Supply Logistic Cost Management In Company A

As the competition became more and more serious in the automotive industry, the vehicle makers have to reduce sale price to get market share, which brings big cost challenge for the whole automotive industry supply chain. Since the vehicle makers are not willing to reduce profit level, they put the cost pressure on their suppliers by pushing them to reduce components price.In such conditions, the automotive components producing companies have to do cost saving to meet this challenge.Since there is already not so much saving margin in the material and labor cost, all of such companies turn to think about its logistic flow. More and more focus are put on optimizing the whole supply now.This research focused on how to make cost management in supply logistic in automotive components producing company based on Activity Based Costing (ABC).First, the scope of supply logistic was re-defined, which refers to the whole material flow process directly from suppler till the production line. According to ABC, the supply logistic flow was divided into seven main activities such as, order, pack, transport, store, re-pack and line-feed. Each activity was calculated and control based ABC method. Then, company A's product G was taken as an example. The supply logistic cost of each activity of product G was calculated out and the total cost in supply logistic is generated.Second, detailed analysis on the whole supply logistic was done based on the calculation results. Optimizations were introduced to reduce the total supply logsitc cost. The cost was saved in the following ways: remove the non-value added activities in the whole flow; consider the logistic cost and logistic ability as one of the most important factor in supplier defining system; setup the mill-run and cross stocking system to reduce transport cost.Finally, after all the optimizations, the supply logistic cost of G product was reduced 4.7%.Thanks to the good effort in product G, Activity Based Costing was regarded as a very useful method in supply logistic cost saving in company A. Thus, company A decided to apply Activity Based Costing (ABC) in all the Chinese plants to make supply logistic cost saving in 2011.