A model for managing logistics costs throughout a product’s life cycle: a case study of a multinational manufacturing company
Abstract
The goal of the study is to develop a model that focuses on managing logistics costs at all stages of a product’s life cycle. The model includes several different cost components and provides a wider coverage of individual processes, as logistics costs are present in different areas of a company’s operations. The applicability of the proposed method was tested in a multinational company that manufactures furniture fittings on a randomly selected product. The test results provide a theoretical and practical confirmation of the necessity to manage the logistics costs for an individual product, since other models are focused exclusively on the cost optimisation of individual logistics processes. The model therefore complements the existing knowledge and represents a practical tool for logistics professionals that enables more efficient logistics costs planning at an early stage in the development of a product, which can result in the long-term reduction in the total costs of logistics and improve the quality of business processes.
First published online 28 August 2019
Keyword : logistics costs, logistics processes, logistics costs management, product’s life cycle, manufacturing company, case study
How to Cite
Škerlič, S., & Sokolovskij, E. (2019). A model for managing logistics costs throughout a product’s life cycle: a case study of a multinational manufacturing company. Transport, 34(5), 517-528. https://doi.org/10.3846/transport.2019.11080
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Ballou, R. H. 2003. Business Logistics: Supply Chain Management. Prentice Hall. 816 p.
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Berman, O.; Wang, Q. 2006. Inbound logistic planning: minimizing transportation and inventory cost, Transportation Science 40(3): 287–299. https://doi.org/10.1287/trsc.1050.0130
Bertazzi, L.; Speranza, M. G. 1999. Models and algorithms for the minimization of inventory and transportation costs: a survey, Lecture Notes in Economics and Mathematical Systems 480: 137–157. https://doi.org/10.1007/978-3-642-58568-5_7
Bertazzi, L.; Speranza, M. G.; Ukovich, W. 1997. Minimization of logistic costs with given frequencies, Transportation Research Part B: Methodological 31(4): 327–340. https://doi.org/10.1016/S0191-2615(96)00029-X
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Blumenfeld, D. E.; Burns, L. D.; Diltz, J. D.; Daganzo, C. F. 1985. Analyzing trade-offs between transportation, inventory and production costs on freight networks, Transportation Research Part B: Methodological 19(5): 361–380. https://doi.org/10.1016/0191-2615(85)90051-7
Burns, L. D.; Hall, R. W.; Blumenfeld, D. E.; Daganzo, C. F. 1985. Distribution Strategies that minimize transportation and inventory costs, Operations Research 33(3): 469–490. https://doi.org/10.1287/opre.33.3.469
Chow, G. 2007. A total logistics cost approach to measuring collateral benefits of security and supply chain improvements at international gateways, in Canada’s Asia-Pacific Gateway and Corridor Initiative, 2–4 May 2007, Vancouver, British Columbia, Canada, 1–19.
Ghodsypour, S. H.; O’Brien, C. 2001. The total cost of logistics in supplier selection, under conditions of multiple sourcing, multiple criteria and capacity constraint, International Journal of Production Economics 73(1): 15–27. https://doi.org/10.1016/S0925-5273(01)00093-7
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Juntunen, J.; Juntunen, M.; Juga, J. 2015. Latent classes of service quality, logistics costs and loyalty, International Journal of Logistics Research and Applications: a Leading Journal of Supply Chain Management 18(5): 442–458. https://doi.org/10.1080/13675567.2014.980793
Kiisler, A. 2008. Logistics in Estonian business companies, Transport 23(4): 356–362. https://doi.org/10.3846/1648-4142.2008.23.356-362
Kivinen, P.; Lukka, A. 2004. Value Added Logistical Support Service: Logistics Cost Structure and Performance in the New Concept. Lappeenranta-Lahti University of Technology, Finland. 82 p.
