms  201  •  Questions for Discussion  and  Review  202  •  Suggested Readings  202

▶ CASE 11.1 Let There be Light Lamp Shade Company 203

­ Chapter­12­TRANSPORTATION­ 204 Comaparing and Contrasting Transportation Infrastructure 205

Transportation Modes 206

Airfreight 206

Motor Carriers 207

Pipelines 209

Railroads 210

Water 210

Intermodal Transportation 211

Transportation Specialists 213

Transportation Regulation 215

Environmental Regulation 215

Safety Regulation 216

Economic Regulation 216

Legal Classification of Carriers 217 Summary  219  •  Key Terms  219  •  Questions for Discussion  and  Review  219  •  Suggested Readings  220

▶ CASE 12.1 HDT Truck Company 220

Chapter 13 TRANSPORTATION MANAGEMENT 224 Rate (Pricing) Considerations 225

Rate Determination 225

Rate and Service Negotiations 228

Modal and Carrier Selection 234

Documentation  235

Contents xiii

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Bill of Lading 235

Freight Bill 237

Freight Claims 237

Making and Receiving Shipments 238

Consolidating Small Shipments 238

Demurrage and Detention 240

Routing 240

Tracking and Expediting 241

Transportation Service Quality  241 Summary  242  •  Key Terms  242  •  Questions for Discussion  and  Review  243  •  Suggested Readings  243

▶ CASE 13.1 Chippy Potato Chip Company 242

­ Chapter­14­ INTERNATIONAL­LOGISTICS­ 245 Macroenvironmental Influences on International Logistics 246

Political Factors 246

Economic Factors 248

Cultural Factors 249

International Documentation  251

Terms of Sale 251

Group 1: Terms that apply to any mode of transport 252

ExW (Exworks) 252

FCA (Free Carrier) 252

CPT (Carriage Paid To) 252

CIP (Carriage and Insurance Paid To) 252

DAT (Delivered at Terminal) 252

DAP (Delivered at Place) 253

DDP (Delivered duty Paid) 253

Group 2: Terms that Apply to Sea and Inland Waterway ­Transport Only­ 253

FAS (Free Alongside Ship) 253

FOB (Free on Board) 253

CFR (Cost and Freight) 253

CIF (Cost, Insurance, and Freight) 253

Methods of Payment 253

International Trade Specialists 255

International Freight Forwarders 255

Nonvessel-Operating Common Carriers 256

Export Management Companies 256

Export Packers 257

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xv

Transportation and Inventory Considerations in International Logistics 257

Ocean Shipping 258

Shipping Conferences and Alliances 259

International Airfreight 260

Surface Transport Considerations 260

International Trade Inventories 261

Logistics Performance Index 262 Summary  263  •  Key Terms  263  •  Questions for Discussion  and  Review  264  •  Suggested Readings  264

▶ CASE 14.1 Nurnberg Augsburg Maschinenwerke (N.A.M) 265

Glossary 272 Name Index 281 Subject Index 285

Contents xv

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xvii

This edition of Contemporary Logistics reflects a business landscape that is characterized by-geopolitical tensions in various parts of the world, steadily increasing trade among countries and across continents, supply chain vulnerabilities caused by severe natural disasters, and an unabated pace of technological advancement. Although these and other events present both-challenges and opportunities for logis- tics managers, the logistics discipline still remains fun, exciting, and dynamic—characteristics that are reflected in our revision.

WHAT’S NEW IN THIS EDITION?

This edition reflects input from reviewers, adopters, and other interested parties in terms of structure, presentation, and content. Specific modifications include the following:

• This edition welcomes a new coauthor, A. Michael Knemeyer, currently Associate Professor of Logistics at the Fisher College of Business, The Ohio State University. Mike’s impressive blend of practical, academic, and consulting experience in logistics and supply chain management provides this edition with fresh insights and perspectives.

