Logistics is the designing and managing of a system in order to control the flow of material throughout a corporation. This is a very important part of an international company because of geographical barriers. Logistics of an international company includes movement of raw materials, coordinating flows into and out of different countries, choices of transportation, cost of the transportation, packaging the product for shipment, storing the product, and managing the entire process. The concept of logistics is fairly new in the business world. The theoretical development was not used until 1966. Since then, many business practices have evolved and logistics currently costs between 10 and 25 percent of the total cost of an international purchase.
There are two main phases that are important in the movement of materials: material management and physical distribution. Materials management is the timely movement of raw materials, parts, and supplies. The physical distribution is the movement of the firm's finished products to the customers. Both phases involve every stage of the process including storage. The ultimate goal of logistics is to coordinate all efforts of the company to maintain a cost effective flow of goods.
There are four logistics concepts: the systems concept, the total cost concept, the after-tax concept, and the trade-off concept. The systems concept is based on all functions of a organization working together in order to maximize benefits. This concept sometimes requires certain components of the organization to operate suboptimally in order to achieve maximum goals of the system. The total cost concept is based on the systems concept, however goal achievement is measured in terms of cost. A variation of the total cost concept is the after-tax concept. This goal of this concept is after-tax profit. This concept is becoming very popular because of the many different national tax policies. The trade-off concept links the...
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