Logistics Operations and Management || Logistics Philosophies

4 Logistics Philosophies

Zahra Rouhollahi

Department of Industrial Engineering, Amirkabir University of Technology,Tehran, Iran

4.1 Lean Logistics

Waste is the basic concept of lean philosophy. Lean philosophy uses a number of

simple concepts and tools to eliminate waste in all supply-chain activities. Lean

manufacturing was introduced and implemented in the manufacturing area in the

book The Machine That Changed the World by Womack et al. [1] in 1990. In this

book, the models the Japanese were using in their car industry was conceptualized

by a group of MIT researchers. Since then, lean concepts and tools have been

adjusted and used in other areas such as transportation and warehousing.

True lean achievement requires major changes and improvement in a company.

In manufacturing processes, changes cover all activities from design to actual

manufacturing. Generally, in logistics, both the inbound and outbound sides require

changes [2].

Before we discuss lean philosophy, let us look at other philosophies that pre-

ceded and led to the foundation of lean philosophy.

4.1.1 Japanese Philosophy

One of the most important philosophies that was accepted for many years is the

just-in-case philosophy. For many years, suppliers held extra inventory as safety

stock in case products were needed. The Japanese believed that holding inventory

kept management away from seeing manufacturing process problems such as bot-

tlenecks and quality problems. They argued that keeping extra inventory is like the

water of a deep lake. With deep water, a captain is not worried about hazardous

rocks below the surface of the lake (Figure 4.1)[3]. To confront these rocks (prob-

lems) and find a solution, the first step is inventory reduction. With this belief, the

Japanese developed the kanban concept (which is also known as the Toyota prod-

uction system, or TPS) that started in assembly-type operations. The philosophy of

kanban is that parts and materials should be supplied right at the moment they are

needed in the production process [4].

In fact, kanban is a pull system, which means that parts needed for production

must only be pulled through the chain in response to demand from the end customer.

Logistics Operations and Management. DOI: 10.1016/B978-0-12-385202-1.00004-9

© 2011 Elsevier Inc. All rights reserved.

http://dx.doi.org/10.1016/B978-0-12-385202-1.00004-9

In contrast, in the conventional push system, production is done according to sched-

ules and available resources such as people, material, and machines regardless of

whether or not the next step needs them at the time. In the kanban system, the aim is

to meet demands right at the time they are ordered and not before. In assembly lines,

stages up the chain provide needed parts. By reducing the kanban quantity (i.e., the

amount demanded from each workstation) bottlenecks gradually become apparent

[3]. The kanban quantity is then reduced gradually until all of the bottlenecks are

revealed and removed. The aim of kanban is to reduce inventory to its minimal

amount at every stage to achieve a balanced supply chain.

4.1.2 Just-in-Time Philosophy

Just-in-time (JIT) systems are the extension of kanban and link purchasing,

manufacturing, and logistics [4]. The primary goals of JIT are inventory reduction,

product quality, and customer-service improvement and production-efficiency maxi-

mization. In JIT systems, the main focus is on achieving continuous improvement of

the process and the quality of the product and service. This is achieved by reducing

inefficient and unproductive time in the production process.

JIT changes many of the principles in a firm. For example, instead of concen-

trating on cost, quality is considered more. ‘Many suppliers’ thinking is replaced

by ‘few suppliers with long-term open relationship’ thinking. In fact, in JIT think-

ing, higher-quality customer service is more important than cost, which is the main

issue in conventional systems.

In JIT systems, material control is based on the view that a process should oper-

ate only on a demand signal from the customer, the pull system noted earlier.

Implementing JIT has several benefits that primarily fall into four general areas

[5]: inventory turnover improvement, customer-service improvement, warehouse-

space reduction, and response-time improvement.

Unreliablesuppliers

Volatiledemand

BottlenecksInaccurateforcasts

Qualityproblem

Figure 4.1 Hidden problems as a result of holding extra inventory [3].

56 Logistics Operations and Management

Lean Manufacturing

As a term, lean manufacturing was first used by Womack et al. in their book The

Machine That Changed the World in 1990. The book is about the techniques and

concepts developed by Taiichi Ohno at Toyota. The goal of lean manufacturing is

reducing “waste” with the goal of total elimination. According to Russell and

Taylor [6], waste is “anything other than the minimum amount of equipment, mate-

rials, parts, space, and time that are essential to add value to the product.”