• This edition contains one new end-of-chapter case, Case 9-1 (“All-Indian Logistics Services”), and modifications of several other cases. For example, some case content, as well as several discussion questions, have been changed in Cases 7-1 (“Handy Andy, Inc.”), 11-1 (“Let There Be Light Lamp Shade Company”), and 14-1 (“Nürnberg Augsburg Maschinenwerke (N.A.M.)”).

• Each chapter in this edition has been revised and incorporates new examples and references. For example, Chapter 1’s discussion of the globalization of trade reports the average growth rate of world trade between 1991 and 2011 (as opposed to between 1997 and 2007 in the tenth edition). As another example, Chapter 14’s discussion of Incoterms reflects the revisions associated with Incoterms 2010, which were effective at the beginning of 2011.

• New content has been added throughout this edition. For example, Chapter 1 now includes a discussion of the rapidly emerging topic of humanitarian logistics. In addition, the “Logistics Activity Measures” section in Chapter 3 contains an expanded discussion of warehousing and inven- tory management performance measurements. Chapter 6 has added a subsection, “Procurement Portfolio Approach,” that highlights Kraljic’s Portfolio Matrix.

• Tables and figures containing country and industry data have been either revised or updated. Examples include Table 1-1, “The Cost of the Business Logistics System in Relation to a Country’s Gross Domestic Product”; Figure 10-3, “2012 Liberty Mutual Workplace Safety Index Findings”; and Table 12-1, “Infrastructure Statistics in Several Countries.”

• The list of Key Terms at the beginning of each chapter has been modified in the eleventh edition, and each key term is defined in the Glossary. New Key Terms in this edition include humanitarian logistics, big data, Logistics Uncertainty Pyramid Model, near-sourcing, and total cost of owner- ship, among others.

• The end-of-chapter Suggested Readings in the eleventh edition have been revised and over 60 percent of them have been published since 2009.

PREFACE

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xviii Preface

INSTRUCTOR SUPPLEMENTS

Supplements are available for adopting instructors to download at www.pearsonhighered.com Registration is simple and gives the instructor immediate access to new titles and new editions. Pearson’s dedicated technical support team is ready to help instructors with the media supplements that accompany this text. The instructor should visit support.pearson.com/getsupport for answers to frequently asked questions and for toll-free user support phone numbers. Supplements include the following:

• Instructor’s Manual • PowerPoint Slides

The current edition of Contemporary Logistics has been prepared by Paul Murphy and Mike Knemeyer, and they welcome your comments and suggestions at drmurphy@jcu.edu (Paul) and knemeyer.4@osu.edu (Mike). Paul and Mike gratefully acknowledge the important contributions that the late Donald F. Wood, James C. Johnson, and Daniel L. Wardlow made to earlier editions.

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1

P art 1 of Contemporary Logistics introduces the many dimensions of the complex and dynamic subject of logistics. Chapter 1 presents an overview of logistics and introduces you to what logistics is and why it is important. The chapter covers the economic impact of logistics and discusses how

logistics interacts with other functions, such as marketing, in an organization. Chapter 2 provides an overview of the general types of information management systems that are

applicable across each business function, and it provides examples of how these general types of information systems are specifically applied in logistics management. Chapter 2 also explores the Internet's influence on logistics and looks at some of the challenges associated with information technology.

Chapter 3 discusses the strategic financial outcomes influenced by logistics decisions. It uses the strategic profit model to highlight how logistics activities influence the key corporate financial measures of net income, capital employed, and return on capital employed.

Chapter 4 examines organizational and managerial issues in logistics. The chapter begins by looking at organizational structure and organizational design for logistics. Chapter 4 also discusses select managerial issues in logistics such as productivity, theft and pilferage, and the impact of terrorism on logistics systems.

