Quiz

Subject “Economics of logistics”

Variant 4

1. Fill in the table.

Logistics logistics Resources cost drivers logistics cost Logistics losses 
business operations
process
Picking Trained Number of visits Picking and packing When the picking
personnel, to pick location costs directly depend on error is not reported, it
technical and and percentage of the merchant’s number results in a storage
spatial resources back orders of Stock Keeping Units loss based on the
(SKUs), the size of the item's value
product, the number of Picking errors impact
units per order, and the customer satisfaction
level of customization of and ultimately, your
the packaging. revenues and profit
margins
Order Packing Human, Number of orders Improper packing of
processing financial and picked goods results in
technical damage to export
resources cargo

Shipping Trained Fuel Prices shipping costs highly A logistics loss of

personnel, Labor Costs depend on the effort shipping means that a
technical Truck/Trailer and involved in vessel is lost–either
resources other equipment transportation and sunk or destroyed or
costs handling products, they that the cost of
Federal vary depending on the repairing it is too
Restriction via amount that is shipped expensive to
Regulation per year undertake

2. Identify the basic dependencies "trade-off" and "trade-up", which may occur in the logistics business
process (according to task 1). 
Trade-off
 Businesses and consumers want 100% of orders to be 100% accurate. If not done properly,
this can create added cost and reduce customer service levels. In other words, it slows down
the order fulfillment process. The tradeoff is plainly apparent when there is $8.00-$10.00 of
labor expended fulfilling a $20.00-$30.00 order. All the profit is used up to make sure the
order is accurate. Modern order fulfillment solutions can be applied to lessen fulfillment
costs while keeping the accuracy near 100%.
Trade-up
 Increased order volumes generally drive economies of scale that result in increased
efficiency. In order processing that efficiency is fueled by creating and processing large
batches of orders at one time.
 Packing orders for shipping are lessening due to automation technology advancements.
There is a tradeoff between packing orders fast and packing them well. Packing them well
means great materials and presentation to the consumer as well as maximizing the cube of
the shipping container and minimizing packaging materials used.

3. Define cost conflicts according to hierarchy levels. Fill in the table.

Cause of Subjects of Main challenges Consequences of conflict Ways to find a
conflict conflict solution to cost
(Who are the conflicts
subjects of this
conflict?)
Conflicts of 1 Level
st

Order Supplier Low price The low price does not

processing
materials, cover
resources and all expenses for
services supply of materials and
resources, therefore the
company
incurs losses Optimize the
Consumer The high price The consumer is not picking and
materials, satisfacted because of packing process
resources and possible delays as well as by using
services, possible high price automation
delays in order systems which
delivering enable the
reduction of
possible delays
Conflicts of 2 Level
nd

Order  Weak  Rude, Enhance

management Documentation unresponsive and customer
department  Unresponsive slow-to-respond service and
Customer customer support strengthen
Service team might be a documentation
real problem for
business
 Incompletete
documentation
leads to further
problems at
picking and
packing
department
Picking and  Missing  inefficient pick Utilizing mobile
packing Product and pack process technology to
department Information  Inaccurate improve
 Inaccurate inventory can lead inventory
Inventory to confusion in accuracy,
the order adopting
fulfillment business
process regarding intelligence to
the amount of utilize data
stock available
Conflicts of 3 Level
d

Shipping  Items are  Damage to goods There are many

department damaged in transit. One of technological
during the most common freight shipping
handling or problems with tools available
shipping cargo shipping is that improve
 Shipping costs damage to goods shipment
are during transit visibility with
real-time
 unreasonably  Delivery delays: tracking. With
high Another common digital tools
 Lack of problem with provided by a
knowledge cargo shipping is logistics service
about delivery delays provider (LSP),
international  Loss or theft of shipment can
shipping cargo: cargo theft deliver accurate
 Shipping route is a common shipment
disruptions problem in the statuses,
 Lost items shipping industry locations,
Warehouse  Inaccurate Inaccurate inventory Implementation
inventory causes picking problems of an automated
information as workers can go to a warehouse
 Inefficient location where the system
space product isn’t available
utilization Inefficient space
 Improper labor utilization can cause
management challenges in inventory
management for the
warehouse manager.

7. Develop a set of measures to optimize logistics costs and reduce the impact of cost conflicts arising
in a logistics company?

1. Eliminate costly errors. In logistics, errors occur regularly and often come at a cost. For example,
shipments may be non-deliverable due to flawed data, or containers may collect demurrage at ports
because import/export documentation isn’t complete. To avoid future errors and their associated
costs, logistics leaders must identify the source of errors and continuously improve their shipping
processes.
2. Evaluate value-added services. Most logistics providers perform some form of value-added
service. These services can be as simple as product labeling or as complex as full product
customization. Outsourcing certain tasks to the logistics provider is convenient, but logistics leaders
should always evaluate whether the convenience is worth it. There might be a more cost-effective
approach, such as completing the service in-house or through a supplier at an earlier point in the
supply chain.
3. Consolidate shipments. Shipment consolidation can be a tremendous cost saver. Logistics leaders
can align inbound and outbound transportation movements so all trucks and containers hold as
much capacity as possible.
4. Enhance internal collaboration. In addition to external collaboration, internal cross-functional
teams with other groups in the supply chain are a key factor for cost optimization. For example,
logistics leaders should know about changes in demand planning, so they can adjust transportation,
warehousing, and labor capacities in advance—and thus gain time to negotiate the best price.
5. Educate decision makers. The fifth action to reduce logistics costs internally is probably the most
important. Leaders must educate decision makers about what their decisions mean for logistics and
inform them about expenditures and trade-offs.