Application of PCA in Controlling and ReducingEnterprise Logistic CostGuide Words: PCA; enterprise logistic cost; index system.Abstract:Logistic cost is accompanied by logistic activities. A logistic cost is an important indicatorto measure the production efficiency of an enterprise. With strengthening the logistic managementawareness, how to effectively reduce logistic cost has become a core mission. Using primarycomponents analysis (PCA)and its advantages,influential factors on logistic cost reduction inenterprise material conveying is analyzed. On the basis of PCA model and scores by the experts, theauthorscomputed someresultsthatcanreflectlogisticcostreduction.Throughcasestudy,itcanbeseen that some factors play very important role and all the reasons should be taken into accountbecauselogistic cost reduction depends on the interaction of all the factors.Through analysis anddeduction, it is concluded that, under the premise of minimizing the information loss of data, theapplication of PCA in the investigation on logistic cost reduction in enterprise material conveyingapprovestobepracticable.I.INTRODUCTIONCustomerrequirements,istheprocessofplanning,implementingandcontrollingthepositiveandnegative circulation and storage, which is highly efficient and low cost to goods, services and relatedinformation between the supply and demand .Through management process, costs can be effectivelyreduced, efficiency raised and resources efficiently allocated.The purpose of logistic costmanagement and control is to reduce costs and enhance enterprises competitiveness. However, fromthepractice, some problems plaguemany enterprises.There are not logistic cost subjects in theenterprise accounting system, which results in difficulties all enterprises controlling their own logisticcost. The logistic cost is distributed in many function sectors, which increases difficulties of thelogistic cost accounting and management. Many enterprises have improperly understood the logisticcosts.Only dominant costs such as external payments transport and warehousing can be seen, but alarge number of loading and unloading activities, mobile, packaging and other expenses are attributedto production or management fees in the internal enterprise consumption. Spending a lot of time toaccount the logistic cost data can only play a role in the financial budget, and cost accounting is just toknow how much the logistic is, which does not apply the logistic cost data. It is unable to grasp therelationship among different logistic patterns, service levels and the logistic cost. Widespread
Application of PCA in Controlling and Reducing Enterprise Logistic Cost Guide Words：PCA; enterprise logistic cost; index system. Abstract：Logistic cost is accompanied by logistic activities. A logistic cost is an important indicator to measure the production efficiency of an enterprise. With strengthening the logistic management awareness, how to effectively reduce logistic cost has become a core mission. Using primary components analysis (PCA) and its advantages, influential factors on logistic cost reduction in enterprise material conveying is analyzed. On the basis of PCA model and scores by the experts, the authors computed some results that can reflect logistic cost reduction. Through case study, it can be seen that some factors play very important role and all the reasons should be taken into account because logistic cost reduction depends on the interaction of all the factors. Through analysis and deduction, it is concluded that, under the premise of minimizing the information loss of data, the application of PCA in the investigation on logistic cost reduction in enterprise material conveying approves to be practicable. I. INTRODUCTION Customer requirements, is the process of planning, implementing and controlling the positive and negative circulation and storage, which is highly efficient and low cost to goods, services and related information between the supply and demand . Through management process, costs can be effectively reduced, efficiency raised and resources efficiently allocated. The purpose of logistic cost management and control is to reduce costs and enhance enterprises competitiveness. However, from the practice, some problems plague many enterprises. There are not logistic cost subjects in the enterprise accounting system, which results in difficulties all enterprises controlling their own logistic cost. The logistic cost is distributed in many function sectors, which increases