Logistics cost occurs due to physical and information systems in use. It can be a quite complex system, which makes it very costly and wide reaching in function and geographic parameters. Due to this, it is very important that marketing staff include one or more logistic specialists at the early stages of product development. By so doing, the marketer can consider logistics element and their cost while producing a marketing plan.
The Logistics life-cycle approach can act promptly, its aim, to ensure that the logistics factor which might otherwise be overlooked are included. It can also be employed as a tool to obtain an operations and systems input to the product life cycle at the development stage. An outline is essential for the complete management of the product especially an “end game plan.” Also raised is consideration of the individual parts of each product component in the distribution channel, in use by the consumer and after its use by the consumer.
The question nevertheless remains, is your company logistics raising your Life cycle costs? It is essential that a critical consideration of this question is taken to guide marketers for the creation of an effective marketing plan. These three concepts listed below can help for proper management of product Life Cycle Cost if properly used as a guide:
- Logistics Life Cycle Assessment Approach;
- Logistics Life Cycle Management; and
- Reduction in Products Life Cycle Cost.
Logistics life cycle assessment approach
The Life cycle Assessment approach, when applied to a logistics chain will provide a detailed account of the impacts of each aspect of the process. This analysis is particularly useful in the determination of a set of indicators which can be used to monitor changes in an environmental load of an evolving logistics system. This analysis, when applied to long distance transport systems, road construction and fuel technology is shown to be quite useful.
The results of the Life cycle Assessment analysis provide quantified impacts in particular environmental areas. Therefore such analysis can provide specific information which can be combined with the available information on the state of the environment to elaborate integrated programs to improve quality.
Through the use of a Life Cycle Assessment analysis, it would be possible to evaluate the present system, determine its impacts and identify areas in need of development optimization or elimination. The results of this analysis could then be used to determine developmental alternatives that could reduce those impacts considered most important.
With further analysis using the same life cycle assessment information base, one could compare the costs and benefits of each alternative in relation to their impacts on the local and global environment, the best alternative which best responds to expected future scenario can be determined, and can, therefore, be used. This analysis would require the following activities:
- Detailed analysis of the impacts associated with each component of the present system
- Identification of the components which have the highest environmental impacts
- Analysis at a territorial level of the most sensitive, most compromised or most highly valued aspects of the local environment.
- Construction and detailed analysis of alternative scenario, impacts, and benefits
Logistics life cycle management
Logistics life cycle management includes the implementation, management, and oversight by the designated program manager, of all activities associated with the acquisition, development, production, fielding, and sustainment. It involves the use of a set of processes which facilitate the creation, tailoring, and navigation of a system development life cycle. A life cycle management system may take the form of an integrated project support environment or an estimating system linked to a project scheduling and tracking.
Logistics Lifecycle management goals include the following:
- Influence product design for affordable system operational effectiveness
- Design and support the system utilizing performance-based logistics.
- Acquire and concurrently deploy the supportable system, including support infrastructure
- Maintain\improve readiness, improve affordability and minimize logistics footprint
It also involves planning for Operation and Support, and the estimation of total costs incurred as early as possible. Supportability which is a key component of performance shall be considered throughout the system life cycle. Program managers are advised to consider supportability life cycle costs, performance, and schedule for making program decisions.
Reduction in product life cycle costs
Reduction in product life cycle cost can occur through the formulation of logistics strategies that are designed towards achieving this aim. The process of logistics strategies formulation can be viewed through the three angles listed below:
- Customer needs to be met through the implementation of proposed strategy
- Target customers
- Resources required for implementation
The logistics strategy formulation is not the process which can be initiated in isolation. In fact, the logistics strategy should have goal congruence with the overall strategy of the business. It should synergize with other functional domains of the organization. For example, the management information system which encompasses all functional areas of the business has the strongest synergy with logistics operations, as it is an information based activity for inventory involvement across the supply chain.
The success of logistics strategy implementation greatly depends on information sharing with customers and sometimes even with logistics partners. Transparency at the transaction level at both ends helps to build up the element of trust which adds value to customer delivery chain, making the strategy implementation task easier and successful.
Cost leadership is an essential approach to this strategy through logistics cost reduction. The road map to achieve this is as follows:
- Reduction in inventory and inventory related cost through JIT, cross docking or postponement
- Freight consolidation, mode, and route selection for reduction in transportation costs
- Scale economics in warehouse operations
- Reduction in transaction cost through it support
- Reduction in vendor base and co-partnership with suppliers
- System approach with IT backbone for reduction in human element for error free logistics operation
Finally, it is necessary to note that besides strategy formulation its implementation is equally important. The program manager should properly evolve a framework for successful implementation of its logistics strategy. The elements of the strategy implementation framework are controls, organization structure, organization culture, and human resource skill.