Page 159 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes Examples of fixed costs: Terminal facilities, Transport equipment, carrier administration, Roadway
acquisition and maintenance [Infrastructure (road, rail, pipeline, navigation, etc.)] etc.
Examples of variable costs include: Fuel, Labor, Equipment maintenance, handling, pickup &
delivery, taxes etc.

Note Cost structure varies by mode.
Rail

High fixed costs, low variable costs
High volumes result in lower per unit (variable) costs
Highway
Lower fixed costs (don’t need to own or maintain roads)

Higher unit costs than rail due to lower capacity per truck
Terminal expenses and line-haul expenses
Water
High terminal (port) costs and high equipment costs (both fixed)

Very low unit costs
Air
Substantial fixed costs
Variable costs depend highly on distance traveled

Pipeline
Highest proportion of fixed cost of any mode due to pipeline ownership and
maintenance and extremely low variable costs

Minimum Damages to Product

Logistics Management must ensure that no/absolute damage happens while the product is in
the custody of Logistics. Damage Costs incurred during transportation should be considered as
a throughput cost, since they will continue regardless of inventory levels.

Did u know? Damage attributed to Warehouse operation is usually charged to the
Warehouse Operator, if the cost is unreasonable.
Quick Response [QR]

Quick Response is generally a retail sector strategy, but can be tried by other industries too.
Quick Response applies JIT principles throughout the entire supply chain. The concept works by
combining Electronic Data Interchange (EDI) with Bar Coding Technology, so that Customer
Sales are tracked immediately. This information is immediately passed on to the Manufacturer
and from there to the suppliers to enable all the partners to plan, produce and deliver the
replenishments to meet Customer Requirements quickly.

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