difficulties of the logistic cost accounting and management. Many enterprises have improperly understood the logistic costs. Only dominant costs such as external payments transport and warehousing can be seen, but a large number of loading and unloading activities, mobile, packaging and other expenses are attributed to production or management fees in the internal enterprise consumption. Spending a lot of time to account the logistic cost data can only play a role in the financial budget, and cost accounting is just to know how much the logistic is, which does not apply the logistic cost data. It is unable to grasp the relationship among different logistic patterns, service levels and the logistic cost. Widespread
anti-backrelationshipof logisticcostwillresultinlowerqualityofenterpriselogisticserviceA completely theoretical, technical and management methods has been initially formed inmodern enterprise logistic system which become an independent and comprehensive discipline toimprove efficiency of modern enterpriselogistic systemReducinglogistic costs is not only atechnical problem but also related to a series of logistic system management. The ultimate goal ofenterprise material conveying system is to ensure that the enterprises, under the premise of normalproduction, can reduce conveying costs in order to guarantee their products'sufficient competitivenessin international market. Thus, reduction of material conveying system cost is a way to increase theprofits of enterprise. PCA is used to study the impact on the factors influencing cost reduction in thematerial conveying system. Then, the factors are classified and sorted in order to obtain primary andsecondary factors influencing cost reduction and propose management measurement.IL.PCAANDMATHEMATICALMODELA.PCAPCA is used to find out some synthetic indexes representing numerous indexes by lineartransformation and abandoning a small part of information, to make these indexes reflect theinformation of all the primary indexes possibly,to ascertain the weights of index objectively and toavoid the subjectivity ensuring the principle that the data information lost is the least. PCA has someadvantages. Principal components are independent each other after primary indexes are transformed,and it caneliminate the related influenceof the indexes and reduce work load to choosethe indexes.Forothermethods,itcanhardlyeliminatetherelated influenceoftheindexes,thus,choosingindexeswill cost much time. On the contrary, PCA can eliminate the related influence and the calculationprocess is comparatively easy.Each primary component is to be ranked by the size of their varianceforPCA.B.Mathematical ModelIt is assumed that there are samples, one of which has p observed variables, X1, X2, X3,..-, Xp.Then the data base will be used It is assumed that there are n appraisable schemes and p indexes, andthere are p nx primitive data. Reference [6] gives the procedures and steps which are not stated.IIL.USING PCATO ANALYZE THE FACTORS' EFFECT ON ENTERPRISE LOGISTICCOSTCONTROLFrom the illustration above, some factors influencing enterprise logistic cost control are discussedThrough summarization, the factors are listed in detail. As a variable, each item is defined. Forinstance, the variable of item (1) is defined as x1, the rest are similar by analogyTheitemsareasfollow.(1) Lineation of material conveying system (xl),(2) Materials assembly and Unitization (x2)
anti-back relationship of logistic cost will result in lower quality of enterprise logistic service. A completely theoretical, technical and management methods has been initially formed in modern enterprise logistic system which become an independent and comprehensive discipline to improve efficiency of modern enterprise logistic system. Reducing logistic costs is not only a technical problem but also related to a series of logistic system management. The ultimate goal of enterprise material conveying system is to ensure that the enterprises, under the premise of normal production, can reduce conveying costs in order to guarantee their products’ sufficient competitiveness in international market. Thus, reduction of material conveying system cost is a way to increase the profits of enterprise. PCA is used to study the impact on the factors influencing cost reduction in the material conveying system. Then, the factors are classified and sorted in order to obtain primary and secondary factors influencing cost reduction and propose management measurement. II. PCAAND