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Total Cost Approach

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Submitted By varsh19
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Explain the systems or total cost approach in logistics and argue( agree / disagree) how you think it adds significance to the world of business logistics

Business logistics refers to a group of related activities all involved in the movement and storage of products and information. business logistics is concerned with the inbound movement of materials and supplies, and the outward movement of finished products. its goal is the delivery of the finished products required by the marketing department to the point where they are needed, when the are needed, in the most economical fashion.

The flow of goods, services and information between the point of origin and the point of consumption or application involves the following activities:

1 Demand forecasting
2 Site selection and facility design
3 Procurement
4 Materials handling
5 Packaging
6 Warehouse management
7 Inventory management
8 Order processing
9 Logistics communications
10 Transport
11 Reverse logistics
12 Customer service

The total cost approach is generated the idea that all activities that are found within the moving and storing of goods and products need to be thought of as a whole, their total cost. It uses cost trade-offs, when logistics expenses may increase in one area while decreasing in others.

The main objective is to find the lowest cost options that will still provide the support for the customer services goals. When this approach is used in the decision making process it’s known as the total logistics concept.

Costs that may be involved in the total cost approach include: inventory cost
Inventory costs are directly affected by such factors as the mode of transport, the number of warehouses planned, the levels of inventory maintained to ensure a certain level of service, etc. The inventory costs are the cost of the money locked-up in the cost of goods, insurance,…...

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