Lean methods target eight types of waste [7]:

1. Defects: money and time wasted for finding and fixing mistakes and defects

2. Over-production: making products faster, sooner, and more than needed

3. Waiting: time lost because of people, material, or machines waiting

4. not using the talent of our people: not using experiences and skills of those who know

the processes very well

5. Transportation: movement of people, materials, products, and information

6. Inventory: raw materials, works in process (WIP), and finished goods more than the one

piece required for production

7. Motion: Any people and machines movements that add no value to the product or service.

8. Over-processing: Tightening tolerances or using better materials than what are necessary.

These wastes can be seen in all logistics activities such as distribution and ware-

housing. In other words, waste is anything that adds no value to a product or service.

Sometimes, more than 90% of a firm’s overall activities are non-value added [8].

In lean manufacturing, paradigms change from conventional “batch and queue” to

“one-piece flow” [9]. In fact, lean manufacturing combines best features of both mass

production and craft production, which means it intends to reduce cost and improve

quality while increasing diversity of production [1,10]. Lean manufacturing leads to

improved product quality and production levels; reduced cycle time, WIP, inventories,

and tool investment; improved on-time delivery and net income; better space, machine,

and labor utilization; decreased costs; and quicker inventory investment [10].

Lean Manufacturing Tools

Various methods and tools are developed for lean implementation. We briefly

describe the following five core lean methods: the kaizen rapid-improvement process,

5S, total productive maintenance (TPM), cellular manufacturing, and Six Sigma.

Kaizen means continuous improvement in Japanese. The kaizen rapid-improve-

ment process is the foundation of lean manufacturing. It holds that by applying

small but incremental changes routinely over a long period of time, a firm can real-

ize considerable improvements. Kaizen involves workers from all levels of an orga-

nization in addressing a specific process and identifying waste in this process.

After finding possible wastes, the team tries to find solutions to eliminate them and

then quickly apply chosen solutions, often within 3 days. After implementing

improvements, periodic events ensure that this improvement is sustained over time.

Standing for sort, set in order, shine, standardize, and sustain, 5S tries to reduce

waste and optimize productivity by maintaining an orderly workplace [11]. Sort

57Logistics Philosophies

means removing every nonessential item from the workplace. Set in order implies

that everything should have a specific place and should always be in the place

unless it is being used. Shine means cleaning the plant and equipments.

Standardize is the process of making people accustomed to the first three S’s, and

sustain means keeping 5S operating over time. The 5S philosophy encourages

workers to maintain their workplace in good condition and ultimately leads reduced

waste, downtime, and in-process inventory. The 5S implementation can also signif-

icantly reduce the space required for operations [12].

TPM reaches effective equipment operation by involving all workers in all

departments. The most important concept of TPM is autonomous maintenance,

which trains workers to be in charge of and take care of their own equipment and

machines. TPM tries to eliminate breakdowns, the time spent on equipment setup

or adjustment, and lost time in equipment stoppages and to minimize defects,

reworks, and yield losses [10].

Cellular manufacturing is the actual practice of the pull system. The ideal cell is

basically a pull system in which one piece is pulled by each machine as it needs

the piece for manufacturing [11]. All of the machines needed for a process are

gathered as a group into one cell. Using cellular manufacturing offers different

advantages such as reduced WIP between machinery, low lead time to customers,

reduced waste, and more flexibility. In a cell, when a defect occurs, only one prod-

uct is defective, and it can be immediately caught. As soon as a defective part is

seen, the operator starts repairing it, which leads to reduced scrap. In addition,

using cells can shorten lead times. For example, if a customer’s order is less than

the usual company batch, the order can be delivered the moment it has been com-

pleted. In conventional manufacturing, however, the customer must wait until the

company batch is completed before the order is shipped.

Developed by Motorola in the 1990s, Six Sigma uses statistical quality-control

techniques and data-analysis methods. Six Sigma uses a set of methods that analyze

processes systematically and reduce their variations, ultimately leading to continu-

ous improvement. At the Six Sigma quality level, there will be about 3.4 defects

per million, which signifies high quality and low variability of process [13].

