The concept of minimizing the overall logistics costs. Logistics costs
- ………………………………………………………. 5
- 1.1. The concept of “total (total) costs”…………………………………………………………………………………………………………………………………………………
- 1.2. “Theory of compromises”…………………………………………………………….6
- 1.3. “Concepts of shared responsibility”……………………………………… ..…….8
- ………………………………………...10
- 2.1. Cost reduction in the development of integrated logistics………………...10
- 2.2. The concept of resource orientation…………………………………………..…. eleven
- 2.3. Strategic cost management………………………………………………………12
- 3. the use of logistics for cost management in domestic and foreign organizations……………….15
- 3.1. The effectiveness of the use of management in logistics systems foreign countries………………………………………………………………… …...….15
- 3.2. The effectiveness of the use of management in the logistics systems of Russia…………………………………………………………………………………………..16
- 4. APPLICATION OF COST MANAGEMENT METHODS IN LOGISTICS SYSTEMS ON THE TERRITORY OF THE KRASNOYARSK REGION…....18
- 4.1. Methods of cost management in the river industry of the Krasnoyarsk Territory…….. .18
- CONCLUSION…………………………………………………… …………….….20
- LIST OF USED SOURCES…………………….………22
The Russian economy has undergone major transformations over the past decade. And the obvious attempts of specialists to form in the country effective market relations similar to those in the West did not always have a positive result, since this required effectively developed methods and methods for managing economic activity. One of the most progressive scientific and applied areas that solve this problem is logistics.
Logistics is broadly consumer-oriented. Its goal is to deliver products just in time with minimal costs for supply, storage, production, packaging, marketing, and transportation. Logistic approaches to design efficient schemes cargo deliveries are successful because they can be widely applied in practice in the conditions of domestic unstable business, emphasizing first of all the need for a flexible work policy. Any effective economic system, including logistics, provides for control over various costs that stimulate its functioning.
The development of logistics is primarily due to the desire of enterprises to constantly reduce the costs associated with the movement of various flows necessary to build a flexible logistics chain. Depending on the specifics of the company's activities, various logistics systems are used. The logistics system includes a set of actions of the participants in the logistics chain (manufacturing enterprises, transport, trade organizations, stores, etc.), built in such a way that the main tasks of logistics are performed.
Logistics systems are very diverse in terms of the scope of the enterprise. For some, logistics is just the ability to work with databases, for some it is supply or warehouse activities. But according to its purpose, namely, its main purpose is to reduce costs, subject to the fulfillment of planned targets, and therefore increase the efficiency of production activities, logistics systems should cover almost all areas of activity.
The relevance of this topic is determined by the creation of effective, well-established methods of cost management, or rather, by endowing organized systems with so-called integrative properties, that is, qualities that are inherent in the entire system as a whole, but are not characteristic of any of the elements separately. The integrative qualities of logistics systems will allow you to competently manage costs, minimize them, and increase your profits, which will allow enterprises to become more competitive both within the country and in the development of international trade relations.
The purpose of writing a term paper is to study cost management in logistics systems and analyze how costs are managed and reduced in logistics systems in the World, as well as in the Krasnoyarsk Territory. This goal is realized by solving the following tasks:
- explore theoretical aspects basic concepts for cost management in logistics systems, identify their positive and negative sides;
- consider cost reduction in the development of integrated supply chains;
- to analyze the effectiveness of the use of logistics for cost management in domestic and foreign logistics organizations.
- to analyze the effectiveness of using cost management concepts in the logistic system of river transport in the Krasnoyarsk Territory.
- 1. BASIC CONCEPTS FOR COST MANAGEMENT IN LOGISTICS SYSTEMS
- 1.1. The concept of "total (total) costs"
The concept of total costs was the basis for the development of a methodology for making logistics decisions. These factors were most pronounced in the 1960s. in the USA. The main trends in the market have been increased attention to buyers (in particular, an increase in the share of services) and the emergence of a large number of different products that satisfy the same needs (competitive products), which forced the search for new ways to coordinate supply and demand, as well as ways to better serve consumers. New logistical approaches have emerged to shorten order and production cycles. The increase in the variety of goods almost automatically led to a significant increase in the cost of creating and maintaining stocks in distribution systems, which required finding new ways to improve commodity distribution structures and reduce costs in physical distribution processes.
