What are three important concept relevant to logistic management by an organization
Answers
Logistics is the process of planning and arranging the movement or transportation of goods and services from the production factory to the selling points or market.
Logistics plays an important role in the supply chain and it is also used to plan and coordination the transfer of goods safely and effectively.
Logistics is a support process for manufacturing and marketing operations.
Other important concepts that are relevant to logistic are,
Total cost concept which states that all various logistic costs must be considered.
Total system concept which means all physical system which affects the market simultaneously must be considered.
The cost trade-off system implies that all cost associated with logistics management to be treated separately and the cost of warehousing should be considered before the movement is carried out
Answer:
The three important concept relevant to logistics management by an organization are as follows:
1)The Cost Trade Offs
2)The Total Cost Concept
3)The Total System Concept
Explanation:
1)The Cost Trade Offs-According to this concept,various cost related to logistics management system cannot be treated separately and a trade off has to be created to achieve the objective of overall cost maximization. It is the recognition that cost patterns of various activities of the firm sometimes display characteristics that put them in economic conflict with one another, and involves balancing the conflicting costs. On the other hand,minimizing the cost of distribution would mean using cheaper and slower transport, fewer warehouses and keeping low level of inventories.This would , of course,bring down the cost of distribution but, at the same time,it may bring down the level of customer service also.Thus the firm have to strike a balance between these two aspects.To do that,they have to first set the level up to which would extend service to the customers.For example, a firm may increase the number of warehouses(involves investment/ opportunity cost). This may help in reducing the transportation cost but at the same time it may elevate the inventory and order processing costs. Thus a firm has to draw balance/trade off between various conflicting resources.
2)Total Cost Concept-According to this concept,various logistics costs must be considered 'Collectively' and counter balanced to attain optimum cost level while choosing various alternative courses of action with respect to product distribution.It is the recognition that conflicting costs should be examined collectively and use the total cost of all logistics activities taken together while choosing the course of action in respect of the physical distribution of products.The total cost envisages the use of total cost(and not the cost of each individual component) while choosing the alternative course of action in respect of the physical distribution of the products. In case total cost is not analyzed, there is every likelihood of taking a wrong decision. For example, while taking choice for transportation type, a firm has to consider all other costs( inventory holding, warehousing cost) associated with a given transportation type and not just transportation costs.
3)Total System Concept-In this all components of physical system which impact the market at the same time are considered. The total system concept is most commonly used concept.It is an approach to managing the physical distribution system of products in its total form as a system consisting of several interconnected tasks operating together to achieve the given objectives. It represents a philosophy of distribution management that considers all those factors in a decision that are in some way affected by the outcome of the decision.Thus, tile system concept of physical distribution envisages integration of all the components of physical distribution as parts of a whole whose market impact is maximum when they operate in synergy. Another words,it is looking at the managing distribution activities as an integrated exercise in which decisions in respect of different components are taken not in isolation of one another but as a whole.