What is a Cost Trade-off?
It is the interrelationship among system variables in which a change in one variable affects other variables’ costs. A cost reduction in one variable may increase costs for other variables, and vice versa.
What is Total Logistics Costs Trade-off?
Total logistics costsThe factors associated with the acquisition, stora... consider the whole range of costs associated with logisticsThe process of planning, implementing, and control..., including transport and warehousingThe act of storing goods that will be sold or dist... costs and inventory1) Raw materials, work in process, finished goods,... carrying, administration, and order processingActivities associated with filling customer orders... costs. Administration and orderAn order is a request to ship products, following ... processing costs are relative to the total volume being handled. However, for the same volume being handled, transport and warehousing costs will vary according to the adopted distributionOutbound logistics, from the end of the production... strategies.
The above graph portrays a simple relationship between total logistics costs and two important cost components; transport and warehousing. Based upon the growth in the shipment1) Lot of freight tendered to carrier by consignee... size (economies of scale) or the number of warehouses (lower distances), a balancing act takes place between transport costs and warehousing (inventory carrying) costs. There is a cutting point representing the lowest total logistics costs, implying an optimal shipment size or number of warehouses for a specific freightGoods being transported from one place to another.... distribution system. Finding such a balance is a common goal in logistical operations. It depends on numerous factors, such as if the good is perishable, the required lead time, and the market densityA physical characteristic measuring a commodity's ...