MATHEMATICAL MODEL A. PCA PCA is used to find out some synthetic indexes representing numerous indexes by linear transformation and abandoning a small part of information, to make these indexes reflect the information of all the primary indexes possibly, to ascertain the weights of index objectively and to avoid the subjectivity ensuring the principle that the data information lost is the least. PCA has some advantages. Principal components are independent each other after primary indexes are transformed, and it can eliminate the related influence of the indexes and reduce work load to choose the indexes. For other methods, it can hardly eliminate the related influence of the indexes, thus, choosing indexes will cost much time. On the contrary, PCA can eliminate the related influence and the calculation process is comparatively easy. Each primary component is to be ranked by the size of their variance for PCA. B. Mathematical Model It is assumed that there are samples, one of which has p observed variables, X1, X2, X3,., Xp. Then the data base will be used It is assumed that there are n appraisable schemes and p indexes, and there are p n× primitive data. Reference [6] gives the procedures and steps which are not stated. III. USING PCATO ANALYZE THE FACTORS’ EFFECT ON ENTERPRISE LOGISTIC COST CONTROL From the illustration above, some factors influencing enterprise logistic cost control are discussed. Through summarization, the factors are listed in detail. As a variable, each item is defined. For instance, the variable of item (1) is defined as x1, the rest are similar by analogy. The items are as follow. (1) Lineation of material conveying system (x1), (2) Materials assembly and Unitization (x2)
(3) Mechanization of staple material convey (x3)(4) Removal of gravity (x4),(5) Reasonable allocation of material activity index and convey index of equipment (x5),(6) Seamless docking of material conveying system (x6),(7) Reasonable, appropriate and practical mechanization and automation (x7),(8) Balanced conveying of material (x8),(9) Reasonable allocation of conveying equipment (x9)Using the items listed above, thirteen problems will be analyzed and discussed using themathematical model provided by Reference.The factors influencing enterprise logistic cost reductionintheprocessof material conveying canbeanalyzedand accessed.Accordingtotheimportanceoffactors,theexperts can score.Thehighest scoreofeachitemis 1o,thus,theexperts cangivedifferentscores about the importance of each item. xi (i-1, 2, .., 13) are used to represent the different itemrespectively. The primitive data is shown in Table 1.Table 1. Primitive dataScoreixiX3X4XsXeX7XsX912959.39.69.19.19.39.89.49.99.59.79.99.59.39.99.19.5349.89.99.19.79.59.59.59.39.69.19.39.59.29.59.29.59.69.3569.29.59.89.69.49.29.49.39.29.99.89.89.89.69.99.09.89.57899.09.79.59.29.79.79.29.59.59.0939.59.59.49.09.19.29.19.09.99.79.79.59.69.49.2A.StandardizeprimitivedataTable 2. Data after standardizationXix:X)X4XsXX7X*X,1231.26550.4136-1.1193-1.63411.98821.2840-1.60090.10900.77760.0239-1.0063-0.83540.82721.6523-0.03080.4117-0.54411.28400.95511.3722-0.83540.82720.2665-0.03080.4117-0.54410.09174-1.2177-1.0063-0.36320.0000.7729-0.03081.0063-1.1006-0.54415-0.90730.77761.52550.4136-0.7729-0.4316-0.7776-1.0494-0.305760.33430.7776-1.30761.24081.30591.17160.41170.97171.2840780.18301.0533-1.24080.95940.7708-1.37220.4664-0.3057-1.52810.9551-1.0063-2.0349-1.89541.0533-2.0679-0.0800-1.9668-1.0494160.0239-0.4117-1.24081.47690.5811-1.46581.57241.6009-0.3057B.Compute through PCATable 3. Results after pca
(3) Mechanization of staple material convey (x3), (4) Removal of gravity (x4), (5) Reasonable allocation of material activity index and convey index of equipment (x5), (6) Seamless docking of material conveying system (x6), (7) Reasonable, appropriate and practical mechanization and automation (x7), (8) Balanced conveying of material (x8), (9) Reasonable allocation of conveying equipment (x9). Using the items listed above, thirteen problems will be analyzed and discussed using the mathematical model provided by Reference. The factors influencing enterprise logistic cost reduction in the process of material conveying can be analyzed and accessed. According to the importance of factors, the experts can score. The highest score of each item is 10, thus, the experts can give different scores about the importance of each item. xi (i=1, 2, ., 13) are used to represent the different item respectively. The primitive data is shown in Table 1. Table 1. Primitive data A. Standardize primitive data Table 2. Data after standardization B. Compute through PCA Table 3. Results after pca
