FACTORS AFFECTINGCOST AND IMPORTANCE OF LOGISTICS.
Introduction• Unpredictability and changeability.• Growth of competition• Competitive advantage. – Productivity advantage – Value advantage
Factors affecting logistics:• Competitive relationship and logistics.• Product relationship and logistics• Spatial relationship and logistics
Competitve relationships.• Firms contributions to cost position and differentiation.• Disaggregates to strategically relevant activities.• Changing consumer behavior.• Markets as well as products and services.• Reducing levels of inventory.
• 1) order cycle. – Operational performance deals with average order cycle time. – Shorter the order less inventory is required.• 2) substitutability. – Ability of two or more goods to be replaced. – Increases competition• 3) inventory effect. – Cost of lost sales is difficult to quantify.
• 4) transportation effect. – Logistics involves movement of products. – Cost varies with the choice of mode of transportation. – Can reduce cost on lost sales by spending more on transportation service. – Improved transportation result in lower inventory cost.
Product relationships.• Product characteristics have to be considered.• 1) dollar value. – Affects its warehousing cost, transportation cost etc• 2) density – Density increases, transportation cost decreases.• 3) Susceptibility to damage. – Increasing risk of damage warehousing and transportation cost ,material handling cost increases.
• Need for special handling. – Products which needs special handling will increase warehousing ,transportation and material handling cost.
Spatial relationships.• The location of manufacturers, suppliers etc plays integral part in decreasing the cost.• Without proper transportation community should be self sufficient.• Result may be lower variety of products, high price and insufficient utilization of natural resources.