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SCM 7 Logistics Cost
SCM 7 Logistics Cost
Logistic Cost
in Industry
Logistics Cost
Plays very important role
◦ cutting down overall operational cost
Gives focus on
◦ reduction of material cost
Will help
◦ In reducing the cost of product
◦ Increases the overall profitability of the plant.
Capital Cost
Incurred Inventory cost carried by the Plant and inventory in
transit.
It consists of
◦ raw material,
◦ WIP,
◦ finished goods,
◦ warehouse inventory,
◦ indirect material inventory including machine spares
◦ Trade goods Inventory
◦ Special Inventory
Capital Cost
◦ Procurement , Customer order planning & Production
planning team plays important role in optimizing
inventory levels in the Supply Chain
Capital Cost
◦ The concept of daily Milk run should be developed for getting
the parts from Suppliers
◦ The source team should work for reducing transit lead time
both for imports & local suppliers.
◦ All local parts should be brought thru daily milk run from
Suppliers .
Capital Cost
◦ All B & C class parts to be stored as per Defined Min/Max
stocking policy
Capital Cost
◦ Introduce Pull Concept at Customer Warehouse &
dispatch only those parts which are consumed by
Customer
Freight cost
Major contributor of logistic cost.
Consists of following category of Freight :
◦ Special Transport within India
Air mode, Courier ,Special Vehicle
◦ Special transport from Outside India
A service ,Flash service ,Unplanned Air freight
◦ Normal Transport
Road Transport ,Sea Mode
Freight cost
In case of inbound /Outbound freight (within India)
Need to have good quality of transporter who can give
best service with minimum cost.
This will be possible when we start developing following
KPI’s.
Packaging Cost
Plays an important role in logistic cost.
Finished products must be packed in such a way that it
reaches to the customer without any damage and pilferage.
Good quality of packing plays important role in customer
satisfaction
We can find improved ways of packaging reducing cost.
Reduction in packing weight also leads to reduction in
freight cost. In case of Export Consignments it can play a
major role .
Packaging Cost
The packaging cost can be minimized by following methods
◦ Plan & convert corrugated boxes to returnable packaging.
◦ Delivery of products with the aim of proper condition and quantity &
correct documents avoids the irritation to customer.
Customs
◦ Many of the industries are importing lot of material
Customs
◦ Efforts are required on localization of imported parts.
◦ Due to high lead time of import parts, there is high risk of non-
moving/slow moving inventory due to fluctuation in demand
and localization will help in reducing this risk.
We have to work in
◦ improving productivity of employees
◦ planning supermarket concept in warehouse
◦ reduction transit lead time using latest technology like RFID ,Bar
coding ,Alpa scan.
Hardness
Action fields Description of measure Degree YTD CF03 CF05 CF09 Owner Comments
(HG)
1. Procurement Reduction in capital charges 5 200 200 150
Localization Localization projects
2. Goods receipt, 3. Incoming 0 0 0 0
inspection
3. Warehouse 0 0 0 0
Localization projects
Reduction in import air freight due saving start from July
to localization onwards
Localization projects
saving start from July
Localization onwards
7. Modification of contracts Sub Total 0 0 0 0
Optimization of vehicle
Re-negotiation of cost paid to 3PL utilization for milk run