The concept of total costs means a comprehensive assessment of the resources expended by the firm. At the same time, the purpose of the activity of the logistics system, the composition of the necessary functions and types of work that ensure its achievement are initially determined. Then, based on the most effective achievement of the goal of the logistics system, they seek to adjust individual types of costs in such a way as to achieve a reduction in their total amount.
For an example of finding a minimum of total costs, we can consider two main categories of logistics costs: transportation costs and inventory costs. These types of costs are closely related. To some extent, a reduction in the cost of inventory requires an increase in transport costs. The essence of the concept of common costs is that all costs are considered to be incurred simultaneously to provide the required level of service. When comparing alternative approaches, the costs for some functions will increase, for some they will decrease or remain at the same level. The goal is to find an alternative that has the lowest overall cost.
Although at first sight the concept of total cost seems simple, in practice its application becomes more complicated. The difficulty of optimizing the total costs of the logistics system is associated not only with the identification and evaluation of costs. Any link in the system is aimed primarily at improving the performance of its function, since the profit of one link of the entire chain, as a rule, is based on the performance of their functional assignments. To focus on the overall result, it is necessary to develop and implement new evaluation schemes that encourage the perception of individual functions for which they are responsible as components of a single process. It must be understood that sometimes it is necessary to go for an increase in expenses in the functional area in order to reduce overall costs.
At the level of the logistics chain, consisting of independent firms, the difficulties in applying the concept of total costs are also due to the complexity of reconciling the interests of different entrepreneurs. However, these barriers must be overcome primarily because the minimum of the total costs of producers and distributors is very important for the consumer. This is a condition for reducing the retail price at which he purchases the goods. A significant part in the final price of the goods is the so-called "transition price", the mark-up that each link in the logistics chain of goods movement produces. The "transition price" depends not only on the activities of an individual enterprise, but also on the level of interaction between suppliers, distributors, carriers, etc. Reducing the "transition price" is achieved through an integrated approach to cost assessment based on the principles of logistics.
1.2. "The Theory of Compromises"
A compromise is understood as the harmonization of the economic interests of the participants in the logistics process. Accordingly, the criterion for the minimum of the total costs of goods distribution and production in the logistics system requires finding separate compromises between the interests of all parts of the logistics system in order to achieve the best balance between costs and the results obtained. However, the interests of various links in production are naturally different. For example, in a firm, marketing managers are interested in increasing market share and therefore high inventory levels. For its part, the production department, seeking to avoid possible supply disruptions, also advocates a high level of inventory, but with such a policy, another indicator of the level of service is simultaneously reduced - the fulfillment of individual orders. Finance and control departments are trying to reduce the volume of stocks, and the transport department is demanding more one-time deliveries. The inventory department is interested in reducing them, but following this leads to a decrease in the reliability of the entire distribution network, production, and ultimately weakens the competitive position of the company. Specialists in the field of logistics, as material flow managers, take a compromise position and try to find and maintain the optimal balance of costs, inventory and quality of service in Figure 1.
S - costs
a is the total cost of doing
order
b - storage costs
c - transport costs
q - lot size
Figure 1 - Dependence of the cost of fulfilling an order on a one-time supply volume
In more complex logistic models, other requirements are taken into account to resolve contradictions. At the same time, they proceed from the characteristics of the products manufactured, the type of enterprise, the industry and the tactics of the company.
