Delft University of Technology
Faculty Mechanical, Maritime and Materials Engineering Transport Technology / Logistic Engineering
M.J. Heeroma Een kostenberekeningsmethode voor de levensmiddelenketen. Masters thesis, Report 97.3.LT.4845, Transport Technology, Logistic Engineering.
The fierce competition in the foodsector forces optimisation within the distribution-chain. Important characteristics of foodproducts are that they are logistically very demanding and have a short throughput time. The foodsector itself can be characterised by the following developments:
Unpredictable customer behaviour; Growing customer service; Shorter demanded delivery time; Decreasing lot sizes;
Increase of retailers' position of power. compared to:
Enlargement of scale by producers; Market internationalisation;
Technological developments like barcoding and EDI (Electronic Data Interchange).
Product developments, of which especially a heavy increasing assortment and a shorter product lifecycle are most important, can be added to this list. One of the most important consequences of these developments are the increased frequency of placing orders by supermarkets, as well as lower stocks in the stores. In this way the retailers try to be responsive to the customers' wishes. Likewise, the powerful grocery stores urge their suppliers to react in the same way. Because of the differences between these sectors, the logistic, and therefore financial, consequences are difficult to compare. Linking costs directly to the products through activities in the distribution process, is a popular way of costing in the foodsector. However, current applications of this 'Activity Based Costing' (ABC) don't give insight into the cost structure of a complete chain, in which the producer is included as well. An objective perspective for estimating the consequences of the current developments appears to be necessary.
During this thesis a costing method, based on 'ABC', is therefore developed, to determine the cost structure in a logistic chain. The activities in this chain will be directly linked to costs, caused by the resources labour, material and space. The intensity and frequency in which these activities occur, depend on the structure in the flow of goods. This structure is obtained by defining the different sorts of packing- and transportunits in which the products are dealt with. Important parameters that influence the structure are the frequency of supplying the store, the diversity of the assortment and the broadness of the flow.
The costing method is implemented in a computermodel, useful to demonstrate some calculations of the cost structure for an individual product in the foodsector. A demonstration of this model showed that the production and handling costs, mainly raised during an increased frequency. Furthermore, the negative influence of ordering more frequently decreases when the flow of goods grows.
The developed costing model is broadly applicable; there are no constraints for the number of connections or activities in the chainmodel. The research for describing and modeling of the chain is therefore an important subject of the costing method. Next to the determined parameters, the effect of other factors, for example an extra connection in the chain, can be measured. The calculations could be differentiated by using a variable cost for labour. By means of a case it appears that the current developments demand significant reorganisations for both the producer and the distribution centre. The profits that are expected by the retailers have to be looked upon with criticism.
Important recommendations are tailoring the model considering the assortments' structure and defining the concept 'slow mover': products with a low throughput in the supermarket. Other recommendations include collecting the flow of goods from the producer and investigating the opportunities of optimising the chain with the new costing model as a principal tool.
Reports on Logistic Engineering (in Dutch)
