Effect at an organisational level
• The reason why these companies can work internationally is that logistics is efficient
enough to have a relatively small impact on the overall cost of the final product. This is measured by the value density.
• The value density is the ratio of a product’s value to its weight or size.
Value Density
• Products with low-value density, like soft drinks, are expensive to move and logistics can form a significant proportion of their final cost. This encourages smaller suppliers who serve local needs.
• On the other hand, logistics adds a relatively small amount to the cost of high-value density products, such as computers.
• This encourages a few main suppliers to serve widespread, or global, needs.
Effect at an organisational level
• The stage in a product life cycle is also important. Near the beginning of the life cycle profits are high and short lead times are more important than cost, thus encouraging local supplies.
• Later in the life cycle, increased competition makes costs more important, and these might be reduced by the efficient, centralised stocks and consolidated transport that come with international operations.
Effect at an organisational level
• The reason why these companies can work internationally is that logistics is efficient
enough to have a relatively small impact on the overall cost of the final product. This is measured by the value density.
• The value density is the ratio of a product’s value to its weight or size.
Value Density
• Products with low-value density, like soft drinks, are expensive to move and logistics can form a significant proportion of their final cost. This encourages smaller suppliers who serve local needs.
• On the other hand, logistics adds a relatively small amount to the cost of high-value density products, such as computers.
• This encourages a few main suppliers to serve widespread, or global, needs.
Effect at an organisational level
• The stage in a product life cycle is also important. Near the beginning of the life cycle profits are high and short lead times are more important than cost, thus encouraging local supplies.
• Later in the life cycle, increased competition makes costs more important, and these might be reduced by the efficient, centralised stocks and consolidated transport that come with international operations.
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