International Research Journal of Engineering and Technology (IRJET)
e-ISSN: 2395 -0056
Volume: 04 Issue: 04 | Apr -2017
p-ISSN: 2395-0072
www.irjet.net
Analyzing logistics cost factors and developing cost optimization tools and techniques for a cement industry (Case study: Lafarge Surma Cement Ltd) Amit Das1*, Tasminur Mannan Adnan2, Md. Sajid Hasan3, Kazi Mushfiqur Rahman3
1Industrial
and Production Engineering, Bangladesh University of Engineering and Technology, Dhaka 1000, Bangladesh 2Industrial Engineering and Management, University of Oulu, P.O. BOX 8000 FI-90014, Finland 3Mechanical and Production Engineering, Ahsanullah University of Science and Technology, Dhaka 1208, Bangladesh ---------------------------------------------------------------------***---------------------------------------------------------------------
Abstract This paper aims at providing a better
service level and revenues. Numerous factors can drive up logistics costs substantially, which may offset the benefits of doing business with the international suppliers. The techniques utilized to analyze the logistics cost can be summarized into four categories: recurrence-based, regression-based, activity-based, and optimization-based [4]. Over the decade logistics has become a key strategic function for the retailers (Bourlakis and Bourlakis, 2001) [5]. Because of the retail revolution logistics becomes retailer driven. Coordination between warehouse and transport activities is very important. Re-engineering the entire supply chain plays a major role in logistics performance. In this way, logistics becomes increasingly important in large retailers value chain (Norek, 1997) [6]. According to Parkan and Dubey (2009), significant modernization of logistics is required in Indian manufacturing and services industry. The paper also argues that with increased FDI in agricultural and retail sectors will drive the growth of Indian logistics sector. Organized retail in India has achieved rapid growth at a significant cost [7]. According to Dröge et al (1991), logistics is becoming an increasingly important part of overall retail strategy because it provides opportunities for enhanced profit, market growth and sustainable competitive advantage. The factors which have impact on retail logistics are warehousing/transportation,supplier performance/communication, internal information systems, activity leveling and inventory/cost reduction [8]. According to Olavson et al (2010), in today’s volatile economy, one supply chain design is probably not enough. What’s really needed is a portfolio of supply chains that at once enables you to be cost effective and yet agile and highly responsive in situations where those competencies are called for [9]. Tracey (2004) stated that transportation is often ignored as a source of competitive advantage. The work stated that transportation performance depends upon the terms like delivery schedules, product quality, satisfactory delivery service and acceptable overall performance [10]. Luo (2007) provided the insight that the delays in transporting, sorting, grading and disposition only serve to reduce the value remaining in the product [11]. Zeng and Rossetti (2003) classified the key logistics cost elements into six categories, namely transportation, inventory holding, administration, customs charges, risk and handling and packaging costs. Transportation cost has been a very common topic of
understanding of the concept of logistics cost and its optimization techniques. The goal is to show a comparison between present cost model of bulk carrying vehicle at Lafarge Surma Cement (LSC) and an optimization tool developed using Microsoft excel which will show the percentage of cost reduction and total savings in Bangladeshi Taka (BDT). In this study, it can be seen that considering some identical cost factors the overall logistics cost can be reduced significantly. Keywords Logistics cost optimization; optimization model; supply chain management; supply chain and logistics management
1 INTRODUCTION Optimization means maximizing the return at a given risk level or risk is minimized for a given expected return [1]. To be successful in today's highly competitive marketplaces, companies must strive for greatest efficiency in all of their activities and completely utilize any possible opportunity to gain a competitive advantage over other firms. Among many possible activities, cost reduction in logistics is regarded as one of the core areas presenting enormous opportunities [2]. The Council of Supply Chain Management Professionals (CSCMP) defines logistics management as-“[The] part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow1 and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirement’’[3]. The majority of prior research on logistics costs can be grouped into two streams. One stream focuses on strategic aspects of the logistics costs, and the other deals with optimized costeffective logistics decisions. As reported by Richardson (1995) and later stressed by Gilmore (2002), logistics controls a significant amount of assets and has direct impact on cash flow and the bottom line, adds value through continuous productivity and service improvements, and possesses a strong relationship with a firm’s customer
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