Question

• Define logistics management.
• What are the three categories of inventory costs?
• What are the objectives of JIT (just in time)? Why do some companies prefer JIT method?

Answer 1

A Thumbs Up! Would be really helpful for me. If you have any questions, please leave a comment and I will get back to you as soon as possible.

A part of the supply chain, logistic management is a process of planning, organizing, and implementing the flow of materials, finished goods, and work in process from its point of origin to point of consumption with keeping in mind the satisfaction level of customers. Basically, logistic support is a crucial element in the process of manufacturing and marketing. It helps the management to focus on the entire system.

Three categories of inventory cost are:

-ordering cost: it is an inbound logistic cost with procurement cost. Ordering cost is basically based on two cost-the costs of ordering too much and the cost of ordering too less.

-carrying cost: inventory cost includes carrying cost which means inventory management and storage using internal or external warehouse services. Carrying costs also include the cost of capital.

-Shortage of stock out Cost & Cost of Replenishment: Cost of Loss, pilferage, shrinkage, and obsolescence, etc. Cost of Logistics. Sales Discounts, Volume discounts, and other related costs.

Just in time method (JIT) is a purchasing an inventory control method where the material is purchased just in the time of production to provide manufacturing of finished goods Just in time for sales.

Here, are the objectives of just in time method:

-zero inventory: zero inventory is the objective because manufacturing is basically processed when there is the need by the customers.

-100% on-time delivery: just in time method make sure that there is the manufacturing of goods only when it is needed, at all stages of the production process.

The companies prefers just in time method because it has the benefit of low-cost inventory with a high manufacturing rate. A defective unit rate is low in just in time method because manufacturing is processed only when there is a demand by the customers. Also, this method has a high output employee rate and the minimum labor rate.