Kim, G.; Wu, K.; Huang, E. 2015. Optimal inventory control in a multi-period newsvendor problem with non-stationary demand, Advanced Engineering Informatics 29(1): 139–145. https://doi.org/10.1016/j.aei.2014.12.002
Kutanoglu, E.; Lohiya, D. 2008. Integrated inventory and transportation mode selection: a service parts logistics system, Transportation Research Part E: Logistics and Transportation Review 44(5): 665–683. https://doi.org/10.1016/j.tre.2007.02.001
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McCarthy-Byrne, T. M.; Mentzer, J. T. 2011. Integrating supply chain infrastructure and process to create joint value, International Journal of Physical Distribution & Logistics Management 41(2): 135–161. https://doi.org/10.1108/09600031111118530
Miranda, P. A.; Garrido, R. A. 2009. Inventory service-level optimization within distribution network design problem, International Journal of Production Economics 122(1): 276–285. https://doi.org/10.1016/j.ijpe.2009.06.010
Perera, S.; Janakiraman, G.; Niu, S.-C. 2018. Optimality of (s, S) inventory policies under renewal demand and general cost structures, Production and Operations Management 27(2): 368–383. https://doi.org/10.1111/poms.12795
Petraška, A.; Čižiūnienė, K.; Jarašūnienė, A.; Maruschak, P.; Prentkovskis, O. 2017. Algorithm for the assessment of heavyweight and oversize cargo transportation routes, Journal of Business Economics and Management 18(6): 1098–1114. https://doi.org/10.3846/16111699.2017.1334229
Petraška, A.; Čižiūnienė, K.; Prentkovskis, O.; Jarašūnienė, A. 2018. Methodology of selection of heavy and oversized freight transportation system, Transport and Telecommunication 19(1): 45–58. https://doi.org/10.2478/ttj-2018-0005
Rybakov, D. S. 2018. A process model of a logistics system as a basis for optimisation programme implementation, International Journal of Logistics Research and Applications: a Leading Journal of Supply Chain Management 21(1): 72–93. https://doi.org/10.1080/13675567.2017.1361910
Rybakov, D. S. 2017. Total cost optimisation model for logistics systems of trading companies, International Journal of Logistics Systems and Management 27(3): 318–342. https://doi.org/10.1504/IJLSM.2017.084469
Sajadieh, M. S.; Thorstenson, A.; Jokar, M. R. A. 2010. An integrated vendor–buyer model with stock-dependent demand, Transportation Research Part E: Logistics and Transportation Review 46(6): 963–974. https://doi.org/10.1016/j.tre.2010.01.007
Santa, R.; Bretherton, P.; Ferrer, M.; Soosay, C.; Hyland, P. 2011. The role of cross-functional teams on the alignment between technology innovation effectiveness and operational effectiveness, International Journal of Technology Management 55(1/2): 122–137. https://doi.org/10.1504/IJTM.2011.041683
Shang, K.-C. 2004. The effects of logistics measurement capability on performance, Asia Pacific Management Review 9(4): 671–687. https://doi.org/10.6126/APMR.2004.9.4.06
Speranza, M. G.; Ukovich, W. 1994. Minimizing transportation and inventory costs for several products on a single link, Operations Research 42(5): 879–894. https://doi.org/10.1287/opre.42.5.879
Stock, J. R.; Lambert, D. M. 2000. Strategic Logistics Management. McGraw-Hill/Irwin. 896 p.
Strack, G.; Pochet, Y. 2010. An integrated model for warehouse and inventory planning, European Journal of Operational Research 204(1): 35–50. https://doi.org/10.1016/j.ejor.2009.09.006
Škerlič, S.; Muha, R. 2016. The importance of systems for controlling logistics costs in the supply chain: a case study from the Slovenian automotive industry, Promet – Traffic & Transportation 28(3): 299–310. https://doi.org/10.7307/ptt.v28i3.1881
Škerlič, S.; Muha, R.; Logožar, K. 2016. A decision-making model for controlling logistics costs, Tehnički Vjesnik – Tehnical Gazette 23(1): 145–156. https://doi.org/10.17559/TV-20141015121023
Tancrez, J.-S.; Lange, J.-C.; Semal, P. 2012. A location-inventory model for large three-level supply chains, Transportation Research Part E: Logistics and Transportation Review 48(2): 485–502. https://doi.org/10.1016/j.tre.2011.10.005
Waller, M. A.; Fawcett, S. E. 2012. The total cost concept of logistics: one of many fundamental logistics concepts begging for answers, Journal of Business Logistics 33(1): 1–3. https://doi.org/10.1111/j.0000-0000.2011.01033.x
Wang, X.; Cheng, T. C. E. 2009. Logistics scheduling to minimize inventory and transport costs, International Journal of Production Economics 121(1): 266–273. https://doi.org/10.1016/j.ijpe.2009.05.007
Zanjirani Farahani, R.; Asgari, N.; Davarzani, H. 2009. Supply Chain and Logistics in National, International and Governmental Environment: Concepts and Models. Physica-Verlag Heidelberg. 316 p. https://doi.org/10.1007/978-3-7908-2156-7
Zhao, Q.-H.; Wang, S.-Y.; Lai, K.-K.; Xia, G.-P. 2004. Model and algorithm of an inventory problem with the consideration of transportation cost, Computers & Industrial Engineering 46(2): 389–397. https://doi.org/10.1016/j.cie.2003.12.019
Ballou, R. H. 2003. Business Logistics: Supply Chain Management. Prentice Hall. 816 p.
