Total Logistics Concept (TLC)
Building on the previous step, let’s look at the Total Logistics Concept (TLC), a commonly used term relating to the treatment of all logistic activities, among all partners, as one integrated system.
In effect, all decisions at different levels are made based on logistics activities as a whole.
For example, packaging used by a company should be based on the requirements of the transportation and storage elements of the supply chain. If we take a situation where goods are repacked in a warehouse because of the transportation requirements, there could be an unnecessary extra cost applied to the supply chain, which could have been considered earlier on.
Let’s take another example: suppose that the manufacturer uses cardboard boxes in the first stage, then the goods are repacked on wooden pallets, which are then stored or transported easily to the final customer. If the cardboard boxes are not valuable for storing or transportation, they can be eliminated, which might save considerable costs. Applying the TLC can save such costs in the supply chain.
In essence, if logistics activities are not integrated, additional costs will be imposed on the supply chain and significant losses could occur. In other words, if each element or part of the supply chain determines its own optimal decisions – and those decisions are not the optimal ones for the whole supply chain – then the total cost of the supply chain will be higher.
Moreover, in the supply chain, all cost elements should be considered simultaneously. So, the decisions should be made according to the total cost, not based on each cost element. Let’s take a look at the following diagram:
As you can see, by increasing the shipment size or number of warehouses, the transportation cost will be decreased; however, the cost of warehousing is increased, which shows how the TLC should be considered when making decisions.
Can you explain or find any other issues related to the TLC which could decrease total costs? Discuss in the comments area.
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