The dependence of the costs of product placement (transportation and storage) on the delivery time is shown in Figure 2.
s - placement costs
A - direct delivery
B - warehouse deliveries
0 t - delivery time
Figure 2 - Dependence of accommodation costs on the delivery time
It follows from the above figure that in order to achieve the minimum delivery time, it is most expedient to carry out deliveries through a network of intermediate warehouses located near customers, where the necessary stocks are created for this. With a warehouse form of supply, costs fall to a certain point due to an increase in the delivery time, and then, with a lengthening of the supply cycle, the costs practically do not change. The transit form of supply is characterized by a closer relationship between costs and the possible time of delivery, and up to a certain point, the warehouse form is more effective, and for non-urgent or rhythmic deliveries, the transit form.
It is assumed that at the turn of the 20th and 21st centuries the social significance of the problems vocational training, protection environment and consumer rights will increase. Under these conditions, the scope of compromises will continue to expand, and, most importantly, it will include balancing the goals of making a profit and solving social problems.
The development of logistics is characterized by the fact that, simultaneously with the evolution of its concept, the process of developing methodological foundations for costing is going on, although it does not proceed so quickly and unambiguously. The problem here, first of all, is to identify the structure of the cost of products and services.
The impetus for the analysis of logistics costs was the instability of the economic situation Western countries in the mid-1950s, which caused a decline in company profits. Initially, such costs included the total cost of operations for the movement of goods (expenses for transportation, warehousing, order processing, etc.). Then, logistics costs began to be considered as cost optimization for the movement of finished products, including their storage and maintenance of stocks, packaging and support activities (spare parts, after-sales service).
The emergence of the concept of compromises made it possible to choose solutions that reduce overall costs or increase total profit, despite the damage to the activities of individual divisions of the company or individual enterprises participating in the overall logistics process.The evolution of logistics abroad shows that it is becoming one of the most important strategic tools in competition for many organizations and firms, and those who have used the concept of integrated logistics, as a rule, have strengthened their position in the market.
1.3. "Concepts of Shared Responsibility"
Since the mid-80s, a new approach to the development of logistics has been outlined in Western countries, as a continuation and development of an integrated approach. Its peculiarity is in the exit of the logistics system beyond the economic environment and taking into account social, environmental and political aspects; criterion - the maximum ratio of benefits and costs. The new approach has been called the "Concepts of Shared Responsibility".
For example, as environmental issues, consumer rights issues, and vocational training become more important, the scope for trade-offs expands to include balancing profit goals with social and other goals. This approach to the creation of logistics systems, the criterion of which is the maximum ratio of output and costs is the "Concept of shared responsibility".
- 2. REDUCING INTERACTION COSTS IN INTEGRATED SUPPLY CHAINS
2.1. Cost reduction in the development of integrated logistics
The development of integrated logistics leads to lower costs in the system. At the turn of the 3rd millennium, the economy of modern Russia is increasingly turning towards systemic structural transformations focused on logistics. The new economy is characterized by the effect of integration, caused by a significant reduction in the cost of interaction.
One of the directions for reforming, first of all, industrial enterprises lies in the plane of creating a mechanism that would flexibly and effectively ensure the interaction of the main elements of the logistics system (LS): "supply - production - warehousing - transportation - marketing". Modern conditions for the development of economic processes urgently require the creation of conditions for the unification of industrial, commercial enterprises and market infrastructure enterprises into integrated supply chains. They are able to quickly, timely and with minimal cost supply products to the consumer.
The prerequisites for an integrated logistics approach are:
- a new understanding of the mechanisms of the market and logistics as a strategic element in the implementation and development of the competitive capabilities of enterprises;
- real prospects and current trends in the integration of participants in economic relations among themselves, the development of new organizational forms - logistics networks;
- technological capabilities in the field of the latest information technologies, opening up fundamentally new opportunities for interaction and cost reduction.