Becker, J.; Görke, M.; Felix, C.; Schmidt, M. 2016. Model-based potential analysis of the distribution logistics: a case study, Production Planning & Control: the Management of Operations 27(9): 698–707. https://doi.org/10.1080/09537287.2016.1166279
Berman, O.; Wang, Q. 2006. Inbound logistic planning: minimizing transportation and inventory cost, Transportation Science 40(3): 287–299. https://doi.org/10.1287/trsc.1050.0130
Bertazzi, L.; Speranza, M. G. 1999. Models and algorithms for the minimization of inventory and transportation costs: a survey, Lecture Notes in Economics and Mathematical Systems 480: 137–157. https://doi.org/10.1007/978-3-642-58568-5_7
Bertazzi, L.; Speranza, M. G.; Ukovich, W. 1997. Minimization of logistic costs with given frequencies, Transportation Research Part B: Methodological 31(4): 327–340. https://doi.org/10.1016/S0191-2615(96)00029-X
Blumenfeld, D. E.; Burns, L. D.; Daganzo, C. F.; Frick, M. C.; Hall, R. W. 1987. Reducing logistics costs at general motors, INFORMS Journal on Applied Analytics 17(1): 26–47. https://doi.org/10.1287/inte.17.1.26
Blumenfeld, D. E.; Burns, L. D.; Diltz, J. D.; Daganzo, C. F. 1985. Analyzing trade-offs between transportation, inventory and production costs on freight networks, Transportation Research Part B: Methodological 19(5): 361–380. https://doi.org/10.1016/0191-2615(85)90051-7
Burns, L. D.; Hall, R. W.; Blumenfeld, D. E.; Daganzo, C. F. 1985. Distribution Strategies that minimize transportation and inventory costs, Operations Research 33(3): 469–490. https://doi.org/10.1287/opre.33.3.469
Chow, G. 2007. A total logistics cost approach to measuring collateral benefits of security and supply chain improvements at international gateways, in Canada’s Asia-Pacific Gateway and Corridor Initiative, 2–4 May 2007, Vancouver, British Columbia, Canada, 1–19.
Ghodsypour, S. H.; O’Brien, C. 2001. The total cost of logistics in supplier selection, under conditions of multiple sourcing, multiple criteria and capacity constraint, International Journal of Production Economics 73(1): 15–27. https://doi.org/10.1016/S0925-5273(01)00093-7
Ji, M.; Fang, J.; Zhang, W.; Liao, L.; Cheng, T. C. E.; Tan, Y. 2018. Logistics scheduling to minimize the sum of total weighted inventory cost and transport cost, Computers & Industrial Engineering 120: 206–215. https://doi.org/10.1016/j.cie.2018.04.041
Juntunen, J.; Juntunen, M.; Juga, J. 2015. Latent classes of service quality, logistics costs and loyalty, International Journal of Logistics Research and Applications: a Leading Journal of Supply Chain Management 18(5): 442–458. https://doi.org/10.1080/13675567.2014.980793
Kiisler, A. 2008. Logistics in Estonian business companies, Transport 23(4): 356–362. https://doi.org/10.3846/1648-4142.2008.23.356-362
Kivinen, P.; Lukka, A. 2004. Value Added Logistical Support Service: Logistics Cost Structure and Performance in the New Concept. Lappeenranta-Lahti University of Technology, Finland. 82 p.
