In this assignment, explain how the concepts in the chapter would affect your countries. You should identify the key ideas in the chapter, then explain how they apply or do not apply in each of these 3 countries.
South Korea
Bosnia Herzegovina
Uzbekistan
This post should be the equivalent of 1-1.5 single-spaced pages in APA format.
At least five paragraphs on a page.The Little Black Book of Supply Chain
57
Logistics and the Total Cost Concept
Crossing Boundaries of Get, Use, and Dispose
In his 1975 doctoral dissertation, Doug Lambert focused on inventory carrying costs, but he
put them in the context of other logistics costs like warehousing, lot sizing, transportation, and
customer service (Lambert, 1975). Later, in a top-selling textbook, Lambert and Jim Stock
assembled a more detailed total cost model. It showed the links to marketing and added order
processing and information systems to the logistics portion of the model (Stock and Lambert,
2007). We take a similar approach in our overview here of logistics.
You should not consider costs in one logistics category without considering the others.
In the opening vignette, the issue was trading off transportation costs for inventory carrying
costs. As Lambert’s dissertation pointed out, you can’t consider that tradeoff if you don’t
know your inventory carrying costs (Lambert, 1975). Inventory carrying costs tend to be
higher than most people think they are. Second, the relationship between logistics cost categories is not always a tradeoff. Sometimes the categories move together.
Let’s take the relationships between five subcategories in logistics. Each of these gets a
chapter later in the book: customer service (Chapter 6), Inventory (Chapter 8), transportation
(Chapter 9), warehousing (Chapter 10), and information systems (Chapter 11). Those chapters
look at how to manage those functions. This chapter concentrates on costs and the relation-
ship between these functions. The chapter is partly an introduction to logistics and partly an
analysis of cost tradeoffs and relationships.
We examine these categories as cost centers, but each is also host to activities. We
briefly covered the total cost concept in Chapter 2, but we expand on each area here. This
chapter uses the term ‘warehouse’ to cover a range of facilities—fulfillment centers, distribution centers, and warehouses. We use it to mean any facility used to store goods for use or sale,
even if the storage period is short.
Customer Service
We can measure the financial impact of customer service failures. We have the financial
models that let us calculate the cost of a lost customer, the cost of a lost sale, and the cost of a
backorder. The problem is that we often don’t have the data. We could use a seven-year win-
dow in the model for Net Present Value and come up with a dollar figure for a lost customer.
That is, we could if we knew that we lost the customer. In some B2B settings, customers tell you without hesitation. “We are leaving. We won’t renew the contract. You missed
too many delivery times.” Since you probably have data on this former customer, you could
project the numbers for their hypothetical future sales. This knowledge might give you a
workable estimate of the cost of the lost customer.
58
The Little Black Book of Supply Chains
Often companies don’t k
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