Ranked byContributionAccumulationvarianceEigenvalueXiX2x3x.rate (%)rate(%)ponentIC3.93700.19980.18550.4325x330.2830.28-0.45231232.540919.5549.830.06890.27000.0408-0.1198X12.225817.1266.950.4848-0.1553-0.05760.0126X241.529611.7778.720.0530-0.49830.05120.1736Xs5Xs1.06258.1786.890.31940.18970.2193-0.250260.87876.7693.65-0.14820.24580.42520.1288xg7X70.57114.3998.040.53650.51140.1709-0.07388X40.15911.2299.26-0.25610.05620.29990.37469X60.06110.4799.73-0.09890.03550.29700.0755Table3. Results after pca (continued)X6X7XsX,Xs-0.3004-0.2308-0.4153-0.2749-0.3081-0.01020.1558-0.12380.2027-0.06390.2385-0.37600.20900.2080-0.30630.59010.28860.0614-0.38910.1716-0.22150.09070.11360.46820.4725-0.37540.21340.4066-0.2394-0.13840.1346-0.0040-0.0438-0.36870.0250-0.1558-0.0930-0.2672-0.0978-0.27210.42580.2890-0.5265-0.08690.0988C.Factoranalysisandfactoranalysiswithcontributionrateof85%Table4.Factoranalysiswiththecontribution rateof85%ComponentsNO. 1 /xlNO. 2 [x]NO.3 xlNO. 4 /xlNO.5 [xslSample ID-0.15440.50990.01870.7933-1.212812340.13020.67180.31140.42210.57330.68150.48310.6764-0.68711.15530.21940.1785-0.36260.1814-0.1510n0.03970.52970.4671-0.1272-0.51506-0.84690.54270.1933-0.27380.40837-0.34130.10620.5844-0.66550.2873801.28770.07430.51380.64640.17590.05010.69290.0457-0.0744-1.2826D.Results and discussionThe contribution rate used in the paper is 85%. It can be different if we have different purpose tohandle theproblemsof logistic cost reduction in enterprisematerial conveying.If the contribution rateis85%,theprimary components arex3,xlandx2.If thecontributionrate is 100percent,wemustconsider all the factors influencing enterprise logistic cost reduction. Sometimes, when we solve someproblems of cost reduction such as improving material active index, materials assembly andunitization,mechanization of staplematerial conveyand soon,otherfactorswill be solved andconsidered naturally. Analyzing the importance and logistic cost reduction in enterprise materialconveyingsystem,theprimarycomponentstakegreateffectsafterobservingtheresultsfromTable4Thefirstprimarycomponent isx3,whichmeansmechanizationof staplematerial conveywillplaymost important role while the contribution rate is 85%.The 2ndand 3rdare xland x2respectivelywhichillustrates thatoptimization and mechanization are,whatever spaceor conveying,thefirst items
Table3. Results after pca (continued) C. Factor analysis and factor analysis with contribution rate of 85% Table 4. Factor analysis with the contribution rate of 85% D. Results and discussion The contribution rate used in the paper is 85%. It can be different if we have different purpose to handle the problems of logistic cost reduction in enterprise material conveying. If the contribution rate is 85%, the primary components are x3, x1and x2. If the contribution rate is 100 percent, we must consider all the factors influencing enterprise logistic cost reduction. Sometimes, when we solve some problems of cost reduction such as improving material active index, materials assembly and unitization, mechanization of staple material convey and so on, other factors will be solved and considered naturally. Analyzing the importance and logistic cost reduction in enterprise material conveying system, the primary components take great effects after observing the results from Table 4. The first primary component is x3, which means mechanization of staple material convey will play most important role while the contribution rate is 85%. The 2ndand 3rdare x1and x2respectively, which illustrates that optimization and mechanization are, whatever space or conveying, the first items
people want to consider.The following primary components are x5and x8, which describes andconsiders the reasonability, allocation, automation and active indexes of conveying material. Theanalysisandillustrationofothercomponentsaresimilartothatofx3E.MeasurementsoflogisticcostreductionAs to enterprises, logistic rationalization is the key to reduce logistic cost which has a directrelationship to the level of profitability and is designed and planned in the light of the actual logisticprocess.Improving logistic speed can reduce the amount of funds occupancy,shorten the logisticcycle, lower storage costs and save logistic costs. Improving the logistic service level to customer isnot only an important means to ensure long-term benefits of enterprises but an