The dynamics of market relations, the globalization of international business and resource constraints lead to a significant increase in the speed of material and financial flows, a reduction in the number of agents in logistics chains, a decrease in the stability and reliability of their functioning due to a drastic decrease in inventories in production and distribution networks. Therefore, the achievement of strategic business goals becomes possible with the further integration of logistics systems into logistics distributed networks. The network principle is becoming one of the effective means of enterprise behavior in a market environment. The work of enterprises as part of logistics networks determines a number of advantages associated with the combination of independent risks, i.e. a decrease in the number of "fluctuations" in the system, as well as a significant reduction in costs and an increase in the quality of the functioning of the entire system. The main reason for their creation lies in the fact that in modern conditions the success of a company depends not only on the availability of its own resources, but also on the ability to attract resources and the competitive capabilities of other participants in the logistics system.
An integrated approach allows the most effective implementation of business goals and the functioning of all its structural elements, presented as responsibility centers. Profit maximization in responsibility centers will be influenced by factors such as competitive positioning (positioning), competitive price, market share and low costs, industry structure, investment efficiency and economies of scale. Integral responsibility for the level of costs is associated not only with intra-company costs. It also includes responsibility for efficiency, on-time delivery, and the choice between manufacturing products and purchasing from suppliers.
Competitive advantages are provided by the logistical integration of structural and functional cost factors. The efficiency of the functioning of logistics systems (networks) implies their consideration as organizational and control systems aimed at achieving an optimal balance between costs (resources) and the level of quality of customer service. Logistics processes are reflected through the following main cost categories:
- costs associated with the organization of the order and its implementation, the supply of inventory items;
- costs for the formation and storage of stocks;
- transport and forwarding costs, including the costs of transporting products from the manufacturer to the consumer;
- storage costs and some others.
They can be reduced to two groups: transformation costs and interaction costs. Until recently, the main factor of strategic success was considered exclusively market orientation. However, to ensure stable profitability, enterprises must correctly select and combine resources. This provides the company with the most serious competitive advantages.
- 2.2. The concept of resource orientation
Resource orientation features include:
- the formation and use of key competencies, which implies a particularly effective combination of resources that competitors do not have;
- maintaining stable key competencies in the long-term strategic perspective;
- the ability of customers to benefit for themselves, the willingness to pay for additional services of the company.
As a centralized potential, the most important integrated logistics network can be (according to the author) a mechanism strategic management costs. Its successful implementation can bring tangible benefits to all its participants and become the most important direction for reforming enterprises in the new economic conditions.
Logistic methods of cost control should be aimed at changing the structure and dynamics of the costs of logistics systems in the direction of their significant reduction. The effect distributed among the participants turns out to be higher than the profits of firms operating in isolation. It is the intersectoral nature of coordinating economic relations in the chain that initially reduces their needs for fixed and working capital, which is necessary to bring material flows (MT) in the form of products to consumers. An integrated approach and the development of methodological foundations for costing have led to the introduction of cost accounting on a functional principle with a focus on the final result.
However, modern methods cost management is evolving all the time. A new orientation, procedures and cost control mechanisms are being approved. The applied methods are classified as follows:
- method for determining costs by processes;
- a method for determining costs based on the life cycle of products;
- a method based on comparison with the best performance of competitors;
- method of strategic cost management.
2.3. Strategic cost management
The study of information about costs in logistics systems has not yet received the necessary attention, both in research and practice. Moreover, the strategic aspect of this problem in relation to logistics is practically not studied.
When considering the concept of strategic cost management (SCM - Strategic Cost Management), there are three basic elements:
- value chains;
- strategic positioning;
- cost factors.
Modern management accounting focuses only on the processes occurring within the enterprise: purchases, administrative costs, products. The key point in the current mechanism is to maximize the difference between procurement and implementation. An integrated logistics approach using value chains is aimed at all participants in just-in-time value chains. From a strategic point of view, value chains and related cost accounting highlight five areas of engagement effectiveness:
- communication with suppliers;
- communication with consumers;
- technological communications within one division;
- communication between departments within the enterprise;
- communications between enterprises in the logistics network.
