Key Logistics Activities and Technologies Related to Logistics

2922 Words Mar 9th, 2013 12 Pages
Introduction
Logistics play a major role in our life. Most of the people might not be aware of the importance of logistics until there are problems appear. Under the pressure of arising competitive environment, most of the business entities are initiated to focus on the development of logistics. Logistics can be said as the transfers of goods and services from the point of origin to the point of consumptions effectively and efficiently in order to meet the requirement of the customers (Logistics World, n.d.). Logistics include the distributions of raw materials, in-progress inventories, finished goods and other related information. Successful logistics enable the business entities to deliver the goods and services consistently to the
…show more content…
In the industries now, most of the company will hold inventory to achieve economies of scale. Company usually purchase and transport all inventory at once to reduce their cost. This is because purchase in a huge amount will reduce the cost of per-unit price while having a full truckload shipment will reduce the cost of per-unit transportation. Then, company will also choose to have a greater plant capacity so that the per-unit manufacturing cost will be lower. However, holding inventory contributed a significant amount of expenses to the companies due to high storage costs, capital cost, service cost, risk cost, and some of the product can be obsolescence in short time. Therefore, the company might try to minimize the expenses by reducing the amount of inventory without interrupting the flow of the products to the customers. Since there is conflict between economies of scale with handling and warehousing costs, companies need to find a suitable way to balance of these two criteria. For instances, company can use Economic Order Quantity (EOQ) to determine the best amount of inventory to order (Stock & Lambert, 2000). The objective of every inventory planner is controlling the inventory they hold to meet the exact amount of customers’ demand. This is because either excess or shortage of inventory will bring up significant costs to the business affecting the operation and opportunities of the business (Management Study Guide, n.d.). In addition to
Open Document