Introduction
Supply chain management and logistics aim to optimize and speed up the transportation and distribution of products from producers to consumers. It leads to lower prices for goods, attracting an existing customer base and new consumers (Addicted to cheap shopping?, 2007). As a result, both parties are satisfied. Companies make profits, and customers receive affordable and quality goods. To achieve this, competent logisticians and supply chain managers need to know the different types of waste in logistics, trade-off techniques, and their relation to the company’s financial resources. This knowledge is necessary to improve many of the loading docks and operations (Modern marvels, 2003). Here, these aspects of supply chain management will be described and analyzed.
Waste in Transportation and Distribution Networks
Classification and categorization are essential for the effective optimization of any complex activity. Supply chain management experts identify seven types of waste in logistics. Goldsby and Martichenko (2005) note that “inventory is also perhaps the most visible form of waste” (p. 20). There is also transportation waste; it is a waste that is “found in having many more assets required to cover transportation demand and in using the existing assets unproductively” (Goldsby & Martichenko, 2005, p. 29). Other types include waste of warehouse space, time and waiting wastes, packaging waste, unnecessary administrative activities and responsibilities, and knowledge waste. What generates the waste is planning and execution errors (Goldsby & Martichenko, 2005). Supply chain managers use elimination strategies to reduce waste and accelerate transportation and distribution processes.
Trade-Offs, Which Every Supply Chain Management Should Know
Supply chain management specialists have developed several trade-offs guided by lean principles to eliminate waste in logistics. One of them is the lot size-inventory trade-off, which means minimizing lot sizes, which harms production efficiency but reduces inventory (Trent, 2008). Trent (2008) notes another useful inventory-transportation cost trade-off technique when inventory holding and reduced consumer services are exchanged for more efficient material handling. It is also worth mentioning the lead time-transportation cost trade-off when a supply chain manager sacrifices efficient and cheap transportation in exchange for short lead times (Trent, 2008). All logisticians and people involved in transportation and distribution should know these three trade-offs.
Logistics Wastes, Trade-Offs, and Cost Savings
It is safe to say that by applying the abovementioned trade-offs, one can save significant amounts of money. For example, small lot sizes lead to cost savings (Trent, 2008). Less frequent material movements and productive usage of space and facilities lead to fewer labor hours, transportation, and warehousing costs. The ABC principle of cost-saving is another tool that helps achieve efficient warehousing (Kerber & Dreckshage, 2011). It is also necessary to mention the cross-docking concept (Farahani et al., 2011). Reduced delivery and lead times allow the supply chain manager to save financial resources associated with renting warehouse space. Optimized packaging enables one to prevent physical damage to items during transportation (Goldsby & Martichenko, 2005). Elimination of administrative and knowledge of waste allows for avoiding ineffective and unnecessary practices and risks associated with items’ distribution.
Conclusion
This work examines in detail logistics topics such as waste classification, trade-offs, and how they affect the company’s resources. Seven types of waste were found to be present in the supply chain. Three trade-offs, the fundamentals of which are lean principles, can be applied to eliminate waste. It leads to cost savings in all areas of transportation and distribution, from inventory to warehouse rent.
References
Addicted to cheap shopping? Why the real cost of goods keeps going down [Video]. (2007). BBC. Web.
Farahani, R., Rezapour, S., & Kardar, L. (2011). Logistics operations and management: Concepts and models. Elsevier.
Goldsby, T., & Martichenko, R. (2005). Lean six sigma logistics: Strategic development to operational success. CRC Press.
Kerber, B., & Dreckshage, B. J. (2011). Lean supply chain management essentials: A framework for materials managers. Auerbach Publications.
Modern marvels: Loading docks [Video]. (2003). A&E Television Networks. Web.
Trent, R. (2008). End-to-end lean management: A guide to complete supply chain improvement. J. Ross Publishing.