The second key competence of logistics systems ( base element) is strategic positioning. The role of analysis and direction of cost management will depend on which path the enterprise chooses. It can be cost leadership or product differentiation. As a rule, this problem is deeply and comprehensively considered within the framework of strategic management. We only note that the chosen strategy will significantly affect the formation of a system for accounting for logistics costs and the configuration of the information system.
Cost factors (the third element of SCM) are divided into strategic structural and functional factors.
Strategic Structural Factors:
- scale: the volume of investments in various functional areas of logistics systems;
- range: vertical and horizontal integration experience;
- technologies used at each stage of the cost chain;
- complexity: the breadth of the product range.
Functional factors:
etc.................
The principle of total costs is to take into account the total cost of managing material and related information and financial flows throughout the entire logistics system.
To determine the effectiveness of the logistics system of the enterprise, a comparison of internal and external costs is carried out. It determines which activities are performed better than other manufacturers, compares the structure of logistics costs for this enterprise and its competitors.
1. Efforts focus on controlling costs where they occur.
2. Data on different types costs are handled differently.
3. in an efficient way to reduce costs is the reduction of activities (procedures, works, operations). Attempts to reduce incremental costs are rarely effective. You can't try to do something at low cost that shouldn't have been done at all.
4. Effective cost control requires that the performance of the enterprise be evaluated as a whole. For economic evaluation business of the enterprise as a whole, you need to have an idea of the results of activities in all functional areas of logistics.
To control logistics costs, it is not enough to control only those costs that are formed within one individual enterprise. Control over logistics costs requires the identification of all costs and the clarity of the mechanism of their formation.
Methods for analyzing logistics costs:
Strategic analysis of logistics costs is a procedure for comparing the position of an enterprise in terms of customer service costs with a similar position of its closest competitors;
Cost analysis - a normative method based on the study of cost elements and aimed at reducing costs and, accordingly, increasing the consumer value of products;
Functional cost analysis is a method aimed at reducing the level of costs for customer service. The method is based on a thorough study of the individual stages of the process of fulfilling consumer orders and finding out the possibility of their standardization for the transition to cheaper technologies.
The procedure for analyzing the logistics costs of customer service:
Cost centers (cost centers) are determined. Cost centers are understood to be the functional areas of the business where significant costs are concentrated and where a reduction in their level can provide an increase in added value for the consumer;
Important cost points within each cost center are identified. Cost centers are separate areas within one cost center that are responsible for all costs attributable to this center;
The business of an enterprise is viewed as a whole as a single cost stream;
Value is seen as the amount that the consumer pays, and not as the amount of costs that arise within the enterprise as legal entity;
The costs are classified according to their main characteristics and thus the logistics costs are diagnosed.
The level of optimal costs - the ratio of the value of costs the best option to the value of the costs of the original option for the purchase of units of production.
Ways to reduce the level of logistics costs:
Negotiating with suppliers and buyers to establish lower selling and retail prices, as well as trade allowances;
Helping suppliers and buyers achieve more low level costs (client business development programs, seminars for dealers);
Back and forth integration to keep total costs under control;
Finding cheaper resource substitutes;
Improving the interaction of the enterprise with its suppliers and consumers in the supply chain. For example, coordination of the activities of the enterprise and its partners in the field of timely delivery of products reduces the level of costs for warehouse operations, inventory management, storage and delivery of finished products;
The concept of total costs means comprehensive assessment resources expended by the firm. At the same time, the purpose of the activity of the logistics system, the composition of the necessary functions and types of work that ensure its achievement are initially determined. Then, based on the most effective achievement of the goal of the logistics system, they seek to adjust individual types of costs in such a way as to achieve a reduction in their total amount.
Using the Pareto optimality criterion allows you to check whether the proposed solution improves the overall state of the logistics system.
For an example of finding a minimum of total costs, consider two main categories of logistics costs: transportation costs and inventory costs. These types of costs are closely related. To some extent, reducing the cost of inventory requires an increase in transportation costs. When determining the size of the batch of ordered books, it is necessary to find the optimum total cost.
