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1. When a company does chose to relocate its facility? Provide an example of facility closing.
2. What are the primary factors for determining rate of transportation?
3. What are the differences between common carriers and exempt careers?
4. Explain the total cost approach in designing a logistics system.
Expert Answer
- There are multiple factors on which a firm decides to move its facility. For example a company like apple started in a Garage and subsequently had to move to other office in order to meet its growth requirements. The most common reason for a firm to relocate its business is COST. Cost plays a critical role in deciding where to have your facility. It can be cost of space, cost of labor, cost of sourcing labor, cost of transportation, image loss cost etc.
The classic example of cost management is Apple which has outsourced its production facility in China to FOXCON.
An example of facility closing can be Saddleback Memorial – San Clemente Hospital in USA, which was not able to meet operating cost of hospitals and thus had to close its facility.
- The primary factors for determining rate of transportation are distance, weight and mode of transportation. In addition factors like surcharges, oversized product also impact the rate of transportation
- A common carrier is one which transports goods or people from a company of place. The carrier is responsible for any loss or damages to goods or people during the transportation phase. It can be an airplane or a truck logistics company which transports people or goods. These carriers are under the regulation of interstate commerce act. These regulations are mandated inorder to avoid monopoly of a particular mode of transportation.
While exempt carriers are one which are exempted from the Interstate commerce act and these carriers have specialization for any specific product of commodity. As these firms are specialized in transportation of specific goods, the lack of infrastructure allows them to get the exemption from the government commerce act.
- Total Cost approach is one where a firm accounts for all the cost associated with any logistics. i.e include the fixed cost as well as the variable cost of transportation. Total cost such as cost of trucks, cost of employee, infrastructure cost while variable cost includes fuel cost, cost during the transportation, incidental labor costs etc
