Posts Selected From the Category "Logistics Management"

The conferences are association of companies, resembling an ordinary cartel or trust, formed to control supply and prices and to limit entry into the trade. The Royal Commission of 1909 defined Shipping ring or conference as ‘a combination, more or less close of shipping companies formed for the purpose of regulating or restricting competition in the carrying trade on a given trade route or routes’. Conferences are formed only in a line trade and not in the tramp service, because the former is a more stable and regular organisation. Since the conferences are made for particular routes only, a shipping company may join many conferences on different routes. Likewise, the shipping companies may not join conference of a particular route and carry on independent business. The organisation of conferences varies. It may be completely formal or informal. A conference may have liners of various nationalities as its members and their purpose of alliance might differ from conference to conference.

To conclude that shipping conferences has two main objectives:

1. To regulate competition between its members.

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Shipping is a competitive industry. The demand for shipping services is a derived one. Shipping services do not have alternative applications. So amongst ship owners competition arises to corner the existing traffic. The causes for the competition are as follows:

• Freedom of use of a certain highways: The permanent way of ocean being a gift of nature, which is free. It is open to all persons and countries of the world without acquiring any rights to float the ships and steamers. Except for some restrictions in coastal waters of the countries, the ship are free to move anywhere on the sea and it invites international competitors.
• Small investment: Shipping requires small investment to start the sailings. The capital investment in construction of permanent way, signals, bridges, tunnels, culverts and platforms etc is not there in purchasing a steamer or a ship. The facilities of loading, unloading and harboring are maintained by the port authorities and therefore no investment is to be made by the ship owner. Such facilities become available on payment of port dues.

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Total cost analysis is the key to managing the logistics function. Management should strive to reduce the total cost of logistics rather than the cost of each activity. So logistics must be viewed as an integrated system rather than the individual system, because reduction in one cost invariably lead to increase the cost of other components. Effective management and real cost savings can be accomplished only by viewing logistics as an integrated system and minimizing its total cost given the firms customer service objectives. So the main costs which are involved in logistics function are:

1. Customer service level costs
2. Transportation costs
3. Warehousing costs
4. Order processing and information costs
5. Lot quantity costs
6. Inventory carrying costs

Customer Service Level Costs

Most business people find it difficult, if not impossible to measure this cost. The cost associated with alternative customer service levels is the cost of lost sales( not only the margin lost by not meeting current sales demand, but the present value of all future contributions to profit forfeited when a customer is lost due to poor availability, long lead times, or other service failures).…

The transportation industry is a complex of institution that includes not only the carriers themselves (the ocean shipping companies, airlines, and truckers), but also the supporting terminal operators, freight forwarders, customhouse brokers, ship brokers, financial houses, insurance firms, and engineering and manufacturing concerns, There is also an array of governmental agencies, that oversee the operations of the industry and control the rates charged and services provided. Changes in any of these institutions or their foreign counterparts have ramifications on the rest of the industry and affect the service provided to the shipper of goods in international trade.

Physical distribution managers have an array of alternative methods or modes of transportation for the movement of goods across borders and within countries. Various forms of sea, air, and land transportation may be available for use singly or in combination. The manager’s choice is influenced by the specific product and market characteristics. Large, bulky, low-unit-value items and basic commodities may not be capable of economically using some forms, such as air transport, except for special shipments.…