Page 167 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes
Did u know? The typical logistical system in a firm seeks to develop and implement an
overall logistical competency that satisfies important customer expectations at a realistic
total-cost expenditure.
Logistical management is concerned with operations and coordination. Operations mean strategic
movement and storage. To complete the total operations mission attention must be given to
integrating physical distribution, manufacturing support, and procurement into a single logistical
process. Functioning as an integrated and coordinated process can best provide operational
management of materials; semi-finished components, and finished products moving between
locations, supply sources, and customers of a firm.
The mission of the logistical system is measured in terms of total cost and performance.
Performance measurement is concerned with the availability of inventory, operational capability,
and quality of effort. Logistical costs are directly related to required level of performance. The
greater the required performance, the higher is the total logistics cost. The key to effective
logistical performance is to develop a balanced effort of service performance and total-cost
expenditure.
The strategic integration of logistics is fundamental to a firms’s success. A firm may not opt to
differentiate competitively on the basis of logistical competency; it must perform logistical
responsibilities as part of the fundamental process of creating customer value. The relative
importance that a firm places on logistical competency will determine the degree of importance
on achieving internal and external integration.
Flexibility is important to logistical competency. Logistical flexibility results from integration
and from implementing time-based control techniques.
7.5.3 Four Logistics Concepts

The systems concept: The systems concept is mainly based on all functions of organization
working together to an maximize benefits. This concept sometimes requires certain
components of the organization to operate sub-optimally in order to achieve maximum
goals of the system.
The total cost concept: The total cost concept is based on the systems concept; goal
achievement is measured in terms of cost.

The after-tax concept: A variation of the total cost concept is the after-tax concept. The goal
of this concept is after-tax profit. This concept is becoming very popular because of the
many different national tax policies.
The trade-off concept: The trade-off concept links the system together in a way that is very
efficient, but can have trade-offs that might be inefficient. The advantages of such high
efficiency must be weighed against the risk involved.
Logistics is a system having a number of components, which can be combined in different
proportions to achieve a set goal.
The long-term objective is profitability, while the short-term objective is to survive competition
by recovering marginal costs.

7.5.4 Logistics Sub-systems

Logistical sub-systems encompass the following:

1. Physical Supply or management of flow of raw materials, spare parts, consumable stores
and machinery and tools from suppliers.

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