Although at first sight the concept of total cost seems simple, in practice its application becomes more complicated. The difficulty of optimizing a firm's total costs is not just about identifying and estimating costs. Any division of the company is aimed primarily at improving the performance of its function, since the remuneration of employees, as a rule, is based on the performance of their functional divisions. To focus on the overall result, it is necessary to develop and implement new evaluation schemes that encourage managers to perceive the individual functions for which they are responsible as components of a single process. The manager must understand that it is sometimes necessary to increase spending in a functional area in order to reduce overall costs.
At the level of a supply chain consisting of independent firms, the difficulties in applying the concept of common costs are due to the complexity of reconciling the interests of different entrepreneurs. However, these barriers must be overcome primarily because the minimum of the total costs of producers and distributors is very important for the consumer. This is a condition for reducing the retail price at which he purchases the goods. A significant part of the final price of the goods is the so-called "transition price", i.e. mark-up, which is produced by each link in the supply chain of goods distribution. The "transition price" depends not only on the activities of an individual enterprise, but also on the level of interaction between suppliers, distributors, carriers, etc. Reducing the "transition price" is achieved through an integrated approach to cost assessment based on the principles of logistics.
Brief summary of the paragraph. The concept of logistics is a chosen general approach to optimizing the delivery process, or logistics operations in general.
Logistics concepts can conditionally be divided into the concepts of cost minimization and the concepts of organization of logistics activities.
Cost minimization concepts are divided into the concept of minimizing each (individual) logistics operation and the concept of minimizing overall logistics costs. The most progressive is the second concept, which is aimed at the final, and not at the intermediate result of minimizing logistics costs.
The concepts of organizing logistics activities are divided into the concept of reengineering, the concept of integration and the concept of supply chain management.
Concept concept. The concept of logistics is usually understood as either some system of views that makes it possible to understand the delivery processes that take place in the economy, or some kind of leading thought (idea, general approach) that determines the entire set of actions of a market participant related to the delivery of products.
In this textbook, the concepts of logistics are presented only in their latest understanding, that is, as a certain leading idea and a general approach based on it to the consideration of logistics processes from the side of a market participant.
The main logistics concepts that have been formed to date can be conditionally divided into two groups: the concepts of minimizing logistics costs and the concepts of organizing logistics activities.
The conditionality of such a division is that, ultimately, the second group of concepts still has as its ultimate goal the minimization of logistics costs, but they focus on essential organizational methods for achieving this goal, while in the first group of concepts, ways to achieve cost minimization are not limited to one of their groups (sides).
Concepts for minimizing logistics costs. These include: the concept of minimizing costs for a separate logistics process; the concept of minimizing the overall logistics costs.
The concept of minimizing costs for a separate logistics
process. A market participant usually performs a wide variety of logistical activities. According to the approach of this concept, the main task is to minimize the costs of each logistics process.
Cost minimization is the goal of any market participant, since it is the main method of increasing its profits. By reducing the cost of delivering products, he thereby, ceteris paribus, increases the total profit from the sale of these products on the market.
The concept of minimizing the overall logistics costs. The essence of the concept is that logistics processes carried out by a market participant are no longer considered separately, as was the case in the previous concept, but in their entirety.
In accordance with this concept, a market participant seeks to minimize delivery costs not only and not so much in each link of this process, but in relation to its final result (product).
For example, a market participant in relation to his final product must carry out several delivery processes. He may aim to ensure that each delivery process is carried out at a minimum cost, but if these logistics processes are interconnected, then it is important that the total cost of them be minimal. This can usually be achieved in such a way that when the costs of some individual processes increase, the costs of other processes decrease to a much greater extent than they could be reduced by isolation. As a result, the total cost minimization only increases.
Concepts of organizing the logistics activities of a market participant. This includes the concepts of: reengineering; integration; supply chain management.
