Mid-Level Technical Logistics: Inventory, Transport, and Network Decisions
Quantitative toolkit
Mid-level candidates must compute and interpret rather than merely define. Expect questions on EOQ (sqrt of 2DS/H, where D is annual demand, S is order cost, H is annual holding cost per unit), reorder point (demand during lead time plus safety stock), safety stock from a service level (z times standard deviation of demand during lead time), and fill rate versus cycle service level. Know that raising service level from 95 to 99 percent costs far more than 90 to 95 because z rises nonlinearly.
Transportation and mode selection
Understand mode characteristics: rail for heavy bulk over long distance, truck for flexibility and short haul, air for high value-to-weight and urgency, intermodal for long-haul container moves, pipeline for liquids. Know TL versus LTL economics: LTL pays for terminal handling and shares space, so rates per pound fall as shipment size grows until TL is cheaper. Incoterms and freight terms (prepaid versus collect) decide who controls the move, which affects consolidation leverage.
Network and inventory policy
Be ready to reason about ABC classification (Pareto: roughly 80 percent of value in 20 percent of SKUs), cycle counting, cross-docking, postponement, and pooling. Distinguish periodic from continuous review; continuous review uses a reorder point, periodic review orders up to a target level and carries more safety stock for the same service.
Traps
- Using average demand instead of demand during lead time in the reorder point.
- Forgetting to convert annual holding cost to a per-unit basis before EOQ.
- Confusing fill rate (units shipped complete) with cycle service level (probability of no stockout per cycle).
- Assuming higher service level always pays; marginal cost rises steeply.
Worked example
Annual demand 10,000, order cost 50, holding cost 4 per unit per year. EOQ = sqrt(2 x 10,000 x 50 / 4) = sqrt(250,000) = 500 units. Order about 20 times per year.