effective way to reducelogistic costs.Under normal circumstances, enterprises should, accordingto industry and goodscharacteristics,fully coordinatewiththecustomer,explorethe combinationoflogisticand distributionand the best way to reduce logistic costs. In practice, companies can choose one or several logisticmodels, which should rely on the final objective to minimize logistic costs and balance from thehighly integrated strategy.V.CONCLUSIONWith economic globalization, there have been the characteristics of network, specialization andstandardization in enterprise logistic. Logistic cost management has become key factors forenterprises to gain a competitive advantage. Based on enterprise logistic cost management status andproblems, innovative logistic cost management mechanism, the logistic costs of building Justificationssystem, multi-joint lower logistic costs are becoming management strategy of enterprise logistic costreduction.Using PCA, the factors influencing logistic cost in enterprise material conveying system areanalyzed. In analyzing the importance and logistic cost reduction in enterprise material conveyingsystem, the primary component takes great effects after observing the results. The first primarycomponents are sorted by x3, x5, x9, x7, 13and so on. Through analysis and discussion, it can befound thatthemechanization,reasonability,allocation,automationand mechanizationbecomemoreand more important in reducing logistic cost and enterprise logistic management. All the factorsshould be considered to reduce enterprise logistic cost. Finally, the measurements of reducing logisticcost are proposed.Through logistic rationalization, speeding logistic, optimizing logistic servicescombining strategies, balancing logistic models and strategy, the logistic cost in enterprise materialconveyingsystemcanbereduced
people want to consider. The following primary components are x5and x8, which describes and considers the reasonability, allocation, automation and active indexes of conveying material. The analysis and illustration of other components are similar to that of x3. E. Measurements of logistic cost reduction As to enterprises, logistic rationalization is the key to reduce logistic cost which has a direct relationship to the level of profitability and is designed and planned in the light of the actual logistic process. Improving logistic speed can reduce the amount of funds occupancy, shorten the logistic cycle, lower storage costs and save logistic costs. Improving the logistic service level to customer is not only an important means to ensure long-term benefits of enterprises but an effective way to reduce logistic costs. Under normal circumstances, enterprises should, according to industry and goods characteristics, fully coordinate with the customer, explore the combination of logistic and distribution and the best way to reduce logistic costs. In practice, companies can choose one or several logistic models, which should rely on the final objective to minimize logistic costs and balance from the highly integrated strategy. V. CONCLUSION With economic globalization, there have been the characteristics of network, specialization and standardization in enterprise logistic. Logistic cost management has become key factors for enterprises to gain a competitive advantage. Based on enterprise logistic cost management status and problems, innovative logistic cost management mechanism, the logistic costs of building Justifications system, multi-joint lower logistic costs are becoming management strategy of enterprise logistic cost reduction. Using PCA, the factors influencing logistic cost in enterprise material conveying system are analyzed. In analyzing the importance and logistic cost reduction in enterprise material conveying system, the primary component takes great effects after observing the results. The first primary components are sorted by x3, x5, x9, x7, 13and so on. Through analysis and discussion, it can be found that the mechanization, reasonability, allocation, automation and mechanization become more and more important in reducing logistic cost and enterprise logistic management. All the factors should be considered to reduce enterprise logistic cost. Finally, the measurements of reducing logistic cost are proposed. Through logistic rationalization, speeding logistic, optimizing logistic services, combining strategies, balancing logistic models and strategy, the logistic cost in enterprise material conveying system can be reduced