PARETO ANALYSIS -- Logistics Cost

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According to Pareto analysis, 80% of a project's benefits can be obtained by doing 20% of the effort, or, in the opposite case, 80% of issues can be linked to 20% of the causes. A strong tool for decision-making and measuring quality is Pareto analysis.

The process of Logistics is based on planning and then the execution of the transportation and the storage of goods in an efficient way from the point of origin to the point of utilization.

Let’s take a company example named Platinum Pharmaceuticals Pvt Ltd, its CEO is targeting logistics manager about the issues in the logistics process:

The cost that faced by the company in their logistics process shows in the chart:

PARETO ANALYSIS

 

 

 

 

 

 

S#

LOGISTICS

LOSS IN AMOUNT

CUMM

CUMM. %

1

Warehousing

7500000

7500000

0.29

2

Transportation

6000000

13500000

0.53

3

Port cost

4500000

18000000

0.71

4

Freight cost

3500000

21500000

0.84

5

Storage

3000000

24500000

0.96

6

Material handling

600000

25100000

0.98

7

Labour efficiency

400000

25500000

1.00

25500000



Reasons of low cost:

Material handling: 

It is the process of moving the materials like products, raw materials within the warehouses or the transportation vehicles and manufacturing facility. The company bears less cost in material handling specifically in warehouse because they have warehouse management and their highly trained labors. As material handling becomes easy and fast by using advanced technologies and equipment. They are using software for record keeping and advance equipment. Storage of material is also well managed and warehouse department also keep record of raw material shelf life so material in this way utilizes timely and do not waste. Also, they have proper check and balance of their inventory and record of material release and used in batches by production department. In this way they manage and store material very well way.

Labor Efficiency: 

The company have well managed and highly skilled labors, that means they have productive labor and highly capable of this efficient working. The labors are able and willing to work and learn skills and also provide improvement to the system. The company provides their labors healthy and conductive work environment. All these facilities at the work station make them able for efficient working, leads to cost saving.

 

By Kahkshan Asif ☺

 

 

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