Total Distribution Cost Object of logistics systems is to minimize Total Distribution Cost (TDc) TDC is the total cost of transporting goods Sum of cost of transport and cost of holding inventory Cost of transport is fees paid to carriers(ship, truck, etc) Annual cost of inventory is typically a fraction of the value of the inventory This fraction is called "Inventory Carrying Cost Typical fraction is 25%, but depends heavily on actual goods, timing Diamonds have low IcC, food has high icc Consists of interest, depreciation, taxes, insurance, losses, warehousesTotal Distribution Cost • Object of logistics systems is to minimize Total Distribution Cost (TDC) • TDC is the total cost of transporting goods – Sum of cost of transport and cost of holding inventory • Cost of transport is fees paid to carriers (ship, truck, etc) • Annual cost of inventory is typically a fraction of the value of the inventory – This fraction is called “Inventory Carrying Cost” • Typical fraction is 25%, but depends heavily on actual goods, timing – Diamonds have low ICC, food has high ICC • Consists of interest, depreciation, taxes, insurance, losses, warehouses