Total cost-analysis:

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The basic integrative concept in logistical network design is total cost. An example illustrated a total cost justification for using high cost airfreight. The basic thesis was that in situations where the speed and dependability of air delivery would permit other costs (such as warehousing and inventory) to be reduced or eliminated, high cost premium transportation would be justified by achievement of lower total cost. Total cost could be reduced by careful integration of logistical activities.

The basic concept of total cost is simple and complements the notion of designing logistics as an integrated performance system. The main problem in operationalizing total cost is that traditional accounting practice for classifying and reporting critical expenses does not typically provide adequate logistics metrics.

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