4.1.3 Lean Principles

Five principles are basic pillars in the lean philosophy [14,15]:

1. Identifying customer value

2. Managing the value stream

3. Developing a flow production

4. Using pull techniques

5. Striving to perfection

Identifying Customer Value

Value is an important and meaningful term in the lean context, meaning something

that is worth paying for in a customer’s point of view [14]. Therefore, the first step


in specifying this value is demonstrating a product’s capabilities and its offered

price.

Managing the Value Stream

Once value is identified, all required steps that create this value must be specified.

Wherever possible, steps that do not add value must be eliminated.

Making Value-Adding Steps Flow

Making steps flow means specifying steps so that there is no waiting time, down-

time, or other general waste within or between the steps.

Using Pull Techniques

Fulfilling customer needs means supplying a product or service only when the cus-

tomer wants it. The following types of waste are eliminated by using pull techni-

ques: Designs that are out of date before the product is completed, finished goods,

inventories, and leftovers that no one wants.

Striving to Perfection

By repeatedly implementing these four steps, perfect value is ultimately created

and there is no waste.

Using these principles is key in making an activity lean. These principles are

also called lean thinking. With this thinking, any tiny change may lead to waste. A

good example is changing the placement of a waste bin in a plant. After awhile

workers get used to the placement of the bin and blindly throw their wastes in it

without searching for it. When the bin’s place is changed, however, workers have

to find the bin first, which is time consuming, even if it is just a few seconds. In

lean thinking, these seconds are waste. The ultimate goal is to eliminate them.

4.1.4 Lean Warehousing: Cross Docking

Warehousing has four major tasks: receiving, storage, order picking, and distribu-

tion. Among these four tasks, storage and order picking are the most costly.

Storage requires inventory holding (one of the eight kinds of wastes), and order

picking needs a lot of labor work hours (which is mentioned as motion in different

kinds of wastes). To eliminate these wastes and produce a lean warehouse, the

cross-docking concept was developed. A cross dock is just like a warehouse in

which only receiving and delivering freight is being done.

Shipments will be transferred directly from incoming trucks to outgoing ones

without any long-term storage. These loads are delivered to receiving doors, sorted,

consolidated with other products for each destination, and loaded onto outgoing

trucks at shipping doors. The whole process is done in less than 24 hours in a typi-

cal cross dock.


Companies such as American Freightways, Yellow Transport, and Old

Dominion Freight Lines operate hundreds of cross docks in North America. Some

retailers such as WalMart and Home Depot also operate cross docks.

Cross docks also function as a place to consolidate loads and thus reduce trans-

portation costs. As illustrated in Figure 4.2, suppose two suppliers serve four custo-

mers. Direct-shipment suppliers may undertake extra costs as a result of a less than

truckload (LTL) for each customer. Using a cross dock as a consolidation center

reduces the number of LTLs and sends more truckloads (TLs) to retailers, substan-

tially reducing transportation costs.

Types of Cross Docking

Napolitano [16] classifies the different types of cross docks as follows.

� A manufacturing cross dock is used to receive and consolidate supplies.� A distributor cross dock consolidates products from different suppliers and delivers them

to customers.� A transportation cross dock consolidating LTLs from different suppliers to reach eco-

nomic shipments.� A retail cross dock receives, sorts, and sends products to different retail stores.

Cross docks can also be divided based on assigned or unassigned information:

predistribution and postdistribution[17]. In a predistribution cross dock, the desti-

nations are already determined and their orders are prepared by vendors for direct

shipment. In this kind of cross dock, shipments that are already price tagged or

labeled are transferred directly into outgoing trucks. In postdistribution operations,

the cross dock must assign freights to each destination to make them ready for

shipping by price tagging, labeling, and so on, which means higher labor costs and

more floor space for the distributor.

Cross docks can also be classified based on the method of freight staging.

According to Yang et al. [18], there are single-stage, two-stage, and free-stage

LTL

LTL LTL

LTL

LTL LTL LTL LT

L

Customer

CustomerCustomer

Customer

Supplier #2

Supplier #1

(A)

Customer

Cross dock

Customer

CustomerCustomer

Supplier #2

Supplier #1

LTL

LTL

TL

TLTL

TL

(B)

Figure 4.2 Direct shipment versus cross docking: (A) direct shipment and (B) cross dock as

a consolidation center.


methods. In a single-stage method, one staging lane is devoted to each receiving or

shipping door, and shipments are placed into these staging lanes. In a two-stage

method, the shipments are unloaded in receiving doors and put directly in a receiv-

ing door’s stage lines. In the center of the cross dock, shipments are resorted and

repacked into the staging lines of the shipping doors. In a free-staging cross dock,

there are no lanes or queues in which freights are placed and pulled to shipping

doors. Instead, near the receiving or shipping doors, freights are resorted and

repacked. Figure 4.3 depicts a two-stage cross dock [19].

