Logistics Cost

In a competitive market, firms require more accurate and detailed logistics cost information from their cost accounting systems to work out the cost-benefits analysis of their logistics strategies in order to design a cost-effective supply chain. Logistics managers require detailed information to determine how different products, customers or supply channels affect the costs of

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Traditional Logistics Costing Method

Logistics is a source of competitive advantage. According to Porter, with cost leadership the busi­ness firm can gain competitive edge over its business rivals. Logistics has much scope for cost reduction and enhance the customer service simultaneously. Hence, logistics management must understand how the behaviour of one cost differs from the other. The conventional

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Logistics Activity-Based Costing

Activity-based costing is defined as: “[a] methodology that measures the cost and performance of activities, resources, and cost objects. Resources are assigned to activities, then activities are assigned to cost objects based on their use. Activity-based costing recognizes the causal relationships of cost drivers to activities.”2 ABC assumes that activities cause cost and that

Implementation of ABC in Logistics

Implementation of ABC can provide greater visibility of the profitability impacted by differ­ent products, customers or supply channels. The company can more accurately trace costs and determine areas generating the greatest profit or loss. The product and customer profitability analysis performed by firms using ABC has significantly altered management perceptions. Prof­itability analyses using ABC

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Logistics Performance Measurement

Performance measures appear as a logical consequence of an ABC system. Activity descriptions include financial and non-financial information. The financial view indicates the costs or resources necessary for performing the activity. The non-financial view describes the activity in terms such as the time required, quality, number of transactions, or schedule attainment. The company can

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Advantages of ABC to Logistics

ABC appears well suited for costing and measuring the performance of logistics processes. Many logistics costs remain buried in overheads; and logistics managers do not have adequate visibility or control over their costs. ABC would more clearly depict the critical linkage existing between corporate profitability and logistics costs and performance. Logistics confronts many of

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Forecasting Models for Optimization in Logistics

A forecast is an estimate of the future level of some variable. The variable is most often demand, but can also be supply or price. Forecasting is often the very fi rst step organizations must go through when determining long-term capacity needs, yearly business plans, short-term operations and supply chain activities. It would be

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Linear Programming for Optimization in Logistics

Linear programming (LP) is the central tool of mathematical programming. LP models are flexible enough to adequately describe many realistic problems arising in modern industrial settings, while at the same time take advantage of the considerable expertise in computational linear algebra that has been developed during the last 50 years. As a result, LP

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Assignment Problems for Optimization in Logistics

When a problem involves the allocation of some resources to different tasks, it comes under the purview of assignment problems. This is a special class of linear programming problem. The objec­tive of the assignment problem is to determine the optimum assignment of given tasks that a set of workers can perform with varying efficiency,

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Transportation Model for Optimization in Logistics

Transportation problem is a special type of linear programming problem and typically involves a situation where goods are required to be transferred from some sources or manufacturing plants to some distribution centres, markets or warehouses at minimum cost. Typically in such a problem, the matrix gives the sources row-wise and the destinations are given

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Queuing Theory

The queuing solution is suitable for solving a service-oriented problem where the customer arrives randomly to avail the service. In this service, time is a random variable. In a typical queuing situ­ation, customers arrive to avail the service at a service system, enter a waiting line, receive service and then leave. The queuing model

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Route Planning

Maintaining a low-cost route structure that meets both business constraints and customer service requirements is critical to the success of a demand-driven supply chain. For supply chain management (SCM), route planning is what you need to create the most efficient logistical routing plans to obtain the best results in asset utilisation and cost cutting.

Inventory Models

Inventory (stocks) is an integral part of every business operation. Inventories occur in all forms and for the most diverse purposes. In applications involving inventory, the manager must answer two important questions: 1. How much should be ordered? and 2. When should it be ordered? The inventories are normally considered as goods for sales,

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Simulation for Optimization in Logistics

According to T.H. Taylor, “Simulation is a numerical technique for conducting experiments on digital computers, which involves certain types of mathematical and logical relationships necessary to describe the behaviour and structure of a complex real-world system over an extended period of time.” When decisions are to be taken under conditions of uncertainty, simulation can

Need for Organization of Logistics

The traditional approach to managing a company was to take each functional area in isolation. So, the production manager managed his function to achieve his objective, which was probably achiev­ing the lowest unit cost of production. This was done by producing long runs of the same prod­uct. It invariably meant building up stocks of

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Drivers of Logistics Organizational Structure

The organizational structure depends on the business strategy the firm pursues to achieve the desired organizational goals. 1. Process This type of organization tries to achieve the maximum efficiency in the movement of goods from a raw materials state through work in process to a finished-goods state. Here, the organization is likely to focus

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Factors Influencing Logistics Organizational Structure

The following factors influence the formation of an organization structure. These factors can be classified into two categories: internal and external. Internal factors cover size of the organization, strategy evolved, management philosophy and the degree of control. Organization structure is impacted by various factors as shown in Figure 22.6 to enhance the organizational performance.

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Logistics – Partners and Organization

Where logistics is critical to strategy but logistics management competency is low, finding a firm with which to partner may provide significant benefits. A strong partner may provide facilities located in new and existing markets, a transportation capability and administrative expertise not available within the company. Business firms have been using the services of

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Evolution in Logistics Concepts

Prior to 1950, the logistical function was part of the physical distribution system in marketing. It was regarded as one of the supportive functions with cross-functional linkages and reporting, result­ing in repetition and duplication of work and resource wastages. This was a production-focused approach born out of the prevailing economic abundance. The movement of

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Logistics Organization Design Principles

For logistics and supply chain management, a suitable organization structure needs to be devel­oped so as to achieve the desired performance level. The organizational structure should be con­sistent with the firm’s logistics strategy so that the desired performance can be achieved to fulfil the corporate vision and mission. The following commonly used organization principles