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Logistics and Supply Chain Management
Notes
Figure 2.2: Total Cost Warehousing Network
Total-cost
network
Total cost inventory cost
Total
Total
transportation
cost
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Number of locations
Source: Reji Ismail, (2008), “Logistics Management,” Excel Books
Logistics cost form an important part of the overall cost structure in any organization. Focus
needs to be on renegotiating freight and shipping rates, reduction in overall freight costs and
streamlining operations. Today logistics management has gained special attention because of
high emphasize on quality of goods and services as well as intense price competition which is
forcing companies to control the costs to survive in the market.
For lowering logistics cost one has to understand following:
Figure 2.3: Steps for Lowering Logistics Cost
Step 1 Determining the customer service targets and organizational
goals
Step 2 Computing current logistics costs
Benchmarking the cost for performing a given set of activities
Step 3
against the competitors in similar business
Developing lowest cost methods and implementing them to
Step 4
meet business needs
Source: Reji Ismail, (2008), “Logistics Management,” Excel Books
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