Product Selection

Generally, products that can easily be handled with low variance and high volume

are the most suitable for cross docking [17].

For supply and demand to be matched, demand for shipments must be certain or

at least have low variance. If demand has high variance, then cross docking is not

suitable.

As cross docking needs frequent shipments that force expenses to system,

demand for shipments must be high enough to justify extra expenses.

Shipping

Sorting

Receiving

Figure 4.3 Two-stage cross-dock structure [19].


Cross-Dock Design

There are two important parameters in cross-dock design: size and shape. The first

decision is the number of doors. Generally, doors are devoted to one of the two fol-

lowing types of trailers [20]:

� Incoming (receiving), from which freight must be unloaded� Outgoing (shipping), in which freight must be loaded

Typically, once the number of destinations of a cross dock is known, the

number of outgoing doors needed is easily determined. The number of doors

required for each destination depends on its freight flow. Destinations with a

higher flow may need more than one door. The number of shipping doors thus

equals the number of destinations the cross dock serves multiplied by their

needed doors.

To determine the number of receiving doors needed, more issues must be

addressed. In some retail cross docks, extra operations such as packaging, pricing,

or labeling need the same number of doors in each side of the cross dock, with

receiving doors devoted to one side and shipping doors to the other. For distribu-

tors’ cross docks, which generally do no value-added processing and are just a

place to consolidate freights, the number of receiving doors can be estimated by

Little’s law: unloading mean time multiplied by trailer throughput [21]. Unloading

is relatively easier than loading. “A good rule of thumb is that it takes twice as

much work to load a trailer as it does to unload it” [20]. To achieve a smooth flow

without bottlenecks, there could be either twice as many outgoing doors as incom-

ing doors or more assigned workers to load each trailer.

The next important factor is cross-dock shape. According to Bartholdi and Gue

[21], most cross docks are I shaped like a long rectangle, but there are also cross docks

in other shapes such as an L (as in Yellow Transportation, Chicago Ridge, IL), a U

(as in Consolidated Freightways, Portland, OR), a T (American Freightways, Atlanta,

GA), an H (Central Freight, Dallas, TX), and an E. Bartholdi and Gue also showed

that design has an important impact on cross-dock costs. I shapes were best for cross

docks with fewer than 150 doors, T shapes for cross docks with 150�250 doors, and

H shapes for more than 250 doors.

The shape of a cross dock also depends on many issues such as the shape of the

land on which the cross dock will be placed, the patterns of freight flows, and the

material-handling systems within the facility [20].

In addition to the shape of cross dock, the location of cross dock and how it is

related to its connections have a considerable effect on its success.

4.2 Agile Logistics

According to Christopher and Towill, “Agility is a business-wide capability that

embraces organizational structures, information systems, logistics processes and, in

particular, mindsets” [22].


The European Agile Forum (2000) defined agility as follows: “Agility is the

ability of an enterprise to change and reconfigure the internal and external parts of

the enterprise—strategies, organization, technologies, people, partners, suppliers,

distributors, and even customers in response to change unpredictable events and

uncertainty in the business environment.”

Flexibility is the pivot characteristic of an agile organization [23]. In fact, agile

philosophy is the extension of a flexible manufacturing system (FMS) in broader

business frameworks. FMSs are systems in which scheduling, routing, controlling,

and so on are mostly done by computers in order to achieve high levels of flexibil-

ity in response to market changes.

4.2.1 Agile versus Lean

Agility is different from leanness, and these two concepts should not be confused.

Lean means containing little or even no fat, but agile means nimble. As mentioned

before, lean focuses on eliminating waste. In fact, “it deals with doing more with

less” [22], whereas agile is the ability to adapt to market changes and to keep

track.

According to Naylor et al. [24], agility means “using market knowledge and a

virtual corporation to exploit profitable opportunities in a volatile marketplace.”

They defined leanness as “developing a value stream to eliminate all kinds of

wastes, including time, and to enable a level schedule.”