Kim, G.; Wu, K.; Huang, E. 2015. Optimal inventory control in a multi-period newsvendor problem with non-stationary demand, Advanced Engineering Informatics 29(1): 139–145. https://doi.org/10.1016/j.aei.2014.12.002
Kutanoglu, E.; Lohiya, D. 2008. Integrated inventory and transportation mode selection: a service parts logistics system, Transportation Research Part E: Logistics and Transportation Review 44(5): 665–683. https://doi.org/10.1016/j.tre.2007.02.001
Lau, H. C. W.; Nakandala, D. 2012. A pragmatic stochastic decision model for supporting goods trans-shipments in a supply chain environment, Decision Support Systems 54(1): 133–141. https://doi.org/10.1016/j.dss.2012.04.012
Madadi, A.; Kurz, M. E.; Ashayeri, J. 2010. Multi-level inventory management decisions with transportation cost consideration, Transportation Research Part E: Logistics and Transportation Review 46(5): 719–734. https://doi.org/10.1016/j.tre.2009.12.012
McCarthy-Byrne, T. M.; Mentzer, J. T. 2011. Integrating supply chain infrastructure and process to create joint value, International Journal of Physical Distribution & Logistics Management 41(2): 135–161. https://doi.org/10.1108/09600031111118530
Miranda, P. A.; Garrido, R. A. 2009. Inventory service-level optimization within distribution network design problem, International Journal of Production Economics 122(1): 276–285. https://doi.org/10.1016/j.ijpe.2009.06.010
Perera, S.; Janakiraman, G.; Niu, S.-C. 2018. Optimality of (s, S) inventory policies under renewal demand and general cost structures, Production and Operations Management 27(2): 368–383. https://doi.org/10.1111/poms.12795
Petraška, A.; Čižiūnienė, K.; Jarašūnienė, A.; Maruschak, P.; Prentkovskis, O. 2017. Algorithm for the assessment of heavyweight and oversize cargo transportation routes, Journal of Business Economics and Management 18(6): 1098–1114. https://doi.org/10.3846/16111699.2017.1334229
Petraška, A.; Čižiūnienė, K.; Prentkovskis, O.; Jarašūnienė, A. 2018. Methodology of selection of heavy and oversized freight transportation system, Transport and Telecommunication 19(1): 45–58. https://doi.org/10.2478/ttj-2018-0005
Rybakov, D. S. 2018. A process model of a logistics system as a basis for optimisation programme implementation, International Journal of Logistics Research and Applications: a Leading Journal of Supply Chain Management 21(1): 72–93. https://doi.org/10.1080/13675567.2017.1361910
Rybakov, D. S. 2017. Total cost optimisation model for logistics systems of trading companies, International Journal of Logistics Systems and Management 27(3): 318–342. https://doi.org/10.1504/IJLSM.2017.084469
Sajadieh, M. S.; Thorstenson, A.; Jokar, M. R. A. 2010. An integrated vendor–buyer model with stock-dependent demand, Transportation Research Part E: Logistics and Transportation Review 46(6): 963–974. https://doi.org/10.1016/j.tre.2010.01.007
Santa, R.; Bretherton, P.; Ferrer, M.; Soosay, C.; Hyland, P. 2011. The role of cross-functional teams on the alignment between technology innovation effectiveness and operational effectiveness, International Journal of Technology Management 55(1/2): 122–137. https://doi.org/10.1504/IJTM.2011.041683
Shang, K.-C. 2004. The effects of logistics measurement capability on performance, Asia Pacific Management Review 9(4): 671–687. https://doi.org/10.6126/APMR.2004.9.4.06
Speranza, M. G.; Ukovich, W. 1994. Minimizing transportation and inventory costs for several products on a single link, Operations Research 42(5): 879–894. https://doi.org/10.1287/opre.42.5.879
Stock, J. R.; Lambert, D. M. 2000. Strategic Logistics Management. McGraw-Hill/Irwin. 896 p.
Strack, G.; Pochet, Y. 2010. An integrated model for warehouse and inventory planning, European Journal of Operational Research 204(1): 35–50. https://doi.org/10.1016/j.ejor.2009.09.006
Škerlič, S.; Muha, R. 2016. The importance of systems for controlling logistics costs in the supply chain: a case study from the Slovenian automotive industry, Promet – Traffic & Transportation 28(3): 299–310. https://doi.org/10.7307/ptt.v28i3.1881
Škerlič, S.; Muha, R.; Logožar, K. 2016. A decision-making model for controlling logistics costs, Tehnički Vjesnik – Tehnical Gazette 23(1): 145–156. https://doi.org/10.17559/TV-20141015121023
Tancrez, J.-S.; Lange, J.-C.; Semal, P. 2012. A location-inventory model for large three-level supply chains, Transportation Research Part E: Logistics and Transportation Review 48(2): 485–502. https://doi.org/10.1016/j.tre.2011.10.005
Waller, M. A.; Fawcett, S. E. 2012. The total cost concept of logistics: one of many fundamental logistics concepts begging for answers, Journal of Business Logistics 33(1): 1–3. https://doi.org/10.1111/j.0000-0000.2011.01033.x
Wang, X.; Cheng, T. C. E. 2009. Logistics scheduling to minimize inventory and transport costs, International Journal of Production Economics 121(1): 266–273. https://doi.org/10.1016/j.ijpe.2009.05.007
Zanjirani Farahani, R.; Asgari, N.; Davarzani, H. 2009. Supply Chain and Logistics in National, International and Governmental Environment: Concepts and Models. Physica-Verlag Heidelberg. 316 p. https://doi.org/10.1007/978-3-7908-2156-7
Zhao, Q.-H.; Wang, S.-Y.; Lai, K.-K.; Xia, G.-P. 2004. Model and algorithm of an inventory problem with the consideration of transportation cost, Computers & Industrial Engineering 46(2): 389–397. https://doi.org/10.1016/j.cie.2003.12.019