The concept of reengineering in logistics. The idea of the approach proclaimed by this concept is that for the purpose associated with the delivery of products that the market participant sets for himself, a single process is developed in which all the functional links of the enterprise are linked. In the event that such a link with existing organizational links fails (or is ineffective), changes are made in the corresponding organizational links (unnecessary ones are removed, new ones are created, existing ones are restructured, etc.), or organizational reengineering is carried out.
The problem is that, firstly, the need for organizational changes (organizational reengineering) can arise whenever the logistical goal of a market participant changes significantly, and secondly, logistical goals are not the only goals that a manufacturer or other market participant faces. .
The concept of integration. This concept proceeds from the fact that all components of the product delivery process that are carried out by this market participant must be interconnected (integrated) with each other. Thus, the logistics processes (logistics activities) in the company (supply, internal production processes, sales, etc.) are not carried out separately from each other, but as a single unit.
a complex aimed at reducing delivery costs, timely delivery of products, establishing sustainable market relations with suppliers and consumers of products, etc.
Supply chain management concept. This approach consists in the best organization of the entire process of delivery of a specific product from its starting point (manufacturer, supplier) to the end consumer.
This concept is based on linking the actions of the entire chain of product delivery from the producer to the consumer, which consists of different market participants. If all parts of this delivery chain are in some kind of organic relationship with each other, for example, they have a close (same) composition of owners, then in this case they can find a “through” economic interest(minimizing costs or increasing profits), which will be maximized if they act on the market as a whole, and not as separate owners whose interests are opposite.
test questions What is the process of delivery of manufactured products and what is its role in the market? What are the two sides of the delivery process and where do they come from? What does it include material process product delivery? What is the delivery of products as a commodity exchanged for money? What parts does logistics science include? What are the main goals and objectives of logistics science? What are the functions of logistics? What are the basic concepts of logistics? Why does a market participant need knowledge of logistics?
10. Should a market participant “blindly” follow scientific recommendations, or should he apply them taking into account the specifics of his practical (market, commercial) activities?
General logistics costs is a basic integral concept for designing a logistics system (network).
Each logistic function (elementary and/or complex) corresponds to certain costs incurred by specific IPs. The structure of logistics costs is shown in Figure 1.5.
Fig.1.5. The structure of logistics costs
In the traditional approach, each of the above costs is considered separately from the others, and therefore it is considered that a reduction in, say, transportation costs automatically leads (in the formal calculations) to a decrease in total costs. In other words, they are guided by the minimum costs in each of the links:
where C h, C P, C xp, C with, C tr - costs, respectively, for procurement activities, production, storage (warehousing), marketing, transportation of products.
But with a systematic approach to logistics and an analysis of the interdependencies between individual activities, it becomes clear that reducing the cost of one type of activity sometimes leads to an increase in the cost of another, as a result of which the overall logistics costs can be reduced, although in certain types operating costs may rise.
Unlike the traditional approach, the logistics approach focuses the enterprise on the rejection of an isolated consideration of costs. As a result, the criterion for the amount of these costs changes, based on the optimal value of each of the terms:
The main problem that arises when using general costs is that the traditional accounting practice of classifying and accounting for the main types of costs, as a rule, does not provide the ability to classify the entire cost chain associated with a particular process of promoting MP from source to consumer. Traditional accounting methods, as shown in Figure 1.6, focus on defining costs by functional area (vertically) and aggregate costs into large aggregates. This does not allow to single out the costs that arise during the implementation of the end-to-end process of promoting the material flow (business process), which means that it does not allow for a detailed analysis of costs of various origins, to take into account all the consequences of the adopted management decisions and their impact on corporate profits.
Fig.1.6. Traditional cost accounting system by function
It is only known what the implementation of a particular function costs. As a result, decisions made in one functional area lead to unforeseen results in others adjacent to it.
Fig.1.7. Accounting for logistics costs along the entire route
material flow
An integrated approach to the development of logistics has changed the concept of its costs. Costing began to be carried out not according to the functional principle, but with a focus on the final result, when the volume and nature of the work of the logistics system are initially determined, and then the costs associated with its implementation.