Mason-Jones et al. [25] differentiated leanness and agility by means of two

important concepts: market qualifier and market winner. To enter a competitive

market, it is important and also necessary to understand what baselines—market

qualifiers—this market has. The criterion for being a winner in this market is called

the market winner. As you can see in Table 4.1, lean philosophy is most promising

when the market winner is cost, but agile is appropriate when service level is the

market winner.

Lean and agile have many different attributes. Agile is stronger when a market

is volatile, dealing with a high variety of products with short life cycles. To apply

lean, a market should be predictable and have a smaller variety of products with

long life cycles. Table 4.2 compares agile and lean with their distinguishing attri-

butes [25].

Table 4.1 Market Qualifier and Market Winner for Agile and Lean Supply [25]

Market Qualifiers Market Winners

Lean Supply Quality Cost

Lead time

Service level

Agile Supply Quality Service level

Cost

Lead time


In another comparison, Christopher [23] compares lean and agile from the points

of view of volume and variety (Figure 4.4). According to him, agility works well in

less-predictable environments with unstable demand and high variety. Needless to

say, it is vital to be fast (or agile) in such environment in response to demand. An

example of this environment is the fashion industry. The volume of fashion goods is

low, but the variability is high. Lean is best in predictable environments with high

volume and low diversity. Routine goods such as groceries and household stuff are

good examples of merchandise when the lean philosophy is preferred.

4.2.2 Quick Response

McMichael et al. [26] define quick response (QR) as “a customer-driven business

strategy of cooperative planning by supply-chain partners to ensure that the right

goods are in the right place at the right time, using IT and flexible manufacturing

to eliminate inefficiencies from the entire supply chain.”

As a strategy in the retail sector, QR uses a number of tactics to improve inven-

tory management and efficiency as well as speed inventory flow [4]. The funda-

mental idea of QR is that to exploit the advantages of markets that are time

based, it is necessary to develop systems that are responsive and fast [3]. Reducing

inventory levels and lead times and increasing the accuracy of forecasting are the

Table.4.2 Comparison of Lean and Agile by Their Distinguishing Attributes [25]

Distinguishing Attributes Lean Supply Agile Supply

Typical products Commodities Fashion goods

Marketplace demand Predictable Volatile

Product variety Low High

Product life cycle Long Short

Customer drivers Cost Availability

Profit margin Low High

Dominant costs Physical costs Marketability costs

Stock-out penalties Long-term contractual Immediate and volatile

Purchasing policy Buy goods Assign capacity

Information enrichment Highly desirable Obligatory

Forecasting mechanism Algorithmic Consultative

Hi

Lo

Agile

Lean

Lo

Var

iabi

lity

VolumeHi

Figure 4.4 Comparison of lean and agile based on

variety and volume [23].


main purposes of QR [27]. This strategy is suitable for highly engineered products

and can be used by firms that produce large amounts of variable products [28].

For Christopher, “The logic behind QR is that demand must be captured in as

close to real time as possible and as close to the final consumer as possible” [3],

which is the most reliable information for the next logistics responses and deci-

sions. Whole decisions are made directly based on this information.

One of the most important things that made QR possible is the development of

information technology. In fact, QR keeps information instead of inventory. QR

uses information technologies such as electronic data interchange (EDI), bar cod-

ing, electronic point of sale (EPOS), and laser scanners to quickly track customer

sales. This information will be really helpful for manufacturers who are in charge

of production scheduling and delivery. If there is a good response time by using a

cross dock instead of a warehouse, then implementing QR can lead to inventory

reduction.

Implementation of QR can benefit both suppliers and retailers. Giunipero et al.

[29] cite cost reduction, reduced stock inventory, stock-turnover increases, and cus-

tomer-service improvement as retailers benefits. Predictable production cycles, fre-

quent orders, reduced costs, and closer relationships with retailers are supplier

benefits. QR advantages are most significant in environments where a high level of

service is targeted. Applying QR has a high fixed cost (because of the required

information technologies), the increment of cost is low when service level

improves. Figure 4.5 depicts this concept [3].

