Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

4.4.2c Features in Reference to an Item: Unit Cost and Transportability

Intended learning outcomes: Present important features and possible values referring to an item: unit cost and transportability.

Continuation from previous subsection (4.4.2b)

An item’s unit cost is defined as the total cost for producing or purchasing one unit of measure of the item, e.g., one part, one gallon, one pound. It includes labor, material, and overhead cost.

  • high-cost item is an item with a relatively high unit cost compared with the unit cost of a low-cost item.

For many important decisions in logistics and operations management, a very rough classification in low- and high-cost items is sufficient. However, an ABC classification considering sales and projected volume would allow a finer distinction. See Section 11.2.2.

The transportability of an item is actually a statement on the size and weight per unit of measurement. If the item is a service, transportability refers to the object on which the service is carried out.

  • A nontransportable itemis an item with a size or weight that permits no transport. These are items or objects, for example, of a size greater than 50 m3or a weight greater than 200 metric tons. An example here is manufacture or maintenance of large plants.
  • A transportable itemis an item with a size or weight that permits transport using technical aids, such as helicopters, heavy goods vehicles, airplanes, or several people working together.
  • A portable itemis an item with a size or weight that permits transport (over a longer period of time) by means of the strength of one person. These are items or objects, for example, of a size smaller than 0.01 m3 or weighing less than 15 kg per unit. Letters sent out by courier are an example.
  • Digitally transmittable itemsare items that may be transmitted, or transported, using a digital communication protocol. These non­material goodshave a size or weight of zero.

The division of unit costs by the size or weight of the object leads to the concept of value density, that is, product value per kilogram or cubic meter. Digitally transmittable items have a value density approaching infinity. Value density plays a central role in the design of supply chains. See here also Section 3.1.1 and [Senn04]. It is a challenge, for example, if low-cost services are to be provided for nontransportable objects. This is the case with services for plants that have been installed worldwide. In designing the services, the proportion of services that can be transmitted digitally is particularly important.

Quiz on Chapter 4.4.2. : not yet available

Six Features in Reference to Customer, and Item or Product or Product Family[kml_flashembed movie="" height="75%" width="100%" /]

Course section 4.4: Subsections and their intended learning outcomes