LOGISTIC AND INVENTORY MANAGEMENT

1.1. Concepts in logistics management

i. Systems concept
It is based on all functions of an organisation working together in order to maximise benefit. This concept sometimes requires certain components of the organisation to operate sub optimally in order to achieve maximum goals of the organisation.
ii. Total cost concept
Logistics focuses on coordination of inbound logistics and material management as well as cost efficient distribution while supporting the customer service goals. All of these activities are connected in many different ways and often logistics managers use the total cost approach to find the most cost effective solution. The main objective is to find the lowest cost options that will still provide the support for the customer service goals.
iii. Total distribution concept
It is a recognition that the interrelationship between different elements e.g. delivery transport and storage need to be considered within the context of the broader supply chain. It is the art of directing the flow of materials and supply of products to the user. It includes the total flow of raw materials, user products, supply and information flows that helps to control materials
movement. Total distribution costs are costs incurred in moving goods from point of production to point of consumption.
iv. After tax concept
A variation of the total cost concept that is aimed to determine the after tax profit.
v. Trade off concept
This concept links the system together in a way that is very efficient but can have tradeoffs that might be inefficient. The advantages of such high efficiency must be weighed against the risks involved