LOGISTICS MANAGEMENT CONCEPTS

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M.COM First Year Tutor Marked Solved Assignment

Course Code: IBO – 05
Course Title: International Marketing Logistics
Assignment Code: IBO-04/TMA/2019-20
Coverage: All Blocks

IBO – 05 International Marketing Logistics Solved Assignment for 2019-20

Q1.) What are the three important concepts relevant to logistics management by an organization? Explain them briefly and state which one you regard as the best approach and why?

Ans: Logistics management is a supply chain management component that is used to meet customer demands through the planning, control, and implementation of the effective movement and storage of related information, goods, and services from origin to destination. Logistics management helps companies reduce expenses and enhance customer service.

The three important concepts relevant to logistics management by an organization are as follows:

1.) The Cost Trade-Offs

2.) The Total Cost Concept

3.) The Total System Concept

1.) The Cost Trade-Offs: According to this concept, various costs related to logistics management systems cannot be treated separately and a trade-off has to be created to achieve the objective of overall cost maximization. It is the recognition that cost patterns of various activities of the firm sometimes display characteristics that put them in economic conflict with one another, and involves balancing the conflicting costs. On the other hand, minimizing the cost of distribution would mean using cheaper and slower transport, fewer warehouses, and keeping low level of inventories.

For example, a firm may increase the number of warehouses(involves investment/opportunity cost). This may help in reducing the transportation cost but at the same time, it may elevate the inventory and order processing costs. Thus, a firm has to draw balance/trade-off between various conflicting resources.

2.) Total Cost Concept: According to this concept, various logistics costs must be considered 'Collectively' and counterbalanced to attain optimum cost level while choosing various alternative courses of action with respect to product distribution. The total cost envisages the use of total cost while choosing the alternative course of action in respect of the physical distribution of the products. In case the total cost is not analyzed, there is every likelihood of taking a wrong decision.

For example, while taking choice for transportation type, a firm has to consider all other costs(inventory holding, warehousing cost) associated with a given transportation type and not just transportation costs.

3.) Total System Concept: In this, all components of the physical system which impact the market at the same time are considered. The total system concept is the most commonly used concept. It is an approach to managing the physical distribution system of products in its total form as a system consisting of several interconnected tasks operating together to achieve the given objectives. Thus, the total system concept of physical distribution envisages the integration of all the components of physical distribution as parts of a whole whose market impact is maximum when they operate in synergy.

Thus, the total system approach is to look broadly at the distribution problem in order to uncover relationships that, if neglected, could lead to suboptimal decisions. This approach is particularly important to logistics because of much of logistics management interfaces with other functional areas within and beyond the legal boundaries of the firm.