Economics and management in the sphere of ict department: management and marketing

3-graph Relationships among logistics costs.
Warehousing costs include costs of rent, depreciation, taxes, utilities, and salaries. Financial costs include opportunity costs whereas costs related to perishability, pilferage, shrinkage, and insurance are included in inventory costs. Order processing costs are the expenses incurred to create and process an order. These costs are included in the determination of the lot quantity for an order. Examples of order processing costs are: cost to prepare a purchase order, cost of sorting and retrieval, cost to put away goods once they have been received, cost to process the invoice related to an order, cost to prepare and issue a payment, etc. Lot quantity costs include setup costs, cost associated with wait time, scrap & operating inefficiencies, and the opportunity cost of lost capacity.
Table 1.5 provides a brief comparison of the major modes of transportation used in global supply chains. The five major modes of transportation that will be further discussed in this chapter and include truck, rail, air, water, and pipeline
Truck.This mode of transportation has seen the most growth over the last 50 years due to trade liberalization. However, the large growth has resulted in significant problems including petroleum fuel consumption and pricing issues, increased environmental impact awareness, traffic congestion, and increase in loss and liability resulting from increased traffic accidents (Notteboom, Rodrigue, & Slack, 1998). Shipment by truck has a relatively low cost but is subject to many regulations due to their time on state governed highways. The size and shape of the loads are also highly regulated by governing bodies. Limitations placed on freight shipments by road coupled with technical and economic factors limit “potential to achieve economies of scale.” Governing bodies dictate the maximum allowable weight for truck shipments within their sovereign borders. Refer to Table 1.5 for details on the allowable gross vehicle weight by country. This means that given the current operating environment, truck transportation will only provide a limited amount of savings resulting from high volume shipments.