As shown, in lower levels of service, cost of implementing QR is high as a

result of high-level information technology. However, by improving service level,

the increment of QR cost is lower than keeping inventory. When the strategy of a

market is to keep extra inventory in order to have a better service level, the amount

of stored inventory must be higher, so its cost increases exponentially. After a cer-

tain level of service, QR cost is much lower than keeping inventory. It shows that,

as a strategy of agile philosophy, QR concentrates on service level more than any

other parameter. Whenever service level is an important key factor in a market, QR

is an appropriate strategy.

Fashion and apparel industries have widely used QR. This strategy is appropriate

in these fields because in these industries high service levels are demanded and

inventory holding is not a suitable solution because of storage costs. Consider a

hypothetical chain of fashion stores. Each of several thousand stores in the chain

tracks consumer preferences daily using its point-of-sale data, which indicate

Cos

t

Service level

InventoryQR

Figure 4.5 QR versus traditional inventory-based

systems [3].


orders. Based on the information gathered, orders will be sent by satellite links to

suppliers around the world. These orders will be consolidated in one place, and

ultimately goods are flown back to the chain’s distribution center. The consolida-

tion center may even be on another continent, with shipments done by planes or

ships. At the distribution center, the goods are price marked and restored for imme-

diate delivery to the retail stores. All of this process will take place in 4�6 weeks,

a time period that cannot be achieved in conventional systems.

Efficient Consumer Response

Development of the QR strategy in the fashion industry encouraged the develop-

ment of the efficient consumer response (ECR) strategy, which has the same con-

cepts as QR in the grocery industry [27]. The Europe Executive Board expresses

the ECR as “working together to fulfill consumer wishes better, faster, and at less

cost.” ECR emphasizes cooperation between distributors and manufacturers, and its

goal is to create a customer-driven system with high levels of consumer satisfaction

and low levels of costs [30].

The main purpose of ECR is to provide efficient replenishment that is achieved

by reducing stock holdings, making stock ranges more practical by indicating the

dimensions of goods, improving space allocation, and introducing new products

effectively [31].

According to Casper (1994), ECR includes the following strategies:

� EDI usage between suppliers and manufacturers, manufacturers and distributors, and dis-

tributors and customers� Use of more accurate bar coding system and better exploitation of point-of-sale data� Mutual close relationship between manufacturers, distributors, suppliers, and customers� Continuous inventory replenishment� Improved product management and development

ECR concepts and its implementation benefits have been known since the early

1990s [31,32], but it is not as widespread as expected. Although many firms in the

grocery sector are using ECR-related concepts, most of them are not applying the

total ECR concept, either not considering certain elements or only partly imple-

menting them [33].

Barriers of implementing ECR are mostly organizational [30]. Haben [34]

argues that these organizational obstacles could be both cultural and functional. He

believes that traditional top-down organizations in which every function is operated

separately, and measurement systems which assess efficiency of parts individually

without attention to whole system, are the major impediments of ECR implementa-

tion and building trust between different parts.

4.2.3 Vendor-Managed Inventory

Vendor-managed inventory (VMI), also called co-managed inventory (CMI), is an

agreement in which monitoring, planning, and managing inventory is done by the


supplier in exchange with real-time information. In fact in VMI, retailer provides

vendor with real time point of sale data and instead vendor takes the responsibility

of monitoring, holding and managing inventory for retailer.

VMI was first implemented in the 1980s by WalMart and Procter & Gamble

[35]; after that, many other companies from different industries used it. VMI’s

most important features are short replenishment lead times and frequent and punc-

tual deliveries that optimize production and transport scheduling [36].

In traditional systems, customers place orders on their suppliers. Although this

seems logical, significant inadequacies magnified the need for efficient systems.

Conventional systems are mostly based on forecasting because suppliers have

no advance warning of orders; as a result, a supplier must carry unnecessary safety

stocks. However, the supplier often encounters unforeseen orders, which leads to

frequent changes of their production and distribution schedules [3]. Thus, custo-

mer’s real-time information substitutes for orders; instead, the supplier takes the

responsibility for monitoring and managing the customer’s inventory.

VMI system has benefits for both supplier and customer. Benefits for customers

are higher product availability and service level and diminished stock-out risk,

while inventory levels and monitoring and managing costs are reduced significantly

[35,37].

As suppliers have access to demand and inventory data, planning and scheduling

of production, distribution, and replenishment can be done better [38], and ulti-

mately the potential for stock outs is significantly reduced. VMI can also lead to

the appropriate use of production capacity [35] and a reduction in the bullwhip

effect [39,40].

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