STUDENTS' CORNER - 238

Logistics Cost

In this session, we will discuss, rather spend some time on the logistics cost and later its relation to transport.

Almost all business activities that attract expenses can be considered sources of logistics cost. Say, you are a manufacturer of a product; it means your business covers the entire range of activities, beginning from procuring raw materials for your product to the final distribution of the products that reach the customer. Every activity of the business is cost to the company, as we normally account it.  You begin with the purchase of the raw materials; then, you convert them into your products. Necessarily, the products must be transportable; it means they must be put into a package. Then, you send the packaged products through some intermediate agents to a warehouse where you store your products; then, from the warehouse, the products move to the final destination that is your customer through some retailer.

All these activities demand expenses; and, if you are what is generally referred to, efficient, then, your expenses are never more than required under normal circumstances.

Efficiency actually means getting things done faster, better and cheaper than others without compromise on quality. It implies that every business activity demands this inevitable efficiency.

You might be aware of the essential Rs about logistics management; just to recall for the sake of continuity: Right product, Right quantity, Right condition, Right place, Right time, Right price and the Right customer.  Every R makes absolute demand on efficiency. If one R is defective, it is like a weak link in the chain whose strength determined based on this weak link.  If all Rs are undertaken with efficiency, rest assured the cost also will be Right.  Business people know very well in their bones that theory is one thing and practical performance is another thing.

We will briefly discuss each R from the point of view of the cost  from our next session.