OVERVIEW OF LOGISTICS PART I

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1

ECONOMIC IMPACTS OF LOGISTICS

Although the logistics discipline today is vastly different from what it was like when the first edition of this book was published in the 1970s, one thing that remains constant is the economic impact of logistics. Before defining what logistics is, we believe it is important to discuss the economic aspects of logistics; you might be surprised at its significant economic impact. From a macroeconomic per- spective, Table 1.1 presents logistics costs in relation to gross domestic product (GDP) for a select group of countries. Although absolute and relative logistics costs in relation to GDP vary from country to country, logistics is most definitely an important component in any country’s economy.

More specifically, logistics can play an important role in a nation’s economic growth and devel- opment. For example, relatively high logistics costs (as a percentage of GDP) in the People’s Republic of China (China) continue to restrict the country’s economic development; in particular, the high costs of highway transportation have severely constrained the growth of China’s e-commerce mar- ket.1 In a similar fashion, the growth of e-commerce sales in India is challenged by logistical ineffi- ciencies to include poor roads and inferior transportation equipment.2

Apart from the previous examples of macrolevel economic impacts, the economic impacts of logistics can affect individual consumers such as you. These impacts can be illustrated through the concept of economic utility, which is the value or usefulness of a product in fulfilling customer needs or wants. The four general types of economic utility are possession, form, time, and place; logistics clearly contributes to time and place utilities.

Possession utility refers to the value or usefulness that comes from a customer being able to take possession of a product. Possession utility can be influenced by the payment terms associ- ated with a product. Credit and debit cards, for example, facilitate possession utility by allowing the customer to purchase products without having to produce cash or a cash equivalent. Likewise,

1 Hua Wang, “High Logistics Cost, Toll Road and Institutional Factors Countermeasure in China,” Journal of Modern Accounting and Auditing, 7, no. 11 (2011): 1301–1306. 2 Sean McLain and Newley Purnell, “Indian Startups Vie to Win E-Commerce Battle,” The Wall Street Journal, October 25, 2015.

An Overview Of LOgistics

Learning Objectives

1.1 To discuss the economic impacts of logistics 1.2 To define what logistics is 1.3 To analyze the increased importance of logistics 1.4 To discuss the systems and total cost approaches to logistics 1.5 To expose you to logistical relationships within the firm 1.6 To introduce you to marketing channels 1.7 To provide a brief overview of activities in the logistics channel 1.8 To familiarize you with logistics careers

Learning Objective 1.1

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Chapter 1 • An Overview of Logistics 3

automotive leases allow customers to take possession of a more desirable model than would be pos- sible with conventional automotive loans.

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. Although form utility has generally been associated with production and manufacturing, logistics can also contribute to form utility. For example, to achieve production economies (i.e., lower cost per unit), a soft-drink company may produce thousands of cases of a certain type of soft drink (e.g., diet cola). You’re not likely to purchase diet cola by the thousands of cases (unless you’re having a really big social event!) but rather in smaller lot sizes, such as a six- or twelve-pack. Through allocation, logistics can break the thousands of cases of diet cola into the smaller quantities that are desired by customers.

Place utility refers to having products available where they are needed by customers; prod- ucts are moved from points of lesser value to points of greater value. Continuing with the diet cola example, place utility is increased by moving the soda from a point of lesser value (e.g., stored in a warehouse) to a point of greater value (e.g., on a supermarket shelf).

Closely related to place utility is time utility, which refers to having products available when they are needed by customers. It is important to recognize that different products have different sensitivities to time; three-day late delivery of perishable items likely has more serious consequences than three-day late delivery of nonperishable items.

Simultaneously achieving possession, form, place, and time utility goes a long way toward facilitating—but not guaranteeing—customer satisfaction. Consider the experience of a former stu- dent who placed an online order of Valentine’s Day flowers for his out-of-state girlfriend. The seller facilitated possession utility by allowing the student to pay by credit card, and a healthy arrangement of the correct bouquet (form utility) arrived at the girlfriend’s residence on Valentine’s Day (place and time utility). Although the seller provided possession, form, place, and timely utility, the buyer was quite unsatisfied with his purchase. The problem: The greeting card that accompanied the flow- ers had the wrong name for the girlfriend (but the right name for the boyfriend)!

