ABSTRACT
One main purpose of operating a company is to maximize the benefit. Thus, cost down becomes a focus task of professionals who are striving to achieve this goal. To succeed in achieving this end, the sticking point is to reduce the cost of production, which is embodied in the quality of value creation and business running. With the level of the cost, evaluation of an enterprise is clear. For all firms, the choice is critical of which activities to perform internally and which to outsource. Cost structure determines largely a firm’s market share and its market position.
Good customer service does not necessarily need a strong financial back up. A well-established customer service can enhance customer retention and help to increase sales and profits. An increasing number of companies are paying more attention to the quality of servicing their customers. For sustained profitability, any firm must be explicit about how it will compete. Competitive advantage in the marketplace derives from providing better customer value for equivalent cost, or delivering equivalent customer value for lower cost. Here, one seeks to achieve both cost leadership and superior customer value, or customer service in another word.
This paper presents a strategic perspective of cost. As is known to all, competition among enterprises is fierce, and this is “Natural selection and survival of the fittest.” The keystone lies in seeking the balance between cost and customer service level in supply chain management, including analysis of transportation cost and inventory policies. Furthermore, Taguchi's Loss Function theory is employed here to illustrate the relationship between cost and customer service level.
Key words: Cost; Customer service level; Taguchi Loss Function; Transport strategy; Inventory strategy
Abstract in English………………………………………………………Ⅱ
Abstract in Chinese………………………………………………………Ⅲ
1. Introduction……………………………………………………………..1
1.1 What Is a Strategy…………………………………………………….1
1.2 Definition of Cost……………………………………………………. 2
1.3 Definition of Customer Service Level………………………………..2
2. Balance between Cost and Customer Service Level……………....4
2.1 Notes Related to Cost…………………………………………………4
2.2 Notes Related to Customer Service Level……………………………6
2.3 Taguchi’s Loss Function Theory…………………………………….10
3. Transport Fundamentals and Decisions…………………………...14
3.1 Service Choices and Their Characteristics…………………………..14
3.2 Transport cost characteristics………………………………………..16
3.3 Transport Service Selection………………………………………….17
4. Inventory Strategy…………………………………………………..20
4.1 Nature of Forecasting………………………………………………..20
4.2 Storage System Functions…………………………………………...22
5. Conclusion………………………………………………………………24
Bibliography……………………………………………………………….25
Acknowledgement………………………………………………………...27
