Asked by Sakina Pervez on Jul 18, 2024
Verified
Total logistics costs are the sum of inventory,transportation,and facility costs for a supply chain network.What occurs as the number of facilities increases?
Total Logistics Costs
Encompass all expenses related to the planning, implementing, and controlling of the efficient flow and storage of goods, services, and related information.
Supply Chain Network
An infrastructure of businesses, staff, processes, insights, and support systems designed to move a product or service from its source to the consumer.
Facility Costs
Expenses associated with operating physical buildings such as warehouses and factories, including rent, utilities, and maintenance.
- Understand the components and significance of total logistics costs in supply chain management.
- Comprehend the impact of facility number changes on total logistics costs.
Verified Answer
AS
Anumalasetty Sai ManikantaJul 24, 2024
Final Answer :
Total logistics costs first decrease and then increase as the number of facilities increases.Each firm should have at least the number of facilities that minimize total logistics costs.For example,Amazon has more than one warehouse primarily to reduce its logistics costs (and improve response time).If a firm wants to reduce the response time to its customers further,it may have to increase the number of facilities beyond the point that minimizes logistics costs.A firm should add facilities beyond the cost-minimizing point only if managers are confident that the increase in revenues because of better responsiveness is greater than the increase in costs because of the additional facilities.
Learning Objectives
- Understand the components and significance of total logistics costs in supply chain management.
- Comprehend the impact of facility number changes on total logistics costs.