LOGISTICS: WHAT IT IS

Now that you have been introduced to select economic impacts of logistics, it’s important to define what logistics is. This book adopts the definition promulgated by the Council of Supply Chain Management Professionals (CSCMP), one of the world’s most prominent organizations for logistics professionals. According to the CSCMP, “Logistics management is that part of supply chain manage- ment that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consump- tion in order to meet customers’ requirements.”3

Learning Objective 1.2

3 www.cscmp.org/about-us/supply-chain-management-definitions

TABLE 1.1 The Cost of the Business Logistics System in Relation to a Country’s Gross Domestic Product

Country Logistics as a Percentage of GDP

United States 8.5

Brazil 12.0 South Africa 12.8 India 13.0 People’s Republic of China 18.0 Vietnam 25.0 Indonesia 27.0

Sources: Various country reports.

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http://www.cscmp.org/about-us/supply-chain-management-definitions
4 Part I • Overview of Logistics

Let’s analyze this definition in closer detail. First, logistics is part of supply chain manage- ment. We’ll talk about supply chains and supply chain management in greater detail in Chapter 5, but the key point for now is that logistics is part of a bigger picture in the sense that supply chain management focuses on coordination among business functions (such as marketing, production, and finance) within and across organizations. The fact that logistics is explicitly recognized as part of supply chain management means that logistics can affect how well (or how poorly) an individual firm—and its associated supply chain(s)—can achieve goals and objectives.

The CSCMP definition also indicates that logistics “plans, implements, and controls.” Of par- ticular importance is the word and, which suggests that logistics should be involved in all three activi- ties—planning, implementing, controlling—and not just one or two. Note that the CSCMP defini- tion also refers to “efficient and effective forward and reverse flows and storage.” Broadly speaking, effectiveness can be thought of as, “How well does a company do what it says it’s going to do?” For example, if a company promises that all orders will be shipped within 24 hours of receipt, what percentage of orders are actually shipped within 24 hours of receipt? In contrast, efficiency can be thought of as how well (or poorly) company resources are used to achieve what a company promises it can do. For instance, some companies use premium or expedited transportation services—which cost more money—to cover for shortcomings in other parts of their logistics systems.

With respect to forward and reverse flows and storage, for many years logistics focused only on forward flows and storage, that is, those directed toward the point of consumption. Increasingly, however, the logistics discipline has recognized the importance of reverse flows and storage (reverse logistics), that is, those that originate at the point of consumption. Although the majority of the discus- sion in this book focuses on forward logistics, many companies today recognize the tactical and strategic implications of reverse logistics. Indeed, reverse logistics continues to grow in importance as individual companies, and select supply chains, recognize it as an opportunity for competitive advantage.4 One illustration of this is FedEx Corporation’s (a leading logistics service provider) 2015 acquisition of GENCO, a logistics service provider with long-standing expertise in reverse logistics.

The CSCMP definition also indicates that logistics involves the flow and storage of “goods, services, and related information.” Indeed, in the contemporary business environment, logistics is as much about the flow and storage of information as it is about the flow and storage of goods. The importance of information in contemporary logistics is captured by Fred Smith, CEO and chairman of FedEx, who believes that “information about the package is as important as the package itself.”5 Furthermore, an important contemporary logistics and supply chain axiom involves the ability to substitute information for inventory;6 for example, the cash register at many contemporary retailers also tracks what and when products are being purchased.

Finally, the CSCMP definition indicates that the purpose of logistics is “to meet customer requirements.” This is important for several reasons, with one being that logistics strategies and activities should be based on customer wants and needs, rather than the wants, needs, and capabili- ties of manufacturers or retailers. Contemporary information technology facilitates an understand- ing of customer wants and needs and this technology allows for real-time interactive communication with customers—a key to meeting customer requirements.