This detail is necessary to determine the incremental costsĪssociated with changes in the logistics system. inbound, outbound, by vendor, by customer, by mode, by carrier, by Transportation CostsĬosts associated with the transportation function can be identified in total and be Least total cost method of logistics while keeping customer service objectives in mind. Profitability or increase expenditures for other components of the marketing mix in anĮffort to maintain or improve market position. Likewise, with decrease in customer service levels, management can improve Mix - promotion, for example - in order to maintain profits with a similar sales Management could also reduce spending in some other to component of the marketing Total system costs brought about by an increase in customer service levels.
Judgment about the likelihood of recovering, through increased sales, the increase in Margin lost by not meeting current sales demand, but the present value of all futureĬontributions to profit forfeited when a customer is lost due to poor availability, longīy comparing total logistics system costs, management can make knowledgeable The costĪssociated with alternative customer service levels is the cost of lost sales( not only the Most business people find it difficult, if not impossible to measure this cost. So the main costs which are involved in logistics Only by viewing logistics as an integrated system and minimizing its total cost given theįirms customer service objectives. Effective management and real cost savings can be accomplished Individual system, because reduction in one cost invariably lead to increase the cost of So logistics must be viewed as an integrated system rather than the Management should strive to reduce the total cost of logistics rather than the cost ofĮach activity. Total cost approach to logistics is the key to managing the logistics function. Home » Logistics Management » Total Cost Approach to Logistics Total Cost Approach to Logistics
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