Design Approach On Logistic Cost Managment In TRW FAWER Automotive Safety Systems

In manufacturing enterprises, logistic cost is the biggest cost expenditure except the raw material cost. Nowadays, logistic managers and staffs are seeking the way to reduce the logistic cost by learning, practicing and summarizing. But what we must appoint is that the absolute value of the logistic cost is always increasing. Because enterprises need to improve their competitive ability by enhance logistic service level, they must invest more money on it, which increase the logistic cost. High logistic cost is the insurance of good service, and that is the paradox of the logistic system benefit. It's difficult to improve the logistic service level and, at the same time, reduce the logistic cost unless there is a fundamental technology improvement. But we are trying to control the logistic cost increasing range and make sure it is lower than the range of the economic increasing range. So the proportion of the logistic cost is decreasing comparing with the enterprise's benefit and become the resource of the benefit.With the development of logistics, great changes have happened in management ideas and means. For example, logistics requires us to think over from the whole process of supply chain in order to reach the best of all; Logistics needs the method of balance to deal with the "law of antinomy". Particularly, from the aspect of cost management, it becomes more important to know the actual logistics cost, to calculate logistics cost exactly, to control and reduce logistics cost considerably after the introductionIn process of daily production and operation, logistic run through the whole process from purchasing, component manufacturing to final product selling to the final customer. Whether the whole process is reasonable and affective or not is depends on the management of the process, which means the logistic management. After several ten years exploring done by domestic experts, operation managers and logistic staffs, a conclusion summarized from daily practicing is: the main aim of the logistic management is to reduce total logistic cost. Why we want to study logistic management is to find a way to reduce the total logistics costs and enhance the competitive ability. In this inflating buyers'market, customers have the ultimate words'right. Therefore, enterprises must try their best to meet customers'requirement in order to keep their position in the market. Obviously, the process of meet customers'requirements restricted by how much an enterprise can invest in. So, enterprises must find a way to balance between the logistic cost and the customers'requirements.Systemic management of the logistic activities means when you do the logistic management decision, you should consider all kinds of logistic cost as well as the relationship among them, and make a good trade-off under the restriction of certain customer service level. In another word, all logistic activities and results can be converted into logistic operation cost, no matter it is direct transportation cost or opportunity cost occurred during inventory or lack of inventory cost due to customer reason.According to the benchmarking of current business, the acceptable formula is: Total Logistics Costs= Transportation Cost+ Inventory Carrying Cost+ Logistics Administration Cost. During daily practices, it has been found that the total logistic cost occurred during series related logistic activities are not only distributed in different functional department inside enterprises but also in different cooperative partners outside enterprises since the logistic management has the characteristics of boundaryless (which is decided by cooperative operation requirement) and opening(which is decided by customer service requirements). Seeing the process of the product value realizing, the logistic cost is related to the production and marketing management activities ( where and when can products realize their value)and also related to the customers'logistic requirement(being a interface interacting to the customer, so we should satisfy the customer). So, even we have this simply and clearly formula, actually it steel difficult to control the total logistic cost.The actual situation is that our enterprises didn't realize the importance of the total logistic cost management. Sometimes, they only care about the direct inventory and transportation costs and don't consider much about the other parts of inventory holding cost and logistic administration cost (Mercer 2002). Lack of the modern logistic management training is one of the reasons, but the main reason is that it is difficult to control the total logistic cost during daily practice.By the way, the calculation method of Activity-Based Costing is applied for adapting logistic service characteristic and avoiding the disadvantage of business-acrossed accounting system. But first we must make clear about the interactive relationship between logistic cost and logistic service activity. Secondly, we must have a set of budget system which can control the whole process matching with the logistic service performance management system.TRW FAWER Automobile Safety Systems(Changchun) Co., Ltd is a company producing car chassis system, braking system, steering wheel and airbag. Since the company established, it developed speedy and become stronger in these ten years under the joint effort of the Chinese and foreign director and managers. The company now is one of the Top50 component manufacture company. The unique and systemic management system also improved with the growing of the company. Now we are focus on how to improve the logistic management system. We hope we can design a set scientific and efficient logistic cost control system by using advanced logistic management knowledge in order to make the logistic management system to meet the requirement of the company continuous development.